John Weru Kiruri & another v Urithi Housing Co-Operative Society Limited [2021] KECPT 263 (KLR)

REPUBLIC OF KENYA

IN THE CO-OPERATIVE TRIBUNAL

AT NAIROBI

TRIBUNAL CASE NO.154 OF 2020

JOHN  WERU  KIRURI.............................................................1ST  CLAIMANT

MARY  WAIRIMU  WERU.......................................................2ND CLAIMANT

VERSUS

URITHI HOUSING   CO-OPERATIVE

SOCIETY LIMITED....................................................................RESPONDENT

RULING

The matter  for determination   is the  Respondent’s  Notice of Motion  Application  dated  14. 12. 2020 filed  on 18. 12. 2020 seeking   the following  prayers:

1. Spent

2. Spent

3. That this  Honourable  Tribunal  be pleased  to set aside  the judgment  entered  on  6th  July  2020 and all  the Consequential  Orders.

4. That this Honourable  tribunal  be pleased  to grant  leave  to the Respondent  to defend  this  suit  and that the  annexed  draft  defence  be deemed  as duly  filed and served.

5. That costs  of this Application  be provided for.

The Application  is based  on the grounds  on the face  of the Application  and supported  by the Affidavit  of Samuel  Ngundo  Mainadeponed  on 14. 12. 2020.

The Application  is opposed  vide the Grounds of Opposition  dated  2. 2.2021 and filed  on 5. 2.2021and the Replying  Affidavit  of  John Weru  Kiruri deponed  on  29. 3.2021. The Respondent  filed  a Supporting  Affidavit  on  23. 4.2021.

The Application  was ordered  to be  disposed of by  way of  written submissions. The  Respondents  filed their  written submissions  on 29. 4.2021,  and the Claimant filed  theirs  on  7. 5.2021. The  Respondent  filed Supplementary  written submissions  on  7. 5.2021.

1.  The gist  of the Respondent’s  Application  is that:

(a) The Claimants  obtained  an ex-parte  judgment  without  serving the  Respondent  with  the summons  and Statement  of Claim,  or that  the service  was improper, defective  and concealed.

(b) That  judgment  was entered  without  affording  an opportunity  to be heard  contrary  to the provisions  of Article  50 Constitution. That  therefore  the judgment  entered  on  6. 7.2020 was irregular  and should  be set aside.

(c)  That  the  Respondent  has a strong  valid  defence  which  raises  triable  issues  and it  is only  fair  and just  that they  be granted  an opportunity  to defend  the suit.

(d) That  the Application  was made  timeously  without  inordinate  delay.

2. The Claimants opposed the Application  vide the Grounds  of Opposition  and their  Replying Affidavit. The  Claimant  submitted  that:

(a)   The  Respondent  was  correctly  served  with  the Summons  and Statement of Claim  on  27. 5.2020, when the documents were delivered physically to the  Respondent’s  offices at  Mountain  Mall  Branch and an officer  of the Respondent  stamped  and signed  acknowledging  receipt.  That the  denial  of service  is frivolous,  spurious  and totally  unjustified.

(b)  That  the Respondent  was not  denied  the right  to be heard  but intentionally  refused  and ignored  and neglected filing  an appearance  and  Defence. Hence the  ex-parte  judgment  was entered  on 6. 7.2020.

(c)   That the defence filed  is vexatious  and intended  to delay  the payment  of refund  to the Claimants, therefore  the defence  has not  raised  triable  issues.

(d) That  the Tribunal  should  not exercise  discretion  in the favour  of the Respondents  who have  been  indolent  in filing  their defence  and whose defence  lacks  merits.

WHETHER  THE DEFAULT  JUDGMENT  WAS  REGULAR  OR IRREGULAR

3. In  a regular  default  judgment, the  defendant  will have  been duly  served  with  summons  to enter  appearance, but  for one  reason or  another, he  failed  to enter  appearance  or file  a defence resulting  to default  judgment.

Such  a defendant  is entitled  under  Order  10 Rule  11 Civil Procedure  Rules, to move  the  court  to set aside the default  judgment   and to  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 and will  take  into  account  such  factors  as:

(i) The reason  for the  failure  of the defendant to  enter appearance  or file  the Defence.

(ii)  The  length  of time  that  has elapsed  since the  default  judgment  was entered.

