Kenya Law Weekly Issue 006/24-25

Held:

1. Allegations of bias or of a reasonable apprehension of bias were serious because they call into question not only the personal integrity of the judge, but the integrity of the entire administration of justice. Therefore, there must be an evidentiary basis for the grounds of bias, either based on statements and conduct made by the judge during the proceedings or arising from the judge’s personal interest or relationship, and an inquiry of bias was contextual and fact-specific. In addition, a judge’s comments during a trial should not be viewed in isolation but reviewed in the context of the entirety of the trial.
2. As a matter of procedure the party alleging bias could seek to have the judge withdraw from the case by way of an application for recusal, or alternatively, seek an invalidation of the judgment on the basis that the judge should have been disqualified when the issue of bias was raised. A judge may, on his or her own initiative, also withdraw from the case, or seek submissions from the parties on whether or not to withdraw. Great caution was exercised by Courts where the issue of bias was raised for the first time on appeal, especially where there was no record of the issue of bias having been raised in the trial Court, since a finding that a decision was tainted by a reasonable apprehension of bias was a jurisdictional error.
3. The respondent relied on findings made in the judgment, based on submissions made by one of the parties, to impugn the trial Judge’s conduct, and that of the entire institution of the Judiciary without any evidence of bias. The nature of evidence that was required to be adduced to demonstrate either actual or apparent bias was as follows; a. Firstly, a judge had an interest, whether direct or indirect and whether pecuniary or otherwise, in the outcome of a decision; b. secondly, a judge was associated with a party or other person involved in the proceedings; c. thirdly, the conduct of the judge, either in the course of or outside the proceedings gave rise to a reasonable apprehension of ‘prejudice, partiality or prejudgment’; and d. lastly, the judge had knowledge of some extraneous information that prevented him or her from bringing an impartial mind to the decision.
4. In delivering a reasoned judgment, courts were not required to give a detailed answer to every argument, and they had a certain margin of appreciation when choosing arguments in a particular case and admitting evidence in support of the parties’ submissions, as guided by the rules of evidence and applicable law. In exercising the judicial function, a judge chooses the more meritorious legal position after taking into account evidence that was properly admitted, evaluating evidence, and where required, resolving uncertainties and filling gaps in the law by considering the applicable legal principles and values. In the event that a judge applied an insufficient judicial decision-making method, the avenue available to a litigant was to appeal or seek a review of the decision on legal grounds, and not to engage in a personal assault of the Judge in the name of bias.
5. The 1st appellant had not provided any evidence of interest, association, conduct, or extraneous knowledge on the part of the Judge of the High Court that would have given rise to a reasonable apprehension of bias to an informed and reasonable observer. No bias was established by the 1st appellant.
6. The doctrine of legitimate expectation was typically applicable in public law and would not apply where both disputants were private parties who were not seeking reliefs from a public body. For legitimate expectation to arise and be recognized, an established set of criteria had to exist, most important of which was that the alleged representation had to originate from a public body and concomitantly, the doctrine could only be applied against a public body.
7. The trial court reasoned that the promise and arrangement of automatic extensions served as motivation for the plaintiff to keep performing in accordance with the assigned obligations resulting to investing heavily in the business. That reasoning appeared to have conflated the doctrine of legitimate expectation with the principle of reasonable expectation, which could support a proper cause of action for damages in a contract, provided that the reasonable expectations arose from the terms of the contract.
8. Reasonable expectations, legitimate expectations, and legal entitlements are three different steps in the recognition of legal rights. Reasonable expectation was the objectively justified belief in the likelihood of some future event or entitlement, whereas legitimate expectation entailed a further justificatory argument for recognizing the expectation whether to remedy arbitrariness, protect detrimental reliance, or uphold some other requirement of morality or fairness. Legal entitlement on the other hand was the recognition that the legal system accorded to the legitimate expectation, for example, by requiring the payment of compensation if the expectation was disappointed.
9. Reasonable expectation tends to concretize within a contract as opposed to a relationship outside of contract. Reasonable expectations could not be construed in the absence of a contractual relationship between the parties having first been established. The doctrine of legitimate expectation was inapplicable to the contractual relationship between Heineken E.A, Heineken B.V and Maxam Limited. The trial court fell into error in basing the continued operation of the Distribution Agreement on the doctrine of legitimate expectation.
