Somochem (Kenya) Limited v Shah [2022] KEHC 10085 (KLR)

Somochem (Kenya) Limited v Shah (Civil Suit 38 of 2019) [2022] KEHC 10085 (KLR) (Commercial and Tax) (15 July 2022) (Judgment)

Neutral citation: [2022] KEHC 10085 (KLR)

Republic of Kenya

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

Commercial and Tax

Civil Suit 38 of 2019

A Mabeya, J

July 15, 2022

Between

Somochem (Kenya) Limited

Plaintiff

and

Rashik Shah

Defendant

Judgment

1. Vide a plaint dated 29/1/2019, the plaintiff brought this suit seeking judgment against the defendant for USD 870,201. 03 together with interest and costs.

2. It’s case was that it was a supplier of plastic products, raw materials and industrial chemicals in Kenya. That the defendant was a director of General Plastics Limited to whom the plaintiff supplied various goods. That sometime in November 2017, the defendant issued an irrevocable personal guarantee in its favour and other parties as security for supply of goods to General Plastic Limited on credit (“the principal debtor”).

3. That the guarantee was, inter alia, a continuing guarantee to the plaintiff for the whole debt that was incurred by General Plastic Limited in relation to supply of goods, notwithstanding any disability or death of the defendant.

4. That based on that guarantee, the plaintiff supplied goods to the principal debtor which defaulted in payment whereby a sum of USD 870,201. 03 was due and owing to the plaintiff. Demand was made on the defendant but he had failed to settle the amount owed.

5. The defendant filed his defense dated 21/3/2019 and denied the plaintiff’s claim. He specifically denied that he had entered into any contract of guarantee with the plaintiff or other parties and therefore denied any breach thereof. He pleaded that was a stranger to the debt claimed by the plaintiff. His case was that he had given a personal guarantee to a third party not before court who had was never accepted the same.

6. He challenged the plaintiff’s right to bring the suit on the basis of his offer to act as guarantor, as the plaintiff was not a party to that offer. He challenged the authenticity of the guarantee filed by the plaintiff and pleaded the doctrine of non est factum. Demand was also denied.

7. At the trial, each party called one witness who relied on their witness statements on which they were cross-examined. Heman Desai (PW1) testified on behalf of the plaintiff and produced the plaintiff’s bundles of documents as Pexh1 and 2. He testified how the defendant gave an irrevocable personal guarantee in November, 2017 in consideration of the plaintiff supplying goods to the principal debtor. That the guarantee was to be a continuing security for the goods to be supplied by the plaintiff.

8. On cross-examination, he testified that the plaintiff prepared a draft guarantee and sent it to the defendant vide an email produced at page 10 of Pexh2. That on 4/11/2017, he received a signed copy of the draft by the defendant. That the draft was not signed by the plaintiff, but a signed copy was later filed.

9. That although the guarantee was made out to Sarah London Limited, it also mentioned affiliated parties including the plaintiff. That the invoices provided at page 224-298 related to the period before the guarantee was signed on behalf of the plaintiff. That only delivery notes were stamped by the principal debtor as evidence that the goods had been delivered to them, and not the invoices. That according to the guarantee, the maximum liability was set at 1. 2 million at clause 9. That the demand to the defendant was written under the instructions of Sarah London Limited.

10. The defendant testified on his own behalf as DW1. He testified that he did not sign the guarantee produced in Court by the plaintiff. That the guarantee he had signed was to the effect that he would guarantee any amount above USD 800,000 to a maximum of USD 1. 2 million.

11. That the guarantee was brought to him in person by the plaintiff’s staff and he executed it, but did not retain a copy. That a copy executed by the plaintiff was to be returned to him but was not. He stated that he gave the guaranteed for the amount in excess of USD 800,000 as that sum was had been insured. amount. That the guarantee was made to Sarah London Limited.

12. On cross examination, he stated that despite claiming that the guarantee produced in Court was false, he had not reported to the police for investigation. He however admitted that the last page of the guarantee bore his signature. That the first two pages were not the in respect of the guarantee he had signed. He admitted the emails contained in the Pexh2.

13. On re-examination, he told the Court that he did not report the false guarantee due to his business relationship with the plaintiff which had been for over 15 years. That the personal guarantee produced by the plaintiff was not signed by the plaintiff/supplier, hence was not accepted. That he signed the guarantee on 3/11/2017 and it was collected around 4th or 5th November, 2017.

14. I have considered the pleadings, evidence and submissions before me. The sole issue for determination is whether the defendant gave a personal guarantee to the plaintiff for the debt incurred by the principal debtor.

15. It was not in dispute that the defendant was a director of the principal debtor at the time the alleged guarantee was made. It was also not in dispute that the debt of USD 870,201. 03 was due from the principal debtor. What was disputed was; whether the defendant gave any guarantee to the plaintiff and if so, whether the same was the one produced in Court.

