CANELAND LIMITED v DOLPHIN HOLDINGS LIMITED & ANOTHER [1999] eKLR

Key Facts

Transaction Type

Issues

• The court determined if the plaintiff was entitled to a refund of Shs.72,900,000 paid to the defendants under a failed agreement. The plaintiff's evidence showed the agreement failed, and the first defendant agreed to refund the amount but only partially did so. The court ruled in favor of the plaintiff, finding the defendants' defenses baseless.
• The court evaluated the second defendant's claim that it was merely a collecting and clearing bank. Evidence showed the second defendant received the plaintiff's payments directly, contradicting its defense. The court ruled this claim false, emphasizing that the second defendant's involvement went beyond a clearing bank role.
• The court addressed whether the defendants' defenses, which were deemed spurious, evasive, and aimed at delaying the trial, constituted an abuse of the court process under Order VI, Rule 13 (1)(h) of the Civil Procedure Rules. The court concluded that the defenses were indeed an abuse of the court process and were not raising any triable issues.
• The court examined whether the first defendant could validly rely on an agreement (dated 12.7.1995) to sell shares in Miwani Sugar Company while simultaneously denying the enforceability of that agreement. The court found this defense inconsistent and a sham, noting that the first defendant had already partially refunded the amount and later changed its position.

Holdings

• The 1st defendant's defense was rejected as inconsistent and self-serving. It initially denied dealings with the plaintiff but later conceded receipt of funds. The court found its claim of repayment conditions lacking substance, especially after partial refunds were made. The defense was characterized as a red herring to delay proceedings.
• The court allowed the plaintiff's application to strike out the defendants' defenses and entered judgment in favor of the plaintiff. The 1st defendant admitted receipt of Shs.72,900,000/- under an agreement to refund but refused to pay the balance despite partial repayment of Shs.15,000,000/-. The 2nd defendant's defense claiming it was merely a collecting/clearing bank was found false, as it was the payee of the cheques and failed to explain its role. Both defenses were deemed scandalous, frivolous, and an abuse of the court process.
• The 2nd defendant's defense was deemed a sham. It denied receipt of funds despite being the payee in all cheques and failing to provide evidence supporting its role as a collecting bank. The court emphasized that payments through clearing banks are not made to the banks themselves, undermining the 2nd defendant's credibility.

Remedies

• The defendants were ordered to jointly and severally bear the plaintiff's costs of the application.
• The court struck out the defendants' defenses as filed, finding them to be an abuse of the court process and intended to delay the trial.
• Judgment was entered in favor of the plaintiff against both defendants jointly and severally for the refund of Shs.72,900,000/=, as prayed in the plaint.

Contract Value

Legal Principles

Precedent Name

• Moore V. Lawson and another
• Kellaway V. Bury Lindley L. J.
• Johnson Joshua Kinyanjui & another Vs. Racheal Wahito Thande and another
• Choitram V. Nazari
• D. T. Dobie & Company (Kenya) Ltd. Vs. Joseph Mbaria Muchina & another

Key Disputed Contract Clauses

• The 1995 agreement between Caneland Limited and Dolphin Holdings Limited outlined payment terms for the purchase of shares in Vanessa Associates Inc. The court analyzed whether these terms were fulfilled and if the agreement's failure justified the refund claim.
• The 1997 agreement stipulated that Dolphin Holdings Limited would refund Shs.72,900,000 to Caneland Limited. The court examined the validity of the defendants' claims that refund conditions were unmet, finding these defenses inconsistent and unfounded.

Cited Statute

• Companies Act
• Civil Procedure Rules

Judge Name

Passage Text

• The fact of the matter is that the second defendant received all the moneys, the subject of this suit. Accordingly, when the 2nd defendant claims, in the face of that clear evidence that it was never paid any money by the plaintiff and that it is a stranger to the transactions between the plaintiff and the 1st defendant, there can be no doubt that the 2nd defendant is not stating the truth.
• In my judgment, the evidence available is clear and straight forward. It establishes without any shadow of doubt that the plaintiff not only paid Shs. 72,900,000/= under an agreement which failed but also in respect of which payment the 1st defendant agreed to refund the money. It is also clear that the agreement to repay was not conditional upon payment of any further sums by the plaintiff to the 1st defendant and in any event, the 1st defendant did not lodge any counter claim to the plaintiff's suit; neither did it seek to join other parties in the suit.
• For the above reasons, the application is allowed, the defences filed herein by the two defendants struck out and judgment entered in favour of the plaintiff against the two defendants jointly and severally as prayed in the plaint.

Damages / Relief Type

• Restitution of Shs.72,900,000 jointly and severally by the defendants.
• Defendants ordered to pay plaintiff's costs of the application.