AIA Architects Limited v Yooshin Engineering Corporation [2022] KEHC 17051 (KLR)

AIA Architects Limited v Yooshin Engineering Corporation (Civil Case 36 of 2019) [2022] KEHC 17051 (KLR) (15 July 2022) (Ruling)

Neutral citation: [2022] KEHC 17051 (KLR)

Republic of Kenya

In the High Court at Mombasa

Civil Case 36 of 2019

MN Mwangi, J

July 15, 2022

Between

AIA Architects Limited

Plaintiff

and

Yooshin Engineering Corporation

Defendant

Ruling

1. The ruling herein is in regard to application by way of Notice of Motion dated 17th October, 2019 filed by the defendant. The said application is premised on the provisions of Section 1A of the Civil Procedure Act, Cap 21, Order 42 Rule 6, Order 51 Rule 1 and Order 10 Rule 11 of the Civil Procedure Rules, 2010, Article 159(2)(d) of the Constitution of Kenya, 2010 and all enabling provisions of the law. The defendant seeks the following orders –i.Spent;ii.Spent;iii.Spent;iv.That the Honourable Court be pleased to grant orders setting aside any Judgment in default (if any) entered in this matter;v.Spent;vi.That the costs of this application be provided for;vii.That such other and/or further relief be granted as this Honourable Court might deem fit and just to grant in the circumstances of this matter.

2. The application is supported by the affidavit of Woo Back Kee, sworn on 17th October, 2019 and a supplementary affidavit sworn on 11th November, 2020 by the same deponent. On 29th October, 2019, the plaintiff filed a replying affidavit sworn by Mohamed Munyanya on 25th October, 2019 and on 25th February, 2021, it filed a further affidavit sworn on 16th November, 2020 by the same deponent.

3. The defendant’s submissions were filed by the law firm of Sang Chambers & Partners Advocates, on 15th December, 2020 while the plaintiff’s submissions were filed on 25th February, 2021 by the law firm of Oduk & Company Advocates. The said submissions were thereafter highlighted.

4. Mr. Sang, learned Counsel for the defendant stated that the defendant herein is seeking a substantive order for the setting aside of the default judgment that was entered on 18th October, 2019. He indicated that there was an ongoing appeal in this case as at the time the default judgment was entered.

5. He further stated that the defendant under paragraph 18. 31 of its supplementary affidavit was seeking leave from this Court to file a defence and counter-claim. He submitted that Order 10 Rule 11 of the Civil Procure Rules provides for the setting aside of an interlocutory judgment and gives the Court discretion to do so. He further submitted that where summons to enter appearance have been served, and a regular judgment entered, a Court has unfettered discretion to set to aside such a judgment on consideration of the reason given for failure to file appearance or a statement of defence, the length of time that has lapsed since the entry of the default judgment, whether the intended defence has triable issues, the prejudice each party is likely to suffer and if it is in the interest of justice to set aside the default judgment.

6. He stated that in an irregular judgment, the default judgment will have been entered against a defendant who has not been served or properly served with summons to enter appearance, and in which case the judgment is set aside ex debito justitae, as a matter of right.

7. Mr. Sang bolstered his submissions with the decision in James Kanyitta Nderitu & another v Martos Philotas Ghikas and another [2016] eKLR, where the Court of Appeal distinguished between regular and irregular default judgments. He also relied on the decision in Toshike Construction Company Limited v Harambee Cooperative Savings and another [2019] eKLR, on the extent of a Court’s discretion in the setting aside of an exparte judgment under Order 10 Rule 11 of the Civil Procedure Rules.

8. He cited the case of Shabban Keah and 2 others v Patrick Omondi Opiyo [2016] eKLR and Gulf Fabricators v County Government of Siaya [2020]eKLR, where the importance of service of summons to enter appearance was addressed by the Court.

9. The defendant’s Counsel also relied on the case of Kenya Broadcasting Corporation v NACADA [2015] eKLR, where the Court stated that once a defendant files an application for stay of a suit and seeks referral of the matter to arbitration he/she is not expected to file a defence to the claim.

10. In regard to the issue of deposit of security, Mr. Sang stated that Order 39 Rule 1 of theCivil Procedure Rules anticipates a situation of an uncooperative defendant, who with intent to delay or avoid any process of the Court, or obstruct or delay execution, has absconded or is about to abscond the local jurisdiction of the Court, or has removed from the jurisdiction of the Court his property, or is about to leave Kenya in circumstances affording reasonable probability that the plaintiff will be obstructed or delayed in execution of the decree, and in which case the Courts issue warrants of arrest for the defendants to show cause why they should not furnish security.

11. On the issue of costs, it was stated that costs are at the discretion of the Court and that the losing party ought to pay the same out and in the event of a regular judgment, costs would be sufficient compensation, as per the decisions in Toshike Construction Company Limited v Harambee Cooperative Savings and another (supra) and Shabhan Keah and 2 others v Patrick Omondi Opiyo (supra). The defendant’s Counsel contended that the defendant was never served with summons to enter appearance, thus the default judgment entered herein was irregular.

12. Mr. Sang contended that once the defendant opted to go on appeal, it would not have been procedural for it to file a defence and admit to the jurisdiction of the Court, yet the very issue of the appeal was the said jurisdiction as to arbitration. He urged that in the interest of substantive justice any omission on the part of the Counsel for the defendant ought not to be visited on the defendant. The defendant’s Counsel stated after the default judgment was entered on 18th October, 2019, the defendant applied for the setting aside of the same on 22nd October, 2019 thus there was no delay in having the interlocutory judgment set aside. He further stated that the Court of Appeal granted stay of proceedings and delivered judgment on 23rd October, 2020 and that on 26th October, 2020 the defendant requested for a mention date for the case herein.

13. Mr. Sang stated that the defendant has a strong counter-claim as per annexure WBK – IX attached to its affidavit. He added that besides raising a counter-claim of about Kshs. 181,257,351. 40 for breach of contract, the defendant denied that the plaintiff was entitled to the sum of about Kshs. 413,500,005. 00 being about 42% of the consultancy sum. He stated that the relationship of the parties herein was governed by a sub-consultancy agreement dated 18th August, 2017 for the sum of Kshs. 19,000,000/= and that the parties were at liberty to enter into further sub-consultancy agreements but the plaintiff did not cooperate.

14. On the issue of the prejudice that may result if the exparte judgment was not set aside, the defendant’s Counsel submitted that the defendant will be prejudiced by being denied a chance of a hearing and determination of the dispute on merits as the sum granted in the exparte judgment against the defendant is colossal.

15. He was of the view that the plaintiff would not be prejudiced by the setting aside of the interlocutory judgment, as it will still have a chance to be heard.

16. He further stated that under Article 50(1) of the Constitution and as affirmed in the Toshike case (supra) the default Judgment ought not to be left to stand as the same would amount to denying the defendant the right to fair hearing and that denial of a litigant to hearing should be the last resort.

17. In addressing the issue of the deposit of Kshs. 413,500,005. 00, Mr. Sang submitted that the claim was without any legal basis as a default judgment cannot be the basis for claiming the said colossal sum as there has been no formal proof to interrogate the veracity of the claims by the plaintiff of such a colossal sum.

18. Mr. Sang stated that a scrutiny of the pleadings herein will show that the plaintiff’s claim of Kshs. 413,500,005. 00 being 42% of the contractual sum, is at best an exaggerated attempt at luck, as the same is not substantiated, for lack of documentation at all, to show that the plaintiff is entitled to 42% of the consultancy sum.

