https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/10946

Mombasa Water Products Ltd v NIC Bank Limited & 2 others (Civil Case 1 of 2021) [2026] KEHC 10946 (KLR) (20 July 2026) (Ruling) Neutral citation: [2026] KEHC 10946 (KLR) Republic of Kenya In the High Court at Mombasa Civil Case 1 of 2021 J Ngaah, J July 20, 2026 Between Mombasa Water Products Limited Plaintiff and NIC Bank Limited Defendant and I&M Bank Limited 1st Third party Mawingo Construction Company (2010) Limited 2nd Third party Ruling 1.This suit was commenced by a Plaint dated 22nd February 2016, filed in the Chief Magistrate's Court at Mombasa as CMCC No. 307 of 2016. The Plaintiff sought, in the main, an order compelling the Defendant to return the original Certificate of Title No. CR 63198 in respect of L.R. No. 5046 (Original No. 5046/1/MN), or in the alternative, payment of Kshs. 10,000,000/= together with interest from 19th March 2015, and costs. 2.The Defendant filed a Statement of Defence dated 30th May 2016 together with a Counterclaim. On the Defendant's application, this Court granted leave for the issuance of a Third Party Notice dated 30th November 2016 against I&M Bank Limited, the 1st Third Party, the Defendant asserting against it a claim for indemnity and/or contribution. 3.Pursuant to that leave, the 1st Third Party was joined to these proceedings. It entered appearance by a Memorandum of Appearance dated 9th January 2017 and filed its Statement of Defence and Defence to Counterclaim dated 25th January 2017. It has, since then, participated in these proceedings for close to a decade. 4.The suit was subsequently transferred to this Court on the Defendant's application, and became Mombasa HCCC No. 1 of 2021. Mawingo Construction Company (2010) Limited was later joined as the 2nd Third Party. 5.Before the suit could proceed to full hearing, the Plaintiff and the Defendant negotiated a settlement. By a consent dated 22nd September 2025 and filed on 26th September 2025, the Plaintiff's claim and the Defendant's Counterclaim were wholly withdrawn, with no orders as to costs. The 1st Third Party was not a party to, and did not execute, that consent. 6.Upon the recording of the consent, learned counsel for the 1st Third Party sought an award of costs against the Defendant. The Court directed the parties to file written submissions on that discrete question. The Defendant filed its submissions dated 5th December 2025, together with a List and Bundle of Authorities. The 1st Third Party filed its submissions dated 11th March 2026, to which it annexed a projection of its costs in the sum of Kshs. 498,580/=. 7.I have carefully considered the pleadings, the record, the rival submissions and the authorities cited. Parties’ positions (i) 1st Third Party 8.The 1st Third Party submits, in summary, that:(a)It was hauled into this litigation at the sole instance of the Defendant, who asserted against it a right of indemnity and/or contribution, and it was therefore compelled to enter the arena and incur considerable expense to defend its position;(b)The suit and the Counterclaim have been compromised without any finding of wrongdoing or liability on its part, and accordingly the “event” contemplated by section 27(1) of the Civil Procedure Act, cap. 21 has crystallised in its favour;(c)Relying on Cecilia Karuru Ngayu v Barclays Bank of Kenya & another [2016] eKLR (Mativo J, as he then was), the Court is not obliged to inquire into the reasons for a consent to which the party claiming costs is a stranger; the only relevant question is whether that non-consenting party is entitled to costs for the trouble it has been put to;(d)The Defendant, having unilaterally invoked the third-party procedure and having failed to establish any basis for indemnity, must bear the consequences of that failed attempt;(e)To permit the Plaintiff and the Defendant to withdraw the suit without addressing its costs would be manifestly unjust, leaving it to bear the financial burden of litigation it did not initiate. (ii) Defendant 9.The Defendant opposes the claim and submits, in summary, that:(a)Costs are in the discretion of the Court under section 27(1) of the Civil Procedure Act;(b)The consent between the Plaintiff and the Defendant was comprehensive and final, embodying the mutual intention of the principal parties that each bear its own costs, and it rendered the third-party proceedings spent;(c)The 1st Third Party obtained no relief, played no role in the resolution of the dispute, and is therefore not a “successful party” within the meaning of section 27(1);(d)The joinder of the 1st Third Party was not adversarial but a necessary and protective measure, the 1st Third Party being in possession of the original title to the suit property;(e)Crucially, it was the 1st Third Party's own default — its failure to remit Kshs. 10,000,000/= to the Defendant in accordance with the condition upon which the original title was released to it by the Defendant's letter dated 10th April 2015 — that precipitated the filing of this suit. Invoking Impressa Ing Fortunato Federice v Nabwire [2001] 2 EA 383, the Defendant says a successful party may be denied costs where, but for its conduct, the action would not have been brought;(f)The parties are financial institutions connected through a single transaction, and Article 159(2)(c) of the Constitution favours reconciliation rather than a punitive costs order. 