National Oil Corporation v John Mwangi Kaguenyu, Attorney General & Peter Kombuthi [2019] KECA 884 (KLR)

IN THE COURT OF APPEAL

AT NAIROBI

[CORAM: OUKO (P), GATEMBU & SICHALE JJA]

CIVIL APPEAL NO. 251 OF 2017

BETWEEN

NATIONAL OIL CORPORATION............................APPELLANT

AND

JOHN MWANGI KAGUENYU........................1STRESPONDENT

HON. ATTORNEY GENERAL.......................2NDRESPONDENT

PETER KOMBUTHI........................................3RDRESPONDENT

(Being an appeal against the Judgment and Decree of the High Court at Nairobi (Mbogholi, J) dated 1stFebruary, 2017 In

NAIROBI HCCC NO. 217 OF 2011

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JUDGMENT OF THE COURT

On 1st September 2015 John Mwangi Kaguenyu, the 1st respondent herein filed an amended plaint dated 22nd July 2015. In the amended plaint, National Oil Corporation,the appellant herein was named as the 1st defendant whilst theAttorney GeneralandPeter Kombuthi, the 2nd and 3rd respondents herein were named as the 2nd and 3rd defendants respectively. The 1st respondent’s cause of action was based on the tort of malicious prosecution over his arrest on 17th March 2005 which according to him was instigated by the appellant’s servants, employee or its agent. The 2nd and 3rd respondents were faulted as they “……. proceeded to prosecute…” .

The appellant filed a statement of defence dated 2nd May 2012 and denied that it had maliciously and in absence of reasonable and probable cause reported the 1st respondent to the police. The 1st respondent filed a reply dated 17th November 2015 to the appellant’s defence and joined issue with the appellant. It would appear that the 2nd and 3rd respondents did not file statements of defence.

The dispute between the parties was heard by Mbogholi, J. who in a judgment delivered on 1st February 2017 found in favour of the 1st respondent. The learned Judge made the following awards:

“Kshs 5 million damages for malicious prosecution

Kshs 250,000/= special damages plus transport costs

Kshs 32,256,000/= loss of user

Total Kshs 37,506,000/=”

The appellant was dissatisfied with the said outcome and in a Memorandum of Appeal dated 17th July 2017 listed seven (7) grounds of appeal. The learned Judge was faulted for failing to appreciate the settled principles of the tort of malicious prosecution as set out in the case of Murunga vs. AG [1982-88] KLR 138; for failing to find that the appellant was wrongfully enjoined in the suit; that the appellant was not culpable for malicious prosecution; in awarding special damages which were not particularized nor proven; for failing to make a proper assessment of the losses allegedly incurred by the 1st respondent and finally for ignoring the law on malicious prosecution as well as the evidence tendered. In the appellant’s written submissions filed on 15th December 2017, grounds 1 and 2 were urged together, ground 3 alone, grounds 4 and 5 together and grounds 6 and 7 together. In faulting the learned Judge for failing to appreciate the principle of the tort of malicious prosecution, several authorities were cited for proposition that for one to be successful in a tort of malicious prosecution, one must demonstrate malice. These included MURUNGA VS. ATTORNEY GENERAL[1979]KLR 138,ITAU VS ATTORNEY GENERAL[1990]KLRandROBERT OKERI OMBEKA VS.CENTRAL BANK OF KENYA[2015] eKLR.

In ground 3 the learned Judge was faulted in finding the appellant is liable to pay damages in the absence of culpability for malicious prosecution.

In ground 4 and 5 the learned Judge was faulted for awarding special damages in the absence of proof and lack of pleadings. The decision of WAWERU THUMBIVS.SAMWUEL NJOROGE CIVIL APPEAL NO.445 OF2003was cited for the proposition that special damages must be specifically pleaded and proved.

Finally, in grounds 6 & 7, it was contended that the learned Judge failed to consider the appellant’s arguments and authorities cited in support of its case.

