Ignazio Messina (K) Limited v Mudira & another [2024] KEHC 11029 (KLR)

Ignazio Messina (K) Limited v Mudira & another (Civil Suit 25 of 2017) [2024] KEHC 11029 (KLR) (17 September 2024) (Interim Judgment)

Neutral citation: [2024] KEHC 11029 (KLR)

Republic of Kenya

In the High Court at Mombasa

Civil Suit 25 of 2017

JK Ng'arng'ar, J

September 17, 2024

Between

Ignazio Messina (K) Limited

Plaintiff

and

Josiah Mudira

1st Defendant

Malaki Omondi Auma

2nd Defendant

Interim Judgment

1. The Plaintiff through an Amended Plaint dated 15th March 2017 and filed on the same day prayed for judgment against the Defendants jointly and severally for an injunction to restrain them from selling, disposing off and transferring their property and in particular from making any withdrawals from any of their bank accounts including but not limited to Josiah Mudira Account’s details – Commercial Bank of Africa Limited, Moi Avenue Branch, Mombasa, Account No. 6726xxxxxx and Malaki Omondi Auma’s Bank Account details – National Bank of Kenya Limited, Portways Branch, Mombasa, Account No. 01245xxxxxxxxx respectively to freeze any or all of such property or accounts held by or owned by the Defendants. The Plaintiff also prayed for US$ 248,957. 00, interest thereon at court rates from 1st January 2014 until payment in full, and costs of and incidental to the suit.

2. The Plaintiff averred that at all material times to the suit, the Defendants were employees of the Plaintiff. That an internal audit of the Plaintiff company was carried out by its principals in 2014 and an ongoing internal fraud was established which resulted in losses. That the Plaintiff engaged Ernst & Young to carry out a forensic audit and the report presented in June 2015 revealed that the Plaintiff had suffered substantial loss through the generation of off-system invoices and collection of amounts relating to the company’s business without being accounted for to the company and the total sum involved was US$ 284,957. 00

3. The Plaintiff stated that it was an express and/or implied term of the Defendant’s contract of employment that they would not neglect or negligently perform their work in such a careless and/or improper manner as to cause the loss and damage. That in breach of the aforesaid term of employment, the Defendants fraudulently colluded and connived between themselves as well as with the Plaintiff’s customers to defraud the company through fictitious off-system invoices as well as funds for container deposits which were in fact never collected thereby causing the Plaintiff colossal loss and damage.

4. The Plaintiff was granted leave to serve the Defendants by way of substituted service through advertisement in a national newspaper of wide circulation which was done in the Daily Nation of 20th March 2017 and an Affidavit of Service sworn by Sanjeev Khagram on 24th March 2017 filed to that effect.

5. The 1st Defendant neither entered appearance nor filed defence.

6. The 2nd Defendant entered appearance and filed a Defence by admitting that he was indeed employed by the Plaintiff but denied collusion or connivance with the 1st Defendant or any party at all to defraud the Plaintiff. The 2nd Defendant denied particulars of loss and damage amounting to US$ 284,957. 00 or any sum or at all and put the Plaintiff to strict proof thereof. The 2nd Defendant denied any financial impropriety when in the employment of the Plaintiff as his scope of duty did not directly involve dealing with finances. He therefore prayed that the suit be dismissed with costs.

7. The matter was referred to Court Annexed Mediation and a Certificate of Non-Compliance dated 9th April 2019 prepared by Mr. Justus Maithya Munyithya, the mediator. The Certificate indicated that though the Plaintiff and the 2nd Defendant were willing to proceed, the 1st Defendant could not be traced for purposes of effecting service and therefore the mediation could not proceed in the absence of one party.

8. The matter went back to court for directions and it was set down for hearing on 14th May 2024. Due to non-attendance of the 2nd Defendant, the Plaintiff served his counsel with a Hearing Notice and an Affidavit of Service sworn on 26th February 2024 by Dan Ondego prepared to that effect. On the said hearing date, Counsel for the Plaintiff called the 2nd Defendant’s Counsel but his phone call went unanswered. When Mr. Brian Mkala, the Court Assistant, called him, he indicated that he was not going to attend court.

9. The court proceeded with hearing of the case where the Plaintiff witness testified. PW1, Deepesh Modi, requested that his statement dated 10th March 2023, a list of documents dated 10th March 2017 and a supplementary list of documents dated 29th March 2023 be adopted as evidence of the court. The Plaintiff’s case was then closed. In the absence of defence, their case was also closed. The court then gave directions for parties to file submissions.

10. The Plaintiff in their submissions dated 23rd May 2024 prayed that judgment be entered against the 1st and 2nd Defendants as prayed for in the Amended Plaint. In respect of the 1st Defendant, the prayer was on account of proper service and subsequent failure to enter appearance and file defence as guided by the decision of the superior court in Bouchard International (Services) Ltd v M’wereria (1987) KLR 193.