(iii) Whether  the intended  defence  raises  triable  issues

(iv) The respective  prejudice  each party  is likely to suffer.

(v) Whether  its  in the interest  of justice  to set  aside  the  default  judgment.

This  Principles  are well  established in Mbogo  & Another  -vs-  Shah [1968]  EA 63 &  Patel  -vs – EA  Cargo  Handling  Services  Limited [1979] EA 75

4. For an irregular  default  judgment,  on the other  hand, it will have  been entered against  a defendant  who  has not  been served  or properly  served  with summons. In such  a case  the default  judgment  is set aside  ex debito  justiciae (as a matter  of right) and not  as a matter  of discretion  because  the party  against  whom  it is  entered  has been  condemned  without  notice  of the  allegations  against  him or an opportunity  to be heard  in response  to those  allegations. This  was held  in Onyango  Oloo  vs  Attorney General [1986-1989] EA  456.

Issues  for determination

(i) Whether  the Respondents  were served

(ii) Whether  there was  inordinate  delay  to file  this Application

(iii) Whether  the draft  defence  raises  triable  issues

(iv) Whether  it is  in the  interest  of  justice  to  set aside  the default  judgment (prejudice  to the  respective  parties.)

(v) Costs.

1. Whether  the Respondents  were  served

5. The Respondent  in their written  submissions  submitted  in paragraph  5  that “ Respondent  has its main  office  in Thika  and several  other  branches  including  one in  Mountain  Mall where  the Claimants  claimed to have  served  the Summons. The Respondents’ legal  office  is based  in Thika  offices,  which  is in charge of taking note  of the matters  and instructing  Advocates  to enter  appearance  on its  behalf. The Summons  was received  in Thika  legal  office on  14. 12. 2020 and upon  perusal  of the court file,  the Advocate  on record  realized  that already  an interlocutory  judgment  had already  been entered  against  the Respondent  thereby  necessitating the instant  Application. “

6. The Respondent  further  submitted  that they  had the intention  to  defend  the matter,  but due  to an “ inadvertent  error,”  they  were not  able  to enter  appearance in good  time.  They prayed for  the Tribunal  to exercise its  unfettered  discretion  and set aside  the judgment.

7. The Claimants  submitted  that the  summons  and Statement of Claim  were  effected  upon the  Respondent  by hand delivery  to the Respondent’s  office  at Mountain  Mall on 27. 5.2020.  That the  agent  of the Respondent  duly received  the Summons,  acknowledged  service  by affixing  the  corporate  stamp of the Respondent upon  the Summons  and a copy  of Statement of Claim  and  signing  against  the  stamp.  That the  person  who signed   was Evans  Mwangi. That  its not  disputed  that  he  had  authority  to  receive/accept  the Summons  on behalf  of  the Respondent.

8. That the  Request  for judgment  dated 19. 6.2020 was filed  and  the Tribunal  after  satisfying  itself  that the  service  of Summons  had been  validly  effected, as  per the   Affidavit  of Service,  entered  the default  judgment  on  6. 7.2020 for prayer  (a) and  ordered  for prayer  (b) be set  down  for formal  proof.

9. That  the judgment  entered  thereof  was  a regular  default  judgment  and the Respondent  is not entitled  to setting  aside  ex debito justiciae but  that  the Tribunal  has the  discretion  to set  aside as  held in  James Kanyiita  Nderitu – vs-  Marios  Phitolas  Ghikas [2016] eKLR.

10. That  the Respondent  does not  deserve  the exercise   of the Tribunal’s  discretion  in their  favour  because  there  was no  justified reasons given.

11. We have carefully  considered  the submissions  and find that  the Respondent  have admitted  service  of  Summons  as cited earlier in this  Ruling ( that is, paragraph  5  of Respondents  written submissions).  This  therefore  shows that  the default judgment  on the liquidated claim (prayer a) and interlocutory  judgment  (prayer  b) was  a regular  default  judgment.This  therefore  brings about  the setting  aside of the default  judgment  to  the discretion  of the Tribunal.

(ii) Whether  there was  inordinate  delay  in filing  the Application

12. We note  that  the Claimant  filed  the Request  for Judgment  on  19. 6.2020. On  6. 7.2020, summary  judgment  was entered  for Kshs.6,500,000/= plus costs and  interest  at court rates  (for prayer a) and interlocutory  judgment  was entered  for prayer  (b) which  was  to  be fixed  for formal  proof.

