[2021] KECA 259 (KLR)

Vintage Investments Limited v Amcon Builders Limited & another (Civil Appeal 45 of 2019) [2021] KECA 259 (KLR) (3 December 2021) (Judgment)

Neutral citation number: [2021] KECA 259 (KLR)

Republic of Kenya

In the Court of Appeal at Mombasa

Civil Appeal 45 of 2019

DK Musinga, J Mohammed & S ole Kantai, JJA

December 3, 2021

Between

Vintage Investments Limited

Appellant

and

Amcon Builders Limited

1st Respondent

Shankla T/A Shankla & Partners

2nd Respondent

(An appeal from the Ruling/Decision of the High Court of Kenya at Mombasa (P. J. O. Otieno, J.) dated 15th October 2018 in H. C. C. C. No. 255 of 1994)

Judgment

1. Before this Court is an appeal against the ruling of P. J. O. Otieno, J. dated 15th October 2018 where he dismissed the 1st respondent’s application dated 28th November 2016 seeking firstly, leave to present, lodge and serve an award issued and read in May, 2003 to the court and parties out of time. Secondly, for the court to adopt the award of Kshs.7,272,886. 50 excluding V.A.T less any payments made and costs of the application.

2. It was the learned judge’s finding that whereas there existed an agreement to refer the dispute between the said parties to mediation and in fact that Ms. Harold R. Fenwick was the appointed mediator, there was no evidence of a mediation agreement between the parties that required the court to have it adopted as an order of the court. In addition, the court found that there was never an arbitration proceeding that could result into an award. Therefore, the learned judge dismissed the application. Regarding the pending suit before the High Court; Civil Suit No. 255 of 1994, the learned judge ordered that the suit shall remain pending, awaiting determination in the usual manner. He proceeded to direct parties to file any desired witness statements and documents and thereafter settle and file a statement of agreed issues.

3. The brief background of the matter is that on 20th July 1992 Vintage Investment Limited and Amcon Builders Limited entered in a construction contract in which Amcon Builders were contracted to carry out construction of the main house, Guest wing, staff quarters, garage and external work comprising landscaping, drive and fencing at Nyali, Mombasa, on plot No. LR MN/I/ 3267 at a sum of Kshs. Six Million, Two Hundred and Ninety-Two Thousand, Five Hundred Only (Kshs.6,292,500/=) as per their Article of Agreement. The 2nd respondent was the appointed lead consultant for the project. A dispute arose over payment of the construction sum upon completion of the building, prompting the 1st respondent to file a suit against the appellant and the 2nd respondent for payment of Kshs.3,672,833. 80/= being the sum due plus interest until payment in full. The suit was filed in 1994 but no diligence was demonstrated towards its prosecution.

4. Sometime in the year 2000 the parties appointed M/s Harold R. Fenwick & Associates to mediate and aid them in resolving their dispute. The parties agreed to be bound by the recommendations of the mediator. In the year 2003, the said mediator made an award in the sum of Kshs.7,271,886. 50 against the appellant and the 2nd respondent herein.

5. The 1st respondent, pursuant to the orders issued by P. J. O. Otieno, J. on 14th October 2016 in the appellant’s application dated 11th May 2016 for reconstruction of the court file which could not be traced and for dismissal of the 1st respondent’s suit for want of prosecution, the learned judge declined to grant an order of dismissal of the suit but directed the 1st respondent to file an appropriate application for enforcement of the award within 45 days, failing which its suit shall stand dismissed for want of prosecution. The 1st respondent filed the application whose determination gave rise to this appeal.

6. Dissatisfied with the learned judge’s initial ruling of 15th October 2018, the appellant preferred an appeal to this Court raising grounds, inter alia, that:a.The learned judge erred in law and in fact in issuing directions for the hearing of the plaintiff’s suit despite having dismissed with costs the plaintiff’s notice of motion application dated 28th November 2016 for enforcement of an alleged arbitral award in the matter, being the sole reason why the High Court (P. J. O. Otieno, J) vide its ruling given on 14th October 2016, did not dismiss the suit for want of prosecution as sought by the 1st defendant through the Notice of Motion application dated 11th May 2016. b.The learned judge erred in law and in fact in failing to find that the suit stood dismissed pursuant to its ruling/decision dated 14th October 2016, having determined that the plaintiff had failed to establish the arbitral award or mediation agreement as alleged.c.The learned judge erred in law and in fact in issuing pre-trial directions for the hearing of the plaintiff’s suit, having dismissed the purported enforcement proceedings by the plaintiff and absent reasonable explanation by the plaintiff on its delay in setting the suit down for hearing, or at all; thereby threatening the 1st defendant’s right to fair hearing.d.The learned judge erred in law and in fact in failing to determine by allowing or dismissing the 1st defendant’s application seeking dismissal of the plaintiff’s suit for want of prosecution, upon finding that there was no arbitration or a mediation agreement between the parties as claimed by the plaintiff; and having put the said application in obeyance pending ascertainment by the court of the purported arbitral award or mediation agreement.

