747 Freighter Conversion Llc v One Jet One Airways Kenya Ltd & 3 others [2014] KEHC 5239 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

MILIMANI COMMERCIAL & ADMIRALTY DIVISION

CIVIL CASE NO. 445 OF 2012

747 FREIGHTER CONVERSION LLC ……..………...……….. PLAINTIFF

VERSUS

ONE JET ONE AIRWAYS KENYA LTD. …..……….…... 1^ST DEFENDANT 

 ARJUN RUZAIK …………………….…………….…….. 2^ND DEFENDANT

 AIR ASIA LANKA (PRIVATE) LIMITED …….......………. 3^RD DEFENDANT

BANKIM MANIBHAI PATEL ……….……….....…………. 4^TH DEFENDANT

R U L I N G

1. When this Court delivered its Ruling on 23rd July 2013 as to the admissibility or otherwise of the Replying Affidavit sworn by the second Defendant dated 9th July 2013, there were 2 Applications before this Court awaiting determination. The first was the Plaintiff’s Notice of Motion dated 5th February 2013 seeking to strike out the first, second and fourth Defendant’s Defences filed herein and/or alternatively that judgement be entered against the first and second Defendants on account of their admission of the Plaintiff’s claim. That Application was brought under the provisions of Order 2 rule 15 (1) (a), (b), (c) and (d) as well as Order 13 rule 2 and Order 51 rule 1 of the Civil Procedure Rules, 2010. The second application before Court was that of the Plaintiff dated 22nd May 2013 which sought to obtain security from the second Defendant with regard to these proceedings but the same was withdrawn with no order as to costs on 17th September 2013.
2. The Plaintiff’s said Notice Motion dated 5th February 2013 was brought on a number of grounds including that the Defences of the first, second and fourth Defendant therein filed on 30th August 2012 and 4th September 2012 respectively did not disclose any reasonable defence as against the Plaintiff’s claim. Such were scandalous and intended to prejudice, embarrass and delay the fair trial of this suit. They were unsupported by any witness statement or any document and, as a result, the specified Defendants had no witnesses to call and no evidence to produce at trial that would serve any useful purpose. The first and second Defendants had admitted the Plaintiff’s claim upon demand and upon the first Defendant’s admission, the fourth Defendant, being the first Defendant’s guarantor (to whom demand had already been issued and the dishonoured) had no true defence to the Plaintiff’s claim. Finally, the Defendant’s Statements of Defence were incompetent, fatally defective, and null and void as the same had been filed by advocates who were not on record as acting for the Defendants contrary to the provisions of Order 9 rules 5 and 6 of the Civil Procedure Rules.
3. The Plaintiff’s said Application dated 5th February 2013 was supported by the Affidavit of a director of the Plaintiff company one Bharat Bhise sworn on even date. The deponent noted that on 8th February 2011, the Plaintiff and the first Defendant herein had entered into a facility agreement (hereinafter “the facility agreement”) in which it was agreed that the Plaintiff would make available to the first Defendant a short term loan facility of up to US dollars 1 million. It was a term of the facility agreement that the principal amount of the loan, together with accrued interest and professional charges incurred by the Plaintiff in making the facility available, would be repaid by the first Defendant to the Plaintiff on a date falling 180 days from the first date that the loan was drawn down (hereinafter “the repayment date”). Interest would accrue on the loan amount calculated on a simple interest basis at 20%. Mr. Bhise went on to say that in consideration of the loan facility, the second and fourth Defendants guaranteed payment to the Plaintiff by the first Defendant by way of two separate guarantees both dated 8th February 2011. Thereafter, the first Defendant drew down a total of US dollars 734,324.75 over the period from 21st January 2011 to 27th May 2011. The repayment date calculated on the date of the first drawdown (21st January 2011, the date upon which interest began running) was thus to be 21st July 2011. The Plaintiff noted that it had incurred expenses by way of legal fees paid to its legal advisers in the amount of US dollars 31,756.85. On the repayment date, the first Defendant failed to pay the total amount of the drawdown together with the interest and the legal expenses.