19. He asserted that the defendant had demonstrated that the parties had entered into a sub-consultancy contract for the sum of Kshs. 19,000,000/= payable to the plaintiff. He contended that Kshs. 413,500. 005. 000 is not the kind of money that a party would be reasonably expected to easily access and deposit as security.

20. Mr. Sang stated that the sums due to the defendant for the main consultancy are payable by the client, Kenya Ports Authority (KPA), upon meeting certain milestones, some of which have been frustrated by the plaintiff’s refusal to submit soft copies of the designs. He posited that the defendant’s apprehension is that the call for the deposit of the colossal sum is not only untenable and/or unattainable but the same would have adverse effects on its consultancy on the LAPSSET project as against public interest.

21. He stated that there was a balance of about of Kshs. 6,612,200. 00 payable to the plaintiff on full performance of its contractual obligations, to wit submissions of the soft copies of the designs/CADs, but for which the plaintiff has, in breach of its obligations, declined to release, but the defendant would deposit the said sum if this Court deems it fit. He further stated that the plaintiff frustrated the defendant’s efforts for the parties to enter into a further sub-consultancy for the supervision of civil works.

22. Mr. Sang stated that the allegation by the plaintiff that the defendant is a flight risk, is not only the legal basis for a claim for deposit, but that the defendant has demonstrated that it was not about to leave the jurisdiction of this Court as -a.The defendant has a permanent establishment in Kenya;b.The construction project in respect of the main consultancy is to end sometime in October, 2021; andc.The defendant is currently working on other projects with KeNHA and KAA.

23. He also stated that warrants of arrest would have to be issued against the defendant upon the plaintiff’s application to show cause why the defendant should not furnish security, and that such a move would not be applicable in the circumstances.

24. Mr. Sang maintained that the plaintiff had not shown that the defendant had with intent of delaying or avoiding the Court process, or obstructing or delaying execution, absconded or was about to abscond the local jurisdiction of the Court, or had removed its property from the jurisdiction of the Court.

25. In concluding his submissions, he urged that in the event that this Court finds that the default judgment was regular, the plaintiff may be awarded thrown away costs.

26. The plaintiff’s learned Counsel, Mrs. Ashioya, submitted that the setting aside of an interlocutory judgment is at the discretion of the Court as provided under Order 10 Rule 11 of the Civil Procedure Rules, 2010. She stated that in exercising the said discretion the Court would not set aside a valid judgment of the Court unless it is demonstrated that the default judgment was obtained irregularly. She stated that in this case, the judgment in default was a regular judgment of the Court.

27. She pointed out that the defendant had not filed its statement of defence as per the directions given by the Court on 23rd September, 2019. She added that the 14 days given to the defendant to do so, passed on 8th October (sic) and failure to comply gave rise to the plaintiff’s right to make an application for judgment in default. Mrs Ashioya submitted that despite the defendant making an application seeking leave to appeal on 23rd September, 2019 when the Court gave its ruling, it failed to make an application for stay of proceedings. She submitted that as such, leave to appeal did not act as a stay of proceedings and the provisions of Order 46 Rule 6 of the Civil Procedure Rules did not apply.

28. The plaintiff’s Counsel stated that the filing of a Notice of Appeal by the defendant did not stay the proceedings in this case and could not have prevented the plaintiff from continuing to pursue its case in accordance with law.

29. She further stated that the defendant was served with pleadings and that an affidavit of service to that effect is on record. She also stated that the defendant entered appearance on 20th May, 2019 which did away with the requirement for them to be served with the summons to enter appearance as they had already entered appearance. She indicated that the defendant thereafter filed a Notice of Preliminary Objection on points of law on 24th May, 2019. She clarified that the requirement to file a statement of defence within 14 days did not emanate from the summons to enter appearance but from the Court after the defendant’s Preliminary Objection was dismissed. She submitted that as a result, the judgment entered against the defendant cannot be said to be irregular on the basis of summons to enter appearance having not been served on it, since it was aware of the case and took directions in Court but failed to comply with the said directions by not filing its defence within the stipulated timelines.

30. The plaintiff’s Counsel referred to Order 10 Rule 4 of the Civil Procedure Rules which states that where the plaintiff makes a liquidated demand only and the defendant fails to appear on or before the day fixed in the submissions or all the defendants fail so to appear, the Court shall on request in Form 13, Appendix A, enter judgment against the defendant or defendants for any sum not exceeding the liquidated demand together with interest thereon from the filing of the suit, at such rates as the Court thinks reasonable, to the date of judgment and costs.

31. She stated that where the plaintiff makes a liquidated demand together with some other claim, and the defendant fails, or all the defendants fail to appear as aforesaid, the Court shall, on request in Form 13 Appendix A, enter judgment for the liquidated demand, and interest thereon as provided by sub rule (1) but the award of costs shall await judgment upon such claim.

32. She submitted that Order 10 Rule 4 of the Civil Procedure Rules, 2010, states that the provisions of Rules 4 to 9 inclusive, shall apply with any necessary modification where any defendant has failed to file a defence. On this issue, she reiterated that all the documents pertaining to this case were within the knowledge of the defendant but it had not provided any valid reasons as to why it failed to seek extension of time to file its defence and/or stay of proceedings before judgment in default was entered in favour of the plaintiff.

33. She stated that the reasons advanced by the defendant that the application that was being filed before the Court of Appeal was voluminous and made it impossible for them to file their application in good time is unmeritorious as a Notice of Appeal is a one-page document which if filed, gives a party 60 days within which to file a Record of Appeal.

34. Mrs. Ashioya further submitted that the filing of a statement of defence would not have prejudiced the defendant’s appeal on the Preliminary Objection on points of law as it would not have amounted to admitting to the jurisdiction of the Court under Section 6(1) of the Arbitration Act. She stated that there had been no excusable mistake and/or compelling reason that had been presented before the Court to warrant the grant of the orders prayed for in the application. She added that equity should aid the vigilant and not the indolent, for which the defendant should not be rewarded as the Court rightfully exercised its discretion in issuing judgment in default of the filing of a defence.

35. While relying on the decision in Waweru v Ndiga [1983] KLR 236, she stated that the Court of Appeal reviewed and upheld its previous decisions on the application of Order 10 Rule 11 of the Civil Procedure Rules by holding that a Court has unfettered discretion to do justice between the parties. That the said Court further held that it may be just and on the facts of a particular case to set aside an exparte judgment so as to avoid hardship and injustice arising from inadvertence or mistake even though negligent, but the discretion should not be exercised to assist anyone to delay justice as delay defeats equity.

36. Mrs Ashioya submitted that in the event that this Court deems it fit to set aside the default judgment, the defendant must bear the costs of non-compliance with procedure and indolence of its Advocates, as was held in the case of Kenya Pipeline Company Limited v Mafuta Products Limited [2014] eKLR. She further submitted that the Court’s power in considering an application to set aside a default judgment is discretionary as was held in the case ofPatel v E.A Cargo Handling Services Ltd [1974] EA 75 and Shah v Mbogo [1967] EA 166.

37. She stated that the Court’s discretion must always be exercised judiciously with the sole intention of dispensing justice to both or all the parties, with each case being evaluated on its own unique facts and circumstances. Mrs Ashioya stated that in this case, the defendant’s Counsel refused on two occasions to proceed with a hearing even when the Court had directed so and had given a ruling for the matter to proceed

38. She indicated that the defendant was used to acting in defiance of Court orders and it was in the same vein that it failed to file its defence or seek leave to extend time, but the present application came as an afterthought after judgment had been entered for the plaintiff. She urged the Court not to set aside the default judgment.