7. The appellant contends that the whole decision is unlawful as it is contrary to pleadings/submissions, evidence, precedent and practice. The decision is also inimical to the overriding objectives of civil procedure and public policy on finality of litigation, and it is inexplicable on the facts and law relevant to the matter. It therefore seeks this Court to set aside the said impugned ruling and in the alternative, allow the prayers sought by the appellant’s notice of motion dated 11th May 2016 seeking dismissal of the suit for want of prosecution.

8. The appeal was canvassed by way of written submissions. The appellant through the firm of Miyare & Company Advocates submitted that 26 years have lapsed since the 1st respondent filed its suit against them on 25th April 1994; that immediately after the filing of the suit, the 1st respondent obtained an injunction prohibiting the appellant from dealing with the said property; that the suit was last before the court on 4th May 2011 when the same was adjourned on account of the 1st respondent and nothing had ever transpired until 12th May 2016 when the appellant filed an application dated 11th May 2016.

9. The appellant further submitted that the issues for determination are threefold, namely; whether the 1st respondent’s suit ought to have been dismissed pursuant to dismissal of its application dated 28th November 2016 for enforcement of an alleged arbitral award and/or mediation agreement; whether the learned judge exercised his discretion injudiciously; and whether the appeal herein should be allowed as prayed.

10. On the first issue, the appellant argued that the 1st respondent went into slumber and was only awoken by the appellant’s application seeking to have its suit dismissed for want of prosecution. The appellant argued that the 1st respondent misguided the court by its assertion that the parties in the subject suit had undergone an arbitration process in 2003 and a final award had been issued and that the inordinate delay in prosecution of its case was occasioned by the missing court file. Further, it was its argument that the assertion by the 1st respondent that there exists an arbitral award caused the learned judge to defer from dismissing the suit and instead directed the 1st respondent to file an appropriate application for adoption of the alleged arbitral award.

11. Counsel submitted that the learned judge having found that there existed neither a mediation agreement nor arbitration proceedings, he ought to have simultaneously dismissed the suit for inordinate delay in the prosecution of the 1st respondent’s case and secondly, the court ought not to have given pre-trial directions.

12. On the second limb, the appellant submitted that Article 159 of theConstitutionand Order 17 rule 2 of the Civil Procedure Rules give the court the discretion, upon application, to dismiss a suit where no action has been taken for one year. Additionally, he submitted that justice delayed without explanation is justice denied and delay defeats equity. Placing reliance on the case of Nilesh Premchand Mulji Shah & Another t/a Ketan Emporium vs M. D. Popat and Others & Another [2016] eKLR, counsel submitted that discretion must be exercised on the basis that it is in the interest of justice, and regard being had as to whether the party instituting the suit has lost interest in it or whether the delay in prosecuting the suit is inordinate, unreasonable, inexcusable, and is likely to cause serious prejudice to the defendant on account of that delay.

13. Also relying on the case of Shah vs Mbogo (1967) EA 116, the appellant submitted that discretion is intended to be exercised to avoid injustice or hardship resulting from accident, inadvertence, or excusable mistake or error, but is not designed to assist a person who has deliberately sought, whether by evasion or otherwise, to obstruct or delay the course of justice.

14. The appellant faulted the learned judge for failing to take into account the real prejudice that will be occasioned to the appellant, given that the appellant’s directors and likely witnesses are either deceased, had permanently migrated out of the jurisdiction of the court, or are too old to have a clear recollection of what had transpired in relation to the dispute, which was brought to the judge’s attention. Secondly, that he erred in failing to dismiss the suit for want of prosecution in the wake of inordinate delay and absence of any excusable explanation by the 1st respondent, thus failing to exercise his discretion judiciously.

15. In conclusion, the appellant submitted that the failure by the 1st respondent to file pleadings in court to supplement the scanty records/pleadings filed by the appellant in reconstruction of the court file is sufficient evidence that the 1st respondent’s documents relevant to the matter are missing and/or unavailable, which will impede pretrial processes and trial as ordered by the court, thus occasion further delay in determining the suit.

16. On the last issue, placing reliance on the case of ET Monks & Company Ltd vs Evans (1985) 584 KLR, the appellant submitted that publicpolicy demands that the business of the court be concluded with expedition.

17. On its part, the 1st respondent through M/s Akanga Abera & Associates argued that the main issue of contention in the appeal revolved around mediation. It was the 1st respondent’s position that the method of an alternative dispute resolution used for resolution of the dispute between the parties was “mediation”, and the same was clearly pointed out by the learned judge in the impugned ruling. Thus, it was quite out of place for the appellant to allude to arbitration or use it interchangeably with mediation when in fact they are two distinct procedures with two different end results.

18. The 1st respondent argued that the learned judge was in order when after striking out the 1st respondent’s application for adoption of the mediation agreement, went ahead to give directions for the suit to be set down for hearing, which is the normal procedure. The 1st respondent further submitted that when mediation fails a dispute has to be resolved by the court.

