Diamond Trust Bank Kenya Limited v Mutubia & another (Civil Appeal E161 of 2023) [2026] KECA 1001 (KLR) (29 May 2026) (Judgment)

Diamond Trust Bank Kenya Limited v Mutubia & another (Civil Appeal E161 of 2023) [2026] KECA 1001 (KLR) (29 May 2026) (Judgment) Neutral citation: [2026] KECA 1001 (KLR) Republic of Kenya In the Court of Appeal at Mombasa Civil Appeal E161 of 2023 AK Murgor, KI Laibuta & GW Ngenye-Macharia, JJA May 29, 2026 Between Diamond Trust bank Kenya Limited Appellant and Godfrey Mutubia 1st Respondent Fatma Hassan Hadi 2nd Respondent (Being an appeal against the Ruling and Orders of the Environment and Land Court of Kenya at Mombasa (S. M. Kibunja, J.) dated 25th July 2023 in E.L.C Case No. 102 of 2019) Judgment 1.This is an appeal against the ruling and orders of the Environment & Land Court at Mombasa (S. M. Kibunja, J.) dated 25th July 2023 in Mombasa ELC Case No. 102 of 2019 in which, vide a Plaint dated 13th June 2019, the 2nd respondent (Fatma Hassan Hadi) filed suit against the appellant (Diamond Trust Bank Kenya Limited) seeking declaratory and injunctive reliefs in relation to a property alleged to be her matrimonial home. 2.The 2nd respondent’s case was that, in 2008, together with her husband (Khalil Hud Ahmed), they purchased the suit property known as CR No. 42769, L.R. No. 14730, Section I Mainland North, where they established their matrimonial home, and had since resided thereon; that, on 30th May 2019, she was surprised to learn through a newspaper advertisement that the said property was scheduled to be sold by public auction on 14th June 2019; and that, upon inquiry, she was informed that her husband had guaranteed repayment of a loan and offered their matrimonial home as security in favour of the appellant without her knowledge or consent. 3.She further averred that she had never been shown a copy of the charge instrument nor informed of the appellant’s decision to charge the matrimonial home; that the appellant’s decision to accept the property as security without obtaining her prior consent was contrary to the mandatory provisions of the Land Act, 2012, the Land Registration Act, 2012 and the Matrimonial Property Act; that any attempt by the appellant to exercise its statutory power of sale on the basis of that charge was therefore illegal, null and void ab initio; and that, unless restrained by an order of injunction, the appellant intended to proceed with the auction in violation of the law and her rights as the wife of the registered owner of the property. 4.By reason of the matters aforesaid, the 2nd respondent sought judgment against the appellant for a declaration that the appellant’s actions were illegal, null and void ab initio; a permanent injunction restraining the appellant from auctioning, selling, transferring, disposing of, or otherwise dealing with the suit property; and for costs of the suit. 5.By a Notice of Motion dated 13th June 2019, the 2nd respondent contemporaneously sought interim injunctive orders to restrain the appellant from auctioning, selling, transferring, disposing of, or otherwise dealing with the suit property pending hearing and determination of the suit. 6.In response to the 2nd respondent’s Motion, the appellant filed a replying affidavit sworn on 26th June 2019 by Lwanga Mwangi, its Debt Recovery Officer, opposing the application and deponing, inter alia, that the application was defective for want of jurisdiction as the suit was a commercial dispute, which ought to have been filed in the High Court. In its ruling dated 13th November 2019, the ELC (Sila Munyao, J.) found that the suit was properly before the court and proceeded to grant the orders of injunction as sought. 7.Aggrieved by the learned Judge’s decision, the appellant moved to this Court on appeal against the impugned ruling in Civil Appeal No. 18 of 2020. 8.While the appeal was pending, the appellant filed a statement of defence and counterclaim dated 17th September 2020 against five defendants, including the 1st respondent (Godfrey Mutubia). In its defence, the appellant averred that, prior to charging the suit property, it had obtained the requisite spousal consent from the lawful wife of the registered proprietor, namely Faiza Brek Said. Accordingly, the appellant maintained that the charge over the property was lawful, valid and enforceable, and that the 2nd respondent was not entitled to the injunctive relief sought. By reason of the matters aforesaid, the appellant prayed that the 2nd respondent’s suit be dismissed with costs. 