[2022] KEHC 12921 (KLR)

Gachuba v Kombo & 3 others (Civil Appeal E066 of 2020) [2022] KEHC 12921 (KLR) (Commercial and Tax) (14 September 2022) (Judgment)

Neutral citation: [2022] KEHC 12921 (KLR)

Republic of Kenya

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

Commercial and Tax

Civil Appeal E066 of 2020

DAS Majanja, J

September 14, 2022

Between

Davis Muriithi Gachuba

Appellant

and

Mariyam Bazhan Kombo

1st Respondent

Rose Nduku Nzioka

2nd Respondent

Catherine Njoki Nyaga

3rd Respondent

David Gitau Muguro

4th Respondent

(Being an appeal from the Ruling and Order of the Co-operative Tribunal sitting at Nairobi dated 29th October 2020 in CTC Case No. 460 of 2018)

Judgment

1. This is an appeal against the ruling and order of the Co-operative Tribunal (“the Tribunal”) dated 29th October 2020 dismissing the Appellant’s application to set aside an ex-parte judgment against him.

2. The basis of the suit before the Tribunal is the Statement of Claim dated 15th August 2018. The Respondents claimed that they guaranteed a loan facility advanced to the Applicant by Mhasibu Savings and Credit Co-operative Society Limited (“the SACCO”). When the Appellant failed to repay the loan, the Sacco proceeded to enforce the guarantees issued by the Respondents amounting to Kshs. 1,535,141,15 which was recovered from them. As a result, the Respondents claimed the amount from the Appellant.

3. It is not disputed that the Appellant was served with Summons to Enter Appearance and the Statement of Claim, entered appearance within the time prescribed but failed to file his Statement of Defence. The court on request of the Respondents entered ex-parte judgment on 6th November 2018.

4. The Appellant filed an application seeking to set aside judgment under Order 10 rule 11 of the Civil Procedure Rules which the Respondents opposed. The Tribunal dismissed the Appellant’s application. In the ruling, the Tribunal accepted that the failure to file the Statement of Defence within the prescribed time was as a result of the error by the Appellant’s advocates for which the Appellant should not be punished. The Tribunal was however not satisfied that the Appellant had a defence that raised any triable issue on the ground that it constituted mere denials and that he had not led any evidence to support his defence. The Tribunal also held that the Respondents would suffer prejudice if judgment was set aside as they would be denied the opportunity to enjoy the fruits of their judgment.

5. It is the ruling that has precipitated this appeal. The thrust of the Memorandum of Appeal dated 6th November 2020 is that Tribunal failed to exercise its discretion judiciously by refusing to grant the Appellant leave to file its Response out of time. That it erred by limiting the Appellant’s illimitable right to a fair hearing and condemned him unheard and that the ruling resulted in a travesty of justice. In support of and in opposition to the appeal, the parties filed written submissions which I have considered.

6. The substance of this appeal is whether the Tribunal erred in the exercise of its discretion in refusing to set aside the default judgment. In an appeal against the exercise of discretion by the trial court, the appellate court will not interfere with the decision of the trial court unless it is satisfied that the court in exercising its discretion has misdirected itself in some matter and as a result has arrived at a wrong decision, or unless it is manifest from the case as a whole that the court has been clearly wrong in the exercise of its discretion and that as a result there has been an injustice (see Mbogo v Shah [1968] EA 93 and United India Insurance Co. Ltd and Others v East African Underwriters (Kenya) Ltd NRB CA Civil Appeal No. 36 of 1983[1985] eKLR).

7. The Appellant does not dispute that the ex-parte judgment was regular as he failed to file his defence within the prescribed time. However, even where the judgment is regular, the court is still entitled to set aside default judgment if the defence raises any triable issue. InTree Shade Motors Limited v D.T. Dobie Company LimitedNRB CA Civil Appeal No.38 of 1998 [1998] eKLR, the Court of Appeal stated that, “Even if the service was valid, judgment will be set aside if [the] Defence raised triable issues”. (see alsoJames Kanyiita Nderitu and Another v Marios Philotas Ghikes and Another [2016] eKLR).