4. The Affidavit in support of the Application continued by detailing that together with accrued interest, the legal fees, costs and expenses, the amount outstanding due to the Plaintiff from the first Defendant came to a total of US dollars 824,953.43. Mr. Bhise went on to say that on 22nd March 2012, the Plaintiff’s advocates demanded the payment of a total of US dollars 1,034,914.03 which was the amount outstanding as at that date, inclusive of interest. The deponent noted that by letter dated 2nd April 2012, the first Defendant admitted owing the sum demanded and requested indulgence as regards payment thereof. Further admissions were made by the first and second Defendants by emails dated 23rd and 30th April 2012 and 14th May 2012. A further demand letter was sent on 15th June 2012 to the first Defendant by the Plaintiff’s advocates. The deponent then went into considerable detail as to what he had been advised by his advocates on record as regards to the legal position in relation to the Plaintiff’s claim, all of which matters should have been covered in submissions rather than an Affidavit where the deponent testifies as to facts known to him, including the liability or otherwise of the fourth Defendant under the guarantee that he had executed in favour of the Plaintiff. However to clarify, Mr. Bhise summed up the position as at the repayment date that the Plaintiff claimed US dollars 824,953.43 together with default interest at the rate of 25% per annum on this amount from 21st July 2011 until payment in full.
5. The Replying Affidavit of the second Defendant, Arjun Ruzaik sworn on 9th of July 2013 was a copious document occupying a total of 332 pages. The deponent related the history of the first Defendant entering into the aviation business, flying aircraft type A319S out of Nairobi taking routes in Africa initially before venturing to the Middle East and India. One of the investors in the first Defendant company to the tune of US dollars 55 million was a company known as HNA Group Company Ltd. (hereinafter “HNA”). Such culminated in an investment agreement dated 27th October 2010, whereby HNA agreed with the first Defendant to invest in the latter as to US dollars 20 million by way of 80% of the shares in the first Defendant and US dollars 35 million through a 7 year loan. Mr. Ruzaik maintained that, at all times, the first Defendant was dealing with HNA and not the  Plaintiff. After a long and complicated story involving the Kenya Civil Aviation Authority, the deponent detailed that the Facility Agreement entered into between the Plaintiff and the first Defendant had been a mistake to the knowledge of the advocates on record for the Plaintiff as it should have been made between HNA and the first Defendant not between the Plaintiff and the first Defendant. The investment in the first Defendant was to be done by HNA and not the Plaintiff. He went on to say that the Facility Agreement was signed by the Plaintiff and the first Defendant in the belief that it embodied the agreement between the first Defendant and HNA. It was signed under a mutual mistake of fact and the deponent resolutely maintained that the first Defendant never in fact agreed to the terms thereof. The same was entered into by the Plaintiff not on its own account but as agent for and on behalf of HNA. As a result, the Facility Agreement, according to Mr. Ruzaik, was executed under a mutual mistake of fact and he, as the second Defendant, had never agreed to the terms contained therein. He had been informed by his advocates on record that the Guarantee and Indemnity Agreement dated 8th February 2011 as between the Plaintiff, the third Defendant (against whom these proceedings have since been withdrawn) and himself had been discharged. As a result, the deponent maintained that the Plaintiff could not, at law, institute and maintain these proceedings based upon the said Guarantee and Indemnity Agreement. Finally, Mr. Ruzaik maintained that the first instalment of approximately US dollars 800,000 out of the loan of US dollars 35 million which was to be advanced by HNA to the first Defendant, was to be repaid after the expiry of 7 years. He attached a bundle of documents which showed that the bridging facility of US dollars 1 million was provided to the first Defendant by HNA and not the Plaintiff. The deponent also confirmed that no demand in writing for the repayment of the said approximate sum of US dollars 800,000 had been given to the first Defendant by HNA.
