[2022] KEHC 183 (KLR)

Pentaglobal Ltd v National Oil Corporation of Kenya (Civil Suit E573 of 2021) [2022] KEHC 183 (KLR) (Commercial and Tax) (14 March 2022) (Ruling)

Neutral citation: [2022] KEHC 183 (KLR)

Republic of Kenya

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

Civil Suit E573 of 2021

A Mabeya, J

March 14, 2022

Between

Pentaglobal Ltd

Applicant

and

National Oil Corporation of Kenya

Respondent

Ruling

1. Before Court are two applications dated 13/6/2021 by the plaintiff and 25/11/2021 by the defendant. The application dated 13/6/2021 was brought under section 1A, 1B, 2 and 3A of theCivil Procedure Act and order 13 rule 2 of the Civil Procedure Rules.

2. In the Motion, the plaintiff sought judgment on admission for the sum of Kshs. 65,996,030/24 for overdue invoices as particularized in paragraph 19 (a) (i) of the Plaint together with interest. Further, the plaintiff sought that the balance of the claim in the sum of Kshs. 36,466,066/51 be deposited in an escrow account held by the advocates for the parties.

3. There was an alternative prayer that the defendant do deposit the total sum claimed in the suit totaling Kshs. 102,462,096/75 in an escrow account held by the parties advocates on record.

4. The application was supported by the affidavit of Edward Orete sworn on 13/6/2021. The plaintiff’s case was that the dispute relates to Tender Ref No. NOCK/PRC/03/(1219) 2016-2017 for the provision of ERP project implementation which the applicant successfully bid for at an offer price of Kshs. 95,624,321. 60/= following an advertisement for bidding lodged by the defendant.

5. The plaintiff also successfully bid Kshs. 24,654,456. 30/= for the post implementation support services. The parties then entered into a contract on 2/6/2017 which appended a schedule of implementation and deliverables alongside the payment due to the plaintiff for each of the stages of implementation.

6. The plaintiff contended that it duly performed its part of the contract but the defendant failed to perform its part of the bargain. That in the course of performance, the plaintiff applied for three variations of timelines on 12/7/2018, 29/11/2018 and 12/4/2019 which were allowed by the defendant on condition that the latter did not bear costs attendant thereto. The variation led to the extension of the ERP implementation service by 12 months leading to further costs on the plaintiff. That the variations were necessary due to the defendant’s delay in performing its responsibilities under the contract.

7. The plaintiff further contended that on 28/9/2019, the defendant extended the deadline for implementation from 30/9/2019 to 31/1/2020 vide a letter without prior consultation with the plaintiff. That on 11/4/2019, the defendant had committed to deliver the items that had been delayed but failed to by the 9/9/2019. Thereafter, the plaintiff declined any further extensions requested by the defendant.

8. That the respondent had failed to make payments for phases 3, 4 and 5 which had been completed and invoices raised, and the amounts remain outstanding despite the applicant’s issuance of notice of nonpayment. That there were some unconcluded works under phases 4 and 5 but the delays were due to the defendant’s inability to facilitate the necessary deliverables in time. On 4/2/2020, the defendant informed the plaintiff that it had withheld payment due to ongoing investigations by the DCI.

9. The defendant had made partial payments on various dates but the overdue invoices remained pending. A demand was made on 6/6/2020 for Kshs. 59,938,685/37 for services already rendered plus interest. That the defendant responded to the demand and acknowledged indebtedness but reiterated that the contract awarded to the applicant was the subject of a criminal investigation which had led to delay in payment. The defendant requested that no further action should be taken as an amicable solution was being sought.

10. The fear of the defendant’s illiquidity triggered the filing of the present suit. In its reply to the application for freezing orders, the defendant produced letters dated 9/9/2019 and 14/7/2020 to the DCI seeking on whether or not to pay. The response by the DCI was on 27/6/2018 which had sought time to finalize investigations.

11. The plaintiff therefore contended that the defendant was relying on a non-existent issue to escape contractual obligations. That the outstanding invoices were admittedly due and owing and there was a danger of the defendant winding up leading to non-payment of the plaintiff’s debt.

12. The defendant opposed the application vide the affidavit of Alex Magu, its general manager, sworn on 2/7/2021. He relied on the affidavit filed in Court on 25/5/2021 in opposition to the plaintiff’s application for freezing orders.

13. It was contended that the defendant had filed a robust defence which raised triable issues hence the allegation of admission was premature and untrue. The indebtedness was denied on the ground that no verification of deliverables had been done.

14. That the ERP project implementation was never completed as the plaintiff was placed under investigation which led to the freezing of further payments of pending or future invoices as guided by the DCI. The invoices of the plaintiff had not been scrutinized by the defendant due the aforesaid investigations in terms of the defendant’s procurement and financial procedures.

15. It was further contended that the termination of the contract by the plaintiff had led to loss on the part of the defendant. The letters addressed to the DCI were confidential and did not amount to admission of debt.

