[2022] KEHC 17094 (KLR)

Panal Freighters Limited v First Assurance Company Limited & another (Civil Suit E034 of 2021) [2022] KEHC 17094 (KLR) (14 October 2022) (Ruling)

Neutral citation: [2022] KEHC 17094 (KLR)

Republic of Kenya

In the High Court at Mombasa

Civil Suit E034 of 2021

MN Mwangi, J

October 14, 2022

Between

Panal Freighters Limited

Plaintiff

and

First Assurance Company Limited

1st Defendant

Habari Insurance Brokers Limited

2nd Defendant

Ruling

1. The application before this Court is a Notice of Motion dated 19th May, 2021 brought under the provisions of Sections 1A, 1B, & 3A of the Civil Procedure Act, order 51 rule 1 of the Civil Procedure Rules, 2010, and all enabling provisions of the law. The 1st defendant seeks the following orders -1. Spent;2. Spent;3. That this Honourable Court be pleased to set aside the ex-parte interlocutory judgment against the 1st defendant entered with all the consequential orders, if any, therein and the defendant (sic) be granted leave to unconditionally defend this suit; and4. That the costs of this application be provided for.

2. The application is anchored on an affidavit sworn on 20th May, 2021 by Neto Simiyu, the Branch Manager of the 1st defendant company. In opposition thereto, the plaintiff filed a replying affidavit sworn on 5th July, 2021 by Ahmed Shimbwa Mwinyi, the Managing Director of the plaintiff company.

3. The application was canvassed by way of written submissions. The 1st defendant’s submissions were filed on 28th September, 2021 by the law firm of Timamy & Company Advocates, while the plaintiff’s submissions were filed by the law firm of Dubow & Company Advocates on 18th October, 2021.

4. Ms. Waithera, learned Counsel for the 1st defendant submitted that the general principles of law in applications of this nature are anchored in the realm of judicial discretion. She cited the case of Lochab Bros Ltd v Peter Karuma t/a Lumumba Lumumba Advocates [2003] eKLR, where the Court held that the main concern of the Court is to do justice to the parties and not impose any conditions on itself to fetter the wide discretion given to it by the rules.

5. The applicant’s Counsel relied on the case of James Mwangi Gathara & another v Officer Commanding Station Loitotok & 2 others [2018] eKLR, and submitted that Judge Nyakundi stated that parties to a litigation are bound to make mistakes including failure to keep time lines set by statute to ventilate disputes on merits and that sometimes, it is a mistake or omission on the part of legal Counsel retained by a party to a suit who is guilty of laches without the knowledge of his client. She also stated that the Judge held that the law did not leave litigants without a remedy as Courts exercise discretion in the interest of justice. Ms. Waithera also relied on the case of Philip & another v Augustine Kibede1982-88 KLR 103.

6. She stated that the plaintiff in its replying affidavit confirmed that the Court file was in chambers for endorsement of the interlocutory judgment during the period the 1st defendant was trying to put its house in order. She stated that the 1st defendant was opposed to the plaintiff’s request for the 1st defendant to deposit the sum of Kshs. 5,500,000/= as a condition precedent to being allowed to defend this matter since this is not an appeal. In addition, she stated that the prejudice that the plaintiff would suffer for the delay in the conclusion of its case is one that can be compensated by an award of costs.

7. Mr. Mwanzia, learned Counsel for the plaintiff submitted that the Court has a wide discretion to set aside an exparte judgment but such discretion must be exercised judiciously. He stated that an exparte judgment could be set aside upon the applicant fulfilling certain conditions. First, by the applicant offering a reasonable explanation why the memorandum of appearance was not filed within the prescribed period as was held by the Court in Prime Bank Ltd v Paul Otieno Nyamodi [2014] eKLR. Secondly, the applicant has to demonstrate that it has a reasonable defence on merits, which was the position taken by the Court in Patel v E.A Cargo Handling Services Ltd [1974] EA 75.

