Kapenguria Teachers Sacco Ltd v Patel t/a Shaven Enterprises & another [2022] KEHC 17129 (KLR) | Third Party Proceedings | Esheria

Kapenguria Teachers Sacco Ltd v Patel t/a Shaven Enterprises & another [2022] KEHC 17129 (KLR)

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Kapenguria Teachers Sacco Ltd v Patel t/a Shaven Enterprises & another (Civil Appeal 38 of 2019) [2022] KEHC 17129 (KLR) (10 November 2022) (Judgment)

Neutral citation: [2022] KEHC 17129 (KLR)

Republic of Kenya

In the High Court at Kitale

Civil Appeal 38 of 2019

AC Mrima, J

November 10, 2022

Between

Kapenguria Teachers Sacco Ltd

Appellant

and

Amrishbhai Manubhal Patel t/a Shaven Enterprises

1st Respondent

Peter Mureithi t/a Xylab Technologies

2nd Respondent

(Being an Appeal arising out of the judgment and decree of Hon VW Wandera (Chief Magistrate) in Kitale Chief Magistrate’s Court Civil Case No 440 of 2012 delivered on 23/08/2019 by Hon MIG Moranga, Senior Principal Magistrate)

Judgment

Introduction: 1. The appellant herein, Kapenguria Teachers Sacco Ltd, was the third party in Kitale Chief Magistrates Civil Case No 440 of 2012; Amrishbhai Manubhai Patel t/a Shaven Enterprises vs Jamleck K Mbiriri t/a Jamkim Construction, Peter Muriithi T/A Xylab Technologies & Kapenguria Teachers Sacco Limited (hereinafter referred to as ‘the civil suit’).

2. The Civil suit had initially been instituted in the High Court of Kenya at Kitale as Civil Case No 99 of 2009, but it was subsequently transferred to the Chief Magistrates Court for hearing and determination. The plaint was dated August 10, 2009.

3. Judgment in the civil suit was delivered on August 23, 2019 wherein the Appellant was decreed to pay the sum of Kshs 1,861, 636/= to the 1st Respondent herein, Amrishbhai Manubhai Patel T/A Shaven Enterprises who was the then Plaintiff in the civil suit.

4. The Appellant was dissatisfied with the trial Court’s verdict and preferred the appeal subject of this judgment.

5. The appeal was vehemently opposed by the Respondents.

The Civil Suit: 6. The 1st Respondent herein was the Plaintiff in the civil suit. One Jamleck K Mbiriri T/A Jamkin Construction was the 1st Defendant whereas the 2nd Respondent herein, Peter Mureithi T/A Xylab Technologies, was the 2nd Defendant. The Appellant herein was the Third Party in the civil suit and was enjoined by the 2nd Respondent herein.

7. The Plaintiff’s case was premised on the construction of a building for the Third Party on the parcel of land described as L R No 3M – Makutano Town within the now West Pokot County.

8. The construction was to be undertaken by the 1st Defendant, as the Main Contractor, at a cost of Kshs 59,000,000/= (Read: Fifty-Nine Million Only). The Lead Consultants were Messrs Skair Associates Architects.

9. In the course of discharging the works, the 1st Defendant sub-contracted the 2nd Defendant to carry out electrical construction and installation works in the said building.

10. The Defendants, on separate occasions, agreed with the Plaintiff, who was then carrying out a hardware supplies business within the said Makutano Area to variously supply their respective required materials.

11. Citing inter alia non-payment for the goods supplied, the Plaintiff filed the civil suit where he made the following prayers: -a.Kshs 5,521,138/= in terms of paragraphs 6 and 9 of the Plaint.b.Costsc.Interestd.Any further or alternative relief this Honourable Court may deem fit to grant.

12. On service of the pleadings, the 1st Defendant failed to enter appearance and/or file a statement of defence and a default judgment was entered against him. The judgment was for the sum of Kshs 1,130,000/= with costs and interest from December 1, 2008 until payment in full.