39. On the issue of whether the plaintiff stands to suffer any prejudice if the said judgment was set aside, Mrs. Ashioya was of the view that it would suffer extreme prejudice since the dispute involves construction of the Lamu Port at Manda Bay as part of the LAPPSET project which was to be completed on October, 2021, which means that the project would be completed without the participation of the plaintiff, yet its designs were being used for the project.

40. She further stated that since the injunctive orders issued by the High Court were set aside by the Court of Appeal in its final determination, it means that the defendant can now compel the plaintiff to furnish it with soft copies of the designs and could continue with what it had, by removing the names and logos of the plaintiff and pass them as its own, thereby completing the project without the participation of the plaintiff, thus making it impossible for the plaintiff to claim its rights over the said designs.

41. It was stated that the plaintiff and the defendant had agreed during the bidding process and its letter of association dated 20th November, 2012 that the work entailed design, review and supervision. She stated that with the setting aside of the injunctive orders, the plaintiff would now lose its role on the supervision part of the project and lose the monies that were meant for the local component, since the defendant would be free to undertake the work with other consultants.

42. Mrs. Ashioya indicated that the defendant is a foreign firm and that once the project was completed, the defendant would leave the jurisdiction of this Court and in the event that the plaintiff wins the case, it will face a lot of hardship to effect the judgment. She also indicated that although the defendant had stated that it has other contracts within the country, those are liquid assets that cannot be seized if it does not have bank accounts or assets in Kenya. She added that contracts with other government institutions could not amount to adequate security.

43. She expressed apprehension that by the time the suit will be heard and determined the defendant will have left the jurisdiction of this Court. She thus stated that setting aside the default judgment would occasion the plaintiff a lot of hardship, as it would delay the suit further and would prejudice the plaintiff more since in this case, time is of the essence, as the project is ongoing and the plaintiff stands to lose Millions of shillings if the supervisory work is completed by other consultants.

44. The plaintiff’s Counsel prayed for the defendant to pay substantive thrown away costs and also make a deposit of Kshs. 413,900,005. 00 in a joint account to be held by the two Advocates or in Court.

45. In regard to the prayer for the deposit of Kshs. 413,900,005. 00, Mrs. Ashioya relied on the provisions of Order 39 Rule 1 of the Civil Procedure Rules and stated that the said sum is what is disputed and the amount awarded to the plaintiff in the judgment the defendant wishes to set aside. She asserted that the defendant is a foreign firm that exists outside the jurisdiction of this Court.

46. She reiterated that the documents furnished by the defendant to show that it has other contracts in the country are not assets or property it holds within the jurisdiction of this country that can be used as security in this case, hence the plaintiff stands to suffer a lot of hardship since the defendants have no assets or bank accounts in Kenya so as to provide security for the plaintiff’s claim.

47. The plaintiff’s Counsel stated that the defendant had failed to give this Court requisite information yet the burden of proof on whether the defendant has any assets or bank accounts within the jurisdiction of this Court shifted to it since the plaintiff had raised the issue. She asserted that the defendant had failed to discharge its burden of proof and that the plaintiff had demonstrated a prima facie case against the defendant on the issue of deposit of security. She relied on the case of National Industrial Credit Bank Ltd v Aquinas Francis Wasike CACivil Appeal No. 238 of 2005.

48. She further stated that the defendant had in its affidavits not rebutted the allegation that it had no assets or bank accounts in Kenya as all it had stated was that it has other contracts in Kenya, but it had not demonstrated that if the Court made an order in favour of the plaintiff, it would be able to satisfy the decretal amount. She cited the case of International Air Transport Association and another v Akarim Agencies Company Limited and 2 others[2014] eKLR to support her submissions.

49. The plaintiff’s Counsel contended that the defendant had not provided the Court with any information that could give assurance that it would satisfy the decretal sum, should the plaintiff’s case succeed. She stated that the defendant is a clear case of a flight risk. She pointed out that the defendant had in its affidavit stated that the project which is the subject of this suit would be completed in October, 2021, hence the apprehension by the plaintiff that the defendant would leave the country before the determination of the suit was valid.

50. Mrs. Ashioya referred to the defendant’s supplementary affidavit sworn by Woo Back Kee at paragraphs 18. 32, where the defendant seeks ample time to file its defence and counter-claim due to the Covid -19 pandemic. She was of the view that in the said circumstances, this suit was likely to go beyond October, 2021 thus the need for the defendant to deposit security as prayed. She also stated that the defendant had also demonstrated that it is difficult for it to prepare its own documents and in the circumstances of this case, the plaintiff may be delayed and obstructed from getting justice once the defendant leaves the jurisdiction of this Court or the plaintiff may be made to undergo extreme hardship.

51. She urged that when a Court is setting aside a default judgment, it has the jurisdiction to impose any condition that would dispense justice to both parties. In buttressing the said submission, she relied on the case of Maina v Mugira [1983] KLR 78 at 179. She urged this Court to give conditions that will protect the interest of the plaintiff if it grants the prayers sought by the defendant as it will serve no good if the case proceeds on merits; and the plaintiff gets a judgment it will be unable to satisfy due to the fact that the defendant will have left the country.

52. She stated that the allegation by the defendant that it had not been paid the monies by Kenya Ports Authority and it is therefore unable to raise the amount being sought was unmeritorious as the defendant had not attached any evidence from the Kenya Ports Authority to demonstrate that it had not been paid the contract price.

53. She submitted that the defendant’s contention that it would not be easy to raise such sums of money was not backed by any statement of accounts to demonstrate its claim, despite showing the several contracts of the works it was doing, which was indicative of the fact that the defendant has the means to raise the amount of Kshs. 413,900,005. 00 as security.

54. The plaintiff’s Counsel stated that in the defendant’s affidavit, it was deposed that the defendant was willing to deposit Kshs. 6,000,000/= as security for costs in good faith. In regard to the said deposition, Mrs Ashioya contended that the said offer was not made in good faith since the amount the defendant is seeking to deposit is not its money but monies due to the plaintiff. She submitted that the plaintiff’s position is that the said amount is not fees payable to the plaintiff, but reimbursement on disbursements of the expenses of doing the designs, and if the defendant was acting in good faith, it would have paid the said amount to the plaintiff instead of seeking to deposit it in Court pending the hearing and determination of the suit.

55. She stated that since the defendant had also seen the need to deposit security, this Court should order for the deposit of the amount of the plaintiff’s claim of Kshs. 413,900,005. 00.

56. In regard to the costs of the present application, Mrs. Ashioya submitted that since the plaintiff was given a regular judgment and if this Court is inclined to set the same aside, the defendant should be ordered to pay the costs of the instant application. She relied on the case of Sebel District Administration v Gasyali & others (1968)EA 300, where the Court stated that a defendant should be ordered to pay costs to compensate the plaintiff for any delay occasioned by the setting aside and by being permitted to defend.

57. She indicated that in its submissions, that the defendant had stated that should the Court allow its application, costs should be paid to the plaintiff and expressed the view that costs alone would not be sufficient to compensate the plaintiff for the loss it would suffer in the delay of the case. She also stated that the fact that injunctive orders had been set aside and the project would continue without the plaintiff’s participation, could not be compensated by costs alone. She urged the Court to compel the defendant to pay to the plaintiff thrown away costs that are reasonable as the Court may deem in the interest of justice, considering that the plaintiff will have an interlocutory judgment of a colossal amount set aside. In addition, she prayed for deposit of security for costs.

