(An appeal from the ruling and order of the Small Claims Court at Nairobi (J.W. Munene, RM/Adjudicator) delivered on 5th June 2023 in SCCCOMM No. E2095 of 2023)
1. This is an appeal from the small claims court. The facts leading to the appeal are contained in the statement of claim dated 24th March 2023 whereby, the appellant sued the respondent seeking judgment in the sum of Kshs. 727,861.00. The respondent entered appearance and filed its statement of defence dated 6th April 2023 denying the averments set out in the claim. In addition, it averred that there was a pending suit in relation to the subject transaction and debt in Nairobi Chief Magistrate Commercial Suit No. E4814 of 2022; Haut International (K) Limited vs. Luke Kibiwott. It thus raised a Preliminary Objection dated 6th April 2023 in which it argued that the claim was incompetent, premature and bad in law for offending the provisions of Section 13 (2) of the Small Claims Court Act. The respondent also filed a Notice of Motion dated 26th April 2023 seeking the following reliefs:
1) THAT the claim offends mandatory provisions of section 13 (2) of the Small Claims Court Act No. 2 of 2016 Laws of Kenya;
2) THAT the statement of claim dated 24th March 2023 be struck out with costs.
2. The application was supported by the grounds on the face of it and the supporting affidavit sworn on 28th April 2023 by Luke Kibiwott, the respondent’s director. The grounds in support of the application were that: there is a pending suit namely Nairobi Chief Magistrate Commercial Suit No. E4814 of 2022; Haut International (K) Limited vs. Luke Kibiwott concerning the same transaction; both suits emanated from the same transaction of goods delivered by the respondent to the appellant; in addition, Chief Magistrate Commercial Suit No. E4814 of 2022 was filed against Luke Kibiwott, the respondent’s director; in that suit, the said Luke Kibiwott raised the defence that he was wrongly sued as he was a director of the respondent; the appellant ought to have withdrawn Chief Magistrate Commercial Suit No. E4814 of 2022 before instituting the present suit; the appellant realized its mistake and therefore pursued the suit the subject of this appeal; the judgment sum sought is a portion of Kshs.1,400,000.00 being sought from Chief Magistrate Commercial Suit No. E4814 of 2022; the suit the subject of this appeal is generally a portion of the larger claim in Chief Magistrate Commercial Suit No. E4814 of 2022; and the present suit amounted to unjust enrichment. The pleadings in Chief Magistrate Commercial Suit No. E4814 of 2022 were attached in support of the application.
3. The appellant vehemently opposed the application. Through the affidavits of Lauryn Ndunge Nzuki, the appellant’s administrator, sworn on 3rd May 2023 and 4th May 2023, the appellant urged the trial court to dismiss the application on the following grounds: the respondent is yet to remit the sum of goods delivered unto it; the suit Chief Magistrate Commercial Suit No. E4814 of 2022 concerned goods and invoices delivered to the defendant therein namely Luke Kibiwott in his personal capacity; it is the said Luke Kibiwott who had previously issued cheques drawn by him in his personal capacity; in this case, it is the respondent who owed the appellant as could be discerned from the invoices raised and copies of bounced cheques; and that the transactions were separate and distinct from each other. In support of those claims, the appellant attached the invoices and bounced cheques in respect of the dispositions made.
4. The respondent filed a supplementary affidavit sworn by its director on 12th May 2023. It reiterated the contents of its application adding: the invoices were paid interchangeably as between the respondent’s director in person and the respondent; that the respondent’s director was not in the business of manufacturing iron sheets as that was the business of the respondent; the deponent negotiated for the terms of engagement on behalf of the respondent. It is for this reason that some of the invoices were entered in his name; and that the appellant’s dispositions were ludicrous.
5. The application was canvassed by way of written submissions. In its ruling dated 5th June 2023, the learned adjudicator held as follows:
“The Court has considered the Notice of Motion Application dated 26/4/2023, the Replying Affidavit and submissions made and finds that indeed the Application is merited.
The instant suit is an abuse of the court process. It offends Section 13 (2) of the Small Claims Court Act.
The suit is struck out with costs to the Respondent.”
6. The appellant being aggrieved by these findings filed its memorandum of appeal dated 15th June 2023, seeking that the appeal be allowed by reinstating the suit and it be allowed to proceed on its merits. They also sought an award for costs of this appeal. The appeal is premised on the following reasons: the learned adjudicator erred in finding merit in the application; the trial court erred in striking out the suit with costs; and the learned adjudicator erred in failing to consider the evidence of the parties in her ruling.
7. The appeal was canvassed by way of written submissions. According to the appellant’s submissions dated 15th July 2024 and the facts laid out in its replying affidavit, it is evident that the two suits were separate and distinct from each other. It argued that the respondent herein and the defendant in Chief Magistrate Commercial Suit No. E4814 of 2022 were two separate and distinct personalities as enunciated in the celebrated case of Salomon vs. A Salomon & Co Ltd [1896] UKHL 1, [1897] AC 22. In the present case particularly, the veil of incorporation had not been lifted. It therefore urged this court to award the prayers set out in its memorandum of claim.
