Kenya National Capital Corporation Ltd v Integrated Wood Complex Ltd & Hosea Kiplagat [2004] KEHC 1396 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

MILIMANI COMMERCIAL COURTS

CIVIL CASE NO.299 OF 2003

KENYA NATIONAL CAPITAL

CORPORATION LIMITED.............................................................................PLAINTIFF

VERSUS

INTEGRATED WOOD COMPLEX

LIMITED...........................................................................................................1st DEFENDANT

HOSEA KIPLAGAT.........................................................................................2nd DEFENDANT

RULING

The Plaintiff/Applicant’s claim against the Defendants is for Kshs 82,706,408. 60 being monies due by the Defendants to the Plaintiff under a contract or Lease Hire Agreement executed between the Plaintiff and the first Defendant and guaranteed by the Second Defendant. The said sum carries interest at 30% per annum from 18th October 2000. The Plaintiff seeks judgment for the said sum plus interest aforesaid. The defence filed by the Defendants denies the Plaintiff’s claim. The Second Defendant further avers that his liability if any has not crystallized as he has not been notified of the first Defendant’s default and further that the alleged guarantee is null and void because the terms and conditions of the agreement or Hire Purchase Agreement have been varied without his notice approval or consent. The Defendants further allege that the interest rate charged by the Plaintiff is unlawful, unconscionable and punitive and contrary to the provisions of Section 39 of the Central Bank Act and Section 44 of the Banking Act. The Second Defendant has further averred that his liability if any under the alleged guarantee is limited.

At the close of the pleadings the Plaintiff has now brought this application under Order 35 of the Civil Procedure Rules seeking that judgment be entered for the Plaintiff as prayed in the Plaint on the grounds that the Defendants are truly and justly indebted to the Plaintiff for the sum claimed in the plaint and the defence filed is a bare denial and is merely intended to keep the Plaintiff out of its just dues. The Plaintiff further alleges that the Defendants have previously admitted indebtedness to the Plaintiff and made repayment proposals which they failed to honour hence the defence is a sham and is merely intended to delay a fair trial of this action. Finally, the Plaintiff alleges that the defence is frivolous, spurious and does not raise any bona fide triable issue. The application is supported by an Affidavit sworn by one Zipporah K. Mogaka the Manager in charge of the Plaintiff’s Legal Services. Several exhibits are annexed to the same affidavit. These include an offer of a lease Hire Facility duly executed by the Plaintiff and the 1st Defendant; A resolution passed by the 1st Defendants’ Board of Directors to avail itself of the said facility, the Lease Hire Agreement; form of Guarantee, correspondence exchanged between the parties, statements of Accounts and demands for payment.

The Defendants did not file a replying affidavit. Grounds of Opposition have however been filed. The Defendants are content to state that there is no admission of the alleged debt, that there is a triable issue or issues; that the application is an abuse of the process of the Court Process, that the application is incompetent and misconceived and that the Defendants have a good and reasonable defence.

The application was canvassed before me on 26th June 2004 and 12th October, 2004. I have considered the application, the pleadings, the affidavit in support of the application the Grounds of Opposition and the submissions by the Learned Counsels. The Law governing summary procedure is now well settled. If the Defendants show either by affidavit or by oral evidence or otherwise that they should have leave to defend the suit, they will be granted unconditional leave to defend. The Defendants however, should show a bona fide triable issue and not any allegation will suffice. In this case the Defendants deny indebtedness to the Plaintiff. The 1st Defendant apart from the bare denial raises no other defence to the substantive claim made by the Plaintiff. It has however alleged that the interest rate charged is unlawful unconscionable and punitive and contrary to Section 39 of the Central Bank Act and Section 44 of the Banking Act.

The Second Defendant on his part in addition to the general denial has alleged that his liability if any has not crystallized as no notice has been given of the 1st Defendant’s default and further that the terms and conditions of the agreement or Hire Purchase Agreement if any between the Plaintiff and the first Defendant have been varied without his notice approval or consent and therefore the guarantee if any is null and void. The challenge made against interest rates is common to the Defendants.