Analysis and Determination 58. Having gone through the prayers sought, the depositions made for the parties herein and the written submissions filed by Counsel on record, the issues that call for determination are-i.If the interlocutory judgment should be set aside;ii.Whether the defendant should deposit security equivalent to the amount being claimed; andiii.Who shall bear the costs of the instant application.

59. In the supporting affidavit sworn by Woo Back Kee on 17th October, 2019 he deposed that the subject matter of the dispute emanates from a sub-consultancy contract on the Lamu Port South Sudan Ethiopia Corridor Project (LAPSSET) meant to serve Kenya, South Sudan and Ethiopia. He further deposed that the dispute emanated from the events of 4th May, 2019 when the applicant issued a notice of termination of the sub-consultancy with the respondent due to a breach of contract by the respondent (plaintiff) and that the plaintiff filed this suit as a result of that termination notice.

60. It was deposed that together with this suit, the plaintiff filed an application dated 8th May, 2019 under certificate of urgency (the 1st application) to have the notice of termination of contract issued by the applicant (defendant) suspended, in addition to seeking various orders. The defendant further deposed that upon issuing their Advocates on record with the documentation in dispute and specifically the sub-consultancy agreement that defined the relationship between them and the plaintiff, their Advocates noted that there was an arbitration clause in the agreement and on 24th May, 2019 he filed a Preliminary Objection on jurisdiction.

61. The defendant also averred that on 10th June, 2019, it was served with another application dated 31st May, 2019 by the plaintiff together with interim orders (the 2nd application). That the two applications and the Preliminary Objection were heard together and on 23rd September, 2019 the Court delivered its ruling dismissing the defendant’s Preliminary Objection and granted the plaintiff various injunctive orders in their two applications. He stated that a typed copy of the ruling was obtained on 2nd October, 2019. The defendant averred that upon delivery the ruling, the High Court then proceeded to issue directions and timelines to the defendant on the filing of its statement of defence and accompanying documents within 14 days; and fixed case conference for 4th November, 2019.

62. The defendant’s deponent averred that having resolved to go on appeal, the filing of a statement of defence would have prejudiced the defendant’s strong quest to refer the matter to arbitration. This Court notes that the rest of the averments in the defendant’s supporting affidavit as at the time of the hearing of this application had been overtaken by events as the defendant filed an appeal to the Court of Appeal against the ruling of 23rd September, 2019 and the said appeal was dismissed by the said Court.

63. In the replying affidavit filed on 29th October, 2021, the plaintiff’s deponent averred that the dispute in this suit emanates from the tender award by the Kenya Ports Authority awarded to both the plaintiff and defendant, but the defendant had taken the entire contract for itself and locked out the plaintiff from enjoying the proceeds of the award of Kshs. 413,900,005. 00. The plaintiff annexed copies of correspondence between the parties to its affidavit.

64. The plaintiff denied that the notice of termination of contract dated 4th May, 2019 was the cause of the dispute as alleged by the defendant and stated that it simply marked the defendant’s determination to completely lock out the plaintiff from enjoying the proceeds of the tender award. The plaintiff claimed that the said notice also marked a complete refusal by the defendant to pay the plaintiff its rightful share of the tender and closed the door on any negotiation between the parties hence this suit. It contended that defendant’s interpretation that the notice of termination was the cause of the dispute was very shallow and does not go to the root of the dispute which is in the proceeds of the tender award.

65. The plaintiff further averred that since the Court rendered itself and dismissed the Preliminary Objection on the points of law filed by the defendant and having not made an application for stay of proceedings before the Court, the said Court proceeded to give directions as to how the matter was to proceed, hence the directions of the Court were issued in accordance with the law, the inherent power of the Court and the said directions were regular and valid. It was averred that the defendant was given 14 days by the Court to file its statement of defence but it failed to do so in total disregard of the Court order and as such, it was in contempt of Court orders.

66. The plaintiff deposed that the defendant had not advanced any valid reasons as to why it had not filed the defence or made an application for extension of time for the filing of a defence pending the hearing of the application for stay in the Court of Appeal; or a stay of proceedings pending the hearing of the appeal.

67. The plaintiff averred that once the defendant failed to file its defence within the stipulated period, it requested for judgment by an application dated 8th October, 2019 and an interlocutory judgment was entered for the plaintiff on 18th October, 2019 and subsequently, an order was extracted and signed by the Deputy Registrar on 23rd October, 2019, which judgment and order are part of this Court’s record.

68. The plaintiff deposed that the present application was a delaying tactic seeking to obstruct justice for the plaintiff and at the same time giving ample time to the defendant to complete the works which it was still undertaking without the plaintiff, in contempt of the orders of this Court after which, it shall be able to leave the jurisdiction of this Court without recourse to the plaintiff.

69. The plaintiff averred that the defendant had not given sufficient reason to warrant the setting aside of the plaintiff’s interlocutory judgment. It was also averred that the interlocutory judgment given to the plaintiff was regular and due process was followed, hence it was a valid judgment of the Court which ought not be set aside.

70. The plaintiff stated that the defendant had the full knowledge that failure to file a defence would give the plaintiff the opportunity to apply for judgment as demonstrated by paragraph 16 of the defendant’s supporting affidavit, yet it failed to make any applications in good time and came back before this Court after the plaintiff had regularly got an interlocutory judgment in its favour.

71. The plaintiff reiterated that the defendant being a foreign company may leave the jurisdiction of this Court due to further delay of the case, and should this Court be inclined to grant the order sought, the defendant should be ordered to deposit in Court the sum of Kshs. 413,900,005. 00 which is the value of the interlocutory judgment entered in favour of the plaintiff as a pre-condition to setting aside of the said judgment.

72. The plaintiff also prayed for thrown away costs which are commensurate to the value of the judgment as a pre-condition of setting aside the interlocutory judgment.

73. In a rejoinder, the defendant in its supplementary affidavit averred that having been granted leave to appeal, the defendant proceeded to process its appeal to the Court of Appeal, being Mombasa Civil Appeal No. 147 of 2019 and sought stay of proceedings vide Mombasa Court of Appeal Civil Application No. 89 of 2019. The defendant further averred that as it was processing the appeal, the plaintiff out of bad faith was taking short cuts at justice by applying for judgement whilst aware that the defendant had moved to the Court of Appeal.

74. It was deposed, that the defendant’s application to the Court of Appeal seeking stay pending appeal was certified urgent and listed for hearing on 25th November, 2019. That the Record of Appeal was filed on 1st November, 2019 at the Mombasa Court of Appeal sub-registry, as it awaited allocation of a case number by the Malindi Registry. The defendant deposed that the Court of Appeal on 25th November, 2019 stayed the proceedings herein pending a ruling on its application and that on 3rd April, 2020 the said Court proceeded to stay the proceedings before this Court pending the hearing and determination of the appeal. The defendant stated that having gone on appeal, it would have been highly prejudicial for it to file a defence and by extension admit to the jurisdiction of this Court, whilst one of the prayers was to have the matter referred to arbitration.