8. The respondent filed its written submissions and list of authorities dated 20th September 2024. It submitted that the trial court properly evaluated the evidence as set out in its application and affidavits in support to arrive at a just conclusion.
9. I have considered the memorandum of appeal, examined the record of appeal and the parties’ written submissions and analyzed the law. The duty of this court as an appellate court is well prescribed under Section 38 of the Small Claims Court Act which limits the jurisdiction of this Court to matters of law only. It provides that:
38. (1) A person aggrieved by the decision or an order Appeals of the Court may appeal against that decision or order to the High Court on matters of law.
(2) An appeal from any decision or order referred to in subsection (1) shall be final.”
10. Thus, I will not heed to the respondent’s invitation to reconsider and reevaluate, the evidence on record as set out in the case of Selle & Another vs Associated Motor Boat Co. Limited & Others (1968) EA 123. I will limit the determination to the issue of law raised which is whether the adjudicator erred in the application of Section 13(2) of the Small Claims Court Act,
11. In its decision of 5th June 2023, the trial court struck out the suit as an abuse of the court process for offending Section 13 (2) of the Small Claims Court Act which provides as follows:
“A claim shall not be brought before the Court if proceedings relating to that claim are pending in or have been heard and determined by any other Court.”
12. Notably, the adjudicator did not furnish reasons why and how it arrived at that conclusion. However, from the proceedings, it appears that the decision was informed by the grounds set out in the face of the application. The pertinent reason for striking out the claim was that the appellant filed Nairobi Chief Magistrate Commercial Suit No. E4814 of 2022; Haut International (K) Limited vs. Luke Kibiwott that bore similar attributes to the present dispute as follows: the two disputes concerned the same transaction; the respondent’s director was sued in the other dispute; and the appellant sought to regularize its anomaly for wrongly suing the respondent’s director by filing the present claim and was therefore in error in filing the claim, the subject of this appeal.
13. The appellant on its part, while acknowledging the subsistence of Nairobi Chief Magistrate Commercial Suit No. E4814 of 2022; Haut International (K) Limited vs. Luke Kibiwott, explained that the two suits were incongruent and unconnected as both defendants in both suits were sued for different transactions.
14. I have looked at the pleadings in both the present matter and in Nairobi Chief Magistrate Commercial Suit No. E4814 of 2022; Haut International (K) Limited vs. Luke Kibiwott. At a glance, I note that the parties are purely different. The amounts claimed are also different and relate to different transactions. The respondent explained that the defendant in E4814 of 2022 was wrongly sued as the director of the appellant. On the contrary, the appellant asserted that the defendant therein was sued in his personal capacity. It is common ground that the payments were made both by the company and the individual, a situation the respondent referred to as interchangeably in respect of the s`1ame transaction.
15. It is important to remind parties of the legal personality principle in that a company is a person separate and distinct from its directors as set out by the House of Lords in the locus classicus case of Salomon vs. Salomon (supra). Similarly, the Court of Appeal in the case of Victor Mabachi & Anor vs. Nurturn Bates Ltd [2013] eKLR held:
“This being the case, Mediacom as a body corporate, is a persona jurisdica, with a separate independent identity in law, distinct from its shareholders, directors and agents unless there are factors warranting a lifting of the veil.”
16. To this end, I find that in Nairobi Chief Magistrate Commercial Suit No. E4814 of 2022; Haut International (K) Limited vs. Luke Kibiwott , regardless of the fact that the defendant therein is the respondent’s director herein, he has been sued in his personal capacity. He is therefore not a party to the present suit. Secondly, a cursory perusal of the generated invoices reveals that the transactions on face of it took place between the appellant and the respondent’s director in E4814 of 2022 on one hand and the appellant and the respondent in the present dispute on the other hand. Clearly, they are in respect to separate transactions and are not mirror reflection of the same transactions as they relate to separate amounts. I hasten to add that at this juncture, I am not concerned with the merits or otherwise of the disputes but whether any semblance of sorts would warrant the invocation of section 13 (2) of the Small Claims Court Act. In any event, the allegation that the suit before the Chief Magistrates Court was to be withdrawn remains unsupported.
Based on those facts the suits are markedly different. I further wish to add that though the power to strike out a suit is granted by the courts, the same should be guarded jealously and invoked in only the clearest of circumstances as its effect is draconian, particularly in the context of the small claims court where the court adopts a more flexible approach. This claim is, in my view, not a candidate for striking out a suit in limine for the reasons exposited above.
17. Taking cue from this, I find that the appellant’s appeal succeeds. I therefore make the following orders:
1. The findings of the trial court dated 5th June 2023 are hereby set aside and substituted with an order that the application dated 26/04/2023 lacks merit and is hereby dismissed;
2. The costs of the application shall abide the outcome of the suit;
3. This matter shall be placed for pre-trial directions before an adjudicator other than Hon. J.W. Munene to facilitate its urgent disposal;
4. Each party shall bear its costs of this appeal.
It is so ordered.
Delivered, Dated and Signed this 24th day of January 2025