Brits Freighters Ltd v National Oil Corporation of Kenya (Civil Suit 123 & 160 of 2019 (Consolidated)) [2022] KEHC 10673 (KLR) (Civ) (17 June 2022) (Ruling)
Neutral citation:
[2022] KEHC 10673 (KLR)
Republic of Kenya
Civil Suit 123 & 160 of 2019 (Consolidated)
DO Chepkwony, J
June 17, 2022
Between
Brits Freighters Ltd
Applicant
and
National Oil Corporation of Kenya
Defendant
Ruling
1.The subject of this ruling is the plaintiff/applicant’s notice of motion application dated June 13, 2019 brought under orders 40 rule 2 of the Civil Procedure Rules and sections 3a, 63(e) and 80 all of the Civil Procedure Act, cap 21 Laws of Kenya and all the other enabling provisions of law. It seeks for the following orders:-
2.The application is premised on five (5) grounds on its face and further supported by the affidavit of its Managing Director, Patrick Kibanya sworn on the same 13th of June, 2019. The plaintiff’s case as advanced therein is that it entered into transport agreement dated November 21, 2017 with the defendant to facilitate the delivery of the defendant’s goods to the defendant’s respective consignees. Once the goods were collected from the defendant, delivery would be confirmed through the delivery notes returned to the defendant upon being signed by the respective consignee. According to the plaintiff there was no direct link-up with the consignees and it was upon the defendant to ensure and confirm delivery.
3.Nonetheless, the plaintiff avers that it received a letter from the defendant on December 14, 2018 alleging that the plaintiff’s drivers had been involved in malpractice in respect of goods meant to be delivered to Geothermal Development Company which were not delivered. According to the plaintiff, it did not only report the matter, 2018 to Kilimani Police Station on December 17, 2018 and later to DCI, but it also suspended the drivers whose trucks were involved. The defendant acquainted to the investigations and through a letter dated January 7, 2019, it expressed its willingness to cooperate with the authorities conducting the investigations.
4.To the plaintiff’s shock, the defendant terminated the transport agreement vide a letter dated January 14, 2019 while the investigations were underway claiming to have acted upon clause 16.2 of the same agreement.
5.The plaintiff now challenges the manner in which the defendant terminated the contract on mere basis of suspicions without any material negligence having been shown on part of the plaintiff and contrary to the express terms of the agreement.
6.In the plaintiff’s view, the defendant was at fault and failed to observe the measures agreed such as issuing confirmation receipts for the all the trucks including the ones said to have been involved in the malpractice. Thus, in the plaintiff’s view, the defendant is unjustified to unilaterally end the contract hence the orders sought should be granted to avert the imminent loss it is likely to suffer.
7.The respondent opposed the claim motion through its replying affidavit sworn by its acting Legal Manager, M/s Gladys Koletit. She deponed that it was an express term of the contract that the plaintiff would defend, indemnify and hold the defendant harmless from and against any loss, damage, claim, penalty, interest, cost suffered in connection with performance of its obligations under the agreement. Clause 8.1 of the transport agreement expressly provided that the plaintiff would fully be liable for any losses during transit of the goods and in this case, the plaintiff’s personnel were involved in malpractices resulting to non-delivery of goods intended for Geothermal Development Company (hereinafter “the consignee”). It is averred that as a result, the defendant incurred losses of Kshs 40,926,019.07 due to such non-delivery. Due to such loss and non-delivery in the manner contained under clause 8.4 of the agreement, the defendant argued that it was well within its rights to take prudent action to terminate the agreement for breach as articulated under clause 16.2.
8.Parties agreed to canvass the application by way of written submissions and the record shows that the plaintiff’s submissions are dated November 2, 2021 whilst those for the defendant are dated March 9, 2022.
Plaintiff/Applicant’s Submissions
9.For the plaintiff, only two issues were pointed out for determination. That is, whether the threshold for interlocutory injunction was satisfied and who should be ordered to bear costs. On the first issue, the plaintiff has relied on the celebrated case of Geilla vs Cassman Brown and Company Ltd where the guiding principles were laid as; whether the applicant has established a prima facie case with high chance of success, if the applicant is likely to suffer irreparable loss that cannot be awarded by damages and lastly, if in doubt, where the balance of convenience lies.
10.On whether a prima facie case has been established, the plaintiff submitted that clause 16.2. of the agreement does not state who should make conclusion thereof and the same was thus left for determination by relevant organs like the court. As such no truth has been reached at and the respondent acted on mere allegations and suspicion in terminating the transport agreement since none of the cases contemplated under clause 16.2 has been proved. Emphasis was added that the court cannot rewrite those terms but only interpret them as in their express intentions unless they are shown to be unconscionable.