19. On the issue of dismissal of the 1st respondent’s suit for want of prosecution, the 1st respondent argued that the learned judge cannot be faulted for the manner in which he exercised his discretion, saying that the right to a hearing ought to be safeguarded as much as possible. Counsel cited Richard Nchapai Leiyagu vs Independent Electoral Boundaries Commission & 2 Others [2013] eKLRwhere the Court held:“The right to a hearing has always been a well-protected right in our Constitution and is also the cornerstone of the rule of law. This is why even if the courts have inherent jurisdiction to dismiss a suit, this should be done in circumstances that protect the integrity of the court process from abuse that would amount to injustice and at the end of the day there should be proportionality.”

20. Lastly, the 1st respondent submitted that a company is separate from its members, directors or agents, such that a company has perpetual succession and it continues to conduct business and carry on its daily affairs separate from its directors. Therefore, the appellant being a limited liability company cannot argue that it will be prejudiced on account of unavailability of its witnesses if the suit were to be heard.

21. In conclusion therefore, the 1st respondent urged this Court to dismiss the appeal with costs so that the suit in the High Court can be set down for hearing.

22. The 2nd respondent never filed any submissions in this matter.

23. We have carefully considered the appeal, the submissions and the authorities cited by both parties.

24. The substantive issue for determination in this appeal is whether the learned judge exercised his discretion judiciously in declining to dismiss the 1st respondent’s suit. Discretion is intended to be exercised to avoid injustice or hardship resulting from accident, inadvertence or excusable mistake or error, but is designed to assist a person who has deliberately sought, whether by evasion or otherwise, to obstruct or delay the cause of justice. See Shah vs Mbogo [1968] EA 116.

25. In Mbogo & Another vs Shah [1968] E. A. 93, this Court held that an appellate court will interfere with the exercise of discretion by a lower court if “it is satisfied that its decision is clearly wrong, because it has misdirected itself or because it has acted on matters on which it should not have acted or because it has failed to take into consideration matters which it should have taken into consideration and in so doing arrived at a wrong conclusion.”

26. The 1st respondent filed the suit in 1994. In 1995 the 1st respondent was granted an interim injunction but since then no diligence was demonstrated towards prosecution of the suit. The only reason advanced by the 1st respondent for the inordinate delay of over 22 years was that the court file was missing for some time, yet the 1st respondent did not show that it had taken any action towards reconstruction of the file for all those years. The inordinate delay was therefore not explained at all. It was ultimately the appellant who filed an application for reconstruction of the file, and a consent order to that effect was recorded on 31st May 2016.

27. In considering an application for dismissal of a suit for want of prosecution, a defendant (like the appellant herein) must show:“(i)That there had been inordinate delay. What is or is not inordinate delay must depend on the facts of each particular case. These vary infinitely from case to case but should not be too difficult to recognise inordinate delay when it occurs.ii.That this delay is inexcusable. As a rule until a credible excuse is made out the natural inference would be that it is inexcusable.ii.That the defendants are likely to be seriously prejudiced by the delay. This may be prejudice at the trial of issues between themselves and the plaintiff or between each of other or between themselves and third parties. In addition to any interference that may properly be drawn from the delay itself, prejudice can sometimes be directly proved. As a rule, the longer the delay the greater the likelihood of prejudice at trial.” See Allan vs Sir Alfred Mc Alphine and Sons Ltd__ [1968] 1 ALL ER 543.

28. In our considered view, the appellant satisfied each of the above cited principles. The learned judge misdirected himself in failing to consider the inordinate delay in prosecution of the case; the fact that no reason was advanced by the 1st respondent for its failure to move the court for reconstruction of the court file for all those years; and the prejudice that the appellant stood to suffer if the trial was to proceed after such an inordinate delay. See Ngwambu Ivita vs Mutua Kyumbu [1984] KLR 441.

29. The appellant had told the court that over that period of 22 years its directors and/or agents who were familiar with the issues that gave rise to the dispute had either died or became too old and senile, and others had gone to live in other jurisdictions. And some of the appellant’s documents that were necessary for its defence had been damaged due to effluxion of time. The learned judge did not address himself to all these important issues, and that was a serious misdirection on his part.

30. Article 159 of the Constitution requires that justice be dispensed without undue delay, and as the adage goes, “justice delayed is justice denied”. Justice considers the interests of all the parties in a matter.

31. In view of our finding that the learned judge did not exercise his discretion judiciously for the reasons we have advanced, this appeal must be allowed, which we hereby do, with the result that the 1st respondent’s suit in the High Court at Mombasa, Civil Suit No. 255 of 1994, is hereby dismissed for want of prosecution. The 1st respondent shall bear the costs of the suit in the High Court as well as the costs of this appeal. We make no orders as to costs in respect of the 2nd respondent.

DATED AND DELIVERED AT NAIROBI THIS 3RD DAY OF DECEMBER, 2021. D. K. MUSINGA, (P).....................................JUDGE OF APPEALJ. MOHAMMED.....................................JUDGE OF APPEALS. ole KANTAI.....................................JUDGE OF APPEALI certify that this is a true copy of the originalDEPUTY REGISTRAR