Kenya Vehicle Manufacturers Limited v Climax Coaches Limited & 2 others [2023] KEHC 25438 (KLR)

Kenya Vehicle Manufacturers Limited v Climax Coaches Limited & 2 others (Civil Appeal E088 of 2022) [2023] KEHC 25438 (KLR) (Commercial & Admiralty) (17 November 2023) (Judgment)

Neutral citation: [2023] KEHC 25438 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts)

Commercial and Admiralty

Civil Appeal E088 of 2022

FG Mugambi, J

November 17, 2023

Between

Kenya Vehicle Manufacturers Limited

Appellant

and

Climax Coaches Limited

1st Respondent

Mobi Key & Bus Limited

2nd Respondent

Equity Bank Kenya Limited

3rd Respondent

(Being an appeal from part of the ruling and orders of issued by Hon. H.M. Nyaberi (CM) on 21st June, 2022 in MC.COMM No. E1636 of 2021 at the Chief Magistrates Court at Milimani)

Judgment

Background 1. The dispute between the parties emanates from a suit filed by the 1st respondent in the lower Court, being CMComm No. E1636 of 2021 against the appellant and the 2nd respondent herein. The suit seeks the release of 4-man buses, to wit xxxx, xxxx, xxxx & xxxx (the man buses) that are unlawfully and illegally held by the 2nd respondent, loss of profits of Kshs. 4,600,000/=, general damages due to the shift in number plates from KDE to KDG, interest and costs of the suit.

2. The 1st respondent’s case was that it entered into a contract with the 2nd respondent for the purchase of the man buses at a total cost of Kshs. 58,885,000/=, with financing from the 3rd respondent. The appellant was responsible for assembling the bodies of the said buses. The appellant confirms having received payment of the 2nd & 3rd instalments which it remitted to the 2nd respondent. The 1st respondent further confirmed that on 24th November 2021, the 3rd respondent released the funds payable to the appellant as per the invoice raised by the appellant. The 1st respondent remitted the amounts to the 2nd respondent. Thereafter, the 1st respondent was stopped from collecting the buses from the 2nd respondent on account of unpaid interest, leading to the suit before the lower court.

3. During the pendency of the suit, the appellant filed a Notice of Motion application dated 24th January, 2022 seeking to have its name struck out of the suit on grounds that it was improperly joined. The application was premised on the grounds that the 1st respondent had no reasonable cause of action against it. The appellant averred that it did not get into any agreement with the 1st respondent, neither was it in possession of the subject matter and as such there was no question which could not be effectually and completely settled with its absence in the suit.

4. Finally, the appellant argued that it could not be sued in place of a disclosed principal. Indeed, when the fabrication was completed, the appellant confirmed that it delivered the man buses to its principal, the 2nd respondent, whose obligation it was to deliver the man buses to the 1st respondent.

5. The application was dismissed by the trial Court vide a ruling dated 21st June, 2022. The appellant being aggrieved by part of the trial Court’s ruling, lodged the appeal herein vide a Memorandum of Appeal dated 6th July, 2022 which was amended on 8th July, 2022. The appellant sought to set aside the ruling and orders of 21st June, 2022 with respect to the appellant’s application dated 24th January, 2022.

6. On 25th April, 2023 this Court gave directions that the instant appeal will be canvassed by way of written submissions. The appellant by way of written submissions reiterated that it had been contracted to fabricate the man buses, raise invoices and receive monies on behalf of the 2nd respondent. The appellant had performed these functions as an agent of the 2nd respondent who was at all times the disclosed principal, and it is trite law that an agent cannot be sued for any acts or omissions conducted in his capacity as an agent when the principal is known.

7. The 1st respondent on the other hand submitted that in as much as the general rule is that a disclosed principal cannot be held personally liable for the acts committed in the course of his contract with a third party, there are exceptions to the said rule such as when fraud, deceit, criminal or tortious acts are committed by the agent.

