Equatorial Commercial Bank Limited v Kewal Contractors Limited,Parminder Singh Manku,Harjeet Singh Manku & Baljinder Kaur Manku [2017] KEHC 9993 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

MILIMANI LAW COURTS

COMMERCIAL & TAX DIVISION

CIVIL CASE NO. 656 OF 2010

EQUATORIAL COMMERCIAL BANK LIMITED..............PLAINTIFF

-VERSUS-

KEWAL CONTRACTORS LIMITED......................1ST DEFENDANT

PARMINDER SINGH MANKU...............................2ND DEFENDANT

HARJEET SINGH MANKU....................................3RD DEFENDANT

BALJINDER KAUR MANKU..................................4TH DEFENDANT

RULING

[1]Before the Court for determination is the Amended Notice of Motion dated 20 March 2017 and filed herein on 21 March 2017. It was filed on behalf of the Plaintiff by the law firm of M/s Muthaura Mugambi Ayugi & Njonjo Advocates pursuant to Article 40 and 67 of the Constitution; Part VIII of the Land Act, 2012; Sections 1, 1A, 1B, 3 and 3Aof the Civil Procedure Act, Chapter 21 of the Laws of Kenya; Order 13 Rule 2,Order 40 Rules1 and 11 and Order 51 Rule 1 of the Civil Procedure Rules, 2010 and any other applicable provisions of the law. The orders sought thereby are as hereunder:

[a] That the Court do give judgment in favour of the Plaintiff  herein for the sum of Kshs. 30,000,000/=which has been expressly admitted on oath as owing and due to the Plaintiff by  the Defendants in the pleadings filed before the Court; and upon entry of judgment, the said sum be released from the joint account number 2037086471 held at Barclays Bank of Kenya Limited in the names of Muthaura Mugambi Ayugi & Njonjo  Advocatesand Magare Musundi & Company Advocates;

[b] That the Court do issue a declaration and direction that the amounts secured in the facility documents  [being a sum of Kshs. 51,132,632. 08as at 31 August 2010 which continues to accrue interest thereon at 20% per annum until payment in full] in favour   of the Plaintiff herein be settled in priority from the compensation funds before any payment to any other parties including the Defendants;

[c] That the costs of an incidental to the application be borne by  the Defendants.

[2] The application was predicated on the grounds that, at the request of the 1st Defendant, the Plaintiff advanced various financial facilities to the 1st Defendant, being hire purchase agreements, overdraft facilities and long and short term loans, to cater for its working capital requirements; and that the said facilities were secured by a number of securities, which included third party charges over Land Reference No. 209/8343/155and Land Reference No. 15052 (IR No. 52294) off Mombasa Road, Embakasi (hereinafter the Suit Property). It was further the contention of the Plaintiff that its efforts to recover the outstanding sums from the Defendants have been unsuccessful and there are in fact outstanding warrants of arrest against the 2nd and 3rd Defendants issued on 1 October 2010 which have remained unexecuted todate largely because the 2nd and 3rd Defendants have been evading the law enforcement agents.

[3] It was averred by the Plaintiff that in the course of time, the Government of Kenya announced plans to construct a Standard Gauge Railway from Mombasa to Nairobi through an advert in the Daily Nation on 3 June 2015 pursuant to Section 14 of the National Land Commission Act, and the Suit Property was listed as one of the properties along the Standard Gauge Railway Corridor that were under review for purposes of compulsory acquisition. The process was finalized and compensation paid, which was, by order of the Court dated 27 September 2016, paid into Account No. 2037086471 held at Barclays Bank of Kenya Limited in the joint names of Counsel for the parties herein.

[4] The Plaintiff now seeks judgment on admission contending that the Defendants have in their pleadings admitted owing Kshs. 30,000,000 and averred that it would only be fair and just to grant the orders prayed for including the release of the escrow funds. The account was also supported by the affidavit of Keziah Rutto, sworn on 20 March 2017, to which the Plaintiff annexed, inter alia, copies of the pleadings in issue, warrants of arrest and Inhibition issued in execution and a copy of the Notice for review of Grants as advertised in the Daily Nation newspaper, as well as the Award from the National Land Commission.

