Solution Savings and Credit Co-operative Society Limited v Tharaka Nithi Cereals Market Co-operative Union & County Government of Tharaka Nithi [2021] KECPT 570 (KLR)

REPUBLIC OF KENYA

IN THE CO-OPERATIVE TRIBUNAL

AT NAIROBI

TRIBUNAL CASE NO.218 OF 2019

SOLUTION  SAVINGS  AND CREDIT

CO-OPERATIVE  SOCIETY  LIMITED....................................................................CLAIMANT

VERSUS

THARAKA NITHI CEREALS  MARKET  CO-OPERATIVE  UNION ..... 1ST RESPONDENT

THE COUNTY  GOVERNMENT OF THARAKA NITHI ...........................2ND RESPONDENT

RULING

Vide the Application  dated 31. 10. 19, the 2nd Respondent  has moved  this Tribunal  seeking  for Orders inter alia:

1. Spent;

2. That  the  interlocutory  judgment  entered   against  the 2nd  Respondent/Applicant  be granted  leave  to  defend  the suit;

3. Costs.

The Application is supported by the grounds on its face and the  Affidavit sworn by Lilian  G. Kiruja on 31. 11. 19.

The Claimant has  opposed  the Application vide  the  Replying  Affidavit  sworn by Peter  Karemanu Igwete on 24. 1.2020.

Vide  the  directions  given  on  4. 2.2020,  the Application  was canvassed  by way of  written submissions.  The 2nd Respondent  filed its submissions on  23. 11. 2020 whereas  the Claimant did so  on 28. 10. 2020.

2nd  Respondent’s Case

Vide the  instant  Application, the 2nd  Respondent  has prayed  for the default  judgment  entered  on 26. 8.19 be set aside  on the ground  that it  did not file a Defence within  good time  on based on the  following  reasons:

a.  That upon  receipt  of summons  to  enter Appearance,  it engaged  the  1st  Respondent  to ascertain  the true  and factual  status  of the loan  Agreement  between  itself  and the  Claimant;

b. That  the 1st Respondent informed  it  that that Kshs.13 Million  had been paid to the Claimant  thus reducing  the principal  amount  outstanding  to  Kshs.2 Million;

c. That  it then  requested  the  1st  Respondent  to furnish  it with  the requisite  documentation  to confirm  payment  of the said  loan;

d. That the said documents were  supplied  sometimes  in August,  2019 thus paving  way for  it to prepare  a  Defence.

e. That  its counsel  on record  learnt  that interlocutory  judgment  had been  entered  against  it on 3. 9.2019.

f. That  the delay  in filing  a Response  to the claim  is attributed  to the fact  that it did  not have  the  requisite  documents  relating  to payment  of  the loan. That the  loan  repayment  documents  were in  the possession  of  the Claimant  and the Claimant  was delaying  in the release  of the said  documents.

Claimant’s  Case

The claimant  has opposed  the application  on grounds  that the  2nd  Respondent  was duly  served  with summons  to enter  Appearance  on 17. 5.2019. That  the  2nd  Respondent entered  Appearance  one (1)  month  after  being served  with summons  but did not  bother  to file a Defence.  That the  judgment  therefore  entered  on  27. 8.19 was regular.

That  the contention  that the  1st  Respondent  has paid  a sum of  Kshs.13 Million  is fake. That  the 1st  Respondent  who is  the principal debtor  has not  denied  existence  of the  debt.

Issues  for determination

The 2nd Respondent’s  Application  has presented  the following issues  for determination:

a. Whether  the 2nd  Respondent has  laid a  proper basis  to warrant  the setting aside  of the default  judgment  entered  on  26. 8.2019;

b. Who should  meet  the costs  of the Application?

Setting aside of default  Judgment

We have  jurisdiction  to set aside a  default  judgment  by dint  of Order  10 Rule  11 of the Civil  Procedure  Rules. The Rule  provides  thus:

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

In the case of  Patel – vs-  East  Africa Cargo  Service  Limited (1974)EA 75, the Court underscored this provision  in the following terms:

“ The main concern of the court is to do justice to the parties  and the  court will  not impose  conditions  on itself to fetter  the wide  discretion  given  to it  by the Rules.”

Before  we can exercise  our jurisdiction  under Order  10 Rule 11  above,  we firstly  have to ascertain  whether  the  default  judgment  is a regular  or irregular  one.  If the  Judgment  is an irregular  one,  then we will  set  it  aside  ex debito  justiciae.

This  was the holding  in the case of  K- Rep  Bank  Limited  -vs-  Segment  Distributors  Limited [2017] eKLR.