8. The 1st respondent contended that if it was found that timely payments were made by the 1st respondent to the appellant, there is a high likelihood that the appellant would be found personally liable for failing to timeously remit the said monies to the 2nd respondent. The 1st respondent argued that if the appellant was struck out from the suit and the 1st respondent’s suit was successful, the 1st respondent will be unable to enforce and execute its judgment against the appellant.

Analysis 9. I have carefully considered the record of appeal, the rival submissions and the authorities presented by Counsel for in support of their rival cases. The issue that arises for determination is whether the appellant’s name should be struck off the suit that is before the trial Court.

10. Order 1 rule 3 of the Civil Procedure Rules is clear that a party against whom any right to relief is sought, is a property party to a suit. This is so long as the right arises out of the same act or transaction or series of acts or transactions is alleged to exist, whether jointly, severally or in the alternative so long as a common question of law or fact would arise. Order 1 rule 5 further makes it clear that it shall not be necessary that every defendant shall be interested as to all the relief claimed in any suit against him.

11. Also important are the provisions of Order 1 rule 10(2) which provide that:“The court may at any stage of the proceedings, either upon or without the application of either party, and on such terms as may appear to the court to be just, order that the name of any party improperly joined, whether as plaintiff or defendant, be struck out…”

12. I agree with the judicial pronouncements on the interpretation of these rules, that a party may be enjoined in a suit either because he is a necessary or non-necessary party to a suit. The distinction was made by the Court in the case of County Government of Kiambu &anothervSenate & Others, [2017] eKLR where it was held as follows:“The presence of opposing parties is one of the essential requirements of any civil suit. But all parties are not necessary for the suit to be adjudicated upon. Therefore, distinction should be made between necessary and non-necessary parties. ‘Necessary Parties’ are those parties from whom relief is claimed. ‘Non-necessary Parties’ are those parties who may be parties to the suit, but from whom no relief has been claimed.”

13. The Court further referred to Joseph Njau KingorivRobert Maina Chege & 3 Others, [2002] eKLR (Nambuye, J as she then was) where it was reiterated that:“… ‘Necessary Parties’ are those parties in the absence of whom no effective decree can be passed by the court.”

14. Turning to this case, the uncontroverted role of the appellant in this transaction was that the appellant was contracted by the 2nd respondent to assemble and/or build the body of the said buses. The appellant also received two (2) payment instalments from the 1st respondent for onward transmission to the 2nd respondent. Further, the appellant received monies from the 1st respondent arising from a full and final invoice which it raised. The man buses were subsequently impounded by the 2nd respondent on the basis that the 2nd and 3rd instalments were not timeously paid.

15. The 1st respondent’s claim against the appellant is that the said payments were paid to the appellant in good time, and the appellant was therefore under an obligation to remit the payments timeously. The 1st respondent thus argues that the appellant is a proper and necessary party to the suit to explain how the interests had accrued in default of paying the 2nd and 3rd instalments which payments were remitted to it timeously.

16. Guided by the jurisprudence that I have referred to, I am persuaded by the arguments made by the 1st respondent that the appellant is a necessary party to this suit in order to enable the court effectually and completely to adjudicate upon and settle all questions involved in the suit. The principal-agency relationship alleged by the appellant and the liability (if at all) of the appellant arising from the agency agreement are issues that will be determined at the trial. This would accordingly mean that should it be found that the appellant is responsible for the delay in remitting payments to the 2nd respondent, his involvement in the suit will be necessary to enable the 1st respondent enforce and/or execute its decree.

Determination 17. In the circumstances, and for all the foregoing reasons, I concur with the trial Court that the appellant is a proper and necessary party to the 1st respondent’s suit being CMComm No. E1636 of 2021. In the end, the appeal herein devoid of merit and it is dismissed with costs to the 1st respondent.

DATED, SIGNED AND DELIVERED IN NAIROBI THIS 17TH DAY OF NOVEMBER 2023. F. MUGAMBIJUDGE