11. In respect to the 2nd Defendant, the Plaintiff submitted that failure to call a witness despite filing a statement of defence, witness statement and documents, the effect is that the averments contained in his defence are mere denials of the Plaintiff’s claim, they remain unsupported and cannot rebut the evidence of the Plaintiff as was held in the case of Trust Bank Limited v Paramount Universal Bank Limited & 2 Others (2012) eKLR. That Section 107 and 108 of the Evidence Act are clear that he who asserts or pleads must support the same by way of evidence. The Plaintiff also relied on the holdings in Netah Njoki Kamau & Another v Eliud Mburu Mwaniki (2021) eKLR and CMC Aviation Ltd v Crusair Ltd (No. 1) (1987) KLR 103 to support the position. The Plaintiff further argued that it was the duty of the 2nd Defendant to follow up on the progress of the suit as was observed in Neeta Gohil v Fidelity Commercial Bank Limited (2019) eKLR and Savings and Loans Limited v Susan Wanjiru Muritu, Nairobi (Milimani) HCCS No. 397 of 2002.

12. The Plaintiff submitted that it discharged its burden and proved its case against the 1st and 2nd Defendants on a balance of probabilities. That the evidence adduced in court by PW1, Mr. Modi vividly stated that the Plaintiff discovered through a forensic audit of its accounts that the 1st Defendant had manipulated the accounts of the Plaintiff leading to a loss of USD 284,957. That the evidence also stated that investigations conducted by the Plaintiff and information provided by customers disclosed the fact that the 2nd Defendant played a part and heinously benefitted from the proceeds obtained through fictitious off-system invoices as well as refunds for container deposits which were in fact never collected by the Plaintiff thereby causing the Plaintiff to lose up to USD 284,957.

13. I have carefully considered the Plaintiff’s Amended Plaint, the evidence adduced, the Defendant’s Defence and submissions by the Plaintiff dated 23rd May 2024. The issues arising for determination are whether the Plaintiff has proved its claim to the required standard, whether the Plaintiff is entitled to interest of the suit and who should bear costs of the suit.

14. On whether the Plaintiff has proved its claim against Defendants to the required standard, this court has established that indeed on the one hand, the 1st Defendant neither entered appearance nor filed defence. Order 10 of the Civil Procedure Rules provides for consequences of non-appearance, default of defence and failure to serve. Most precisely, Order 10 Rule 9 and Rule 10 of the Civil Procedure Rules provide: -[Order 10, rule 9]Subject to rule 4, in all suits not otherwise specifically provided for by this Order, where any party served does not appear the plaintiff may set down the suit for hearing.[Order 10, rule 10]The provisions of rules 4 to 9 inclusive shall apply with any necessary modification where any defendant has failed to file a defence.

15. On the other hand, the 2nd Defendant entered appearance and filed defence but failed to appear in court during the hearing to tender his evidence. It is trite law that where a party fails to give evidence to substantiate its pleadings, the pleadings remain mere statements of fact. Additionally, failure by a defendant to adduce evidence to challenge the Plaintiff’s claim renders the evidence unchallenged.

16. In Karuru Munyororo v Joseph Ndumia Murage & Another, Nyeri HCCC No. 95 of 1988, Makhandia, J held that: -“The plaintiff proved on a balance of probability that she was entitled to the orders sought in the plaint and in the absence of the defendants and or their counsel to cross-examine her on the evidence, the plaintiff’s evidence remained unchallenged and uncontroverted. It was thus credible and it is the kind of evidence that a court of law should be able to act upon”.

17. In light of the above, the Plaintiff has proved its claim against Defendants to the required standard.

18. On whether the Plaintiff is entitled to interest of the suit, Section 26(1) of the Civil Procedure Act has set out the principle on the award of interest as follows: -Where and in so far as decree is for payment of money, the court may, in the decree, order interest at such rate, as the court deems reasonable to be paid on the principal sum adjudged on sum principal sum for any period before the institution of the suit, with further interest as sum rate as the court deems reasonable on the aggregate so adjudged from the date of the decree to the date of payment or to such earlier date as the court thinks fit.

19. Mulwa, J. in Madison Insurance Company Ltd v Mung’ot (Civil Appeal 215 of 2020) (2022) KEHC 9800 (KLR) (Civ) (14 July 2022) (Judgment) cited with authority the case of PremLata v Peter Musa Mbiyu (1965) EA 592 where it was held that an award of interest on the principal sum is generally to compensate a plaintiff for the deprivation of any money or specific goods through the wrongful act of a defendant.

20. On who should bear costs of the suit, Section 27 of the Civil Procedure Act provides that costs follow events, courts have discretion in granting the costs and the said discretion ought to be exercised judiciously. This court finds that actions of the Defendants led to filing of the suit herein. Costs are therefore awarded to the Plaintiff as against the Defendant.

21. The upshot is that the Plaintiff’s suit succeeds and I enter judgment in their favour as follows: -a.The sum of USD 284,957 shall be paid to the Plaintiff by the 1st Defendant, Josiah Mudira, and 2nd Defendant, Malaki Omondi Auma, jointly and severally.b.Interest on (a) above at court rates from 1st January 2014 until payment in full.c.Costs of the suit to the Plaintiff.

DATED AND DELIVERED VIRTUALLY AT MOMBASA THIS 17TH SEPTEMBER 2024………………………J.K. NG’ARNG’AR, HSCJUDGEIn the presence of: -Ondego Advocate for the PlaintiffNo appearance Advocate for the 1st DefendantNo appearance Advocate for the 2nd DefendantCourt Assistant – Mr. Samuel Shitemi