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Court of AppealDismissedCivil Appeal (consolidated) arising from High Court Suit Nos. 4141 and 4142 of 1979

United India Insurance Co Ltd v East African Underwriters (Kenya) Ltd [1985] KECA 39 (KLR)

Court of Appeal of Kenya
15 February 1985
CMC.B. MadanAKA.A. KnellerAHA.R.W. Hancox
8,695 words in judgment
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The bottom line

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Kenya's Court of Appeal ruled that Kenyan courts can ignore a contract clause forcing disputes to foreign courts when the deal was performed in Kenya and the evidence is there.

What this practically means

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Executive summary

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This consolidated appeal arose from two High Court suits (Nos. 4141 and 4142 of 1979) in which a Kenyan insurance agency company sued United India Insurance, Oriental Fire and General Insurance, and Kenindia Assurance for breach of Chief Agency agreements. Each agreement contained an identical clause conferring exclusive jurisdiction on the courts of Bombay and governing the disputes by Indian law. The defendants applied for a stay of the Kenyan proceedings; Platt J refused the stay and they appealed. The Court of Appeal (Madan, Kneller and Hancox JJA) unanimously dismissed the appeal. Madan JA, delivering the leading judgment, restated the law: an exclusive jurisdiction clause should normally be honoured unless strong reason - a heavy burden on the party resisting it - justifies departure, and Kenyan courts retain a discretion to assume jurisdiction over agreements performed in Kenya. Strong reason existed here: all the alleged breaches occurred in Kenya, the witnesses and documentary evidence were in Kenya, Kenindia was domiciled in Kenya, the Indian three-year limitation period would deprive the plaintiff of a legitimate juridical advantage and was a neutral factor at best, and separate trials in Kenya and Bombay risked conflicting decisions. The court took judicial notice of the notorious congestion in the Bombay courts and held that Lord Denning MR's Fehmarn approach was not a novel test but equivalent to the strong-reason standard. All three judges applied the five grounds on which an appellate court may interfere with discretion and found none established, affirming Platt J's order. The appeal was dismissed with costs to the respondent.

Questions the Court framed

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

  1. 1.Whether the High Court was bound to stay the proceedings in favour of the exclusive jurisdiction clause conferring jurisdiction on the courts of Bombay
  2. 2.Whether strong reason was shown for departing from the exclusive jurisdiction clause
  3. 3.Whether the Indian three-year limitation period was a relevant factor
  4. 4.Whether the balance of convenience and the location of witnesses and evidence favoured trial in Kenya
  5. 5.Whether the judge's reference to The Fehmarn test amounted to a misdirection
  6. 6.Whether the court could take judicial notice of alleged delays in the courts of Bombay
  7. 7.Whether the Court of Appeal was entitled to interfere with the judge's exercise of discretion

Key legal issues

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01

Effect of an exclusive jurisdiction clause and the strong reason test

Holding

The clause must normally be obeyed; departure requires strong reason, a heavy burden on the party resisting it.

Reasoning

The court adopted the Makefjell and Fehmarn principle that parties who freely choose a forum must be held to their bargain. It endorsed the prior Kenyan decision in Carl Ronning that strong reason is a pre-requisite to refusing effect to such a clause. However, where the case is exceptional - breaches committed, business transacted and evidence located wholly in Kenya - strong reason justifies the Kenyan courts assuming jurisdiction.

p. 5
02

Whether Platt J's discretion was properly exercisable and whether the Court of Appeal could interfere

Holding

The judge's discretion was properly exercised; none of the five grounds for appellate interference was established.

Reasoning

All three judges applied the test formulated by Brandon LJ and repeated in the Abidin Daver and in Carl Ronning: interference lies only for misdirection on law, misapprehension of fact, wrong considerations taken or omitted, or a plainly wrong result. The judge had recognised the rule favouring enforcement of the clause and given valid reasons for treating the case as exceptional, so the appeal failed.

p. 12
03

Judicial notice of delays in the courts of Bombay

Holding

A court may take judicial notice of notorious facts such as court congestion; such notice dispenses with proof but is not conclusive.

Reasoning

Relying on Sarkar on Evidence, Thayer and English authority, Madan JA held that the director's sworn, uncontradicted statement about the overloading of the Bombay lists was evidence of a notorious fact which the court could recognise without formal proof. The defendants offered no proof to the contrary. Kneller JA, while not resting on that ground, noted the statement was on record and uncontradicted.

p. 5
04

Balance of convenience and the natural forum

Holding

Kenya was the natural forum: the breaches, the business, the witnesses and the documents were all in Kenya, and trying related actions in two countries risked conflicting decisions.

