Mabati Rolling Mills Limited v Sera Steel Limited & 3 others [2022] KEHC 10097 (KLR)

Mabati Rolling Mills Limited v Sera Steel Limited & 3 others (Civil Case E212 of 2021) [2022] KEHC 10097 (KLR) (Commercial and Tax) (19 May 2022) (Ruling)

Neutral citation: [2022] KEHC 10097 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Civil Case E212 of 2021

DAS Majanja, J

May 19, 2022

Between

Mabati Rolling Mills Limited

Plaintiff

and

Sera Steel Limited

1st Defendant

Ketan Kumar Rasikbhai Patel

2nd Defendant

Mautik Rajesh Kumar Patel

3rd Defendant

Bhavik Kumar Ghanshyambhai

4th Defendant

Ruling

Introduction and Background 1. Before the court is a Notice of Motion dated 29th July 2021 made, inter alia, under Order 13 Rule 2 of the Civil Procedure Rules (“the Rules”) where the Plaintiff principally seeks judgment on admission for KES 17,100,000. 00 against the Defendants. It contends that they admitted the debt in a Deed of Acknowledgment and Settlement dated 9th September 2020 (“the Deed of Settlement”). The application is supported by grounds set out on its face together with the affidavits of the Plaintiff’s Legal Officer, George Githoge Maina, sworn on 28th July 2021 and 31st August 2021 respectively. It is opposed by the Defendants through the replying affidavit of the 2nd Defendant sworn on 12th August 2021. In addition to their pleadings and depositions, the parties have also filed written submissions in support of their respective positions.

2. The facts giving rise to the present application can be gleaned from the Plaint and the parties’ depositions. The Plaintiff and the 1st Defendant, which was formerly known as Palak International Trading Limited, signed the Deed of Settlement where the 1st Defendant agreed that it owed the Plaintiff KES 17,100,000. 00 being outstanding sums for goods delivered to 1st Defendant by the Plaintiff. The 1st Defendant unconditionally and irrevocably undertook to settle the amount as per the terms and conditions stipulated under the Deed of Settlement by making monthly installment payments of not less than KES 500,000. 00 and such other amounts payable to the Plaintiff not later than the 10th day of every month. The debt was also to attract interest at the rate of 3% per month until payment in full.

3. To secure the payment and discharge of the 1st Defendant’s obligations under the Deed of Settlement, and in addition to any other securities provided, the 1st Defendant was to assign and grant to the Plaintiff, security rights over its inventory and stock and in the alternative, security rights over its movable property in accordance with the Movable Property Security Rights Act, No. 13 of 2017 and/or such other applicable legislation in force. Further, the Deed of Settlement was to constitute a security by way of personal guarantee on the 1st Defendant’s signatory for the debt. Consequently, the 2nd Defendant, a director of the 1st Defendant executed a guarantee on 30th September 2020 for the sum of KES 17,100,000. 00 and according to its terms, the guarantee could not be revoked until the settlement in full of the debt due and owing to the Plaintiff by the 1st Defendant.

4. On 22nd April 2021, the Plaintiff filed suit against the Defendants claiming that the Deed of Settlement has not been honoured and that the Defendants have failed, refused and/or neglected to pay the sum of KES 17,787,056. 7 which the Plaintiff now claims from them and forms the basis of its suit against the Defendants.

The Application 5. In support of its application, the Plaintiff relies on the terms of the Deed of Settlement. It adds that the 2nd and 3rd Defendants executed a Personal Guarantee dated 13th April 2012 which was a continuing Guarantee, covenanting with the Plaintiff and undertaking to be answerable and responsible for all such sums payable by the 1st Defendant to the Plaintiff on account of goods supplied to or purchased by the 1st Defendant and the 2nd and 3rd Defendants as guarantors declared, inter alia, that the Plaintiff would be at liberty to act as though it was the Principal Debtor. The Plaintiff further states that the 4th Defendant, as is the 2nd Defendant, is also liable as a guarantor of the 1st Defendant pursuant to Clause 3. 2 of the Deed of Settlement.

6. The Plaintiff avers that on 27th February, 2020, the 1st Defendant, through a letter of the same date under the hand of 2nd Defendant, admitted the debt and made payment proposals. It issued several post-dated cheques amounting to KES 16,850,000. 00, which cheques were dishonoured on presentation.

7. The Plaintiff therefore submits that the Defendants admitted their indebtedness through the email correspondence dated 31st October and 6th November 2015 as well as through their advocate’s letter dated 13th July 2016. It urges the court to allow the application as there is no justifiable reason for the Defendants failing to pay the acknowledged and admitted outstanding sum of KES. 17,100,000. 00.

