Savannah Cement Limited v Abdullahi & another [2022] KEHC 3205 (KLR)

Savannah Cement Limited v Abdullahi & another (Civil Appeal 650 of 2019) [2022] KEHC 3205 (KLR) (Civ) (12 May 2022) (Judgment)

Neutral citation: [2022] KEHC 3205 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Civil

Civil Appeal 650 of 2019

CW Meoli, J

May 12, 2022

Between

Savannah Cement Limited

Appellant

and

Gullled Ahmed Abdullahi

1st Respondent

Abshir Ahmed Abdullahi

2nd Respondent

Judgment

1. This appeal emanates from the ruling delivered on 7th October 2019 in Nairobi CMCC No. 974 of 2019. On February 19, 2019 Savannah Cement Limited, (hereafter the Appellant) filed a suit in the lower court against Gulled Ahmed Abdullahi and Abshir Ahmed Abdullahi (hereafter the 1st and 2nd Respondent/Respondents) seeking payment of the sum of USD 20,747/- being the balance payable in respect of goods supplied by the Appellant in the year 2015 upon the Respondents’ request.

2. The Respondent entered appearance and filed the motion dated 30th April 2019 expressed to be brought under Sections 1A, 1B, 3A & 15 of the Civil Procedure Act and Order 1, 2 & 51 of the Civil Procedure Rules, seeking to strike out the suit on grounds of want of jurisdiction, and for being defective, frivolous, and vexatious. The grounds on the face of the motion were amplified in the supporting affidavit of 1st Respondent. He deposed that both he and 2nd Respondent were directors of Regional Logistics and Supplies Limited (hereafter the company), which company was incorporated in the Republic of South Sudan and having its registered offices in Juba, South Sudan; that the suit arose from a contract between the Appellant and the company sometimes in 2015 for the supply of cement and that the cause of action in the matter arose in Juba , South Sudan where the company had its registered office and hence the court lacked jurisdiction to try the suit.

3. The deponent also contended that the suit had been brought against the Respondents in their individual capacity as directors of the company whereas the company was a separate legal entity from its directors, with the capacity to sue and be sued; that the corporate veil could only be lifted pursuant to leave of the court enabling the suing of directors in their individual capacity for liabilities incurred by the company.

4. The Respondent opposed the motion through a replying affidavit dated 8th May 2019 and thereafter parties canvassed the motion by way of written submissions. In a ruling delivered on 7th October 2019 the trial court allowed Respondent’s motion and struck out the Appellant’s suit, provoking the instant appeal which is based on the following grounds:“1. THAT the Learned Magistrate erred in law and in fact and misdirected herself on the matters before her consequently making a wrong and erroneous decision of striking out the Plaintiff’s for want of jurisdiction.2. THAT the Learned Magistrate erred in law and misdirected herself when she failed to find that the cause of action arose in Nairobi within the jurisdiction of the Chief Magistrates Court at Nairobi as the breach by the Defendants occurred in Kenya.3. THAT the Learned Magistrate misdirected herself when she failed to find that the Defendants are resident of Nairobi and do not have known address in Juba South Sudan.4. THAT the Learned Magistrate erred in law and fact and misdirected herself when she failed to find that the Defendants having accepted service of summons and unconditionally entered appearance, the Defendants had acquiesced to the jurisdiction of the court.5. THAT the Learned Magistrate erred in law and fact and misdirected herself when she completely ignored to consider that the Defendants are citizens of Kenya and residing within the Republic of Kenya, having been served with the summons to enter appearance at their business premises in Eastleigh, Nairobi to which they accepted service and entered appearance.6. THAT the Learned Magistrate erred in law and fact when she misdirected herself on the matter before the court when she failed to find that the contract was executed in Kenya and partly performed in Kenya.7. THAT the Learned Magistrate erred in law and fact when she failed to appreciate that it was just and equitable for the suit to be maintained in Kenya as the Defendants are citizens of Kenya and shall not be prejudiced in any way by the suit being instituted in Kenya.8. THAT the Learned Magistrate erred in law when she gave more weight to the Respondents’ pleadings and submissions and completely ignored the Appellant’s pleadings and submissions on the matter before the Court.9. THAT the Learned Magistrate erred in law and misdirected herself on the matter before the court thereby misapplying her discretionary powers under the Civil Procedure Act, Civil Procedure Rules and laid down principles for striking out a suit.10. THAT the ruling and order of court issued on 7th October 2019 is wholly erroneous in law and fact contrary to equity, judicial precedent and a gross miscarriage of justice.” (sic)

