[2023] KEHC 23517 (KLR)

NCBA Bank Kenya PLC v Wangui & 5 others (Civil Suit E884 of 2021) [2023] KEHC 23517 (KLR) (Commercial and Tax) (13 October 2023) (Ruling)

Neutral citation: [2023] KEHC 23517 (KLR)

Republic of Kenya

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

Commercial and Tax

Civil Suit E884 of 2021

FG Mugambi, J

October 13, 2023

Between

Ncba Bank Kenya Plc

Plaintiff

and

Virginia Wangui

1st Defendant

Catherine Wangari Kimani

2nd Defendant

Pennie Njeri Chege

3rd Defendant

John Rikie Kimani

4th Defendant

Rikie Ngige

5th Defendant

Simon Ngigi Kimani

6th Defendant

Ruling

Brief Facts 1. This ruling determines the application dated March 30, 2023 which is brought under section 3 of the Judicature Act, section 1A, 1B, 3A of the Civil Procedure Act Cap 21 Laws of Kenya, Order 40 rule 1A and order 51 rule 1 of the Civil Procedure Rules 2010. The application seeks to set aside the judgment entered on January 10, 2023 and to have the matter heard on merit. It also seeks a temporary injunction against the respondent Bank from attaching and proceeding with execution.

2. The application is premised on the grounds on the face of it and supported by the affidavit sworn by Simon Ngigi KIMANI and further buttressed by the submissions dated May 11, 2023. The respondent in opposition to the application filed a replying affidavit sworn by its principal legal counsel Stephen Atenya on April 19, 2023 and written submissions dated May 17, 2023.

3. The genesis of the dispute between the parties is a term loan facility of Kshs 150,000,000/= along with a credit card facility of Kshs 1,000,000/= that was advanced to Rudufu Limited. The facility was secured by a charge, personal guarantees and indemnity executed by the 1st to 6th defendants and a Deed of Rental Assignment over the Collateral LR No 209/2669.

4. The applicant avers that it retained a reserved right both in law and by the contract entered into by the parties to call in the facility and generally exercise its rights in case the principal borrower failed to service the debt and further call in the guarantees and hold the guarantors to account on default by the principal borrower. This meant that the guarantors were thus liable upon default by the principal borrower.

5. The account fell into arrears thus necessitating the respondent Bank to issue demand for payment. Attempts to dispose of the collateral failed to secure bids sufficient to realize the sums outstanding and a demand was issued to the 1st to 6th defendants. The respondent sued the 1st to 6th applicants for the outstanding amount vide a plaint dated October 22, 2021.

6. The applicants failed to enter appearance and a default judgment was issued on January 10, 2023. It is this judgment that the applicants now seek to set aside on the basis that they were not served with the summons to enter appearance and that had they been served, they would have filed a statement of defence. The applicants claim that they only became aware of the suit upon service of the decree and proclamation.

7. The applicants confirm that they were indeed guarantors for the facility advanced to Rudufu Limited which had placed the property known as L R No 209/2669 worth Kshs.250,000,000 as security. It is their argument however that the plaintiff was first supposed to recover the amounts from the secured property before pursuing the guarantors. Further it was submitted that the three email addresses used to serve the applicants did not belong to all the applicants and that the 4th applicant had been admitted in hospital and passed on at the time of service.

8. The respondents’ position was that the applicants willfully refused to participate in the proceedings despite being served with the summons and notices. The respondent contended that it effected service by its process server who delivered the documents to I&M Bank and Rudufu Limited at Wilson Airport. Service was also effected through email, registered post and WhatsApp. According to the respondent that amounted to proper service and therefore the applicants were well aware of the suit.

9. With respect to setting aside the judgment, it was the respondent’s contention that the same would be detrimental since the applicants had started disposing off their assets after they were served with the suit documents. Further it was contended that the amount due and owing was Kshs. 184,462,959. 78 and the same continued to attract interest. It was the respondent’s contention that the applicants failed to demonstrate irreparable loss which could not be compensated by the bank, should the applicants succeed in their claim.