9.In its counterclaim against Siyama Company Limited, Khalil Hud Mohamed, Fatma Hassan Hadi (the 2nd respondent), Faida Brek Said and Godfrey Mutubia (the 1st respondent) as the 1st to 5th defendants respectively, the appellant sought declarations affirming the validity of the charge and the appellant’s entitlement to exercise its statutory power of sale over the suit property. 10.The appellant’s case was that it advanced a term loan facility of Kshs. 17,200,000 to Siyama Company Limited sometime in 2012; that the loan was secured by a legal charge over the suit property registered in the name of Khalil Hud Mohamed; that the borrower defaulted in repayment, and that the outstanding sums remained due and payable; that the charge was valid; and that it was entitled to exercise its statutory power of sale over the property to recover the debt. In the alternative, the appellant averred that, if the charge were found to be invalid, such invalidity resulted from fraudulent misrepresentations by the above-named defendants to the counterclaim, particularly with regard to the spousal consent furnished to the bank as witnessed and endorsed by the 1st respondent. Accordingly, the appellant sought declarations affirming the validity of the charge or, in the alternative, findings of fraud, together with recovery of the outstanding sums by attachment and sale of the charged property. 11.While the main suit and the appellant’s counterclaim remained pending, the appellant’s appeal against the ELC’s ruling of 13th November 2019 was eventually heard and determined by this Court (Kairu, Nyamweya & Lesiit, JJ.A.), vide a judgment dated 24th June 2022 in which the Court allowed the appellant’s appeal in Civil Appeal No. 18 of 2020, set aside the ELC’s ruling dated 13th November 2019, and struck out the 2nd respondent’s application for injunction as well as her substantive suit. In their decision, the learned Judges held that the ELC had no jurisdiction to entertain the 2nd respondent’s suit, which ought to have been filed in the High Court. 12.Following this Court’s decision aforesaid, the 1st respondent filed a Notice of Preliminary Objection dated 29th June 2022 challenging the appellant’s counterclaim for want of jurisdiction. When the matter came up for mention on 2nd November 2022, the Environment and Land Court (S. M. Kibunja, J.) took to mind this Court’s judgment dated 24th June 2022 and ordered that the file in the ELC be closed. In the words of the learned Judge:“That upon perusing the Court of Appeal judgment in Civil Appeal No. 18 of 2020 and in view of its determination at paragraph 34 striking out the suit with costs, the court orders that the file be closed.” 13.Aggrieved by the decision of Kibunja, J., the 1st respondent filed a Notice of Motion dated 7th March 2023 seeking review of the court’s order to close the file, arguing that the appellant’s counterclaim and the 1st respondent’s preliminary objection thereto had not been addressed or dealt with by the Court of Appeal and remained pending; that the court had made an error on the face of the record by closing the file without considering the pending matters; and that the 1st respondent’s preliminary objection on the fate of the counterclaim ought to have been heard and determined, particularly on the issue of costs in the counterclaim. 14.When the Motion for review came up for hearing on 4th May 2023, the 1st respondent brought to the court’s attention the fact that none of the respondents thereto had filed a response to his application despite having been duly served, and requested for a ruling date whereupon the learned Judge scheduled delivery of the ruling for 26th July 2023. 15.In its belated response to the 1st respondent’s Motion for review, the appellant filed a replying affidavit sworn on 30th May 2023 by Joram Kilwanda, its Debt Recovery Officer. Mr. Kilwanda deponed that the decree striking out the suit had been issued by the Court of Appeal and merely adopted by the ELC on 2nd November 2022; that the ELC could not review a judgment or order of a superior court; that the suit had been instituted by the 2nd respondent and not by the appellant; that, upon being served, the bank had promptly challenged the jurisdiction of the court to hear the dispute; that the counterclaim had only been filed after the court had erroneously held that it had jurisdiction, and that the bank was entitled to join any parties it deemed appropriate as defendants to that counterclaim; and that the counterclaim had not been dismissed on its merits, but had merely become redundant once the Court of Appeal struck out the main suit for want of jurisdiction. 