11.In that view, the plaintiff submitted that in terminating the agreementthe defendant not only acted without observing the rules of natural justice but also keeping a blind eye on the provision of clause 15.1, which makes it necessary to ascertain if the respondent is in breach before the clause on indemnity is invoked.
12.As to whether the plaintiff is likely to suffer substantial loss, it is submitted that the plaintiff will suffer irreparable harm which cannot be compensated by an award of damages if it losses business opportunities through acts of the defendant of discriminating, harassing or barring the plaintiff from making such future or taking into account the issues constituting the present case. In support of those submissions, reliance was placed in the Court of Appeal case of Joseph Ntombura vs Godfery Simiyu & 4 Others [2018]eKLR, where the court observed thus the test to be applied should be whether the person applying for the injunctive relief will suffer irreparable harm. The test is not whether the person against whom the orders is to be made will suffer irreparable harm.
13.The plaintiff further submits that it stands to suffer greater prejudice than the respondent if the orders of injunction are not granted and therefore, the balance of convenience tilts in its favour. As regards costs, the plaintiff relies on section 27 of the Civil Procedure Act to submit that costs should follow the events.
Defendant/Respondent’s Submissions
14.On the other hand, the defendant/respondent points out that the key issue for determination is on whether the plaintiff is entitled to any injunctive orders. In that respect, the defendant expounds on the three principles laid in the case of Geilla vs Cassman Brown (supra). The first one being on whether the plaintiff has established a prima facie case. On this, the defendant submits that the transport agreement was a binding contract and the partial or nonperformance by the plaintiff would translate to a material breach worth of terminating the contract. In the present case, the plaintiff was tasked with among other duties, duty to transport consignment of products from the defendants depot and assume responsibility of the same until it is delivered and discharged at the consignee’s premises. Clause 8.2 of the agreement provides that in the event the fuel product is lost while in transit or otherwise not delivered, the plaintiff shall be liable and would indemnify the defendant with regard to such losses. Clause 8.3 further provided that in the event the plaintiff’s vehicle is involved in fraud, the defendant would forthwith terminate the contract without notice. In addition, clause 16.2 provides that the defendant can terminate the contract forthwith if the plaintiff breaches the terms of the contract.
15.Given that the plaintiff and/or his personnel were involved in malpractices in respect of the consignee, it cannot use this court as an excuse from performing its contractual duties and obligations or otherwise prevent the respondent from enforcing its contractual rights. The court in that respect is invited to make a finding that since the plaintiff was in fundamental breach of the terms of the contract, it was right for the defendant to terminate the contract. The court has also been invited to interpret the clauses in the transport agreement in their strict sense without rewriting the intention of the parties. In view of the above summary, the defendant submits that the plaintiff has not established a prima facie case and supports those submissions with excerpts from the cases of National bank of Kenya Ltd vs Pipeplastic Samkolit (K) Ltd & Another [2001]eKLR, Zubeidi vs Patrick Mwangangi Kibaiya & Another [2014]eKLR.
16.Secondly, on substantial loss, it is submitted that the plaintiff has not demonstrated what irreparable injury it has suffered as a result of their own breach. In the defendant’s view, the plaintiff has not approached the court with clean hands, and it would be iniquitous for the court to grant protection to a plaintiff who has failed to honour his part of bargain. In addition, the defendant submits that the allegations that the plaintiff will be isolated and discriminated thus losing business opportunities, are baseless since the Transport agreement under clause 9.0 projected that there was no business guaranteed to the plaintiff and the defendant was not enjoined to engage the plaintiff as its sole transporter. These submissions are supported with excerpts from the cases of Elizabeth Wanjiku Kariungi vs Equity Bank (Kenya) Limited [2017] eKLR and Mamta Peeush Mahajan vs Yashwant Kumari Mahajan [2017] eKLR.
17.Thirdly, on where the balance of probabilities lies, it is submitted that the plaintiff has not denied having collected the consignment from the defendant and has not shown that the delivery was ever done. Therefore, since the defendant has already suffered loss of the lost consignment and given that no business was exclusively guaranteed in the contract, it was submitted that the balance of convenience tilted in favour of the defendant. Thus, the defendant craved for the application to be dismissed.
Analysis and Determination
18.I have considered the plaintiff’s application together with the affidavit that were filed in support thereof. I have also considered the defendant’s affidavit in reply to the application. Finally, I have considered the written submissions by the parties’ respective advocates and the various authorities that were cited in support thereof. The dispute here is a straight forward one, seeking the determination on whether or not the court should grant to the plaintiff/Applicant an injunction pending the determination of this suit.