5. The appeal was canvassed by way of written submissions. The Appellant anchored its submissions on the provisions of Section 15 of the Civil Procedure Act in asserting that the lower court had jurisdiction to entertain the suit before it. Citing several decisions, including Kanti and Company Limited v South British Insurance Company Limited [1981] eKLR, Shadrack Wachira Gikonyo v Abt Associates Inc. [2017] eKLR, Petra Development Services Limited v Evergreen (Singapore) PTE Limited & another [2014] eKLR, and Ragbhir Singh Chatthe v Classic Mouldings Ltd [2020] eKLR counsel argued that the Respondents were deemed to have acquiesced to the jurisdiction of the court upon unconditionally entering appearance in the suit ; and that the Appellants had the option file their suit either at the place where the contract was executed, at the place where the Respondents resided, or where the cause of action arose as provided in section 15(c) of the Civil Procedure Act.

6. Counsel contended that the Appellant carried on its business Nairobi and that the contract was partly performed in Nairobi and payment was to be effected in Nairobi. Hence, the Appellant had the election to institute the suit in Nairobi, Kenya or Juba -, South Sudan. Counsel reiterated evidence that the Respondents were Kenyan citizens domiciled in Nairobi Kenya. Invoking the provisions of Order 1 Rule 10 of the Civil Procedure Rules, and the decision in Litein Tea Factory Company Limited & Another v Davis Kiplangat Mutai & 5 others [2015] eKLR it was asserted that non-joinder of the company could not defeat the action as the lower court was empowered allow the joinder of a necessary party at any stage of the suit. Counsel complained that in striking out the suit, the lower court denied the Appellant an opportunity to have its pending motion for joinder of the company determined on merit. The court was thus urged to allow the appeal with costs.

7. The Respondents agreed with the lower court’s findings. They relied on the provisions of Section 14 & 15 of the Civil Procedure Act and on the decisions inDoshi Enterprises Limited v Oriental Steel Fabricators & Builder Nairobi (Milimani) HCMA No. 627 of 2001 quoted in Justus Kyalo Mutunga v Labh Singh Harnam [2012] eKLR and Samuel Kamau Macharia v KCB & 2 Others, Civil Application No. 2 of 2011. Counsel contended that the Respondents are directors of a limited liability company duly registered in Juba; that all documents pertinent to the transaction between the parties were addressed to the said company and dispatched to Juba; that all goods and invoices thereof were delivered to Juba hence the suit ought to have been filed in Juba. Concerning the Respondents’ entry of appearance, it was pointed out that they did not take the step of filing a defence, but immediately filed the motion challenging the jurisdiction of the lower court. And therefore, the Respondents did not acquiesce to the court’s jurisdiction.

8. The Respondents’ counsel relied on the decision in Agricultural Finance Corporation v Lengetia [1982-88] 1 KAR as cited in City Council of Nairobi v Wilfred Kamau Githua t/a Githua Associates & Another [2016] eKLR among other decisions to argue that there was no privity of contract between the Appellant and the Respondents who were sued as directors of the company. That the belated motion to join the company was of no avail and could not salvage the defective suit. The Respondents therefore saw no merit in the appeal and urged that it be dismissed.

9. The court has perused the record of appeal as well as the original record and considered the material canvassed in respect of the appeal. The duty of this court as a first appellate court is to re-evaluate the evidence adduced in the lower court and to draw its own conclusions, but always bearing in mind that it did not have opportunity to see or hear the witnesses testify.See Peters v Sunday Post Ltd [1958] EA 424; Selle and another v Associated Motor Boat Co. Ltd and Others [1968] EA 123; William Diamonds Ltd v Brown [1970] EA 11 and Ephantus Mwangi and Another v Duncan Mwangi Wambugu [1982 – 88] 1 KAR 278.

10. The Court of Appeal stated in Abok James Odera t/a A. J. Odera & Associates v John Patrick Machira t/a Machira & Co. Advocates [2013] eKLR that:“This being a first appeal, we are reminded of our primary role as a first appellate court namely, to re-evaluate, re-assess and reanalyze the extracts on the record and then determine whether the conclusions reached by the learned trial Judge are to stand or not and give reasons either way.”

