Success Electronics and Transformer Manufacturers Limited v Kilewah Electro Hard & Electronics Limited; Mwangi & another (Proposed Third Parties) [2022] KEHC 14715 (KLR)

Success Electronics and Transformer Manufacturers Limited v Kilewah Electro Hard & Electronics Limited; Mwangi & another (Proposed Third Parties) (Insolvency Petition E034 of 2019) [2022] KEHC 14715 (KLR) (Commercial and Tax) (13 October 2022) (Ruling)

Neutral citation: [2022] KEHC 14715 (KLR)

Republic of Kenya

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

Commercial and Tax

Insolvency Petition E034 of 2019

WA Okwany, J

October 13, 2022

Between

Success Electronics and Transformer Manufacturers Limited

Petitioner

and

Kilewah Electro Hard & Electronics Limited

Respondent

and

Samuel Gathogo Mwangi

Proposed Third Party

Hyperteck Electrical Services Limited

Proposed Third Party

Ruling

1. The respondent herein filed the application dated November 9, 2020 seeking the following orders:-a.That leave be granted for the Defendant to take out a Third Party Notice to the Proposed 1st and 2nd Third Party; That a Third Party Notice be and is hereby issued to the 1st and 2nd Third Parties herein to be enjoined in this matter;b.That upon hearing and determination of this Application, a Third Party Notice be served upon the 1st and 2nd Third Parties herein and they be deemed admitted as the 1st and 2nd Third Party and be allowed to file their responses.c.That the costs of this application be in the cause.

2. The application is supported by the affidavit of George Kimani Kariuki and is based on the following grounds:-a.In the petitioners' Petition for insolvency dated September 2, 2017 the petitioner have annexed an agreement dated May 18, 2017b.The said agreement purports to be of supply of 1430 Nikkonledxion Luminaire described as 125W K09121 Nikkon S433 worth USD 248,100 from the Petitioner to the respondent.c.At the execution page it is the 1st proposed third party who has signed and the rubber stamp of the 2nd Proposed Third party is embossed therein.d.All the other documents and correspondences being relied upon by the petitioner the said signature of the 1st proposed third party and the rubber stamp of the 2nd proposed third party appear.e.The 1st proposed third party has never been an employee of the respondent/applicant and neither was he authorized to transact on behalf of the respondent/applicant.fFurther, the 2nd interested Third Party is not a subsidiary of the Respondent/Applicant neither was it authorized to transact using the applicant's name.g.It is in the interest of justice that the third parties be enjoined in these proceedings and file their responses to the petition.h.Having demonstrated lack of knowledge in the signing of the agreements and there being no evidence that the company received the consignment the proposed third parties ought to indemnify the applicant in the event the petition succeeds.i.If this application is not allowed, the applicant stands the risk of being condemned to pay a debt it was not privy to and hence suffer irreparable loss and damage.

3. The Petitioner opposed the application through the replying affidavit of its Director Mr. Tan Wei Neng who states that the parties herein entered into an agreement wherein the respondent received a consignment valued at USD 248,100 which the respondent has not paid for thus necessitating the filing of these proceedings. It is the Petitioner’s case that main issue for determination between the parties herein is the nonpayment of debt arising out of their contract which issue does not involve the proposed third parties.

4. The application was canvassed by way of written submissions. The issue for determination is whether the applicant has made out a case for the issuance of the Third Party Notices.

5. Order 1 rule 15 of the Civil Procedure Rules, 2010 states as follows;-The aforementioned provision mandates the court to consider the pleading and give directions on whether there is a triable issue between the defendant and third party as to the liability of the third party and establish the manner in which the dispute between the defendant and the 3rd party is to be tried.

6. In Kenya Commercial Bank vs Suntra Investment Bank Ltd (2015) eKLR, the Court held that:-“In law, a third party is enjoined in a suit at the instance of the Defendant and through the set procedure under Order 1 Rule 15-22 of the Civil Procedure Rules. And, liability between the Defendant and the third party, but of course, after the Court is satisfied that there is a proper question to be tried as to liability of the third party and the Defendant and has given directions under Order 1 Rule 22 of the Civil Procedure Rules. The way I understand the law on third parties, such issues of third parties are issues and triable only between the third party and the Defendant and cannot be a bona fide issue triable between the Defendant and the Plaintiff. On the basis of those legal reasons, even if the third party had been joined, which he has not, it is not a triable issue as all for purposes of liability between the Plaintiff and the Defendant. Looking at the defence and the generalized denials, it is a mere sham. It is a perfect candidate for striking out.”

7. In EK Kagwa vs Costa (1963) Ex 213 & Sango Bay Ltd vs Dresdner Bank Ltd (1971) EA 307 the court stated as follows:-“Before the court can exercise its discretion to issue third party notice, it has to evaluate the allegations of the plaintiff in terms of its legal claim to the relief he is seeking. The court also has to evaluate the defendant’s allegations against the third party and has to be satisfied that the substance of each claim is the same and that there is a linkage between all the claims before issuing the notice.”

8. In the present case, the applicant’s case was that the agreement that forms the foundation of these proceedings was executed by the 1st proposed third party while the rubber stamp belonged to the 2nd proposed third party. It was the applicant’s contention that the 2nd interested party was not its employee and was therefore not authorized to transact on its behalf.

9. The Petitioner, on its part, submitted that it engaged the respondent directly in relation to the consignment and that it was not in its place to inquire into the inner workings of the company on execution of contracts.

10. My finding is that the issues raised by the applicant regarding the execution of the contract are weighty issues that go to the root of the agreement that is subject to this petition. I note that the signatures and stamp on the agreement belong to the 1st and 2nd proposed third parties respectively. I am persuaded that indeed there is a triable issue between the applicant and the proposed third parties.

11. Consequently, I find that the applicant has made out a case for the granting of the third party notices to the intended 1st and 2nd third parties to enable the court determine the issues in question conclusively. I therefore allow the application in the following terms: -a.The application dated November 9, 2020 to join the 1st and 2nd intended third parties’ is grantedb.The third parties shall be served with pleadings and shall file and serve responses within 30 days from the date of service.c.The costs of the application shall abide the outcome of the main suit.

DATED, SIGNED AND DELIVERED VIRTUALLY AT NAIROBI THIS 13TH DAY OF OCTOBER 2022. W. A. OKWANYJUDGEIn the presence of: -Ms Wameyo for Ms Akal for Petitioner/RespondentNo appearance for applicant.Court Assistant- Sylvia