10.From the foregoing, the following issues fall for determination:(i)Whether a consent to which the 1st Third Party was not a party can extinguish or determine its entitlement to costs;(ii)Whether the “event” within the meaning of section 27(1) of the Civil Procedure Act has occurred in favour of the 1st Third Party;(iii)Whether there is “good reason” to depart from the general rule that costs follow the event, and in particular whether the alleged conduct of the 1st Third Party disentitles it to costs;(iv)If the 1st Third Party is entitled to costs, by whom those costs are to be borne, and on what basis they are to be quantified. Analysis and determination Effect of a consent to which the 1st Third Party is a stranger 11.Section 27(1) of the Civil Procedure Act, Cap 21, provides:“Subject to such conditions and limitations as may be prescribed, and to the provisions of any law for the time being in force, the costs of and incidental to all suits shall be in the discretion of the court or judge, and the court or judge shall have full power to determine by whom and out of what property and to what extent such costs are to be paid, and give all the necessary directions for the purposes aforesaid; and the fact that the court has no jurisdiction to try the suit shall be no bar to the exercise of those powers;Provided that the costs of any action, cause or other matter or issue shall follow the event unless the court or judge shall for good reason otherwise direct.” 12.The discretion so conferred is wide, but it is a judicial discretion. As Kuloba J (Rtd.) puts it in Judicial Hints on Civil Procedure (2nd Edn., p. 94):“Costs are [awarded at] the unfettered discretion of the court, subject to such conditions and limitations as may be prescribed and to the provisions of any law for the time being in force, but they must follow the event unless the court has good reason to order otherwise.” 13.The Defendant's central contention is that the consent of 22nd September 2025 was “comprehensive and final”, “embodying the mutual intention of the principal parties”, and that it disposed of the question of costs across the board. With respect, that contention cannot stand. 14.A consent order is, in its essence, a contract between the parties to it, given the imprimatur of the Court. It derives its binding force from the agreement of those who made it. It follows, as a matter of elementary principle, that it can neither confer rights upon, nor extinguish the accrued rights of, a person who is a stranger to it — res inter alios acta alteri nocere non debet. The Plaintiff and the Defendant were perfectly entitled to agree, as between themselves, that each would bear its own costs. They were not entitled to agree, behind the back of the 1st Third Party, that the 1st Third Party would bear its own costs of nearly a decade of litigation into which the Defendant itself had dragged it. 15.The Defendant's own description of the position is instructive. It concedes at paragraph 14 of its submissions that upon the consent, “the third-party proceedings were thereby rendered spent.” The 1st Third Party puts it in materially identical terms: “the Defendant's prayer for indemnity and/or contribution against the 1st Third Party stands spent, as no claim survives against it.” Both parties are agreed, then, that the Defendant's claim against the 1st Third Party has come to an end without adjudication. The only question is who pays for it. 16.The reference to the third-party proceedings being “spent” is, if anything, a submission against the Defendant's own interest. The claim for indemnity and contribution was the Defendant's claim. The Defendant was dominus litis of it. By consenting to the withdrawal of the main suit and of its own Counterclaim, the Defendant effectively abandoned the very foundation upon which its third-party claim rested. A party who invokes a procedure, puts another to the expense of answering it, and then abandons it, does not ordinarily walk away without consequence. 17.I therefore hold, on the first issue, that the consent dated 22nd September 2025 operates inter se the Plaintiff and the Defendant only. Its stipulation that there be “no orders as to costs” governs the position between those two parties. It has no bearing whatsoever on the 1st Third Party's independent entitlement, if any, to costs. That entitlement survives the consent and falls to be determined by this Court in the exercise of its discretion under section 27(1). 18.This conclusion is squarely supported by Cecilia Karuru Ngayu v Barclays Bank of Kenya & another [2016] eKLR, where Mativo J (as he then was), confronted with a consent between a plaintiff and a first defendant to which the second defendant was a stranger, held:“As stated above in cases whereby the parties enter into a consent, the court does not go further to inquire the reasons for the consent… nor can an adverse inference be made against the plaintiff while determining costs. The only relevant issue is whether or not the second defendant is entitled to costs. The court is only interested in determining whether or not the second defendant is entitled to costs for the steps taken as enumerated earlier.” Has the “event” occurred in favour of the 1st Third Party? 19.The Defendant contends that the 1st Third Party is not a “successful party” because it obtained no relief and contributed nothing to the resolution of the dispute. This, with respect, misconceives what an “event” is, and misconceives the position of a defendant (or a third party) in litigation. 