The Defendants’ reply 8. The Defendants state that by filing the application, the Plaintiff intends to circumvent the request for better and further particulars served on it on 6th July 2021. They submit that allowing the application in the circumstances would amount to an injustice.

9. The Defendants aver that the Statement of Account relied on by the Plaintiff as proof of debt dated 26th January 2021 is for a company by the name “Palak International Limited” while the 1st Defendant, who presently goes by Sera Steel Limited, was previously Palak International Trading Limited as per its Certificate of Change of Name dated 20th February 2019.

10. The Defendants state that the 4th Defendant did not provide or execute any personal guarantee personally hence he is not liable under the Deed of Settlement. The Defendants’ further state that the 4th Defendant did not in fact undertake to pay any amounts by signing the Deed of Settlement as he only signed it in his capacity as Director and as such could not be liable as alleged by the Plaintiff.

11. The Defendants contend that the Personal Guarantee dated 13th April 2012 executed by the 3rd Defendant was not co-signed by the 2nd and 3rd Defendants as co-signees as alleged by the Plaintiff and was only signed by the 2nd Defendant as a witness. That the 3rd Defendant on the other hand only undertook by his own Personal Guarantee dated 30th September 2020 to pay KES 17,100,000. 00 and not KES 22,100,000. 00 as alleged by the Plaintiff. The Defendants do not admit the debt and aver that it has not accrued to enable the guarantee be called up.

12. As regards the Deed of Settlement, the Defendants state that the inclusion of Clause 3. 1 which provides that it shall constitute a guarantee on the Debtor’s signatory seeks to trap the signatories of the Deed of Settlement, more so, the 4th Defendant, for whom no Personal Guarantee exists on record as to their undertaking. That in effect, the inclusion of that clause binds the 4th Defendant to pay KES 17,100,000. 00 and the 2nd Defendant to pay KES 22,100,000. 00 is manifestly against the intention of the parties to the Deed of Settlement. The Defendants contend that there was in fact no meeting of minds concerning the embedded personal guarantee clause given the manner that the Plaintiff had conducted itself in seeking and being so diligent as to ensure the Personal Guarantees are explicitly on record for some of the parties. It therefore submits that to enforce the impugned Clause 3. 1 would be to enforce a capture on the Defendants on terms that they did not address their minds to as evinced by the conduct of business by the Plaintiff well demonstrated before this Court.

13. While the Defendants admit that the courts cannot rewrite contracts between parties, the courts may intervene in the circumstances of this case where there is no meeting of minds. Thus, they add that this constitutes a triable issue entitling them to be heard and for the application to be dismissed.

14. The Defendants insist that the debt is fictitious and figures have been plucked from the air with no basis whatsoever and the alleged acknowledgement of debt done two years ago is not their act as it was either obtained through manipulation, high handedness and misrepresentation and that such issues will be well ventilated in a full hearing and not through a frivolous application like the one herein.

Analysis and Determination 15. The main issue for determination is whether judgment on admission should be entered in favour of the Plaintiff and against the Defendants as admitted in the Deed of Settlement.

16. The Defendants complain that the application is an attempt to circumvent the request for particulars dated 2nd June 2021. They have not filed their statement of defence. I note from the record that the Plaintiff answered the request by the particulars dated 23rd June 2021. The Defendants have not argued that they lack sufficient particulars to respond to the application. They have also not applied to enforce the request under the provisions of the Rules. They seem to suggest that they require the particulars to file their defence but I reject this suggestion since a request for particulars does not act a stay of proceedings. In any case, the Defendants have elected to proceed and argue the application despite not having filed their statement of defence.

17. I also do not think that the failure to file a defence precludes the Plaintiff from filing an application for judgment on admission. The Plaintiff may apply for judgment at any stage of the suit under Order 13 Rule 2 of the Rules which states as follows:Any party may at any stage of a suit, where admission of facts has been made, either on the pleadings or otherwise, apply to the Court for such judgment or order as upon such admissions he may be entitled to, without waiting for the determination of any other question between the parties; and the Court may upon such application make such order, or give such judgment, as the Court may think just.