The 1st respondent opposed the appeal and in written submissions filed on 8th January 2018 contended that the appellant through its agents/employee was “actively instrumental” in having the 1st respondent arrested; that the 2nd and 3rd respondents failed to establish reasonable and probable cause in arresting the 1st respondent; that there was imputation of malice as the 1st respondent had done business with the appellant for 5 years and was all of a sudden blacklisted even without seeking the 1st respondent’s explanation of the alleged loss; that the 1st respondent was acquitted of the criminal charge preferred against him; that the suit took more than 5 years; and finally, that the 1st respondent in supporting the award of damages was of the view that these were proved as required.

In supporting the appeal, the 2nd and 3rd respondents filed their submissions on 5th November 2018. In their brief submissions, they reiterated the appellant’s submissions.

On 12th November 2018, the appeal came before us for hearing. Learned counsel Mr. Odhiambo and Mr. Kubai appeared for the appellant. Mr. Njuguna appeared for the 1st respondent and Mr. Ngumbi appeared for the 2nd and 3rd respondents.

In urging the appeal, Mr. Odhiambo submitted that the award of both special and general damages was not warranted and that no malice was established. Counsel reiterated that in the circumstances of the case the essentials of the tort of malicious prosecution were missing. Mr. Ngumbi for the 2nd and 3rd respondent wholly supported the 1st respondent’s written submissions and made no oral submissions.

On behalf of the 1st respondent, Mr. Njuguna submitted that the 1st respondent established the loss suffered in the five (5) years; that receipts were produced that established the loss; that the Civil Procedure Rules allow the production of documents in support of a litigant’s case even at a later date; that the appellant’s agent issued Memos to all other depots black-listing the 1st respondent’s trucks; that these actions implied malice and finally, that thorough investigations would have absolved the 1st respondent of criminal culpability.

We have considered the record, the rival oral and written submissions, the authorities cited and the law.

For a start it is not denied that the 1st respondent and the appellant had a business relationship. It is also not disputed that following a report made by the appellant’s agent/employee, the 1st respondent was arrested on 17th March 2005 and charged in Nairobi Chief Magistrate’s Court Criminal Case No. 553 of 2005. On 21st June 2010, the 1st respondent was acquitted under the provisions of Section 215 of the Criminal Procedure Code. However, the single most important issue for our determination is whether the allegation of malicious prosecution was established. The trial Judge summed up his findings as follows:

“The arrest of the plaintiff was initiated by the 1stdefendant, its agent and or servant. It is the 1stdefendant who made a complaint to the Police Banking Fraud Unit whose investigation department took over the matter ending with the prosecution of the plaintiff. Had the complaint not been made, the plaintiff would not have gone through what he did.

The prosecution was terminated in favour of the plaintiff. Malice can be imputed or inferred depending on the circumstances of the case. At the same time, even after receipt of the complaint, the police must act reasonably and there must be probable cause for them to mount the prosecution”.

With respect to the judge, case law is replete on the issue of malicious prosecution. Of critical importance is that a litigant must establish malice. It is not sufficient to find one liable on the basis that he/she is the one who made the complaint. In the often cited case of MURUNGA VS. ATTONEY GENERAL [1979] KLR 138, the principles of the tort of malicious prosecution were spelt out. These are:-

“ i) The defendant instituted the prosecution against the plaintiff.

ii) The prosecution ended in plaintiff’s favour.

iii) The prosecution was instituted without reasonable and probable cause.

iv) The prosecution was actuated by malice.”

