[2022] KEHC 10749 (KLR)

Air Afrik Aviation Limited v Stanbic Bank Kenya Limited & another (Civil Case 413 of 2018) [2022] KEHC 10749 (KLR) (Commercial and Tax) (31 May 2022) (Ruling)

Neutral citation: [2022] KEHC 10749 (KLR)

Republic of Kenya

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

Commercial and Tax

Civil Case 413 of 2018

DAS Majanja, J

May 31, 2022

Between

Air Afrik Aviation Limited

Plaintiff

and

Stanbic Bank Kenya Limited

1st Defendant

Bank of South Sudan

2nd Defendant

Ruling

1. The application for determination is the plaintiff’s notice of motion dated March 15, 2022made, inter alia, order 8 rules3 and 5 of the Civil Procedure Rules (“the Rules”) principally seeking leave to amend its Plaint. In addition to the grounds on the application’s face, the application is supported by the affidavit of Eric Agolla Lugalia, a director of the Plaintiff, sworn on March 15, 2022.

2. The 1st defendant opposes the application though its grounds of opposition dated April 8, 2022. The parties have also filed written submissions in support of their respective positions where the 2nd defendant has voiced its support for the application.

3. The facts giving rise to the suit are common cause and can be gleaned from the Plaint and the 1st defendant’s amended statement of defence and counterclaim.The plaintiff is a limited liability company incorporated in both Kenya and South Sudan and is engaged in the business of provision of airline carriage and charter services for both passengers and cargo in the Republic of South Sudan and the rest of the East African Community with its principal offices both in Juba and Nairobi. The 1st defendant, formerly known as CFC Stanbic Bank Limited is licensed to conduct banking business within the Republic of Kenya and has various branches in Kenya and South Sudan. The 2nd defendant is a banking institution incorporated in the Republic of South Sudan and vested with the supervisory powers over the banking business carried on by the 1st defendant and all banks in South Sudan.

4. By a leasing agreement dated September 4, 2014signed between the plaintiff and the Government of South Sudan through the Ministry of Defence & Veteran Affairs, the plaintiff leased several aircrafts to the South Sudanese Government for a term of one year but renewable for Five (5) years commencing on 1st October 2014 until August 30, 2015 for the agreed total cost of US $20,640,000. 00. It was expressly agreed in the said Leasing Agreement, inter alia, that the Government of South Sudan as the Lessee was to pay to the Plaintiff a deposit of 35% of the value of the total contract sum equivalent to US$7,224,000. 00 as advance payment. At all material times, the Plaintiff maintained business bank accounts with the 1st defendant in Juba, South Sudan and such payments by the Government of South Sudan were to be made into the Plaintiff's bank accounts held with the 1st defendant therein on a lump sum basis.

5. On February 8, 2016, the 1st defendant credited the plaintiff’s account with the sum of US$ 7,224,000. 00 pursuant to a payment order no. 287 raised by South Sudan’s Ministry of Finance and Economic Planning with the 2nd defendant and in favour of the Plaintiff. However, on May 27, 2016, the 1st defendant reversed the aforementioned transaction, which amount the 1st defendant claims was paid in error as the 2nd defendant had not credited the 1st defendant’s dollar offshore Nostro account to actualize the payment to the plaintiff. The 1st defendant reversed this amount by first accessing the plaintiff’s credit balance of US$ 6,015,152. 74 and on 30th May 2016, the 1st Defendant further debited the Plaintiff’s account with the sum of US$ 1,100,000. 00 which the 1st Defendant claims was mistakenly withdrawn by the Plaintiff and yet the funds belonged to the 1st Defendant as the 1st Defendant was still not in funds from the 2nd Defendant.

6. The Plaintiff was aggrieved by the actions of the 1st Defendant and filed suit against it averring that said actions constituted false and fraudulent banking by the 1st Defendant and that the 1st Defendant deliberately misrepresented and/or distorted the true facts in that no such credits or debits were made and authorized by the Plaintiff and that the 1st Defendant further engaged in false, fraudulent and/or distorted accounting contrary to banking practices, illegality, recklessness, fraud, malice, oppression, bad faith, breach of duty of care and negligence. The Plaintiff avers that as a consequence of the 1st Defendant's actions aforesaid, the Plaintiff has suffered extreme inconveniences, loss and damage and its business operations were totally crippled and that it failed to execute its obligations under the Leasing Agreement dated 4th September 2014 which was eventually terminated due to the Plaintiff’s failure and/or inability to execute its part of the contract which breach, the Plaintiff claims was induced or caused by the 1st Defendant's acts and omissions aforesaid. Thus, the Plaintiff claims that it lost the business opportunity and benefit contained in the said contract and/or to secure an extension and/or lost the opportunity to execute other contracts of a similar nature.

7. Therefore, the Plaintiff seeks declaratory orders, punitive, special and exemplary damages against the 1st Defendant. In due course and on application by the Plaintiff, the 2nd Defendant was joined to the suit as Defendant.

The Application 8. The Plaintiff’s case is that the proposed amendments are intended to rectify and streamline the quantum of special damages and/or loss of benefit suffered by it as a consequence of freezing its bank account and subsequent cancellation of the Leasing Agreement dated 4th September 2014. Further, it states that the proposed amendments are also necessary to rectify inadvertent mistakes and errors in the Plaint and to add some clarity, therefore, the proposed amendments are relevant, merited and justified in that they arise from the same set of facts and the same subject matter.

9. The Plaintiff adds that initially the loss and damage suffered by the Plaintiff was quantified and pleaded as US$ 14,400,000 but that the Financial Projection Report dated 9th March 2022 prepared by its Certified Public Accountant, Mr Orwa Warren Odhiambo show that the quantified the loss and damage amounts to US$ 80,090,432. 94 hence the necessity to amend the Plaint.

