Machiri Limited v China Wu Yi Company Ltd [2022] KEHC 89 (KLR)

Machiri Limited v China Wu Yi Company Ltd (Civil Case 213 of 2016) [2022] KEHC 89 (KLR) (Commercial and Tax) (4 February 2022) (Ruling)

Neutral citation number: [2022] KEHC 89 (KLR)

Republic of Kenya

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

Civil Case 213 of 2016

A Mabeya, J

February 4, 2022

Between

Machiri Limited

Plaintiff

and

China Wu Yi Company Ltd

Defendant

Ruling

1. In SMN vs ZMS & 3 Others [2017] eKLR, the Court of Appeal stated: -“There is no dearth of authorities on the law governing the setting aside of consent judgments or orders … Generally, a court of law will not interfere with a consent judgment except in circumstances such as would provide a good ground for varying or rescinding a contract between parties”.

2. In Flora N. Wasike vs Destimo Wamboko [1988] eKLR, the Court stated: -“It is now settled law that a consent judgment or order has contractual effect and can only be set aside on grounds which would justify setting a contract aside, or if certain conditions remain to be fulfilled, which are not carried out: see the decision of this Court in J M Mwakio vs Kenya Commercial Bank Ltd Civil Appeals 28 of 1982 and 69 of 1983”

3. In Board of Trustees National Social Security Fund v Micheal Mwalo [2015] eKLR, the Court of Appeal held: -“A Court of law will not interfere with a consent judgment except in circumstances such as would provide a good ground for varying or rescinding a contract between parties. To impeach a consent order or a consent judgment, it must be shown that it was obtained by fraud, or collusion or by an agreement contrary to the policy of Court”.

4. Finally, in Setton on Judgments and Orders (7thEdn), Vol.1 pg 124, the author states that: -“Prima facie, any order made in the presence and with the consent of counsel is binding on all parties to the proceedings or action, and on those claiming under them... it cannot be varied or discharged unless obtained by fraud or collusion, or by an agreement contrary to the policy of the court...; or if the consent was given without sufficient material facts, or in general for a reason which would enable the court to set aside an agreement”.

5. By a Motion on Notice dated 3/09/2021 and brought under section 3A of the Civil Procedure Act, and Order 10 rule 11 of the Civil Procedure Rules, the defendant sought two orders. It sought for the stay of execution of the judgment of 21/5/2019 and the consequential partial decree, that the application be heard together with the defendant’s Chamber Summons dated 30/01/2017 that sought leave to issue a Third Party Notice against KeNHA (“the 3rd party”). The application also sought the setting aside of the judgment dated 21/5/2019.

6. The application was supported by the affidavit of Xiong Kaihua sworn on 3/8/2021. It was contended that the defendant was contracted by the 3rd party as the main contractor in respect of the rehabilitation and upgrading of Nairobi-Thika Road. On the other hand, the 3rd party appointed the plaintiff as a subcontractor in respect of the relocation of water and sewerage facilities along Thika Road whereby a sub-contract agreement was entered into between the two on 25/7/2011.

7. That by a plaint dated 9/5/2016, the plaintiff had brought this suit for unpaid fees from performance of the contract for a sum of Kshs. 139,471,809/= and interest. The defendant denied liability on the ground that, according to the agreement of 25/7/2011, payments to the plaintiff were based on payments certified by the Engineer and received by the defendant from the 3rd party.

8. It was the defendant’s case that since it had not received any payment from the 3rd party, the 3rd party ought to have indemnified the defendant from any claim. As such, the defendant filed an application dated 30/1/2017 seeking leave to issue a Third Party Notice against KeNHA on grounds that it was the proper party to pay any unpaid fees. It was also the defendant’s case that the plaintiff was a “nominated subcontractor” appointed by the 3rd party.

9. When the matter came up for hearing on 21/5/2019, the advocates for the plaintiff and the defendant entered into a partial consent for judgment in the sum of Kshs. 139,471,809/=. There was no agreement on the issue of costs.

10. It is on the aforesaid background that the defendant brought the instant application challenging the consent judgment on the ground that it was entered into by the defendant’s then advocate without instructions. That it was entered into fraudulently and it would be prejudicial to obligate the defendant to pay the judgment sum despite that the amount claimed was payable by the 3rd party. The defendant thus prayed that the consent judgment be set aside.