16. The plaintiff produced a guarantee produced at pages 1 to 3 of Pexh2. However, the defendant denied having agreed to the terms set out therein. He stated that though he signed the last page of the guarantee, the first two pages of the guarantee produced in Court were different from what he had signed. That once he executed the alleged guarantee, he did not receive an original from the plaintiff hence did not file any in court.

17. The beginning point is the defendants principal pleading, the defence. In his statement of defence and evidence in chief, the defendant alleged that he made an offer for guarantee to Sara (London) Limited (“Sara London”) who did not accept the offer. That a representative from Sara London took all the three copies of the offer promising to return them once executed by Sara London. None was returned. That the guarantee he signed only guaranteed any amount in excess of USD 800,000 as at 3/11/2017.

18. However, when he testified orally, after adopting his witness statement, he shifted his tale and stated that the guarantee was brought to him in person by a staff of Somochem, the plaintiff herein. That he executed the same but did not retain a copy.

19. On cross-examination, he again changed his story and admitted that he had received the guarantee through his email whereby he signed it and sent it via email to the plaintiff. The originals were later collected.

20. From the emails produced by the plaintiff as Pexh2, it is clear as to what transpired between the parties. The correspondence exchanged between PW1 and the defendant shows that the defendant was dealing with the plaintiff. That the draft guarantee was sent to the defendant by PW1 on 4/11/2017. The defendant signed the copy and sent an email back to Heman, who acknowledged receipt of the signed draft, and requested for the originals. In his testimony, the defendant stated that the originals of the guarantee were collected around 4th or 5th November 2017.

21. Going back to the guarantee produced by the plaintiff, the same is shown to have been signed by the defendant 4/11/2017. The date of the emails correspond with the date of the execution of the guarantee.

22. This shift in tales arouses anything else than confidence in the defendant’s claim that he signed a different guarantee and not the one before Court. He did not produce the alleged guarantee that he signed. It is highly unlikely that the guarantee that the defendant executed was other than the one produced. If it be true that he was guaranteeing the amount of between $800,000 and $1. 2 million as he contended, it is expected that the minute he received the demand from the plaintiff, he would have indicated as much in response thereto.

23. Further, had there been an insurance for the USD800,000 as alleged by the defendant, nothing would have been easier than to produce the same. It is not lost of this Court that the defendant was a director of the principal debtor and that all documents in the possession of the said debtor in respect of the claim herein were at his disposal.

24. The defendant sought to rely on a different agreement not before this Court. He did not tender any evidence to prove its existence. The burden of proof is always on the person alleging the existence of a fact.

25. In any case, the fact that the defendant had pleaded that the debt of $870,000 was strange to him through his defense and witness statement, and later admitted the execution of the guarantee made him less believable and further weakened his case.

26. Further, his contention that the guarantee was made to a third party, Sarah London, also fails. It was established through documentary evidence that the plaintiff was an affiliate of Sarah London, and that the guarantee applied to Sarah London and its affiliates. The guarantee itself read that “In consideration of Sarah London Limited and or its affiliates including the other entities”.

27. The defendant also contended that the plaintiff never signed the guarantee. That without acceptance, there was no binding contract between them. That is also a contention without a basis. There is nothing in the guarantee to indicate that the defendant was making an offer to the plaintiff which had to be accepted. The document itself is a complete contract by itself. It was not a conditional guarantee neither was it ‘subject to acceptance’.

28. InSmith –vs- Cook (1891) AC 297 at 303, it was held: -“The duty of the court is to give the natural meaning to the language of the deed unless it involves some manifest absurdity or would be inconsistent with some other provision of the deed and would therefore be contrary to the intention of the parties as appearing upon the face of the deed.”

29. In Storer v Manchester City Council[1974] 1 W.L.R. 1403, the court stated: -“In contracts you do not look into the actual intent in a man's mind. You look at what he said and did. A contract is formed when there is, to all outward appearances, a contract. A man cannot get out of a contract by saying: “I did not intend to contract” if by his words he has done so. His intention is to be found only in the outward expression which his letters convey. If they show a concluded contract that is enough.”

30. In the present case, by his own conduct in executing the guarantee, the defendant undertook to settle the liabilities of the principal debtor. The plaintiff is no stranger to the defendant as the latter would want the Court to believe. The active correspondence between the two, produced as PExh2 says it all. There was even an admitted meeting of 13/6/2018 wherein the guarantee was discussed.

31. The terms of the guarantee are clear. The debt by the principal debtor is undeniable. There is evidence at pages 5 to 299 of PExh1. I find that the plaintiff has proved its claim against the defendant to the required standard.

32. Accordingly, the plaintiff’s claim against the defendant succeeds. Judgment is entered for the plaintiff against the defendant as prayed for in the plaint. The plaintiff shall have the costs of the suit.

It is so decreed.DATED AND DELIVERED AT NAIROBI THIS 15TH DAY OF JULY, 2022. A. MABEYA, FCIARBJUDGE