HOUSING COMPANY OF EAST AFRICA LIMITED V BOARD OF TRUSTEES NATIONAL SOCIAL SECURITY FUND & ANOTHER [2013] KEHC 2701 (KLR)

REPUBLIC OF KENYA

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

Civil Case 543 of 2007 [if gte mso 9]><![endif]

HOUSING COMPANY OF EAST AFRICA LIMITED …........… PLAINTIFF

VERSUS

THE BOARD OF TRUSTEES

NATIONAL SOCIAL SECURITY FUND ………………. 1ST DEFENDANT

KISIMA MANAGEMENT LIMITED ………………..…. 2ND DEFENDANT

R U L I N G

1. The Application for determination before Court is dated 25 October 2011 brought by the Plaintiff seeking that the Order of injunction granted pursuant to an application dated 19 October 2007 as against the first Defendant, be discharged, varied or set aside and the second Defendant be allowed to deal with the suit property L. R. No. 209/11408 (hereinafter “the suit property”) as it deems fit. It also asks that the Caveat lodged against the title of the suit property be lifted so that the Transfer of the same in favour of the second Defendant do proceed. The Application is brought on the grounds that it has been more than 4 years since the suit was filed in Court and the Plaintiff has deliberately failed and/or neglected to set down the suit for hearing while, in the meantime, enjoying the restraining Orders as against the first Defendant, all this time. The second Defendant noted that it and the first Defendant had entered into a sale agreement for the suit property which such sale had been successfully concluded before the injunction Orders were issued. The first Defendant had been paid the entire purchase price as per the sale agreement being Shs. 85 million.

2. The Application was supported by the Affidavit of one Humphrey Ndegwa, a director of the second Defendant dated 25 October 2011. The deponent noted that the first and second Defendants had agreed terms as to the sale of the suit property and the Agreement called for the payment of the agreed consideration of Shs. 85 million upon the execution thereof. Such monies had been paid in full. The deponent continued to relate the history of the matter before Court and noted that the second Defendant had filed a Notice of Motion on 8 February 2008 which sought to discharge, vary the and/or set aside the injunction granted to the Plaintiff. That application was however dismissed by Khaminwa J. on 23 February 2009. The deponent had been advised by the second Defendant’s counsel on record and that even though the second Defendant’s said application was dismissed, it was now more than 12 months since the injunction was affirmed. Order 40 Rule 6 provides that an injunction should lapse within a period of 12 months from the date of the grant thereof unless there are any sufficient reasons that the Court would order otherwise.

3. The Application was opposed by the Plaintiff who filed a Replying Affidavit thereto sworn by its Executive ChairmanJoseph Macharia Muthama dated 23 November 2011. The deponent set out extensively, the history of the suit as before this Court including the Application by the second Defendant dated 8 February 2008 which sought to vary, discharge or setting aside the injunctive Orders as detailed above. The deponent was of the opinion that the determination of the second Defendant’s said Application by Lady Justice Khaminwa in favour of the Plaintiff, had bearing on the present application before court in that it wasres judicata. The Plaintiff set out in detail the dates from which the hearing of this suit had been fixed by consent or otherwise and the dates upon which the same had been taken out of the hearing lists largely due to the shortage of judges. The deponent concluded his Replying Affidavit by stating that in his opinion the second Defendant’s application wasres judicata, an abuse of the process of this Court and that it is a disguised Appeal against the findings of a Judge of concurrent jurisdiction.

4. The second Defendant’s submissions filed herein on 1 December 2011 repeated the grounds set out in the Application and the prayers sought therein. Thereafter the second Defendant went into great detail in relation to the background of the dispute between the parties. At paragraph 7 of the its submissions, the second Defendant put forward 3 issues that it felt needed to be determined by this Court:

“(a) Whether in view of Order 40 Rule 6 and 7 of the Civil Procedure Rules the injunction issued on the 23rd February 2009 can be allowed to stand?

(b) Whether the suit should be dismissed for want of prosecution?

(c) Whether the matter in issue in the application isres judicata as alleged by the Plaintiff in light of the change circumstances and provisions of law?”

