[2023] KEHC 26055 (KLR)

Gulf African Bank Limited v Atticon Limited & 4 others (Commercial Case E086 of 2019) [2023] KEHC 26055 (KLR) (Commercial and Tax) (30 November 2023) (Ruling)

Neutral citation: [2023] KEHC 26055 (KLR)

Republic of Kenya

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

Commercial and Tax

Commercial Case E086 of 2019

DAS Majanja, J

November 30, 2023

Between

Gulf African Bank Limited

Plaintiff

and

Atticon Limited

1st Defendant

Douglas Kailanya

2nd Defendant

Dorothy Chepkurui

3rd Defendant

Billy Odero Onyango

4th Defendant

Export Processing Zones Authority

5th Defendant

Ruling

1. On 26. 05. 2023, the court rendered a judgment (“the Judgment”) where it found that the 2nd, 3rd and 4th Defendants fraudulently held themselves out as directors of the 1st Defendant (“the Company”) and aided in its loss of Kshs. 21,846,607. 25 and judgment was thus entered against them for this sum. The court also dismissed the Plaintiff’s suit against the Defendants.

2. The 3rd and 4th Defendants have now filed the applications dated 05. 06. 2023 and 07. 06. 2023 respectively under, inter alia, Order 10 Rule 11 of the Civil Procedure Rules seeking to set aside the Judgment against them and for leave to file their respective defences. The 3rd Defendant’s application is supported by her affidavit sworn on 05. 06. 2023 while that of the 4th Defendant is supported by his affidavit sworn on 07. 06. 2023. The applications are opposed by the Company through the replying affidavit of its director,Emily Nkirote Buantai, sworn on 29. 06. 2023. The Company and the 3rd Defendant have supplemented the positions in their pleadings by filing written submissions.

3. The Defendants case is that they were never served personally with the Summons to Enter Appearance and Plaint and any other court process by the Plaintiff or the Company pertaining to the suit. They contend that by failing to serve them with court process, the Plaintiff and Company contravened Order 1 Rule 24, Order 5 Rule 1 and Order 7 Rule 8 of the Civil Procedure Rules and that therefore the judgment entered in default of appearance was irregular and ought to be set aside ex debito justitiae.

4. The 3rd Defendant depones that her known address is P.o Box 101463-00100, Nairobi and not P.O BOX 30333-00100 NAIROBI and that the affidavit of service is tainted with falsehood as the certificate of posting is dated 06. 03. 2019 at 10. 42 am, whereas the plaint is dated 02. 04. 2019 which means the summons were issued and served earlier before the plaint was filed in court. The Defendants therefore urge the court to exercise its unfettered discretion and set aside the Judgment against them.

5. The Company opposes the applications and states that the Defendants have not met the threshold for setting aside judgment set out in Mbogo & Another v Shah [1967] EA 116. It states that the Defendants have always been aware of the existence of this suit and are simply feigning ignorance of it. It contends that there is proof that the Defendants were served with demand Letters and the pleadings with respect to this matter by registered post and they do not set out any claims capable of dispelling the findings of this Court in the Judgment.

6. On the contention that that the Defendants have always been or should have been aware of the existence of this suit, it points out the Defendants were parties to Hon. Franklin Mithika Linturi & 2 Others v The Director of Public Prosecutions & 15 Others Milimani CHRD Petition No. E068 of 2021. In that case, the Defendants were the 5th and 6th Defendants and the petition specifically mentioned the suit documents which were attached to the depositions. That the Defendants entered appearance and duly filed their responses to the petition. Further, that the Defendants’ relatives, proxies and business associates are parties to Arnold Kipkurui Langat & 2 Others v Atticon Limited & 8 Others, HC ML COMM No. E201 of 2021 where the existence of this suit is explicitly mentioned.

7. The Company asserts that the address provided by the Defendants, that is, P.o.box 101463 – 00100 (jamia) Nairobi is the same address indicated in the plaint as that of the 4th Defendant, hence it is the address that the Plaintiff ostensibly served through registered post the suit documents and the Notice of Intention to Sue. Thatthere is on record a Certificate of Posting for the above postal address dated 06. 03. 2019 whose date closely coincides with the date of issue of Demand Letters dated 04. 03. 2019 by the Plaintiff to all the Defendants and therefore it can be implied that the Defendants received the Notice of Intention to sue and the subsequent pleadings. The Company further claims that it is a matter of public record that the Defendants are husband and wife as deponed in an affidavit by the 3rd Defendant dated 08. 04. 2019 in Milimani High Court Commercial Civil Case No.412 of 2018: Barons Estate Limited & Another v Emily Nkirote Buantai, therefore, service of documents effected on or through either party is deemed to be effective service.

