Kundanlal Restaurant v Devshi and Company (Civil Appeal No. 76 of 1951) [1952] EACA 77 (1 January 1952)

## COURT OF APPEAL FOR EASTERN AFRICA

## Before SIR BARCLAY NIHILL (President), SIR NEWNHAM WORLEY (Vice-President) and BOURKE, J. (Kenya)

## KUNDANLAL RESTAURANT, Appellants (Original Defendants) ν

## DEVSHI & COMPANY, Respondents (Original Plaintiff) Civil Appeal No. 76 of 1951

(Appeal from the decision of H. M. Supreme Court of Kenya, Harley, Ag. J.)

Practice—Civil Procedure—Motion for Summary Judgment—Order 35, rules 2 and 3-Defendants raising triable issues-Leave to defend-When conditional.

The plaintiffs sued defendants on a specially indorsed plaint and filed a motion for summary judgment under Order 35, rules 2 and 3. The defendants asked for leave to defend relying on a statement of defence and an affidavit sworn by a partner alleging there was no privity of contract between plaintiffs and defendants and that the alleged transactions were void for illegality under the Price Control Regulations. The plaintiffs filed two affidavits in reply. On the motion for summary judgment, leave to defend was granted conditional on payment of Sh. 7,000 into Court within seven days as security. Leave to appeal from the order was granted. No formal order was drawn up and the condition was not complied with nor was any appeal filed.

On the plaintiffs' application judgment was entered for plaintiffs as prayed. The defendant thereupon appealed from the judgment.

Held $(8-5-52)$ .—(1) That the appeal was against the whole judgment and not against the order and consequently the failure to draw up a final order did not prevent an appeal against<br>the judgment and the validity of the order could be examined.

(2) There were triable issues disclosed in the affidavits and it was not possible to form an opinion on the merits at the time of the order.

(3) A condition of payment into Court ought not to be imposed where a reasonable ground of defence is set up.

Cases referred to: Laird v. Briggs (1881) 16 Ch. 664; Hasmani v. Banque du Congo Belge (1938) 5 E. A. C. A. 89; Jacobs v. Booth's Distillery Co. (1901) 85 L. T. 262 H. L.;<br>Wing v. Thurlow 10 T. L. R. 53, 151; Ward v. Plumbley 6 T. L. R. 198; Bowes v. Caustic Soda Co., 9 T. L. R. 328; Churanjilal & Co. v. Adam, E. A. C. A. Civil Appeal 22/50.

D. N. Khanna for appellants.

Cockar for respondents.

JUDGMENT (delivered by SIR NEWNHAM WORLEY (Vice-President)).—This appeal which is from a judgment of the Supreme Court of Kenya, comes before this Court in rather unusual circumstances. In Civil Suit No. 1060 of 1951 the plaintiff (respondent in this appeal) sued the defendant (appellant) on a specially endorsed plaint for Sh. 6,584/58, being the amount due for goods alleged to have been sold and delivered to the appellant firm, and for further consequential relief. On 11th October, 1951, the respondent company filed a motion for summary judgment under Order 35, rules 2 and 3. The appellant firm asked for leave to defend relying upon a statement of defence filed on 13th October, 1951, in

accordance with the practice in the Supreme Court of Kenya and on an affidavit sworn by one Kundanlal, a partner in the appellant firm. The substance of the appellant firm's allegations in these documents was-

- (a) that there was no privity of contract between the respondent company and themselves; that the goods, if sold and delivered, were sold to one Chagganlal to whom the plaintiffs gave exclusive credit and from whom the plaintiffs had accepted two cheques in settlement of his account, which cheques it was alleged had been dishonoured; and that the plaintiffs had made a demand for payment on Chagganial before suing them: - (b) in any event the prices charged for the goods alleged to have been sold and delivered contravened the Price Control Regulations and therefore the alleged transactions were void for illegality.

The respondent company filed two affidavits in reply; one was sworn by Amritlal, a partner in the respondent-company, in which he denied these allegations and alleged, *inter alia*, that the cheques had been given by Chagganial (who is a partner in the appellant-firm) because the firm itself had no banking account. The other affidavit was sworn by Chagganial himself; in it he admitted the transactions alleged in the plaint and the liability of the firm for the amount claimed, denied that he had had any personal dealings with the plaintiffs and alleged that the firm was heavily in debt to other traders.