The second Defendant then set out the provisions of Order 40 rules 6 and 7 as read together with Order 54 rule 2. It noted that the injunction was obtained on 23rd February 2008 over five years ago now and, in its opinion, the same had lapsed. There was no question of prejudice as the parties had sufficient notice and could, at least, have come to court to seek the extension of the injunctive orders as a result of the changed circumstances and the new provisions under the Civil Procedure Rules, 2010. The second Defendant referred the court to the case ofMobil Kitale Service Station v. Mobil Oil Kenya Ltd & Anor. Kisumu HCCC No. 205 of 1999 (unreported). Warsame J. had held in that case:

“….. The object of granting an interlocutory injunction is to protect the plaintiff against injury by violation of his right for which he could not be adequately compensated in damages recoverable. While an interlocutory injunction being in an equitable remedy would be taken away (discharged) where it is shown the person’s conduct with respect to matters pertinent to the suit does not meet the approval of the Court which grant the orders which is the subject matter. The orders of injunction cannot be used to intimidate and oppress another party.”

5. In this regard, the second Defendant maintained that it was experiencing immense prejudice and oppression due to the interlocutory orders obtained by the Plaintiff in that while it had paid Shs. 85 million to the first Defendant for the purchase of the suit property, it still had not obtained possession thereof. One of the reasons why the second Defendant had failed to obtain possession of the suit property was because the Plaintiff herein had failed to prosecute this matter expeditiously by having it set down for hearing and determination. It was of the opinion that the Plaintiff had acted in an inequitable manner which did not entitle it to continue enjoying the injunction which is an equitable remedy. The second Defendant also maintained that the Plaintiff was guilty of laches for failing to take any concrete steps to have the matter expedited and set down for hearing. The second Defendant referred to the case ofBernard Ochola Ngani & Ors v. Mathayo Ndo & 2 Ors HCCC No. 270 of 2001 which I did not consider pertinent to this application as it referred to an application for dismissal of suit for want of prosecution. The second Defendant also cited the Fitzpatrick case (1962) 2 All ER 657and Nilani v. Patel & Ors (1969) EA 341. The second Defendant noted that the necessary steps in this case would be to comply with Order 3 rule 2 of the Civil Procedure Rules by the Plaintiff filing a list of documents, witness statements and lists of witnesses. The second Defendant observed that the Plaintiff, in its Replying Affidavit, had alleged that it had not been possible to set the suit down for hearing due to various applications which had been made in the course of time by the various parties and the various adjournments that had been sought by both the Plaintiff as well as the other parties. It concluded its submissions by stating that, in its opinion, the Plaintiff had turned this matter into a circus by sitting on the injunction and taking the procedural rules, casually. In order to illustrate the Plaintiff’s laches, the second Defendant cited the case ofSouth Nyanza Sugar Co. Ltd v. Dalmas Mbogo (2010) eKLR wherein my learned brother Musinga J. had found:

“The appellant has not given any explanation as to why she has not moved the court in any way for over five years and neither has she explained why she deliberately failed to comply with the court order issued on 23rd May 2005. This clearly shows that the appellant’s has lost interest in this appeal. The appellant’s conduct is outrightly an abuse of the court process and the long delay in disposal of this appeal is prejudicial to the respondent who is unable to enjoy the fruits of his judgement.”

6. Finally, the second Defendant, in its submissions, touched upon the question ofres judicata. It admitted that although the issues raised in the application before court may seem similar with the second Defendant’s previous application, there was a difference. The present application was brought under the very specific rule of Order 40 rule 6 while the previous application had been brought under sections 3A and 63 (e) of the Civil Procedure Act and Order 39 rule 4 of the Civil Procedure Rules. It maintained its position that the injunction had lapsed. It also noted that in the previous application, the issue raised was that the Plaintiff had failed to disclose material facts in respect of the suit property and had the same been placed before this Court, it would have been in a better position to give an informed decision on the same. The second Defendant concluded that the logical and obvious step that the Plaintiff herein should have taken was to approach the Court to extend the validity of the injunction by disclosing sufficient reasons for the same.

