Eco Bank Kenya Limited v Linyati Limited [2023] KEHC 26195 (KLR)

Eco Bank Kenya Limited v Linyati Limited (Insolvency Cause E012 of 2021) [2023] KEHC 26195 (KLR) (Commercial and Tax) (30 November 2023) (Ruling)

Neutral citation: [2023] KEHC 26195 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Insolvency Cause E012 of 2021

JWW Mong'are, J

November 30, 2023

Between

Eco Bank Kenya Limited

Petitioner

and

Linyati Limited

Respondent

Ruling

1. The Petitioner/Applicant filed a Notice of Motion application dated 27th March, 2023 pursuant to the provisions of Articles 10, 25, 27, 40, 50, & 159 of the Constitution of Kenya, 2010, Sections 1B, 3A & 80 of the Civil Procedure Act, and Order 45 Rules 1 & 5 of the Civil Procedure Rules 2010 seeking the following orders –i.Spent;ii.Spent;iii.The court be pleased to review paragraphs 47(i) and (iii) of the ruling dated 10th March 2023 allowing the application to set aside the Statutory Demand dated 20th April 2021 with costs;iv.The court do set aside the entire ruling dealing with the Notice of Motion dated 20th April 2021 and order that the Notice of Motion dated 20th April 2021 be determined on priority basis;v.The court do award costs of the Notice of Motion dated 5th November 2021 to the Petitioner; andvi.The costs of the application be awarded to the Petitioner in any event.

2. The application is premised on the grounds on the face of the motion and is supported by affidavits sworn on 27th March, 2023 by Allen Waiyaki Gichuhi Sc, learned Counsel for the Petitioner and John Wambugu, the Petitioner’s Senior Legal Officer. In opposition thereto, the Respondent filed a replying affidavit sworn on 18th July, 2023 by Stephen Gichohi, the Respondent’s Director.

3. The Petitioner’s case is that the application dated 20th April, 2021 was never reserved for ruling thus the ruling delivered by this Court on 10th March, 2023 was supposed to be with respect to the application for joinder dated 5th November, 2021 and not both applications dated 20th April, 2021 and 5th November, 2021 as is the case.

4. The Petitioner averred that the Court made a grave mistake and error when it delivered a ruling on the two applications without affording the Petitioner its Constitutional right to a fair hearing thus condemning it unheard contrary to the provisions of Article 50 of the Constitution. It further averred that, its submissions dated 29th October, 2021 in opposition to the application dated 20th April, 2021 were never considered since the Court only heard submissions on the joinder application. In addition, the Respondent never filed its written submissions to the application dated 20th April, 2021.

5. The Petitioner stated that the Court at Paragraph 41 of its ruling dated 10th March, 2023 holding that a bank is not entitled to any compensation in the event that it is not in a position to recover the sums advanced during an exercise to sell the charged property, occasioned a grave miscarriage of justice that has affected the entire banking industry. The said holding is fatally flawed as it has contravened the law on guarantees and affected the concept of suretyship by holding that guarantors were exonerated from any liability if the charged property was sold, thus it must be set aside with immediate effect.

6. The Respondent in opposition to the instant application deposed that when writing the ruling dated 10th March, 2023, this Court extensively considered the Petitioners replying affidavit sworn by Edith Wanjiku and written submissions dated 28th October, 2021 filed in opposition to the application dated 20th April, 2021, by reproducing their contents in its ruling dated 10th March, 2023.

7. The Respondent averred that there is nothing wrong with the Court’s finding at paragraph 35 of its ruling that the Petitioner cannot purchase the property of the chargee and still go after the guarantors to recover the sums owed. It further averred that the Court was persuaded that the Petitioner was adequately protected, and as a result it made an order striking out the statutory notices. It was stated by the Respondent that the instant application is an appeal and that the Petitioner was inviting this Court to sit on appeal of its own decision rather than challenge the said decision at the Court of Appeal.

8. The application herein was canvassed by way of written submissions that were highlighted on 16th October, 2023. The Petitioner’s submissions were filed on 30th June, 2023 and 15th September, 2023 by the law-firm of Wamae & Allen Advocates, whereas the Respondent’s submissions were filed by the law firm of Kithinji Marete & Company Advocates on 15th August, 2023.

9. Mr. Gichuhi (SC), learned Counsel for the Petitioner submitted that it is trite law that a lender can choose the manner in which it chooses to exercise its statutory power of sale without limitation as to which security should be pursued first. He relied on the Court of Appeal case of Mutiso V Mutiso [1984] eKLR where it was held that it is a fundamental principle of justice that before an order or decision is made, the parties and particularly the party against whom the decision is to be made should be heard. Senior Counsel further relied on the Court of Appeal case of Standard Chartered Financial Services Limited & 2 others v Manchester Outfitters (Suiting Division) Limited (Now Known as King Woollen Mills Limited & 2 others [2016] eKLR and asserted that this Court has residual jurisdiction to review its decisions to which there is no appeal.