10. The Plaintiff submits that in the circumstances, the Defendants will not be prejudiced by the proposed amendments as they will be at liberty to amend their respective defences. It urges that this court should grant the application in the interest of justice.

The 1st Defendant’s Reply 11. The 1st Defendant contends that this application has been brought in bad faith and with the sole purpose of muddling up the issues for determination. That the proposed amendments introduce a completely new and inconsistent cause of action which will change the substratum of the suit thus occasioning the 1st Defendant great prejudice.

12. The 1st Defendant insists the proposed amendments are not genuine and are intended to delay the expeditious hearing and disposal of this suit contrary to the overriding objective of the Civil Procedure Act which is to facilitate the just, expeditious, proportionate and affordable resolution of disputes. That the Plaintiff is guilty of laches and gross indolence having filed the application more than 3 years after the institution of the suit on 14th December 2018. Furthermore, that despite the Plaintiff expressing its intention to amend the Plaint on November 29, 2021, it failed to file the application timeously and only did so on March 15, 2022 close to 5 months late.

13. The 1st Defendant accuses the Plaintiff of is seeking to litigate its case in instalments as the information which forms the basis of the application has always been or ought to have been in the Plaintiff’s custody, possession and/or contemplation. As such, the 1st Defendant holds that the delay by the Plaintiff in presenting the application for amendment at this late stage when pleadings have closed and the matter is ready for hearing is inordinate and cannot be excused.

14. The 1st Defendant avers the application lacks bona fides as the Plaintiff has always been aware of the facts which it now seeks to introduce by way of an amendment but it waited until the eve of the hearing to notify parties of its intention to amend the Plaint. It states that no justifiable reason has been proffered by the Plaintiff to warrant the exercise of the court’s discretion in its favour and it stands to suffer prejudice if the application is allowed. The 1st Defendant submits that any delay violates its right to the expeditious determination of the suit. That the proposed amendment if allowed will force it to procure additional witnesses to respond to the additional claims with the resultant expense. The 1st Defendant urges that the Application is an abuse of the process of the Court.

Analysis and Determination 15. I do not think it is in dispute that amendment of pleadings is a discretionary power granted to the court by order 8 rule 5(1) of the Rules as follows:For the purpose of determining the real question in controversy between the parties, or correcting any defect or error in any proceedings, the court may either on its own motion or on the application of any party order any document to be amended in such manner as it directs and on such terms as to costs or otherwise as are just.

16. Although the parties have cited several decisions of our courts to support their respective position, I adopt what the Court of Appeal stated in Elijah Kipngeno Arap Bii v Kenya Commercial Bank Limited NRB CA Civil Appeal No.81 of 2004 [2013] eKLR where it outlined the general principles that guide the court in dealing with amendments as follows:The law on amendment of pleading in terms of section 100 of the Civil Procedure Act and order VIA rule 3 of the repealed Civil Procedure Rules under which the application was brought was summarized by this Court, quoting from Bullen and Leake & Jacob's Precedents of Pleading - 12th Edition, in the case of Joseph Ochieng & 2 others vs. First National Bank of Chicago, Civil Appeal No. 149 of 1991 as follows:-“The ratio that emerges out of what was quoted from the said book is that powers of the court to allow amendment is to determine the true, substantive merits of the case; amendments should be timeously applied for; power to so amend can be exercised by the court at any stage of the proceedings (including appeal stages); that as a general rule, however late, the amendment is sought to be made it should be allowed if made in good faith provided costs can compensate the other side; that the proposed amendment must not be immaterial or useless or merely technical; that if the proposed amendments introduce a new case or new ground of defence it can be allowed unless it would change the action into one of a substantially different character which could more conveniently be made the subject of a fresh action; that the plaintiff will not be allowed to reframe his case or his claim if by an amendment of the plaint the defendant would be deprived of his right to rely on Limitation Acts.

17. I have looked at the proposed amended plaint and I note that the plaintiff seeks to amend the Plaint so as to rectify and streamline the quantum of special damages its seeks and the loss of benefit it has suffered as a result of the freezing of its bank account and cancellation of the Lease Agreement dated September 4, 2014. The initial claim as quantified and pleaded and quantified was for the loss of US$ 14,400,000. 00, the proposed amend no claims US$ 80,090,432. 94 based on detailed Financial Projection Report.

18. While I agree with the 1st Defendant that here has been a delay in seeking the amendment given that the information was in the plaintiff’s possession, I think the proposed amendment, in substance, does not change the cause of action but expands the scope of damages pleaded. The plaintiff provides the necessary details supported by the documentary evidence. Since the case has not been heard, I think this is an appropriate case where costs would assuage any prejudice cause by the delay.

Disposition 19. In light of the foregoing, I allow the Plaintiff’s application dated March 15, 2022 and order as follows:a. Leave be and is hereby granted to the plaintiff to amend the defence in terms of the draft amended plaint which shall be filed and served within 7 days from the date hereof.b. The defendant are granted leave to amend their respective pleadings within 14 days from the date of service of the amended Plaint.c. The plaintiff shall bear the defendants costs of the application.

DATED AND DELIVERED AT NAIROBI THIS 31ST DAY OF MAY 2022. D. S. MAJANJAJUDGECourt Assistant: Mr M. OnyangoMr Kang’ethe instructed by Kagwimi Kang’ethe and Company Advocates for the PlaintiffMs Ogula instructed by Isere Kamau and Maema Advocates for the 1st Defendant.Mr Ahmednasir, SC instructed by Ahmednasir Abdikadir and Company Advocates for the 2nd Defendant