Spire Bank Kenya Limited v Maize Milling Company Limited & 2 others [2022] KEHC 229 (KLR)

Spire Bank Kenya Limited v Maize Milling Company Limited & 2 others (Civil Suit E249 of 2019) [2022] KEHC 229 (KLR) (Commercial and Tax) (25 March 2022) (Ruling)

Neutral citation: [2022] KEHC 229 (KLR)

Republic of Kenya

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

Commercial and Tax

Civil Suit E249 of 2019

EC Mwita, J

March 25, 2022

Between

Spire Bank Kenya Limited

Applicant

and

Maize Milling Company Limited

1st Respondent

Capital Second Limited

2nd Respondent

Grarm Investiments Auctioneers

3rd Respondent

Ruling

1. The applicant, Spire Bank limited (Spire Bank), took out a notice of motion dated 21st October 2020 under section 1A, 1B and 3A of the Civil Procedure Act and Orders 8 rule 3 (1) and 51 rule 1 of the Civil Procedure Rules, seeking leave to amend its statement of defence. In the alternative, the applicant sought extension of time to file a counterclaim, and the draft amended defence be deemed to have been duly file and served upon payment of requisite fees.

2. The grounds upon which the application was premised are on the face of the motion, supporting affidavit sworn by John Wageche on 21st October 2020 and written submissions dated 12th February 2021.

3. Spire Bank stated that the amendments are necessary for determination of the real question in controversy between the parties; the amendment will not prejudice the rights of the parties in the suit and the application was brought without delay.

4. According to Spire Bank, the 1st plaintiff took a loan facility of from its predecessor of Kshs 150,000,000 which was secured by a legal charge over LR No. 209/9769 (the property). There was default in loan repayment leading to issuance of statutory notices for purposes of selling the property in exercise of its statutory power of sale.

5. The property was sold at forced sale of Kshs. 61,600,000 which recovered part of the outstanding amount only. There is Kshs. 178,419,785. 53 still outstanding from the plaintiff. For that reason, Spire Bank wished to amend the plaint and claim the outstanding amount.

6. Spire Bank relied on Martin Wasula Machyo v Housing Finance Company Limited & Another [2015] eKLR, citing Central Bank of Kenya Limited v Trust Bank Limited & 5 others[2000] eKLR, that a party is allowed to make such amendments as may be necessary for determination of real questions in controversy, or to avoid a multiplicity of suits, provided there is no undue delay; no new or inconsistent cause of action is introduced; no vested interest or accrued legal right is affected and the amendment can be allowed without injustice to the other side.

7. According to Spire Bank, the application was made in good faith and without delay whatsoever. It cited East Bakery v Castelino [1958] EA 461 and urged that the application be allowed.

Response 8. Maize milling company Ltd, (Maize Milling), and Capital Second Ltd, (Capital), filed grounds of opposition dated 24th January 2021 and written submissions dated 17th May 2021 in opposition to the application. They argued that that application as drawn was misconceived, fatally defective and bad in law. They further argued generally that the application was not brought in good faith and only sought to delay the suit. According to Maize Milling and Capital, the information relied on for seeking to amend was within Spire Bank’s Knowledge at the time of filing the defence and, therefore, no sufficient grounds had been put forward to allow the application.

9. According to Maize Milling and Capital, the amendment sought would introduce other parties and no good reason had been given why directors were to be joined in the suit. It is their case that it would not be proper to allow the counterclaim as it would open a “bandora of issues in the suit”. They maintained that Spire Bank had not acted in good faith since it had instituted Bankruptcy proceedings against their directors in HCCC NO. E020 of 2019 Diamond Hasham Lalji v Spire Bank Limited with regard to the debt herein and which was still active.

10. Maize Milling and Capital maintained that allowing the amendment would cause them prejudice since the two matters were being pursued against them concurrently and, therefore, the amendment would not assist the court in resolving the issues in dispute at once.

11. They relied on Freight Forwarders Kenya Limited v Aya Investments Uganda Limited [2014] eKLR, that however negligent or careless one may have been and however late the proposed amendment, the amendment should be allowed if it can be done without injustice.

12. They again cited National Bank of Kenya Limited v Classic Furniture Mart Limited & 2 others [2015] eKLR, that parties are allowed to make such amendments as may be necessary for determining the real question in controversy to avoid a multiplicity of suits provided there is no undue delay, no vested interest or accrued legal right is affected and there is no injustice to the other party. (see also Institute for Social Accountability & Another v Parliament of Kenya & 3 others [2014] eKLR),

13. They urged that the application be dismissed with costs.

Determination 14. I have considered the application and the response. I have also considered the decisions relied on by parties. The application seeks leave to amend the defence by adding other parties and a counter claim. The application was opposed on grounds that it was not made in good faith and that the amendments would prejudice the other parties.

15. Whether or not to grant eave to amend is at the discretion of the court. Order 8 rule 3(1) of the Civil Procedure Rules gives the court wide discretion to allow amendment to pleading on such terms as to costs or otherwise as may be just and in such manner as it may direct. The time when an amendment should be allowed in not restricted but of course should be within reasonable time and before a party closes his case.

16. In National Bank of Kenya Limited v Classic Furniture Mart Limited & 2 others(supra) the court stated that parties should be allowed to make such amendments as may be necessary for determining the real question in controversy to avoid a multiplicity of suits, provided there is no undue delay, no vested interest or accrued legal right is affected and there is no injustice to the other party.

17. In East Bakery v Castelino [1958] E A 461, it was held that an amendment sought before the hearing should be freely allowed, if they can be made without injustice to the other side and there is no injustice if the other side can be compensated by costs.

18. In Clarapede v Commercial Union Association (883) WLR 262, Brett, M. R stated that however negligent or careless a party may have been in the first omission and however late the proposed amendment, the amendment should be allowed if it can be done without injustice to the other side. There would be no injustice if the other side can be compensated by costs.

19. The principles emerging from the decisions above, are that the court should be minded to freely allow an application to amend if it will not cause injustice to the other party and if such injustice can be compensated by costs. This is the cardinal principle of the right to a fair hearing now in our Constitution. However, the amendment should not be allowed where a distinct cause of action is to be substituted for another, or to change by means of amendment, the subject matter of the suit.

20. I have perused the draft amended defence, the supporting affidavit and the response thereto. There is no argument that the proposed amendments are intended to introduce a distinct cause of action. There is also no argument that the amendments with cause injustice the other side that cannot be compensated by costs. The argument that the application for leave to amend is intended to delay the case seems to ignore the fact that the law allows a party may amend his pleadings at any time on terms as the court may consider appropriate.

21. There is again no denial that this matter has not been heard and therefore, there can be no argument that the application for amendment has been brought without undue delay. The contention by the respondents that allowing the amendments would cause them prejudice since there is another matter which is being pursued against the parties that are being added that is going on concurrently with the present suit is not a bar to allowing the amendment. This is so because these people, as the applicant stated, were guarantors and, therefore, the amendment would assist the court in resolving the issues in dispute at once.

22. Taking into account the totality of the circumstances of this case, and the reasons why the law allows amendments, it is the view of this court that the application is for allowing.

23. Consequently, the application dated 21st October 2020 is allowed and the court makes the following orders:1. Leave is granted to Spire Bank Limited to amended the defence.2. The amended defence be filed and served within 14 days from the date hereof.3. The respondents are granted leave to file a reply to defence and defence to counter claim within 14 days after service of the amended defence and counterclaim.4. Each party to bear their own costs

DATED SIGNED AND DELIVERED AT NAIROBI THIS 25THDAY OF MARCH 2022EC MWITAJUDGE