19.Such is governed by the now well-established principles that were initially well laid down in East African in the case of Giella vs Casman Brown & Co Ltd [1973] 358. Those principles settling the law have remained that; a plaintiff seeking to get and be granted a temporary injunction must establish a prima facie case with probabilities of success, must establish that he stands to suffer a loss irreparable by an award of damages if the injunction be refused and where the court is in doubt, it balances the convenience between the parties.
20.In a later decision by the Court of Appeal in the case of Nguruman Limited vs Jan Bonde Nielsen & 2 Others [2019]eKLR, the law was laid that the three prerequisites must be proved in a sequential manner underscoring the fact that the foundation of grant of temporary injunction is a prima facie case with probabilities of success.
21.Now, the applicant shoulders the burden of proving the prima facie case and in doing so, he/she/it must show a clear and unmistakable right to be protected which is directly threatened by an act which the applicant seeks to be restrained. In other words, the plaintiff/applicant on a preponderance of probabilities must show that he has a right which is being threatened with violation.
22.There are numerous judicial decisions on this subject which I do not wish to array save for being content and adopt the Court of Appeal’s decision in the case of Mrao Ltd vs First American Bank of Kenya Ltd& 2 Others [2003] eKLR where the superior court observed thus;
23.In considering the material placed before me against the principles I have laid above, the plaintiff alleges that in terminating the transport agreement between the parties unilaterally, the defendant acted without observance of the rules of natural justice which guarantee a party the right to be heard before adverse action is taken against it. As such, the plaintiff submits that the termination of the contract discriminates, isolates and bars it from making any future bids. In the plaintiff’s view, it would be proper if the defendant is restrained from taking adverse action based on the transport agreement.
24.In my view, the relationship between the two parties is stipulated under the transport agreement and if either of the parties has to assert any right by virtue of the agreement, then it must stem from the agreement. The principle on freedom of contract which is central to the law of contract enjoins the court to hold parties to their bargain when resolving disputes arising from their written agreement. Therefore, the underlying question is whether the plaintiff has demonstrated that in terminating the agreemen, the defendant has threatened to violate or has in fact violated a right flowing from the transport agreement and intends to perpetuate the violation.
25.The defendant has explained that it terminated the agreement following a material breach by the plaintiff in failing to deliver a consignment meant to be delivered to a consignee known as Geothermal Development Company. In its affidavit, the plaintiff does not deny that it collected the said consignment but alleges that it suspended its drivers who were involved in the alleged fraud and investigation are underway intended to establish who was at fault are underway.
26.I have considered the agreement and find the relevant clauses are; clause 8.1 which places the duty of care, safety and ensuring security of the consignment on the plaintiff from the date it was collected from the defendant until it is discharged to the respective consignee. Clause 8.2 states that the plaintiff would be liable, in the event of loss while the consignment is on transit. Clause 8.3 which gives the defendant the sole discretion to terminate the agreement if any of the plaintiff’s vehicles is involved in fraud. clause 16.0 provides that the contract would be terminable if any of the plaintiff’s vehicle is involved in fraud, theft or malpractice or for material breach.
27.Clearly, there is no proof that the consignment was ever delivered to Geothermal Development Company and the plaintiff does not deny that it was entrusted with the duty to ensure safe delivery of the product. Although the plaintiff does not expressly admit the aspects of fraud, it admits that it suspended the drivers whose vehicles were involved. Undeniably, the duty to ensure safe custody of the product while on transit was squarely on the plaintiff. I thus take the view that non-delivery of the product amounts to breach of the core reason why the plaintiff was contracted by the defendant and the plaintiff cannot be excused from its non-performance by seeking the protection of the court.
28.The plaintiff bears the onus to rebut such averments by showing that it indeed made the delivery and handed back the delivery note to the defendant as anticipated in the agreement. That burden of proof has not been discharged and I am of the consequent view that the plaintiff has not established a prima facie case to warrant the grant of the temporary orders of injunction as sought.
29.Once the plaintiff has failed to demonstrate a prima facie case, I do not think that the second requirement as to inquiry if damages would be an adequate remedy need to be a major consideration and I rest my case at this point. In any event, the agreement states under clause 9.0 that its duration would be commencing on November 15, 2017 and terminated on November 14, 2020. As it is, the duration of the contract has already terminated and the only remedy, if any would lie in the award of damages. It would be an academic exercise to determine on whether substantial loss would result from the termination of the contract unless it is shown that parties subsequently terminated the contract.
30.In the end, I find and hold that the plaintiff’s notice of motion application dated June 13, 2019 is without merit proceed to dismiss it with costs to the defendant.It is so ordered.
RULING DELIVERED VIRTUALLY, DATED AND SIGNED AT NAIROBI this 17th day of JUNE, 2022.D. O. CHEPKWONYJUDGE