Analysis 10. I have considered the pleadings and the rival submissions by all the parties. Order 10 rule 4(1) and (2) of the Civil Procedure Rulesdictates that the court can enter judgment with respect to a liquidated claim where the defendants fail to appear in court. Order 10 rule 11 on the other hand gives the court discretion to set aside such judgment and it provides thus:“Where judgment has been entered under this Order the court may set aside or vary such judgment and any consequential decree or order upon such terms as are just.”

11. The law on setting aside ex parte judgments is now settled. In Shah v Mbogo & Another, [1967] EA 116 the court held that:“… the principles governing the exercise of the court’s discretion to set aside a judgment obtained ex parte… the discretion is intended so to be exercised to avoid injustice or hardships resulting from accident, inadvertence or excusable mistake or error, but is not designed to assist the person who has deliberately sought, whether by evasion or otherwise, to obstruct or delay the course of justice.”

12. The first question I must ask myself is whether the default judgment herein regular or irregular. I am guided by the Court of Appeal decision in James Kanyiita Nderitu & Another v Marios Philotas Ghikas & Another, [2016] eKLR, where the court differentiated between a regular and irregular judgment. It held as follows:“From the outset, it cannot be gainsaid that a distinction has always existed between a default judgment that is regularly entered and one, which is irregularly entered. In a regular default judgment, the defendant will have been duly served with summons to enter appearance, but for one reason or another, he had failed to enter appearance or to file defence, resulting in default judgment. Such default is entitled, under Order 10 rule 11 of the Civil Procedure Rules, to move court to set aside the default judgment and to grant him leave to defend suit.In such a scenario, the court has unfettered discretion in determining whether or not to set aside the default judgment, and will take into account such factors as the reason for the failure of the defendant to file his memorandum of appearance or defence, as the case may be; the length of time that has elapsed since the default judgment was entered; whether the intended defence raises triable issues; the respective prejudice each party is likely to suffer; whether on the whole it is in the interest of justice to set aside the default judgment, among other. ...In an irregular default judgment, on the other hand, judgment will have been entered against a defendant who has not been served or properly served with summons to enter appearance. In such a situation, the default judgment is set aside ex debito justitiae, as a matter of right. The court does not even have to be moved by a party once it comes to its notice that the judgment is irregular; it can set aside the default judgment on its own motion.”

13. As far as service goes, Order 5 rule 6 of the Civil Procedure Rules providesfor personal service. Rule 7 stipulates that where there is more than one defendant, service of summons should be made to each defendant. Order 5 rule 22B provides for service through electronic mail services (e-mail) in the following terms:“(1)Summons sent by Electronic Mail Service shall be sent to the defendant's last confirmed and used E-mail address.(2)Service shall be deemed to have been effected when the Sender receives a delivery receipt.(3)Summons shall be deemed served on the day which it is sent; if it is sent within the official business hours on a business day in the jurisdiction sent, or and if it is sent outside of the business hours and on a day that is not a business day it shall be considered to have been served on the business day subsequent.(4)An officer of the court who is duly authorized to effect service shall file an Affidavit of Service attaching the Electronic Mail Service delivery receipt confirming service.”

14. I have considered the two affidavits of service annexed to the respondents replying affidavit. With respect to the affidavit sworn by Christopher Omache, a court process server on November 23, 2021, service on the 1st to 6th applicants as directors of Rudufu Limited was effected on November 16, 2021. This was at the offices of the said company, at Wilson Airport. Service was effected on the Operations Manager, a Mr Shukran, who declined to sign the principal copy.

15. I note that the 1st to 6th respondents have not denied that they were directors of the company. They have not denied that the company is located at Wilson Airport but have only taken issue with the return of service not being specific about which building the service was effected. There is also no denial that the said Mr Shukran was an Operations Manager at Rudufu Ltd.

