Standard Investment Bank Limited v Nyakundi & 3 others [2022] KEHC 14966 (KLR)

Standard Investment Bank Limited v Nyakundi & 3 others (Civil Suit E195 of 2020) [2022] KEHC 14966 (KLR) (Civ) (4 November 2022) (Ruling)

Neutral citation: [2022] KEHC 14966 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Civil

Civil Suit E195 of 2020

CW Meoli, J

November 4, 2022

Between

Standard Investment Bank Limited

Plaintiff

and

Cyprian Nyakundi

1st Defendant

Kahawa Tungu Limited

2nd Defendant

Robert Alai

3rd Defendant

Business Times Kenya

4th Defendant

Ruling

1. For determination is the motion dated September 24, 2021 by Cyprian Nyakundi and Robert Alai, the 1st & 3rd Defendants herein (and hereafter the 1st & 3rd Applicant/Applicants) seeks to set aside the default judgment entered against the Applicants on June 18, 2021 and leave to file a statement of defence out of time. The motion is expressed to be brought under Sections 3 & 3A of the Civil Procedure Act (CPA), Order 10 Rule 11 and Order 51 Rule 1, 3 & 4 of the Civil Procedure Rules (CPR), among others. The grounds on the face of the motion are amplified in the supporting affidavits of the 1st and 3rd Applicants.

2. The 1st Applicant deposes that Standard Investment Bank (hereafter the Respondent) filed this suit contemporaneously with a notice of motion under urgency the latter seeking interim prohibitory and mandatory injunctive orders against him; that he instructed counsel to act on his behalf and that the motion was heard, and a ruling delivered on March 10, 2021. However, counsel was under the honest but mistaken belief that a defence statement had been filed alongside other documents, and it was not until the service of the notice of entry of judgment on July 28, 2021, that the omission was discovered.

3. He further deposes that the Respondent intends to proceed with formal proof hearing and a final judgment may be entered against him. He asserts the desire to be heard in his defence as demonstrated from his participation during the interlocutory proceedings as he has a valid defence that raises serious triable issues. That currently the Respondent has interim orders in his favour pursuant to the ruling delivered on March 10, 2021, and therefore it will not be prejudiced if the instant motion is allowed, and the matter determined on the merits. He contends that he will be grossly prejudiced if the motion is not granted and the mistake, which has been explained, though regrettable should not be visited on the innocent litigant. Moreover, that delay in filing the instant motion was due to the August court recess.

4. The 3rd Applicant’s affidavit material was an exact replica of the 1st Applicant’s depositions concerning the pertinent facts and no useful purpose will be served by reproducing the contents therein.

5. On its part the Respondent opposes the motion by way of a replying affidavit sworn by Nicholas Ng’ang’a Wangunyu, the Executive Director of Strategy with the Respondent company and duly authorized to depose. He asserts that summons to enter appearance were served upon Were & Oonge Advocates, Kahawa Tungu Limited (hereafter the 2nd Defendant/Respondent) and Business Times Kenya Limited (hereafter the 4th Defendant) via email, in line with the Civil Procedure (Amendment) Rules 2020. He deposed that the Applicants entered appearance through the firm of Were & Oonge Advocates, outside the prescribed time and equally failed to file their statement of defence in time. That on account of the default, the Respondent obtained interlocutory judgment which judgment was regular and not liable to be set aside as a matter of right.

6. The Respondent contends that the Applicants have been indolent and slothful in defending the suit; that reasons advanced for failing to file their statement of defence are an afterthought and untenable; that there was inordinate delay in filing the instant motion as judgment had been entered on June 18, 2021 and despite notice of entry judgment being served upon the Applicants, the instant motion was filed two months later on September 24, 2021; that the claim that delay in moving the court was due to the High Court recess is frivolous as court registries remain operational during recess; that the draft defence does not raise any triable issues; and that it is not in the interest of justice that the motion be allowed as the Applicants’ deliberate omissions are intended to obstruct the course of justice.

7. In a supplementary affidavit deposed by the 3rd Applicant in his own behalf and on behalf of the 1st Applicant, the deponent states that whereas the default judgment is regular, the court has unfettered discretion to set it aside because the defence raises triable issues and so that justice is done. He reiterates some of the material in the supporting affidavits.

8. The motion was canvassed by way of written submissions. Counsel for the Applicants anchored his submissions on the provisions of Order 10 Rule 11 of the Civil Procedure Rules and the decisions in Sammy Maina v Stephen Muriuki [1984] eKLR concerning the applicable principles. And referring to the decision in Republic v Speaker Nairobi City County [2017] eKLR as cited in Doa Doa Tented Camps and Lodge Limited v Jubilee Insurance Company of Kenya Limited [2021] eKLR counsel submitted that mistake of counsel ought not be visited upon their client and further that the fact that a party has made a mistake does not mean that he should not have his case determined on the merits. That from the record of proceedings the Applicants have been keen on defending the matter up until the interlocutory ruling was delivered and the inadvertent error in not filing a defence within time ought to be excused.