11. The lower court in allowing the motion expressed itself in part as follows:“The court will decide if the defendant has demonstrated and satisfied the principles that would guide this court in determining the application.The principles that would guide the court in making a decision are laid out in the decided case Tom Odhiambo Achillah t/a Achilla T.O & Co. Advocates vs Kenneth Wabwire Akide t/a Akide & Co. Advocates & 3 others [2015] eKLR………..The Court will first deal with the issue of jurisdiction as lack of it means that the other issues will not be considered.Section 15 of Civil Procedure Act is applicable from that provision this suit should be filed where the defendants reside, carries business or works unless otherwise with leave of the court or the defendant have acquiesced to the court’s jurisdiction.The documents presented before the court confirm that the defendant carry on their business in Juba South Sudan.The Plaintiff dealt with a company.The letter of offer was addressed to the company in Juba. Plaintiff invoices and deliveries tabled in court confirms that deliveries were sent to Juba.Clearly the defendant carry on business in Sudan. The Plaintiff has not demonstrated that the Directors of the Company, he dealt with reside in Nairobi Kenya, or that part performance was done in Kenya. From the documents before court I am satisfied that cause of action arose in Juba where the defendants carry on the business in the name of a company. This suit should be filed in Juba.On that point of law, which succeeds, this suit is struck out with no orders as to costs.” (sic)

12. In the court’s view, the appeal turns on two questions, namely, whether the trial court was properly seized of the matter, that is, whether it had jurisdiction to entertain the suit, and secondly whether the Respondents were proper defendants in the suit. The Respondents motion before the subordinate court was primarily anchored on the provisions of Section 15 of the Civil Procedure Act and Order 1 & 2 of the Civil Procedure Rules. The former provides that:“Subject to the limitations aforesaid, every suit shall be instituted in a court within the local limits of whose jurisdiction —(a)the defendant or each of the defendants (where there are more than one) at the time of the commencement of the suit, actually and voluntarily resides or carries on business, or personally works for gain; or(b)any of the defendants (where there are more than one) at the time of the commencement of the suit, actually and voluntarily resides or carries on business, or personally works for gain, provided either the leave of the court is given, or the defendants who do not reside or carry on business, or personally work for gain, as aforesaid acquiesce in such institution; or(c)the cause of action, wholly or in part, arises.Explanation (1)- …Explanation.(2)—A corporation shall be deemed to carry on business at its sole or principal office in Kenya, or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place. Explanation.(3)—In suits arising out of contract, the cause of action arises within the meaning of this section at any of the following places, namely— (i) the place where the contract was made; (ii) the place where the contract was to be performed or the performance thereof completed; (iii) the place where in performance of the contract any money to which the suit relates was expressly or impliedly payable.Illustration. —(a) A is a tradesman in Nairobi. B carries on business in Mombasa. B by his agent at Nairobi buys goods of A and requests A to deliver them to Mombasa by rail. A may sue B for the price of the goods either in Nairobi, where the cause of action has arisen, or in Mombasa, where B carries on business.” (Emphasis added).

13. Upon its own examination of the matter, this court notes that the Respondents on their part have not refuted the fact that the Appellant is a company operating and or registered to carry on business in Nairobi, Kenya. It was not disputed that Nairobi was the place where the contract or contracts which were the subject of the lower court suit were made, the place the contract (s) was to be performed albeit partially, and the place where monies due thereunder were impliedly payable. Further it was not in dispute that the designated customer and recipient of the Appellant’s cement consignments was Regional Logistics and Supplies Limited, a company allegedly incorporated in Juba, South Sudan (per Annexure GAA-1).

14. The Appellant therefore had the option of filing its suit in Juba, South Sudan where the Defendants claimed to reside, and where the contract was apparently to be completed, or in Nairobi. It is significant in this regard that the suit in the lower court was not against the company as such, but against the Respondents as individuals, a matter that generated objection by the Respondents. In my view, the trial court therefore misapprehended relevant facts especially regarding the place where the cause of action arose, and further misapprehended or selectively applied the provisions of section 15 (a) (b) and (c) of the Civil Procedure Act to the facts of the case, hence arriving at an erroneous conclusion. The court ought to have brought the whole purport of the section to bear upon the facts of the case in determining the proper place for filing of the suit before it, and therefore jurisdiction. The learned magistrates’ finding that the cause of action exclusively arose in Juba where the Respondents allegedly carried on business and that the suit ought to have been filed in Juba, South Sudan was therefore a misdirection.