16. The affidavit of service sworn by Jackie Kwambukha Ochieng indicates that the defendants were served on November 18, 2021, service being effected by email, pursuant to Order 5 rule 22B of theCivil Procedure Rules. The email with the attachments was sent to kimanicanter@yahoo.com, info@rudufu.co.ke and rikiengige@gmail.com. I have perused the guarantee documents signed by the 1st to 6th applicants and attached to the application. I am satisfied that the email addresses that were given by the 1st to 6th respondents were all info@rudufu.co.ke, possibly being company emails. Only two of the applicants gave alternative email addresses which were also included in the mail.

17. The applicants cannot therefore deny the email addresses which they themselves provided to the bank in the security documents. For purposes of Order 5 rule 22B, these were the confirmed email addresses of the applicants and as such I find no problem with the service.

18. Further evidence on record shows that service was also effected by post to the 1st and 6th applicants through PO Box 21488-00505, Nairobi. I have compared this address with the documents that the applicants executed with the respondent Bank and in particular the 1st and 6th applicants and I note that the address is similar. The certificates of postage placed before the court also confirm that the letters were sent to the 1st and 6th applicants. The 6th applicant was also served by WhatsApp.

19. While the court sympathizes with the demise of the 4th applicant, no evidence has been produced to prove the period of the 4th applicant’s hospitalization when he would not have been accessible for service. In any case, even if this had been produced, it does not exonerate the other applicants.

20. It is interesting that the applicants state that they only became aware of execution upon being served with the proclamation. It is not clear how the proclamation was served or how and conveniently so, the applicants were able to receive the proclamation and not all the other pleadings. It was stated that the same was served on the 6th applicant. It would appear to me that the applicants chose to ignore the court summons until they were awakened by the execution.

21. Having come to the conclusion that the service was proper, the defendants did not attend court at their own fault therefore the judgment entered was regular. I then turn to the question whether this is a proper case for exercising the inherent discretion of the Court to set aside the judgment.

22. I have looked at the statement of defence. The applicants do not deny that a facility was advanced to Rudufu Ltd, that they guaranteed the facility and that the company was in default. The only issue that they raise is that the respondent was supposed to call on the property secured by the charge first and that the security was sufficient to pay the outstanding amount. It has already been stated by the respondent that the property has been sold and that it was not sufficient to cover the amount outstanding on the facility. This is not controverted by the applicants.

23. The respondents have also brought to the attention of the Court, another related suit, being HCCC E151 of 2019 where Rudufu Limited had sued the respondent restraining it from exercising its statutory power of sale. Even though the 1st to 6th applicants are not parties to that suit, it is obvious that they are also not strangers to the dispute herein.

24. I say so because the verifying affidavit to the plaint in HCCC E151 of 2019 was signed by the 6th applicant, in his capacity as Managing Director of Rudufu Ltd. He used the same postal address, PO Box 21488-00505, that was used to effect service on the directors in the current suit as his postal address. The replying affidavit therein was also sworn by the 6th applicant relating to the loan facility.

25. I note that in HCCC E151 of 2019 similar grounds alleging lack of proper service of statutory notices were raised. The court dismissed the argument and found that there was sufficient service when the notices were served on the directors of Rudufu Limited on PO Box 21488-00505, which address was given in the charge and security documents. The Court went on to dismiss the application for injunction filed by the applicant, Rudufu Limited, noting at pages 7-8 of its ruling that the facility was not controverted and neither was the default.

26. Having so analyzed the law and the circumstances of this case as I have, I do not ignore the fact that the applicants have submitted that the amounts involved are colossal. This reason is not in itself sufficient to set aside the judgment. In fact, on this account alone, the applicants should have been vigilant to defend the claim or reach out to the respondent instead of ignoring service. The conduct of the parties all along depicted lack of interest.

Determination 27. Given the circumstances I am of the opinion that the applicants may be using the court process to delay this case, something that justice abhors.

28. For the reasons that I have pointed out, the application dated March 30, 2023 is therefore dismissed with costs to the respondents.

DATED, SIGNED AND DELIVERED IN NAIROBI THIS 13 TH DAY OF OCTOBER 2023. F. MUGAMBIJUDGE