Unga Limited v Diamond Wholesalers Limited [2023] KEHC 26955 (KLR)

Unga Limited v Diamond Wholesalers Limited (Commercial Civil Suit E856 of 2021) [2023] KEHC 26955 (KLR) (Commercial and Tax) (15 December 2023) (Ruling)

Neutral citation: [2023] KEHC 26955 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts)

Commercial and Tax

Commercial Civil Suit E856 of 2021

DO Chepkwony, J

December 15, 2023

Between

Unga Limited

Plaintiff

and

Diamond Wholesalers Limited

Defendant

Ruling

1. The Plaintiff/Applicant filed a Notice of Motion application dated 8th October, 2021 under Order 36 Rule 1, Order 51 Rules 1, 1A, 3 and 4 all of the Civil Procedure Rules, 2001, and Sections 3A of the Civil Procedure Act. It seeks the following order: -a.The Honourable Court be pleased to enter Judgment for the sum of Kenya Shillings Twenty-Seven million, nine hundred and eighty-nine thousand, seven hundred and ninety-six and eighty-four cents (Kshs.27,989,796. 84) in favour of the Plaintiff/Applicant herein as against the Defendant/Respondent herein as prayed in the Plaint.b.The Honourable Court be pleased to make and or grant such other and or further order(s) as it may in the interest of justice deem expedient and or necessary.c.That the costs of this application be provided for.

2. The application is premised on among other grounds that the Plaintiff/Applicant was involved in the manufacture and marketing of a broad range of the Applicant’s products which included a broad range of human nutrition, animal nutrition and animal health products. These products were offered on credit to the Defendant, and to ensure payment, the Defendant had obtained a bank guarantee for Kshs.30,000,000/= in favour of the Plaintiff but upon expiry of the same on the 17th February, 2021, the Defendant has refused to renew it. Thus, a debt of Kshs.27,989,796. 84 for products offered on credit services remained unsecured and so far the Defendant has refused to positively respond to demands on the outstanding amount.

3. In the Affidavit sworn in support of the application by one Lynda Banja, the Plaintiff’s legal officer, the Defendant has acknowledged the debt on many platforms and is therefore truly indebted to the Plaintiff in the sum of Kshs.27,989,796. 84. Now, the Plaintiff seeks the court to condemn the Defendant to pay the said monies which according to the Deponent, the Defendant is truly indebted to the Plaintiff. In the upshot, the court is being asked to enter Judgment against the Defendant for the said sum of Kshs.27,989. 796. 84.

4. In response to the application, the Defendant filed Grounds of Opposition dated the 25th March 2022 and a Notice of Preliminary Objection evenly dated. The major ground in the Notice of Preliminary Objection is that the instant suit is fatally defective for lack of authority on the institution of the suit, appointment of the Plaintiff’s advocate and or authorizing Lynda Banja, the deponent of the verifying affidavit to swear the affidavit.

5. On the grounds of opposition, the Defendant avers that the application at hand offends provision of Order 36 Rule 1 which preclude the filing of such an application after a defence has been filed and in any event, the application has been overtaken by events given that the Defendant has already filed a defence.

6. In response to the Notice of Preliminary Objection and the Grounds of objection, the Plaintiff filed a supplementary affidavit sworn by Lynda Banja on 29th September, 2022. She averred that the Plaintiff Company had passed a special resolution on the 4th October, 2021 authorizing her the signing of any document with respect to this suit. The special resolution further appointed the firm of advocates on record for the plaintiff to file and prosecute this matter. In any event, the filing of the requisite authority should not necessarily be filed at the time of instituting the suit as per Order 3 of the Civil Procedure Rules, 2010 even although copy of the authority was filed on 16th June, 2022. Additionally, the Plaintiff Company issued authority dated 8th June, 2022 ratifying the filing of the suit herein as well as the swearing of the affidavits. Lastly, the deponent has averred that Order 36 of the Civil Procedure Rules, 2010 does not preclude the filing of an application as the one at hand nor does a subsequent defense render a previously filed application incompetent.