16.Mr. Kilwanda further deponed that, the parties having been drawn into proceedings that were ultimately struck out, the responsibility for the costs of the suit lay with the 2nd respondent; and that the 1st respondent had failed to explain the delay in bringing the review application. The appellant urged the court to dismiss the application with costs. 17.In its ruling dated 25th July 2023, the ELC (S. M. Kibunja, J.) proceeded on the assumption that the application for review was unopposed, observing that: “None of the other parties herein filed a response to the application and no submissions have been filed on the application either.” The ELC found that the Court of Appeal’s decision had only struck out the 2nd respondent’s suit, but did not address or deal with the appellant’s counterclaim; and that the counterclaim, being an independent suit, remained pending before the court despite the striking out of the 2nd respondent’s suit. The learned Judge concluded that the order of 2nd November 2022 had been made in error since the counterclaim had not been determined and remained alive. The learned Judge held that the 1st respondent had demonstrated sufficient grounds for review of the order. Accordingly, the court allowed the application, reviewed and set aside the order closing the file, and directed that the 1st respondent’s preliminary objection to the counterclaim be set down for hearing. The court further ordered that the costs of the review application would abide the outcome of the preliminary objection. 18.Dissatisfied with the learned Judge’s decision, the appellant moved to this Court on the instant appeal on the following 8 grounds set out in its Memorandum of Appeal dated 26th September 2023:“a.That the learned Judge erred in law in failing to hold that the Court did not have jurisdiction to preside over any proceedings in Mombasa ELC Cause No. 102 of 2019 as the suit was struck out for want of jurisdiction vide the Judgment of the Court of Appeal delivered on 24 June 2022 in Malindi COA Civil Appeal No. 18 of 2020: Diamond Trust Bank Kenya limited -vs- Fatma Hassan Hadi.b.THAT the learned Judge wrongly interpreted the effect of the Judgment of the Court of appeal delivered on 24 June 2022 in Malindi COA Civil Appeal No. 18 of 2020 and in so doing presided over the 1st Respondent’s application dated 7 March 2023 despite the fact that the primary suit to wit Mombasa ELC Case No. 102 of 2019 was struck out for want of jurisdiction;c.That the learned Judge erred in law and in fact in failing to consider the Appellant's Replying Affidavit to the 1st Respondent's Application dated 9th March 2023 filed on 24th May 2023.d.That the learned Judge erred in law and in fact by wrongly interpreting the provisions of Order 7 Rule 13 of the Civil Procedure Rules, 2010.e.That the learned Judge erred in law and in fact by ignoring that the Plaintiff's suit was struck out for a lack of jurisdiction and was neither abandoned, stayed, discontinued [nor] dismissed.f.That the learned Judge erred in law and in fact by failing to hold that the suit was a nullity from the onset owing to a lack of jurisdiction of the Honourable Court.g.That the learned Judge erred in law and in fact by holding that the Appellant’s counterclaim dated 17 September 2020 was still pending despite the fact that Judgment of the court of appeal delivered on 24 June 2022 in Malindi COA Civil Appeal No. 18 of 2020: Diamond Trust Bank Kenya Limited -vs- Fatma Hassan Hadi rendered all proceedings from the onset of the suit a nullity.h.That accordingly, the learned Judge erred in allowing the 1st Respondent’s Application dated 7 March 2023.” 19.On the grounds aforesaid, the appellant prays for orders declaring both the primary suit and counterclaim as having been automatically struck out pursuant to the Judgment of this Court given on 24th June 2022 in Civil Appeal No. 18 of 2020; that the impugned ruling be set aside and substituted for an order striking out the application dated 7th March 2023 with costs to the appellant; that the costs of this appeal be awarded to the appellant; and for such further or other orders as are just in the circumstances of this appeal. 20.In support of the appeal, learned counsel for the appellant, M/s. Madhani Advocates LLP, filed written submissions dated 27th February 2024 while, in rebuttal, learned counsel for the 1st respondent, M/s. M. Ananda & Company, filed their written submissions dated 28th March 2024. 