18. The parties agree that the jurisprudence relating to applications made for judgment on admission was set out in the Court of Appeal case of Choitram v Nazari Nrb Ca Civil Appeal No. 8 of 1982 [1984] eKLR where Madan, JA stated as follows ;-For the purpose of Order XII Rule 6, admission can be expressed or implied either on the pleadings or otherwise, e.g. in correspondence. Admissions have to be plain and obvious, as plain as a pikestaff and clearly readable because they may result in judgment being entered. They must be obvious on the face of them without requiring a magnifying glass to ascertain their meaning In the same judgment, Chesoni Ag. JA,stated:Admissions of fact under Order XII rule 6 need not be on the pleadings. They may be in correspondence or documents which are admitted or they may even be oral. The rules used words “otherwise” which are words of general application and are wide enough to include admission made through letter, affidavits and other admitted documents and proved oral admissions…….It is settled that a judgment on admission is in the discretion of the court and not a matter of right that discretion must be exercised judicially.(Also See Peeraj General Trading & Contracting Company Limited, Kenya & another v Mumias Sugar Company Limited ML Civil Case No. 192 of 2015 [2016] eKLR)

19. The Plaintiff’s prayer for judgment on admission is anchored on the Deed of Settlement which as stated in the introductory part, is not disputed in as much as the Defendants appear to be challenging its import. I also note that even though the Defendants claim that the Plaintiff has sued the wrong party by making reference to a Palak International Limited and not Palak International Trading Limited, I find this to be nothing more than a misdescription as this is a reference to the same entity, a fact that is common to both parties. Such misdescription is not fatal to the proceedings and does not defeat the Plaintiff’s cause of action and the Court is guided by the constitutional desire to serve justice which is the very reason why courts have been given unfettered discretion in ordering an amendment in such a case in order to reflect and have the correct parties before the Court. Under that power, the Court would still allow the amendment to correct a misdescription if at all it is necessary (see Fubeco China Fushun v Naiposha Company Limited & 11 others Ml HCCC 222 of 2012 [2014] eKLR).

20. The Deed of Settlement was made between the Plaintiff and the 1st Defendant and it expressly, plainly and obviously provides that the 1st Defendant owes it a debt of KES 17,100,000. 00 that attracts interest at a rate of 3% per month until payment in full and the 1st Defendant acknowledged this debt and agreed to make installment payments of KES 500,000. 00 to the Plaintiff not later than the 10th day of every month. I have no doubt that this debt by the 1st Defendant to the Plaintiff is plain and clear and it is well and truly admitted and as can be seen from the various correspondences between it and the Plaintiff. I therefore enter judgment on admission in favour of the Plaintiff and against the 1st Defendant for the sum of KES 17,100,000. 00.

21. The Defendants’ protestation and opposition to the application for judgment on admission against the 2nd, 3rd and 4th Defendants is that they did not guarantee the debt under the Deed of Settlement. From the deposition, the 2nd Defendant does not dispute that he undertook to guarantee the aforementioned debt by the 1st Defendant to the tune of KES 17,100,000. 00 as can be seen from the Guarantee dated 30th September 2020. I find this to be an unequivocal admission of the debt and that the 2nd Defendant is also liable for the same in the aforesaid sum of KES 17,100,000. 00 and I accordingly enter judgment on admission against him.

22. The Plaintiffs’ case against the 3rd Defendant is borne out of a Guarantee executed on 13th April 2012, way before the Deed of Settlement was executed therefore, it cannot be clearly said that the Guarantee also extended to the admitted debt under the Deed of Settlement or for other goods supplied by the Plaintiff to the 1st Defendant not covered in the said Deed. This is an issue of trial and cannot be determined at this stage by entering a judgment on admission. I also say the same in respect of the 4th Defendant, whose liability is hinged on the interpretation of the Deed of Settlement as there is no explicit admission of the 4th Defendant in respect of or guaranteeing the debt by the 1st Defendant. This is also an issue for trial and cannot form the basis of a judgment on admission at this point.

Conclusion and Disposition 23. For the reasons I have set out above, I allow the Plaintiff’s application dated 29th July 2021 to the following extent:a.Judgment on admission be and is hereby entered for the Plaintiff against the 1st and 2nd Defendants jointly and severally for the sum of KES 17,100,000. 00b.Subject to the 3rd and 4th Defendants filing a defence, if any, the remaining claims against the 1st and 2nd Defendants may proceed for hearing.c.The 1st and 2nd Defendants shall bear the Plaintiff’s costs of the application and the suit against them.

DATED AND DELIVERED AT NAIROBI ON THIS 19TH DAY OF MAY 2022. D. S. MAJANJAJUDGECourt Assistant: Mr M. OnyangoMr Thiga instructed by Waruhiu K’Owade and Ng’ang’a Advocates for the Plaintiff.CM Advocates LLP for the Defendants.