[5] The application was opposed by the Defendants and their common position, as deposed to in the Replying Affidavit sworn by the 2nd Defendant, Parminder Singh Manku on 29 May 2017, is that, whereas they admit that certain financial facilities were advanced to the 1st Defendant as stated by the Plaintiff, no admission was made by the 2nd Defendant in the affidavits and pleadings referred to herein. It was averred by the 2nd Defendant that the figure of Kshs. 30,000,000 stated in his Replying Affidavit sworn on29 July 2013 was a mere approximation and was therefore subject to confirmation, granted that the Defendant had made substantial payments towards reducing the outstanding loans; and that there is need for a forensic audit to be undertaken with a view of ascertaining the exact amount due before any payment can be sanctioned. To this end, the Defendants relied on the In Duplum Rule, contending that the interest claimed is more than the loan amount. It was accordingly their contention that this is not a suitable case for the entry of judgment on admission as has been sought by the Plaintiff.

[6] The parties' respective positions were amplified by their Counsel in the written as well as oral submissions made herein. Mr. Nyaribo,Learned Counsel for the Plaintiff, reiterated the Plaintiff's contention that despite concerted efforts to execute the warrants of arrest that were issued herein against the 2nd and 3rd Defendants, the Plaintiff has been unsuccessful, and that one of the reasons has been because the 2nd Defendant in particular, has been keeping house. He therefore urged the Court not to be considerate to parties who have been out to subvert the due process of the law. It was further argued that since the Defendants have admitted in clear terms that they owe the Plaintiff Kshs. 30,000,000 in paragraph 18 of the Replying Affidavits sworn on29 July 2013and 18 July 2016 (filed on 22 July 2016) as well as the formal letter of admission of debt dated 19 May 2009. It was on that basis that the prayer for judgment and release of the admitted portion of the debt was predicated.

[7] Mr. Musundi, Learned Counsel for the Respondent, relied on the skeletal submissions filed herein on 31 May 2017 together with their List and Bundle of Authorities filed therewith. Their argument was that the purported admission, which simply stated that the loan was approximately Kshs. 30,000,000, was no admission at all as it is not unequivocal for purposes of Order 13 Rule 2 of the Civil Procedure Rules; and that all the 2nd Defendant stated is that the 1st Defendant borrowed Kshs. 30,000,000 and that a total sum of Kshs. 15,000,000 has since been paid. Counsel further submitted that the bank statements supplied do not reflect the correct status of the Defendants' account, and therefore the Defendants intend to rely on the In Duplum Rule to dispute the outstanding debt by way of a forensic audit. Counsel relied on the cases of Sunrose Nurseries Ltd vs. Gatoka [2012] eKLR;HarithSheth T/A Harit Sheth Advocates vs. Shamas Charania [2014] eKLR and Scholastica Nyaguthi Muturi vs. Housing Finance Co. of Kenya Ltd & Another [2017] eKLR, as well as Section 44A of the Banking Act, Chapter 488 of the Laws of Kenya, in support of his arguments.

[8] Order 13 Rule 2of theCivil Procedure Rules is the key provision under which the application has been brought. It provides that:

“Any party may at any stage of a suit, where admission of facts has been made, either on the pleadings or otherwise, apply to the Court for such judgment or order as upon such admissions he may be entitled to, without waiting for the determination of any other question between the parties; and the Court may upon such application make such order, or give such judgment as the Court may think just.”

[9] In the Choitram Vs Nazari (1984) KLR 327the foregoing provision was the subject of interpretation and in that regard, the Court stated thus:

“Admissions have to be plain and obvious…and clearly readable because they may result in a judgment being entered. They must be obvious on the face of them without requiring a magnifying glass to ascertain their meaning…”

(See also Harit Sheth t/a Harit Sheth Advocates vs. Shamas Charania [2014] eKLR)

[10]  Having perused and considered the Plaintiff's application filed on 21 March 2017, the grounds relied on as well as the averments in the affidavits filed herein in connection with that application in the light of the proceedings and pleadings filed herein, there appears to be no dispute that the Plaintiff did accord the 1st Defendant various financial facilities for which the 2nd, 3rd and 4th Defendants provided third party securities. The record is clear that, on account of default by the 1st Defendant in servicing the facilities, the Plaintiff opted to file this suit in recovery. As at 1 October 2010 when this suit was filed, an amount of Kshs. 51,132,632. 08 was said to be owing to the Plaintiff, and contemporaneously with the Plaint, the Plaintiff filed the application dated 30 September 2010, seeking warrants of arrest against the 1st and 2nd Defendants to show cause why they should not furnish security in the sum of Kshs. 51,743,502. 08 for their appearance in Court when required to. That application was allowed on 9 June 2011 and all indications are that the warrants are yet to be executed.

