Carosa Investments Limited v Kobil Petroleum Limited [2017] KEHC 1373 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

CIVIL APPEAL  NO. 488  OF 2014

CAROSA INVESTMENTS LIMITED...................................APPELLANT

-V E R S U S –

KOBIL PETROLEUM LIMITED.......................................RESPONDENT

(Being an appeal from the judgement of Hon. M. Chesang (Mrs) A.G Senior Resident Magistrate delivered on 1st October, 2014 in Nairobi CMCC No. 1177 of 2006)

JUDGEMENT

1) Carosa Investments Ltd, the appellant herein, filed an action before the Chief Magistrate’s Court, Milimani Commercial Court, Nairobi against Kobil Petroleum Ltd, the respondent herein.  In the aforesaid suit the appellant sought for judgment against the respondent in the sum of ksh.1,270,024/15.  The aforesaid amount is alleged to have arisen from a deposit of ksh.2,000,000/= pursuant to an agreement dated 25. 10. 2004.  The respondent filed a defence to defend the claim.  The suit was heard by Hon. M. Chesang, learned Senior Resident Magistrate, who eventually dismissed the suit on the basis that Robric Ltd had no locus standi in the dispute nor any relevance to the suit.  The learned Senior Resident Magistrate was of the view that Robric Ltd was a separate legal entity from Carosa Investments Ltd.  Being aggrieved by the aforesaid decisions, the appellant preferred this appeal.

2) On appeal, the appellant put forward the following grounds of appeal in its memorandum:

1. THAT the learned trial magistrate erred in both fact and law in failing to consider the admissions made by the defendant in its pleadings particularly the amended defence.

2. THAT the learned trial magistrate erred in law  and fact in failing to consider and evaluate the evidence tendered before her at the suit’s hearing.

3. THAT the learned trial magistrate erred in law and fact by failing to appreciate that duties and obligations of Robric Limited were transferred to the plaintiff.

4. THAT the learned trial magistrate erred in law and fact by holding that Robric Limited had no relevance to the plaintiff’s suit.

5. THAT the learned trial magistrate erred in law and fact in failing to consider the parties’ written submissions; in particular the plaintiffs.

6. THAT the learned magistrate erred in law and fact in failing to consider all the facts presented before her judiciously.

3) When the appeal came up for hearing, learned counsels recorded a consent order to have the appeal disposed of by written submissions.  At the time of writing this judgment, the appellant was the only party who had filed its submissions.  I have re-evaluated the case that was before the trial court.  I have also considered the appellant’s written submission.  It would appear from the pleadings and the evidence tendered before the trial court that Robric Ltd entered into a Dealer’s Licence agreement with the respondent to inter alia operate a petrol station in the name of the respondent.  On the request of the respondent Robric Ltd deposited ksh.4,000,000/= to be utilised as security deposit and working capital.  After the agreement was executed, the appellant took over the operations of the petrol station and proceeded to execute a Dealer Licence with the respondent dated 25. 10. 2004 with a clause requiring the appellant to deposit with the respondent a sum of ksh.4,000,000/= to be utilized as security deposit and working capital for product purchase.  The appellant proceeded to credit the amount paid by Robric Ltd in favour of the appellant as security deposit and working capital for product purchase.  The appellant avers that it was forced to file the suit before the trial court against the respondent when the respondent refused or neglected to refund the security deposit.  Hon. Chesang heard the suit and eventually dismissed the same on the basis that Robric Ltd has locus standi or any relevance in the dispute since it was a separate legal entity.  The learned Senior Resident Magistrate further stated that there was no justification for the payment of interest at the rate of 24% as opposed to 1. 2% provided for in the agreement binding the parties.

4) The six grounds of appeal put forward by the appellant are interrelated hence, I will determine them together.  The appellant has argued that the trial magistrate erred when she failed to appreciate that the respondent had admitted in its amended defence that it received a sum of kshs.4,000,000/= from Robric Ltd and that it had expressed its intention to operate the petrol station in the appellant’s name.

5) With respect, I agree with the submission of the appellant that the trial magistrate fell into error when she dismissed the appellant’s suit.  It is evident from paragraph 4(e) of the defendant’s amended defence that the defendant (respondent) maintained the deposit paid by Robric Ltd under a trading account in the plaintiff’s name.  It is doubtful whether the respondent would have maintained a trading account for the appellant if no working capital or security deposit had been paid by the appellant.  A critical examination of the evidence of PW1 will reveal that the sum of ksh.4,000,000/= paid by Robric Ltd was utilized by the respondent in favour of the appellant and this piece of evidence was never shaken nor controverted by the respondent in cross-examination.  There is no doubt that the suit was dismissed mainly on the basis that the appellant did not have locus standi to claim money paid by Robric Ltd since it was a distinct legal entity from the appellant.  Though the doctrine of separate legal entity was properly laid out, it may not apply in the circumstances of this case since it appears that the appellant and Robric Ltd had a mutual agreement in which the appellant was allowed to utilize the deposit paid by Robric Ltd to operate an account with the respondent.

6) In the end, I find this appeal to be meritorious.  I allow the appeal.  Consequently, the order dismissing the appellant’s suit dated 1st October 2014 is set aside.  The order which commends itself in the circumstances of the matter is that the suit is restored and should be heard denovo before another magistrate of competent jurisdiction other than Hon. Chesang.

7) Costs of the appeal is awarded to the appellant.

Dated, Signed and Delivered in open court this 6th   day of November, 2017.

J. K. SERGON

JUDGE

In the presence of:

............................for the Appellant

............................for the Respondent