10. The trial Court’s decision to look to the Constitution for relief, and the trial court’s declarations under Articles 19 and 27(2) of the Constitution were unnecessary under the principle of constitutional avoidance. It was in error for the trial Court to base its findings on the renewal of the Kenya Distribution Agreement on the application of public law principles or interpretation of the Constitution. Kenya’s law of contract was sufficient in the adjudication of contractual cases when applied in the context of the procedural imperatives contained in Article 159(2)(d) (without undue regard to procedural technicalities) and Article 10 (national values) of the Constitution.
11. The purpose of interlocutory rulings and orders, which were the rulings and orders made by a court between the commencement and final resolution of a cause of action while the case was still ongoing, was to provide temporary or provisional decision on an issue or remedies. A judgment or order was final if it finally disposed of the rights of the parties, and was interlocutory if it did not. Since an interlocutory ruling did not dispose of a cause of action with finality, the issues it addressed could become moot by the time of the final judgment, or could still be live.
12. It was possible that the final decree merely carried into fulfilment the preliminary decree. There was thus no legal bar to a judge relying on or adopting the reasoning and findings made in an interlocutory ruling, if it was supported by the evidence and law adduced during trial, and in a reasoned judgment. The only operative and legal bar with respect to interlocutory rulings and orders was that the parties’ ultimate rights were not to be decided at an interlocutory stage, except in the clearest of circumstances.
13. The basic legal effect of 'without prejudice' communication was that statements made therein in the context of an existing dispute could not be relied upon as evidence against the interests of the relevant party. That rule was codified in section 23(1) of the Evidence Act which provided that no admission could be proved in civil cases if it was made either upon an express condition that evidence of it was not to be given or in circumstances from which the court could infer that the parties agreed together that evidence of it should not be given. The rule was based on the express or implied agreement of the parties involved that communications in the course of their negotiations should not be admissible in evidence if, despite their negotiations, a contested hearing ensued.
14. The contents of a communication made "without prejudice" were only admissible in certain exceptional circumstances, including when there had been a binding agreement between the parties arising out of it, or for the purpose of deciding whether such an agreement had been reached, and to the fact that such communications had been made was also admissible to show that negotiations have taken place, but not its contents, which were otherwise not admissible.
15. Any doubts, conflicts, differing interpretations with regard to the “without prejudice” notice of termination must in the circumstances therefore be construed against the originator of the notice. In that regard, Heineken E.A and Heineken B.V had the opportunity to, and option of issuing two notices to ensure that there was no misunderstanding regarding which portion of the “without prejudice” considerations applied to which market. The submission by the appellants that there was no “doubt” as to which portion of the business was covered by the “without prejudice” segment of the letter was also not sufficient to remove the pleaded ambiguity.
16. The letter and Notice of Termination dated January 27, 2016 which was issued by Heineken E.A and Heineken B.V on a “without prejudice” basis was inadmissible as evidence of any negotiations, acceptance or admission on the part of Maxam Limited as regards termination of the contract, just as it was not evidence of any negotiations and admission as regards payment of compensation on their part. In light of that effect, and the ambiguity as to its intent, the letter accordingly could not be construed as amounting to a lawful or valid Notice of Termination under Clause 17 of the Distribution Agreement. The Kenya Distribution Agreement was therefore legally still subsisting as at January 27, 2016 and was not validly terminated.
17. The Notice of Termination could not be the basis of any findings with regards to termination of the agreement by dint of Clause 18 of the Kenya Distribution Agreement, which provided for the instances when the agreement could be terminated immediately by notice in writing for various reasons. The letter was not admissible as evidence of any termination, and in any event, it was clear therein, that it was being issued pursuant to Clause 17. Both Clauses 17 and 18 would only have become operational if there was a valid notice of termination given. The trial Court erred in its finding that the notice of termination was not issued in accordance of Clause 18 of the Agreement for want of reasons for the termination.
18. A court should only determine issues raised before it by way of pleadings. A court, even when it had jurisdiction, would not base its decision on unpleaded issues. However, where the parties lead evidence and address the unpleaded issues, and from the cause adopted at trial it appears that the unpleaded issues have been left for the decision of the court, the court could validly determine the unpleaded issues. The non-compliance with the provisions of the Stamp Duty Act is not fatal to the enforcement of an agreement, and the courts were enjoined under section 19 (3) (a) (b) and (c) not to reject such an agreement in totality, but to receive it and either assess the stamp duty itself and direct that it be paid, or could impound such an agreement and direct that it be delivered to the stamp duty collector for him to assess the stamp duty payable and demand its payment.