On 18. 12. 2020, the Respondent filed their Notice of Motion under Certificate of Urgency dated  14. 12. 2020. There  is no  reasonable  explanation  given  by the  Respondent  to show  that  they  were  diligent  in speed  to  file  this Application  7 months  after entry of default  judgment.

The Respondent  only stated  that there was  an “inadvertent error” which  has not  been disclosed. We  find that  there was  inordinate  delay  in filing  the  instant  Application.

(iii) Whether  the draft  defence  raises  triable  issues

13. The Respondent  submitted  that  they  brought  this Application  pursuant  to the right  of hearing  and being  afforded  an  equal  opportunity  to canvass  their case  before  a determination  is made.  They cited  Fredrick  Chege Kamenwa – vs-  Aron  K. Kandie  (2001) eKLR and  Winnie  Wambui  Kibunge  &  2 others  - vs-  Match  Electricals  Limited (2012) eKLR.

14. That they  have a  Defence  which  has merit.  That  their model  invites  members  to make  a booking  of plots  in the bulk  land purchased by  paying  monies  for  deposit  and eventually  the plots  are transferred  upon completion  of payment of purchase  price and  conveyancing  fees.  That the  Claimants  made no  deposits  towards  the plots.  That in  the event  that money  was paid,  it was  sunk  in the project  and the option  for the Claimants  would  be to  transfer  to other  projects  if they  are dissatisfied.

15. The  Claimant  submitted  that  the Respondent  have not  been denied the right to be heard  but rather  they deliberately and intentionally refused  and ignored  and neglected filing  of  appearance and defence.  That  the  sole intention  of the Respondent  is  to delay  payment  and refund.

16. That  the Claimant  paid  the  price, deposit  and conveyancing  fees  as per  the vouchers, receipts  and bank  slips  totaling  to Kshs.6. 5 Million to the Respondent.

17. That  the sale of  land was  in terms of  the Agreement  of Sale  dated  16. 9.2017 and the land  parcels  were  clearly  identified  and the Respondents  held  themselves  out  as the beneficial  owners  to Plot  Number  3 and 13  on Nyeri Municipality  LRQ384/4and  not on any other  parcel  of land as per  the terms  of the  Agreement.

18. That  therefore  the Respondent  cannot  purport  to have  “sunk” all the  money on the purchase  of the bulk  land  since  they  were  the beneficial  owners  as  per the  Sale Agreement.

19. That  the Respondent  has not  offered  a refund  of the money; despite  earlier  demands.

20. We  have carefully  considered  the submissions  of  both parties.

As  discussed  earlier, the default  judgment  is regular hence  the Tribunal  has  the unfettered  discretion  on the issue  of setting  aside  a regular  default judgment as held  in the Mbogo – vs- Shah case (Supra).

21.  We have  noted  the contents  of  the draft   Defence  and  the nature  of the matter,  we believe  that  it  would  be  fair  to allow  the parties  to have  their day  in court and argue  out  the matter.  We note also  that the  matter  arises  out of an Agreement  between  the parties,  and the prayers  sought  would be  better  determined  by way  of  evidence  and hence  find that  the defence  has  raised triable issues.

(iv) Whether  it is  in  the interest  of justice  to set aside  the default  judgment  (prejudice  to the  respective  parties)

22.  This  matter  arises  out of an  Agreement  between  the parties. The  Claimant  filed the suit  for  a liquidated  amount  of Kshs.6. 5.Millionand  a  summary  judgment  was entered. The Claimants  submitted  that they  invested  their hard earned  money  on the project  and paid  all that  was required  for  completion  of the Agreement.  That they  made  their  last payment in  August  2018 and  the Sale  Agreement  dated  16. 9.2017.

23. We have  found that  the default  judgment  was entered regularly  and  the discretion  to set  aside  the default  judgment  lies  with the  Tribunal.  We note  that  the reason  put forward  for failure  to enter  appearance  and file  a Defence  was indicated  by the Respondent as an  inadvertent  error.  The said “ inadvertent  error” was not  disclosed. Thereafter,  there was inordinate  delay  in filing  the Application  that is,  7 months  after entry  of default  judgment.

