Topaz Petroleum Limited v Kenya Pipeline Company; Energy and Petroleum Regulatory Authority (Interested Party) (Commercial Case E719 of 2024) [2025] KEHC 13056 (KLR) (Commercial and Tax) (18 September 2025) (Ruling)

Key Facts

Transaction Type

Issues

• The court determined whether the Plaintiff's request to refer the matter to arbitration was valid, considering that the debt was admitted and no actual dispute existed under Clause 22.0 of the TSA. The court concluded that arbitration was inapplicable as there was no genuine dispute to resolve.
• The court assessed if the Applicant satisfied the requirements for injunctive relief under Section 7 of the Arbitration Act and Order 40 of the Civil Procedure Rules. It found that Topaz failed to demonstrate a prima facie case, irreparable harm, and balance of convenience, leading to the dismissal of the injunction application.

Holdings

• The court referred the parties to mediation regarding whether KPC's actions fell within the dispute resolution framework under the Energy Act. This was due to insufficient clarity in the evidence presented at the time of the ruling.
• The court found that Topaz's failure to pay invoices under the TSA triggered KPC's lien rights. Topaz's non-payment was undisputed, and KPC's subsequent actions to sell petroleum products were deemed in accordance with the contract's default mechanism.
• The court dismissed Topaz's application for referral to arbitration and injunction, finding it without merit. The court determined that Topaz had admitted the debt, rendering arbitration inappropriate as there was no actual dispute. Additionally, Topaz failed to meet the legal criteria for an injunction, having not established a prima facie case of infringement of contractual rights.

Remedies

• All existing interim orders, including those related to the application, were discharged by the court.
• The court referred the parties to mediation to address the dispute resolution framework under the Energy Act. Further directions for the main suit will depend on the mediation's outcome.
• The court dismissed the plaintiff's application for arbitration and injunction with costs, determining it was without merit.

Legal Principles

• The court emphasized that parallel proceedings in court and arbitration constitute an abuse of process, as the applicant could not simultaneously pursue litigation and arbitration under the same dispute. This aligns with the doctrine of exhaustion of remedies, requiring adherence to contractual dispute resolution mechanisms before seeking judicial intervention.
• The court applied the criteria for granting an interim injunction as outlined in Giella v Cassman Brown [1973] EA 358, requiring the applicant to establish a prima facie case, demonstrate irreparable injury, and show the balance of convenience favors injunctive relief. The applicant failed to meet these thresholds, particularly the prima facie case, as the debt was admitted and the contractual mechanism for recovery was in place.

Precedent Name

• Mrao Ltd v First American Bank of Kenya Limited and 2 Others
• Giella v Cassman Brown

Key Disputed Contract Clauses

• Clause 16.3 of the TSA grants KPC a lien on Topaz's petroleum products after 60 days of non-payment. The court upheld KPC's enforcement of this clause to sell products for debt recovery, finding it lawful under the contract.
• Clause 16.2 of the TSA, requiring Topaz to pay invoices, was central to the dispute. The court found Topaz had admitted non-compliance with this obligation, triggering KPC's contractual rights under the lien provision.
• The court analyzed Clause 22.0 of the Transportation and Storage Agreement (TSA), which mandates arbitration for disputes arising from the agreement. It determined that arbitration was inapplicable because the debt was admitted, leaving no actual dispute to resolve.

Cited Statute

• Energy Act (Chapter 314 of the Laws of Kenya)
• Civil Procedure Rules
• Energy (Complaints and Dispute Resolution) Regulations, 2012
• Arbitration Act
• Petroleum Act (Chapter 308 of the Laws of Kenya)

Judge Name

Passage Text

• I am satisfied that the Applicant has not met the threshold for a grant of injunction as set out in Giella v Cassman Brown [1973] EA 358, namely:- a. Establish his case only at a prima facie level, b. Demonstrate irreparable injury that cannot be compensated by way of damages if a temporary injunction is not granted, and c. Ally any doubts as to (b) by showing that the balance of convenience is in his favour.
• It is also evident that the action by the Respondent was in accordance with the terms of the TSA contract, which provides for an agreed on, an inbuilt mechanism for recovery of the debt. Clause 16.3 of the Agreement provides as follows: KPC shall have a lien on equivalent Product Quantity upto the extent of exposure belonging to the OMC in custody of KPC. After 45 days' notice from the due date, KPC shall be at liberty to sell all such products and apply the proceeds of such sale to the satisfaction of such lien and all proper charges and expenses...
• Based on the reasons as set out above, I find that the Application is without merit. The same is accordingly dismissed with costs.

Damages / Relief Type