19. Having raised the issue of stamping of the agreement late in the day during the hearing in the trial Court, the appellants could not run away from the consequences thereof because they turned out to be to their disadvantage. There was no reason to interfere with the findings and orders granted by the trial court in relation to stamp duty.
20. Heineken E.A and Heineken B.V accepted that Maxam Ltd did not possess monopoly influence, and they also failed to establish that the exclusivity granted to Maxam Ltd could be characterised as one that invited a per se prohibition, for example, “price-fixing”, “transfer of costs”, “transfer of commercial risk”, “demand for the payment of goodwill” by distributors, setting “market or sales targets” for a distributor, “embossing bottles”, “gifting branded refrigerators in exchange for sales”, etc., all of which were per se prohibited practices because they were "plainly anticompetitive", and were conclusively presumed illegal without further examination or necessity to produce evidence.
21. There was no prohibition in Kenya’s law against a distributor maintaining more than one exclusive territorial distributorship. A distributorship that was circumscribed by a distributorship agreement from dealing with competing products or one which, in practice, produced such an outcome, was to be characterised as belonging to the class of per se prohibited practices. If in actual fact it could be shown that the distributor overwhelmingly distributed for one manufacturer, an anti- competitive per se prohibition was automatically presumed entitling such a distributor to damages on an opportunity cost basis, because there could be no other reasonable inference that could be drawn other than that the distributor had been prevented from dealing with competing brands. Such a threshold could be inferred where a distributor’s business was more than fifty percent of its turnover in favour of a dominant monopoly, that being the threshold set by the Competition Act itself in its definition of “dominant undertaking/position” under sections 23, 24 and 24A.
22. Conduct which lessened competition in the beer market could be investigated by the Competition Authority and penalties imposed against the offending undertaking. However, such an investigation and imposition of fines and penalties would not bar an affected party from separately, simultaneously or subsequently suing for damages. Parties seeking to enforce compliance or seeking damages under the Competition Act were therefore entitled to “gains-based” reliefs in addition to loss-based reliefs, which would allow for a shift in focus from victims to the perpetrators. A breach of competition/anti-trust law therefore provided a cause of action to sue for damages for claimants who suffer loss from anti- competitive behavior, where the regulatory fines and penalties were deemed inadequate to achieve any deterrence.
23. The appointment of the third party distributors by Heineken E.A and Heineken B.V during the litigation between the parties was in breach of Clause 26 of the Kenya Distribution Agreement. In addition, since the appointment of the third party distributors essentially terminated the exclusive nature of the Kenya Distribution Agreement, that was a repudiatory breach by the appellants, as it essentially deprived the respondent of the core benefit of the Kenya Distribution Agreement.
24. The third party distributors could also not acquire any rights as against the respondent that could legally disrupt vested rights arising out of the Kenya Distribution Agreement, and not being privy to the said agreement, the cause of action by the third party distributors, if any, lay against the appellants without reference to the respondent. A third party in such circumstances took the risk that its rights over the subject matter of a contract that was in litigation would only concretise in the event that the giver of its rights succeeded in the litigation. It was necessary for the giver of those rights to join the third parties in the on-going litigation for any rights they may have to be confirmed or determined, or for the third parties themselves, locus standi permitting, to join proceedings where their rights could be affected.
25. No legal obligation in the circumstances attached to the respondent to join third parties with whom it had no privity of contract or basis for joinder. Even if those third parties were to join ongoing proceedings, their participation would not have detracted from the finding that they aided in the breach of contract by the appellants, and on the contrary, the only legal purpose that may have been achieved by their joinder would be the recovering of any damages due from them for inducing the breach of contract. The prejudice pleaded by the appellants was one that they therefore brought upon themselves by the appointment of the third party distributors in breach of the agreement.
26. The appointment of third party distributors basically also meant that the respondent was unable to continue with the performance of its obligations under the contract in the original terms, and its witness gave evidence on the frustrations it faced from the appellants in that regard. The respondent in effect became just “one of the distributors”. Therefore, even though there was no express affirmation or acceptance by the respondent, one of the legal effects of the appointment of the third-party distributors was that it was deemed that the respondent had accepted the repudiation. The breach therefore effectively discharged the parties from the contract, and what remained was the issue of compensation and damages arising from the breach.
