[2021] KECPT 570 (KLR)

REPUBLIC OF KENYA

IN THE CO-OPERATIVE TRIBUNAL

AT NAIROBI

TRIBUNAL CASE NO.218 OF 2019

SOLUTION SAVINGS AND CREDIT

CO-OPERATIVE SOCIETY LIMITED....................................................................CLAIMANT

VERSUS

THARAKA NITHI CEREALS MARKET CO-OPERATIVE UNION ..... 1ST RESPONDENT

THE COUNTY GOVERNMENT OF THARAKA NITHI ...........................2ND RESPONDENT

RULING

Vide the Application dated 31. 10. 19, the 2nd Respondent has moved this Tribunal seeking for Orders inter alia:

1. Spent;

2. That the interlocutory judgment entered against the 2nd Respondent/Applicant be granted leave to defend the suit;

3. Costs.

The Application is supported by the grounds on its face and the Affidavit sworn by Lilian G. Kiruja on 31. 11. 19.

The Claimant has opposed the Application vide the Replying Affidavit sworn by Peter Karemanu Igwete on 24. 1.2020.

Vide the directions given on 4. 2.2020, the Application was canvassed by way of written submissions. The 2nd Respondent filed its submissions on 23. 11. 2020 whereas the Claimant did so on 28. 10. 2020.

2nd Respondent’s Case

Vide the instant Application, the 2nd Respondent has prayed for the default judgment entered on 26. 8.19 be set aside on the ground that it did not file a Defence within good time on based on the following reasons:

a. That upon receipt of summons to enter Appearance, it engaged the 1st Respondent to ascertain the true and factual status of the loan Agreement between itself and the Claimant;

b. That the 1st Respondent informed it that that Kshs.13 Million had been paid to the Claimant thus reducing the principal amount outstanding to Kshs.2 Million;

c. That it then requested the 1st Respondent to furnish it with the requisite documentation to confirm payment of the said loan;

d. That the said documents were supplied sometimes in August, 2019 thus paving way for it to prepare a Defence.

e. That its counsel on record learnt that interlocutory judgment had been entered against it on 3. 9.2019.

f. That the delay in filing a Response to the claim is attributed to the fact that it did not have the requisite documents relating to payment of the loan. That the loan repayment documents were in the possession of the Claimant and the Claimant was delaying in the release of the said documents.

Claimant’s Case

The claimant has opposed the application on grounds that the 2nd Respondent was duly served with summons to enter Appearance on 17. 5.2019. That the 2nd Respondent entered Appearance one (1) month after being served with summons but did not bother to file a Defence. That the judgment therefore entered on 27. 8.19 was regular.

That the contention that the 1st Respondent has paid a sum of Kshs.13 Million is fake. That the 1st Respondent who is the principal debtor has not denied existence of the debt.

Issues for determination

The 2nd Respondent’s Application has presented the following issues for determination:

a. Whether the 2nd Respondent has laid a proper basis to warrant the setting aside of the default judgment entered on 26. 8.2019;

b. Who should meet the costs of the Application?

Setting aside of default Judgment

We have jurisdiction to set aside a default judgment by dint of Order 10 Rule 11 of the Civil Procedure Rules. The Rule 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.”

In the case of Patel – vs- East Africa Cargo Service Limited (1974)EA 75, the Court underscored this provision in the following terms:

“ The main concern of the court is to do justice to the parties and the court will not impose conditions on itself to fetter the wide discretion given to it by the Rules.”

Before we can exercise our jurisdiction under Order 10 Rule 11 above, we firstly have to ascertain whether the default judgment is a regular or irregular one. If the Judgment is an irregular one, then we will set it aside ex debito justiciae.

This was the holding in the case of K- Rep Bank Limited -vs- Segment Distributors Limited [2017] eKLR.

The court in the case of Fidelity Commercial Bank Limited – vs- Owen Amos Ndungu & Another, HCC.NO. 241/1998 gave a distinction between a regular and irregular judgment as follows:

“ A distinction is drawn between regular and irregular judgments. Where summons to enter Appearance has been served and there is default in entry of Appearance the ex parte judgment entered in default is regular. But where the exparte judgment sought to be set aside is obtained either because there was no proper service or any service at all, of the summons to enter Appearance, such judgment is irregular and the affected Defendant is entitled to have it set aside as of right”

Where the default judgment is regular, then the Tribunal has to consider if the draft Defence filed with the Application raises triable issues. This was the holding in the case of James Kanyiita Nderitu & Another - vs- Marios Philotas Ghikes & Another [2016]eKLR. In the pertinent part, the court held thus:

“ In a regular default judgment, the Defendant will have been duly served with summons to enter appearance, but for one reason or another, he failed to enter appearance or to file a Defence, resulting in default judgment. Such a Defendant is entitled under Order 10 Rule 11 of the Civil Procedure Rules to move to court to set aside the default judgment and to grant him leave to defend the 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 to the reason as 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 interests of justice to set aside the default judgment.”

Reasons for failure to file a Defence

The 2nd Respondent has stated that it did not file a Defence in good time because it had requested for documentation on repayment of the loan from the 1st Respondent and that by the time it received the same, judgment had already been entered. That it was not the custodian of the said documentation but that the Claimant was vested with the same but was adamant to share.

We have considered this response in light of the claim and the Application and find it reasonable. For all intents and purpose, the 2nd Respondent was a guarantor. The 1st Respondent was a principal debtor. It is thus likely or probable that the 2nd Respondent had to call for information regarding the loan from the 1st Respondent.

Length of time

Default judgment was entered on 26. 8.2019. The instant Application was filed on 6. 12. 2019. This is a period of approximately three months. Taking into account the explanation preferred above, we find that the Application has been originated without unreasonable delay.

Draft defence

We have perused the statement of defence dated 27. 9.2019. We note that the 2nd Respondent has disputed existence of the claim (at paragraph 8 thereof) by stating that the same has already been paid to the Claimant. The effect of this assertion to the claim is that it raises an issue worth determining regarding payment of the amounts so demanded. It is thus a triable issue. To this extend therefore, we find that the draft defence raises triable issues.

Prejudice

A question abound as to whether the Claimant will suffer any prejudice if the orders sought are granted. In our respective view, it will not. In fact, the 2nd Respondent will be the one to suffer prejudice if the Claimant is allowed to execute the claim against it only to turn out later that it had indeed been paid.

Conclusion

The upshot of the foregoing is that we find merit in the 2nd Respondent’s Application dated 31. 10. 2019 and allow it on the following terms.

a. The Statement of Defence dated 27. 9.2019 is deemed as duly filed and served out of time;

b. The Claimant to file and serve a Reply to the same within 14 days herein;

c. Mention to confirm compliance and fixing a hearing date on 24. 5.2021.

d. In the meantime, the 2nd Respondent to pay the Claimant thrown away cost of Kshs.20,000/= before the hearing date.

RULING SIGNED, DATED AND DELIVERED VIRTUALLY THIS 25TH DAY OF MARCH, 2021

Hon. B. Kimemia Chairperson Signed 25. 3.2021

Hon. Jane Mwatsama Deputy Chairperson Signed 25. 3.2021

Mr. P. Gichuki Member Signed 25. 3.2021

Kagicha Advocate for Claimant/Applicant

Muthomi Advocate for Respondent/Applicant

Hon. B. Kimemia Chairperson Signed 25. 3.2021