KINGSWAY TYRES & ANOTHER v ALISON RETREADING CO. LTD. & 3 OTHERS [2003] KEHC 27 (KLR)

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

Civil Case 151 of 2002

KINGSWAY TYRES & AUTOMART LTD..................................................... PLAINTIFF

VERSUS

ALISON RETREADING CO. LTD. AND THREE (3) OTHERS............. DEFENDANT

RULING

This is the Notice of Motion dated 5th January, 2003 filed by the Plaintiff under Order XXXV Rule 2 and 3 of the Civil Procedure Rules and Section 3A of the Civil Procedure Act.  The plaintiff seeks summary judgment to be entered against the Defendants for a sum of Kshs.23,640,451/= plus costs and interest. The Plaintiff is relying on 4 grounds set out in the motion, namely, that:-

(i) The Defendants are truly and justly indebted to thePlaintiffs for the sum of Kshs.23,640,451/=.

(ii) The debt was incurred on account of goods suppliedto the 1st defendant at its request and instance and guaranteed by the 2nd, 3rd and 4th Defendants.

(iii) The defences filed herein are a sham and do notdisclose any reasonable defence neither do they raise any triable issues.

(iv) The defences filed herein are vexatious and are onlymeant to delay the fair trial of this suit.

The application is supported by an affidavit sworn by the Plaintiff's Managing Director, Mr. Manoj Shah and sworn on 5th January, 2001.  The plaintiff claims that it supplied goods to the 1st  Defendant and that payment was guaranteed by the 2nd, 3rd and 4thDefendants. The Plaintiff has annexed delivery notes as part of itsevidence. The Plaintiff contends that delivery was acknowledged bythe stamps of the 1st Defendant on the delivery notes. That in anattempt to pay the 1st Defendant issued 10 cheques but all werereturned upon presentation with remarks "Refer to Drawer". That theDefendants were given Notice of dishonour but no payment has been made. The amount claimed is inclusive of interest. The plaintiffclaims 10% handling charges on all goods returned and as stated inthe invoices raised. That goods were sold without any guarantee andthere was to be interest at 2% p.m. on outstanding amounts. That allinvoices were raised in 1997 and the cheques issued in 1998. Thecheques were issued by the First Defendant Company.

The Plaintiff's claim against the 2nd, 3rd and 4th Defendants is set out in paragraphs 11, 12, 13, 14, 15, 16 and 17 of the Plaint which reads as follows:-

"11.  The Plaintiff claims damages for fraudulent misrepresentation against the second, third andfourth Defendants jointly and severally.

12.  In order to induce the plaintiff to enter into the oralagreement referred to in paragraph 4 of the plaint, thesecond, third and fourth defendants on variousoccasions while meeting with the Plaintiff made thefollowing representations to the Plaintiff: -

(i) The First Defendant Company was in a soundfinancial position to pay up for all the ordersmade.

(ii) The First Defendant had received financialaccommodation with a reputable Bank andwould be able, therefore, to settle all thePlaintiffs invoices within seven days of deliveryof goods ordered for by the First Defendant.

(iii) The second, third and fourth Defendants wouldpersonally guarantee payment to the Plaintiff bythe First Defendant for supply and delivery ofgoods.

(iv) Issuing post-dated cheques to the Order of theFirst Defendant.

13.  The said representations were made by and are to beinferred from:-

> The  various  oral  conversations  anddiscussions  between  the  Plaintiff and the second,  third  and  fourth  Defendants  onbehalf of the First Defendant.

> Issuance by the second, third and fourthDefendants of cheques to the order of theFirst Defendant while knowing that theFirst Defendant had no or no sufficientfunds available in its account with itsbankers.

14. Acting on the faith and truth of the said representationsand induced thereby, the plaintiff made and completedthe said contract and made several deliveries of goodsat the instance and request of the First Defendants.

15. The Plaintiff has since discovered and the fact is thateach of the said representation was untrue in that;

(i) The First Defendant was and/or is not financiallysound and was and/or is not able to settle theinvoices for the goods supplied to it by thePlaintiff.

(ii) The First Defendant was and/or is not capable ofsettling the Plaintiff's invoices for goodsdelivered within seven days of the delivery.

(iii) The second, third and fourth Defendants havenot and not willing to personally guarantee tothe Plaintiff the payments of debts owing to thePlaintiff by the First Defendant for supply anddelivery of goods to the First Defendant.

(iv) The aforesaid cheques issued to the Plaintiff bythe second, third and fourth Defendants to theorder of the First Defendants were alldishonoured and returned marked "Refer to theDrawer."

16. The Second, Third and Fourth Defendants made thesaid representations fraudulently and either wellknowing that they were false and untrue or recklesslynot caring whether they were true or false.

17. The Plaintiff has therefore suffered loss and damagesas a result of the said representations and the Plaintiffclaims damages..."

The Plaintiff's application is opposed by the Defendants.Mr. Otieno appeared for the 2nd and 3rd Defendants but was holdingbrief for Mr. Amolo for the 1st and 4th Defendants. The Defendantsfiled 2 Replying Affidavits namely, one by Mr. Amin MohammedLakha filed on 25th May 2001 and the second made by Mr.Abdulmalik Fazal Lakha filed on 31st May, 2001. The Defendantsalso relied on their 4 respective Defences. Initially, the Defendantsintended to raise the defence of Res Judicata in this application butthis was later withdrawn when the Court declined to allow sucharguments, there being a finding on the issue by Hon. Justice Osiemoin another application. Mr. Otieno may argue the matter at a differentforum but not in this application.