75. The defendant denied that it was in contempt of Court or that it had disobeyed Court orders, given that it had duly sought and obtained stay of proceedings and the filing of the defence to enable it to pursue the appeal. The defendant contended that it would be erroneous for the plaintiff to term the directives to file a statement of defence as Court orders, as the same were directions of this Court in the form of leave to file defence, which directions could have been varied in view of compelling circumstances like the ones at hand, noting that the Hon. Court granted the defendant leave to appeal.

76. The defendant also deposed that the interlocutory judgment was sought by the plaintiff despite it being in the knowledge that the defendant had gone on appeal and had sought stay, and that the matter had been listed for case conference on 4th November, 2019. The defendant contended that with its application at the Court of Appeal having been listed for hearing on 25th November, 2019 and the appeal having been duly filed, it was in the interest of substantive justice for the defendant to be allowed to pursue its appeal and by extension, prosecute the matter on merits as opposed to exploitation of procedural loopholes, a tactic that the plaintiff has heavily employed.

77. The defendant denied that it was about to leave the jurisdiction of the Court and indicated that it has a permanent establishment in Kenya as per its certificate of compliance which was annexed to its supplementary affidavit. It also averred that the constitution of the project including the buildings and associated infrastructure in dispute were expected to end sometime in October, 2021 as per the extension granted by its client, KPA. Further, that the defendant was working with various Kenyan clients including Kenya National Highways Authority (KeNHA), Kenya Airports Authority (KAA) as per the annexures to the affidavit.

78. The defendant deposed that it had not disobeyed orders of this Court prior to the filing of the plaintiff’s 2nd application dated 31st May, 2019, an issue that was already canvassed before this Court with no finding in favour of the plaintiff’s allegations. It was stated that in any event, the Court of Appeal set aside the injunctive orders that the plaintiff had obtained herein, and as such, any disobedience, which was denied; had been overtaken by events.

79. The defendant asserted that the reasons for setting aside the interlocutory judgment are that it was unable to file its defence because it was processing the appeal, a process that entailed the application for proceedings and ruling, the application for stay pending appeal, noting that the documentation was quite bulky owing to the numerous documentation filed at this Honourable Court, and that filing a statement of defence would have prejudiced the defendant’s challenge on jurisdiction and the main quest to have the mater referred to arbitration.

80. The defendant deposed that in view of the directives of the Court of Appeal for the case to proceed in this forum, it prayed for an opportunity to file its statement of defence and counter-claim, as well as the supporting witness statements and documents. The defendant was of the view that it had satisfied the criteria under Order 10 Rule 11 of the Civil Procedure Rules, 2010, for setting aside judgment in default.

81. The defendant averred that in the same manner that the plaintiff exploited procedural loopholes to obtain judgment in default, the said judgment ought to be set aside because of failure by the plaintiff to serve summons to enter appearance as required by Order 5 Rule 1 of the Civil Procedure Rules, 2010. The defendant deposed that the claim for deposit of the sum of Kshs. 413,900,005. 00 sought by the plaintiff is oppressive, unconscionable and cannot be the basis for setting aside an interlocutory judgment entered in the absence of proceedings towards it on merit.

82. It further deposed that the said amount would not be in the custody of the defendants, as the same would be released in bits by the defendant’s client, KPA, on meeting certain milestones, some of which the defendant had frustrated by refusal to submit the soft copies of the designs. That further, the defendant had since the year 2016 asked the plaintiff to submit its quotation for supervision of the building works together with the mobilization plan, but the plaintiff had not responded.

83. The defendant stated that as a sign of good faith, the defendant would be willing to deposit in Court the sum of Kshs. 6,612,200 (Kshs. 5,700,000/= and VAT of 16%) which is the amount which in its view, was the balance due to the plaintiff albeit that the plaintiff had not yet complied with its contractual obligation. The defendant contended that thrown away costs are in their own nature minimal and would in their view be commensurate to the costs incurred procuring the judgment in default, but not the interlocutory judgment which was obtained without trial on merit.

84. In the plaintiff’s further affidavit filed on 15th December, 2020 it was deposed that the defendant took directions before this Court on 23rd September, 2019 to file its defence within 14 days but failed to do so, a fact which gave rise to the plaintiff’s right to apply for interlocutory judgment in default of the filing of a defence. It further deposed that the plaintiff made an application for grant of interlocutory judgment and upon verification that the same was procedural, the Deputy Registrar granted the same in accordance with the legal process and the law.

85. The plaintiff denied having acted in bad faith and taking short cuts in making an application for interlocutory judgment as alleged by the defendant. The plaintiff asserted that it acted with prudence in pursuing its case.

86. The plaintiff deposed that the defendant had an opportunity to apply for stay of proceedings before this Court when the ruling was rendered on 23rd September, 2019 but did not do so but opted to take directions to file its defence in 14 days and time started running against it and it do not seek extension of time. It was further deposed that upon expiry of the 14 days, the plaintiff’s right to file an application for judgment in default of filing a defence accrued and it filed the same lawfully and well within the procedure, hence the interlocutory judgment is a valid judgment that ought not to be set aside.

87. It also deposed that the filing of a defence in line with the directions of the Court would not have prejudiced the appeal in any way as it would not amount to admitting to the jurisdiction of the Court and in any case, the defendant had a chance to file an application for extension of time in filing a defence but did not do so, hence its failure to pursue its case cannot be visited upon the plaintiff.

88. The plaintiff stated that the application for stay of proceedings was filed after the interlocutory judgment had been granted hence the said application and subsequent stay of proceedings did not have any bearing on and/or affect the validity of the interlocutory judgment. It further stated that directions of a Court can only be varied when the Court is moved by a party but in this case, the defendant despite having the knowledge failed to, ignored and/or neglected to move the Court to vary its directions and time continued to run against it.

89. The plaintiff’s deponent stated that he had been advised by his Advocate that interlocutory judgment on liquidated sums do not need to go for formal proof as they are final judgment, hence this case was going on formal proof on unliquidated claims only.

90. The plaintiff contended that the annexures provided by the defendant did not in any way demonstrate that it is not a flight risk and further that it has any assets in Kenya and/or bank accounts within the jurisdiction of this Court that are subject to the orders of this Court. It was stated that the certificate of compliance under the Companies Act cannot of itself compel a party to stay in this jurisdiction and/or act as security for setting aside an interlocutory judgment. It was deposed that the contract that is the subject of this suit had been extended to October, 2021, a fact that clearly shows the need for the defendant to deposit money as security as a matter of urgency as with the injunctive orders issued by this Court set aside, it was only a matter of months and the defendant would be able to leave the jurisdiction of this country, thus the reason why the interlocutory judgment ought not to be set aside so that the plaintiff can go for formal proof to finalize the case before the defendant can flee the jurisdiction of this country.

91. It was also averred that the contract that the defendant has with other companies in Kenya are further evidence that it has the means and that it is able to deposit the disputed amount in Court. It was contended that the said contracts are not assets that can be attached to satisfy a Court judgment should the plaintiff win the case. It was stated that it is a matter for substantive justice that in order to set aside a valid judgment of the Court, the defendant should be compelled to provide security against the said judgment by depositing the disputed amount as prayed.

92. It was asserted by the plaintiff that since the Court of Appeal had set aside the injunctive orders issued by this Court, the protective measures that were granted to the plaintiff were in effect lifted hence the need of the defendant to deposit the disputed sums of monies amounting Kshs. 413,900,005. 00 in a joint account for both the plaintiff and the defendant’s Advocates or the Court as security for the plaintiff, since the defendant is a foreigner and would finish construction of the Lamu Port and leave jurisdiction of this Court, hence a flight risk.