8. He cited the case of Aisha Motor Dealers Limited & another v Wanza Kisilu & Peter Nzagi (Suing as legal representatives of the estate of Anthony Kisilu-deceased) [2020] eKLR and submitted that it is not enough for the 1st defendant to entirely blame his Advocate on record as he had a duty to constantly check with his Advocate the progress of his case, since the case belongs to him and not his Advocate. In addition, Mr. Mwanzia stated that the 1st defendant had admitted to having instructed its Advocates on record too late in the day. He submitted that there was no evidence produced by the 1st defendant in support of the allegation that it had problems filing its documents online.

9. He relied on several cases, one of them being Clemensia Nyanchoka Kinaro v Joyce Nyansiaboka Onchomba [2020] eKLR and submitted that clients cannot continue to hide behind the failure of their Advocates to perform certain required actions, as an Advocate is an agent of the litigant and where the Advocate is guilty of inaction, the litigant will bear the consequences of his Advocate’s inaction. He stated that the litigant would be at liberty to pursue his Advocate for such mistakes through an action for professional negligence.

10. He submitted that the draft defence does not raise any triable issues since the said defence contains mere denials to the allegations made in the plaint. Mr. Mwanzia submitted that since the judgment herein is a regular one, this Court has a duty to balance the competing interests of the parties herein. He relied on the case of M/s Jondu Enterprises Limited v Spectre International [2019] eKLR and submitted that in the event that this Court is inclined to set aside the exparte judgment, then it should direct the 1st defendant to deposit the sum of Kshs. 5,500,000/= in Court or in a joint account to be opened by the Advocates on record.

Analysis and Determination. 11. I have considered the application herein and the affidavit filed in support thereof, the replying affidavit by the plaintiff and the written submissions by Counsel for the parties. The issue that arises for determination is whether the interlocutory judgment should be set aside.

12. In the affidavit filed by the 1st defendant, it deposed that the plaintiff through its Advocates M/s Dubow & Company Advocates filed the suit herein for compensation and indemnity and/or restitution for the damages suffered by the plaintiff as a result of the execution and/or settling the decree issued in Mombasa Chief Magistrate’s Court Civil Case No. 1743 of 2013. Subsequently, the plaintiff requested for interlocutory judgment against the 1st defendant on account of non-appearance and the same was endorsed.

13. The 1st defendant averred that it failed to appoint an Advocate to file a memorandum of appearance and a statement of defence in time although the plaintiff’s Advocate on record served it with the summons to enter appearance and a copy of the plaint on 10th May, 2021, which was within time. It averred that when the 1st defendant’s Advocates were filing a memorandum of appearance and statement of defence, the file could not be located since it was in chambers for endorsement of the interlocutory judgment.

14. It further averred that prior to the Court file not being located, its Advocates were also unable to file the memorandum of appearance and statement of defence as the e–filing system of the Court had rendered filing of documents impossible. The 1st defendant stated that it has a good defence that raises triable issues against the plaintiff’s claim, hence it should be accorded its day in Court to defend the same.

15. The plaintiff in its replying affidavit deposed that the 1st defendant was duly served with summons to enter appearance and the pleadings herein. That subsequently, interlocutory judgment was entered against the 1st defendant on 17th May, 2021. It averred that the 1st defendant does not have a triable defence to the suit herein since it had insured the plaintiff’s motor vehicle registration No. KBH 893Z/5246 Mercedes Benz Trailer in respect of third party claims.

16. The plaintiff stated that on 22nd July, 2011, its employee Abdullah Juma Bidu, was involved in an accident with the said motor vehicle whereby he suffered serious injuries. That the said Abdullah Juma Bidu sued the plaintiff in Mombasa Chief Magistrate Court Civil Case No. 1783 of 2013 claiming general damages for injuries suffered as a result of the said accident. It was stated that the 1st defendant took over the conduct of the said suit and on 17th November, 2017, judgment was entered against the plaintiff for Kshs. 3,975,000/= together with costs and interest from the date of filing the suit, which came to a total of Kshs. 5,500,000/= as at the time of the execution exercise. It was also stated that the said amount was recovered from the plaintiff and not its insurer, the 1st defendant, as required by law

17. The plaintiff averred that the suit in issue is a declaratory suit whereby the plaintiff is seeking to be indemnified of the said Kshs. 5,500,000/=. He further averred that as a result of the execution process, it lost some of its tools of trade hence its claim is also for loss of use of the said tools from the 1st defendant.