Reasoning

Applying the Eleftheria factors, the court found the evidence wholly situated and more readily available in Kenya, Kenindia domiciled in Kenya, enforcement of any Bombay decree against Kenindia hazardous, and separate trials in Kenya and Bombay a potential legal disaster because the same issues might be determined differently. The foreign time bar also operated as a procedural advantage sought by the defendants.

p. 3

Legal principles established

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  • An exclusive jurisdiction clause should normally be respected and enforced unless strong reason is shown for departing from it, the burden lying on the party seeking to avoid it.
  • The Court of Appeal will not interfere with a discretionary decision of a judge unless the judge misdirected himself in law, misapprehended the facts, took into account matters he should not have, failed to take account of matters he should have, or the decision is plainly wrong.
  • The Kenyan courts have a discretion to assume jurisdiction over an agreement to be performed in Kenya notwithstanding a foreign exclusive jurisdiction clause.
  • A limitation period of a foreign forum is to be treated as a neutral factor rather than a decisive one.

Court orders

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  1. 1.Appeal dismissed
  2. 2.Costs of the appeal awarded to the respondent

The bench

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

CM
majority

Wrote the judgment

Delivered the leading judgment. Held that an exclusive jurisdiction clause should normally be respected but may be displaced on strong reason; Kenya was the natural forum; Platt J's discretion was properly exercised and the appeal should be dismissed with costs.

He said this litigation should proceed close to the scene. He was right. It is litigation which properly belongs to this country. I would dismiss the appeal with costs.p. 6
AK
concurring

Wrote the judgment

Concurred that Platt J's exercise of discretion was not plainly wrong and that the appeal must be dismissed with costs.

The appellants have not persuaded me that Mr Justice Platt’s exercise of his discretion was plainly wrong or was the result of any misdirection or non-direction of law or fact.p. 6
AH
concurring

Wrote the judgment

Reviewed the English authorities at length, endorsed Brandon J's Eleftheria principles as supplanting the earlier Fehmarn test, and agreed the trial judge gave valid reasons for holding the case exceptional; found none of the five grounds for appellate interference established.

The trial judge held here that this case was exceptional and he gave valid reasons for so doing. I agree with those reasons.p. 10
On appeal from
High Court of Kenya
Suit Nos. 4141 and 4142 of 1979
Jurisdiction invoked
Appellate jurisdiction of the Court of Appeal over an interlocutory decision of the High Court refusing a stay of proceedings
Consolidated with
High Court Suit No. 4141 of 1979, High Court Suit No. 4142 of 1979

Relief refused

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Stay of proceedings in favour of the courts of Bombay

Strong reason was shown for not enforcing the exclusive jurisdiction clause; Kenya was the natural forum where the breaches occurred and the evidence and witnesses were situated

p. 6

Dismissal of the two suits

The judge's discretion to refuse the stay was properly exercised and not shown to have miscarried

p. 6

Costs

Appeal dismissed with costs to the respondent.

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.

I would dismiss the appeal with costs. As Kneller and Hancox JJA agree it is so ordered.
p. 6Final orders - dismissal of the appeal
strong reason is a pre-requisite to the exercise of the court’s discretion not to give effect to the exclusive jurisdiction clause, the onus of proving strong reason being upon those who seek to avoid it
p. 3Strong reason test for foreign jurisdiction clauses
The Court of Appeal is only entitled to interfere if one or more of the following matters are established: first, that the judge misdirected himself in law; secondly, that he misapprehended the facts; thirdly, that he took account of considerations of which he should not have taken account; fourthly, that he failed to take account of considerations of which he should have taken account, or fifthly, that his decision, albeit a discretionary one, is plainly wrong.
p. 6Appellate interference with discretionary decisions
The courts of this country have a discretion to assume jurisdiction over an agreement which is made to be performed in Kenya notwithstanding a clause therein conferring jurisdiction upon the courts of some other country.
p. 2Kenyan courts' discretion over foreign jurisdiction clauses
The starting point is that Kenya is a natural forum for the dispute where all breaches are alleged to have taken place
p. 3Natural forum
The enforcement of the exclusive jurisdiction clause is shown to be “unreasonable” under the circumstances
p. 4Unreasonableness of enforcing the clause

Issues in the judgment

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minor

The judgment gives inconsistent dates for the Oriental agreement: it is first described as dated March 17, 1969 and later as dated March 11, 1969; the BIG agreement is first dated December 23, 1968 and later December 23, 1960.

minor

The judgment gives inconsistent citations for The Fehmarn ([1957] 1 Lloyd's Law Reports 551 versus 511) and for The Eleftheria ([1970] p. 94 versus [1969] 1 Lloyds Law Reports 237).

minor

The judgment gives inconsistent citations for The Chaparral, first as [1972] 2 Lloyd's Rep 315 and later as [1968] 2 Lloyds Law Report 158, and for the Makefjell passage attributed variously to Cairns LJ and Cairn(s) LJ.

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (10)

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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, "United India Insurance Co Ltd v East African Underwriters (Kenya) Ltd [1985] KECA 39 (KLR)", Case Analysis (1985). Civil Appeal (consolidated) arising from High Court Suit Nos. 4141 and 4142 of 1979. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1985/39/eng@1985-02-25

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