27. Exclusive distribution agreements attract a different consideration from other commercial contracts, and that differentiation was most profound when analysing the relative power dynamics of the parties, especially in terms of termination of those agreements and restriction on, or compensation upon, such termination. That position was mainly informed by the extensive capital investments required of distributors in exclusive distribution agreements to perform their part of the contract, and terminating an exclusive distributorship agreement without proper consideration of that investment could be a costly process for distributors. In common law jurisdictions, courts generally respected the express terms of the distribution agreement between the parties, and in terms of damages, in the event that the supplier terminated the distribution agreement in breach of its terms, then the distributor would have an action for breach of contract and may claim for damages for loss caused as a consequence of the unlawful termination or breach.
28. There were three distinct types of damage arising from the relationships between the parties in the instant matter, namely the damages arising from the breach of the contract including recovery of expenditure incurred and expected profits, and goodwill compensation. The evidence presented by the respondent and accepted by the trial Court arose from expected returns from its investment in the distributorship, which created reasonable expectation that the distributorship contract would be extended for a period necessary for the respondent to recover that investment. Therefore, irrespective and notwithstanding the provisions of the Distribution Agreement, from the workings and reality of their business relationship, Maxam Ltd was in fact and in law a business joint-venture of the appellant, and entitled to a share of their profits from the sales it made. It deployed its capital for the benefit of the appellants, who clearly derived benefit from utilising and appropriating that investment.
29. The respondent also created substantial goodwill for the appellant which established reasonable expectations of compensation. Goodwill, once vested could not be extinguished even if the agreement had an expiry term, and retained its separate character as an enforceable property right. Once goodwill was legally vested, it could not be unilaterally annulled. Given the loss and damage arising from the circumstances of the breach by the appellants, the projection of profits for the period 2017 to 2021 was reasonable and adequate to enable Maxam Ltd to recoup its expenditure and goodwill.
30. The loss of business and expected profits can be established based on reasonable estimations. Even though Clause 21 of the Kenya Distribution Agreement excluded payment of compensation for losses incurred from loss of profits, goodwill and investments made among other, it was notable that the clause only became applicable where the contract was validly terminated, which was not the case in the instant appeal. Reasonable expectations may be based on normative grounds. In Kenya, that normative basis was equity, as set out in Article 10 of the Constitution and defined by the Court of Appeal the body of principles constituting what was fair and right, which were therefore implied and reasonably expected in contracts.
31. . There was no compelling legal or factual basis that would necessitate the Court’s questioning of the award of Kshs 1,799,978,868.00. However, the claim for special damages for loss on decreased volumes of sale totalling to Kshs 11,495,674.00/-; as well as loss of profits totalling to Kshs 5,116,514.00/-, which were particularised in the plaint as arising between the months of August 2017 and November 2017 were actual losses incurred which ought to have been specifically proved. No such evidence was brought by the respondent to justify the award of that head of special damages.
32. Taking of accounts under Order 20 Rule 3 of the Civil Procedure Rules was an interlocutory procedure, and an application was made by chamber summons and supported by an affidavit stating the grounds of the claim to an account; and such application could be made at any time after the time for entering an appearance had expired. It was only in exceptional circumstances that such an account could be made after judgment. An account for profits was also a specific equitable remedy for breach of contract and was an action taken against a defendant to recover the profits taken as a result of the breach of duty, in order to prevent unjust enrichment. In conducting an account of profits, the plaintiff was treated as if they were conducting the business of the defendant, and made those profits which were attributable to the defendant's wrongful actions.
33. The main argument against the availability of an account of profits as a remedy for breach of contract was that the circumstances where that remedy could be granted would be uncertain. That would have an unsettling effect on commercial contracts where certainty was important. Those fears were not well founded. There was no reason why, in practice, the availability of the remedy of an account of profits needed to disturb settled expectations in the commercial or consumer world. An account of profits would be appropriate only in exceptional circumstances.
34. Normally the remedies of damages, specific performance and injunction, coupled with the characterisation of some contractual obligations as fiduciary, would provide an adequate response to a breach of contract. It would be only in exceptional cases, where those remedies were inadequate, that any question of accounting for profits would arise. No fixed rules could be prescribed. The court would have regard to all circumstances, including the subject matter of the contract, the purpose of the contractual provision which had been breached, the circumstances in which the breach occurred, the consequences of the breach and the circumstances in which relief was being sought.