9. Counsel reiterated the dicta in the case of Speaker of Nairobi City County Assembly (supra) and Thayu Kamau Mukingi v Francis Kibaru Karanja [2013] eKLR to argue that a party ought to be granted an opportunity to be heard even where the judgment entered is regular. That the court needs to examine the draft defence to establish whether it raises triable issues. That the draft joint statement of defence raises the defences of justification, fair comment, and qualified privilege which if successful are complete defences in a suit for defamation. The decisions in Sebei District Administration v Gasyali & Others (1968) EA 300 as cited in David Kiptanui Yego & 134 Others v Benjamin Rono & 3 Others [2021] eKLR and Pravinchndra Jamnadas Kakad v Lucas Oluoch Mumia [2015] eKLR were also relied on.

10. On the part of the Respondent, counsel cited the provisions of Order 6 Rule 1, Order 7 Rule 7, Order 10 Rule 6 & 10 and the case of Patrick Muturi v Kenindia Assurance Company Ltd [1993] eKLR to emphasise the default on the part of the Applicants leading to entry of the interlocutory judgment. While calling to aid the Court of Appeal decisions in James Kanyiita Nderitu & Another v Marious Philotas Ghikas & Another [2016] eKLR and Pithon Waweru Maina v Thuku Mugiria [1983] eKLR counsel submitted that the judgment was regular and cannot be set aside as a matter of right. Further that, the explanations advanced by the Applicants for their default were unsatisfactory and do not warrant the court’s exercise of its discretion in their favor. That indeed the Applicants deliberately delayed the course of justice by indolent and slothful conduct demonstrated by late entry of appearance and failure to file their defence.

11. Submitting on whether the draft defence raises triable issues counsel relied on the decisions in Ecobank Kenya Limited v Minolta Limited & 2 Others [2018] eKLR and Spinners and Spinners Limited v Kimilili Wholesalers (K) Limited [2020] eKLR to contend that the defence raised by the Applicant ought not to go to trial as freedom of speech is not absolute. The court was urged to dismiss the motion.

12. The Court has considered the rival affidavit material and submissions in respect of the motion. The Applicants motion is expressed to be brought under Section 3 & 3A of the Civil Procedure Act (CPA), and Order 10 Rule 11 (CPR). There is no dispute that the judgment herein is a regular judgment. The power to grant or deny an application to set aside or vary such judgment or any consequential decree or order, is discretionary, wide, and unfettered. However, like all judicial discretion it must be exercised judicially and justly. The objective of the discretion conferred upon the court was spelt out in the case of Shah v Mbogo and Another [1967] EA 116:“The discretion to set aside an ex-parte judgment is intended to be exercised to avoid injustice or hardship resulting from accident, inadvertence or excusable mistake or error but it is not designed to assist a person who has deliberately sought whether by evasion or otherwise to obstruct or delay the cause of justice.”

13. Order 10 Rule 11 of the 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 decree or order upon such terms as are just.”

14. The principles enunciated in Shah v Mbogo (Supra) were amplified further by Platt JA in Bouchard International (Services) Ltd v M'Mwereria [1987] KLR 193. The Court of appeal in Miarage Co Ltd v Mwichuiri Co Ltd [2016] eKLR cited a passage from the latter decision as follows:“The basis of approach in Kenya to the exercise of the discretion to be employed or rejected ... is that if service of summons to enter appearance has not been effected, the lack of an initiating process will cause the steps taken to set aside ex debito justitiae. If service of notice of hearing or summons to enter appearance has been served, then the court will have before it a regular judgment which may yet be set aside or varied on just terms. To exercise this discretion is a statutory duty and the exercise must be judicial. The court in doing so is duty bound to review the whole situation and see that justice is done. The discretion is intended so to be exercised to avoid injustice or hardship resulting from accident, inadvertence or excusable mistake or error, but is not designed to assist a person who has deliberately sought whether by evasion or otherwise to obstruct or delay the course of justice...A judge has to judge the matter in the light of all the facts and circumstances both prior and subsequent and of the respective merits of the parties before it would be just and reasonable to set aside or vary the judgment, if necessary, upon terms to be imposed. Hence the justice of the matter, the good sense of the matter, were certainly matters for the judge. It is an unconditional unfettered discretion, although it is to be used with reason, and so a regular judgment would not usually be set aside unless the court is satisfied that there is a defence on the merits, namely a prima facie defence which should go to trial or adjudication. The principle obviously is that, unless and until the court has pronounced a judgment upon the merits or by consent it is to have the power to revoke the expression of its coercive power, when that has been obtained only by a failure to follow any of the rules of procedure. ….. The judge before whom the application for setting aside is presented will have a greater range of facts concerning the situation after an inter partes hearing, than the judge who acts ex parte... Although sufficient cause for non-appearance may not be shown, nevertheless in order that there be no injustice to the applicant the judgment would be set aside in the exercise of the court’s inherent jurisdiction”.

