Safaricom Plc v East Africa Data Handlers Limited [2022] KEHC 12979 (KLR)

Safaricom Plc v East Africa Data Handlers Limited (Civil Case E127 of 2019) [2022] KEHC 12979 (KLR) (Commercial and Tax) (14 September 2022) (Ruling)

Neutral citation: [2022] KEHC 12979 (KLR)

Republic of Kenya

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

Commercial and Tax

Civil Case E127 of 2019

DAS Majanja, J

September 14, 2022

Between

Safaricom Plc

Plaintiff

and

East Africa Data Handlers Limited

Defendant

Ruling

1. The Defendant has moved this court by the Notice of Motion dated August 6, 2021 made, inter alia, under Order 11 rule 3(2) of the Civil Procedure Rulesseeking an order compelling the Plaintiff to produce certain documents listed in Prayer 1 of its Notice of Motion dated February 18, 2020 including any account, book of account, voucher, receipt, letter, memorandum, paper, writing, or copy or extract from any document, or any other document including specific documents which the Defendant set out in the application. It also requires the Plaintiff to produce all the data from its Cloud Account hosted on the Plaintiff’s server and, a list of all employees terminated by the Plaintiff due to their involvement in the fraudulent acts alleged. The Defendant also seeks an order that the application be heard together with its application dated February 18, 2020 in which the Defendant sought similar orders of discovery.

2. The application is supported by affidavit and further affidavit of the Defendant’s Chief Executive Officer, George Njoroge, sworn on August 6, 2021 and December 17, 2021. The application is opposed by the Plaintiff through the affidavit of its Senior Manager Enterprise Operations, Collins Kiprono, sworn on December 9, 2021. The matter was canvassed by written submissions.

3. The Defendant submits that it filed the application on 18th February 2020 seeking to compel the Plaintiff to produce specific documents/information relevant to the issues in dispute herein, and which documents are in the power and/or possession of the Plaintiff. The Defendant’s Chief Executive Officer averred that the Defendant lodged a complaint with the Plaintiff in 2017 about discrepancies in the account balances of certain merchant accounts and sought for various documents including: unarchived merchant account statements, the investigation report by the Plaintiff into the fraud committed by its staff and, information about the unauthorised migrationnt of merchants from the Defendant’s aggregation. The Plaintiff was ordered to comply with discovery and produce the documents sought.

4. The Defendant further submits that upon perusing the Plaintiff’s Affidavit of Documents sworn on January 22, 2021, it confirmed that the Plaintiff had failed to fully comply with discovery and produce the documents sought in the application dated February 18, 2020. Further,that the Plaintiff’s replying affidavit sworn by Daniel Ndaba contained various misleading averments, designed to hoodwink the court on the execution of the contract.

5. The Defendant submits that while the court granted leave to amend its Defence to include a counterclaim on July 23, 2021, a valid counterclaim depends on the fair exchange of all documents relevant to the dispute, to enable the Defendant prepare for its case. It avers that all the information sought is in the possession, power and control of the Plaintiff and no explanation has been given for the Plaintiff’s refusal to produce the same. It states that it is for this reason that the Defendant ought to be compelled to comply with the orders of discovery.

6. The Plaintiff opposes the application and submits that it has produced all the documents that are necessary and relevant to the resolution of this suit. It urges that the documents relating to the other merchants are not necessary neither are they relevant to the determination of the matter at hand. It urges that the Defendant’s application is calculated to frustrate the Plaintiff’s claim and that the reliefs claimed are flawed, unsustainable and res judicata.

7. The Plaintiff submits that it has not willfully failed and/or refused to comply with the orders of discovery as it filed a Further List of Documents dated October 29, 2020 through production of Mpesa Statements relating to the seven (7) Ttill numbers relevant to the Plaintiff’s claim. As regards the investigative report, the Plaintiff states that such a report is not in its possession and/or control. It states that the Defendant became aware of the alleged fraud dating back to as early as 2017 and thus it ought to have conducted an independent audit in accordance with clause 11. 7 of the Agreement. It adds that the Defendant has conceded that the fraud was reported at Parklands Police Station under OB Number 52 of January 30, 2018 therefore it is the Defendant who ought to inform court and the Plaintiff of the outcome of the Police investigation. In sum, the Plaintiff states that the application ought to be dismissed as the Defendant is attempting to side-step its obligations under the agreement between them as it is its duty to reconcile accounts as they have access to the Mpesa aggregator system and merchant information.

8. There is no dispute that under section 22 of the Civil Procedure Act, the Court has power to order discovery of documents. The parties have cited substantial and copious authorities on the purpose, nature and scope of discovery. I will only quote one of the decisions to underwrite the importance of discovery where Havelock J., in Concord Insurance Co. Ltd v NIC Bank Ltd [2013] eKLR observed as follows:The issue for determination, from the foregoing is discovery and inspection of documents, and whether the Applicant is warranted under the applicable rules and by the application, to the documents sought. According to Black’s Law Dictionary, 7th Edition, discovery is defined as; “The disclosure by the defendant of facts, titles, documents, or other things which are in his exclusive knowledge or possession, and which are necessary to the party seeking the discovery as a part of a cause or action pending or to be brought in another court, or as evidence of his rights or title in such proceeding.It follows that in an application for discovery, a party has to ensure that the documents sought are “necessary” to the cause of action before or pending trial before the Court. It has to be a disclosure of relevant facts to the matters in issue. According to Halsbury’s Laws of England, Volume 13 para 1, the learned authors detail; “The function of the discovery of documents is to provide the parties with the relevant documentary material before the trial so as to assist them in appraising the strength or weakness of their relevant cases, and thus to provide the basis for the fair disposal of the proceedings before or at the trial. Each party is thereby enabled to see before the trial or to adduce in evidence at the trial relevant documentary material to support or rebut the case made by or against him, to eliminate surprise at or before the trial relating to the documentary evidence and to reduce the cost of litigation. Discovery is therefore limited solely to the matter in contention. The Court, in exercise of its discretion to issue such orders as to discovery, will be guided by the relevance of the documents that the applicant seeks, in relation to the pleadings. The authors in Halsbury’s (supra) at para 38 write: “Relevance must be tested by the pleadings and particulars and when particulars have been served which limit a particular issue then discovery on that issue is limited to the matter raised in the particulars.”