The Defendants raise the question of Limitations and object tothe jurisdiction of the Court on this ground. The Plaintiff's case is thatthe parties entered into an oral agreement sometimes in 1994.  The suit was filed on 27th November, 2000. On this ground theDefendants contend that the cause of action herein is time-barredand therefore this Court has no jurisdiction to hear the matter.

The Defendants contend that there are several triable issuesraised in the pleadings in this suit and that the suit should go to trialon its merits. Some of the triable issues referred to are:-

1.     Whether the agreement was for collection of goodsfrom the Plaintiffs premises or delivery at Kisumu.

2.     Failure of consideration.

3.     Whether Notice of dishonour was ever issued andserved.

4.      Receipt of goods.

5.     Question of interest.

6.     Whether there was any guarantee given by Second,Third and Fourth Defendants.

I have considered the Plaintiffs application and the supportingAffidavit.  I have also perused the Defendants replying affidavits andthe  annextures.  I have also taken into account the elaboratesubmissions by Counsels.

I will deal with the question of the oral agreement first. In myview, for an oral agreement to be proved by way of affidavits in suchan application for summary judgment, the same must be admitted by the Defendants or party against whom it is intended to be enforced.The admission could be through the pleadings or in correspondenceetc. The terms and conditions must be certain and undisputed. Inthis case, the dateswhen the oral agreement was made is notmentioned, only the year. There is no letter, note, memorandum,affidavit or pleading in which the oral agreement is admitted or inwhich this court can discern the existence of the said agreement.This is a triable issue. Can the Court deduce the existence of anagreement through the invoices and delivery notes? I havethoroughly looked at the said documents against the defences andreplying affidavits. It would appear to this Court that the Plaintiff andFirst Defendant transacted somebusiness in which the Plaintiffdelivered or at least supplied goods to the First Defendant. Invoiceswere raised. On the face of the invoices, some of the conditions ofthe transactions are set out:-

e.g. - 10% handling charges

-   2% monthly interest on overdue accounts

-   goods sold without guarantee

-   accounts to be settled within 25 days of invoices,etc.

The invoices are raised by the Plaintiff to the First Defendant.The proposed delivery notes show that the customer is the 1stDefendant, they list the quantities of the goods, type, nature orspecifications of the goods (tyres, tubes etc). There are stamps of thePlaintiff and 1st Defendant, Registration Numbers of vehicles andnames of persons who received the goods.

The invoices are denied by the 1st Defendant. They also denydeliveries. From the copies of the said documents and thedeponements, this Court is unable to make any finding. For theinvoices to be proved and the deliveries too, further evidence isrequired. Oral testimonies of the players under oath and scrutinyunder cross-examination is necessary to support the facts alleged inthe invoices and delivery notes. The Court needs to verify eachinvoice against each delivery, the quantities, the prices, the dates, thepersons delivering and those receiving, the owners of the motorvehicles delivering etc.

The cheques appear to have been drawn by the 1st Defendantbut it is true that no notice of dishonour was exhibited as required bythe Bills of Exchange Act. In any case the total value of the cheques are for Kshs.4,210,305. 60/= while the application for summaryjudgment is for Kshs.23,640,451/=.

The plaintiff, for the purposes of this application claims that the2nd, 3rd and 4th Defendants guaranteed the said payments. I havelooked at the application and the Pleading carefully and find nowherewhere the Plaintiff pleaded the existence of any guarantee issued orgiven by the 2nd, 3rd and 4th Defendants. To this Court, a guaranteeas a legal instrument constituting a collateral or security must bepleaded and identified specifically. This Court has not been referredto such a guarantee. I think that what the Plaintiff is alluding to is thatthe 2nd, and 3rd Defendants gave warranties whether express orimplied. However, such allegations in the application is not supportedby any pleading in the Plaint. In the Plaint, the 2nd, 3rd and 4thDefendants are sued for damages for fraudulent misrepresentationswhich induced the Plaintiff to transact with the 1st Defendant - Fromthe nature of the said cause of action, this suit needs to go for trial.The allegations of fraudulent misrepresentations cannot be triedsummarily by way of affidavits. This is a triable issue.

In H.C.C.C. No.1239 of 2003, Milimani Commercial Courts -Kenya Oil Co. Ltd. and Chief Petroleum Limited, I said:-

"... This Court is of the view that applications underOrder 35 are of a summary nature. In fact the headingreads. "Summary Procedure". In the Oxford -Advanced Learner Dictionary, the meaning of theword "summary" is said to include:-

"... done immediately, without payingattention to the normal process thatshould be followed: summary justice/execution- summary judgment."

The marginal notes against Order 35, Rule 1 refers to"summary judgment". To me an application under this Order doesnot constitute a normal trial where all the processes under Order 10,Rule 11 (A) have been exhausted including Interrogatories, Discoveryand Inspection. That is why summary procedure is possible evenbefore a Defence is filed. It ought only be invoked or summaryjudgment entered where from the evidence adduced through anaffidavit, it is shown to the Court that the Defendant has no orpossibly cannot have a Defence whatsoever to the claim or cause ofaction, that the Defence is hopeless, a sham and does not raise anytriable issues. Under the said Rules the Defendant is given a right toshow by way of affidavit or even oral evidence that he should haveleave to defend the suit."

For summary judgment to succeed the causes of action mustbe uncontestable and be proven by little effort and evidence through an affidavit. The hearing of an application for summary judgmentmust remain what it is supposed to be and not converted into a trial orother process, for to do so would change its meaning and verypurpose. This Court finds that the Defences herein and the pleadingsin general, raise numerous triable issues which must go to trial fordetermination on their merits.

Accordingly, I hereby dismiss the application for summaryjudgment with costs to the Defendants.

Dated and delivered at Nairobi this 22nd day of September,2003.

MOHAMMED IBRAHIM

JUDGE