16. It was denied that the defendant would wound up any time soon. That the sum claimed in the plaint was colossal and was in contention and would form a pertinent issue for determination in the suit. That the admission must be unequivocal and the applicant must have shown that the defendant had taken steps aimed at dissipating its assets or was unable to meet the final judgment of the Court.

17. The parties filed their respective submissions on 10/8/2021 and 21/9/2021, respectively which the Court has considered.

18. Order 13 Rule 2 of the Civil Procedure Rules, 2010 under which the plaintiff made its application provides: -“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.”

19. In Choitram Vs Nazari (1984) KLR 327, Madan JA (as he then was) held: -“For the purpose of order XII rule 6, admissions can be express 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. Much depends upon the language used. … It matters not if the situation is arguable, even if there is a substantial argument, it is an ingredient of jurisprudence, provided that a plain and obvious case is established upon admissions by analysis.…If upon a purposive interpretation of either clearly written or clearly implied, or both, admissions of fact the case is plain and obvious there is no room for discretion to let the matter go to trial for then nothing is to be gained by having a trial. The court may not exercise its discretion in a manner which renders nugatory an express provision of the law.”

20. The plaintiff’s contention is that the defendant had made several admissions in the letters dated 9/9/2019 and 14/7/2020 addressed to the DCI. It was contended that the defendant had admitted that it was withholding the plaintiff’s payment and sought directions from the DCI on whether or not to make such payment.

21. On the other hand, the defendant contended that the letters were confidential and were written to assist the DCI in its investigations. In addition, the defendant filed a statement of defense dated 25/5/2021 and a replying affidavit of even date. At paragraph 14 of the statement of defense, the respondent denied the particulars of indebtedness. It also denied the delays attributed to it by the plaintiff. That no payment could be made because the plaintiff was under investigation.

22. The question to be answered is whether there was a plain and obvious admission of the claim by the defendant. The view the Court takes is that there was no direct and obvious admission on the part of the defendant. The correspondence relied on was not meant for the plaintiff and the plaintiff cannot seek to rely on it.

23. Though the defendant did not deny that some payments were still pending, there was no direct, plain and obvious admission of the amount claimed. It is therefore difficult to hold as to the exact amount due or whether the amount claimed was the admitted sum.

24. In Cassam vs Sachania [1982] KLR 191, it was held that: -“Granting judgment on admission of facts is a discretionary power which must be exercised sparingly in only plain cases where the admission is clear and unequivocal… Judgment on admission cannot be granted where points of law have been raised and where one has to resort to interpretation of documents to reach a decision.”

25. Apart from the letters to the DCI, the plaintiff sought to place reliance on a letter dated 16/8/2016 marked as MKA-5. That letter, in my view, cannot be relied on as it was written on a without prejudice basis. There is no evidence that the contents thereof were accepted by the plaintiff so as to amount to a contract.

26. On the prayer for depositing security in Court, the Court is not convinced that there was satisfactory grounds for such an order. The claim has not been ascertained. There was no evidence to show that there was a likelihood of the defendant folding shop soon or later.

27. The plaintiff’s contention that the respondent was at risk of being liquidated were not satisfactory as the evidence relied on related to articles published in the local dailies. The Auditor General’s report relied on was dated 30/6/2016 and did not reflect the current financial position of the respondent. In an event, the defendant is a state corporation and the chances of folding are minimal. That application cannot succeed.

28. That leaves the Court with the defendant’s application dated 25/11/2022. The same was brought under Article 50 of the Constitution and sections 1A, 1B(a) and 3A of the Civil Procedure Act.

29. The application sought an order that pending the outcome of the criminal investigations and any eventual criminal proceedings over the contract the subject matter of this suit, these proceedings be stayed.

30. Although the Court directed that the said application be responded to, the plaintiff does not seem to have opposed the application.

31. The grounds for the application were set out in detail on the face of the Motion and in the supporting affidavit of Lilian Waweru sworn on 23/11/2021. These were to the effect that the DCI had completed investigations and had recommended criminal prosecution on some individuals within the defendant and the directors of the plaintiff in respect of the award and execution of the contract the subject of his suit.

32. That in the premises, it was imperative that these proceedings be stayed until the DPP approves the prosecution and the criminal proceedings are concluded.

33. With greatest respect, I am unaware of any law that would require he say of civil proceedings to await a criminal trial. That would in my view be in breach of Article 159 of the Constitution which requires that justice should not be delayed.

34. All that the defendant has to do is to plead the same in the defence and at the trial, the trial Court will consider the criminal element in the contract and would make appropriate findings and remedies in accordance with the well settled principles of the law.

35. The upshot is that this Court finds both applications to be without merit and dismiss the same with costs.

It is so ordered.DATED AND DELIVERED AT NAIROBI THIS 14TH DAY OF MARCH, 2022. A. MABEYA, FCIArbJUDGE