[2011] KEHC 1184 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI

CIVIL SUIT NO. 210 OF 2005

JANET OSEBE GECHUKI …………………………………..................…………………..PLAINTIFF

VERSUS

THE COMMISSIONER OF CUSTOMS & EXCISE………..............................……….1ST DEFENDANT

RAJEN H. MALDE ………………………………………..................………………..2ND DEFENDANT

RULING

The Notice of Motion dated 6th May, 2011 is filed by the 2nd Defendant herein which is premised under Order 25 Rule 5 of Civil Procedure Rules 2010 and Sections 1A, 1B, 3A and 63 (e) of the Civil Procedure Act.

It seeks the following prayers:-

(1)That this suit as concerns the second Defendant be marked as compromised and judgment be entered for the second Defendant against the first Defendant accordingly in the terms that:-

(a)The Toyota RAV4 Chassis NO. ACA21-0084330 and now bearing Registration Number KBE 493H be returned to the first Defendant within the next 7 days and delivered to a person designated to it;

(b)The first Defendant do refund to an pay to the second Defendant the sum of Kenya Shillings 2,000,000. 00 together with interest thereon at court rates from the date of payment by the second Defendant to the first Defendant until such time as the said sum shall be refunded; and

(c)The costs of this suit be paid by the first Defendant to the second Defendant as agreed or taxed.

(2)That the costs of this application be provided for.

The application is based on the grounds set forth on its face and on affidavit sworn by the 2nd Defendant on 6th May, 2011.

The application is supported by the Plaintiff and she has filed a supporting affidavit sworn on 2nd June, 2011. The 1st Defendant in opposition to the application has filed an affidavit sworn by one Seraphin Anamanjia on 8th May, 2011.

The short background of this matter is that the 2nd Defendant bought the motor vehicle in issue in an auction advertised by the 1st Defendant but the Plaintiff filed this suit challenging the said sale and had obtained the injunction against the 2nd Defendant restraining him to deal with the motor vehicle. I shall not dwell on the issue raised by the Plaintiff i.e. whether the Interim Injunction has been discharged in view of the earlier order made vide Ruling of Hon. Nambuye J. delivered on 7th March, 2008. It is averred by the 2nd Defendant that he is still holding the motor vehicle awaiting the order of the court.

The only issue before the court is whether there is a binding contract between the 2nd Defendant and the 1st Defendant so as to rule that the suit as between the two Defendants has been compromised.

It is not in dispute that the 1st Defendant addressed a letter dated 26th August, 2010 to the counsel both for the Plaintiff and the 2nd Defendant.

It was written without prejudice.

The letter proposed as under:-

“We have instructions to negotiate on an out of court settlement as follows:

1. The 2nd Defendant be refunded the sum of Kshs.2,200,000. 00 paid as the purchase price of the motor vehicle with interest at court rates.

2. The Plaintiff then to clear the vehicle as per the provisions of East African Customs Management Act, 2004. ”

The 2nd Defendant/applicant by his advocates’ letter dated 2nd September, 2010 accepted the said proposal. This letter was an open letter. His lawyers also wrote a second letter of 8th March, 2011 reiterating that so far as the 2nd Defendant is concerned, the matter stands compromised on his accepting the proposal made by the 1st Defendant. It sought confirmation of such compromise from the 1st Defendant.

In failure of any response from the 1st Defendant, the 2nd Defendant thus filed the present application.

The Plaintiff in support of the application submitted that the 1st Defendant is now estopped in law from contending that there is no binding contract between the two Defendants. So far as the Plaintiff is concerned, the 1st Defendant has to compensate her in damages for loss of user of the vehicle. The loss occurred due to the sale of the motor vehicle despite the reassurance made by the 1st Defendant vide the letters of 12th January, 2005, 24th January, 2005 and 25th January, 2005.

The 1st Defendant’s contentions are twofold. The letter was written ‘without prejudice’ to both the parties in anticipation that both parties shall accept the proposals made in its letter dated 26th August, 2010. I may observe at this stage that the averments made in paragraph 6 of the replying affidavit are that the money to be refunded was Kshs.2,100,000/= and not Kshs.2,200,000/= as written in the said letter. Apart from the fact that the party cannot renegotiate the proposal by way of an affidavit without any sustainable document, I do note that the 2nd Defendant/applicant has prayed for refund of only Kshs.2,000,000/=. This issue thus does not avail to the 1st Defendant.

