[2017] KEHC 10146 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

MILIMANI LAW COURTS

COMMERCIAL AND TAX DIVISION

CIVIL CASE NO. 1822 OF 2000

ORION EAST AFRICA LIMITED...............................…PLAINTIFF

VERSUS

TETU COFFEE GROWERS CO-OPERATIVE

SOCIETY LIMITED (IN LIQUIDATION).......................DEFENDANT

AND

THE CO-OPERATIVE BANK OF KENYA LIMITED........GARNISHEE

RULING

[1]Before the Court for determination is the Garnishee's Preliminary Objection filed herein on 5 June 2017. It was filed in response to the Plaintiff's Notice to Show Cause dated 24 May 2017, by which the Plaintiff required the Managing Director of the Garnishee to show cause why he should not be arrested and committed to civil jail for failing to pay the decretal sum herein together with interest and costs, amounting to Kshs. 5,642,159/=. Accordingly, the Garnishee raised 9 points in objection to the Notice to the Notice to Show Cause, which I have summarized as follows:

[a] That execution of the decree herein arising from the Judgment delivered on 14 February 2001 is time barred in view of the express provisions of Section 4(4) of the Limitation of Actions Act, Chapter 22 of the Laws of Kenya;

[b] In the alternative, that the alleged Garnishee Order, made by consent of the Decree Holder and the Judgment Debtor on 4 December 2001,is time-barred in view of the express provisions of Section 4(4) of the Limitation of Actions Act; and is therefore a nullity;

[c] That the consent entered into between the Decree Holder and Judgment Debtor on 4 December 2001 on attachment of shares held by the Garnishee is not binding on the Garnishee as the Decree Holder had in any event withdrawn proceedings against the Garnishee on 9 November 2001;

[d] That the Deputy Registrar of the Court has no jurisdiction to entertain the execution proceedings by dint of Order 49 Rule 5 of the Civil Procedure Rules.

[e]That the Notice to Show Cause is actuated by malice and/or bad faith and amounts to abuse of the court process because a share is not a debt and is therefore not amenable to Garnishee Proceedings.

[2] Upon the filing of the Notice of Preliminary Objection, directions were given by the Court on the 13 June 2017 for the filing of written submissions in respect thereof, which were highlighted on 17 July 2017. The Garnishee's written submissions were filed on 20 June 2017 and were highlighted by Learned Counsel, Mr. Ohaga. He urged the Garnishee's Preliminary Objection under the following three prongs:

[a] That the process of execution that the Decree Holder sought to recommence by way of the Notice to Show Cause dated 24 May 2017 is time barred by dint of Section 4(4) of the Limitations of Actions Act;

[b] That the purported Garnishee Order is a nullity in any event as the Consent Order in respect thereof could not bind the Garnishee, which was not a party thereto;

[c]That shares are not debts for purposes of Garnishee Proceedings.

[3] Mr. Kamau, Learned Counsel for the Plaintiff resisted the Preliminary Objection, contending that, other than the issue of limitation, the Garnishee has raised purely evidential material of facts in support of the Preliminary Objection. According to him, the Preliminary Objection has not been well taken. On limitation, Mr. Kamau's argument was that the application for execution, having been made within 8 months from the date of Judgment, was well within the 12 year limitation period; and that what the Plaintiff seeks to do by way of the Notice to Show Cause dated 24 May 2017 is to simply follow through. According to him the process of execution must be left to run its course to completion; and that any other finding to the contrary would be a mockery of justice.

[4] It was further the submission of Counsel for the Plaintiff that the Court cannot be moved to declare its own order a nullity as has been done by the Garnishee; and that if the Garnishee had any cause for complaint against the Consent Order then it ought to have filed an application to have it set aside or reversed an appeal. Counsel added that although the Garnishee has been thus designated herein, the Order that was made, and which the Plaintiff seeks to execute, was not for attachment of debt, but attachment of shares; and therefore that the use of the word Garnishee is therefore a misnomer and a mere superfluity.

