Equatorial Commercial Bank Limited v Rural Electrification Authority, Bear Afic (K) Limited & Mohammed Issak Ali t/a Freestyle Investment [2017] KEHC 2491 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

COMMERCIAL & ADMIRALTY DIVISION

CIVIL SUIT NO.    361  OF  2015

B E T W E E N:

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

Versus

RURAL ELECTRIFICATION AUTHORITY……………....……………… 1ST DEFENDANT

BEAR AFIC (K) LIMITED ……………………………………………..… 2ND DEFENDANT

and

MOHAMMED ISSAK ALI  Trading as

FREESTYLE INVESTMENT  ….…....……… APPLICANT/INTENDED 3RD DEFENDANT

R U L I N G

1. The Court has before it two Applications.   The First is dated 4th September 2015 but appears to have been filed on 4th September 2015 but did not come before the Duty Judge (Hon E. Ogola J) until 8th September 2015.  The first Application is filed on behalf of a Mohammed Issak Ali trading as Freestyle Investment who wishes to be joined as a party to the ongoing suit and application.   The Second Application is dated 27th November 2015 and was filed on 2nd December 2015 under a Certificate of Urgency seeking variation and/or discharge of the Order of the Court made on 22nd July 20015 and extended on 29 July 2015.

2.  The Application dated 4th September 2015 (“First Application”) does not state which provisions it is brought under but seeks the following Orders:

“1. THAT the Honorable Court be pleased to grant leave to applicant to be enjoined as a third Defendant in this suit.

2.  THAT the Honorable Court be pleased to grant leave to the parties herein to amend the pleadings herein where necessary

3.   Costs of the application be provided for.”(sic)”

3. The Application is brought on the following grounds:

i).  THAT the applicant has a claim over the subject matter of this suit being tender number REA/12-13/OT/012 of supply of 75MMSQ ASCR CONDUCTORS and the proceeds there from, the same having been assigned or sold and forfeited to him by the 2nd Defendant.

ii). THAT the applicant has a direct interest in the subject matter the same having been transferred sold and or forfeited to him on the 13th day of June 2015

iii).  THAT the enjoinment of the applicant in this suit as a Defendant will go a long way to assisting this Honourable (sic) to effectively and completely adjudicate and settle all the questions involved in the suit.

The  reasons for Urgency put forward were:

1. THAT the applicant is the legal owner of the subject matter of this suit being tender number REA/12-13/OT012 OF SUPPLY OF 75MMSQ ASCR CONDUCTORS and the proceeds there from, the same having been assigned or sold and forfeited to him by the 2nd Defendant.

2. THAT the injunctive orders  herein have frozen the account from which the Applicant’s payment is due and the same is causing him untold hardships

3. That it is in the interests of justice that the annexed application be heard during the current vacation in order to safeguard the interest of the 3rd [intended] Defendant/Applicant.

4. In it Mr Ali states:

“1. THAT I am the applicant herein and therefore am competent to swear this affidavit in support of the application herein.

2. THAT I am a businessman trading in the name and style of M/S FREESTYLE INVESTMENT a duly registered business firm

3. THAT on or about the 5th day of May 2015 I was awarded a tender by the 1st Defendant for supply of 1000 Kilometers of 75MM2 ACSR CONDUCTORS as per the letter of offer for purchase dated the 5th day of May 2015 (Exhibited as MIA-1)

4. THAT on or about 19th May 2015 i was issued with a local purschase order number 10002383 for supply of 1000 kilometers of 75 MM2 ACSR CONDUCTORS by the 1st Defendant (Exhibit “MIA-2”)

5. THAT on or about the 6th day of May 2015 I wrote my letter to acknowledging the aforesaid local purchase order (Exhibit “MIA-3”)

6. THAT on or about the month of June 2015, having learnt that the 2nd Defendant had similar conductors and that its contract of supply had expired I initiated negotiations with the 2nd Defendant which gave rise the said 2nd Defendant assigning, selling out or forgeiting its right to supply the said conductors on a negotiated buy out amount (Exhibit“MIA-4”).