7. Vide the directions issued by this court, the application was canvassed by way of written submissions and the court record reflects that the Plaintiff/Applicant’s submissions are dated 12th October, 2022 while the Defendant’s are dated 11th October, 2022.

8. In its submissions, the Plaintiff has relied on a number of decided authorities including the case Kenya Commercial Bank Ltd v Stage Coach Management Limited (2014) eKLR and the case of Portlink Limited v Kenya Railway Corporation (2015) eKLR which pointed out that proceedings started without proper authority can be ratified by filing the relevant authority by the company. This is so because no timelines are provided under the Civil Procedure Rules, 2010 on filing of the Authority.

9. As regards the merits of the Preliminary Objection as well as the grounds of submissions, it is submitted that the proceedings can be ratified and further that Order 36 Rule 1 of the Civil Procedure Rules only serves to expedite the determination of disputes but does not preclude a party from filing an application for summary Judgment in contemporaneity with the Plaint.

10. As for the prayers sought in the application, it is the Plaintiff’s submissions that the Defendant admitted its indebtedness as demonstrated in the letter dated 11th February, 2021 wherein the Defendant had requested for extension of its credit terms from 21 days to 40 days alleging that it was awaiting a payment of Kshs.100million by “NMS”. Similarly, a letter by the Defendant’s advocate dated 24th July, 2021 admitted the debt of Kshs.27,989,796. 84 which forms the basis of the instant application. Therefore, the allegations by the defendant that the accrued debts are as a result of failure to deliver goods requested by the Defendant or that the Plaintiff had not taken into account some of the invoices already paid by the Defendant were misplaced. According to the Plaintiff, the failure to file a Replying Affidavit meant that the statement of facts supporting the application were uncontroverted hence the defence contained mere denials. In support of that line of argument reliance was placed on the case of Hellen Jerotich Chepkwony v Crown Bus Services (2017) eKLR.

11. The Defendants on the other hand vide its submissions dated 11th October, 2022, submitted that the instant application is frivolous in view of Order 36 of the Civil Procedure Rules 2010 which provides that an application for summary Judgment can only be filed where the Defendant has entered appearance but has not filed a defence. In supporting the argument that filing an application for summary Judgment while there is a defence on record is unprocedural, the Defendant relied in the cases of Swiss Deli Trade (Panama) Inc v Privamnuts EPZ Kenya Ltd [2021] eKLR and Hellen Jerotich Cheokwony v Crown Bus Services [2017] eKLR.

12. The Defendant further submitted in support of its Notice of Preliminary Objection and argued that the supplementary affidavit which sought to introduce the Authority to file this suit was filed without the leave of the court and ought to be struck out. As such, this suit will be none - compliant to the mandatory provisions of Order 4 Rule 2 and 4 and it ought to be dismissed.

Analysis and Determination 13. I have considered the instant application, the Notice of Preliminary Objection and grounds of opposition filed in response thereto together with the respective submissions filed by the parties in support of their respective positions. In my opinion, the following issues do arise for determination: -a.Whether the Notice of Preliminary Objection is merited.b.Whether the court should grant the prayers sought in the Notice of Motion application dated 8th October, 2021. c.Who bears the cost of the application?

14. The Defendant’s Preliminary Objection is primarily hinged on the requirement of a resolution before a suit is filed on behalf of a company. It is emphasized that order 4 rule 2 & 4 of the Civil Procedure Rules provides for the necessity for a company, which is filing a suit, to have an authorizing Resolution so to do either from the Board of Directors of the company or by members of the company in a General Meeting. The Plaintiff/Applicant did not deny that position but pointed out a number of judicial authorities wherein it has been held that such company resolution need not be filed at the same time as the suit but may be filed any time before the suit is fixed for hearing. The Plaintiff went on to attach on its supplementary affidavit, a company resolution dated the 4th October, 2021 and authority to swear dated 8th June, 2022.