15. The above notwithstanding, this court agrees with the Appellant’s submission that the Respondents had by entering unconditional appearance in the suit submitted to the jurisdiction of the court. The facts in Kanti & Co. Ltd. were not dissimilar to those in this case. The defendant therein (respondent) had entered unconditional appearance, and seventeen days later, sought to move the court to strike out the suit for want of jurisdiction. The High Court found that “by filing an unconditional memorandum of appearance the Applicant (defendant) submitted to the jurisdiction of the Court…”

16. On appeal, the Court of Appeal held per Madan JA (as he then was) held that:“I am of the opinion that the defendant by entering unconditional appearance submitted to the jurisdiction of the High Court, and it could not thereafter abrogate or annul it unilaterally by entering an amended appearance even under protest without an order of the court releasing it from its admission and acceptance of jurisdiction. Once a defendant submits to the jurisdiction of the court, the plaintiff acquires a vested interest which the defendant cannot deprive him of at his whim by entering a conditional appearance or appearance under protest. As long as the unconditional appearance stood, as it stands even today, the court was seized of jurisdiction to try the suit”.

17. More recently in Active Partners Group Limited & another v Hassan Zubeidi; Dubai Bank Kenya Limited (II) & another (1st Interested Parties) [2019] eKLR the Court of Appeal echoed the judgment of Githinji JA (as he then was) in Raytheon Aircraft Credit Corporation & another v Air Al Faraj Limited [2005] eKLR where the learned Judge of Appeal had decried the lacuna in the rules as to the procedure for the raising of an objection to jurisdiction, by a foreign defendant sued in Kenya. The Court of Appeal stated inter alia that:“The unconditional memorandum of appearance was filed contemporaneously with an application protesting the jurisdiction of the court. In our view, the fact of the filing of an application protesting the jurisdiction of the court was sufficient notice to bar any entry of judgment in default of defence.As submitted by the appellants, the Civil Procedure Act and the Rules do not provide a procedure where a party who wishes to challenge jurisdiction should adopt.In Raytheon Aircraft Credit Corporation & another v Air Al Faraj Limited [2005] eKLR, Githinji, JA rendered himself thus:-“There are no rules of the court prescribing the procedure for challenging the jurisdiction of the High Court by a foreign defendant who has been sued in this country in breach of contractual forum selection and the exclusive jurisdiction clause. The procedure suggested by the predecessor of the court in Prabhadas (N) & Co. v Standard Bank [1968] EA 679 at page 684 paragraphs C – E is to enter a conditional appearance and then move the court for setting aside the process. In United India Insurance Co. Ltd (supra), the defendants entered appearance under protest and moved the court for orders to stay proceedings. In Fonville case (supra) the High Court said that the filing of a defence under protest, the filing of an application for stay of proceedings or striking out the proceedings and the raising of a preliminary objection to the suit before trial are lawful means of challenging the jurisdiction of the court (see page 78 paragraphs l – j).In this case, the appellant had pleaded in the defence that the court did not have jurisdiction in view of the exclusive jurisdiction clause and raised a preliminary objection to the court on account of jurisdiction clause and raised a preliminary objection to the suit on account of jurisdiction at a very early stage in the proceedings. I would reiterate what this Court said in the application for stay of proceedings (supra) that the High Court had jurisdiction to hear arguments and rule on the point of jurisdiction.However, the procedures to be followed in this important area of litigation should no longer be left uncertain. I would recommend to the Rules Committees that appropriate comprehensive rules of procedure be urgently promulgated to facilitate the administration of justice”

18. Reverting to the appeal before it, the Court of Appeal observed that:The learned Judge found (in the instant appeal) that:(F)iling of an application that protests jurisdiction simultaneously or concurrently with a memorandum of appearance (which though, may be unconditional 0serves the same purpose. In the circumstances of this case the filing of the Entry of Appearance on November 25, 2016 was not a submission to the jurisdiction of this Court as the Defendant had concurrently protested it by way of substantive application”.In our view, the filing of an unconditional memorandum of appearance simultaneously with the motion challenging the jurisdiction of the court on 25th November, 2016 were sufficient to indicate that the issue of jurisdiction had to be dealt with before entry of judgment in default of defence.”

19. As observed by the Court of Appeal, there are no rules of procedure to prescribe the procedure by which defendants such as the Respondents herein may protest jurisdiction, but it appears that where a defendant or other party upon being served with pleadings determines to challenge the jurisdiction of the court, such party ought to file his unconditional memorandum of appearance simultaneously with a motion challenging the jurisdiction of the court. Applying the foregoing to the facts of this case, it appears beyond argument that the Respondents had submitted to the jurisdiction of the court when they entered unconditional appearance, and their belated motion to protest jurisdiction was too little too late, and to no avail.