13. The 1st Defendant satisfied the said judgment.

14. It was the Plaintiff’s case against the 2nd Defendant that proceeded for hearing.

15. The Plaintiff testified and did not call any witness. He testified at length on the goods he supplied to the 2nd Defendant and produced invoices in support. The Plaintiff was duly cross-examined by the 2nd Defendant and the Third Party.

16. The 2nd Defendant also testified and did not call any witness. He challenged the Plaintiff’s averments and contended that the case against him be dismissed with costs. In the alternative, the 2nd Defendant prayed that if any judgment was to be entered against him, then it should be against and be satisfied by the Third Party who was to pay him so that in turn he would pay the Plaintiff.

17. The Third Party denied any nexus with the 2nd Defendant or at all. It averred that it only contracted the 1st Defendant to undertake the construction works and not third parties.

18. According to the Third Party, any claim by parties contracted by the 1st Defendant could not attach to it.

19. The 2nd Defendant and the Third Parties jointly prayed for the dismissal of the civil suit with costs.

The Appeal: 20. Dissatisfied with the decision rendered in the civil suit, the Third Party lodged an appeal whose Memorandum of Appeal was dated September 20, 2009.

21. The Third Party, now turned Appellant herein, preferred the following grounds of Appeal: -1. That the trial court erred in law and in fact in ordering the appellant to satisfy the debt due from the 2nd respondent to the 1st respondent when the trial court had not made a finding on the extent of the appellant’s alleged indebtedness to the 2nd respondent.2. That the trial court erred in law and in fact in finding and holding that the appellant is indebted to the 2nd respondent when the appellant is not indebted to the 2nd respondent.3. That the trial court erred in law and in fact in deciding the case against the weight of the evidence presented before the trial court.

22. The Appellant then prayed for the following orders: -1. That the judgment of the trial court be varied and set aside.2. That the 2nd respondent’s claim in the trial court against the appellant be dismissed.3. That the costs of this appeal and the case below be awarded to the appellant.

23. With the approval of the Court, the parties proposed to dispose of the appeal by way of written submissions. All the parties duly complied and filed their respective written submissions.

24. The Appellant’s submissions were filed on July 3, 2022. It was submitted that the trial Court erred in awarding Kshs 1,861,636. 00 against the Appellant since it did not make a finding on the amount of money the Appellant owed the 2nd Respondent. It was insistent that a Third Party is not liable to pay a Plaintiff more than the Third Party owes a Defendant.

25. It further maintained that it was not a party to the contract between the 1st and the 2nd Defendants in the civil suit. Flowing from that, it submitted that enforcing the burden arising from a contract in which it was not a party to was against the privity of contract rule. For this presupposition, it relied on Agriculture Finance Corporation vs Lengetia Limited & Jack Mwangi[1985] eKLR.

26. It, therefore, contended that the trial Court’s rationale behind that order was invalid.

27. Further, it was argued that the trial Court erred since it failed to acknowledge the fact that the Appellant having paid the main contractor under its contract, it was discharged from any claims against a third party, even in the rarest instances where such would legally attach.

28. The Appellant then submitted that some exhibits (D Exb 1, D Exb 4 and D Exb. 9) could not be relied upon since there was no evidence of service even though the Appellant bore no legal or contractual obligation to act on them. It urged that the evidence was misconceived.

29. Consequently, it was prayed that the appeal be accordingly allowed.

30. The 1st Respondent filed his submissions on July 10, 2022.

31. He submitted that the 2nd Respondent herein did not deny being supplied with electrical materials by the 1st Respondent. The Court was urged to note that the 2nd Respondent’s position was that the Appellant did not pay the 2nd Respondent and as a result the 2nd Respondent could not meet his obligations towards the 1st Respondent.

32. The 1st Respondent further submitted that the main contractor authorized the Appellant to make direct payments to the 2nd Respondent in the sum of Kshs 2,187,007. 70, an arrangement which the Appellant failed to honour. Prove payment.

33. The 1st Respondent buttressed the position by submitting that even when the Appellant’s witness testified, he neither stated nor furnished any evidence to prove that the Appellant had fully paid the main contractor all monies due and payable under the contract.