6. With the leave of the Court, the said Bharat Bhise swore and filed a Supplementary Affidavit on behalf on the Plaintiff dated 26th August 2013. The deponent opened his statement by categorically denying that the Plaintiff was either a subsidiary or an agent of HNA. The two companies were separate and distinct legal entities. The Plaintiff was not privy to the Agreement referred to by the Defendants dated 27th October 2010 as had been detailed in the Replying Affidavit. The deponent admitted that there was an indication from the emails, documents and correspondence annexed to the Replying Affidavit that HNA and other investors may have intended to invest in the first Defendant. However, the Facility Agreement was personal between the Plaintiff and the first Defendant and HNA was not a party thereto. Mr. Bhise went on to comment as regards the Memorandum of Understanding and the Head Terms of Investment between the first Defendant and HNA being exhibit “AJ 1” to the Replying Affidavit. He commented thereon extensively but noted that there was no reference to the Plaintiff in either document and, further, that the Head Terms of Investment had expired by the date that the Facility Agreement was entered into. The deponent went on to comment that as per clause 3.1 of the Facility Agreement, the first Defendant required the loan facility from the Plaintiff for the purposes of acquiring an air operator’s licence in Kenya. He noted that the Facility Agreement was secured by an all asset debenture against the first Defendant’s assets as well as the personal guarantees of the second, third and fourth Defendants. Mr. Bhise reiterated the details of the bank statements annexed to the Supporting Affidavit to the Plaintiff’s Application which showed that the funds under the Facility Agreement were transferred from the Plaintiff’s bank account to the first Defendant’s account not through HNA. He further noted that in the correspondence passing between him and the first and/or second Defendants (copied to the Plaintiff’s advocates and the advocates for the first and second Defendants) the first and second Defendants had admitted receiving the demand letter and had sought indulgence up to 31^st March 2013. Finally, Mr. Bhise was of the view that the express admissions by the first and/or second Defendants, which had not been denied in the Replying Affidavit, showed that there was no true defence to the Plaintiff’s claim. In his opinion, the defence raised of mistake was an afterthought in order to delay the conclusion of this matter and for the Defendants to avoid their contractual obligations to the Plaintiff.
7. The Defendants filed their initial submissions as regards the Plaintiff’s said Application before Court on 5th November 2013. They immediately drew the Court’s attention to what I had detailed in my Ruling delivered on 23rd July 2013, immediately after the Replying Affidavit was filed herein. The Defendants reminded the Court that it had considered, upon a review of the Defences as well as the issues raised in the Replying Affidavit, that the Defendants had put up an answer to the Plaintiff’s claim against them. It referred to the well-known case of D. T. Dobie & Company (Kenya) Ltd v Muchina (1982) KLR 1 detailing that the power to strike out pleadings was to be exercised cautiously when the Court could not be fully aware of the merits of the case through discovery and oral evidence. On an application to strike out pleadings, no opinions should be expressed as this would prejudice a fair trial and would restrict the freedom of the trial judge in disposing of the case. The Defendants maintained that the Court should aim at sustaining rather than terminating a suit. A suit should only be struck out if it was so weak that it was beyond redemption and incurable by amendment. It was the Defendants’ view that the issues raised in the Defences were worthy of trial.
8. The Defendants further submitted that it was no longer open to this Court to strike out the said Defences since it had already made the observation that the issues raised therein to be important and worthy of trial. Summary determination was for plain cases both as regards the facts and the law. To this end, the Defendants referred to the cases of Nazziwa v Serwaniko & Anor. (As is 9072 EA 246 as well as Lalji t/a Vakkep Building Contractors v Carousel Ltd (1989) KLR 386. The Defendants then went into great detail as to the history of the first Defendant and its entry into the aviation business in Kenya, all of which facts had been contained in the Replying Affidavit. The Defendants stated that those facts had not been challenged by the Plaintiff and again referred to there being triable issues where a mistake was made as to the identity of one of the parties to the transaction. In view of the Defendants’ submission that the principal agreement was void through mistake, they maintained further that the Guarantees and Indemnities could not be enforced as they were ancillary thereto. The Defendants referred to the case of Coutts & Co v Browne-Lecky (1947) 1KB 104 in this regard.