21.Having considered the record of appeal, the grounds on which it is anchored, the rival submissions and the law, we find that two issues commend themselves for our determination, namely: whether the learned judge erred by failing to consider the appellant’s replying affidavit filed in opposition to the 1st respondent’s application for review; and whether the learned Judge erred in failing to hold that the Court lacked jurisdiction to preside over further proceedings, and in holding that the appellant’s counterclaim remained pending and capable of being prosecuted notwithstanding the Court of Appeal’s decision striking out the main suit 22.On the 1st issue as to whether the learned Judge was at fault in failing to consider the appellant’s replying affidavit belatedly filed in response to the 1st respondent’s application for review, the learned Judge observed that, by the time he retired to draft the ruling, none of the other parties had filed a response to the application; and that no written submissions had been filed thereon. 23.In their submissions, counsel for the appellant faulted the learned Judge and contended that the appellant filed a replying affidavit on 30th May 2023; that the learned Judge acted in error by treating the appellant’s Motion as unopposed; that, had the learned Judge considered the replying affidavit, he would have noted the appellant’s opposition and the reasons as to why the Motion for review had no merit; and that it was the ELC’s erroneous decision of 13th November 2019 that prompted the counterclaim. 24.In rebuttal, counsel for the 1st respondent submitted that the appellant had not filed any response to the 1st respondent’s application by 4th May 2023 despite having been served on 6th April 2023; that the court reserved the ruling for 26th July 2023; and that the learned Judge could not consider the affidavit filed 25 days after the court had issued directions on delivery of the ruling. According to counsel, “it is doubtful whether the said affidavit found its way to the file, noting that after the issuance of directions on delivery of the ruling, the court would in ordinary circumstances retain the court file for purposes of writing the ruling.” 25.From the proceedings on record, it is clear to us that the 1st respondent’s application for review was fixed for hearing on 4th May 2023; that it is not in dispute that the appellant had been duly served with the 1st respondent’s application and the hearing notice; that, when the application came up for hearing on 4th May 2023, there was no appearance for the appellant; and that all the parties had been served with the 1st respondent’s application on 6th April 2023 as shown in the affidavit of service filed on 3rd May 2023. However, no replying affidavit had been filed in response to the application. Accordingly, the 1st respondent’s advocate requested for a ruling date, which was fixed for 26th July 2023 with directions that a Notice be served. 26.It is noteworthy that the appellant does not deny having been served with the notice as directed. Be that as it may, it proceeded to file a replying affidavit on 30th May 2023, 25 days after the court’s directions on delivery of the ruling. We find nothing on record to suggest that the appellant made any attempt to place the replying affidavit before the learned Judge for consideration before the ruling. In the circumstances, the learned Judge cannot be faulted for proceeding on the premise that the 1st respondent’s application was unopposed. 27.Turning to the 2nd and decisive issue as to whether the learned Judge was at fault in failing to hold that the Court lacked jurisdiction to entertain further proceedings, we take to mind his holding that the appellant’s counterclaim remained pending and capable of being prosecuted notwithstanding the decision of this Court to strike out the main suit. According to the learned Judge, this Court’s Judgment did not at all address the counterclaim filed by the appellant in the suit that was struck out. In his view, “… a counterclaim filed by a defendant is in itself an independent suit that can go to hearing where the plaintiff’s suit is determined one way or the other;” and that Order 7 rule 13 of the Civil Procedure Rules allows a defendant to continue with the counterclaim where the plaintiff’s suit has been discontinued. In conclusion, the learned Judge stated that “[t]he order to close the file made on 2nd November 2022 was made in error.” 