[5] Having carefully considered the Notice of Preliminary Objection dated 5 June 2017, the written submissions filed herein, including the authorities cited by Learned Counsel in the light of the pleadings and proceedings herein, it is evident that this is a suit that was brought by the Plaintiff way back on 17 October 2000 to enforce the payment by the Defendant, Tetu Coffee Growers Co-operative Society Limited (In Liquidation), for some Kshs. 1,907,100/=, being the agreed value of goods supplied and delivered to the Defendant at its request in the year 1999. The pleadings further show that a cheque that was issued by the Defendant in settlement of the debt was dishonoured on presentation. Accordingly, the Plaintiff successfully moved the Court for the striking out of the Defence, whereupon Judgment was entered in its favour on 14 February 2001as prayed for in the Plaint. It is instructive that the application for striking out the Defence was conceded to by Counsel for the Defendant.

[6] The court record further shows that efforts to have the Liquidator settle the decree did not yield any fruit, thus prompting the Plaintiff to file the Chamber Summons dated 29 April 2001 requesting for the public examination of the Liquidator. The examination proceedings commenced on 3 October 2001 before Ringera, J (as he then was) but had to be suspended after the Liquidator expressed the willingness to dispose of some of the shares of the Defendant in settlement of the Decree. It appears that this is how the Co-operative Bank of Kenya, the Garnishee herein, got roped in, as shown by the record of the proceedings of 30 October 2001. However, the Cooperative Bank of Kenya Ltd, vide its letter dated 15 October 2001 to the Liquidator, did not hesitate in notifying the parties herein thus:

"We ... write to advise you that as we are not quoted in the public exchange, our shares cannot be sold to the general public. However, the shares can be sold and transferred,subject to the Bank's Bye-Laws, amongst members of the Bank themselves on a willing buyer and willing seller basis.

[7] Thereafter, on 26 October 2001, the Bank was cited as a Garnishee in an application of even dated vide which the following orders were sought:

[a]That all the shares held by the Garnishee on account of the Judgment Debtor be attached to answer the Decree dated 14 February 2001 for Kshs. 1,907,10/= plus costs of Kshs. 371,095/= and interest at the rate of 12 % from the date of filing suit till payment in full together with the costs of the Garnishee Proceedings;

[b] That the Garnishee be further ordered within seven days after the services of the Order upon it to inform the Court what sum is due from it to the Judgment Debtor and show cause why the same should not be used to satisfy the Decree herein.

[8] When the aforesaid application came up for argument on 4 December 2001, a Consent Order was recorded between the Plaintiff and the Defendant in the following terms:

"By consent, the Decree Holder herein do attach shares whose market value is equivalent to the amount in the decree herein plus costs and interest held by the Co-operative Bank of Kenya Ltd on the Judgment Debtor's account and sell the same through an authorized stock broker in order to realize the decree herein."

[9] As was pointed out by Mr. Ohaga, who was then and has been all along on record for the Garnishee, that Consent Order was made in the absence of the Garnishee. Thereafter motions were filed to have the Managing Director of the Garnishee examined, but the efforts had not yielded any fruit by 1 February 2012 when the suit was dismissed for want of prosecution at the instance of the Court. That dismissal was the subject of the Notice of Motion dated 4 November 2014, which was determined on 3 February 2017,and whose outcome was that the dismissal order was set aside, thereby paving the way for the Plaintiff to proceed with the execution process by way of Notice of Motion.

[10] It is against the foregoing backdrop that the Garnishee filed the Notice of Preliminary Objection dated 5 June 2017. In their written submissions Counsel focused on two broad issues which I adopt as the issues for determination, namely:

[a] Whether execution of the decree herein is time-barred.

[b] Whether the Garnishee Order is a nullity.

[11] On the first issue, it was the argument of Mr. Ohaga for the Garnishee that, since the Judgment sought to be executed was entered on 14 February 2001, any execution in respect thereof is time-barred by dint of Section 4(4) of the Limitation of Actions Act. It was further contended that even assuming that the Consent Order for the attachment of shares is valid, the Plaintiff had only 12 years to enforce the same; and that any attempt to do so at this point in time is untenable on account of Section 4(4) of the Limitation of Actions Act. He relied on the case of M'Ikiara M'Rinkanya & Another vs. Gilbert Kabeere M'Mbijiwe [2007] eKLR in which the Court of Appeal held that:

"All post judgment proceedings including originating proceedings and interlocutory proceedings for execution of judgment are statute barred after 12 years."