34. The 1st Respondent urged this Court to dismiss the appeal as there was no error on the part of the trial Court.

35. The 2nd Respondent had not filed his submissions as at the time of writing this judgment.

Analysis: 36. The High Court, as the first appellate Court, is enjoined to revisit the evidence on record, evaluate it and reach its own conclusion in the matter. (See the case of Selle & Ano vs Associated Motor Boat Co Ltd (1968) EA 123).

37. This Court, nevertheless, appreciates the settled principle that an appellate Court will not ordinarily interfere with findings of fact by the trial Court unless they were based on no evidence at all, or on a misapprehension of it or the Court is shown demonstrably to have acted on wrong principles in reaching the findings. This was the holding in Mwanasokoni – versus- Kenya Bus Service Ltd(1982-88) 1 KAR 278 and Kiruga –versus- Kiruga & Another (1988) KLR 348).

38. This Court has carefully perused the record and appreciates the matter. Since the appeal hinges on the liability of a third party, the Court will have a brief and general look at third party proceedings.

39. Third party proceedings are designed to avoid a multiplicity of suits. Lord Esher MR in Baxter vs France (No 2), [1895] 1 QB 591 at p 593 aptly captured it as follows: -"The general scope of the third party procedure is to deal with cases where by applying it, all the disputes arising out of a transaction as between the Plaintiff and the Defendant, and between the Defendant and a third party, can be tried and settled in the same action….."

40. Scrutton LJ in Barclays Bank vs Tom, [1923] 1 KB 221 at p 224 stated as under: -"To get the third party bound by the decisions given between the plaintiff and the defendant … to save the extra expense which would be involved by two separate independent actions."

41. And, in Transami (U) Ltd Transocean (U) Ltd Kampala, the High Court in Uganda emphasized on the rationale behind taking out third party proceedings thus: -"On the facts and the evidence, in order to avoid a multiplicity of legal proceedings arising out of the alleged sale of the first plaintiff to the defendant by the Government, it is necessary that the Attorney General be joined as a third party so that the court can settle as far as possible all matters in controversy between the parties to the suit."

42. On the legal position that third party claims may arise either by way of express contract or impliedly, Bowen L J in Birmingham and District Land Company vs London and North Western Railway Company(2) (1887), 34 Ch D 261 had the following to say: -"I think it tolerably clear that the rule, when it deals with claims to indemnity, means claims to indemnity such as either at law or in equity. In nine cases out of ten a right to indemnity, if it exists at all as such, must be created either by express contract or by implied contract: by express contract if it is given in terms by the contract between the two parties; by implied contract if the true inference to be drawn from the facts is that the parties intended such indemnity, even if they did not express themselves to that effect, or if there is a state of circumstances to which the law attaches a legal or equitable duty to indemnity, there being many cases in which a remedy is given upon an assumed promise by a person to do what, under the circumstances, he ought to do."

43. The position was further expounded inEastern shipping Co vs Quah Beng Kee (1), [1924] AC 177 at p 182, where the Court held that:"A right to indemnity generally arise from contract express or implied, but is it’s not confined to cases of contract. A right to indemnity exists where the relation between the parties is such that either in law or in equity there is an obligation upon the one party to indemnify the other. There are, for instance, cases in which the state of circumstances is such that the law attaches a legal or equitable duty to indemnify arising from an assumed promise by a person to do that which, under the circumstances, he ought to do. The right to indemnity need not arise by contract; it may (to give other instances) arise by statute; it may arise upon the notion of a request made under circumstances from which the law implies that the common intention is that the party requested shall be indemnified by the party requesting him; it may arise (to use Lord Eldon’s word in Waring vs Ward; a case of vendor and purchaser), in cases in which the court will ‘independent of a contract raise upon his (the purchaser’s) conscience an obligation to indemnify the vendor against the personal obligation of the vendor. These considerations were all dealt with by the Lords Justicesin Birmingham and District Land CO vs London and North Western Ry Co"

44. Echoing the position in law, the Court in Mombasa HCCC No 2005/1995 Premier Savings & Finance Ltd vs Hamendra Mansukhlal Shahheld that: -"…. it would be undesirable in matters of contract to import indemnity where there is no express provision for it and none can be implied. It is not disputed in this matter that there is no express agreement for indemnity which is the claim laid against the third party. It is said that it can be implied, I suppose that would be by implication of law, such as where there is a fiduciary relationship between the parties."