[11]  There is further no contestation that one of the parcels of land offered as security has since been compulsorily acquired by the Government of Kenya for the construction of the Standard Gauge Railway and compensation paid to the 4th Defendant, which monies are in an escrow account held in the joint names of Counsel on record herein. Orders in that regard were made by consent of the parties on 17 October 2016. Given the agreed facts aforementioned, the single issue for my determination is whether a good case has been made by the Plaintiff for entry of judgment on admission as prayed. In this regard, I have looked at the documents referred to in the Supporting Affidavit as embodying the admission. The first is paragraph 18 of the 2nd Defendant's Affidavit sworn on 29 July 2013 in which the 2nd Defendant deposed thus:

"THAT paragraph 22 is untrue as our loan balance is approximately Kshs. 30,000,000/= only but our bank statement indicates Kshs. 39,000,000/=. The Plaintiff, despite receiving monies from us continues to mislead the court and that is why they have not even annexed a bank statement to show the extent of our indebtedness."

[12]  In my careful consideration, the foregoing cannot be said to be an unequivocal admission, an admission which is plain on the face of it, the Defendants owed the Plaintiff Kshs. 30,000,000. The averment continues to raise questions about the exact extent of the Defendants' indebtedness on the ground that some payments had been made. It is noteworthy too that the averment was made in 2013, and therefore it would require evidence for the Court to ascertain whether and when the alleged payments were made by the Defendants.

[13]  The second document that is said to contain admissions of indebtedness by the Defendants is the 2nd Defendant's Replying Affidavit sworn on 18 July 2016 which was filed herein on 22 July 2016. Having carefully perused that affidavit, I find nothing therein that can be construed to be an admission of Kshs. 30,000,000 as is alleged by the Plaintiff. The purport of that affidavit is that there were sums of money due and owing to the Plaintiff but the amount was not clear, for which reason it was averred that:

"...the Respondents are ready and willing to settle the sums due and owing herein from the compensation that is rightfully due from the Interested Party once the sums due and owing have been ascertained and/or agreed upon by both parties."

[14]  As for the letter dated 19 May 2009which appears at page 97 of the Plaintiff's initial application dated 30 September 2010, that is a letter that was written, not by the Defendants, but by the Plaintiff to the Defendant by which the Plaintiff accepted the Defendants' proposal for the regularization of their accounts on terms. One of the terms was that the Defendants were to acknowledge the debt of Kshs. 49,322,771 that was outstanding as at 1 February 2009. That letter is therefore of no help to the Plaintiff's cause in terms of proving an admission for purposes of Order 13 Rule 2 of the Civil Procedure Rules.

[15]  In addition to the foregoing is the Defendant's postulation that the In Duplum Rule applies hereto. I note the contention of the Plaintiff's Counsel that this aspect was not pleaded by the Defendants in their Defence. However, it is trite that pleadings ought to contain only facts. (see Order 2 Rule 3(1) of the Civil Procedure Rules);and that whereas it is permissible for a party to raise any point of law in his pleading by dint of Rule 9 of Order 2, this is not obligatory. In particular, Order 2 Rule 3(4) is explicit that:

"A party need not plead any fact if it is presumed by law to be true or the burden of disproving it lies on the other party, unless the other party has specifically denied it in his pleading."

Accordingly, I take the view that the Defendant is not necessarily precluded from raising the In Duplum Rule for consideration at the trial hereof.

[16]  In the premises, since a clear point of law emerges from the case presented by the Defendants, it cannot be said that there is an unequivocal admission of the sum of Kshs. 30,000,000 as alleged by the Plaintiff; and in this respect, I find instructive the case of Cassam Vs Sachania[1982] KLR 191in which it was held that:

“Granting judgment on admission of facts is a discretionary power which must be exercised sparingly in only plain cases where the admission is clear and unequivocal… Judgment on admission cannot be granted where points of law have been raised and where one has to resort to interpretation of documents to reach a decision.”(Emphasis supplied)

[17]  The foregoing being my view of the matter, and considering that the tenor and spirit of Article 159 (2) (d)of the Constitution of Kenya is to give parties a hearing without undue regard to procedural technicalities, it is my finding that the Notice of Motion dated 20 March 2017 ought to be dismissed and the main suit proceeded with to hearing and disposal on merits, on the ground that the so called admission is neither unconditional nor unequivocal.Costs thereof to be in the cause.

Orders accordingly.

DATED, SIGNED AND DELIVERED AT NAIROBI THIS 12TH SEPTEMBER 2017

OLGA SEWE

JUDGE