10. Mr. Marete, learned Counsel for the Respondent referred to the provisions of Order 45 of the Civil Procedure Rules 2010 and submitted that the application herein does not meet the threshold for the grant of orders of Review. He further submitted that having made its decision on the facts before it, this Court is functus officio, and the only route available would have been an appeal to the Court of Appeal. In opposition to the instant application, learned Counsel relied on the case of National Bank of Kenya Limited v Ndungu Njau [1997] eKLR where the Court of Appeal considered what constitutes and error on the face of the record and held that misconstruing a statute or other provision of the law cannot be a ground for review. Learned Counsel urged this Court to be guided by the Court of Appeal’s holding in Nyamogo and Nyamogo Advocates v Kogo (2001) 1 E.A 173 where it was held that mere error or wrong view is certainly no ground for a review although it may be for an appeal.

11. In rejoinder, Mr. Gichuhi (sc) submitted that it was not denied that the Respondent’s Advocates insisted on having the joinder application determined first before the main application, and only the joinder application was prosecuted and not the application dated 20th April, 2021. He cited the Court of Appeal case of Gatirau Peter Munya v Dickson Mwenda Kithinji & 2 others [2014] eKLR and further submitted that it was unconscionable for the Respondent to seek to benefit from a ruling where it never filed submissions and deliberately caused all the adjournments leading to the delay in the fair determination of the matter.

Analysis And Determination 12. I have considered the instant application, the grounds set on its face, and the affidavits filed in support thereof. the replying affidavit by the Respondent and the written as well as oral submissions by Counsel for parties, and I am of the considered view that the issues that arise for determination are –i.Whether this Court should review paragraphs 47(i) and (iii) of its ruling dated 10th March 2023; andii.Whether costs of the Notice of Motion application dated 5th November 2021 should be awarded to the Petitioner.iii.Whether this Court should review paragraphs 47(i) and (iii) of its ruling dated 10th March 2023.

13. The law on review applications is found under Section 80 of the Civil Procedure Act Cap 21 Laws of Kenya and Order 45 of the Civil Procedure Rules 2010. The Court of Appeal in the case of Sanitam Services (E.A.) Limited V Rentokil (K) Limited & Another [2019] eKLR held as hereunder with regards to applications for review of an order or judgment -“Jurisdiction to review a judgment or order of a court is donated by Section 80 of the Civil Procedure Act and Order 45 Civil Procedure Rules. By those provisions of law any person considering himself aggrieved by a decree or order from which an appeal is allowed but from which no appeal has been preferred or is aggrieved by a decree or order by which no appeal is allowed and who from the discovery of new and important matter or evidence which after the exercise of due diligence was not within his knowledge or could not be produced by him at the time when the decree was passed or the order made or on account of some mistake or error apparent on the face of the record or for any other sufficient reason – a person who fits within those categories may apply for a review of judgment or to the court which passed the decree or made the order and this should be done without unreasonable delay”.

14. It is trite law that an application for review of an order or judgment is only made in instances where there was a mistake or error apparent on the face of the record. The Court of Appeal in the case of National Bank of Kenya Limited v Ndungu Njau (Supra) cited by the Respondent held as hereunder with regards to applications for review of an order or judgment -“A review may be granted whenever the court considers that it is necessary to correct an apparent error or omission on the part of the court. The error or omission must be self-evident and should not require an elaborate argument to be established. It will not be a sufficient ground for review that another Judge could have taken a different view of the matter”.

15. Further, in Muyodi v Industrial and Commercial Development Corporation & Another [2006] 1 EA 243 the Court of Appeal in dealing with a similar application held that –“In Nyamogo and Nyamogo v Kogo [2001] EA 174 this court said that an error apparent on the face of the record cannot be defined precisely or exhaustively, there being an element of indefiniteness inherent in its very nature, and it must be left to be determined judicially on the facts of each case. There is real distinction between a mere erroneous decision and an error apparent on the face of the record. Where an error on a substantial point of law stares one in the face, and there could reasonably be no two opinions, a clear case of error apparent on the face of the record would be made out. An error which has to be established by a long-drawn process of reasoning or on points where there may conceivably be two opinions can hardly be said to be an error apparent on the face of the record. Again, if a view adopted by the court in the original record is a possible one, it cannot be an error apparent on the face of the record even though another view was also possible. Mere error or wrong view is certainly no ground for a review although it may be for an appeal. This laid down principle of law is indeed applicable in the matter before us.”

16. What is discernible from the aforementioned decisions is that an error apparent on the face of the record must be a self-evident error which need not require elaborate arguments to support it. The Petitioner averred that the error apparent on the Court’s ruling dated 10th March, 2023 was that the said ruling contravened the law on guarantees and has affected the concept of suretyship.