28.Counsel for the appellant submitted that it was undisputed that the 2nd respondent filed suit in a court devoid of jurisdiction. Citing the case of George C. Gichuru v Senior Private Kioko & another [2013] KECA 476 (KLR), counsel highlighted the proposition that parties cannot, even by consent, confer jurisdiction on a court where none exists; and that, to act without jurisdiction, the outcome would be a nullity. 29.Counsel also cited the cases of Phoenix of E.A. Assurance Company Limited v S. M. Thiga t/a Newspaper Service [2019] KECA 767 (KLR); and Omega Enterprises (Kenya) LTD. v Kenya Tourist Development Corporation Limited & 2 others [1998] KECA 2 (KLR), which restated the principle encapsulated in the case of Macfoy v United Africa Co Ltd [1961] 3 All ER 1169 that:“If an act is void, then it is in law a nullity. It is not only bad, but incurably bad. There is no need for an order of the court to set it aside. It is automatically null and void without more ado, though it is sometimes convenient to have the court declare it to be so. And every proceeding which is founded on it is also bad and incurably bad. You cannot put something on nothing and expect it to stay there. It will collapse…” 30.Counsel further submitted that the import of this Court’s Judgment in Civil Appeal No. 18 of 2020 was that the ELC did not have jurisdiction to entertain the 2nd respondent’s suit; that, consequently, all the proceedings arising therefrom, including the appellant’s counterclaim, were a nullity; that the learned Judge erroneously continued to exercise jurisdiction when he had none; and that, by granting the Motion for review, the learned Judge, in effect, sat on appeal on this Court’s Judgment and reasserted jurisdiction upon himself when he had none. 31.In addition to the foregoing, counsel contended that this Court’s Judgment and order in Civil Appeal No. 18 of 2020 had the legal effect of substituting the ELC’s ruling and order of 13th November 2019; that all proceedings and pleadings arising from the said ruling and order were also invalidated, terminated and became a nullity in law; and that, consequent to this Court’s order to strike out the 2nd respondent’s suit for want of jurisdiction, there was no suit within which a defence and counterclaim could be filed. 32.On their part, counsel for the 1st respondent submitted that the learned Judge correctly appreciated, interpreted and applied the provisions of Order 7 rule 13 of the Civil Procedure Rules to the effect that the appellant’s counterclaim was a separate and distinct suit which had not been addressed by this Court’s Judgment; that the Judgment was specifically directed at and meant for the 2nd respondent’s suit and not the counterclaim; and that this Court’s Judgment did not in any way curtail the trial court’s power to make final orders striking out the counterclaim. 33.It is trite law that where a suit is filed in a court without the requisite jurisdiction, it is a nullity ab initio and, consequently, all proceedings/orders founded thereon are null and void. This principle was enunciated in this Court’s decision in Owners of the Motor Vessel “Lillian S" v Caltex Oil (Kenya) Ltd [1989] KECA 48 (KLR) where the Court pronounced itself on the fundamental requirement of jurisdiction in every suit in the following words:“Jurisdiction is everything. Without it a court has no power to make one more step. Where a court has no jurisdiction there would be no basis for a continuation of proceedings pending other evidence. A court of law downs its tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction …. Where a court takes it upon itself to exercise jurisdiction which it does not possess, its decision amounts to nothing. Jurisdiction must be acquired before judgement is given.” 34.In Joseph Muthee Kamau & another v David Mwangi Gichuru & Another [2013] KECA 284 (KLR), this Court also held that:“25.When a suit has been filed in a court without jurisdiction, it is a nullity. Many cases have established that; the most famous being the case of Kagenyi v Musirambo [1968] EA 43 ….26.…. We hold that jurisdiction cannot be conferred at the time of delivery of judgment. Jurisdiction does not operate retroactively. Jurisdiction must exist at the time of filing suit or latest at the commencement of hearing.” 