When the motion for summary judgment came on for hearing on 24th October, Mr. Cockar, for the plaintiffs, relied on Chagganlal's affidavit; Mr. Khanna, for the defendants, urged that triable issues were raised on the affidavits and asked for unconditional leave to defend. An order was made granting leave to defend conditional on payment of Sh. 7,000 into Court within seven days by way of security. Leave to appeal from this order was granted.

No formal order was drawn up but the appellant-firm neither complied with the condition nor lodged an appeal and on 19th November, 1951, on the application of the respondent-company's advocate, judgment was entered for the plaintiff-respondent as prayed. The appellant thereupon appealed to this Court from the judgment on the grounds-

- (a) that the condition upon which leave to defend was granted was wrongly imposed as it had the effect of improperly shutting out the appellants from defending; and - (b) that issues of fact and law having been raised the learned Judge misdirected himself in not giving unconditional leave to defend.

At the hearing of the appeal, Mr. Cockar rather belatedly raised the point (which had already exercised the minds of the Court) that the appeal was incompetent as it was an appeal from the order granting conditional leave to defend and that this order was not before the Court (see the judgment of this Court in E. A. C. A. Civil Appeal No. 67 of 1951). After argument and consideration we were satisfied that there was no substance in this objection and heard the appeal on its merits. It will be convenient at this stage to indicate briefly the reasons which led me for my part to rule against the objection.

I was at first inclined to the view that the appellant-firm was in contempt for not having complied with the order and could not now be heard to question it but I am satisfied on further consideration that that view would be incorrect. The order in fact was not mandatory: it offered the appellants the choice of complying with the condition or suffering judgment to go by default. Their choice of the latter course does not debar them from now challenging the judgment which flowed from the order and in such a challenge, the validity of the order must be examined. I would respectfully adopt the language of Jessel, M. R. in Laird v. Briggs, (1881) 16 Ch. D. 664 (where the complaint was from a refusal of leave to amend) "As you have appealed from the whole judgment the whole case will be open to appeal".

The principle embodied in these words has been given statutory expression in section 76 (1) of the Civil Procedure Ordinance (Chapter 5), which provides that "where a decree is appealed from, any error, defect or irregularity in any order, affecting the decision of the case, may be set forth as a ground of objection in the memorandum of appeal"; and also in rule 22 of the Eastern African Court of Appeal Rules, 1925, as follows: $-$

"No interlocutory order or rule from which there has been no appeal shall operate so as to bar or prejudice the Court of Appeal from giving such decision upon the appeal as may be just."

Turning to the question of merits, I am of opinion that this appeal should succeed. In Hasmani v. Banque du Congo Belge (1938) 5 E. A. C. A. 89, Sir Joseph Sheridan, C. J., delivering a judgment, with which the other members of the Court concurred, said: "If there is one triable issue contained in the affidavit supporting the application for leave to appear and defend then the appellant is entitled to have leave to appear and defend unconditionally." So far as I am aware, this decision has, with one possible exception to which I shall refer later, stood unchallenged since 1938 and I do not think we should depart from the general rule therein expressed, though, for my part, I would recognize that this general rule may be subject to some exceptions. In this matter the Courts of Kenya should in my view follow the English practice under Order 14, rule 6 of the Rules of the Supreme Court, 1883, which I take from the Annual Practice, 1951, page 153:—

"The principle on which the Court acts is that where the defendant can show by affidavit that there is a bona fide triable issue, he is to be allowed to defend as to that issue without condition (Jacobs v. Booth's Distillery Co. (1901) 85 L. T. 262 H. L.) . . . A condition of payment into Court ought not to be imposed where a reasonable ground of defence is set up ... Since Jacobs v. Booth's Distillery Co. (supra) the condition of payment into Court, or giving security, is seldom imposed, and only in cases where the defendant consents, or there is good ground in the evidence for believing that the defence set up is a sham defence and the master 'is prepared very nearly to give judgment for the plaintiff' in which case only the discretionary power given by this rule may be exercised (*Wing v. Thurlow* 10 T. L. R. 53, 151). It should not be applied where there is a fair probability of a defence (Ward v. Plumbley 6 T. L. R. 198; Bowes v. Caustic Soda Co. 9 T. L. R. 328) nor where the practical result of applying it would be unjustly to deprive the defendant of his defence."

