[2022] KEHC 42 (KLR)

Lustman & Company (1990) Limited v Corporate Business Centre Limited & 4 others (Civil Suit 311 of 2018) [2022] KEHC 42 (KLR) (Commercial and Tax) (4 February 2022) (Ruling)

Neutral citation number: [2022] KEHC 42 (KLR)

Republic of Kenya

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

Civil Suit 311 of 2018

EC Mwita, J

February 4, 2022

Between

Lustman & Company (1990) Limited

Applicant

and

Corporate Business Centre Limited & 4 others

Respondent

Ruling

1. The Applicant took out a motion on notice dated 28TH May 2021 under Article 35(1) of the Constitution, sections 68(1) and 69 of the Evidence Act, sections 1, 1A, 3A, (a) of the Civil Procedure Act and Orders 11 rules 2, 3(5)(b) and 51 rule (1) of the Civil Procedure Rules, seeking an order directing the respondents to produce, make discovery on oath and deliver and or avail copies of various documents with regard to the matter in question in the suit, more particularly, all the documents particularized in its notice to produce and amended notice to produce dated 8th September 2020 on the same day. The Applicant also prays that the court does make such orders as it may deem just or necessary including striking out the Defendants’ defence(s) for non-compliance.

2. The Application is supported by the grounds on its face and the Affidavit of the Daniel Ndegwa Wokabi, sworn on 28th May 2021. From those grounds and the supporting Affidavit, the Applicant, a registered estate agent, procured a purchaser for the 1st Defendant’s property (LR No. 209/11122), for which it was entitled to a commission, being a percentage of the purchase price. The commission payable was to be inferred from two letters dated 12th August 2014 and 14th May 2015 through which the 1st Defendant instructed the Applicant to procure a purchaser for its property. The commission payable, the applicant stated, could only be determined from the documents executed between the vendor and the purchaser and other documents which the Defendants have declined to disclose.

3. It is the Applicant’s case that having procured a purchaser and linked the purchaser with the 1st Defendant, it fulfilled its obligation thus paved the way for negotiations before the two successfully concluded the transaction. The Applicant stated that the purpose of the discovery is to provide it with relevant documentary materials, thus level the litigation ground between them and expedite the hearing of this dispute.

4. According to the Applicant, despite service of amended notice to produce dated 8th September 2020 on the Respondents, no response was forthcoming from them. It was stated that the Defendants concealed the true purchase price when the transfer of shares was registered with the Registrar of Companies thereby hiding from the Applicant the true purchase price from which its commission could be ascertained. It maintained that the documents sought will assist the court in ascertaining the consideration, thus determine the commission claimed in the plaint.

5. According to the Applicant, the Respondents will not suffer prejudice and their right to a fair hearing guaranteed under Article 50(2), (3)(c) will not be prejudiced.

6. The 2nd and 3rd Respondents filed a replying Affidavit by their advocate Justus Obuya, sworn on 28th September 2021. He deposed that for the court to compel a party to produce documents, it must satisfy itself that the documents are not only relevant but also necessary. According to the deponent, the documents sought are not relevant and the Applicant is not only on a fishing expedition, but also attempts to procure irrelevant information to blackmail the Respondents.

7. On each of the documents sought, the deponent has responded by stating that the documents are not relevant as they will not show that he Applicant introduced the defendants (read purchasers) to be entitled to a commission. It is the deponents view that the Application is not merited.

8. I have not been able to trace the 1st, 4th and 5th Respondents’ responses on record or on the online platform.

9. The Applicant filed written submissions dated 14th July 2021. It submitted that during case management, it requested the Respondents to produce several documents for discovery, including; share sale/purchase agreements between the 1st 2nd and 3rd Defendants and the 5th Defendant, share transfer deeds, stamp duty declaration assessment and pay in slips for the transfer of shares, stamp duty assessment and payment of Kshs, 739,283,120, Bank slips for payment, Minutes of the 88th Board of Trustees meeting of the 5th Respondent held on 26th August 2014, and Minutes of the 90th Board of Trustees of the 5th Respondent held on 13th November 2014 or 18th November 2014, receipts on payment of Stamp Duty on the two shares franked on 16th April 2015 with a consideration of Kshs. 739,283,120 and Form D submitted with it.

10. It is the Applicant’s case that the amount disclosed and declared for the transfer of shares and assessed stamp duty of Kshs. 100/= was understated compared to another document which showed Kshs. 739,283,120, and further that stamp duty of 1% of the consideration of the above amount was paid four months after assessment.