45. As stated above, this Court has carefully reviewed the evidence. There are several factual issues which are not in dispute. They include the fact that the Appellant entered into a building contract with Messrs. Jamkim Construction as the main contractor. The contract was reduced into writing and a copy was produced in evidence. The contract price was Kshs 59,000,000/= (Read: Fifty-Nine Million Only).

46. There is also no dispute that the contract was fully executed and the contemplated building handed over to the Appellant. The works were under the supervision of Messrs Skair Associates Architects as the Project Architects and Messrs Magare and Partners as the Project Quantity Surveyors.

47. It is also not contested that the main contractor had sub-contracted the 2nd Respondent herein to render electrical works in the instant building.

48. It was further readily admitted that the 1st Respondent supplied the 2nd Respondent all the required materials on the understanding that once the 2nd Respondent was paid by the main contractor he would settle the 1st Respondent.

49. The arrangement between the 1st Respondent and the 2nd Respondent was, however, not reduced into writing and neither was it part of the contract between the Appellant and the main contractor.

50. The 2nd Respondent’s reaction to the civil suit was categorical. He contended that he was not able to pay the 1st Respondent since the Appellant had not paid the main contractor who was to pay him, in turn. As a result, the 2nd Respondent took out and enjoined the Appellant as a Third Party in the civil suit.

51. The question of the liability of the third party or otherwise was determined in the civil suit.

52. The trial Court, in a detailed fashion, went through the evidence

53. And it was, rightly so, convinced that the Appellant was indebted to and decreed it to satisfy the then Plaintiff’s claim.

54. The evidence speaks for itself. The Appellant was well aware that the 2nd Respondent contended that it had not paid the main contractor the entire contract sum so as to enable the 2nd Respondent to be paid and to also settle the 1st Respondent. There was also evidence that the Appellant had been directed by the main contractor and the Project Architect to directly pay the 2nd Respondent some sums of money. The Appellant had partially complied.

55. The Appellant entered appearance and filed its defence. It also participated in the trial by calling its representative to testify. Surprisingly, despite the 2nd Respondent’s clarity of claim against the Appellant, the Appellant did not tender any evidence to confirm that indeed it had fully discharged its contractual obligations with the main contractor and that it could not pay the 2nd Respondent.

56. The Appellant did not give any other explanation for not honouring the subsequent request to directly pay the 2nd Respondent rather than holding to the fact that there was no privity of contract between the 2nd Respondent and itself. One, therefore, wonders of the prevailing situation when the Appellant paid the 2nd Respondent as requested by the main contractor and advised by its Architects. Was the Appellant then not aware that it had no privity of contract with the 2nd Respondent?

57. The foregoing circumstances reveal that there was an implied contract between the Appellant and the 2nd Respondent and that the Appellant had partly performed it.

58. With such evidence, the evidential burden of proof shifted to the Appellant to disprove the factual standing.

59. The Appellant would have simply discharged that burden of proof by either tendering evidence as to why it could not honour the request, for instance, say it had fully paid the main contractor the entire contract sum or may be the contract with the main contractor was frustrated. However, the Appellant did not do so.

60. The upshot was that the Appellant failed to discharge its evidential burden of proof and as such the 2nd Respondent’s claim against the Appellant was proved on the preponderance of probabilities and the Appellant was obliged to settle it.

61. The other closely related issue is the amount payable by the Appellant to the 2nd Respondent. The trial Court correctly deduced the amount payable to be Kshs 1,861, 636/=. However, the sum was made up in two parts. There was the sum of Kshs 1,060,036/= which was the cost of the goods the 1st Respondent supplied to the 2nd Respondent and Kshs 801,600/= which amount the 1st Respondent had proved to have directly deposited into the 2nd Respondent’s bank account at the sole request of the 2nd Respondent. The said amount was a loan advanced by the 1st Respondent to the 2nd Respondent.