8. The Company states that the Defendants’ proposed Statements of Defence do not raise any triable issues which negate the essential findings of the Judgment especially with the regard to the Plaintiff’s negligence and consist of mere denials. That the Defendants admit to having applied for and guaranteed the Tawarruq Local Purchase Order Finance Facility from the Plaintiff and they further admit to having orchestrated a change in the directorship of the Company which was allegedly accepted by the bonafide directors of the Company only to be reversed immediately after disbursement of the facility to allegedly avoid repayment. That these assertions are an admission that the Defendants were complicit in a fraudulent transaction. Further, that the Defendants have admitted to being directors of the Company and to issuing Personal Guarantees to the Plaintiff, therefore even if the outcome of the case had been in favour of the Plaintiff, the Defendants would still have been held liable.

9. The Company avers that it will suffer great prejudice if the applications are allowed because it has expended substantial resources over four years in defending the suit. The Company submits that should the Court be minded to grant the applications, it should order the Plaintiff and the Defendants to deposit the decretal sum and the interest thereon in a joint interest-earning account in the name of the Plaintiff’s and the Company’s Advocates and order the Plaintiff and the Defendants to pay throw away costs to the Company.

Analysis and Determination 10. The main issue for determination is whether the Judgment and consequent proceedings against the Defendants should be set aside for want of service. Order 10 rule 11 of the Civil Procedure Rules empowers the court to set aside judgment in default of appearance or defence or upon such terms as are just. The general principle is that the court has unfettered discretion to set aside judgment on such terms as it deems fit and just. This principle was summarized as follows in Shah v Mbogo and Another (Supra):The discretion to set aside an exparte 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.

11. More recently the Court of Appeal in Richard Nchapai Leiyangu v IEBC & 2 others NYR CA Civil Appeal No. 18 of 2013 [2013] eKLR expressed itself as follows:We agree with the noble principles which go further to establish that the courts’ discretion to set aside ex parte judgement or order for that matter, is intended to avoid injustice or hardship resulting from an accident, inadvertence or excusable mistake or error but not to assist a person who deliberately seeks to obstruct or delay the course of justice.

12. Although the court found, at Para. 6 of the Judgment, that the Defendants had been served with the pleadings in this suit, it is still open for them to demonstrate they were not actually served. The Defendants have contended that the address used to serve them was incorrect as their known address is P.o Box 101463-00100, Nairobi And Not P.o Box 30333-00100 Nairobi. Whereas the Company does not dispute this and states that the address used by the Plaintiff in the Plaint to serve the Defendants was P.O. Box 101463-00100, a perusal of the Plaint and supporting pleadings indicate that a different address was in fact used. Thus, if at all the Company served the Defendants using the addresses provided in the Plaintiff’s pleadings therein, then they relied on the wrong addresses and the Defendants never received the pleadings in their correct addresses.

13. The Company has also argued that the Defendants have always been aware about the existence of this suit which has always been mentioned in other suits between the parties. The Court of Appeal in Misnak International (UK) Limited v 4MB Mining Limited C/O Ministry of Mining, Juba Republic of South Sudan & 3 others MSA CA Civil Appeal No.118 of 2018 [2019] eKLR answered the question whether mere knowledge of the existence of a suit is sufficient enough for a party to proceed against another party without service of summons. They concurred with the decision of Aburili J., in Law Society of Kenya v Martin Day & 3 Others [2015] eKLR where she held as follows:It is not sufficient for a plaintiff to institute suit against a party. That party must be invited to submit to the authority of the court in order for the legal process of setting down the suit for trial to commence. The circumstances of this case are such that Summons must be served in the manner provided for in the rules to enable the defendants who have no registered office or business in Kenya submits to the jurisdiction of this court. It therefore follows that their knowledge of the existence of the suit is not sufficient enough to proceed against them. They may be aware of the suit but unless they are prompted by the summons in the manner provided for in the rules, the jurisdiction of this court is not invoked.’

14. Thus, in the absence of proper service of summons to the Defendants to prompt them to defend the suit, the Judgment against them cannot stand as it would be against the rules of natural justice that a party should not be condemned unheard. For this reason alone, I am constrained to set aside the judgment not as a matter of discretion, but as a matter of judicial duty, ex-debito justiciae (see James Kanyiita Nderitu& Another vs. Marios Philotas Ghikas & Another MSA CA Civil Appeal No. 6 of 2016 [2016] eKLR)

15. Before I close the matter, I wish to point out that the Plaintiff did not take a position on the applications for consideration. Its suit against the Defendants was dismissed and it evinced its intention to appeal against the Judgment. Even though the Plaintiff has elected to appeal against the Judgment, the Plaint and Counterclaim are inextricably linked, the logical consequence is that the entire Judgment must be set aside and the suit heard afresh with all parties.

Disposition 16. In conclusion, I now make the following dispositive orders:a.The 3rdDefendant’s application dated 05. 06. 2023 and the 4th Defendant’s application dated 07. 06. 2023 are allowed on terms that the entire Judgment be and is hereby set aside.b.The Defendants shall file and serve their respective Statements of Defence within 7 days from the date of the court’s ruling.c.Each party shall bear their own costs.

SIGNED AT NAIROBID. S. MAJANJAJUDGEDATED AND DELIVERED AT 30TH THIS DAY OF NOVEMBER 2023. A. MABEYAJUDGE