Prime Steel Mills Ltd,Abyssinia Iron & Steel Ltd & Western Steel Mills Ltd v Blue Nile (EA) Ltd & Midroc Water Drilling Company Ltd [2018] KEHC 5223 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

COMMERCIAL AND ADMIRALTY DIVISION-MILIMANI

CIVIL CASE NO.128 OF 2017

PRIME STEEL MILLS LTD.............................................1ST PLAINTIFF/RESPONDENT

ABYSSINIA IRON & STEEL LTD..................................2ND PLAINTIFF/RESPONDENT

WESTERN STEEL MILLS LTD.......................................3RD PLAINTIFF/RESPONDENT

VERSUS

BLUE NILE (EA) LTD........................................................1ST DEFENDANT/APPLICANT

MIDROC WATER DRILLING COMPANY LTD.......2ND DEFENDANT/RESPONDENT

R U L I N G

This is a ruling on the 2nd Defendant’s application dated 22nd June, 2017. It seeks the following orders:-

1. That execution of default judgment entered on the 24th April 2017 be stayed.

2. That orders granted on 5th April 2017 for deposit with the Court of Kshs. 20,000,000 by the Defendants be set aside and that the name of the Applicant herein Midroc Water Drilling Company Ltdbe struck out from this suit.

Grounds On The Face Of the Application are as follows:-

1. THATthe Plaintiff/Respondents enjoined the Applicant as parties to the suit herein without any justification or cause of action.

2. THAT Plaintiffs allegation that the Applicant and the 1st Defendant/Respondent are associated companies does not in itself form a cause of action.

3. THAT the Plaintiff only made a claim that the 1st Defendant had committed to settling its contractual obligation against the Plaintiffs Courtesy of a perceived expected decretal sum due to the Applicant herein which claim is false.

4. THATthe Applicant is a stranger to the averments and claims by the Plaintiff on the relationship between 1st and 2nd Defendant and or the decretal sums if any.

5. THATthe Applicant was never a party to the contractual relationship between the Plaintiffs and the 1st Defendant, neither does ant party have any right to levy lien to the Applicants assets, if at all.

6. THATthe Court entered an Ex-parte order for the deposit of a security of Kshs.20,000,000 with the Court on 5th April 2017 affecting the Applicant without being heard and that the Applicant runs the risk of being cited for contempt for not observing the above order if it remains on record.

7. THATthe Plaintiffs have a judgment in default entered on 24th April 2017 by the Court which the Plaintiff applied for the extraction of a decree on or about 6th May 2017 and that the Applicant runs the risk of having its assets attached and or wasted by the Plaintiff for a cause of action unknown to it unless this Honorable Court intervenes.

The application is supported by Affidavit sworn by John Kendagor Rotich who is the General Manager of the 2nd Defendant’s herein dated 22nd June, 2017. He averred that the Applicants have been greatly prejudiced and inconvenienced for having to defend a suit wherein they have been wrongly sued, occasioning loss of time and costs.

He restated grounds set out above.

In response the Plaintiff/Respondents filed a Replying Affidavit sworn by Joan Misere, an advocate of the High Court of Kenya. She averred that the Plaintiffs instituted a suit against the Defendants seeking payment of the principal amount totaling Kshs. 49,930,098. 48 plus interest in the sum of Kshs. 7,828,888. 56 owing and due to the Plaintiffs. She averred that the Defendants were supposed to deposit Kshs. 20,000,000 in Court pending hearing and determination of the suit and in addition they were to enter appearance and file their defence which they neglected to do either. The Defendants later entered their joint defence and response on the 4th May 2017 days after the judgment in default had been entered.

She averred that the 1st and 2nd Defendants had similar directors being Mohammed Said Chute and Lidia Gode Yussuf and that vide a letter dated 15th December 2016, the 1st Defendant through its Director Mr. Mohammed Said Chute undertook to settle the debt upon receipt of the proceeds of the judgment delivered in favor of the 2nd Defendant against National Water Conservation & Pipeline Corporation. She averred that in addition, Lidia Gode Yussuf a Director in both Defendant companies issued the 1st Plaintiff with postdated cheques totaling sum of Kshs. 20,000,000which upon presentation was dishonored.

She averred that the security for payments of sums owed to the Plaintiff Property L.R. No. Dagoretti/Ruthimitu/661 Dagoretti area in Nairobi County could only secure Kshs. 1,500,000 which is not sufficient to satisfy payment of the sums owing and due to the Plaintiff.

Further, in response the 1st Defendant/Respondent filed a Replying Affidavit sworn by Wangira Okoba, Advocate who averred that she was instructed by the 1st Defendant to file an application dated 3rd May 2017 for review of the Court order and a further application dated 9th May 2017 for a stay of execution of the Court order dated 5th April 2017 but the Court file went missing and later learnt that the same had been irregularly transferred to the family division for purposed of entering a judgment in default thus denying the 1st Defendant a chance to defend itself. This was done despite the Deputy Registrar of commercial division being on duty. She averred that initially one of the directors of the 1st Defendant assumed that proceeds from the judgment expected for the benefit of the 2nd Defendant could be used to repay part of the Plaintiffs claim but later on learnt that the money from the said judgement belonged to the Kenya Commercial Bank which had financed the operations of the 2nd Defendant.

