Dolphin Transporters Limited v Bank of India Limited,And By Way Of Counterclaim By First Defendant Binayi Jayantilal Shah,Baadal Chadrakant Shah,Pranji Kanji Vekaria & Kanji Karsan Vekaria [2013] KEHC 7032 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

COMMERCIAL AND ADMIRALTY DIVISION

CIVIL SUIT NO. 98 OF 2011

DOLPHIN TRANSPORTERS LIMITED………….....…....……………...PLAINTIFF

VERSUS -

BANK OF INDIA LIMITED….……...............................................1ST  DEFENDANT

And by way of counterclaim by first defendant

BINAYI JAYANTILAL SHAH ….……..…………..….……............2ND DEFENDANT

BAADAL CHADRAKANT SHAH……………….….……............3RD  DEFENDANT

PRANJI KANJI VEKARIA……...………..…...….….……............4TH  DEFENDANT

KANJI KARSAN VEKARIA…….….….……………….…............5TH   DEFENDANT

RULING

On or about 7th February 2013, the 1st defendant served the 2nddefendant with summons to enter appearance, an amended defence and counter claim as well as other pleadings in this suit. Doubt is removed completely by the affidavit of service sworn by Isaac Miano, a process server, on 11th February 2013. In that amended defence and counterclaim, the 1st defendant prayed for judgment, jointly and severally, against the plaintiff and all the other defendants in the sum of Kshs 3,853,473. 71 together with interest and costs.

The 2nd defendant failed to enter appearance and defence to the action by way of counterclaim within the prescribed time. The 1st defendant thus filed a request for judgmentin default of appearance and defence. Judgment was formally entered on 10th May 2013 as prayed in the suit. In addition, a certificate of costs under rule 68 A (2) of the Advocates Remuneration Order was issued by the Deputy Registrar of the Court. He certified the costs in the sum of Kshs 130,542.

The decree was extracted by the 1st defendant. The decree holder has commenced the process of execution. There is a formal notice to execute filed in Court on 19th September 2013. The 2nd defendant has now presented a notice of motion dated 24th July 2013 seeking to set aside the interlocutory judgment. He craves for leave to defend the suit unconditionally. The 2nd defendant does not seriously contest service of the summons, the amended defence and counterclaim and the other pleadings. His attack on the decree is four-pronged: first, that he was taken ill immediately after service; secondly, that he was incurring heavy expenditure on medicines and could not therefore afford legal counsel; and, thirdly, that he is layman who was unaware of the consequences of failure to defend the suit. Fourthly, the applicant contends that he has a strong defence raisingtriable issues. He thus beseeches the Court to reinstate him to the seat of justice. All those matters are buttressed by his supporting deposition sworn on 24th July 2013 and the annexed draft statement of defence.

The application was vigorously contested by the 1st defendant. There are grounds of opposition dated 13th August 2013. They are on a three-strand: firstly, that no plausible reasons have been put forth to justify the failure to enter an appearance; secondly, that the draft defenceis devoid of merit and raises notriable issue; and, thirdly, that the applicant is not entitled to unconditional leave to defend the action. The 1st defendantthus prayed that the motion be dismissed with costs.

I have heard the rival arguments.Theapplicable legal principles in a matter of this nature are well settled. This court has wide and unfettered discretion to set aside an ex-parte order.  As stated in Shah VsMbogo [1967] E.A 116, the discretion “is intended so 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”.  That decision by Harris J was sustained by the Court of Appeal in Mbogo and another Vs Shah [1968] E A 93.  See also KimaniVsMc Connell [1966] E A 547.

The 2nd defendant was served with the summons, amended defence and counterclaim as well as other pleadings on 7th February 2013. He concedes that service. It is trite that ignorance of the law is not a defence. It cannot thus fall from the lips of the 2nd defendant that, as a layman, he was unaware of the consequences of failing to enter an appearance. I am fortified there by the fact that the served summons bear a clear notice of consequences. The warning is in bold capitals on the face of the summons. The summons served on the 2nd defendant in this case are annexed to the affidavit of service that  I referred to earlier filed in court on 8th March 2013. They state:

“YOU ARE HEREBY REQUIRED within 15 days from the date of service hereof to enter an appearance in the said suit. Should you fail to enter an appearance within the time mentioned above, the 1st defendant may proceed with the suit and judgment may be given in your absence”.

