[2022] KEHC 13331 (KLR)

Muthembwa v Co-operative Bank of Kenya Limited & another (Civil Suit 110 of 2016) [2022] KEHC 13331 (KLR) (Commercial and Tax) (16 September 2022) (Ruling)

Neutral citation: [2022] KEHC 13331 (KLR)

Republic of Kenya

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

Commercial and Tax

Civil Suit 110 of 2016

A Mshila, J

September 16, 2022

Between

Cosmas Kyalo Muthembwa

Plaintiff

and

Co-operative Bank of Kenya Limited

1st Defendant

Parkplace Hotel Training Centre Limited

2nd Defendant

Ruling

Background 1. The plaintiff and the 1st defendant reached a compromise and on November 12, 2019 a consent was recorded in the following terms:“The plaintiff's suit be and is hereby marked as withdrawn;The parties to agree and/or submit on the issue of costs.”

2. The parties could not agree on the issue of costs and thus submitted on it as follows;

Applicant’s Case 3. It was the applicant’s submission that the plaintiff clearly moved court with the sole intention of frustrating the 1st defendant from exercising its statutory power of sale court and indeed the Court of Appeal held that the plaintiff (a director of the 2nd defendant) had admitted that indeed 2nd defendant had defaulted in repaying the loan.

4. The 1st defendant further had to engage its firm of advocates on record to defend its interests and in the process incurred legal costs. In addition, the 1st defendant's advocate had to attend court severally due to the several applications that had been filed by the plaintiff.

5. The applicant referred the court to the case of Farah Awad Gullet v CMC Motors Group Limited [2018] eKLR where the Court of Appeal further stated;“In the party of independent candidates of Kenya versus Mutula Kilonzo & 2 others. HC EP No. 6 of 2013, the High Court had this to say on the issue of costs: -“It is clear from the authorities that the fundamental principle underlying the award of costs is two-fold. In the first place, the award of costs is a matter in which the trial judge is given discretion .... But this is a judicial discretion and must be exercised upon grounds on which a reasonable man could come to the conclusion arrived at. In the second place the general rule that costs should be awarded to the successful party, is a rule which should not be departed from without the demonstration of good grounds for doing so.”

6. Further reliance by the applicant was placed on Richard Kuloba,Judicial Hints on Civil Procedure, 2ndEdition, page at page 10, the author authoritatively states as follows on the issue of costs: -“The law of costs as it is understood by courts in Kenya is this, that where a plaintiff comes to enforce a legal right and there has been no misconduct on his part-no omission or neglect, and no vexatious or oppressive conduct is attributed to him, which would induce the court to deprive him of his costs the court has no discretion and cannot take away the plaintiff's right of costs. If the defendant, however innocently, has infringed a legal right of the plaintiff, the plaintiff is entitled to enforce his legal right and in the absence of any reason such as misconduct. is entitled to the costs of the suit as a matter of course”

7. In the light of the above the applicant submitted that the plaintiff should be condemned to pay costs of the suit to the 1st defendant.

Respondent’s Case 8. The respondent/plaintiff in response submitted that this matter was now fully settled and the parties requested that the same be marked as such. The claim for costs arose long after the parties had agreed on the settlement sum in this suit, effected the necessary discharge, subdivisions, sale, transfer and payment of the agreed sum and the claim is not only a fraudulent act on the part of the 1st defendant but also a mockery of the out of court settlement agreement made by the parties. It amounts to unjust enrichment and tantamount to theft which act should not be countenanced by the court.

9. It was the respondent’s contention that the 1st defendant provoked the plaintiff to institute and sustain this suit before the court due to its ill intention to dispose of the charged property and later agreed to the disposal of a portion of the charged property much later. If the plaintiff had remained quiet, he could have lost the entire land to the 1st defendant. The plaintiff’s claim before the court was therefore merited and deserving an intervention of the court.

10. The 1st defendant's scheme of demanding more than what was bargained for ought to be brought to a close by the court by declining the prayer for costs.

Issues for Determination 11. After considering the parties’ arguments there is only one issue for the court to determine;a.Whether the 1st defendant is entitled to costs of the suit.

Analysis 12. The applicant relied on the provision of section 27 of the Civil Procedure Act which provides;“(1)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 to give all necessary directions for the purposes aforesaid; and the fact that the court or judge 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 order.”

13. The import of the above provision is that costs follow the event unless ordered otherwise.

14. The award of costs is therefore discretionary. In exercising this discretion, courts must not only look at the outcome of the suit but also the circumstances of each case. In Morgan Air Cargo Limited v Evrest Enterprises Limited [2014] eKLR the court noted that“The exercise of the discretion, however, depends on the circumstances of each case. Therefore, the law in designing the legal phrase that ‘‘Cost follow the event’’ was driven by the fact that there could be no ‘‘one-size-fit-all’’ situation on the matter. That is why section 27(1) of the Civil Procedure Act is couched the way it appears in the statute; and even all literally works and judicial decisions on costs have recognized this fact and were guided by and decided on the facts of the case respectively. Needless to state, circumstances differ from case to case.”

15. What then were the events of this matter? The 2nd defendant defaulted in repaying the loan necessitating the issuance of the statutory notice by the 1st defendant. The plaintiff then moved the court vide a plaint and notice of motion dated and filed April 11, 2016 seeking injunctive orders against the 1st defendant, arising from its demand to exercise its statutory power of sale. Thereafter, the applicant herein filed a notice of appointment and opposed the said application. Once in receipt of summons to enter appearance, the 1st defendant duly filed a statement of defence on September 26, 2016.

16. The injunctive orders were granted conditionally and the plaintiff failed to comply and instead appealed the court’s decision. The plaintiff then proceeded to file a notice of motion application dated May 12, 2017 in this court seeking stay of execution pending the hearing of the application at the appellate court. The application was opposed by the applicant herein and was later dismissed by the court.

17. It is upon the dismissal of the application filed at the Court of Appeal that the parties entered a consent which was recorded on November 12, 2019.

18. The settlement of a matter whether by consent or otherwise, is not a bar to costs. In addition, settlement of a case by consent does not necessarily mean there is no successful party. The Court reiterates the finding in in Morgan Air Cargo Limited v Evrest Enterprises Limited(supra) where the court 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. The incidence of settlement by consent of the parties, to my mind, is just but a vital factor the court should consider, within the circumstances of each case, in deciding whether costs are payable or not. 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.”

19. The respondent faulted the applicant stating that the 1st defendant provoked the plaintiff to institute and sustain the suit before the court due to its ill intention to dispose of the charged property. But one thing that is clear is that the Plaintiff defaulted in repaying the loan and this occasioned the activities that then followed.

20. Considering the entire chain of events from the filing this suit up to the time the parties entered a consent, the numerous court attendances cited above the court finds no reason to deny the applicant1st defendant costs and looking at these events and the entire circumstances of the case this court is satisfied that the 1st defendant was the successful party and is entitled to costs of the suit.

Findings and Determination 21. For the foregoing reasons this court makes the following findings and determinations;i.The application is found to have merit and it is hereby allowed.ii.The 1st defendant is found to be entitled to costs of the suit.iii.Each party shall bear its own costs in the instant application.Orders Accordingly.

DATED SIGNED AND DELIVERED ELECTRONICALLY AT NAIROBI THIS 16TH DAY OF SEPTEMBER, 2022. HON. A. MSHILAJUDGEVirtually in the presence of: -Lucy: Court AssistantMr Kariuki: Advocate for the PlaintiffMr Kenneth: Advocate for the Defendant