BARCLAYS BANK OF KENYA LIMITED v SPARKLE FOOD MANUFACTURERS LIMITED [2008] KEHC 1124 (KLR)

REPUBLIC OF KENYA IN THE HIGH COURT OF KENYA AT NAIROBI (NAIROBI LAW COURTS)

Civil Appeal 618 of 2000

BARCLAYS BANK OF KENYA LIMITED……..……………APPELLANT

VERSUS

SPARKLE FOOD MANUFACTURERS LIMITED…….….RESPONDENT

JUDGMENT

The facts which gave rise to this appeal briefly may be stated.

The appellant is a banking institution which renders financial services. The respondent which is a limited liability company opened an account No. 12282247 with the appellant on 16th January 1997 which named all the 3 directors namely JULIUS NZIOKA KHAME PETER GAKONO MUIRURI and W.K. KAREITHI as signatories.  The shareholding in the company were as follows:

J. N. Khame      -    400

W. K. Kareithi    -    300

P. G. Muiruri   -    300

On 8th April 1997 shareholders convened an Extraordinary General meeting and passed a resolution to remove J. N. Khame as a director with effect from the same day and was also barred from transacting any business on behalf of the company.  Following that resolution notification of change of directors and secretaries was served upon the appellant as well as the Registrar of Companies.  The notification read in part as follows:-

Mr Julius Nzioka’s name was removed as a director of the company with effect from 8th April, 1997

When the two directors namely W. K. Mureithi and P. G. Muiruri tried to transact the affairs of the company, the appellant refused to allow them to operate the company’s account and blocked the same.  The Respondent filed a suit at Nairobi Milimani Commercial Court being Civil Suit No. 1766 seeking injunctive orders to restrain the appellant from blocking the said account.  The Respondent also sought general damages.  The appellant filed a defence in which it denied the respondent’s claim on the ground that the respondent’s account was opened by the respondents with that express mandate that all the 3 directors would sign jointly for any transaction on the said account and as this mandate has not changed it would not allow the operation of the account by only two directors of the respondent company.  The pleadings were closed and the respondent went to the registry and took a hearing date and served the appellant with a hearing notice.

When the suit came up for hearing the appellant as well as its advocate failed to attend court and the hearing proceeded under the provisions of Order IXA of the Civil Procedure Rules and judgment was delivered on 19th October 2000 in which the trial magistrate awarded  the respondent a sum of Sh. 360,000/= general damages for breach of contract and injury to the plaintiff’s commercial credibility.

On 7th November 2000 the appellant brought a Chamber Summons seeking orders to set aside and or vary the judgment delivered on 19th October 2000 and the defendant be granted leave to defend the suit.  The application was based on the ground that the non-attendance by the defendant or its counsel at the hearing of the suit on 12th October 2000 was due to the mistake of the defendant’s Advocate’s clerk in failing to diaries the hearing date in the concerned counsel’s diary or even the other office diaries and that the Defendant has a plausible defence on record which raises triable issues and the same should not  be shut out.  The court in dismissing the appellant’s application stated that after it had perused the pleadings on general and the defence in particular it does not appear if the defendant has a good defence after all.  The trial court heard the case fully and considered the defence on record before reaching the verdict.

The applicant was served and were not proper service but he did not attend court during the hearing of the suit nor his advocate.  The reason given for non-attendance is that the hearing date was not noted in the office diary due to inadvertence.

The judgment which was entered in favour of the Respondent was in my view a regular judgment which can however be set aside pursuant to Order IXA Rule 10 0f the Civil Procedure Rules which give the court very wide discretion.

The principles to be followed in an application to set aside a judgment were laid out in PATEL V. EA CARGO HANDLING SERVICES LTD 1974 EA 75 at 76 where Duffus P. said:

“I also agree with this broad statement of the principle to be followed.  The main concern of the court is to do justice to the parties and the court will not impose conditions on itself to fetter the wide discretion given to it by the rules.  I agree that where there is a regular judgment as is the case here the court will not usually set aside the judgment unless it is satisfied that there is a defence on the merits.  In this respect defence on merits, does not mean in my view, a defence that must succeed, it means as SHELDON J put it “triable issue”.  That, is an issue which raises a prima facie defence and which should go to trial for adjudication.”

In the instant case it is upon the court to consider whether there is a defence or as often said “a bona fide defence” which ought to go for trial.

The defence on record is that when the Account was opened with the appellant all the 3 directors of the company were named as signatories.  There was express mandate that all the 3 directors would sign jointly for any transaction on the same Account.  Further the director the respondent wanted locked out is the majority shareholder of the company.

I am sure that had the trial magistrate applied the principles to be followed in an application to set aside judgment, he would not have dismissed the appellant’s application to set aside the ex parte judgment.

For the reasons stated above the appellant’s appeal must succeed.  Accordingly I allow the appeal and set aside the ex parte judgment entered in favour of the respondent. On 19th October 2000 and order that the case goes back for retrial before the same court but before a different magistrate of competent jurisdiction.  Costs will be costs in the cause.

Delivered and dated at Nairobi this 23rd  day of May 2008.

J. L. A. OSIEMO

JUDGE