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Supreme CourtAllowedPetition 15 of 2020

Bia Tosha Distributors Ltd v Kenya Breweries Ltd & 6 others

Supreme Court of Kenya
17 February 2023
Philomena Mbete MwiluP M MwiluSmokin Charles WanjalaS C WanjalaNjoki Susanna NdunguNjoki NdunguILI LenoalaWilliam OukoW Ouko
16,335 words in judgment
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·~65 min to read original · ~4 min brief

The bottom line

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Supreme Court rules constitutional disputes cannot be forced into arbitration; case sent back to High Court.

What this practically means

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The Supreme Court overturned a Court of Appeal decision that sent a dispute between Bia Tosha and Kenya Breweries to arbitration. The Court held that constitutional violations must be decided by courts, not arbitrators. It also criticized the Court of Appeal for ignoring a contempt application. The case now returns to the High Court for a full hearing of the constitutional claims.

Executive summary

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The Supreme Court allowed the appeal by Bia Tosha Distributors Limited against the Court of Appeal judgment that had set aside High Court conservatory orders and referred the dispute to arbitration. The dispute arose from a long-standing distributorship relationship where the appellant had paid substantial goodwill for distribution territories, which the 1st respondent later repossessed without refund. The appellant filed a constitutional petition alleging violation of rights under Articles 19, 27, 36, and 40 of the Constitution. The High Court granted conservatory orders preserving the appellant's exclusive territory, but the Court of Appeal set aside those orders and directed the matter to arbitration. The Supreme Court first dismissed preliminary objections to its jurisdiction, holding that the appeal raised questions of constitutional interpretation and application that had been canvassed in the superior courts below. On the merits, the Court found that the Court of Appeal erred in three key respects: first, by failing to determine pending applications including a contempt of court application; second, by referring the dispute to arbitration when breaches of the Constitution do not fall within the jurisdiction of arbitrators; and third, by making a final determination on matters still pending before the High Court. The Supreme Court reinstated the High Court orders of June 29, 2016, remitted the matter to the High Court for disposal on priority basis, and directed the High Court to consider punishment for contempt of court. The Court also clarified that status quo orders must be accompanied by descriptive particulars of the exact position to be preserved. Costs were awarded to the appellant against the 1st and 2nd respondents.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether this court has jurisdiction to determine this appeal
  2. 2.Whether the Court of Appeal erred in declining to decide on pending applications
  3. 3.Whether the Court of Appeal erred in granting the reliefs contained in its judgment

Key legal issues

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01

Whether the Supreme Court has jurisdiction under Article 163(4)(a) to hear an appeal from an interlocutory ruling on conservatory orders.

Holding

The Supreme Court has jurisdiction because the appeal raises questions of constitutional interpretation and application that were canvassed in the superior courts below, even though the ruling was interlocutory.

Reasoning

The Court applied the three-part test from Rutongot Farm Ltd v Kenya Forest Service: (i) what was the question in issue at the High Court and Court of Appeal; (ii) did the superior courts dispose of the matter after interpreting or applying the Constitution; (iii) does the instant appeal raise a question of constitutional interpretation or application that was the subject of judicial determination. The High Court had to determine whether the matter involved constitutional questions or was merely a commercial dispute, and the Court of Appeal addressed itself to constitutional provisions including Article 159(2)(c) and Article 23. The appeal challenges the rationale for the Court of Appeal decision and its effect on infringement of rights, including the use of a private arbitrator to determine constitutional questions.

p. 21
02

Whether the Court of Appeal erred in failing to determine pending applications, including an application for contempt of court.

Holding

The Court of Appeal erred by not making any determination on the application for contempt, both when it was live before it and in the judgment that disposed of the matter with finality.

Reasoning

The Court of Appeal deliberately ignored the pending applications, including the contempt application, and proceeded to hear the main appeal. The Supreme Court held that every litigant is entitled to a decision, and contempt proceedings are a matter of public interest that should be prioritised and determined in limine. The Court of Appeal's failure to determine the contempt application was an unfortunate misdirection.

p. 28
03

Whether the Court of Appeal erred in referring the dispute to arbitration and thereby divesting the High Court of jurisdiction over constitutional claims.

Holding

The Court of Appeal erred because breaches of the Constitution do not fall within the jurisdiction of arbitrators, and the dispute transcended the commercial agreement into the constitutional sphere.

Reasoning

The Supreme Court held that the appellant's amended petition raised constitutional questions requiring resolution as such. The Court of Appeal, by overturning the High Court ruling and referring the matter to arbitration, deprived the appellant of its recourse and divested itself of control over the case. The Court cited Nyutu Agrovet Limited v Airtel Networks Kenya Limited for the proposition that breaches of the Constitution cannot be introduced by way of an application to set aside an arbitral award. The Court also noted that there were parties not privy to the arbitration agreement.

p. 30
04

Whether the Court of Appeal's status quo order was sufficiently clear to determine whether contempt occurred.

Holding

The status quo order was vague and ambiguous, but the Supreme Court determined that it could only mean the position obtaining at the High Court, i.e., the High Court orders of June 29, 2016.