17. It is not disputed that the Petitioner had filed a replying affidavit and written submissions in opposition to the application dated 20th April, 2021 but the Respondent had not filed written submissions. Upon perusal of the record, I note that at no point did the Court give directions to the effect that the application for joinder dated 5th November, 2011 shall be heard first neither did the Respondent make an application to that effect. I am of the considered view that it is misleading for the Petitioner to assert that by virtue of this Court delivering a ruling with respect to the application dated 20th April, 2021, it was condemned unheard yet it had filed a replying affidavit and submissions in opposition to the said application which were considered by the Court in its ruling dated 10th March, 2023 as can be seen at paragraphs 13-25 of the said ruling.

18. In the case of Mutiso v Mutiso (Supra) cited by the Petitioner, the Court of Appeal held that it is a fundamental principle of justice that before an order or decision is made, the parties and particularly the party against whom the decision is to be made should be heard. For this reason, the Petitioner’s assertion that a ruling on the application dated 20th April, 2021 was not supposed to be prepared since the Respondent had not filed submissions is misconceived. This is because, this Court is of the view that submissions can be equated to a lawyer’s marketing language used to persuade the Court to render a decision in favour of a particular party, what is important in prosecution of applications is the affidavits as they contain the evidence relied on by a party in support or in opposition to a particular set of facts.

19. Accordingly, since all the parties herein had filed their affidavits in support and in opposition to the application dated 20th April, 2021, and the Respondent who did not file submissions is not complaining and/or alleging that it was condemned unheard, this Court finds that all the parties were accommodated and given a chance to ventilate their case before it retired to write its ruling dated 10th March, 2023 with respect to the application dated 20th April, 2021. Further, the Petitioner having filed all its pleadings with respect to the said application, nothing would have changed even if the Court was to write a ruling for the said application at a later date.

20. On the issue of the Court’s interpretation of the provisions of Section 97 of the Land Act and the impact it has on the banking industry, I am bound by the Court of Appeal’s decision in Nyamogo and Nyamogo Advocates v Kogo [2001] 1 E.A 173 that a mere error or wrong view is certainly no ground for a review although it may be for an appeal. Further, I am of the considered view that determining whether or not the Court’s interpretation of the provisions of Section 97 of the Land Act was correct and its impact on the banking industry will involve a long-drawn process and will require an elaborate argument thus it does not qualify as a ground for review. From the foregoing, I am of the view that if at all the Petitioner was dissatisfied and/or aggrieved with the Court’s finding in its ruling dated 10th March, 2023, it should have lodged an appeal against it at the Court of Appeal. To this end, I agree with Counsel for the Respondent that this application is an invitation for this Court to sit on Appeal of its own decision an act which is frowned upon in law.

Whether costs of the Notice of Motion application dated 5th November 2021 should be awarded to the Petitioner. 21. Costs are provided for under Section 27 of the Civil Procedure Act Cap 21 of the laws of Kenya which states as hereunder –1. Subject to such conditions and limitations as may be prescribed, and to the provisions of any law for the time being in force, the costs of and incidental to all suits shall be in the discretion of the court or judge, and the court or judge shall have full power to determine by whom and out of what property and to what extent such costs are to be paid, and to give all necessary directions for the purposes aforesaid; and the fact that the court or judge has no jurisdiction to try the suit shall be no bar to the exercise of those powers:Provided that the costs of any action, cause or other matter or issue shall follow the event unless the court or judge shall for good reason otherwise order.2. The court or judge may give interest on costs at any rate not exceeding fourteen per cent per annum, and such interest shall be added to the costs and shall be recoverable as such.

22. It is now settled law that costs follow the event unless the Court for good reason orders otherwise. In Orix (K) Limited vs Paul Kabeu & 2 others [2014] eKLR the Court held as hereunder with regards to costs -“...the court should have been guided by the law that costs follow the event, and the plaintiff being the successful party should ordinarily be awarded costs unless its conduct is such that it would be denied costs or the successful issue was not attracting costs. None of the deviant factors are present in this case and the court would still have awarded costs to the plaintiff, which I do.”

23. Upon perusal of the ruling dated 10th March, 2023, it is evident that the Court was silent on the issue of costs with respect to the application dated 5th November, 2021 despite the fact that the Petitioner was the successful party in the said application, thus it is only fair and just that it be granted costs of the said application in the absence of any reasons not to. For this reason, I am persuaded that there is a mistake and/or error apparent on the face of the record with regards to the award on costs hence this Court finds that the Petitioner is entitled to an order for costs for the application dated 5th November, 2021.

24. The upshot is that the application dated 27th March, 2023 is partly successful and as a result I make the following orders –i.Costs of the Notice of Motion dated 5th November 2021 are hereby awarded to the Petitioner;ii.In view of the fact that the instant application, responses and submission shave been replicated in HCCOMM Nos. E009 of 2021, E010 of 2021, E011 of 2021 and E012 of 2021, this ruling shall also apply to the said matters; andiii.Each party to bear its own costs.

Orders accordingly.

DATED, SIGNED AND DELIVERED VIRTUALLY AT NAIROBI THIS 30TH DAY OF NOVEMBER, 2023. ………………………………………J.W.W. MONG’AREJUDGE