18. It is not in dispute that the suit in the lower Court was filed on 6th April, 2021. A perusal of the Affidavit of Service filed on 12th May, 2021, sworn by Davidson N. Kuguru on 13th April, 2021 shows that the 1st defendant was served with summons to enter appearance on 13th April, 2021. On 11th May, 2021, the plaintiff filed a request for judgment of even date and an interlocutory judgment was entered on 17th May, 2021 since the 1st defendant had failed to file a memorandum of appearance and a statement of defence within the stipulated period of time despite having been duly served. It is noteworthy that the said interlocutory judgment was entered subject to formal proof hearing.

19. As correctly submitted by Counsel for the parties, this Court has the discretion to grant an order to set aside the interlocutory judgment pursuant to the provisions of order 10 rule 11 of the Civil Procedure Rules, 2010. This Court must however exercise its discretion cautiously, in the interest of justice, and upon such terms as are just. In Maina -v-Muriuki[1984] KLR 407, it was held that the Court’s discretion should be exercised to avoid injustice or hardship resulting from accident, inadvertence and excusable mistake or error.

20. The principles to be considered when dealing with an application to set aside an interlocutory judgment were laid down by the Court in Mohamed & another -v- Shoka [1990] KLR 463 as follows-i.Whether there is a regular judgment;ii.Whether there is a defence on merit;iii.Whether there is a reasonable explanation for any delay; andiv.Whether there would be any prejudice.

21. The interlocutory judgment on record is a regular judgment as the 1st defendant admitted having been duly served with the summons to enter appearance and accompanying documents in good time. This being the case, this Court has a duty to examine the draft statement of defence filed by the 1st defendant to establish whether it raises any triable issues. This was the position taken by the Court in Thayu Kamau Mukigi -v- Francis Kibaru Karanja [2013] eKLR, where the Court stated that-“on the second prayer of the defendant that he be granted leave to file his defence and counter claim, I will be guided by the principles elucidated in the case of Tree Shade Limited -v- DT Dobie Co. Ltd. CA 38/98 where the court held that when an ex-parte judgment was lawfully entered the court should look at the draft defence to see if it contained a valid or reasonable defence.”

22. Ms. Waithera submitted that the 1st defendant has a good defence that raises triable issues. I have looked at the statement of defence annexed to the 1st defendant’s supporting affidavit as “jrg-1” and noted that at paragraph 3, the 1st defendant denies that it had insured motor vehicle registration No. KBH 8932/5246 Mercedes Benz Trailer.

23. I have looked at the plaintiff’s plaint and seen that the suit herein is a declaratory suit. This Court notes that for a declaratory suit to have been filed, there must have been an insurance contract between the plaintiff and the defendant, unless evidence to the contrary disproving the contract is adduced before the Court seized of such a suit.

24. I am therefore of the considered view that the 1st defendant’s denial of having insured the plaintiff’s motor vehicle registration No. KBH 8932/5246 Mercedes Benz Trailer is a weighty issue that ought to be subjected to trial since the plaintiff’s suit begins and ends with the existence of the said contract of insurance. It is my finding that the 1st defendant’s statement of defence raises triable issues, thus there is a defence that needs to be heard on merits.

25. The 1st defendant averred that on 10th May, 2021 when its Advocates were filing a memorandum of appearance and a statement of defence, the file could not be located since it had been taken to chambers for endorsement of an interlocutory judgment. It further averred that prior to the Court file not being located, its Advocates were also unable to file the memorandum of appearance and statement of defence as the e–filing system of the Court had rendered filing of documents impossible.

26. The 1st defendant having been served with the requisite documents on 13th April, 2021 ought to have filed a memorandum of appearance and statement of defence on or before 27th April, 2021.