15. The Court of Appeal in James Kanyiita Nderitu (supra) set out the parameters to be considered when setting aside a regular judgment as follows: -“From the outset, it cannot be gainsaid that a distinction has always existed between a default judgment that is regularly entered and one, which is irregularly entered. In a regular default judgment, the defendant will have been duly served with summons to enter appearance, but for one reason or another, he had failed to enter appearance or to file defence, resulting in default judgment. Such a defendant is entitled, under Order 10 rule 11 of the 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 the reason 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 interest of justice to set aside the default judgment, among other. See Mbogo & Another v Shah (supra), Patel v EA Cargo Handling Services Ltd (1975) EA 75, Chemwolo & Another v Kubende [1986] KLR 492 and CMC Holdings v Nzioki [2004] 1 KLR 173).”

16. The Applicants’ stated reason for failing to file their statement of defence within the prescribed time is mistake and or inadvertency on the part of counsel on record who, mistakenly believed that he had filed the statement of defence alongside the documents in respect of the interlocutory motion. Although counsel involved did not swear an affidavit to corroborate the Applicants’ claims, the record of the proceedings in respect of the interlocutory motion indicate that the Applicants vigorously participated in opposing the same through affidavits and submissions. As such, it is believable that their counsel was laboring under the mistaken belief that a defence had been filed. Moreover, there is no evidence of an intent on the part of the Applicants to deliberately delay or obstruct the course of justice and indeed their active participation in the interlocutory proceedings evinces their desire to defend the suit. Thus, it may well be that having been caught up in defending the interlocutory motion, the Applicant’s counsel lost sight of the matter of filing a defence.

17. Observing the inevitability of occasional lapses or mistakes in the normal course of things, Apaloo JA (as he then was) famously stated in Phillip Kiptoo Chemwolo and & Anor v Augustine Kubede (1986) eKLR that :-“I think a distinguished equity judge has said:“Blunders will continue to be made from time to time and it does not follow that because a mistake has been made that a party should suffer the penalty of not having his case determined on its merit.”I think the broad equity approach to this matter is that unless there is fraud or intention to overreach, there is no error or default that cannot be put right by payment of costs. The court, as is often said, exists for the purpose of deciding the rights of parties and not for the purpose of imposing discipline....”

18. No fraud or intention to overreach has been demonstrated in this case on the part of the Applicants. The delay herein is not inordinate and the draft defence exhibited herein raises what appear to be serious triable issues. The Applicants therein plead privilege, justification, and fair comment, which if successful would comprise a complete defence against the Respondent’s claim that is grounded on the tort of defamation.

19. The Court of Appeal in Daniel Lago Okomo v Safari Park Hotel Ltd & Another [2017] eKLR reiterated its holding in Kenya Trade Combine Ltd v Shah, Civil Appeal No 193 of 1999, where it stated:“In a matter of this nature, all a defendant is supposed to show is that a defence on record raises triable issues which ought to go for trial. We should hasten to add that in this respect a defence which raises triable issues does not mean a defence that must succeed.”

20. The Court of Appeal in Vishva Stone Suppliers Company Limited v RSR Stone (2006) Limited (2020) eKLR while emphasizing the right to a hearing stated that:“Turning to the request to allow the applicant to exercise his now undoubted constitutionally underpinned right of appeal, the position is…. crystalized …. in the case of Richard Ncharpi Leiyagu v IEBC & 2 Others (supra); Mbaki & Others v Macharia & Another [2005] 2EA 206; and the Tanzanian case of Abbas Sherally & Another v Abdul Fazaiboy, Civil Application No 33 of 2003; for the holding inter alia that:(i)the right to a hearing is not only constitutionally entrenched but it is also the corner stone of the Rule of law;(ii)the right to be heard is a valued right; and(iii)that the right of a party to be heard before adverse action or decision is taken against such a party is so basic that a decision which is arrived at in violation of it will be nullified, even if the same decision would have been reached had the party been heard, because the violation is considered to be a breach of natural justice…”

21. Considering all the foregoing, the court is persuaded that the justice of this matter lies in allowing the Applicants’ motion on terms that the Applicants will file their defence in 14 days and pay thrown away costs including the costs of this motion to the Respondent within 28 days of assessment thereof by the Deputy Registrar.

DELIVERED AND SIGNED ELECTRONICALLY AT NAIROBI ON THIS 4THDAY OF NOVEMBER 2022C MEOLIJUDGEFor the Applicants: Mr Muriungi h/b for Mr OongeFor the Respondent: Mr Kithinji h/b for Mr GachuhiC/A: CarolPage | 4HCCC No E195 of 2020