35. Given the characteristics of exclusive beer distribution agreements, they qualifed as “exceptional cases” which necessarily invited the relief of “account of profits” as an effective remedy to balance the rights of the parties in the context of a gain-based award requiring the brewer/manufacturer to account to a distributor for the benefits received during the life of the distributorship agreement. The wrongdoer must be compelled to give up all such gains irrespective of whether the violation had caused the plaintiff any financial immeasurable loss, because gains must be disgorged even though they were not shown to correspond to a disadvantage suffered by the plaintiff. However, that was not a principle of general application, and the applicability of that head of claim must be determined on a case-by-case basis in all other circumstances. “Account of profits” in the context of exclusive beer distribution cases satisfy the “exceptional case” standard.
36. Maxam Ltd laid out a justifiable basis for that relief. It was entitled to an order of account of profits compelling Heineken E.A and Heineken B.V to account for the profits they derived from the utilisation of Maxam Ltd’s capital and infrastructure and therefore the share of Heineken E.A’s and Heineken B.V’s profits which ought to accrue to Maxam Ltd. However, the relief was sought and granted at an interlocutory stage, and was not granted as a final order in a judgment.
37. The judgment could not remain “open” for the taking of account of profits after final judgment was rendered by the trial Court, absent any exceptional circumstances to justify the order of taking of accounts. However, the entire judgment was not a nullity because it was an “open judgment”, since the offending portion was but one of the orders granted by the trial Court, and was therefore severable.

Appeal partly allowed.

Orders

1. The consolidated appeals by Heineken E.A and Heineken B.V were dismissed, save for the grounds on the application of the doctrine of legitimate expectation and on the order for account for profits.
2. The following orders of the High Court were set aside consequent to the findings made in the instant judgment:
   a. The injunction order restraining Heineken E.A and Heineken B.V from;
   i. Terminating the distribution agreement dated May 21, 2013 between Maxam Ltd and Heineken E.A relating to the distribution of the Heineken larger beer brand in Kenya contrary to the terms of the agreement.
   ii. Appointing any other distributor for the distribution of the Heineken larger beer brand in Kenya contrary to the terms and conditions of the agreement.
   b. The declaration issued that the Kenyan Distribution Agreement dated May 21, 2013 between Maxam Ltd and Heineken E.A was in full force and effect as per the terms and conditions set out therein.
   c. The declaration issued that the actions and breach by Heineken E.A and Heineken B.V had infringed on Maxam Ltd’s rights as protected by Article 19 of the Constitution.
   d. The declaration issued that the conduct of Heineken E.A and Heineken B.V of offering lower market prices to other distributors of the Heineken Larger Beer, approving higher market prices to Maxam Ltd on the same products and arbitrarily reducing Maxam Ltd’s approved margins was discriminatory and offended the provisions of Article 27(2) of the Constitution.
   e. The declaration issued that the pricing models imposed on Maxam Ltd by Heineken E.A and Heineken B.V without Maxam Ltd’s prior consultation and/or express consent, and which models were issued subsequent to the Court order of August 28, 2017 were exploitative, oppressive, unfair, null and void.
   f. The order issued directing the taking of accounts in respect of loss of profits occasioned to Maxam Ltd by reason of reduced volumes of sales as well as reduced profit margins from September 2017 until the date of the judgment of the High Court.
   g. The special damages for loss of profits as tabulated in prayer (i) of the plaint that were awarded to Maxam Ltd.
3. The order by the High Court directing Maxam Ltd to submit the Distributorship Agreement dated March 21, 2013 to the Stamp Duty Collector for assessment of the duty payable, upon which Maxam Ltd was to pay the amount in the normal manner within 7 days from the date of the judgment, and a copy of the stamped document bearing stamp duty collector’s stamp and court stamp be submitted to the Deputy Registrar within 4 days from such stamping by court for record purposes, was affirmed and upheld.
4. The declaration issued by the High Court that the Notice of Termination dated January 27, 2016 from Heineken E.A to Maxam Ltd was unlawful, irregular, unprocedural and therefore null and void, was affirmed and upheld.
5. The award by the High Court to Maxam Ltd of special damages for loss of business of Kshs. 1,799,978,868.00 to be paid by Heineken E.A and Heineken B.V, arising from their repudiatory breach of the Kenya Distribution Agreement, was affirmed and upheld.