27. I have gone through the record and found that there is a memorandum of appearance and a statement of defence dated 5th May, 2021 and filed on 19th May, 2021 by the 1st defendant. I also note that the 1st defendant’s Advocate admits that they are to blame for the failure to enter appearance and file a statement of defence on time. As correctly submitted by Counsel for the plaintiff, an Advocate’s failure to execute a client’s instructions amounts to professional negligence. See Water Painters International -v- Benjamin Ko’goo t/a Group of Women in Agriculture Kochieng (Gwako) Ministries [2014] eKLR.

28. I however take judicial notice of the fact that we are operating in a digital era and time and again, the Judiciary has had challenges with the e-filling system thus necessitating physical filing of documents. It is also noted that after an application for request of judgment was made, the file had to be taken to the Deputy Registrar for purposes of endorsement. It is my finding that the 1st defendant has offered a plausible explanation for the delay in the filing of its memorandum of appearance and statement of defence.

29. In Patel -v- EA Cargo Handling Services Ltd [1974] EA 75, the Court held that as follows on the powers of the Courts in the exercise of their discretion-“There are no limits or restrictions on the judge’s discretion except that if he does vary the judgment, he does so on such terms as may be just. The main concern of the court is to do justice to the parties and the court will not impose condition on itself or fetter wide discretion given to it by the rules, the principle obviously is that unless and until the court has pronounced judgment upon merits or by consent, it is to have power to revoke the expression of its coercive power where that has obtained only by a failure to follow any rule of procedure.” (emphasis added).

30. In the case of Rahman -v- Rahman [1999] LTL 26/11/9, the Court considered the nature of the discretion to set aside a default judgment and concluded that the elements the judge has to consider are: the nature of the defence, the period of delay (i.e., why the application to set aside had not been made before), any prejudice the claimant was likely to suffer if the default judgment was set aside, and the overriding objective.

31. I note that the application herein was filed on 21st May, 2021, whereas the interlocutory judgment was entered on 17th May, 2021. The memorandum of appearance and statement of defence were filed on 19th May, 2021. The present application was filed barely two days after the 1st defendant was notified of the entry of the interlocutory judgment. The application herein was as such filed without undue delay.

32. The interlocutory judgment entered was subject to formal proof hearing. It is not disputed that the case herein is yet to be fixed for formal proof. It is my finding that the only prejudice that will be occasioned to the plaintiff in the event the said interlocutory judgment entered on 17th May, 2021 is set aside will be delay in prosecuting its claim. In the case of Rayat Trading Co. Limited -v- Bank of Baroda & Tetezi House Ltd [2018] eKLR the Court held that:“If the court sets aside a default judgment, it may do so on terms. In most cases the defaulting defendant will be ordered to pay the claimant’s costs thrown away. In addition, the Court may consider imposing a condition that the defendant must pay a specified sum of money into court to await the final disposal of the claim.”

33. In administration of justice, Courts are guided by the provisions of Article 159(2)(d) of the Constitution of Kenya and Sections 1A and 1B of the Civil Procedure Act. The focus being on substantive justice, the just, efficient and expeditious disposal of cases rather than procedural technicalities. I am of the considered view that it will be in the interest of justice, for the parties herein to be heard fully on the merits of their respective claims, noting that the matter is yet to be set down for formal proof hearing.

34. The upshot is that the application dated 19th May, 2021 is merited and is allowed in the following terms- i.That interlocutory judgment entered on 17th May, 2021 against the 1st defendant is hereby set aside with all consequential orders, if any;

ii.That the 1st defendant’s memorandum of appearance and statement of defence filed on 19th May, 2021 are deemed to be duly filed and to be properly on record;

iii.That the 1st defendant shall pay the plaintiff thrown away costs of Kshs. 20,000/= within twenty-one (21) days of the date of this ruling; and

iv.In default of compliance with order No. (iii), the order vacating the interlocutory judgment shall automatically lapse without further reference to the Court.

It is so ordered.

DATED, SIGNED andDELIVERED atMOMBASA on this14th day ofOctober, 2022. Ruling delivered through Microsoft Teams Online Platform.NJOKI MWANGIJUDGEIn the presence of-Mr. Mwanzia for the plaintiffMs Waithera for the 1st defendantMr. Ndege for the 2nd defendantMr. Oliver Musundi – Court Assistant.Page 3 of 3 NJOKI MWANGI, J.