She further averred that the Plaintiffs owe the 1st Defendant over Kshs. 17,000,000 for transport services rendered which the Plaintiffs have failed and or refused to pay and the 1st Defendant is in the process of raising a counter claim or filing a separate suit if necessary.

2ND DEFENDANT/ APPLICANT’S SUBMISSIONS

Counsel for the 2nd Defendant restated the grounds on the Notice of Motion and the Supporting Affidavits and raised two issue one is argued is whether the 2nd Defendant is a necessary party and whether default judgment was a fraud

Counsel submitted that Justice (Retired) Havelock in the case of Pizza Harvest Ltd Vs. Felix Midigo(2013)eKLRcited with approval the words of Devlin J in Amon Vs. Raphael Tuck & Sons 1956 1 ALL ER 273, in reference to who is a necessary party wherein the good judge held at Paragraph 286-287:-

“What makes a person a necessary party? It is not of course merely that he has relevant evidence to give on some of the questions involved: that would only make him a necessary witness. It is not merely that he has an interest in the correct solution of some question involved and has thought of relevant arguments to advance and is afraid that the existing parties may not advance them adequately…the Court might often think it convenient or desirable that some of such persons be heard so that the Court could be sure that it had found the complete answer, but no one would suggest that it would be necessary to hear them for that purpose. The only reason which makes it necessary to make a person a party to an action is so that he should be bound by result of the action, and the question to be settled, therefore must be a question in the action which cannot be effectually and completely settled unless he is a party.”

PLAINTIFF/ RESPONDENTS SUBMISSIONS

Counsel for the Plaintiff restated the grounds on Replying Affidavit and submitted as to whether the 2nd Defendant was rightly enjoined as a party to this suit and whether the default judgment was regularly entered.

Counsel submitted that he would like to rely on the authority cited by Justice (Retired) Havelock in the case of Sameer Africa Limited Vs. Aggarwal & Sons Limited (2013)eKLR which he relied on the Court of Appeal decision in Shanzu Investments Ltd Vs. The Commissioner of Lands Civil Appeal No.100 of 1993 as follows;

“Now, in this instance the judgment was regularly obtained in such circumstances the Court will not interfere unless satisfied that there is a Defence on the merits.”

ANALYSIS AND DETERMINATION

I have considered arguments by parties herein. The issue as to whether exparte judgment was regularly entered has been raised in this application. On perusal of the record I note that on 28th may 2018 this Court found that exparte judgment was properly entered. I will not go back to the issue again.

I wish to consider the remaining issue set out hereunder:-

1. Whether the 2nd Defendant was wrongly joined in this suit and name of the 2nd Defendant should therefore be struck out.

2. Whether orders for deposit of Kshs. 20,000,000 by Defendants should be stayed.

On the first issue the 2nd Defendant argue that there is no cause of action against them as they were wrongly sued and that the 2nd Defendant was condemned to jointly deposit security of Kshs. 20,000 together with the 1st Defendant without being heard. That a mere association of parties do not raise an actionable claim when it is owing to the other. That the only claim is the 1st Defendant committed to settle Plaintiffs claim from expected  decretal amount due to the Applicant; allegation which is denied by the 2nd Defendant

On perusal of the Plaint filed, I note that in paragraph 7 the Plaintiff has indicated that the 2nd Defendant is associate to 1st Defendant. That pursuant to an oral agreement the Plaintiff agreed to provide credit facilities to the 1st Defendant and associate companies. Paragraph 13 clearly indicate that the credit facilities were provided to the 1st Defendant.

Paragraph 15 of the Plaint indicate that the 1st Defendant promised to settle the amount owing upon receipts of judgment in favour of the 2nd Defendant.

There is no indication to the effect that the 2nd Defendant was provided credit facility to the 2nd Defendant nor is there any guarantee undertaken by the 2nd Defendant for facility or commitment to pay on behalf of the 1st Defendant. The cheque that was dishonored was issued by the 1st Defendant. The Plaintiff has not demonstrated any claim against the 2nd Defendant. I do not see any remote connection between the credit facilities advanced to 1st Defendant with the 2nd Defendant.

From the foregoing I find that the 2nd Defendant was wrongfully joined in this suit.

FINAL ORDERS

The claim against the 2nd Defendant is hereby struck out. 2nd Defendant’s name be struck out of this suit according.  Costs to the 2nd Defendant.

Dated and Delivered at Nairobi this 20th day of July, 2018

....................................

RACHEL NGETICH

JUDGE

IN THE PRESENCE OF:

GRACE      :  COURT ASSISTANT

WAKOKO  :  COUNSEL FOR 2ND DEFENDANT/APPLICANT

MISERE     :  COUNSEL FOR PLAINTIFFS/RESPONDENTS

WANGIRA:   COUNSEL FOR 1ST DEFENDANT