62. The trial Court noted that the 1st Respondent had conceded that he was owed a total of Kshs 2,646,036/= as the value of goods as evidenced in the invoices he presented before Court. The 1st Respondent further admitted that he was in receipt of a total of Kshs 1,586,000/= as testified by the 2nd Respondent in the criminal proceedings. To this end, the trial Court, correctly so, found that the 1st Respondent could only claim a sum of Kshs 1,060,036/= being the price of goods he supplied. That finding is sound and is hereby sustained.

63. But how much was payable to the 2nd Respondent by the Appellant? The 2nd Respondent testified that on completion of the project, he raised an invoice to the Appellant for settlement. It was produced as D Exb 2. It was for the sum of Kshs 2,157,007/70. The invoice was raised after the Project Architect issued a Certificate of Completed Works (which was produced as D Exb 3) dated November 28, 2008.

64. The 2nd Respondent averred that the Project Architect advised the Appellant to directly pay the 2nd Respondent. In acceding to the request, the Appellant paid the 2nd Respondent the sum of Kshs 1,000,000/= leaving a balance of 1,157,007/70. When the balance was not forthcoming, the 2nd Respondent formally wrote to Jamkim Construction, the Project Architect and the Appellant on February 11, 2009 vide a letter which was produced as D Exb 4.

65. The 2nd Respondent further testified that he raised yet another invoice for Kshs 3,141,422/80 (produced as D Exb 5) upon issuance of a Certificate by the Project Architect on March 30, 2009. The Certificate was produced as D Exb, 6.

66. It was also in evidence that the main contractor, Jamkim Construction, wrote to the Appellant on August 4, 2009 vide D Exb 8 authorizing direct payment to the 2nd Respondent in the sum of Kshs 4,328,430/50. Subsequently, on September 9, 2009, the 2nd Respondent was paid Kshs 2,216,763/70 by the Appellant by way of a cheque leaving a balance of Kshs 2,128,430/00. The deposit slip was produced in evidence as D. Exb.7.

67. According to the 2nd Respondent, the balance of Kshs 2,128,430/00 has not been satisfied to-date. He then wrote to the Appellant, the Project Architect and the main contractor on July 31, 2013 (as evidence by D Exb 9) seeking the balance which was by then Kshs 3,663,935/75 courtesy of interest thereon.

68. It was, therefore, the 2nd Respondent’s contention that since the Appellant had not paid him the amount of money which was in excess of the decreed sum, then the Appellant ought to settle the decree forthwith.

69. As said, despite all the evidence, the Appellant still contended that it had no contract with the 2nd Respondent.

70. The trial Court, hence, deduced the amount of money that the Appellant owed the 2nd Respondent. It was Kshs Kshs 2,128,430/00 which sum increased with interest to Kshs 3,663,935/75.

71. On the basis of the foregoing, this Court does not find any difficult in taking the position that the trial Court was right in its judgment. I say so since there was evidence that the Appellant held Kshs 3,663,935/75 in favour of the 2nd respondent and as such the sums decreed in the civil suit would be easily off-set from the yet-to-be-paid sums.

Disposition: 72. Deriving from the foregoing, this court now makes the following final orders in this matter: -a.The appeal is hereby dismissed.b.The appellant shall pay the costs as ordered in the civil suit as well as the costs of the appeal.

Orders accordingly.

DELIVERED, DATED AND SIGNED AT KITALE THIS 10TH DAY OF NOVEMBER, 2022. A. C. MRIMAJUDGEJudgment virtually delivered in the presence of:Mr. Kidiavai, Learned Counsel for the Appellant.Mr. Kiarie, Learned Counsel for the 1st Respondent.Mr. Samba, Learned Counsel for the 2nd Respondent.Kirong/Regina – Court Assistants.