93. The plaintiff deposed that it would be in the interest of substantive justice if this Court is inclined to set aside a valid interlocutory judgment of the Court to allow the defendant to file its defence, and defend the suit, to order the defendant to deposit the amount in the said judgment, since injunctive orders were set aside.

94. The plaintiff averred that since the Court of Appeal had made a determination that the matter proceeds before this Court, there are no arbitration proceedings that will be affected by the interlocutory judgment hence there is no need to set aside on that account.

95. It was stated that the claim that it was the Advocate’s fault to fail to comply with the directions of the Court was an unmeritorious excuse that ought not to be used to set aside a valid judgment of the Court without an affidavit from the defendant’s Counsel stating that it was their mistake and not that of their client, and that they are willing to pay for the consequences of the said mistake, and not that of their client.

96. The plaintiff stated that if the Court allows the defendant to file a defence and counter-claim, it should be given the statutory timeline of 14 days to file a defence.

97. On the claim by the defendant that it was never served with summons to enter appearance, the plaintiff deposed that the purpose of the said summons under Order 5 Rule 1 of theCivil Procedure Rules is to put the defendant on notice to enter appearance and defend the suit, but in this case the defendant was served with applications together with the plaint, and entered appearance on 20th May, 2019.

98. It was averred that the defendant was further directed to file its defence within 14 days on 23rd September, 2019 and the interlocutory Judgment was due to default to file a defence and not failure to enter appearance hence order 5 Rule 1 of the Civil Procedure Rules does not apply to this case.

99. In response to the defendant’s offer to deposit Kshs. 6,612,200. 00 in Court, the plaintiff deposed that the defendant was acting in bad faith since that is the amount that the plaintiff is claiming from the defendant as disbursements for doing the designs, which monies the plaintiff already spent and issued the defendant with the bill, but it declined to pay.

100. The plaintiff deposed that the amount of disbursements ought to be paid to the plaintiff and not to the Court and that is what is owed to the plaintiff as stated by the defendant as what should be deposited in Court is the disputed amount of Kshs. 413,900. 005. 00 which this Court already awarded to the plaintiff in the interlocutory judgment.

If the interlocutory judgment should be set aside. 101. It was admitted by the defendant that the contract that forms the subject of this application was expected to end in October, 2021. A copy of the extension granted by the defendant’s client, KPA, was annexure WBK-V to the defendant’s supplementary affidavit. The said annexure is a letter dated 3rd September, 2020 addressed to the defendant’s deponent. It was written by Eng. A.M. Samatar of Kenya Ports Authority. It states as follows in part –“It is noted that the contactor had applied for an extension of time of 462 days from the revised completion date of 23rd October, 2020 to 28th January, 2022. Following your detailed assessment and our subsequent discussions this extension was reduced to 368 days thus the completion date changed from 23rd October, 2020 to 26th October, 2021. Pursuant to sub - clause 8. 4 of the conditions of contract for construction, CCCC’s request for an extension of time for completion, 368 days is hereby approved. It is a condition of this approval that all costs in relation to this extension will be at the contractor’s expense. The project handover date shall therefore be 26th October, 2021. Please instruct the contractor to provide a revised works programme, within 7 days from the date of this letter to demonstrate how this will be achieved.”

102. Bearing the foregoing in mind, this Court will proceed to determine the application herein starting with the proceedings of 23rd September, 2019. On that day Mr. Sang for the defendant sought leave to appeal against the decision on the Preliminary Objection which was the subject of the ruling. In response to the said request, Mrs Ashioya stated that there being no application for stay pending appeal, they sought a near date to enable the matter to be disposed of without rendering the plaintiff’s suit nugatory. She indicated that she had no objection to the request by Mr. Sang.

103. The Court granted leave to the defendant to appeal against the decision of the Court on the Preliminary Objection. The Court directed that the parties be supplied with certified copies of the proceedings and ruling upon payment of requisite Court fees. The Judge also stated as follows –“(iii)In order that matter (sic) is progressed and the hurdle of arbitration having been passed, let the defendant file its defence within 14 days from today together with all the elements under Order 7 Rule 5. iv.Parties to attend court on 4. 11. 2019 for case conference.v.Costs to be in the cause.”

104. It is crystal clear that after the ruling was delivered, the defendant did not apply for stay of proceedings and the ruling delivered on 23rd September, 2019.

105. It therefore follows that the 14 days’ timeline for the defendant to file its statement of defence started running from the date of the ruling.

106. On 18th October, 2019, the Deputy Registrar entered interlocutory judgment against the defendant for failure to file its statement of defence. On 22nd October, 2019, the defendant filed an application seeking stay of proceedings in this matter pending the hearing of the application and the appeal in the Court of Appeal. The only prayer that has not been overtaken by events in the said application is the one for setting aside of the interlocutory judgment.

107. It is apparent that orders for stay of execution and proceedings were granted by the Court of Appeal on 3rd April, 2020 and on 23rd October, 2020 the Court of Appeal in its judgment set aside the injunctive orders given to the plaintiff. The said Court declined to refer the matter to arbitration.

108. In the case relied on the defendant’s Counsel in Kanyitta Nderitu & another v Marios Philotas Ghikas (supra), the Court of Appeal upheld the setting aside of the default judgment therein because there was doubt that the default judgment and all consequential orders made by Mbito J., were made without service of the summons to enter appearance, which was irregular. In the said case, the Court of Appeal expounded on what constitutes a judgment that has been entered regularly and one which has been irregularly entered.

109. In regard to a default judgment that has been regularly entered the Court stated as follows –“Such a defendant is entitled under Order 10 Rule 1 of the Civil Procedure Rules to move the court to set aside the default Judgment and grant him leave to defend the suit. In such a scenario, the court has unfettered discretion in determining whether or not to set aside the default Judgment will take into account such factors as the reason for the failure of the defendant to file his memorandum of appearance or defence, as the case may be, the length of time that has elapsed since the default Judgment was entered, whether the intended defence raises triable issues, the respective prejudice each party is likely to suffer, whether on the whole it is in the interest of justice to set aside the default among others (sic) ……..

110. In an irregular default judgment on the hand, judgment will have been entered against a defendant who has not been served with summons to enter appearance.

111. In such a situation, the default Judgment is set asideex debito justitiae, as a matter of right. The Court does not even have to be moved by a party once it comes to its notice that the judgment is irregular; it can set aside the default judgment on its own motion.

112. In the application herein, the defendant contends that the interlocutory judgment ought to be set aside for failure by the plaintiff to serve summons to enter appearance as required under Order 5 Rule 1 of the Civil Procedure Rules, 2010, which is one of the grounds upon which a Court can set aside an interlocutory judgment. The plaintiff maintained that the purpose for summons to enter appearance under Order 5 Rule 1 of the Civil Procedure Rules is to put the defendant on notice to enter appearance and defend the suit, but in this case the defendant was served with the applications together with the plaint, and they entered appearance on 20th May, 2019.

113. Order 5 Rule 1 of the Civil Procedure Rules provides as follows –“(1)When a suit has been filed summons shall issue to the defendant ordering him to appear within the time specified therein.(2)Every summons shall be signed by the Judge or an officer appointed by the Judge and shall be sealed with the seal of the Court without delay, and in any event not more than thirty days from the date of filing suit.(3)Every summons shall be accompanied by a copy of the plaint;(4)The time for appearance shall be fixed with reference to the place of residence of the defendant so as to allow him sufficient time to appear;Provided that the time for such appearance shall not be less than ten days.(5)Every summons shall be prepared by the plaintiff or his advocate and filed with the plaint to be signed in accordance with subs rule (2) of this rule.(6)Every summons, except where the court is to effect service, shall be collected for service within thirty days of issue, failing which the suit shall abate.”