The parties  are bound  by the  terms  of  their  Agreements and  it seems   that the  Claimant  was not  satisfied  with the  delivery  of the terms  of   the Agreement.

24.  The Respondents  submitted  that they  brought  the Application  under Order  10  Rule  II Civil Procedure  Rules  and  not  under  Order  42  Rule  6  Civil Procedure  Rules.

The Claimants  submitted  that  they have  suffered  at the hands  of the Respondents, who  have perpetuated delay  in the determination  of the matter.

They prayed   for the amount  be deposited  in the Tribunal  or in an  interest  earning account  within  15 days and thereafter,  then  the judgment  may be  set aside  and the  Respondent  be allowed  to file their  defence  in the matter.

25. Order  10 Rule  II Civil Procedure Rules  provides that :

“  Where  judgment  has been  entered  under this  order,  the court may  set aside  or vary  such  judgment  and any  consequential  orders  upon  such  terms  as are just.”

We note  that a regular  default  judgment  was entered  in terms  of prayer  (a)  Summary  Judgment  for the liquidated  claim  plus costs  and interest  thereof  and  Interlocutory  Judgment  for  prayer  (b) as  per  the  Statement of Claim filed  on 14. 5.2020.

Rule  3  Cooperative Tribunal  ( Practice and Procedure) Rules  2009 provides  that:

“ Nothing  contained in these  Rules  SHALL limit  or otherwise  effect  the inherent  power of  the Tribunal  to make  such orders  as may be  necessary  for the  ends  of justice  or  to prevent  abuse  of the process  of the Tribunal.“

Rule  4

“  The Tribunal  SHALL  have  power  and discretion  to decide all matters before  it with  due speed  and dispatch   without  undue  regard  to technicalities  of procedure.”

26. In the light  of  these  provisions,  nothing  prevents  the Tribunal  from  issuing  such  orders  as may be  just.  We note that  the status  of the Respondent  (as a  Co-operative  Society) which  has been  experiencing  many  issues  in regard  to liquidity. The  judgment  entered  herein  was  as a result  of the Respondent  having failed  to exercise  due  diligence  in entering  appearance  and filing  a Defence.  The Claimants  have obtained  a regular  default  judgment  and the  Respondents  did not expedite  the Application  for setting aside  earlier. We  noted   earlier  that  7 months  was inordinate  delay.

27. However,  in the interest of  justice,  and in  the  exercise  of the inherent power  and discretion, we  make  the following  Orders in the interest  of justice  as  enumerated  in Order  10 Rule  II Civil Procedure  Rule, and  Rule  3 and  4  Cooperative  Tribunal  ( Practice and Procedure ) Rules 2009.

1.  That the judgment entered on 6. 7.2020 and all the  Consequential  Orders  are herein set aside  on condition that;

a.  That the Respondent  herein  do deposit  the liquidated  sum  as per the  default  summary judgment,  amount  of Kshs. 6. 5.Million  in an interest  earning  account in the joint  names  of the Advocates of the parties within  15  days  of this Ruling.

b. That leave  is granted  to the  Respondent  to file  and serve  their  Response  to the Claim,  Witness Statement  and Documents  within  7 days  herein.

c. Corresponding  leave  is  granted to the  Claimant  to file  and serve  their Reply  to the Response, any  other documents  and Witness  Statements  within  7 days  of service.

2.  In default,  Order 1 shall  be   deemed   to  be vacated ( that is, Summary  judgment  shall stand)  and the  matter  to be  fixed for Formal  Proof for prayer (b).

3. The Respondent  to pay the thrown  away  costs  of this  Application  assessed  at Kshs.15,000/=.

4. Mention  on  9. 8.2021 for directions.

Ruling signed, dated and delivered virtually  at Nairobi this 15thday of July, 2021.

Hon. B. Kimemia   Chairperson   Signed  15. 7.2021

Hon. J. Mwatsama  Deputy Chairperson Signed  15. 7.2021

Mr. G. Kamiti    Member   Signed  15. 7.2021

Tribunal Clerk   C. Maina

Kamaara  for  the Claimant/Respondent

Gitau  for the Respondent

Hon. J. Mwatsama  Deputy Chairperson Signed  15. 7.2021