China Zhongxing Construction Company Ltd v Eden Development Limited (K) [2020] eKLR Case Summary

Case Brief: China Zhongxing Construction Company Ltd v Eden Development Limited (K) [2020] eKLR


1. Case Information:
- Name of the Case: China Zhongxing Construction Company Ltd v. Eden Development Limited (K)
- Case Number: Civil Case No. 30 of 2019
- Court: High Court of Kenya at Mombasa
- Date Delivered: October 26, 2020
- Category of Law: Civil
- Judge(s): P.J.O. Otieno
- Country: Kenya

2. Questions Presented:
The court must resolve the following central legal issues:
1. Whether the High Court has the requisite jurisdiction to entertain the matter.
2. Whether the applicant has made out a case for the granting of interim orders of protection pending arbitration.

3. Facts of the Case:
The plaintiff, China Zhongxing Construction Company Ltd, entered into a construction contract with the defendant, Eden Development Limited (K), on June 8, 2009, for the development of Beach Apartments at a property located at LR. No. MN/I/3595 Shanzu, Mombasa. The plaintiff completed its contractual obligations and was issued final certificates of completion, but the defendant failed to pay a balance of Kshs. 85,410,551, which includes interest and unpaid withholding tax. The plaintiff feared that the defendant might transfer the suit property, thus depriving the plaintiff of recourse for its liquidated demand. The plaintiff sought an injunction to prevent such transfer pending arbitration as stipulated in their contract.

4. Procedural History:
The plaintiff filed an application on April 19, 2019, under the Arbitration Act and the Civil Procedure Act seeking injunctive relief and referral of the dispute to arbitration. The defendant responded with a Notice of Preliminary Objection, arguing that the case should be transferred to the Nairobi High Court, asserting that Mombasa was an improper forum. The application was argued through written submissions, with the plaintiff citing the case of *Safaricom Limited v. Ocean View Beach Hotel Ltd & 2 others* (2010) eKLR to support its claims.

5. Analysis:
- Rules: The court considered the Arbitration Act, particularly Section 7, which allows for interim measures of protection by the High Court before or during arbitral proceedings. Additionally, Section 12 of the Civil Procedure Act stipulates that suits regarding immovable property should be instituted in the court within the local limits of where the property is situated.

- Case Law: The court referenced *Safaricom Limited v. Ocean View Beach Hotel Ltd & 2 others* (2010) eKLR, which established criteria for granting interim measures, including the existence of an arbitration agreement and the threat to the subject matter of the arbitration. The court also cited *Owners of the Motor Vessel “Lilian S” v. Caltex Oil (Kenya) Ltd* (1989) KLR 1 regarding the necessity of jurisdiction.

- Application: The court found that it had jurisdiction as the suit property was located in Mombasa, aligning with Section 12 of the Civil Procedure Act. The plaintiff demonstrated a legitimate concern regarding the potential transfer of the suit property, confirming that the defendant had sold units to third parties. Thus, the court concluded that the plaintiff met the threshold for granting interim measures to preserve the subject matter pending arbitration.

6. Conclusion:
The court ruled in favor of the plaintiff, granting the application for interim orders and referring the dispute to arbitration as per the contract. The defendant was restrained from transferring the suit property pending the arbitration process, with costs to abide by the outcome of the arbitration.

7. Dissent:
There were no dissenting opinions noted in the ruling.

8. Summary:
The High Court of Kenya ruled in favor of the plaintiff, China Zhongxing Construction Company Ltd, allowing its application for interim protection against the defendant, Eden Development Limited (K). The ruling emphasized the court's jurisdiction based on the location of the suit property and the existence of an arbitration agreement, underscoring the importance of preserving the subject matter pending arbitration. This decision reinforces the legal framework governing arbitration and interim measures within the Kenyan judicial system.