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Court of AppealAllowedCivil Appeal 29 of 1999· [2005] KECA 312 (KLR)

Raytheon Aircraft Credit Corporation & another v Air Al-Faraj Limited [2005] KECA 312 (KLR)

Court of Appeal of Kenya
8 July 2005
EGEmmanuel GithinjiPhilip Kiptoo TunoiAkilano TunoiJOJohn Walter Onyango Otieno
3,159 words in judgment
View original judgmentRead on Kenya Law Watch case
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·~13 min to read original · ~4 min brief

The bottom line

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Kenya's Court of Appeal ruled contract clauses requiring disputes to be heard in foreign courts must be respected unless a party shows strong reasons otherwise.

What this practically means

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Executive summary

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The Court of Appeal at Nairobi (Tunoi, Githinji and Onyango Otieno, JJ.A) allowed an appeal against Mbogholi J's ruling in H.C.C.C. No. 1611 of 1998, in which the High Court had overruled a preliminary objection and asserted jurisdiction over a dispute arising from a Lease Purchase Agreement of a Beechcraft 1900c aircraft. The agreement was governed by Kansas law and designated two Kansas courts as the exclusive forums, with a limited option for the lessor to sue for repossession or recovery of monies elsewhere. The High Court had held that its unlimited constitutional jurisdiction under section 60(1) could not be curtailed by contract, and that the clause was tinctured with oppression. The Court of Appeal rejected that construction: section 60(1) does not authorize the High Court to disregard private international law or to assume jurisdiction over persons outside Kenya without leave to serve process abroad, which was never sought. Applying Karachi Gas v Issaq and the English authorities on exclusive jurisdiction clauses, the Court held that the plaintiff bore the burden of showing strong cause for suing in Kenya and had failed. The oppression finding was unsupported by evidence, the aircraft had already left Kenya, and Raytheon had first commenced proceedings in Kansas, creating a risk of parallel proceedings the judge failed to consider. The Court also confirmed that a foreign defendant may challenge jurisdiction by preliminary objection without a formal stay application, and recommended that the Rules Committee promulgate comprehensive procedural rules. The appeal was allowed, the superior court's orders set aside, the preliminary objection allowed with costs, the suit stayed, and costs of the appeal awarded to the appellants.

Key legal issues

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01

Whether section 60(1) of the Constitution confers on the High Court jurisdiction overriding contractual choice of forum clauses

Holding

No. Section 60(1) does not permit the High Court to disregard private international law on choice of law and exclusive jurisdiction clauses in international commercial agreements.

Reasoning

The learned judge in the High Court had held that the Constitution's unlimited jurisdiction could not be limited by contract. The Court of Appeal disagreed, holding that constitutional jurisdiction does not displace the settled rules of private international law governing foreign defendants. Where a defendant is not domiciled or trading in Kenya, jurisdiction must be assumed through the statutory machinery for service out of the jurisdiction, and exclusive jurisdiction clauses must ordinarily be honoured.

p. 3
02

Whether the High Court had assumed jurisdiction over Raytheon, a foreign corporation

Holding

No. Leave to serve the first appellant outside the jurisdiction was never sought or granted, so the court had not assumed jurisdiction over Raytheon.

Reasoning

Raytheon was incorporated in Kansas and neither traded in Kenya through a subsidiary nor was domiciled in Kenya. The contract was governed by Kansas law and the aircraft had already been removed from the jurisdiction before suit. Since no application for leave to serve out of the jurisdiction was made, the objection to jurisdiction should have been allowed on this ground alone.

p. 4
03

Whether strong reasons existed to depart from the exclusive Kansas jurisdiction clause

Holding

No. The finding that the clause was oppressive was unsupported by evidence, and the risk of parallel proceedings in Kansas, which had commenced first, was not considered.

Reasoning

There was no affidavit evidence on the circumstances in which the agreement was made, so the oppression finding was unfounded. Raytheon had reserved only limited rights to sue in non-contractual forums, not unlimited jurisdiction. Kansas proceedings had been instituted before the Kenyan suit, and the judge failed to consider the risk of parallel proceedings and inconsistent decisions.

p. 4
04

Whether jurisdiction could be challenged by preliminary objection without a formal application for stay

Holding

Yes. The High Court had jurisdiction to hear and rule on the point of jurisdiction raised in the preliminary objection, though the procedures in this area should be regularised by rules.

Reasoning

Relying on its earlier interlocutory decision in the same matter, the Court noted that a preliminary objection is a point of law which, if successful, disposes of the suit. While a formal application is prudent, filing a defence under protest, applying for stay, or raising a preliminary objection are all lawful means of challenging jurisdiction. The Court recommended that the Rules Committee promulgate comprehensive rules.

p. 5

Legal principles established

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  • Section 60(1) of the Constitution does not empower the High Court to disregard private international law on choice of law and exclusive jurisdiction clauses in international commercial agreements or to assume jurisdiction over persons outside Kenya without leave for service out of the jurisdiction.
  • Where parties are bound by an exclusive jurisdiction clause, effect must ordinarily be given to it unless the party suing in the non-contractual forum discharges the burden of showing strong reasons.
  • The High Court will not assume jurisdiction over a foreign defendant not trading or domiciled in Kenya unless the contract falls within Order V rule 21(e) (made in Kenya, governed by Kenyan law, or breached in Kenya) and leave to serve summons outside the jurisdiction has been obtained.
  • A foreign defendant may challenge jurisdiction by preliminary objection, conditional appearance, defence under protest, or application for stay of proceedings; a formal application for stay is not mandatory.

Court orders

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  1. 1.Appeal allowed
  2. 2.Orders of the superior court set aside
  3. 3.Substituted order that the High Court has no jurisdiction to hear and determine the suit
  4. 4.Appellants' preliminary objection allowed with costs
  5. 5.Suit in the superior court stayed
  6. 6.Costs of the appeal to the appellants

Authorities

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Legislation

  • Constitution of Kenyasection 60(1)
  • Companies ActCap 486
  • Civil Procedure RulesOrder V rule 21(e)
  • Civil Procedure RulesOrder V rule 23
  • Civil Procedure RulesOrder V rule 27

Cases cited (8)

  • Raytheon Aircraft Credit Corporation & Another v Air Alfaraj Limited
    Civil Application No. Nai. 326 of 1998
  • Pattni vs Ali & 2 Others
    HCCC No. 418 of 1998 (unreported)
  • Karachi Gas Co. Ltd v Issaq
    [1965] EA 42
  • Fonville v Kelly III & Others
    [2002] 1 EA 71
  • Donohue v Armo Inc.
    [2002] 4 LRC 478
  • The Eleptheria
    [1969] 2 All ER 641
  • United India Insurance Co. Ltd v East African Underwriters (Kenya) Ltd
    [1985] KLR 898
  • Prabhadas (N) & Co. v Standard Bank
    [1968] EA 679
On appeal from
High Court of Kenya at Nairobi
H.C.C.C. No. 1611 of 1998
Jurisdiction invoked
Appeal to the Court of Appeal against the ruling and order of the High Court (the judgment does not state the specific appellate provision)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (25)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Raytheon Aircraft Credit Corporation & another v Air Al-Faraj Limited [2005] KECA 312 (KLR)", Case Analysis (2005). Civil Appeal 29 of 1999. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2005/312/eng@2005-07-08

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.