7. THAT as per the resolution of the Company board the purpose of the buy-out was to enable them settle its loan with the plaintiff

8. THAT it is important that I am enjoined as defendant so as to assist the Court to effectively and completely adjudicate and settle all questions involved in teh suit herein.

9. THAT my payment pursuant to the aforesaid tender has been stopped by the injuctive orders herein, I therefroe have a direct interest in the subject matter herein as purchaser

10. THAT I have since delivered the consignement to the 1st Defendant as per my aforesaid contract.

11. THAT I swear this affidavit in support of the appliction herein to be enjoined as a party to the suit.

12. THAT whatever that I have deponed to herein above is correct save sources whereof have been expressly disclosed.”

5. The Applicant/Intended 3rd Defendant has also filed a Affidavit in Support of Urgency sworn by Mr Peter Mirie, Advocate.  It is allegedy identical to the other documents filed,  However,  at paragraph 3 onwards it states that the matter has since been subject to litigation of some applications brought in the instance of all the parties herein.  4.  It is important that the applicant be enjoined as a Defendant to assist the Court... “5.  THAT the Honourable court has since ruled on application issued injunctive orders which have stopped the applicant’s payments pursuant to the aforesaid tender.”.

6. The First Application was filed under a Certificate of Urgency together with an Application for it to be heard during the Court vacation.    Hon E. Ogola J certified the Matter both as urgent as well as suitable for hearing during the Court Vacation.  In addition he  ordered the Applicant to serve the Respondents (Plaintiff and two Defendants) and therefore listed the First Application for Hearing on 21 September 2015.   The File came back before Hon E. Ogola J on 21st September 2015.  It had been served upon the Plaintiff only on 18th September 2015, that is 10 days later and only three days before the Hearing.   The Judge gave directions for the Plaintiff to respond within three days.  On 24th September 2015 (although the date had previously be given by this Court,  all 4 parties were represented and present in Court before Hon Ogola J).  Upon the existing Parties satisfying the Court that there were ongoing negotiations with a view to reaching towards settlement, the interim order made by this Court was extended by Hon Ogola J for 21 days.  The Record of the proceedings do not show that the Applicant objected to that delay.  The Court also ordered that “All the parties to be served with all the applications on record within 10 days.”.  Hon E. Ogola J also ordered that “2.  Interim Orders are extended to 22nd October 2015 when the matter will be mentioned.”.  On 22 October 2015 the matter was heard before this Court .  Only the Applicant was represented,  Mr Kariuki holding brief for Mr Kingara informed the Court that the Application for joinder was filed and all the Parties had been served and have responded.  Save for the Plaintiff, those responses do not appear on the File.  The Court gave directions for the Parties to ensure that all the documents have been placed on the file when the Ruling was reserved.

7. There are neither Affidavits of Service nor Responses for the Defendants.  In the circumstances, the Applicant has not demonstrated that the Defendants were served with the Application.  The Plaintiff was served and has filed a Replying Affidavit as well as Written Submissions.  On 11th July 2016  Mr Nyanao informed the Court that he/2nd Defendant  had not seen the Application dated 4th September 2015 therefore the Applicant/Intended 3rd Defendant was again ordered directed to serve the Application dated 4th September 2015 upon the 2nd Defendant and file a return of service.  There is no return of service on the Court file.  The Plaintiff is opposing the Application.

8. The Plaintiff has filed a Replying Affidavit on 23rd September 2015 sworn by Ms Susan Ndungu who is a relationship manager with the Plaintiff.  Attached are numerous exhibits which are referred to as they arise.  The Court gave Directions for Written Submissions to be filed and Highlighted.  Only the Applicant and the Plaintiff have complied with that order.  Their representatives both felt that there was no need to highlight and they stood by their Written Submissions.

