JADE PETROLEUM LIMITED v KOBIL PETROLEUM LIMITED, METRO PETROLEUM LIMITED & PANKAJ SOMAIA [2009] KEHC 2710 (KLR)

REPUBLIC OF KENYA IN THE HIGH COURT OF KENYA AT NAIROBI (MILIMANI COMMERCIAL COURTS)

Civil Case 62 of 2008

JADE PETROLEUM LIMITED ……………...  PLAINTIFF/APPLICANT

VERSUS

KOBIL PETROLEUM LIMITED ……………………   1ST DEFENDANT

METRO PETROLEUM LIMITED ………………..….  2ND DEFENDANT

PANKAJ SOMAIA ……………………………………  3RD DEFENDANT

RULING

The plaintiff/applicant instituted this suit against the defendant seeking for judgment for a liquidated sum of US$ 129,613. 26 with interest and costs.  This claim is allegedly incurred in respect of supply of petroleum products valued at

US $ 453,293. 50 which was paid for by the plaintiff to be supplied by defendant.  The defendant delivered products only worthy US $ 332,680. 30 and withheld products worth US $ 129,613. 20 the sum claimed in this suit.

The defendant filed a defence and counter claim, and in the counter claim, the defendant enjoined Metro Petroleum limited and Pankaj Somaia as defendants in the counter-claim.  The defendant allege that Metro Petroleum Limited obtained money from them under false pretence and representation. Metro Petroleum Ltd failed to deliver products paid for by the defendants.  The defendant alleges that this happened when the plaintiff was under the management of Pankaj Somaia who took over the business of Metro Petroleum Limited and started trading in the same petroleum products.

The particulars of fraud in the counter claim against the plaintiff, Metro Petroleum Ltd and P. V. Somaia, the three defendants in the counter-claim are  as follows:-

(a)Obtaining money from the Plaintiff under or through false pretence.

(b)Inducing the Plaintiff to pay money for products which the defendants knew or ought to have known that they could not deliver.

(c)Purporting to sell goods to the plaintiff through false misrepresentation.

(d)Concealing the assets of the 2nd defendant from the plaintiff

(e)Obstructing the plaintiff from recovering its just debt or claim from the 2nd defendant.

(f)Obtaining money from the plaintiff unlawfully and through unlawful means.

The plaintiff filed a reply to the defence and counter claim and denied in general and in specific terms the allegations and the claim stated in the counter- claim.

The plaintiff has now filed a notice of motion dated 20th August 2008 seeking for summary judgment against the defendant as prayed in the plaint and in the alternative judgment on admission for US $ 129,613. 20 plus interest.  This application is based on the grounds that the claim against the defendant is a liquidated one for money had and received by the defendant for the supply of petroleum products which were not supplied as agreed.  Further the defendants have admitted in its defence that, it appropriated US $ 129,613. 20 belonging to the plaintiff to settle an alleged debt owned to it by an entity known as Metro Petroleum Limited. Further the defence filed by the defendant is not reasonable; it is an abuse of the court process.

This application is further supported by the affidavit of one Pankaj Vrajlal Somaia sworn on 20th August 2008 and a further affidavit sworn on 4th February 2009. The plaintiff contends that the arguments and the introduction of Metro Petroleum Limited is without basis because that is an independent entity altogether.  These arguments were taken further by Mr. Karuiki counsel for the applicant. He submitted that there is no legal justification for the defendant to withhold money owned to the plaintiff on account of a third party who was indebted to the defendant.  This argument cannot stand in the face of the company law because the defendant admitted the money was appropriated towards the settlement of debts owned by Metro Petroleum Limited who were not a party to the contract of supply petroleum products.

According to counsel for the plaintiff, the defendant cannot possibly have any defence to the plaintiff’s claim and their defence does not raise any triable issues.  Citing the ancient case of Salomon v Salomon (1987) AC page 22 counsel submitted that the plaintiff is an independent entity separate from its share holders and directors the company cannot in any way  be an agent of the directors or vice versa

Furthermore P.V. Somaia swore a further affidavit on 4th February 2009 denying that he was not a shareholder or director of the plaintiff company.  He attached a copy of letters from Equatorial Secretaries and Registrars, and the Registrar of Companies showing the directors of the plaintiff.  He also exhibited a copy of a suit he has filed against Metro Petroleum Limited filed on 18th October 2007, in which he is challenging a decision by the directors of that company who purported to exclude him as a director. According to Mr. Kariuki for the plaintiff, the defence is a mere sham.  It is spurious and does not raise triable issues requiring trial.  The plaintiff should be given summary judgment on account of admission of the claim by the defendants.