9. Finally, the Defendants submitted that the Plaintiff was not entitled to summary judgement on account of their admission of the Plaintiff’s claim. The evidence as set out in the correspondence merely requested for time to resolve the dispute between the parties. There was no plain and obvious admission note contained therein. Admissions as such, had to be plain and obvious. They must leave no room for doubt as to whether the parties had passed out of the stage of negotiation into that of a definite contract. Moreover, the Defendants maintained that there was no discretion to be exercised by the Court if triable issues had been disclosed in an application for summary judgement. In their view, where the defence is not frivolous and discloses substantial triable issues, leave to defend should be granted unconditionally. The Defendants referred this Court to the case of Lucy Momanyi v Nurein Hatimy & Anor. (2003)KLR 545.
10. The Plaintiff’s submissions were filed herein on 15th of November 2013. It gave the grounds for striking out the Defences of the first, second and fourth Defendants being (a) for not disclosing any reasonable defence, (b) being scandalous and to being an abuse of process. There was no denying of the Facility Agreement. There was also no denying the execution of the Guarantees and Indemnities dated 8th February 2011 by the second and fourth Defendants. There was no denial by the first Defendant as to the drawing down of the facility. The only defence relied upon by the Defendants was one of mistake. The Plaintiff then referred to the well-known case of Choitram v Nazari (1984) KLR 327 before continuing to state that although there was a general denial at paragraph 1 of each of the Defences such was no help as to the obvious execution of the Facility Agreement as well as the Guarantees and Indemnities. It was the view of the Plaintiff that, as a result of the absence of a specific and express traverse of the above mentioned documents, the same are deemed to be admitted and therefore undisputed. The Plaintiff then went on to query as to whether the defence of mistake was available to the Defendants. It cited the case of Rodgers v Ingham (1876) 3 Ch D 351 in which it was held that a party cannot claim to have been mistaken if it was represented by legal counsel. Further, the Plaintiff submitted that where a contract is voided by a mistake of fact, then the parties are to be returned to the same position that they were in prior to the contract being entered into. As a result, the Defendants’ defence of mistake would entitle the Plaintiff to a refund of the amount claimed under the doctrine of restitution.
11. The Plaintiff continued with its submissions by detailing that in the Replying Affidavit, the Defendants had failed to address the procedural issues raised as regards compliance with Order 9 rule 5 and Order 7 rule 5, Civil Procedure Rules. It referred to the case of National Bank of Kenya Ltd v Wilson Ndolo Ayah (2009) eKLR where the Court held that it is public policy that Courts should not aid the perpetration of illegalities. To this end, the Plaintiff maintained that it had never been served with the Notice of Change of Advocates when the firm of Mungu & Co. Advocates came on record as acting for the first, second and fourth Defendants. This Court considers that there is no merit in this argument as it was quite clear that Mungu & Co., Advocates came on record on behalf of the first, second and fourth Defendants on 30th August 2012. However, the Plaintiff’s point as regards the Defendants ignoring the provisions of Order 7 rule 5 is much more pertinent to the Application before this Court. There is no doubt that the Defences filed by Mungu & Co., Advocates on behalf of the first, second and fourth Defendants were not accompanied by a list of witnesses to be called at the trial or the written statements by those witnesses and/or copies of documents which the said Defendants wished to rely upon at the trial. Order 7 rule 5 is mandatory in that regard and with regard to the proviso thereto, the said Defendants have not sought the leave of the Court to furnish their witness statements at least 15 days prior to the trial conference under Order 11. This Court is acutely aware of the provisions of Article 159 (2) (d) of the Constitution as to justice being administered without undue regard to procedural technicalities. However, such cannot be used as a panacea for all ills in relation to the Rules of Civil Procedure.
12. Continuing with its submissions, the Plaintiff moved on to the law in relation to judgements on admissions. Having quoted Order 13 rule 2 of the Civil Procedure Rules, the Plaintiff referred again to the Choitram case (supra) in which the holding of Melisih LJ was adopted in the case of Gilbert v Smith (1876) 2CD 686 as follows:

“I think that rule was framed for the express purpose, that if there was no dispute between the parties, and if there was on the pleadings such an admission as to make it plain that the plaintiff was entitled to a particular order, he should be able to obtain that order at once upon motion. There must, however, be such an admission of facts as would show that the plaintiff is clearly entitled to the order asked for, whether it be in the nature of a decree, or a judgement, or anything else. The rule was not meant to apply when there is any serious question of law to be argued. But if there is an admission on the pleadings which clearly entitled the plaintiff to an order, then the intention was that he should not have to wait, but might at once obtain any order which could have been made on an original hearing of the action.”

Chesoni Ag JA went on to add a few words of his own in relation to judgement on admission as follows:

“An admission is clear if the answer by a bystander to the question whether there was an admission of facts would be ‘of course there was’. In Kiprotich v Gathua & Others (1976)KLR 87 at p.90 the former Court of Appeal for Eastern Africa said:

‘…..the jurisdiction to award judgement on admission resulting from failure to reply to a counterclaim should only be exercised in the clearest of cases…’

The principle is the same when considering an application under order XII rule 6 for judgement on admissions arising in any form.

Admissions of fact under order XII rule 6 need not be on the pleadings. They may be in correspondence or documents which are admitted or they may even be oral. The rule uses the words ‘or otherwise’ which are words of general application and are wide enough to include admissions made through letter, affidavits and other admitted documents and proved oral admissions.”

13. The Plaintiff further referred to the cases of Geoloy Investments Ltd v Behal t/a Krishan Behal & Sons (2002) 2 KLR 447 and Cassam v Sachania (1982) KLR 191. The Plaintiff went on to outline in detail where the admissions in this case had been made by the Defendants referring to various letters more particularly the demand letter dated 22nd March 2012. Particularly significant was the second Defendant’s email of 2nd April 2012 in which the Defendant’s then advocate Joe Githaiga of Coulson Harney Advocates had made the following admissions:

          “(i)   That he had received the demand letter.

(ii)   That the same had demanded a principal amount of US$734,324 plus interest etc total US$1,034,914.

(iii)  The 2nd Defendant sought up to 31st March, 2013 to resolve it.

 (iv)  Admitted that there was a loan.

   (v)  Gave an alternative suggestion of converting the loan into shares.”

14.    The Plaintiff followed this submission by reference to further correspondence dated 25th April 2012, 30th April 2012 and 14th May 2012 (3 communications). Further, the Plaintiff submitted that it mattered little whether the Court had already found that the Defences filed herein disclosed triable issues for the reason that applications under Order 13 rule 2 are distinguishable from those under Order 36 rule 1. In the latter case, the existence of a triable issue would be pivotal but not so in the former case. The Plaintiff submitted that the admissions by the first and second Defendants were plain and obvious and that a bystander would have no doubt that the second Defendant, the Chief Executive Officer and director of the first Defendant, expressly acknowledged receipt of the demand letter even to the extent of quoting the sum demanded in his reply thereto. Further, the Plaintiff submitted that if this Court found that the second Defendant had made admissions on behalf on the first Defendant, they should be taken as additionally made in the second Defendant’s personal capacity, as a clear indication that he was aware of his guarantee and indemnity made to the Plaintiff.