7. The Plaintiff’s submissions were filed herein on 16 December 2011. It is interesting to note that it has taken until the 5 March 2013 for the submissions to come before this Court for highlighting. The Plaintiff noted that its list and bundle of authorities in relation to this Application had been filed on 24 November 2011. It thereupon set out the facts in relation to the application before Court. The Plaintiff’s main submission was that the second Defendant had been in a rush to push through its sale agreement with the first Defendant in order to achieve only one aim – to lock out the Plaintiff whose claim and interest both Defendants had appreciated but which they were prepared to ignore and disregard. It maintained that had the conspiracy by the Defendants succeeded, the same would have defeated the Plaintiff’s subsisting Sale Agreement with the first Defendant as well as the Plaintiff’s investment in the suit property. With reference to the finding of Lady Justice Khaminwa in respect of the second Defendant’s previous application dated 8 February 2008, the Plaintiff set out what it considered that the Judge had covered in her critical findings:

“a)The Plaintiff had demonstrated a prima facie case with a good chance of success.

b)The Plaintiff is likely to suffer loss which cannot be compensated with damages since the Plaintiff had passed possession of a part of the suit property to a third party with the approval of the 1st Defendant. Further, the Plaintiff had moved in to develop the suit property.

c)The Agreement between the 1st and 2nd Defendants came after the Agreement between the Plaintiff and the 1st Defendant.

d)The 2nd Defendant should have made enquiries before purporting to buy the suit property in which case the 2nd Defendant would have learnt that the Plaintiff was in possession at the time the Agreement between the 1st and 2nd Defendants was made.

e)The Plaintiff is entitled to maintain the caveat lodged against the suit property for as long as the Plaintiff’s claim to be registered as a proprietor of the suit property remains.

f)The balance of convenience in this case tilts in favour of the Plaintiff”.

Thereafter, the Plaintiff outlined what it felt were the issues arising for determination as follows:

“1. Is the Plaintiff to blame for the alleged delay in prosecution of    this Suit?

2. Is the 2nd Defendant entitled to a discharge of the injunction under the provisions of Order 40 Rule 6 of the Civil Procedure Rules, 2010 (“the Rules”)?

3. Is the Plaintiff’s Application Res Judicata?

4. Should the Suit be dismissed for want of prosecution?”

8. As regards the second Defendant’s allegation that there had been delay in prosecuting this suit, the Plaintiff referred the Court to paragraph 13 of its Replying Affidavit. The Plaintiff maintained that the delay was attributable to the following factors:

“a)Two (2) pending Applications one by the Plaintiff, the other by the 2nd Defendant.

b)The 2nd Defendant’s act of seeking adjournments on at least two (2) occasions when the Plaintiff was ready to proceed, namely, on 22nd October, 2010 and 4th April, 2011.

c)One occasion when the 2nd Defendant induced an adjournment by serving its Replying Affidavit just a few minutes before the matter was called for hearing.

d)The adjournment of the case by the Court on one occasion on 21st February 2011 when the Plaintiff was ready to proceed.

e)The negotiations aimed at settling the suit which endured for the better part of this year. Indeed on 4th April, 2011 the Plaintiff’s Advocate, while strenuously opposing the 2nd Defendant’s Application for adjournment prayed that if the adjournment was to be granted, the Court should grant a near hearing date. However, the 2nd Defendant expressed confidence that the matter would be settled out of Court and urged the Court to list the matter for mention as opposed to hearing. The Court obliged and listed the matter for mention.

f)It is now months since then and the 1st Defendant (which was convening and conducting negotiations meetings) has exhibited lack of interest in negotiations, hence our letter dated 26th September, 2011 advising the Defendant that since negotiations have failed to bear any fruit, the Plaintiff would be resorting to the pending litigation.

g)On one occasion when the matter was adjourned after it was listed as a mention in the day’s cause list rather than a hearing”.