Reasoning

The Supreme Court noted that the Court of Appeal's order to maintain 'status quo obtaining as at today' was not accompanied by descriptive particulars, leading to confusion. However, the Court reasoned that the proceedings before the Court of Appeal only ensued as a result of the High Court decision, and the application for stay sought to prevent execution of that decision. Therefore, the status quo could only mean the position as obtaining at the High Court, preserving the dealings of the parties as at February 2, 2006.

p. 34

Legal principles established

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  • Constitutional breaches cannot be decided by arbitrators or used to challenge arbitral awards.
  • When a dispute involves constitutional issues, parties have the right to access courts regardless of arbitration agreements.
  • Courts must prioritize and decide contempt applications as soon as they arise.
  • A 'status quo' order must clearly describe the exact position to be preserved; vague orders cause confusion.
  • The Supreme Court can hear appeals from interlocutory rulings if they involve constitutional interpretation.

Court orders

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  1. 1.The appeal dated August 20, 2020 be and is hereby allowed
  2. 2.The judgment and orders of the Court of Appeal in Civil Appeal No 163 of 2016 delivered on the July 10, 2020 be and are hereby set aside in entirety
  3. 3.The High Court orders of June 29, 2016 be and are hereby reinstated and the court do consider the consequences of any disobedience of those orders
  4. 4.The matter be and is hereby remitted to the High Court for disposal of the amended petition dated June 20, 2016 pending before the High Court on priority basis; considering the age of this matter
  5. 5.Costs in the Court of Appeal and in this court are awarded to the appellant as against the 1st and 2nd respondents

The bench

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One judgment of the whole court — no separate or dissenting opinions.

Philomena Mbete Mwilu
P M MwiluDCJ
Currently serving
majority
Smokin Charles Wanjala
S C WanjalaCJ
Currently serving
majority
Njoki Susanna Ndungu
Njoki NdunguSCJ
Currently serving
majority
IL
majority
William Ouko
W OukoSCJ
Currently serving
majority
On appeal from
Court of Appeal at Nairobi
Civil Appeal No 163 of 2016
Jurisdiction invoked
Article 163(4)(a) of the Constitution of Kenya, 2010

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

Breaches, violations and infringements of the Constitution do not fall within the jurisdiction of arbitrators and such breaches cannot be the basis of setting aside arbitral awards.
p. 30 Arbitration and constitutional rights
Where the dispute, however, transcends the commercial dispute, well into the constitutional sphere, as is the case before us, every person is free to access courts and have their day in court.
p. 30 Access to justice
when an issue of contempt of court arises, it is one which should be prioritised and determined in limine as soon as it arises.
p. 28 Contempt of court
If indeed the courts must use the term status quo, it is only practical that the same be accompanied by the descriptive particulars of the exact position that the court seeks to preserve.
p. 33 Court orders

Key timeline

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2006-02-02
Parties' dealings as at this date became the reference point for the status quo order.
2016-06-20
Bia Tosha filed an amended petition in the High Court raising constitutional claims.
2016-06-29
High Court issued orders that were later reinstated by the Supreme Court.
2020-07-10
Court of Appeal delivered judgment referring the dispute to arbitration and setting aside High Court orders.
2020-08-20
Bia Tosha filed an appeal to the Supreme Court.
2023
Supreme Court allowed the appeal, reinstated High Court orders, and remitted the case for hearing.

Practical implications

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For lawyers

Handle constitutional claims in court, not arbitration

When drafting arbitration clauses, ensure they explicitly exclude constitutional disputes. If a client's case involves alleged constitutional violations, advise them to file in court and resist referral to arbitration. Also, always file contempt applications promptly and insist the court decides them before the main hearing.

For businesses

Review arbitration clauses in contracts

Your commercial contracts with arbitration clauses may not cover constitutional claims. If a dispute escalates to allegations of rights violations, you cannot rely on arbitration to resolve them. Consider adding a clause that allows court intervention for constitutional issues. Also, ensure any court-ordered 'status quo' is clearly defined to avoid disputes.

For individuals

Your constitutional rights can't be arbitrated away

Even if you signed a contract with an arbitration clause, you can still go to court if your constitutional rights are violated. The Supreme Court confirmed that courts must hear such claims. If a lower court tries to send your case to arbitration, you can appeal. Also, if someone disobeys a court order, the court must deal with that contempt immediately.

Frequently asked questions

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Can constitutional issues be decided by arbitration in Kenya?+

No. The Supreme Court in Bia Tosha v Kenya Breweries held that breaches of the Constitution cannot be decided by arbitrators. Such disputes must be heard in court, even if the parties have an arbitration agreement.

What happens if a court ignores a contempt application in Kenya?+

The Supreme Court said courts must prioritize and decide contempt applications as soon as they arise. Ignoring them is a misdirection. You can appeal if the court fails to rule on your contempt application.

What is a status quo order and why must it be specific in Kenya?+

A status quo order preserves the existing state of affairs. The Supreme Court ruled that such orders must clearly describe the exact position to be kept. Vague orders cause confusion and can lead to disputes over whether contempt occurred.

Can the Supreme Court hear an appeal from an interlocutory ruling in Kenya?+

Yes, if the appeal raises a question of constitutional interpretation or application that was argued in the lower courts. The Supreme Court has jurisdiction under Article 163(4)(a) even if the ruling was not final.

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, "Bia Tosha Distributors Ltd v Kenya Breweries Ltd & 6 others", Case Analysis (2023). Petition 15 of 2020. Source: https://new.kenyalaw.orghttps://new.kenyalaw.org/akn/ke/judgment/kesc/2023/14/eng@2023-02-17

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