6. . Heineken E.A and Heineken B.V shall pay Maxam Ltd the costs of the trial in the High Court and of the consolidated appeals.

Held:

1. The requirement for a court to consider and weigh all the evidence did not mean that the judgment must also include a complete embodiment of all the evidence led, as if it comprised a transcript of the proceedings. All it meant was that the summary of the evidence led had to entail a complete embodiment of all the material evidence led. In order to determine whether there was any merit in the accusation that some evidence was disregarded, the appellate court had to consider the evidence presented in the trial court, juxtapose it against the judgment by the trial court, and the 1st appellate court and finally determine whether there was any basis for interfering with the judgment.
2. If the appellate Court was of the view that a particular fact was so material that it should have been dealt with in the judgment, but such fact was completely absent from the judgment or merely referred to without being dealt with when it should have, that would amount to a misdirection on the part of the trial court. The Court of Appeal must then consider whether the said misdirection, viewed either on its own or cumulatively together with any other misdirection, was so material as to affect the judgment, in the sense that it justified interference with. The 1st respondent and the High Court considered all the material before them. There was no misdirection on the part of the High Court. Therefore, there was no merit in the argument that the High Court did not consider the appellant’s evidence or that the decision was unsupported by evidence. The 1st respondent considered all the material presented to it.
3. Judicial Review was entrenched in Article 47 of the Constitution. The Fair Administrative Action Act expanded the scope of judicial review grounds beyond those traditionally recognized by the common law. A reading of the impugned clause left no doubt that it applied to all bidders without any exception as opposed to a particular bidder. The trial court was correct in its finding to that effect. Accordingly, no cogent evidence was adduced to support the assertion that the impugned clause only targeted the appellant. Accordingly, the appellant’s argument that the clause only referred to it lacked merit. In any event, despite taking the view that the application before the trial court was a judicial review application, a reading of the judgment showed that the trial court addressed the merits of each parties’ case. Therefore, there was no misdirection that could occasion injustice to the appellant.
4. The Constitution only prohibited unfair discrimination. Notably, the impugned clause required a tenderer or its associates not to have been convicted or paid any fines anywhere in the world, directly or indirectly, for any irregularities regarding government contracts such as bribery or organizational deficiency. That was only one of the many other eligibility criteria set out in the tender document as a pre- qualification. There was nothing on record to suggest that the clause only applied to the appellant and not to all prospective bidders. A clause setting out eligibility requirements could not be said to be discriminatory unless it specifically barred a particular person or entity and allowed others in similar situations. The appellant maintained that the fine it paid in Switzerland did not amount to culpability. If that was the case, one wondered why then it found the clause offensive in Kenya. There was nothing wrong or unconstitutional or impermissibly discriminatory on the impugned clause. If anything, the clause met the constitutional muster in Articles 10 and 227.
5. A jurisdictional error arose when a decision-maker exceeded the authority or power conferred upon it. It meant that the decision-maker had failed to comply with an essential condition to or limit on the valid exercise of power, and that rendered the decision invalid. A reading of the entire record showed that there was no attempt before the Court of Appeal to demonstrate that the 1st respondent exceeded its authority or failed to comply with an essential condition in the exercise of its functions. The 1st respondent’s proceedings clearly showed that the 1st respondent properly discharged its functions in accordance with the PPAD Act.
6. The 1st respondent had not failed to interpret or apply the law correctly. A judicial review court was not required to interfere with the findings of a trial court just because it could have arrived at a different conclusion. What was important was that the Court had to be satisfied that there was a misdirection which occasioned injustice.
7. An error of law referred to any ruling, decision, or process that conflicted with the principles of the law. An error of the law implied failure to correctly apply the law, leading to a violation of the litigants' rights. There was nothing in the appellant’s arguments or in the High Court judgment that suggested that it suffered from an error of law. The 1st respondent’s decision did not suffer from unreasonableness. Both the High Court and 1st respondent carefully considered all the evidence tendered by the parties.
8. The appellant maintained that the term “organizational deficiency” was not defined under Kenya’s law. That could be so. However, not all terminologies were defined in law. It was also not demonstrated that a set of facts or circumstances or an act or omission arising from “organizational deficiency” could not constitute an offence known to the law or misconduct which could taint a procurement process. If any person bore the burden of explaining what the said terminology meant, it was the appellant and not the Court. The appellant could not purport to blame a terminology which it was not called upon to define.