[12] The Plaintiff on his part was of the argument that since it commenced the process of execution of the decree herein well within the 12 year period, on 26 October 2001, and a consent thereafter made on 4 December 2001for the attachment of the Defendant's shares in the hands of the Garnishee, the Notice to Show Cause is competently before the Court as it is in furtherance of that same execution process. The Plaintiff relied on the cases of Hudson Moffat Mbue vs. Settlement Fund Trustees & 3 Ohters ELC No. 5704 of 1992 and Jestimore Simwenyi vs. Samson Sichangi ELC No. 42 of 2015 for the proposition that where the execution process is commenced within the 12 year period, it must be allowed to run its course to completion.

[13] It was further the submission of the Plaintiff that the Garnishee has not approached the Court with clean hands as it is solely to blame for the long period it has taken to secure compliance with the Garnishee Order; and that it should therefore not be allowed to extend its frustration of the Plaintiff and further its acts of abuse of the Court process through its present Preliminary Objection. With regard to the case of M'Ikiara M'Rinkanya vs. Gilbert Kabeere M'Mbijiwe (supra) that was cited by the Garnishee, the Court was urged by Counsel for the Plaintiff to find that it is distinguishable as the issue of limitation of time was not disputed and the question was whether the Court had the discretion to grant extension of time.

[14] Needless to say that a Preliminary Objection ought to be confined to points of law. This was well explained in the case of Mukisa Biscuits Manufacturing Co. Ltd vs. West End Distributors [1969] EA 696 thus:

"... a preliminary objection consists of a point of law which has been pleaded, or which arises by clear implication out of pleadings, and which if argued as a preliminary point may dispose of the suit. Examples are an objection to the jurisdiction of the court or a plea of limitation or a submission that the parties are bound by the contract giving rise to the suit to refer the dispute to arbitration."

[15] The point of limitation that was raised by Counsel for the Garnishee is therefore pertinent as Section 4(4) of the Limitation of Actions Act, on which the Garnishee's Preliminary Objection was anchored, provides that:

"An action may not be brought upon a judgment after the end of twelve years from the date on which the judgment was delivered, or (where the judgment or a subsequent order directs any payment of money or the delivery of any property to be made at a certain date or at recurring periods) the date of the default in making the payment or delivery in question, and no arrears of interest in respect of a judgment debt may be recovered after the expiration of six years from the date on which the interest became due."

[16]From the summary of the facts aforestated, it is manifest that it is well over 12 years since Judgment and the ensuing Decree were passed herein. Similarly, the Consent Order that specifically authorized the attachment of the Defendant's shares is well over the 12 years aforementioned in age. Nevertheless, it is also manifest that the process of execution did not commence with the Notice to Show Cause dated 24 May 2017,which is the subject of the Garnishee's Preliminary Objection. It started with the application dated 27 April 2001 for the examination of the Liquidator, which culminated with the Consent Order of 4 December 2001;by which an Order was made for the attachment of the Defendant's shares. Indeed, the Garnishee was herein enjoined on 6 November 2001 when it appointed the firm of Onyango Ohaga & Company Advocates to act for it in the matter, upon being served with the Plaintiff's application dated 26 October 2001.

[17]Accordingly, I take the view that the 12 year limitation period closed on 27 April 2001 when the application for the examination of the Liquidator was filed as this was the initial step taken towards execution of the Decree herein. In the premises, it is my finding that this is a matter in which execution commenced during the 12 year limitation period but was not concluded within that period, and is therefore not subject to the provisions of Section 4(4) of the Limitation of Actions Act. This is the position that was taken by Mutungi, J in the case of Hudson Moffat Mbue vs. Settlement Fund Trustees & 3 Others, ELC No. 5704 of 1992 (OS) in which the Court held thus:

"...the expression "An action may not be brought upon a judgment after the end of twelve years from the date on which judgment was delivered ..." means that unless an application has been brought for enforcement of the judgment and has been completed and/or the same has not been concluded by the time the 12 year period expires, no fresh action for enforcement of the judgment can be brought after the expiry of 12 years from the date of the delivery of the judgment."

[18] Similarly, in Jestimore Simwenyi vs. Samson Sichangi (supra), the Court held that:

"The Notice to Show Cause was issued on 6. 4.2001. The applicant's argument that the order of eviction was issued on 6. 4.2009 is not true as the order of eviction was issued on 6. 4.2001 and therefore the time starting running on the date of judgment and stopped running when the application for execution was made in the year 1999. "

[19] I have also looked at the case of M'Ikiara M'Rinkanya vs. Gilbert Kabeere M'Mbijiwe (supra) that was cited by Mr. Ohaga for the proposition that all post judgment proceedings, including interlocutory proceedings for execution of judgment are statute-barred after 12 years, but would be of the persuasion that it is distinguishable as the issue of limitation was not disputed. Indeed the question was whether the Court had the discretion to extend the time provided for under Section 4(4) of the Limitation of Actions Act.