15. The general principle is that a Preliminary Objection should always be on a pure point of law apparent on the face of the pleadings without extensive analysis of facts and circumstances. If argued at a preliminary stage, it might dispose the suit. It usually implies that the facts as pleaded are correct save for the legal barrier to the sustenance of the suit. Having considered the grounds on the face of the Preliminary Objection, they relate to matters of procedure and whether or not they meet the threshold for a competent Notice of Preliminary Objection hence sustainable. This court thus proceeds to determine the merit of the Notice of the Preliminary Objection.

16. The Defendant in its submissions asked the court to dismiss the supplementary affidavit on account of having been filed without leave of the court. It is however admitted that this court granted the Defendant leave to file a replying affidavit and thereafter the Plaintiff to file a supplementary affidavit. The Defendant chose not to file the Replying Affidavit and now submits that without the replying affidavit, the plaintiff had no leave to file the supplementary affidavit. However, this court disagree with the Defendant’s submissions. The leave granted to the Plaintiff for filing the supplementary affidavit was not depended on the Defendant filing a Replying Affidavit and it would be defeatist to justice for one to assume so. Thus, the leave for the Plaintiff to file the supplementary affidavit was not extinguished by the Defendants failure to file the replying affidavit hence the supplementary affidavit is rightly before this court. In any event, by virtue of the overriding objective, this court is mandated to do substantive justice to parties while disregarding procedural technicalities. Substantive justice would not call for expunging a supplementary affidavit on grounds of the opposing party’s unwillingness to file a Replying Affidavit.

17. Order 4 Rule 1(4) of the Civil Procedure Rules states that where the Plaintiff is a corporation, the verifying affidavit shall be sworn by an officer of the company duly authorized under the seal of the company to do so. However, this court associates itself with the decision of Odunga J, in the case of Leo Investments Limitedv.Trident Insurance Company Limited [2014] eKLR where the learned judge held inter alia that the mere failure to file the resolution does not invalidate the suit. Odunga J, did however acknowledge that a suit filed without a resolution by a corporation may attract some consequences.

18. Likewise, having perused the authority dated 8th June, 2022 authorizing Lynda Banja to swear affidavits and resolution dated 4th October, 2021 authorizing the institution of this suit and appointing the firm of Messrs. Kibanya & Kamau Associates Advocates to act on behalf of the Plaintiff, this court holds that the absence of such authority at the time of filing the suit was not fatal to the Plaintiff’s case. It could be filed any moment before the suit is slated for hearing since the Order 4 of the Civil Procedure Rules does not specifically require that such resolution granting a firm of advocates authority to file suit on behalf of a company or authority to swear affidavits be filed at the same time that the said suit is filed. That being the case, the preliminary point raised by the Defendants is dismissed.

19. Now turning to the merit of the application dated 8th October, 2021, the same seeks Judgment on admission for the sum of Kshs.27,989,796. 84 against the Defendant. The admission is said to have been demonstrated in the letter dated 11th February, 2021 wherein the Defendant had requested for extension of its credit terms from 21 days to 40 days alleging that it was awaiting a payment of Kshs.100million by “NMS” and further in a letter by the Defendant’s advocate dated 24th July, 2021. In opposing the application, the Defendant argued that an application for summary judgment filed before the filing of a defence is unprocedural. That application should be filed where the applicant has entered appearance but chooses not to file a defense but where a defense is filed, such application does not in the Defendant’s view hold water.

20. In the court’s view, Defendant’s view may not be what Order 36 Rule 1 postulates. An application for summary judgment is not defeated merely because a defendant has filed a defence or it was filed before the Defendant was accorded enough time to file its defence. The defence is one of the ways the Defendant is entitled to demonstrate that it has a good defence and that the matter should proceed to trial. To insist that the application is incompetent on such procedural exercises is to elevate a technicality to a fetish contrary to the provisions of Article 159 of the Constitution which requires the court to determine matter without undue regard to technicalities. The court indeed should focus on whether the filed defence raises any triable issue to counter the alleged admission. Consequently, this court declines to dismiss the application on such grounds.