The facts as can be discerned from the record are that the 1st respondent in his business dealings with the appellant used to pay for petroleum products by deposits of cash at Cooperative Bank. Upon such deposits, the 1st respondent would then collect the products. One such a deposit slip was missing and an audit by the appellant showed that one of the payments was missing. The appellant made a report to the Banking Fraud Unit and this culminated in the arrest and subsequent arraignment in court of the 1st respondent. The position of the law is that a plaintiff has to demonstrate that there was malice on the part of the complainant. This is because once a report is made, the matter is taken up for purposes of investigation. If the investigation reveal culpability, a complainant becomes a state witness and under an obligation to attend court to testify. Should however, the investigations show that the complainant made false accusation, then he/she is charged with the offence of giving false information to a public officer. In this Court’s decision of JEDEL NYAGA VS. SILAS MUCHEKE CA NO. 59 OF 1987the court stated:-

“ The appellant had made a complaint to the police andnothing more and what followed had nothing to do withhim. The decision to arrest the respondent was made bythe police who must have found some merit in thereport”.

Consequently,  the  Court  found  that;  “theappellant who had made the report to the police was notresponsible for the arrest of the respondent and the merefact that he was a probable prosecution witness did notrender him responsible for the arrest of the subsequent prosecution of the respondent by the police.”

Similar findings were made  in KOECH VS. AFRICAN HIGHLANDS& PRODUCE COMPANY LIMITED & ANOTHER [2006]2 EALR 148 wherein the court stated:-

“The police carried out their own investigation and were satisfied that there were sufficient grounds upon which a charge of theft by servant could be preferred against the plaintiff. The first defendant carried out its own investigation regarding the disappearance of its property, just like any prudent person or company would in the circumstances but those investigations had nothing to do with the investigations by the second defendant through the police and the resultant decision to charge the plaintiff with the said offence.”

In JAMES KARUGA KIIRU VS JOSEPH MWAMBURI & OTHERS [2001] eKLR the court stated:-

…however, the mere fact that a complaint is lodged doesnot justify the institution of a criminal prosecution.  Thelaw enforcement agencies are required to investigate thecomplaint before preferring a charge against a personsuspected of having committed an offence.  In other wordsthe police or any other prosecution arm of the Governmentis not a mere conduit for complainants. The police mustact impartially and independently on receipt of a complaintand are expected to carry out thorough investigationswhich would ordinarily involve taking into account theversions  presented  by  both  the  complainant  and  thesuspect…On the other hand it would be obviously absurdto make a defendant liable because matters of which hewas not aware put a different complexion upon facts,which in themselves appeared a good case for prosecution. But neglect to make a reasonable use of the sources of information available before instituting proceedings would be evidence of want of reasonable and probable cause and also malice. It is not required of any prosecutor that he must have tested every possible relevant fact before he takes action. His duty is not to ascertain whether there is a defence, but whether there is a reasonable and probable case for a prosecution. Circumstances may exist in which it is right before charging a man with misconduct to ask for an explanation but no general rule can be laid down.”

It is not disputed that the 1st respondent had collected petroleum products from the appellant. In spite of the 1st respondent producing the deposit slip as a pre-requisite for the collection of the products, the bank reconciliation did not reflect the deposit made by him. It is in view of this that we find the appellant’s report was not actuated by malice. The audit report carried out by the appellant established that the products collected by the 1st respondent had not been paid for. The appellant made a report to the Banking Fraud Unit who commenced their own investigations. As stated in the case of Murunga vs. Ag. (supra), it is not sufficient for a tort of malicious prosecution for one to establish that he was acquitted in the ensuing criminal trial. He/she must further establish that the report and the prosecution was actuated by malice. We see no malice herein.

It is for the above reasons that we find that this appeal has merit. It is hereby allowed and the judgment of 1st February 2017 is hereby set aside. Costs of this appeal and of the High Court to the appellant and the 2nd and 3rd respondent.

Dated and delivered at Nairobi this 8thof March, 2019

W. OUKO (P)

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JUDGE OF APPEAL

S. GATEMBU KAIRU,FCIArb

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JUDGE OF APPEAL

F. SICHALE

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JUDGE OF APPEAL

I certify that this is a

true copy of the original.

DEPUTY REGISTRAR