114. The plaintiff in this case does not make any mention of having taken out any summons to enter appearance and of having effected service of the same on the defendant.

115. In an affidavit of service dated and filed on 20th May, 2019 by Ms June Odhiambo Ashioya, the plaintiff’s Counsel, she averred that on 11th of May, 2019, she received instructions form Oduk and Company Advocate to serve a plaint and verifying affidavit, a Notice of Motion application together with its supporting affidavit and annexures therein filed under certificate of urgency on 9th May, 2019 at the High Court Mombasa together with a Court order dated 9th May, 2019 and a hearing notice dated 10th May, 2019. She further averred that since the documents were heavy and bulky, she was accompanied by a pupil in their law firm by the name Kevin Wilson Ashioya. That they went to Manda Bay in Lamu County and they served the said documents on one Mr. Harrison, the Deputy Site Manager, who had authority to receive such documents.

116. The Court record shows that on 20th May, 2019, the defendant herein filed a memorandum of appearance dated 18th of May, 2019. The defendant then went ahead and filed responses to the two applications filed by the plaintiff, dated 8th May, 2019 and 31st May, 2019.

117. The purpose that summons to enter appearance are meant to serve is to bring to the notice of the defendant that a cause of action has been filed against him/it, and that he/it is required to enter appearance and defend the suit. This Court is guided by the decision of the Court of Appeal in Nanjibhai Prabhundas and Company Ltd v Standard Bank Ltd [1968] EA 670, where the Court held as follows on the objective of service of summons to enter appearance -“….. we definitely appreciate and agree that the object and scope of summons to enter appearance, is to make the defendant aware of the suit filed against him and to afford him time to appear and follow the process of law.”

118. The Court further stated as follows –“In my view,where a defendant chooses to enter an unconditional appearance in proceedings in the court, he must be taken, save in exceptional circumstances such as where the contemporaneously files a Notice of Motion to set aside the proceedings to which he has entered appearance, to have waived any irregularity in the process to which he enters an appearance and thus accepts the jurisdiction of the court. Any statement to the contrary byMacduffJ. in the Jethallal case (supra) is an incorrect statement of the law and should not be followed.” (emphasis added).

119. The defendant herein filed a memorandum of appearance on 20th May, 2019 and proceeded to participate in the proceedings of this case without raising an objection from the outset about the lack of service of summons to enter appearance. Given the said circumstances, this Court concludes that the defendant waived its right of service of summons to enter appearance and cannot be heard to challenge the same through the affidavit filed on 10th November, 2020 after it filed a memorandum of appearance on 20th May, 2019. Such a challenge has been brought too late in the day when so much water has gone under the bridge.

120. It is my finding that in this case, the interlocutory judgment entered on 15th October, 2019 was a regular default judgment as the defendant acquiesced the non-service of summons to enter appearance by its very actions of filing a memorandum of appearance on 20th May, 2019. That being the case, the defendant has the onus of explaining to the satisfaction of this Court the reasons as to why it failed to comply with the directions given by Judge P.J. Otieno requiring it to file a statement of defence within 14 days from 23rd September, 2019.

121. The main explanation given was that the defendant was engaged in preparation of bulky documents for the appeal to the Court of Appeal to challenge the ruling of 23rd September, 2019. Further, that since leave had been sought and granted to appeal the said decision, the plaintiff should not have taken the procedural step of applying for interlocutory judgment but should have waited for the appeal process to run its course.

122. Mr. Sang referred to the plaintiff’s action as having been done in bad faith but in this Court’s opinion, Mrs Ashioya stated the correct legal position that by being granted leave to appeal on its own was not sufficient and could not have been a bar to stop the plaintiff from proceeding on with its case in the best way it knew how, since no order for stay of proceedings pending appeal were sought and granted by this Court. It is apparent from the Court proceedings that the defendant did not foresee the consequences of failing to make such a critical application. Since the 14 days granted for the filing of the statement of defence elapsed on 8th October, 2019, the plaintiff was within its rights to apply for interlocutory judgment in default of the filing of a defence.

123. As Mrs Ashioya aptly put it, the plaintiff did what it thought was prudent by applying for an interlocutory judgment since there was no order staying the proceedings in the High Court.

124. The case of Kenya Broadcasting Corporation v NACADA (supra) cited by Mr. Sang is distinguishable from this case, as in that case (Kenya Broadcasting Corporation v NACADA (supra) there was an application for stay of the suit pending its determination through arbitration and referral of the dispute/matter to arbitration. In the present case, no order for stay of proceedings was sought from this Court when leave to appeal was granted.

125. The defendant relied on the case of Shabban Keah and 2 others v Patrick Omondi Opiyo [2016] eKLR, where the Court set aside a default judgment for failure by the plaintiff to serve summons to enter appearance. This Court notes that the said decision was rendered by a Court of concurrent jurisdiction, and is of persuasive value to this Court.

126. Having heretofore noted in this ruling that the defendant acquiesced to the non-service of the summons to enter appearance, this Court holds that the interlocutory judgment entered in this case was a regular judgment. The said judgment was entered as a result of the defendant’s default in filing of the statement of defence within 14 days as directed by Judge P.J. Otieno on 23rd September. 2019. It was not entered due to failure to enter appearance and file a defence after service of summons to enter appearance.

127. It is worth noting that when the defendant filed an appeal to the Court of Appeal to challenge the jurisdiction of the High Court to hear this case in view of a contractual clause that disputes should be refereed to arbitration, the Court of Appeal in paragraph 32 of its ruling stated thus –“In our view, the preliminary objection was not only improperly worded but was also raised after entry of appearance, and the appellant having acquiesced the jurisdiction of the court.”

128. The defendant having so acquiesced the jurisdiction of this Court and guided by the case of Nanjibhai Prabhundas & Co. Ltd v Standard Bank Limited (supra), I do concur with the plaintiff’s Counsel that the interlocutory judgment is properly on record.

129. In the case of Roofspec & Allied Works Co. Ltd v George Kamau Thuge [2009] eKLR, the Court held that the fact that the application was seeking to have the matter referred to arbitration did not preclude them from filing a defence as the two matters are mutually exclusive.

130. On the issue of deposit of the amount that may be ultimately abiding if the plaintiff is successful in its case, it is notable that the contract the subject of the suit herein was to be completed by 26th October, 2021 as per the letter addressed to the defendant by Engineer Samatar of KPA. It can therefore be safely concluded that the said contract was finalized and the defendant was paid the contract sum by the KPA.

131. In response to the apprehension on the part of the plaintiff that the defendant would most likely leave the jurisdiction of this Court, the defendant relied on an annexed a certificate of compliance and copies of an offer and acceptance of a contract awarded to it by KeNHA. The said certificate states as follows –“Youshin Engineering Corporation a company incorporated in Korea, has this day delivered to me for registration the documents in the particulars specified in section 366 of the companies Act Cap (Cap 486).”