9. Any analysis of the First Application would be incomplete without setting out the background facts and the peculiar relationship of the existing Parties to the Suit.  The Plaintiff is a commercial Bank.  Since the filing of the Suit, it has changed its name to Spire Bank.  The 1st Defendant is a statutory body corporate established under Section 66 of the Energy Act Cap 314 , Laws of Kenya.    The 1st Defendant invited tenders for the provision of plant equipment and services to enable it to fulfill its role and functions.  The 1st Defendant was also said to be under a presidential directive to connect all public primary schools to the national Grid by 30th November 2015.  The Second Defendant tendered and was successful.  By its Letter of 8th October 2012 (that is 3 years before the dispute) the 1st Defendant notified the 2nd Defendant that it had been successful and had been awarded tender No REA/12-13/OT/012 to supply 1,000 kilometers of 77mm² ACSR conductors at the costs of US$935,350.  The 1st and 2nd Defendant were expected to and did enter into a written contract which is exhibited  to the Replying Affidavit as Exhibit SM-2.  The 2nd Defendant was supposed to import the conductors from a Chinese company called Tong-DA Cable Ltd .  A copy of the Notification of Award appears at Exhibit SM-1.  It is a detailed document.  It is dated and has a reference number.  It identifies the conductors cables etc that are to be supplied including country of origin, quantity and price.  It is signed by the CHIEF EXECUTIVE OFFICER.   It also sets out the requirement of performance security.  That performance  bond together with a Master and Slave Letters of Credit were provided by the Plaintiff to the 2nd Defendant See Exhibit SN-4 p 14).  The consignment from China was shipped around February 2015.  It arrived in Mombasa and was impounded by officers of the Kenya Revenue Authority.  According to their Letter of 23rd March 2015 from the Kenya Revenue Authority setting out the charges that were payable both in relation to duty for the goods as well as fines for understating their value.  The 1st Defendant required the goods.  The 2nd Defendant was to supply them or lose out on its contract.  The Plaintiff was the 2nd Defendant’s Bank and therefore they made the payment on conditions as to repayment.  The 400 containers were delivered to and stored in the premises of  the 1st Defendant.  The Plaintiff was not paid and therefore instituted the suit by filing a plaint on 22nd July 2017.  On the same day the Plaintiff filed an application under Certificate of Urgency for injunctive relief.  That was granted and then was extended by agreement of the Parties on various dates which will be set out below.

The Second Application

10. The Second Application was filed on 2nd December 2015 by the Advocates for the 1st Defendant.  The ghist of that Application was that the 400 containers stored at the 1st Defendant’s Plaintiff’s had become an imposition and therefore the 1st Defendant was seeking variation of the injunction to allow for their removal whether by sale or otherwise.  The 1st Defendant was also incurring significant cost for storage.  Due to looming deadlines and the delays occasioned by the “protracted wrangles between the 2nd Defendant and the Plaintiff Bank the 1st Defendant had resolved to obtain the cables and conductors from elsewhere and therefore required the space.  The Certificate of Urgency states at paragraph 4 “THAT a variation of the court order will further ameliorate the continued loss and embarrasment being occasioned to the applicant, who despite having no contractual obligation with the respondents now has to bear the inconvenience and financial responsibility of storing and keeping the conductors in good condition and safe custody...”

11. The Second Application seeks the following orders:

1. THAT this application be certified urgent and its service be dispensed with in the first instance

2. THAT the honourable court be pleased to review/vary its orders made on the 22. 7.2015 to allow the applicant to part with possession of the ACSR conductors

3. THAT the honourable court be pleased to vary its orders so that the Respondents are ordered to immediately remove the ACSR conductors from the applicant’s premises, in default whereof the respondents to meet the actual and incidental costs of the applicants continued storage of the same....”

12. The 2nd Application was not certified as urgent for the reasonst that appear in the record.  The Matter was to come before the Court on 16th December 2015 but was instead listed on 10th December 2015.  This Court gave directions for both Applications to be dealt with together.   The interim orders were extended to 16th December 2015 by Consent notwithstanding that it had already lapsed on 26th November 2015.  That day was declared a public holiday and the Court did not sit.    Eventually the matter came before the Court on 18th December 2015.  The existing parties filed a consent dealing with the application filed on 22nd July 2015 dealing with the Injunction.  The issue of payment to the Plaintiff was settled by the Parties Advocates holding the funds in a joint bank account.    Therefore the Injunction was discharged and the Application was marked as settled by Consent.  That is the factual background against which the Appliction for joinder must be decided.