9. Despite the utility of discovery in achieving fairness in line with the overriding objective, it must not be forgotten that discovery is not intended to be a fishing expedition. The court may decline to order discovery which is oppressive and outside the scope of what is in dispute. Discovery is confined to documents in the knowledge and possession of the party which are relevant to the cause of action. Hence the relevance must be determined by the pleading and issues in contention.

10. Turning to the matter at hand, the record is clear that the court made order for full discovery for both sides. On October 7, 2020, the court ordered that discovery be completed within 30 days. The matter was mentioned subsequently thereafter culminating in an order issued on 19th January 2021 that the Plaintiff do file and serve its affidavit of documents within 7 days in default of which the Plaint would be struck out. The Plaintiff responded to this order by filing the Affidavit of documents sworn by Collins Kiprono Too on January 22, 2021.

11. The only issue is whether the Plaintiff has complied with the order of discovery. The Plaintiff’s case against the Defendant is based on an Mpesa Merchant Aggregator Agreement between the parties under which the Defendant agreed to, inter alia, acquire and manage Lipa na Mpesa merchants on the Plaintiff’s behalf. According to the Plaintiff, the Defendant recruited merchants but failed to remit the money collected from the merchants causing them to demand Kshs. 20,349,685. 00 being the sum demanded by Mpesa merchants directly from the Plaintiff. As a result of the breach, the Plaintiff terminated the agreement and claimed the Kshs. 20,349,685. 00.

12. In the initial request, the Defendant sought the following documents:i.a list of all merchant customers migrated from the Defendant’s aggregation platform to the Plaintiff’s head office and/ or to a standalone merchant including their relevant “Know Your Customer” details, the date when the merchant was migrated and the details of who authorized the migration of each merchant;ii.a list and details of all account reversals by merchants aggregated on the Defendant’s platform including the date, time and place of reversal, the mobile telephone number used in the reversal, transaction value and the person who authorized the reversal; andiii.the Plaintiff’s investigation’s report into the unauthorized backend access to the Defendant’s aggregation accounts by the Plaintiff’s employees, servants and/or agents in the creation of the unauthorized administrative accounts.iv.all the data on the Defendant’s cloud account 1-1723846357 hosted on the Plaintiff’s server.v.the names of all its employees who were terminated from employment due to their involvement in the fraudulent acts complained of.

13. In an effort to comply with the order, the Plaintiff provided the documents in the Further List of Documents dated October 29, 2020 through a virtual link and permitted it to access any other documents relating to the transactions between it and the Plaintiff on request. It is to be noted that the documents were in respect of the accounts for which the demand from third parties were made to it which is within the scope of the Plaintiff’s claim. It is worth observing that apart from the request of documents, the Defendants also seek certain facts and particulars which are not within the purview of an application for discovery. A request for particulars such as dates, names and details must relate to specific provisions of the plaint, defence or other pleading (see Habiba Ali Mursai and 4 Others v Mariam Noor Abdi NRB ELC No. 126 of 2019 [2021] eKLR). In my view therefore and bearing in mind that under the Agreement the Defendant had access to the Mpesa system relating to its account, the Plaintiff has provided all the merchant information in relation to and during the term of the Agreement in its Further List of Documents dated October 29, 2020.

14. The Defendant seeks the Plaintiff’s investigation’s report into the unauthorized backend access to the Defendant’s aggregation accounts by the Plaintiff’s employees, servants and/or agents in the creation of the unauthorized administrative accounts. In response to this request, the Plaintiff points out the Defendant reported the fraud to the Police hence the report of the investigation can be obtained from the Police and it does not have such a report in its possession.

15. The Defendant’s case is grounded on the fact that despite having been granted leave to amend its Defence to include a counterclaim on July 23, 2021, it has been unable to do so on the ground that it seeks all the information in the Plaintiff’s power and possession to enable it file the counterclaim. Unless and until the counterclaim is filed, the scope of discovery is limited to the parameters set out in the pleadings on record, that is the Plaint and the Defence hence the principle that discovery is limited to necessary documents. What is necessary is grounded on the pleadings on record. A pleading which is yet to be filed cannot form the basis for discovery as the court cannot permit discovery in order to enable the Defendant lodge a counterclaim. Allowing such a course would amount to permitting an open ended fishing expedition to enable Defendant make out or discover a cause of action.

16. It is for the reasons I have set out above that I am constrained to dismiss the Defendant’s application dated October 6, 2021 with costs to the Plaintiff.

DATED AND DELIVERED AT NAIROBI THIS 14TH DAY OF SEPTEMBER 2022. D. S. MAJANJAJUDGEMs Rweya instructed by Meritad Law Africa LLP Advocates for the Plaintiff.Ms Ndirangu instructed by Nderitu and Partners Advocates for the Defendant.