132. Section 366 of the repealed Companies Act, Cap 486 stated as follows-“(1)Foreign companies which, after the appointed day, establish a place of business within Kenya shall, within thirty days of the establishment of the place of business, deliver to the registrar for registration—(a)a certified copy of the charter, statutes or memorandum and articles of the company or other instrument constituting or defining the constitution of the company, and, if the instrument is not written in the English language, a certified translation thereof;(b)a list of the directors and secretary of the company containing the particulars mentioned in subsection (2);(c)a statement of all subsisting charges created by the company, being charges of the kinds set out in subsection (2) of section 96 and not being charges comprising solely property situate outside Kenya;(d)the names and postal addresses of some one or more persons resident in Kenya authorized to accept on behalf of the company service of process and any notices required to be served on the company; and(e)the full address of the registered or principal office of the company.(2)The list referred to in paragraph (b) of subsection (1) shall contain the following particulars with respect to each director and secretary—(a)in the case of an individual, his present Christian name and surname and any former Christian name or surname, his usual postal address, his nationality and his business occupation, if any; and(b)in the case of a corporation, its corporate name and registered or principal office, and its postal address:Provided that, where all the partners in a firm are joint secretaries of the company, the name and principal office of the firm may be stated instead of the particulars mentioned in this subsection.”

133. The certificate of compliance under Section 366 was issued on 4th April, 2013 to the defendant. In this Court’s considered view, the said certificate cannot be regarded as evidence to show that the defendant cannot close its operations in Kenya and go back to Korea.

134. The fact that the defendant was awarded a contract by KeNHA on 6th March, 2014 for the construction of, and supervision of the Mwatate – Taveta (A23) Road Section cannot be evidence of the fact that the defendant has not as at the time of writing this ruling completed its part of the contract and has been paid its dues.

135. To this Court, the apprehension expressed by the plaintiff that the defendant may leave the jurisdiction of this Court is not unfounded. In any event, the defendant having been paid the full contract sum of the subject of this suit, and being a foreign company has the duty to assure this Court and the plaintiff that in the event that the plaintiff will be successful in this suit, the amount that may be decreed will be available to it.

136. The defendant’s position is that if at all this Court makes an order for deposit of the sum that may ultimately be binding on it, then it ought to be the sum of Kshs. 6,612,200,00 and not Kshs. 413,500,900. 05 as claimed by the plaintiff. The plaintiff has referred to the sum of Kshs. 6,612,200. 00 as the cost disbursements it incurred, which should be paid by the defendant.

137. This Court notes that in the plaint filed herein, the amount being claimed by the plaintiff is Kshs. 413,500,005. 00 and not the sum of Kshs. 6,612,200. 00.

138. On the issue of the discretion conferred on Courts in setting aside interlocutory judgments, Order 10 Rule 1 of the Civil Procedure Rules, 2010 is applicable. It provides as follows –“Where Judgment has been entered under this order the court may set aside or vary such judgment and any consequential decree or order upon such terms as are just.” (emphasis added).

139. Such discretion must however be exercised judiciously. In Pitthon Waweru Maina v Thuku Mungira [1983] eKLR Kneller JA stated that –“The court has a very wide discretion under the order and rule and there are no limits and restrictions on the discretion of a Judge except that if the judgment is varied, it must be done on terms that are just.”

140. In Shah v Mbogo [1969] EA 116 at 123, the Court held that –“This 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.”

141. In this matter, the explanation given for failure to file a defence was due to the appeal that had been filed in the Court of Appeal, but as has been said severally, there was no order for stay of proceedings that sought and granted by the High Court and time continued to run as against the defendant in regard to the time it had been given by Judge P.J Otieno to file its statement of defence. As such, the explanation given by the defendant for non-compliance is not a satisfactory one. This Court however notes that the dispute herein involves a large amount of money in the sum of Kshs. 413,900,005. 00 which the plaintiff claims to be owed by the defendant.

142. I have perused the draft statement of defence and counter-claim annexed to the defendant’s supplementary affidavit as exhibit WBK - IX, wherein the defendant avers to have been awarded the tender number KPA/P57. 2012-13/MD by Kenya Ports Authority for consultancy service for the detailed the design, review and supervisions of the construction of the First Three Berths and Associated infrastructure for the Lamu Port at Manda Bay, Lamu. The defendant further avers that upon due negotiations, the plaintiff, and the defendant entered into a sub-consultancy agreement on 18th August, 2017 for the review of the building works and detailed designs (“the sub-consultancy contract”) at an agreed price of Kshs. 19,000,000. 00. The defendant claims that the plaintiff and the defendant were to enter into a separate sub-consultancy contract for the supervision of building works, but the plaintiff declined to submit its quotation despite requests by the defendant.

143. It was also claimed that upon failure to comply with their obligations, particularly submission of the final design report and soft copies of drawings/computer Aided Designs (“CAOS”), the defendant issued the plaintiff with a notice of termination of contract on 04/05/2019, triggering the instant suit.

144. Paragraph 15 of the draft defence states that the tender was awarded to the defendant at the exclusion of the plaintiff who was not a bidder, and that the amount of about Kshs. 413,900,005. 00 denominated in Kes shillings, was not the entitlement of the plaintiff.

145. The defendant in the said statement of defence maintains that the plaintiff was not part of the bidders to the tender but only the defendant in a joint venture with DY engineering, bided for the tender, noting that there was no local participation in the bidding at the material time.

146. The defendant also stated that it had paid the plaintiff about 70% of the Kshs. 19,000,000/= for the work done so far, and that the remaining balance of about 30% was to be paid upon completion of the plaintiff’s obligations.

147. In the draft counter-claim, the defendant claims the sum of Kshs. 181,251,351. 40 for the plaintiff’s alleged breach of contract.

148. From the above excerpts of the defendant’s statement of defence and counterclaim, triable issues have been raised on whether or not there was an agreement that the plaintiff was to be paid 42 % of the contract sum of Kshs. 413,900. 005. 00 or if the amount owed to the plaintiff is the balance of 30% arising from the sub- consultancy contract entered into on 18th August, 2017.

149. To my mind, this is a case that needs to go to trial on merits as it will give the defendant an opportunity to defend itself against the claim by the plaintiff and to prosecute its counter-claim. I am therefore persuaded that I should exercise my discretion in favour of the defendant/applicant. Having noted that the defendant is a foreign company with no known fixed assets in Kenya and also the fact that the completion date for the contract the subject of the claim herein was 26th October, 2021, it is clear to this Court that the plaintiff may have nothing to cushion it against non-payment, in the event that it will be successful in this case. I therefore give a conditional order setting aside the interlocutory judgment. As a condition to the grant of the said order, the defendant shall deposit the amount that may ultimately abide against it if the plaintiff succeeds in its claim.

150. The final orders are that–i.The interlocutory judgment entered on 18th October, 2019 is hereby set aside. As a condition thereof, the defendant shall deposit the sum of Kshs. 413,900. 005. 00 in a joint interest earning bank account in the names of the Advocates on record for the parties herein, within 45 days from today;ii.In default thereof the interlocutory judgment shall stand reinstated;iii.The plaintiff is hereby awarded thrown way costs of Kshs. 100,000/=.It is so ordered.

DATED, SIGNED AND DELIVERED AT MOMBASA ON THIS 15TH DAY OF JULY, 2022. THE RULING HAS BEEN DELIVERED THROUGH TEAMS ONLINE PLATFORM.NJOKI MWANGIJUDGEIn the presence of:Ms Njagi for the defendant/applicantNo appearance for the plaintiff/respondentMr. Oliver Musundi – Court Assistant.