20.On the meaning of “event”, Kuloba J (Rtd.) (op. cit., p. 99), cited with approval both in Cecilia Karuru Ngayu and in Morgan Air Cargo Limited v Evrest Enterprises Limited [2014] eKLR, states:“The words ‘the event’ mean the result of all the proceedings to the litigation. The event is the result of the entire litigation… the expression ‘the costs shall follow the event’ means that the party who on the whole succeeds in the action gets the general costs of the action…” 21.A defendant — or a third party defending an indemnity claim — does not come to court to obtain relief. It comes to resist relief. Its success is measured not by what it wins, but by what it does not lose. The 1st Third Party entered these proceedings with a single objective: to resist the Defendant's claim for indemnity and/or contribution. That claim has now died. It died without a scintilla of liability being established against the 1st Third Party. No evidence was called against it. No finding was made against it. Measured against the only yardstick that matters — the objective with which it entered the arena — the 1st Third Party has succeeded completely. The event has occurred in its favour. 22.To say that the 1st Third Party “obtained no relief” is, in truth, to say no more than that no relief was granted against it. That is the very definition of success for a party in its position. 23.Nor does it avail the Defendant to say that the termination was by consent rather than by adjudication. The authorities are uniform — and, notably, the authorities are the Defendant's own. In Republic v Kenya Airports Authority & 5 others, Ex parte Transglobal Cargo Centre Limited [2015] eKLR — which the Defendant placed before this Court in its own Bundle of Authorities — Odunga J (as he then was) stated in terms:“It does not matter whether the termination of the proceedings are by an order of the Court or by consent as long as the event is favourable to the party seeking costs. Therefore absent any mitigating factors, there is no basis for denying the interested parties costs.”The learned Judge proceeded to award the interested parties their costs, to be borne by the ex parte applicant who had brought them into the proceedings. 24.Likewise, in Morgan Air Cargo Limited v Evrest Enterprises Limited [2014] eKLR — again, an authority relied upon by the Defendant — Gikonyo J held:“But, it does not necessarily mean that, where parties have entered into consent to settle a proceeding, no costs should be awarded, or there is no successful party in the matter… A consent recorded in settlement of a proceeding is not an automatic disentitlement of costs and I would, therefore, hesitate profoundly to make any generalized propositions on the law that consent is an automatic disentitlement of costs without reference to the context of the particular case.” 25.The Defendant's own bundle, therefore, states the law against it. I am fortified in the conclusion that a settlement between the Plaintiff and the Defendant is not, and cannot be, an automatic disentitlement of the 1st Third Party to its costs. 26.I am aware of Rufus Njuguna Miringu & another v Martha Muriithi & 2 others [2012] eKLR (discussed in Morgan Air Cargo), where it was held that where parties settle by consent, the consent cannot be read as meaning that one or the other has succeeded, and each should bear its own costs. That authority is, however, readily distinguishable and of no assistance to the Defendant here. It concerned the costs position as between the very parties who had themselves compromised the suit. The rationale — that parties who settle are taken to have accepted their respective conduct and to have shared in the successful resolution — has no application at all to a party who was never consulted, never agreed, and shared in nothing. The 1st Third Party did not settle. 27.I therefore hold, on the second issue, that the event within the meaning of section 27(1) has occurred in favour of the 1st Third Party. Is there “good reason” to deny the 1st Third Party its costs? 28.The general rule having been established, the burden shifts. The Defendant must persuade this Court that there is good reason to depart from it. The Defendant's principal — indeed, its only substantial — ground is that the 1st Third Party's own default caused this suit to be filed, and that it cannot now rely on that same default to claim costs. The Defendant invokes the principle in Impressa Ing Fortunato Federice v Nabwire [2001] 2 EA 383 that:“A successful party can be denied costs if it is proved that but for his conduct the action would not have been brought.” 29.That is undoubtedly a correct statement of the law. See also Devram Manji Daltani v Danda [1949] 16 EACA 35, cited in Transglobal (supra), where it was held that a successful litigant may be deprived of costs where his conduct has led to litigation which might have been averted. But the principle carries within it a critical qualifier, which the Defendant passes over in silence: the conduct must be “proved”. 30.And there lies the fatal difficulty with the Defendant's submission. The allegation that the 1st Third Party failed to remit Kshs. 10,000,000/= in breach of the condition contained in the Defendant's letter of 10th April 2015 is precisely the contested factual allegation which formed the substance of the Defendant's third-party claim. It was denied by the 1st Third Party in its Statement of Defence dated 25th January 2017. It was never tried. No witness was ever cross-examined upon it. No finding was ever made upon it. And it was never tried because the Defendant elected to withdraw. 