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Plaintiff v Tata Chemicals Magadi Ltd (plaintiff's name not stated in the judgment extract)

High Court of Kenya
29 September 2020
POP J O Otieno
1,315 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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If a contract dispute goes to arbitration, the court can issue an injunction to prevent one party from unilaterally ending the agreement.

What this practically means

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Executive summary

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The plaintiff and defendant each filed applications which were ordered heard together. By a consent recorded at the hearing, the defendant's application dated 17/3/2020 was allowed, referring the suit to arbitration under the arbitration clauses (clauses 21 and 17) of the parties' agreements dated 21/06/2018 and 19/09/2019, leaving only the plaintiff's application dated 9/3/2020 for determination. That application sought a temporary injunction restraining the defendant from terminating the two contracts, assigning them to third parties, or advertising fresh tenders for offloading and handling of soda ash at Mombasa and Kajiado depots pending the suit. The plaintiff alleged termination on 24/01/2020 without valid reason or hearing, despite the agreements running to 31/3/2021 and 31/08/2022, and pleaded legitimate expectation and exposure to losses including labour suits. The defendant, through an affidavit of Shine Mathews, confirmed the contracts but relied on a termination clause permitting termination on 30 days' notice with full payment, contending the claim had no probability of success and any loss was quantifiable. Otieno J, applying Giella v Casman Brown, held that on an interlocutory application the court must avoid determinative findings that could embarrass the arbitrator; the plaintiff's case was not flimsy, tenuous or vexatious, disclosing a prima facie case. Invoking section 7 of the Arbitration Act, the court held the arbitration agreement was best protected by preserving the subject matter of the dispute. The court allowed the motion, granting an interim injunction restraining termination per the notices dated 24.01.2020 pending the arbitral determination, with costs of the motion abiding the arbitration's outcome.

Key legal issues

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01

Whether an injunction can issue to restrain termination of contracts where the dispute has been referred to arbitration by consent

Holding

Yes; the court granted an interim injunction restraining termination pending the arbitral determination, to preserve the substratum of the arbitration.

Reasoning

Having referred the dispute to arbitration by consent, the court retained supervisory jurisdiction and could grant interim protection under section 7 of the Arbitration Act. Referring parties to arbitration while allowing termination to take effect would render the arbitration futile, so the subject matter - the manpower outsourcing contract - had to be preserved.

p. 2
02

Whether the plaintiff established a prima facie case

Holding

The court found a prima facie case disclosed without making determinative findings on the strength of the claim.

Reasoning

The court declined to assess the strength or weakness of the claim to avoid embarrassing the arbitrator, holding only that the case was not flimsy, tenuous or vexatious, as evidenced by the parties' acknowledgment of a dispute and referral to arbitration. A prima facie case need not be one that must succeed.

p. 2

Legal principles established

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  • A prima facie case need not be one that must succeed; it suffices that the claim is not flimsy, tenuous or vexatious.
  • Where a dispute is referred to arbitration, the court may grant interim protection under section 7 of the Arbitration Act to preserve the subject matter so the award serves its purpose.
  • On an interlocutory injunction application the court must not make determinative findings of fact that may embarrass the trial or arbitral tribunal.

Court orders

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  1. 1.An interim relief in the nature of an injunction restraining the defendant from terminating the contracts with the plaintiff in terms of the termination notices dated 24.01.2020 pending the determination of the dispute by way of arbitration
  2. 2.Costs of the motion to abide the outcome of the arbitration proceedings
Jurisdiction invoked
Section 7 of the Arbitration Act (interim protection in aid of arbitration referred by consent under the parties' arbitration clauses)

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Plaintiff v Tata Chemicals Magadi Ltd (plaintiff's name not stated in the judgment extract)", Case Analysis (2020). . Source:

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