9. Continuing with its submissions, the Plaintiff examined in depth the reasons for the delay in its prosecuting this suit but then set out the provisions of Order 40 Rule 6 of the Civil Procedure Rules, 2010 pointing out that injunctions would lapse after a period of 12 months from the date of their being granted unless there was “any sufficient reason” for the Court to order otherwise. The Plaintiff also drew the Court’s attention to the revocation and transitional provisions as set out in Order 54 of the Civil Procedure Rules, 2010. It noted that the injunction in its favour was granted on 23 February 2009 before the new Rules came into effect. The Plaintiff also pointed out the Supreme Court’s Advisory Opinion Application No. 1 of 2011 with reference to the Supreme Court Rules. It was the Plaintiff’s opinion that this Court should adopt the Supreme Court’s opinion as regards its Rules in relation to the Civil Procedure Rules, 2010. It maintained that Rule 56 of the Supreme Court Rules, 2011 just like Order 54 of the Civil Procedure Rules, 2010 allowed application of the Rules to pending proceedings. In its advisory Ruling, the Supreme Court detailed:

“With regard to the rules, we are of the view that they were made and gazetted long after these proceedings were filed and the Application heard. The Rules came into force on 10th October, 2011 when the Ruling was still pending… We find that it would be truly prejudicial, onerous and oppressive to enforce the application of the rules without taking into account what has already taken place. In any case, the law is clear that generally, the law does not apply retroactively. It would be a violation of the rights of the parties herein representing Kenyans to direct that the Rules come first and the record/proceedings must wholly conform to the Rules.”

10. The Plaintiff also referred the Court to the finding of the Court of Appeal inKenya Commercial Bank Ltd v. Kenya Planters Co-operative Union (2010)eKLR as follows:

“Perhaps, in addition, I should add that since the application before me was principally grounded on sections 3A and 3B of the Appellate Jurisdiction Act, the decision by this Court in the case of MONGIRA supra that the list of factors to be considered is not exhaustive, was prophetic in that after the enactment of the O2 principle, this Court is statutorily required when exercising its powers either under the Act or the rules made pursuant to the Act or in interpreting the provisions of the Act or the rules to give effect to the overriding objective (which was elsewhere baptized “O2 principle” (or “the oxygen principle”)). Under the O2 principle, the court’s mandate in each case or appeal is to act justly and as far as is practicable, to act fairly. Expressed differently and broadly, the principal aims of the O2 principle is to achieve or attain justice, and fairness in the circumstances of each case; reduce cost and delay; deal with each matter in ways which are proportionate; and ensuring that the parties are on an equal footing and finally, allotting to each case an appropriate share of the court’s resources, while taking into account the need to allot resources to other cases.

In my opinion, in the circumstances described in the case before me I would fail in my duty to give effect to the O2 principle if I did not grant the order for extension as sought so as to enable the parties to have the merit of the application determined outside the prescribed period. The reason for this is that, although the court rules have a very special value as handmaidens of justice as often expressed, and in ensuring certainty, efficiency, predictability and curtailing arbitrariness, the O2 principle now demands that whenever this Court is exercising any of its powers under the Act or the rules or interpreting them, the Court must give effect to the O2 principle. Therefore since in the circumstances of this case, I am called upon to exercise the powers conferred on me by Rule 4 of this Court’s rules, I must as a matter of statute law give effect to the O2 principle. The net effect in my view is that, while the four factors will continue to assist the court in assessing whether it has discharged its duty under sections 3A and 3B, it is the considerations set out in the sections which take precedence and which must prevail. The considerations are in my view not exhaustive because the concept of good management is vast. Thus, technicalities of procedure, non-compliant precedents or the exercise of power in a manner that would defeat the court’s core business of acting justly, would have to give way. Indeed, I could not agree more with the recent decision of this Court in the case of DORCAS NDOMBI WASIKE V BENSON WAMALWA KHISA & 2 OTHERS ELD C.APPEAL NO. 87 of 2004 where the Court held interalia:-

“The overriding objective principle has been introduced into our law by a statute and is is, inherently a principle of substantive law. We agree as submitted by Mr. Amolo that, where there is a conflict between the statute (overriding objective principle) and a subsidiary legislation (rules of this Court) the statute must prevail. A conflict is however unlikely to arise because section 3A (1) of the Act not only enacts the overriding objective principle but also expressly superimposes the overriding objective to the application of the existing rules with the result that the Court is enjoined to apply the overriding objective principle in both the substantive and procedural matters. That is to say that, the rule should also be construed in a manner which facilitates the just, expeditious proportionate and affordable resolution of the appeals”.