31.The Defendant now invites this Court to find, in a ruling on costs, the very fact which it abandoned the opportunity to prove at trial. I decline that invitation, and I decline it firmly. To accede to it would be to determine the merits of the abandoned third-party claim in the guise of a costs ruling — to give the Defendant, without evidence and without trial, the very finding it walked away from. A party cannot compromise a suit before hearing and then ask the Court to assume in its favour, on the question of costs, the truth of the disputed allegations it never proved. If the Defendant wished to establish the 1st Third Party's default, the forum for that was the trial it chose to forgo. 32.There is a second and independent answer. Even taking the Defendant's narrative at its highest, the proximate cause of the 1st Third Party's presence in this suit, and of the costs it has incurred, was not the events of 2015. It was the Defendant's own deliberate procedural decision, taken in November 2016, to seek leave and issue a Third Party Notice. Nobody compelled the Defendant to do so. Having chosen to invoke Order 1 of the Civil Procedure Rules and to put the 1st Third Party to the expense of answering an indemnity claim for the better part of ten years, the Defendant cannot now be heard to disclaim responsibility for the costs of that exercise. 33.Indeed, on the Defendant's own account, it was the Defendant who released the original title to the 1st Third Party, and the Defendant who did so on conditions of its own framing. The Defendant was not a passive bystander to the transaction it now characterises as the 1st Third Party's default. 34.As to the invocation of Article 159(2)(c) of the Constitution and the “non-adversarial” relationship between two financial institutions: the promotion of reconciliation and the encouragement of settlement are important values, and this Court gives them full weight. But they cut the other way. Nothing would more effectively discourage parties from litigating in good faith than a rule that two litigants may compromise a suit between themselves and, by that private bargain, strand a third party — brought in against its will — with a decade's worth of irrecoverable legal expense. Settlement is to be encouraged; settlement at the expense of a stranger to the settlement is not. 35.I have also weighed the criteria set out by Odunga J in Transglobal (supra) — the conduct of the parties, the subject of the litigation, the circumstances leading to its institution, the events leading to its termination, the stage and manner of termination, the relationship between the parties, and the need to promote reconciliation. Applying this criteria to this case, the circumstances of joinder are that the 1st Third Party was joined at the Defendant's instance, on the Defendant's application, on the Defendant's assertion of indemnity; as for the stage of termination, the suit was terminated after nearly a decade, on the very threshold of hearing, after the 1st Third Party had incurred the full burden of preparation; and on the manner of termination, it was by a private consent from which the 1st Third Party was excluded; finally, regarding the conduct of the 1st Third Party in the litigation, it has not been suggested, nor is there any proof of misconduct, dilatoriness, and impropriety against it in the conduct of these proceedings. The 1st Third Party entered appearance promptly, pleaded promptly, and attended court diligently. 36.I find no good reason to depart from the general rule. The 1st Third Party is entitled to its costs. By whom are the costs to be borne, and on what basis? 37.The 1st Third Party seeks its costs against the Defendant. That is plainly right. The Plaintiff never made any claim against the 1st Third Party and never sought any relief against it. The 1st Third Party's presence in this suit is attributable to the Defendant alone. Costs must therefore follow that reality and be borne by the Defendant. 38.As to quantum: the 1st Third Party has annexed to its submissions a projection of costs totalling Kshs. 498,580/=, comprising an instruction fee of Kshs. 365,200/=, drawings, perusals and court attendances, and disbursements of Kshs. 29,100/=. That projection is not a matter for determination in this ruling. The assessment of costs is the province of the Taxing Officer, to be conducted in accordance with the Advocates (Remuneration) Order. This Court says nothing as to the reasonableness of any item in that projection, and nothing in this ruling should be read as an endorsement of it.For the reasons set out above, I make the following orders:(a)The consent dated 22nd September 2025 and filed on 26th September 2025, by which the Plaintiff's claim and the Defendant's Counterclaim were withdrawn with no orders as to costs, binds the Plaintiff and the Defendant only, and does not determine the entitlement of the 1st Third Party to costs.(b)The 1st Third Party, I&M Bank Limited, is entitled to the costs of the suit and of the third party proceedings, such costs to be borne by the Defendant, NIC Bank Limited.(c)The Defendant shall bear the 1st Third Party's costs of and incidental to this application for costs. 43.Orders accordingly. SIGNED, DATED AND DELIVERED ON 20 JULY 2026NGAAH JAIRUSJUDGE