21. In considering whether the Defendant has admitted the Plaintiff’s claim or part of it, in its statement of defence dated 1st March, 2022, the Defendant admitted having engaged with the Plaintiff in supply of various products but avers that it made periodic payments thereafter until it settled all its debts with the Plaintiff. It averred that the amount now being claimed relates to goods which the Plaintiff never delivered to it or some payments which the Plaintiff did not factor. As such, it denied the claimed debts. I have as well read through the letter dated 11th February, 2021 and find the same does not contain any unequivocal admission of the sum of Kshs.27,989,796. 84 but merely acknowledges the existence of a debt. Interestingly, in the letter dated 24th July, 2021, the Defendant’s advocate acknowledges that the Defendant admits the debt of Kshs.27,989,796. 84 as owing but requested for reconciliation of the amounts due. The same line of argument is postulated in the defence where the Defendant connotes that the Plaintiff claims for debts already paid for or goods not delivered.

22. Order 13 Rule 2 of the Rules which deals with judgment on admission provides as follows:-“Any party may at any stage of a suit, where admission of facts has been made, either on the pleadings or otherwise, apply to the Court for such Judgment or order as upon such admissions he may be entitled to, without waiting for the determination of any other question between the parties; and the Court may upon such application make such order, or give such Judgment, as the Court may think just”.

23. In the case of Choitram v Nazari [1984] KLR 327 where Madan, JA expresses the view that:-“For the purpose of Order XII Rule 6, admission can be expressed or implied either on the pleadings or otherwise, e.g. in correspondence. Admissions have to be plain and obvious, as plain as a pikestaff and clearly readable because they may result in judgment being entered. They must be obvious on the face of them without requiring a magnifying glass to ascertain their meaning”.In the same case, Chesoni Ag. JA, observed that:“Admissions of fact under Order XII rule 6 need not be on the pleadings. They may be in correspondence or documents which are admitted or they may even be oral. The rules used words “otherwise” which are words of general application and are wide enough to include admission made through letter, affidavits and other admitted documents and proved oral admissions ……. It is settled that a judgment on admission is in the discretion of the court and not a matter of right that discretion must be exercised judicially”.

24. In the instant case, Clause (4) of the letter dated 24th July, 2021 and addressed to the Plaintiff by the Defendant’s advocate reads as follows: -“Our client maintains that the alleged outstanding debt of Kshs.27,989,796. 84 is owing and requests for a reconciliation of the amounts due.”

25. In the court’s opinion although the above clause admits the debt and the outstanding amount, it is also seeking for reconciliation of the amount due to determine the actual debt. That in this court’s view is a qualified admission as opposed to plain and obvious, or as plain as a pikestaff admission for purposes of entry of a summary judgment. Further, it was explained in the statement of defence that the figure claimed is merely on the basis of payments which were not at all factored and or claims on goods which were not delivered. For this court, this is a triable issue which must not necessarily succeed but should be argued on merit for the purpose of ascertaining the actual debt owing to the Plaintiff by the Defendant.

26. Accordingly, this court disallows the Plaintiff’s application dated 8th October, 2021 and directs that the suit proceeds for full hearing. Parties shall fix a pretrial date on priority basis to expedite on the disposal of the matter. Parties shall bear their own costs for the application.It is so ordered.

RULING DATED AND SIGNED AT KIAMBU THIS 13TH DAY OF DECEMBER, 2023. D. O. CHEPKWONYJUDGERULING DELIVERED VIRTUALLY, DATED AND SIGNED AT NAIROBI THIS 15TH DAY OF DECEMBER , 2023. ALFRED MABEYAJUDGE