11. In concluding its submissions, the Plaintiff submitted that the second Defendant’s application before court was similar to its previous application for the discharge of injunctive Orders which was dismissed by this Court on 23rd February 2009. The Plaintiff maintained that as a result, the current application before this Court wasres judicata. By Order 17 rule 2 of the Civil Procedure Rules, under the heading “Prosecution of Suits”, the court, where no step has been taken by either party for one year, may dismiss the suit and under rule 2 (2) any party to the suit may also apply for its dismissal. The Plaintiff noted that in this case, the second Defendant’s current application before court was made when the Plaintiff’s Motion for amendment of the Plaint had been given a date only a month away. As a consequence, the Plaintiff submitted that that this case fell outside the rules for dismissal of a case for want of prosecution. Finally, the Plaintiff detailed that mention must be made of the two Rulings delivered in this Court inHarbinder Singh Sethi v Wilhelm & Anor (2005) eKLR andSunflag Textiles & Knitwear Mills Ltd & Anor. v. Lijutsa (2007) eKLR as per Visram J. (as he then was) and Osiemo J.respectively. In the former case, the learned Judge found that both parties were equally to blame for the delay in prosecuting this suit and consequently it would be highly unjust to remove a party from the seat of justice. In the latter case, the Judge held:

“But the power to dismiss an action for want of prosecution without giving the Plaintiff the opportunity to remedy his fault will not be exercised unless the court is satisfied that there has been inordinated and inexcusable delay on the part of the Plaintiff. In the instant suit the delay is excusable on the ground that there were proposals for settlement out of court which is conceded by counsel for the Defendant.”

12. The second Defendant’s Application before Court was filed under Certificate of Urgency on 25 October 2011. Setting aside for the moment the time it has taken for the Application to be aired before Court and for the written submissions to be filed, I have examined the Court record prior to that date. Apart from the second Defendant’s application to lift the injunctory Orders which was dismissed by this Court (Khaminwa J.) on 23 February 2009, there was an application by the Plaintiff to amend the Plaint dated 2 August 2010. Although this application came before Court on a number of occasions, it is to be noted that on the 4th April 2011, Mr. Mwenesi, the then advocate for the second Defendant, informed the Court that the parties were likely to settle all the whole of the case given some 30 - 45 days. Eventually by 28th July 2011, the Court was informed that settlement negotiations had broken down and the Judge directed that the Plaintiff’s said application to amend its Plaint be set down for hearing before any Judge. Prior to the same coming for hearing, the second Defendant filed its present application before Court. Looking at these events, I can say that no blame can attach to either party herein for the delay in prosecuting this case. I was impressed and do hereby adopt the finding of the Supreme Court in the Advisory Opinion Application No. 1 of 2011 Re the Commissioner for the Implementation of the Constitution as set out above as well as the finding of the Court of Appeal in theKenya Commercial Bank case (supra). I also find that there were proposals for settlement out of court which led to a delay (if you can call it that) from April 2011 to October 2011. Consequently, I take cognizance of the finding ofOsiemo J.in theSunflag Textiles case (also supra) and adopt the same in this Ruling. Finally, I have perused the Notice of Motion dated 8 February 2008 filed by the second Defendant which sought that the Order of injunction granted by the Court pursuant to the Plaintiff’s application dated 19 October 2007, be discharged, varied and/or set aside. In my view, this application by the second Defendant dated 25th October 2011, is brought on exactly the same grounds as the previous one, save that the second Defendant has emphasised the delay in the Plaintiff in prosecuting this suit. To this end, I do not consider that the second Defendant’s said Application herein isres judicata, as the delay in so prosecuting was not ventilated before Khaminwa J.

13. However, I have already found that I do not think that the delay in prosecuting this suit was necessarily the fault of any party herein. As a result, I dismiss the second Defendant’s said Application dated 25th October 2011 but with no order as to costs. The Plaintiff is hereby directed to set down the suit for hearing within 21 days of the date hereof. Order accordingly.

DATED and delivered at Nairobi this 4th day of June, 2013.

J. B. HAVELOCK

JUDGE

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