[20] As to whether the Garnishee Order dated 4 December 2001 is a nullity, it was the submission of Mr. Ohaga that since Garnishee Proceedings related to the attachment of debts, the Consent Order of 4 December 2001was of no consequence, granted that at the material time, the Garnishee did not have any relationship with the Defendant which could be termed as a debtor-creditor relationship, and held no money which could be considered as a debt in the context of Garnishee Proceedings. Counsel relied on the cases of Orion East Africa vs. MugamaFarmers Co-operative Union Ltd & Another [2015] eKLR for the proposition that shares do not amount to a recognizable debt existing between a Garnishee and the Defendant; and the case of Mcfoy vs. United Africa Co. Ltd [1961] 3 AllER 1169 to support his submission that if an act is a nullity then it is incurably bad and there is no need for an order of the Court to set it aside.

[21] From the standpoint of the Plaintiff however, it was argued that it was absurd for the Court to be asked to declare its own order a nullity. He explained that the application pursuant to which the Consent Order was made, was filed for attachment of debts as well as attachment of shares which were held to the credit of the Defendant by the Garnishee. Accordingly, Counsel contended that since the Court did not order attachment of any debt, the contention by the Garnishee that a share is not a debt is merely academic; and that the substance of the Order of this Court has always been clear to the Garnishee. Counsel further submitted that the case of Orion East Africa vs. Mugama Farmers (supra) that was cited by the Garnishee is irrelevant since what is sought herein is not attachment of debt but of shares.

[22] Having considered the foregoing submissions, I take the following view of the matter: that although the Garnishee was not party to the Consent Order of 4 December 2001, it was directly affected thereby, and therefore had the liberty to apply for its variation or setting aside on that ground. It appears that it did not do so. It is now trite that a Consent Order can only be set aside on grounds of fraud or mistake. This principle was well enunciated in Hirani V. Kassam [1952] 19 EACA131thus:

“It is now well settled law that a consent judgment or order has contractual effect and can only be set aside on grounds which would justify setting a contract aside, or if certain conditions remain to be fulfilled, which are not carried out: see the decision of this court in J. M. Mwakio v Kenya Commercial Bank Limited Civ Apps 28 of 1982 and 69 of 1983. In Purcell v F.C. Trigell Ltd [1970] 3 All ER 671, Winn LJ said at 676:-

“It seems to me that, if a consent order is to be set aside, it can really only be set aside on grounds which would justify the setting aside of a contract entered into with the knowledge of the material matters by legally competent persons, and I see no suggestion here that any matter that occurred would justify the setting aside or rectification of this order looked at as a contract.”

[23] Accordingly, my view is that the Preliminary Objection is, to that extent, misconceived; and that the Consent Order of 4 December 2001 is valid and good for enforcement. However, I find merit in the Garnishee's argument that there is a prescribed procedure governing the attachment of shares in Order 22 Rule 40(1) of the Civil Procedure Rules. It provides as follows:

"(1) in the case of --

(a) a share in the capital of a corporation; or

(b) other movable property not in the possession of the judgment-debtor, for the attachment of which specific provision is not made by these Rules the attachment shall be made by a written order prohibiting-

(i) in the case of the share, the person in whose name the sahre may be standing from transferring the same or receiving any dividend thereon; or

(ii) in the case of the other movable property except as aforesaid, the person in possession of the same from giving it to the judgment-debtor."

[24] This is the procedure that ought to have been invoked by the Plaintiff; and therefore to the extent that it was not, the Notice to Show Cause dated 24 May 2017, which seeks the arrest and committal to civil jail of the Garnishee's Managing Director, is untenable. This is particularly so, noting that the Garnishee had been discharged from these proceedings by an Order of the Court dated 9 November 2001 before the Consent Order of 4 December 2001 was made. It is therefore on that ground that I would uphold the Preliminary Objection and find that the Notice to Show Cause dated 24 May 2017 is misconceived. The same is accordingly struck out with costs to the Garnishee.

It is so ordered.

DATED, SIGNED AND DELIVERED AT NAIROBI THIS 6TH DAY OF OCTOBER, 2017

OLGA SEWE

JUDGE