15.    The Defendants’ reply to the Plaintiff’s written submissions was filed herein on 2nd December 2013. With regard to the first, second and fourth Defendants’ defences, the Plaintiff had failed to demonstrate how the defence of mistake was scandalous because of the finding in Mpaka Road Development Ltd v Kana (2004) 1 EA 161 as per Ringera J. (as he then was):

“A matter would only be scandalous if it would not be admissible in evidence to show the truth of any allegation in the pleading which is sought to be impugned.”

Further, the Defendants maintained that the defence of mistake cannot be an abuse of the court process because it is one of the defences at law that vitiates a contract. The Defendants did not deny that the first Defendant executed the Facility Agreement or indeed that the second and fourth Defendants executed the Guarantees and the Indemnities dated 8th February 2011. The Defence was that those contracts had been vitiated by mistake and such had been adequately pleaded in the Defences. The Defendants had submitted that it was trite law as per Halsbury’s Laws of England Vol. 77 (2010) 5th Edition paragraph 13 as follows:

“where a mistake is made as to identity of one of the parties to a transaction, there is no agreement formed.”

16.    The Defendants submitted that HNA had confirmed to the authorities in Kenya that it was the one who advanced the monies and entered into contracts with the first Defendant. The Defendants maintained that the Plaintiff would be unjustly enriching itself if the said monies were to be released to it and not to HNA. The Defendants further submitted that the Plaintiff in its written submissions had embarked upon arguing the merits of the case. Such cannot be determined by a Court seized of an application for striking out. As per the D. T. Dobie case (supra) this Court could not usurp the role of the trial court and for it to do so would be contrary to the principles detailed therein. The Defendants also maintained that the failure to comply with the provisions of Order 9 rule 5 and Order 7 rule 5 of the Civil Procedure Rules did not entitle a party to a summary determination of their case. Such failure did not go to jurisdiction. The Defendants went on to say that the procedural rules were handmaidens not masters of justice and that it was now a cardinal principle of the exercise of judicial authority that justice must be done without due regard to technicalities. Moreover, a party must prove its case at trial. Finally, the Defendants submitted that words such as “requested for indulgence” or “seeking your understanding” as detailed in the letter of 23rd April 2012 did not amount to an admission for the purposes of Order 36 rule 1 of the Civil Procedure Rules. In their view, the correspondence exchanged between the parties did not meet the requisite threshold that the admission must be plain and obvious.

17. I have already found as above that I disagree with the Defendants’ submission that non-compliance with rules of procedure does not go to jurisdiction. I believe that it does. No party may just waive the Rules of Procedure to suit itself in the mistaken belief that justice must be done without due regard to technicalities. Where such technicalities go to the root of applications or the defence of applications, they must be permitted to stand. If one is to throw the rule book out of the window, the only result will be chaos in our courts. However, I take the point as raised by counsel for the Defendants as to whether the Defences filed by the first, second and fourth Defendant as drawn are scandalous, frivolous or vexatious. In my view, I would adopt the finding of Ringera J. in the Mpaka Road case (supra) as quoted above.  I do not find the Defences as scandalous and further, I do not find that they disclose no reasonable defence. As pleaded, the Defences are based on mistake which, I agree with the Defendants, is a defence at law that vitiates a contract.
18. In my view, the Plaintiff herein has chosen to use a double-edged sword in attacking the Defences of the first, second and fourth Defendants. First of all, it maintains that there are no triable issues raised in those Defences and as such they should be struck out in accordance with the provisions of Order 36 rule 1. The Plaintiff has submitted that there can be no mistake as to the parties in relation to the Facility Agreement and that the same stands separate and apart from any negotiations that the Defendants may have been having with HNA. I would agree save that there is the potential triable issue in that the Defendants maintained that the correct party as “lender” in the Facility Agreement should have been HNA and not the Plaintiff. Here is where the distinction can be drawn, in my opinion, between the potential success of the Plaintiff’s Application before Court brought under the provisions of Order 2 rule 15 (1) (a), (b), (c) and (d) and judgement on admissions under the provisions of Order 13 rule 2. I have already found that the Defences do disclose a reasonable cause of action or defence in law and that such are neither scandalous , frivolous nor vexatious or otherwise an abuse of the process of the court which may prejudice, embarrass or delay the fair trial of the suit.  As such, the Plaintiff’s Application under Order 2 Rule 15 fails.
19. However. What is the position of the Plaintiff’s Application under Order 13 Rule 2? the Defendants have not denied that the first Defendant executed the Facility Agreement and, indeed, that the second and fourth Defendants executed the said Guarantees and Indemnities dated 8th February 2011. There has been no denial by the Defendants of the fact that the first Defendant drew down almost the entire facility offered to it by the Plaintiff. In view of these undisputed and/or admitted facts, it seems clear to me that the provisions of Order 13 rule 2 may well be satisfied. That rule reads as follows:

“2. Any party may at any stage of the suit, where admission of facts has been made, either on the pleadings or otherwise, apply to the court for such judgement 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 judgement, as the court may think just.”

That provision is word for word the same as the old Order XII rule 6. Guidance as to the interpretation of rule 2 is given in Madan JA’s (as he then was) judgement in the Choitram case. The learned Judge detailed as follows:

“For the purpose of order XII rule, admissions can be express or implied either on the pleadings or otherwise, eg 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.  The admissions must leave no room for doubt that the parties passed out of the stage of negotiations onto a definite contract.  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.  Indeed, there is no other way, and analysis is unavoidable to determine whether admission of fact has been made either on the pleadings or otherwise to give such judgment as upon such admissions any party may be entitled to without waiting for the determination of any other question between the parties.  In considering the matter, the judge must neither become disinclined nor lose himself in the jungle of words even when faced with a plaint such as the one in this case.  To analyse pleadings, to read correspondence and to apply the relevant law is a normal function performed by judges which has become established routine in the courts.  We must say firmly that if a judge does not do so, or refuses to do so, he fails to give effect to the provisions of the established law by which a legal right is enforced.  If he allows or refuses an application after having done so that is another matter.  In a case under order XII rule 6 he has then exercised his discretion for the order he makes falls within the court’s discretion.  The only question then would be whether the judge exercised his discretion properly either way.  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. What comes over quite clearly from the Replying Affidavit as well as the extensive correspondence annexed thereto is that the second Defendant, Arjun Ruzaik spent a considerable period of time trying to put together a consortium so that the first Defendant aviation company could commence operations in Kenya. Unfortunately for the second Defendant, time caught up with him and the joint-venture project never came about. When I say that time caught up with the second Defendant, it is noted that he did spend a considerable amount of time attempting to persuade HNA to invest in the project and even got so far as agreeing a Summary Term Sheet and a Memorandum of Understanding in relation to HNA’s proposed participation. The second Defendant even travelled to Beijing for this purpose to meet with HNA representatives, bearing in mind that the HNA Group operated extensively in aviation in the Far East. However, HNA was not the only proposed investor in the first Defendant. The second Defendant was also in contact with the Bravia Capital group based in New York. In fact, the Bravia Capital group, at least from the correspondence, was the one proposed promoter who was really pushing the project. Indeed, Bravia was keen to involve the Kenya Government as a shareholder in the project through its investment arm – the Industrial and Commercial Development Corporation (ICDC) as well as seeking a 10% investment from CADF (the Chinese Government). It appears to this end that Bravia intended to link in with the HNA Group and hold its investment in a joint Special Purpose Vehicle (SPV) together with HNA.
21. All that the potential investors required to see was that the first Defendant acquired the appropriate Air Operators’ Licence from the Kenya Civil Aviation Authority as well as the proposed investment from the Kenya Government. As the project developed, the first and second Defendants required what was termed a “bridging facility” to provide suitable working capital to the first Defendant to pay the necessary fees for the said Licence plus other start-up expenses including pilot training on the two aircraft initially proposed to be utilised at the inception of the project. The correspondence clearly shows that it was Bravia, through a separate Special Purpose Vehicle (SPV) (the Plaintiff) that agreed to make available the bridging facility but Bravia could not approve the overall deal and involvement with the HNA Group, until the investment contribution by the Kenya Government was resolved. This all took such a long period of time and in fact never did materialise, so that it was obvious that the Bravia/HNA Group, in the end, decided not to pursue the project and, in the meantime, the said Summary Term Sheet expired.