Formidable opposition was put up by the defendant, its counsel Mr. Oyatsti  relied on the affidavit of Patrick Kondo sworn on 16th January 2009.  It was argued that the issues raised in the defence and counter-claim raise triable matters necessitating this matter going for full trial.  There is also a counter claim by the defendant against the plaintiff and two others claiming for the same amount of money.  The cause of action was a breach of contract laced with fraud and misrepresentation. The defendant’s counter claim is based on allegations of fraud and false misrepresentation in the performance of a contract.

The defendants denied liability and pleaded the defence of fraud in the procurement and performance of the contract.  The plaintiff is also the 1st defendant in the counter claim.  It is alleged that the 3rd defendant was a director of the 1st and 2nd defendant in the counter claim; they are jointly accused of fraud.  Thus the defendant’s defence cannot be deemed as admission of the claim.

Mr. Oyatsi further argued that in the face of the claim by the defendant’s based on the allegation of fraud which was committed by three separate parties, the plaintiff cannot say there is admission because the counter claim is clearly set out on how the fraud was committed by the three entities.  The counter claim is against two companies that is, Jade petroleum Ltd and Metro petroleum Ltd are a limited liability companies.  They are thus abstract entities which have no feelings of their own but controlled by individuals.

It is also admitted that P.V. Somaia is a director of Jade Petroleum.  That is on paragraph 1 of the supporting affidavit.  However a further affidavit sworn on 6th February 2009 the same P.V. Somaia denied under paragraph 3 that he was a shareholder or director of the plaintiff but claims to be the Chief Executive Officer.  These are contradictions which amount to perjury by the deponent who should be put on the witness box to establish his true identity.

Having set out the background of the pleadings and the rival submissions, this application is brought under the provisions of order XXXV of the Civil Procedure Rules.  As I understand it, a plaintiff with a liquidated claim to which there is clearly no defence can obtain a quick and summary judgment without being unnecessarily kept from what is due to it, by way of delaying tactics by the defendant.  However if there are reasonable grounds raised in the defence, raising triable issues, the plaintiff is not entitled to summary judgment.

The primary issue to determine in this application is whether the defence and counter claim raises triable issues.  The defence and counter claim is against the plaintiff, Metro Petroleum Limited and Pankaj Somaia.  There are allegations of fraud in which the 2nd and 3rd defendants are alleged to have conspired to obtain money from the plaintiff in the counter claim while pretending that Metro petroleum limited could sell petroleum products to the plaintiff and therefore payment was effected.  The particulars of the fraud and misrepresentation are set out and the reasons why the defendant is also claiming a sum of US $ 129,613. 20 from the plaintiff and the two additional entities.

It is well appreciated that a company is at law a different entity all together from the subscribers and directors.  Thus the company cannot be held liable on behalf of actions by the directors except to the extent and in the manner provided for in the Companies Act.  In this particular case, there is an allegation of fraud in obtaining money through false pretence inducement, misrepresentation and other allegations against the plaintiff, P.V. Somaia and Metro Petroleum Limited.

P.V. Somaia has denied that he is a share holder or director of the plaintiff.  This is in his further affidavit sworn on 4th February 2009 paragraph 3 where he states:-

“That I have never been a shareholder or director of the applicant and I am now its Chief Executive Officer.  Annexed hereto and collectively marked as PS1 are true copies of letters from the applicant’s secretary and the Applicant’s directors evidencing the same?”

This is however contrasted by supporting affidavit sworn on 20th August 2008 where he states as follows:-

“That I am a non shareholder Director of the Plaintiff by the original action (hereinafter the plaintiff/applicant) and I am duly authorized by the Plaintiff/applicant to swear this affidavit on its behalf.”

In view of these contradictions and allegations of fraud touching on the plaintiff, the ends of justice in this matter will be served if this matter proceeds to full trial.  Accordingly the application is disallowed; I will give directions that parties do comply with discovery within 30 days from the date of this ruling by filing agreed bundle of documents or disputed bundle of documents.  I further direct the matter be fixed for hearing on priority basis.  Costs of this application will be in the cause.

RULING READ AND SINGED AT NAIROBI THIS 3RD DAY OF JULY 2009 .

M.K. KOOME

JUDGE