11. The plaintiff opposed the application vide the affidavit of Eng. James Mbugua Macharia sworn on 13/8/2021. The third party also responded vide an affidavit sworn by Eng. Daniel S. Cherono on 27/8/2021. As regards the prayer for joinder, the defendant and the 3rd party stated that the 3rd party had been served with an application dated 30/1/2017. It entered appearance and raised a preliminary objection dated 18/4/2017 which was dismissed vide a ruling made on 18/8/2017.

12. It was contended that the third party filed its defence dated 17/7/2017 wherein it also raised a preliminary objection which was also dismissed vide the court’s ruling dated 31/10/2018. It was therefore contended that the prayer for joinder had no basis.

13. As regards the prayer for the setting aside the consent judgment, it was contended that at the time the consent was entered, defendant’s then advocates had been duly appointed and had filed a statement of defence dated 6/7/2016 on behalf of the defendant. That the defendant was always aware of the consent and took several active measures to ensure compliance with the terms of the consent. Consequently, the defendant could not claim not to have given its advocates instructions to enter the consent.

14. All the parties served their submissions which the Court has considered. There are two issues for determination. The first is whether the defendant’s application to enjoin the third party is res judicata, and second is whether the consent judgment should be set aside.

15. On the first issue, there was evidence that an application dated 30/1/2017 was heard and allowed. The third party entered appearance and filed a preliminary objection dated 18/4/2018. The same was heard and dismissed and the parties directed to prepare the suit for hearing, with the third party on board. The 3rd party has since taken various steps in these proceedings.

16. In the premises, I find that the application dated 30/1/2017 to be res judicata.

17. The second issue is whether the consent judgment should be set aside. The defendant claimed that it did not issue instructions to its advocates to enter the consent, that consent judgment entered on 21/5/2019 was fraudulently entered into. The plaintiff and third party on the other hand strongly disputed this. They referred the court to several documents to show that the defendant did participate in the consent and its compliance.

18. The Court has examined the record. In as much as the defendant claims not to have given its advocate instructions to enter a consent, several matters militate against that position. Firstly, there is no evidence that that advocate was served with the current application in order to respond to the allegations made against him. I have always held the view that where a party makes allegations against his erstwhile advocate, such as in this Court, it is imperative that such advocate should be served for his response.

19. Secondly, there was a letter dated 24/7/2020 produced by the plaintiff “JM6”. That letter was written by the defendant to the third party. It read in part as follows: -“As you are aware, the honourable court in this particular suit directed that there was no dispute whatsoever that the principal sum was owed to the plaintiff. With this understanding, judgment was entered in favour of the plaintiff for Kshs. 139,471,809. 71 and thus the same is payable as the work was done and delivered but has not been paid for … It is not in dispute that this sum is payable by yourselves to us for onwards payment to the plaintiff …”

20. From the letter, two things come to the fore; that the defendant admitted that the principal sum was payable to the plaintiff for the work done, and that it was the third party who was to pay the judgment sum. The defendant was urging the third party to comply with the consent judgment. There is nothing in that letter or on record to indicate that the said judgment was entered without the defendant’s blessings.

21. If at all the defendant’s advocate fraudulently entered the consent, the defendant would not be seen to seek its compliance. Further, there was no evidence to show that ever since 2019 when the consent was entered, the defendant had ever challenged the same.

22. The record shows that on the day the consent was recorded, all the advocates for the parties were present. All that comes out is that the defendant’s advocates continued to insist, after the judgment, that the money was to be paid by the third party. This was in line with the defendant’s contention in its defence. Whether it is tenable, that is a different matter all-together. That can only be decided in the defendant’s indemnity suit against the 3rd party.

23. As regards the prayer for stay, I am alive to the fact that the third party proceedings were not conclusively dealt with. In the interest of justice, I find it imperative that there be directions as regards the third party proceedings between the defendant and third party. This is in consideration of the fact that the third party application dated 30/1/2017 was allowed. To that end, prayers 2 will be allowed with conditions. That there will be a stay for 120 days within which time the defendant’s suit for indemnity against the 3rd party should have been determined.

24. The costs of the application are to be borne by the defendant.

It is so ordered.DATED AND DELIVERED AT NAIROBI THIS 4TH DAY OF FEBRUARY, 2022. A. MABEYA, FCI ArbJUDGE