13. The Plaintiff and the Applicant have filed Written Submissions and attached Authorities which have been considered carefully.  The Plaintiff points to order 1 Rule 10(2) and argues that the Applicant does not fall within its requirements.  It povides:

Order 1, rule 10] Substitution and addition of parties.

10. (1) Where a suit has been instituted in the name of the wrong persons as plaintiff, or where it is doubtful whether it has been instituted in the name of the right plaintiff, the court may at any stage of the suit, if satisfied that the suit has been instituted through a bona fide mistake, and that it is necessary for the determination of the real matter in dispute to do so, order any other person to be substituted or added as plaintiff upon such terms as the court thinks fit.

14. The Civil Procedure Rules also provide for joinder in other Rules in particular Order I Rule 5:  “5. It shall not be necessary that every defendant shall be interested as to all the relief claimed in any suit against him.”.Also Order 1 Rule 6;  “6. The plaintiff may at his option join as parties to the same suit all or any of the persons severally, or jointly and severally liable, on any one contract, including parties to bills of exchange and promissory notes. In addition:  7. Where the plaintiff is in doubt as to the persons from whom he is entitled to obtain redress, he may join two or more defendants in order that the question as to which of the defendants is liable, and to what extent, may be determined as between all parties.” and so on.

15. It is clear from the Rules and the Authorities cited by the Parties that the Applicant must establish a legal and factual nexus between the Suit and its claim or entitlement to be joined.    Dealing with the facts alleged by the Applicant in turn.

(1) It is repeated often in the Applications and Affidavits that the Applicant is entitled to be paid from the Bank account frozen by the Court.  At no time did either this Court or Hon E. Ogola J order the freezing of any bank account.  In the circumstances, that statement is untrue and points to the lack of clean hands.

(2) The Applicant states that he has a claim over the subject matter of the suit, being the tender to supply the ASCR Conductors and cables.  He says the claim arises from “the same being assigned or sold and forfeited to him by the 2nd Defendant” .  The Contract relates to public procurement.  The Contract between the two Defendants contains clause 3. 15. 1 which forbids assignment.  It states; “The tenderer shall not assign, in whole or in part, its obligations to perform under this Contract, except with the Procuring Entity’s prior written consent.”.  There is no consent written or otherwise put forward by the Applicant.  In the circumstances, there is no valid enforceable claim put forward in support of the Application.

(3)  The Applicant also says he was awarded the tender on 5th May 2015.  On that day the goods had already arrived in the Country so what was the Defendant tendering for?  The Documents he exhibits although bearing the appropriate letterheads are so lacking in detail as to make them unpersuasive.  Further, the Court takes into account the correspondence exhibited suggesting a dispute between various factions of the 2nd Defendant which led to the misuse of its letterheaded paper.  In the circumstances, such documents would have to be attested to by the authors and they were not.  The Applicant deliberately and repeatedly denied them an opportunity to see the evidence by not serving it.

(4) The Applicant also says he obtained the subject matter by sale.  There is no proof of payment or sale terms put forward.

(5) The Applicant says that it is important for him to be enjoined as a Defendant so as to assist the Court.  That can be done by filing evidence and appearing as a witness.  It is not necessary for him to be a party.

(6) The Applicant has repeatedly been ordered to serve the Application upon the Defendants and has not done so.  That means the Second Defendant cannot either support/corroborate or deny his assertions.  Apart from being in breach of Court Orders, it points to the absence of bona fides

16. As a consequence the Applicant has failed to establish any connection to the tender contract and/or suit.  For those reasons the Application is dismissed with costs.

Order accordingly,

FARAH S. M. AMIN

JUDGE

Delivered and Signed at Nairobi this 3rd day of November of  2017.

In the Presence of:

Court Clerk:  Patrick Mwangi

for Applicant:  Mr Kengara

Plaintiff :  Ms Muhoja HB Mr Musyoka

for Defendant:  Mr Mugambi HB Mr Ndege