The 2nd defendant was served personally. I have not heard him to say he cannot read or write. He is described in the pleadings as a businessman and guarantor. He is thus a knowledgeable person.At the foot of the summons, there appears further information on how to enter an appearance in person or by advocate. I thus find the allegation that he was unaware of the consequences to be possible but highly improbable. It is untenable.

The 2nd defendant deposes that he was taken ill. He states that as a result, he was out of pocket and not in a position to instruct counsel in the suit. He stated as follows at paragraph 3:

“That due to the illness I spent a lot of money on medicine, doctor’s fees and hospital bills that when I was back to good health I did nothave the financial ability to instruct an advocate. It took sometime(sic) before I had enough to instruct the firm of Anyegah& Company”

I commiserate with the 2nd defendant. Regrettably, he does not annex to his deposition any medical records or certificate, a copy of a hospital bill or even a bank statement to support the claims of sickness or impecuniosity. Since this was a key ground in the motion, he could have beena little more diligent. The 2nd defendant has treated that matter casually and has only himself to blame.In the end, his allegations remain just that; bare allegations. The court has no cogent or empirical evidence to persuade it to exercise its discretion in his favour. I find little merit in that ground.

The last major ground is that the 2nd defendant has a good defence to the action. From what I stated earlier, the interlocutory judgment was regular. The court, if satisfied that there is a bona fidedefence raising triable issues, may still exercise its unfettered discretion to set aside the interlocutory judgement. See generally Osodovs Barclays Bank International Limited [1981] KLR 30, MomanyivsHatimy [2003] 2 EA 600. Those decisions were made in the context of motions for summary judgment. But the principles still hold true.A more relevant decision on the subject  is inPatel vs East African Cargo Handling Services [1974] EA 75. There must be a reasonable and bonafidedefence if a regular judgment is to be set aside. The Court must ask itself whether any useful purpose would be served by toppling the decree. In Magunga General Stores vs Pepco distributors Ltd [1987] 2 KAR 89, it was held as follows;

“First of all a mere denial is not a sufficient defence in this type of action. There must be some reason why the defendant does not owe the money. Either there was no contract or it was not carried out and failed. It could also be that payment had been made and could be proved. It is not sufficient therefore simply to deny liability without some reason given”

I have studied the draft defence annexed to the motion. I cannot say it is frivolous. The 2nd defendant states that he had ceased to be a director of the plaintiff in the year 2006. He states that the guarantees at the heart of the suit were varied without his consent and that the guaranteed debt had been paid by the principal debtor. He alleges fraud. He pleads laches. He denies owing the 1st defendant the sums in the decree. All those allegations may be false or untenable. They may also be well founded. I cannot make a meaningful finding at this stage on the basis of untested evidence or the rebuttal from the bar by the 1st defendant’s learned counsel. That truly will be the province of the trial court. The less I say about it now, the better. I am then not able to say that the statement of defence is not a reasonable traverse to the action.

This court is now enjoined by article 159 of the Constitution and sections 1A and 1B of the Civil Procedure Act to do substantial justice to the parties. Justice is however a two way street. The 1st defendant has a regular judgment. I have found the 2nd defendant was personally served and did not provide a good reason for failure to enter appearance. There is then a sense of obstruction of justice or attempt to delay determination of the matter. Despite having a plausible traverse to the action, I am minded to grant conditional leave to defend.The 2nd defendant must demonstrate good faith. The Court must pacify the 1st defendant for loss of the immediate fruits of its decree. Since there is a regular judgment, the 2nd defendant shall deposit the decretal sum in Court or in an interest earning account of both counsels. Considering, the sum involved, the deposit shall be placed within 60 days. I will also grant the 1stdefendant thrown away costs of Kshs 30,000 to be paid by the 2nd defendant within 60 days.

In the result, the interlocutory judgment entered on 10th may 2013 is hereby set aside upon satisfaction of the two conditions above. The defendant shall file and serve its defence within 14 days. The 1st defendant shall be at liberty to reply within the time prescribed by the Rules. If the 2nd defendant fails to place the deposit or to pay the thrown away costs within the 60 days, the statement of defence shall stand struck out and the interlocutory judgment shall be reinstated.

It is so ordered.

DATED and DELIVERED at NAIROBI this 4th day of October 2013

G.K. KIMONDO

JUDGE

Ruling read in open court in the presence of

Mr. A. A. Ondiek for the 2nd defendant/ applicant.

Ms M. Mathai for Murugarafor the 1stdefendant/ respondent.

Mr. Collins Odhiambo Court Clerk.