It was further submitted that because of the refusal by the Plaintiff to accept the proposals made by the 1st Defendant, there is no contract validly entered and that the letter addressed ‘without prejudice’ is not admissible in evidence and because of that, the 2nd Defendant cannot be heard to submit that a valid contract is entered. Moreover, there is no contract executed by both parties by way of consent order/letter.

Ms. Jonmohamed appearing for the 2nd Defendant submitted that the general rule of inadmissibility of correspondence exchanged ‘without prejudice’ is not absolute. It is by now trite that the communication made ‘without prejudice’ are admissible when there has been a binding agreement between the parties arising out of it, or for the purpose of deciding whether such an agreement has been reached (see Halsbury’s Laws of England (4th Edition 17th Vol. paragraph 213).

The case of Lochab Transport Ltd. –vs- Kenya Arab Orient Insurance Ltd.(1986) e KLRwas relied upon.

Similar issue of compromise on without prejudice was raised and Hon. Shield J. observed thus:-

“I do not understand this plea. It could only be made by a lawyer who did not understand the significance of the words ‘without prejudice’. You cannot have an agreement made without prejudice. If an offer is made ‘without prejudice’, evidence cannot be given of this offer. However, if this offer is accepted, a contract is concluded and one can give evidence of the contract and give evidence of the terms of the ‘without prejudice’ letter offer.”

Mr. Twahir, the learned counsel appearing for the 1st Defendant responded by relying on Halsbury’s Laws of England (4th Edition, Vol. 37 paragraph 593), wherein it is stated that “When there is agreement between the parties not to disclose the document or information that can be a ground for refusing the disclosure to the court and that where communications are expressed to be ‘without prejudice’ and are made as a part of negotiations in an attempt to compromise the proceedings they are subject to privilege from the disclosure to the court by either party.”

I shall have no difficulty in accepting the above propositions of law which is time tested as well as fair and judicious.

Are the facts of this application covered under the above principles?

The first letter of proposals from the 1st Defendant was addressed to both the parties i.e. the 2nd Defendant and the Plaintiff. The two proposals, in my considered view, were distinct and could be accepted by two parties separately. The facts of this case are not complex and I further note that unless the 2nd Defendant does not release the motor vehicle, the claim of the Plaintiff cannot be properly heard and determined.

The 1st Defendant entered into two separate contracts first with the Plaintiff for release of car from the bonded warehouse and then with the 2nd Defendant for the sale of the vehicle by the public auction. There is no direct relationship between the Plaintiff and the 2nd Defendant. In response to the proposal offered to him, the 2nd Defendant accepted the same, and has reiterated the same in the second letter of 8th March, 2011 stressing that there is a concluded agreement when the 2nd Defendant accepted the proposal made by the 1st Defendant. The offer and acceptance thereof thus makes a concluded agreement. There was furthermore no condition that the two proposals made in 1st Defendant’s letter of 26th August, 2010 have to be accepted by both the parties to be effective.

The 1st Defendant did not respond to the acceptance by the 2nd Defendant and acceptance has been in effect since then. The internal correspondence between the 1st Defendant and its advocate has no value which can be added to the concluded agreement.

Without much ado, in view of the premises aforesaid, I allow the application and order that the Toyota RAV4 Chassis No. ACA21-0084330 and bearing Registration No. KBE 493H be returned to the 1st Defendant by the 2nd Defendant and be delivered to the officer designate within 10 days from date hereof and that the 1st Defendant refund to the 2nd Defendant a sum of Kshs.2,000,000/= with interest at court rates from the date the 2nd Defendant paid the said sum to the 1st Defendant till the said sum is refunded by the 2nd Defendant.

I shall not make any order on the costs hereon.

Dated, signed and delivered at Nairobi this 21st day ofSeptember, 2011

K. H. RAWAL

JUDGE

21. 9.2011