11. The Applicant maintained that the documents in the Respondents’ bundle appear to have been stamped on 15th April 2016 with a cancelled stamp of 15th December 2015, yet the transaction closed in December 2015, which meant payment was made four months later. The Applicant argued, therefore, that the discovery sought will shade light on the consideration paid for the property and thus the commission payable to it.

12. The Applicant urged the court to exercise its discretion under section 22 of the Civil Procedure Act and order discovery, inspection and production under oath, subject to such conditions as the court may prescribe.

13. It relied on Halsbury’ s Laws of EnglandVol. 13 paragraph 1 on the purpose of discovery of documents. It also cited Kenya Commercial Bank of Kenya Ltd v Kenya Pipeline Company Ltd [2014] eKLR, for the proposition that where prejudice will not be suffered or hardship caused to a party, an order for discovery should be made. It further cited Concord Insurance Company Limited (under Statutory Management) v NIC Bank Limited [2020] eKLR, on the objects of section 22 and discovery. The applicant again relied on the decision in Chase Bank (Kenya) Limited v Cannon Assurance (K) Limited [2019] eKLR, on the nature and extent of discovery.

14. It again relied on Sheng Shuang Quarry Limited v NCC Bank Limited [2019] eKLR to argue that discovery is central to litigation and Ramji Megji v Kisii University [2016] eKLR that discovery is intended to aid a party gain access to vital documents that may be in exclusive custody of his opponent among other decisions and urged the court to allow the application.

15. The 2nd and 3rd Respondents filed submissions dated 28th September 2021. They argued that for the court to order discovery, it must be satisfied that the documents sought are relevant and necessary. It was their case that the documents sought by the Applicant are not relevant and that the Application is a fishing expedition. According to the 2nd and 3rd Respondents, the documents sought will not disclose who introduced the 5th Respondent(purchasers) to the 1st Respondent(vendor), while some documents, such as minutes of the Board of Trustees of the 5th Respondent, would infringe on the 5th Respondent’s right to privacy.

16. They relied on Concord Insurance Co. LTD v National Industrial Credit Bank Ltd[2013] eKLR to argue that relevance must be tested by the pleadings, and that discovery will not be ordered in respect of irrelevant allegations in the pleadings. They also cited Selecta Kenya Gmbh & Co Kg & another v Peter Wanderi [2015] eKLR, that discovery should not be used as a fishing expedition and that discovery will not be allowed if the documents sought are not necessary.

17. Once again I have not traced submissions for the 1st 4th and 5th Respondents either on record or on the online platform.

18. I have considered the Application, the response filed and submissions made on behalf of the parties as well as the decisions relied on.

19. The Application before court is for discovery and production of documents. The Applicant’s case is that as an estate agent, it procured a purchaser for the 1st Respondent’s property for which it was entitled to a commission, a percent of the purchase price. However, despite performing its obligation, it was shut out of the transaction. The Respondents have refused to disclose the documents relevant for purposes of calculating and determining its commission. It has therefore filed the present Application for purposes of discovery and production of the relevant documents to enable it prosecute its case against the Respondents for recovery of its commission.

20. The 2nd and 3rd Respondents filed a replying affidavit by its advocate sworn on 28th September 2021. The core of the depositions in the affidavit was that the documents sought are not relevant as they will not show who introduced the purchasers (5th Respondent) to the vendor (1st Respondent).

21. The 2nd and 3rd respondents also filed submissions to the Application. They argued, just as they did in the replying affidavit, that the Application was a fishing expedition; that the documents sought are not necessary and that they will not disclose who introduced the purchaser to the vendor.

22. The 1st, 4th and 5th respondents did not file any responses to the Application and, if they did, none has been traced on record or on the online platform.

23. Whether or not the court should order discovery and production of documents is a matter of discretion to be exercised in a judicious manner for purposes of fostering justice of the case. Section 22 of the Civil Procedure Act states:Subject to such conditions and limitations as may be prescribed, the court may, at any time, either on its own motion or on the application by either party-a.Make such orders as may be necessary or reasonable in all matters relating to the delivering and answering of interrogatories, the admission of documents and facts and the discovery and inspection, production, impounding and return of documents or other material objects producible as evidence.The court has the power to summon any person to produce such documents or adduce evidence as the case may be.

24. Discovery is a formal pre-trial process through which a party to litigation may seek to discover evidence and facts that are crucial to his case, and as can be seen from section 22, the scope of discovery is quite broad. A party may seek to discover any fact that is not privileged but is relevant to the subject matter in the suit. The emphasis should be that the documents sought are relevant to the issue before the court.