8. As I stated earlier, the Tribunal excused the failure to file the Statement of Defence within the prescribed time but refused to set aside the judgment on the ground that it did not raise any triable issue and that the Respondents would suffer prejudice if the judgment is set aside.

9. In this appeal, the Appellant argues that its draft Statement of Defence raises triable issues which would require examination. For example, the issue of waiver by the SACCO By-laws, lack of evidence that the Sacco had in fact recovered the amount claimed from the Respondents, lack of a resolution by the SACCO to recover the amount from the Respondents and lack of evidence that the SACCO had recovered the amount claimed from the Respondents’ deposits or savings and whether the claim was barred by the doctrine of exhaustion. The Appellant cited several decisions among them Job Kilach v Nation Media Group Limited and Others [2015] eKLR and Dhanjal Investment Limited v Shabaha Investment Limited [1997] LLR 169 to demonstrate that having raised a bona fide triable issue, the Tribunal was entitled to grant it leave to defend the claim by setting aside the judgment.

10. In response, the Respondents support the conclusion of the Tribunal that the draft Statement of Defence was a mere denial and did not raise any triable issue. They point out that the Appellant did not plead that he had paid the loan or even annex any document to show that he was not in default. In their view, he did not annex any evidence because he did not have any evidence hence there was no reasonable basis upon which the court could reach a conclusion that he had a defence to the suit. They cited several decisions among them Moses Masika Wetangula v Danson Buya Mungatana [2015] eKLR and Equitorial Commercial Bank Ltd v Jodam Engineering Works Limited and Others [2014] eKLR.

11. Resolving the meaning and application of a triable issue for purposes of setting aside default judgment is at the heart of this appeal. In Job Kilach v Nation Media Group and Others (Supra), the Court of Appeal states that, ‘’A triable issue is said to exist is there is a dispute in the facts, which dispute can only be resolved after ventilation of a full hearing.’’ The present case must be distinguished from cases where the court is required to strike out a defence or summary judgment for in those cases the court has the opportunity to examine all the evidence and documentation put forth by both sides. In this case, the Appellant has raised affirmative defences which cannot be dismissed as mere denials.

12. On the issue at hand, the Tribunal expressed itself as follows:Whilst the Respondent contend that the Claimants have not led evidence to demonstrate that they been indeed deducted to recover the loan, he himself has not led evidence to demonstrate that his account is sound and that he has not defaulted in repaying the loan. To this end we find that the said draft Defence does not raise triable issues.In coming to the aforesaid conclusion, the Tribunal appears to have accepted that there were factual issues on both sides but nevertheless concluded that the Appellant had not led any evidence to support his case. I find that this was a misdirection on the part of the Tribunal as an application to set aside judgment is not a mini trial given the parties have not had the opportunity to present their evidence, documentary or otherwise. I hold that the Appellant’s Statement of Defence raises bona fide trial issues which would require ventilation at a trial.

13. Having come to the conclusion that the judgment ought to be set aside, I also find that any prejudice to the Respondents as a result of the Appellant’s default and delay in filing his defence can be assuaged by an award of costs. They are accordingly awarded thrown away costs before the Tribunal.

14. For the reasons I have outlined above, I allow the appeal on the following terms:1. The Appellant’s Notice of Motion dated 6th December 2018 before the Tribunal is allowed and the judgment entered on 6th November 2018 be and is hereby set aside.2. The Appellant’s shall file and serve its Statement of Defence within 14 days from the date hereof.3. The Appellant shall pay costs thrown away before the Tribunal while the Respondents shall bear costs of this appeal assessed at KES. 20,000. 00.

DATED AND DELIVERED AT NAIROBI THIS 14TH DAY OF SEPTEMBER 2022. D. S. MAJANJAJUDGECourt Assistant: Mr M. Onyango.Mr Gachuba instructed by Mwaniki Gachuba Advocates LLP for the Appellant.Mr Owino instructed by Owino and Company Advocates for the Respondents.