The court  in the  case of  Fidelity  Commercial Bank  Limited – vs-  Owen Amos  Ndungu  & Another, HCC.NO. 241/1998  gave  a distinction  between  a regular  and irregular judgment  as follows:

“ A distinction  is drawn  between  regular  and irregular  judgments.  Where summons  to  enter  Appearance  has  been served  and  there is  default  in entry  of Appearance  the ex parte  judgment  entered  in default is regular.  But where  the exparte judgment  sought  to be set  aside  is obtained  either because  there  was no proper  service  or any service  at all, of  the summons  to enter  Appearance, such  judgment  is  irregular  and  the affected Defendant  is entitled  to have  it set aside as of right”

Where  the  default  judgment  is  regular,  then  the Tribunal  has to  consider   if the draft  Defence filed with the Application raises triable issues. This was the holding in the case of James Kanyiita Nderitu & Another  - vs-  Marios  Philotas  Ghikes  & Another [2016]eKLR.  In  the pertinent  part,  the court  held thus:

“ 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 to file  a Defence,  resulting  in default  judgment.  Such  a Defendant  is entitled  under Order  10 Rule  11  of the Civil  Procedure  Rules  to move to  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 to the  reason  as for  the failure  of the Defendant  to file his  memorandum  of Appearance,  or  defence,  as the case may be, the length  of  time that has  elapsed  since the default  judgment  was entered; whether  the intended  Defence  raises  triable  issues,  the  respective  prejudice each party  is likely  to suffer whether  on the whole,  it is  in the  interests of  justice  to set  aside   the default judgment.”

Reasons  for failure  to file a  Defence

The  2nd Respondent  has  stated  that  it did not  file a Defence  in good time  because  it had requested  for documentation  on  repayment  of the loan from  the  1st  Respondent  and that  by the time  it received  the same,  judgment  had already  been entered. That  it was  not the custodian  of  the  said documentation  but that  the Claimant  was  vested  with  the same  but was  adamant  to share.

We have  considered  this response  in light  of the claim and the Application  and find  it  reasonable. For all  intents and  purpose,  the 2nd  Respondent  was a guarantor. The 1st  Respondent  was a  principal  debtor. It is  thus likely  or probable  that the 2nd Respondent  had to call  for information  regarding  the loan  from the  1st Respondent.

Length  of time

Default  judgment  was entered  on 26. 8.2019. The instant  Application  was filed  on  6. 12. 2019. This  is a period  of  approximately  three  months. Taking  into account  the explanation  preferred  above,  we find that  the  Application  has been originated without  unreasonable  delay.

Draft  defence

We have  perused the statement  of defence dated 27. 9.2019. We note that the  2nd  Respondent  has disputed  existence  of the claim (at paragraph  8 thereof)  by stating  that the same  has already  been paid  to the Claimant. The effect  of this assertion  to the claim  is  that it raises  an issue  worth  determining  regarding  payment  of the amounts  so demanded.  It is thus  a triable  issue. To this  extend  therefore,  we find  that the  draft  defence  raises  triable  issues.

Prejudice

A question  abound as to whether  the Claimant  will suffer  any prejudice  if the  orders  sought  are granted.  In our  respective view, it will not.  In fact,  the 2nd  Respondent  will be  the  one to suffer  prejudice  if the Claimant  is allowed  to execute  the claim  against  it only to  turn out  later that  it  had indeed  been paid.

Conclusion

The upshot  of the foregoing  is that we find  merit  in the 2nd Respondent’s  Application  dated  31. 10. 2019 and allow  it  on the following  terms.

a. The Statement  of  Defence   dated  27. 9.2019 is deemed  as duly filed  and served  out  of time;

b. The Claimant  to file  and serve  a Reply  to the same within  14 days  herein;

c. Mention  to confirm  compliance  and fixing  a hearing  date on 24. 5.2021.

d. In the meantime, the  2nd  Respondent  to pay  the Claimant  thrown away cost of  Kshs.20,000/= before  the hearing  date.

RULING SIGNED, DATED AND DELIVERED VIRTUALLY THIS 25TH DAY OF MARCH,  2021

Hon. B. Kimemia         Chairperson                Signed      25. 3.2021

Hon. Jane Mwatsama   Deputy Chairperson  Signed      25. 3.2021

Mr. P. Gichuki               Member                       Signed      25. 3.2021

Kagicha Advocate  for Claimant/Applicant

Muthomi  Advocate  for Respondent/Applicant

Hon. B. Kimemia    Chairperson   Signed      25. 3.2021