25. The learned Authors of Halsbury Laws of EnglandVol 13 opine at paragraph 38 that, discovery will not be ordered in respect of irrelevant allegations in the pleadings, which even if substantiated could not affect the result of the action nor in respect of an allegation not made in the pleadings or particulars, nor will discovery be allowed to enable a party to fish for witnesses or for a new case, that is to enable him start a new case.

26. Regarding the centrality of discovery, the court observed in Oracle Productions Ltd v Decapture Ltd & 3 Others [2014] eKLR that pre-trial discovery is so central to litigation that the entire Order 11 of Civil Procedure Rules (2010) has substantially devoted to it, including sanctions for non- compliance. Orders 4 and 7 now require parties to file and serve documentary evidence with their pleadings, while Order 14 empowers the Court to order production, impounding and return of documents. The court was emphatic that discovery should be limited solely to matters in contention and relevance will only be gauged or tested by pleadings or particulars provided.

27. It should be added that discovery is also intended to aid a party access vital documents to his case that are solely in the custody of the opposite party, thus levelling the litigation ground. (Ramji Megji v Kisii University[2016] eKLR). The court emphasized in Concord Insurance Co. LTD v NIC Bank Ltd [2013] eKLR that only relevant documents should be disclosed and that relevance is to be tested in the pleadings, and that discovery should not be used as a fishing expedition. (Selecta Kenya Gmbh & Co Kg & another v Peter Wanderi[2015] eKLR).

28. In M. L. Sethi vs R. P. Kapur, 1972 AIR 2379, 1973 SCR (1) 697, the Supreme Court of India observed that:The documents sought to be discovered need not be admissible in evidence in the enquiry or proceedings. It is sufficient if the documents would be relevant for the purpose of throwing light on the matter in controversy. Every document which will throw any light on the case is a document relating to a matter in dispute in the proceedings, though it might not be admissible in evidence. In other words, a document might be inadmissible in evidence yet it may contain information which may either directly or indirectly enable the party seeking discovery either to advance his case or damage the adversary's case or which may lead to a trail of enquiry which may have either of these two consequences.

29. What the court was saying in that decision, was that if a document would throw light on the matter in dispute, the discovery of that document would be considered relevant even though the document may be inadmissible in evidence in the long run. It is the relevance of the document and not its admissibility that matters.

30. From the decisions referred to above, the main aim of discovery and production of documents is to uphold the case of the party seeking discovery and production and in order to destroy or weaken the opponent’s case. In that regard, for a party to succeed in getting order for discovery or production, he has a duty to establish that the discovery is aimed at fair disposal of the matter. The party must also show that the facts to be elicited will assist in establishing his case.

31. I have considered the arguments by parties on the documents sought to be discovered. The Applicant has sought several documents it says will assist it prosecute its case. The core of the Applicant’s case is that it procured purchasers and introduced them to the 1st Respondent (vendor) and for that, it is entitled to a commission being a percentage of the purchase price. The Applicant stated that it was shut out of the transaction and did not have the benefit of knowing the agreed purchase price.

32. The 2nd and 3rd Respondents simply stated in their Response that the documents sought to be discovered are not relevant and they will not show who introduced the purchaser(s) to the vendor(s). The 1st 4th and 5th Respondents did not respond to the Application. It is important to note that the 1st Respondent, the vendor and the main party in the dispute did not deny that the documents are in the Respondents’ sole possession and custody. All other Respondents did not also deny that the Applicant served the notice to produce.

33. Having considered the arguments on record, I am satisfied that the documents sought to be discovered are relevant to the dispute before court. The argument put forward by the 2nd and 3 Respondents that discovery of the documents will not show who introduced the purchaser(s) to the vendor(s) is not, in my view, an issue for determination at this stage. That issue will be determined during the trial of the main suit. The Respondents have also not denied that the documents sought are in their exclusive possession. In other words, they have not shown that the Applicant could in any other way access those documents other than through discovery and production.

34. Similarly, the argument that the documents in the form of minutes of the 5th Respondent’s Board of Trustees will breach its privacy has no basis.

35. In the end, having considered the application the response and submissions by parties, I am satisfied that the Applicant has succeeded in persuading the court that it is entitled to discover documents it seeks, and that this court is satisfied that those documents are relevant to the matters in question in this suit.

36. Consequently, the Application dated 28th May 2021 is allowed. The Respondents are hereby ordered to produce and serve the Applicant certified copies of the documents sought in the Amended Notice to produce dated 8th September 2020 within fourteen (14) days from the date of this Ruling. Costs of the Application to the Applicant.

37. Orders accordingly.

DATED, SIGNED AND DELIVERED AT NAIROBI THIS 4THDAY OF FEBRUARY 2022EC MWITAJUDGE