22. It is the first, second and fourth Defendants’ submission that all these matters were intertwined and as a result they each had a Defence to the Plaintiff’s claim. Indeed at paragraph 12 of the first Defendant’s Defence, it maintains that the Facility Agreement was entered into by the parties and made by mistake. It insisted that the Facility Agreement dated 8th February 2011 should have been made between HNA and the first Defendant not between the Plaintiff and the first Defendant. Unfortunately, as is obvious from the document itself, the Summary Term Sheet with HNA had expired as at 31st January 2011. Similarly, the second Defendant’s Defence at paragraph 12 thereof repeated word for word the contents of paragraph 12 of the first Defendant’s Defence as above. The second Defendant maintained that the Facility Agreement was drawn up and signed under a mutual mistake of fact, a position adopted by the fourth Defendant in his undated Defence filed on 4th September 2012. The Plaintiff in its Reply to the first Defendant’s Defence stated that the loan facility was made available to the first Defendant by the Plaintiff to whom the first Defendant had made several utilisation requests and did draw down the facility as per the Facility Agreement. The Plaintiff emphasised that the HNA Group was not a party to the Facility Agreement either as a principal to the Plaintiff or at all. No part of the loan facility was drawn down from the HNA Group by the first Defendant either directly or through the Plaintiff. Similarly, as regards the second and fourth Defendants’ Defence, the Plaintiff confirmed that the HNA Group was not a party to the Facility Agreement whether as principal or at all. The HNA Group was also not a party to the Guarantees and Indemnities entered into by the second and fourth Defendants. No part of the loan facility as secured by the Guarantees and Indemnities was drawn from the HNA Group either directly or through the Plaintiff.
23. The first demand letter to the first Defendant was dated 22nd March 2012. The email correspondence that followed the demand letter quite clearly shows that the same was received by both the first and second Defendants as evidenced by the second Defendant’s email to Bharat Bhise of 2nd April 2012. His further email of 14th May 2012 made the suggestion that it had been agreed that the loan would be written off by treating it as project expenses. That email was shortly followed by one from Bharat Bhise, dated the same day, making it clear that there had been no meeting or discussion at which the Plaintiff would agree to write off the loan. In fact, Mr. Bhise was so incensed at the suggestion made by the second Defendant in that regard, that he directed that any further communication as regards thereto should be sent to the Plaintiff’s advocates, Mona Doshi or Samson Okongo.  Indeed it was the latter who wrote the demand letters dated 15th June 2012 addressed to the first Defendant and 17th May 2012 and 15th June 2012 addressed to the second, third and fourth Defendants.
24. In my view, the test laid down by Madan JA (as he then was) in the Choitram case in relation to admissions has been answered in the correspondence availed to Court with regard to this matter. I am satisfied that it is plain and obvious that the second Defendant on his own behalf and on behalf of the first Defendant clearly admitted the loan made to the first Defendant by the Plaintiff herein. To my mind, there is no point in letting this matter go to trial for there is nothing to be gained by having a trial. The Defendants have tried their level best to put up a smokescreen in order to avoid liability but to no avail. Accordingly, I allow the Plaintiff’s Notice of Motion dated 5th February 2013 as regards Judgement on admission under Order 13 Rule 2, of the Civil Procedure Rules, 2010. The Defences of the first, second and fourth Defendants are hereby struck out and judgement is entered as prayed for in the Plaint. The Plaintiff will also have the costs of the Application as well as the costs of the suit.

DATED and delivered at Nairobi this 15^th day of May, 2014.

J. B. HAVELOCK

JUDGE