In the instant case the appellant's affidavit and statement of defence raised two triable issues, namely whether or not there was privity of contract between the appellant firm and the plaintiff company and whether or not the transactions on which the plaintiff's claim was based were tainted with illegality. The learned Judge who made the order for conditional leave to defend has not recorded his reasons for imposing the condition. It may be that he accepted Chagganlal's affidavit as true and suspected that the defence of no privity of contract was a sham one. He did not, however, say so and, taking all the facts into consideration, it appears to me that there is no sufficient reason for preferring Chagganial's affidavit to Kundanlal's. I think that "good grounds for believing" the defence to be a sham one means something more than mere suspicion. But in any case this suspicion would not affect the defence of illegality as to which there is a

plain assertion on one side and an equally plain denial on the other: it is impossible to form any opinion on the merits of this defence until the Court has examined the details of the goods supplied and the prices charged for them.

The possible exception to which I have referred above is E. A. C. A. Civil Appeal No. 22 of 1950 (Churanjilal & Co. v. Adam). In that case the appellant appealed from an order of the Supreme Court of Kenya refusing him leave to defend. This Court allowed the appeal to the extent of substituting for the order appealed from an order granting leave to defend conditional on the appellant therein giving security for the amount of the claim and costs. I do not think that in so ordering the Court intended to lay down any new principle or depart from any accepted principle. That is I think made clear by the following passage from the judgment of Graham-Paul, $V. P.$ :

There is no difficulty about the principles to be applied in deciding this appeal. The law on the point is clear and only its application to the facts gives any trouble. It is desirable and important that the time of creditors and of Courts should not be wasted by the investigation of bogus defences. That is one important matter but it is a matter of adjectival law only, embodied in the Rules of Court and cannot be allowed to prevail over the fundamental principle of justice that a defendant who has a stateable and arguable defence must be given the opportunity to state it and argue it before the Court. All the defendant has to show is that there is a definite triable issue of law."

After considering the affidavits on the record, the learned Vice-President said: $-$

"This is I think a border-line case, but I am not prepared to hold that the Court below was right in considering that the appellant had failed to show that there was a triable issue of fact or law which could be raised by way of defence. I would therefore allow the appeal with costs but, in view of all the circumstances and particularly the affidavit of R. H. Vedi. I consider that leave to defend should be given only on the appellant giving security."

The other two members of the Court were of opinion that the affidavits of the appellant did raise triable issues and agreed with the order proposed by the Vice-President. Hasmani's case (*supra*) does not appear to have been brought to the notice of the Court. I think therefore that Churanjilal's case can be properly viewed as a decision based on special facts. It is true that in some respects there is a similarity between that case and the one now before us, for in that case also the dispute was as to whether goods ordered by the defendant's son (who also held his power of attorney) had been purchased by him personally or on behalf of the defendant company.

I do not question the correctness of the decision in Churanjilal's case and it must be remembered that the learned Judges who decided it had before them an order which showed that the Supreme Court was prepared to give judgment for the plaintiff-respondent. But it is not in my view an authority which we are bound to follow in applying the accepted principles to the facts of any other case. For my part, giving the best consideration I can to the affidavits in the instant case, I am quite unable to form any firm belief at this stage that the defences put forward are shams: whether they are or not is a question which can only be determined by the trial. I would therefore allow this appeal with costs, set aside the order of the Supreme Court and substitute an order granting the appellant unconditional leave to defend as to the whole of the respondent's claim, with leave to file a fresh defence within fifteen days from to-day if so advised.

The appellant should also have his costs of and incidental to the application for judgment and of showing cause against the application (Order 35, rules 2, 4) and 8). Mr. Khanna has asked for an order that these costs be paid forthwith under Order 35, rule 8 $(b)$ , relying upon the correspondence which, he says, gave the plaintiff-respondent clear notice that the defendant-appellant would rely on a contention which would entitle him to unconditional leave to defend. I am not persuaded however that the plaintiff-respondent's attitude has been so unreasonable as to warrant making an order for payment forthwith and I think the justice of the case will be met by an order that the plaintiff-respondent shall pay these costs to the defendant-appellant in any event. All other costs incurred in the action up to date and subsequently will abide the event of the trial or be paid as directed by an order made at the trial.

SIR BARCLAY NIHILL (President).—I concur in the judgment delivered by the learned Vice-President and have nothing to add. The appeal is allowed with costs and an order will be made in the terms proposed.

BOURKE, J. (Kenya).—I agree.