The Plaintiff has annexed to its application numerous exhibits which show that indeed the Plaintiff and the 1st Defendant entered into an agreement under which the Plaintiff agreed to extend a Lease Hire facility to the first Defendant for the sum of Kshs 10,318,790. 85 on the security of the Lease Hire Agreement over trucks and trailers that were being acquired which were KYU 445/ZB 1072 KYU 446/ZB 1073 and KYU 447/ZB 1074. The second security was the Directors’ personal and irrevocable continuing guarantee for the said sum. The Second Defendant duly executed the personal guarantee. The Plaintiff has exhibited this guarantee.

The Defendants did not deny the facts as presented by the Plaintiff in its application and supporting affidavit. The denials contained in paragraphs 2 and 3, of the defence are therefore without basis. In paragraph 4 of the defence the Second Defendant avers that his liability if any has not crystallized as no notice has been given of the First Defendant’s default. Correspondence exchanged between the parties show that the Second Defendant was notified of the First Defendant’s default. He has not filed a replying affidavit to respond to this fact. The 2nd Defendant’s averment in paragraph 4 of the defence is therefore untrue.

In paragraph 5 of the defence the 2nd Defendant alleges variation of the Hire Purchase Agreement between the Plaintiff and the First Defendant. He has not given particulars of the alleged variation. He could have done so in a Replying Affidavit. He chose not to file any. The averment regarding variation of the Lease Hire Agreement is therefore without substance. There can therefore be no argument that the guarantee given by the 2nd Defendant is null and void. Besides, correspondence exchanged between the parties show that the Second Defendant at no time complained about variation of the Lease Hire Agreement. The averment in paragraph 5 of the defence is therefore hollow and does not raise a bona fide triable issue.

What now remains for consideration is whether the averment made in respect of rates of interest applied by the Plaintiff constitutes a bona fide triable issue. The offer made by the Plaintiff and accepted by the 1st Defendant in exhibit ‘ZKM2” provided for interest at 18% per annum and the Plaintiff reserved the right to change the rate without notice to the 1st Defendant. The guarantee executed by the 2nd Defendant also made provision for interest. The guarantee was exhibited as ZKM5 to the supporting affidavit of Zipporah K. Mogaka aforesaid. This document at paragraph 1 guaranteed to pay to the Plaintiff all sums including interest which then or thereafter was to become due and owing by the 1st Defendant to the Plaintiff. It is clear therefore that variations in the rates of interest were provided for. The sums claimed as interest are therefore contractual. The Plaintiff is not a bank. The provision of Section 39 of the Central Bank Act and Section 44 of the Banking Act do not therefore assist the Defendants. As the rates of interest were contractual, it cannot be said to be unconscionable and punitive. It could not have in any case been an issue if the Defendants had kept their part of the bargain. I find therefore that a challenge made against the rates of interest applied does not raise a bona fide triable issue.

In summary, I find that the defence filed by the Defendants dated 22nd July 2003 is a sham and does not raise a bona fide triable issue. I am alive to the fact that summary remedy should be applied only in plain and obvious cases and that the power to strike out any pleading or any part of a pleading should be exercised with extreme caution. I have had this principle in mind in considering the Plaintiff’s application. The Defendants had a chance to show by affidavit, oral evidence or otherwise that they should have leave to defend. I am afraid in the light of material availed to me by the Plaintiff the Defendants have not identified any bona fide triable issue. I have therefore no alternative but to order that the defence dated and filed on 22nd July 2003 be and is hereby struck out.

I further order that Summary Judgment be and is hereby entered for the Plaintiff against the Defendants jointly and severally in the sum of Kshs 82,706,408. 60 together with interest thereon at the rate of 30% p.a. from 18th October 2000 until payment in full. The Plaintiff shall also have the costs of this application and the suit.

DATED AND DELIVERED AT NAIROBI THIS 4th DAY OF NOVEMBER, 2004.

F. AZANGALALA

AG. JUDGE