20. On the Respondents’ objection as to whether they were proper defendants in the suit before the subordinate Court, I note that the lower court did not address itself to the matter in its ruling. The Respondents contended before the lower court and on this appeal that the Appellant had sued them in their individual capacity and yet being directors of the company, they were separate legal entities and could not be liable for transactions made between the company and the Appellants. The Respondents relied on the copy of certificate of incorporation of the company (annexure GAA1) in this regard. The certificate merely confirms incorporation of the company in South Sudan but does not indicate the identities of the directors of the company. Thus, beyond their bald deposition, the Respondents tendered no proof of their alleged relationship with the company.

21. The Appellants for their part deposed that they were in no position to confirm or deny whether the Respondents were indeed directors of the company. They further asserted that the Respondents in making orders for goods from the Appellant had presented themselves as agents of the company and did not proffer any authority to transact on behalf of the company. And that so far as they were concerned, the Appellants dealt with the Respondents in their individual capacity. The invoices and delivery notes tendered before the lower court indicated that the company was the designated recipient of the subject goods.

22. Thus, the true relationship between the Respondents and the company and their role in the material transactions could not possibly be determined based on the material presented by the Respondents in support of the claim to be directors of the company. Suffice to say that he who alleges must prove, and the question of the Respondents’ relationship with the company being a matter within their knowledge fell upon them to establish, in canvassing their motion before the lower court. Nothing therefore turns on the alleged improper lifting of the corporate veil about which the Respondents made heavy weather. Besides, Order 1 Rule 3 of the Civil Procedure Rules provides that:“All persons may be joined as defendants against whom any right to relief in respect of or arising out of the same act or transaction or series of acts or transactions is alleged to exist, whether jointly, severally or in the alternative, where, if separate suits were brought against such persons any common questions of law or fact would arise.”

23. Further, Order 1 Rule 9 of the Civil Procedure Rules states that:“No suit shall be defeated by reason of the misjoinder or non-joinder of parties, and the court may in every suit deal with the matter in controversy so far as regards the rights and interests of the parties actually before it.”

24. No doubt echoing the exhortation by Madan, JA in D.T. Dobie & Company (Kenya) Ltd vs. Muchina [1982] eKLR, the Court of Appeal stated in Kivanga Estates v National Bank of Kenya Limited [2017] eKLR:“It is not for nothing that the jurisdiction of the court to strike out pleadings has been described variously as draconian, drastic, discretionary, a guillotine process, summary and an order of last resort. It is a powerful jurisdiction capable of bringing a suit to an end before it has even been heard on merit. Yet a party to civil litigation is not to be deprived lightly of his right to have his suit determined in a full trial. The rules of natural justice require that the court must not drive away any litigant from the seat of justice, without a hearing, however weak his or her case may be. The flip side is that it is also unfair to drag a person to the seat of justice when the case against him is clearly a non-starter. The exercise of the power to strike out pleadings must balance these two rival considerations … Striking out a pleading though draconian, the Court will in its discretion resort to it, where, for instance the court is satisfied that the pleading has been brought in abuse of its process or where, it is found to be scandalous, frivolous and vexatious”. (Emphasis added)

25. In light of the foregoing, the court finds that the lower court’s conclusion that the suit before it ought to have been filed in Juba, Sudan and therefore that it lacked the jurisdiction to entertain the matter was based on a misapprehension of the provisions of Section 15 of the Civil Procedure Act. Secondly, the assertion by the lower court in its ruling that the Appellants dealt with a company, and with the Respondents as directors of the said company was premature and without basis. In the circumstances, this appeal is merited and is allowed.

26. The court hereby sets aside the ruling and orders of the lower court dated October 7, 2019 and substitutes therefore an order dismissing the Respondents’ motion dated April 30, 2019 with costs to the Appellants. The Appellants are awarded the costs of the appeal.

27. The court further directs that the lower court file be remitted back to the subordinate court so that early dates may be fixed for the hearing of the pending joinder motion by the Appellants dated May 8, 2019.

DELIVERED AND SIGNED ELECTRONICALLY AT NAIROBI ON THIS 12TH MAY 2022. C.MEOLIJUDGEIn the presence of:For the Appellant: Ms. KendiFor the Respondents: Ms. ChitechiC/A: Carol