9. Under Swiss law, companies were liable in cases where the company’s inadequate organisation meant that an offence was not prevented. If criminal charges were brought against a company in Switzerland, they were often for “defective organization”. That was due to the two-tier system in which – in line with Article 102 of the Swiss Criminal Code – corporate criminal liability was regulated.
10. . Kenya did not have similar provisions in its statutes. However, it had not been demonstrated that the so called “organizational deficiency” could not lead to the commission of an offence known to the law in Kenya. Much as the appellant blamed the 1st respondent and the High Court for failing to interrogate the terminology, it was not lost to the Court of Appeal that the appellant never availed to the Board and the High Court the details of the alleged settlement with the Attorney General of Switzerland for them to appreciate what the settlement entailed and whether there was any malpractice. The appellant was heavily guarded in making a full disclosure of such crucial facts, yet it expected the courts below to make a finding that the said clause was unfairly targeting it. Therefore, the two courts below could not be blamed for failing to define that terminology. Conversely, the appellant had an evidential burden to prove that the term had no adverse consequences to it and therefore its use was unfair.
11. . A clause that sought to bar a prospective bidder who had been fined, convicted or paid any fines anywhere in the world, directly or indirectly for any irregularities regarding government contracts such as bribery or organizational deficiency could not be said to offend the provisions of sections 2, 41, 55, 58, 62 and 80 (3) of the PPAD Act. Such a clause was underpinned by Articles 10 and 227 of the Constitution, section 3 of the PPAD Act and the Public Finance Management Act, all of which lay down the principles of public procurement and disposal of public goods and management and use of public finance.
12. The attempt to invoke section 41 of the PPAD Act was inappropriate. That provision dealt with debarment which was essentially a different process, and it was not a bar to the mandatory eligibility clauses in a bid document. All bids had mandatory eligibility criteria. The appellant never attached the entire tender document but only exhibited some pages. It would have been prudent to avail the entire document to the Court. Nevertheless, clause 3 of the document attached by the appellant had explicit clauses relating to fraud and corruption which the appellant was not complaining about. Clause 4.6 of the same documents also provided more instances of ineligibility where a tenderer had been sanctioned by PPRA or was under suspension or debarment. The appellant’s argument in opposition to the impugned clause was tantamount to suggesting that ineligibility clauses in a bid document were unconstitutional and contrary to the law. That was not so. The appellant’s argument challenging the impugned clause had no merit, and the attempt to hide behind section 41 of the Act did not help at all, otherwise, entertaining the said argument was tantamount to saying no bid document should contain mandatory eligibility criteria.
13. A Procuring Entity was permitted to customize its bid document to suit its needs. That was an international tender which was open to tenderers from any part of the world. The Procuring Entity acted lawfully by ensuring that all bidders, whether from Kenya or from other jurisdictions, who may have committed malpractices relating to the matters cited in the impugned clause do not take advantage of the absence of such a clause. Such a clause not only enjoyed constitutional underpinning under Articles 10 and 227, but was also aimed at ensuring that public procumbent and asset disposal was not polluted by unethical and unscrupulous tenderers.
14. The tender being an international tender, it was important that the bidders thereof be entities of proven ‘corporate hygiene’ both in Kenya and in the countries where they were incorporated at or other countries where they operate. One of the guiding principles of public procurement under section 3(g) of the PPAD Act was adherence to international norms. It was not demonstrated that organizational deficiency in Switzerland was innocuous or of no consequence in public procurement in Kenya.
15. Judicial review orders were discretionary and were not granted automatically, hence a court could even refuse to grant them even where the requisite threshold had been attained since the court had to weigh one thing against another and see whether or not the remedy was the most efficacious in the circumstances obtaining, and since the discretion of the court was a judicial one, it must be exercised on evidence of sound legal principles. Further, whenever the court was vested with discretion to do certain acts as mandated by statute, the same had to be exercised judiciously and not in an arbitrary and capricious manner. Once that was demonstrable from the record, it would be difficult for the appellate court to interfere with the exercise of the lower court's discretion. There was no misdirection at all on the part of the High Court in the exercise of its discretion in refusing to grant the judicial review orders sought.

TAppeal dismissed with costs to the respondents.