35.In Equity Bank Limited v Bruce Mutie Mutuku t/a Diani Tour & Travel [2016] KECA 250 (KLR), this Court further elucidated on the fate of a suit found incompetent for want of jurisdiction thus:“In numerous decided cases, courts, including this Court, have held that it would be illegal for the High Court in exercise of its powers under Section 18 of the Civil Procedure Act to transfer a suit filed in a court lacking jurisdiction to a court with jurisdiction and therefore sanctify an incompetent suit. This is because no competent suit exists that is capable of being transferred...It is settled that parties cannot, even by their consent confer jurisdiction on a court where no such jurisdiction exists. It is so fundamental that where it lacks, parties cannot even seek refuge under the “O2” principle or the overriding objective under the Civil Procedure Act, the Appellate Jurisdiction Act or even Article 159 of the Constitution to remedy the situation.” 36.This Court having held in its Judgment dated 24th June 2022 that the 2nd respondent’s suit was incompetent for want of jurisdiction and accordingly struck it out, there was no basis for the continuation of proceedings, including the counterclaim which involved the same subject matter. To our mind, all pleadings and proceedings still pending after this Court’s determination were therefore automatically rendered incurably bad in law and a nullity in the manner described in Macfoy v United Africa Co Ltd (supra). 37.The implication of this Court’s Judgment was that the ELC had no jurisdiction to entertain any further proceedings founded on the incompetent suit. In the circumstances, the learned Judge could not assume jurisdiction to consider and determine the 1st respondent’s application dated 7th March 2023 seeking review of the court’s decision to close the file. 38.In Sarup Singh vs Union of India 2011 AIR (SC) 514, the Supreme Court of India held that:“19.… if a particular Court lacks inherent jurisdiction in passing a decree or making an order, a decree or order passed by such Court would be without jurisdiction and the same is non-est and void ab initio.20.The aforesaid position is well-settled and not open for any dispute as the defect of jurisdiction strikes at the very root and authority of the Court to pass decree which cannot be cured by consent or waiver of the parties.” 39.The 1st respondent’s argument that the court could still consider an application challenging its jurisdiction does not hold as the question of the ELC’s jurisdiction to hear the matter had been conclusively determined by this Court in its Judgment dated 24th June 2022. Accordingly, the learned Judge’s reliance on Order 7 rule 13 of the Civil Procedure Rules to sustain the counterclaim was a misstep. The rule provides:13.Discontinuance, stay or dismissal of suit [Order 7, rule 13]If, in any case in which the defendant sets up a counterclaim the suit of the plaintiff is stayed, discontinued or dismissed, the counterclaim may nevertheless be proceeded with. 40.It goes without saying that the rule only sustains counterclaims where the main suit is stayed, discontinued or dismissed. It cannot rescue a counterclaim where the main suit has been struck out for want of jurisdiction. The rule is reserved for situations where the court is properly clothed with the jurisdiction to determine the main suit in the first place in order to be able to stay, discontinue or dismiss the suit on its merits. 41.It is an immutable principle that, if the court lacks jurisdiction over the original suit, the ensuing proceedings are void ab initio, and the court cannot entertain a counterclaim founded thereon because jurisdiction cannot arise from a null proceeding. This follows the well- known principle stated in Macfoy v United Africa Co Ltd (supra) where it was held that “[i]f an act is void, it is a nullity… there is nothing to stand on.” Thus, where the original action is a nullity for want of jurisdiction, the counterclaim cannot stand independently in that proceeding. 42.Having considered the record of appeal, the grounds on which it is anchored, the rival submissions of learned counsel, the cited authorities and the law, we reach the inescapable conclusion that the appeal succeeds and is hereby allowed. Consequently, the ruling and orders of the Environment and Land Court of Kenya at Mombasa (S. M. Kibunja, J.) dated 25th July 2023 are hereby set aside. 43.Considering that the appeal was prompted by the learned Judge’s misapprehension of the law on the jurisdictional issues raised with regard to the counterclaim, we hereby direct that each party bears their own costs of the appeal. Orders accordingly. DATED AND DELIVERED AT MOMBASA THIS 29TH DAY OF MAY, 2026. A. K. MURGOR............................... JUDGE OF APPEALDR. K. I. LAIBUTA CArb, FCIArb................................ JUDGE OF APPEALG. W. NGENYE-MACHARIA............................... JUDGE OF APPEALI certify that this is a true copy of the originalSignedDeputy Registrar