[1948] EACA 10

## COURT OF APPEAL FOR EASTERN AFRICA

## Before SIR BARCLAY NIHILL, C. J. (Kenya), EDWARDS, C. J. (Uganda), and SIR JOHN GRAY, C. J. (Zanzibar)

#### SUNDER DASS carrying on business under the name of the ASSOCIATES-INVESTMENT AND FINANCE COMPANY, Appellants (Original Plaintiff-Garnishors)

$\mathbf{v}_\perp$

# MUNICIPAL COUNCIL OF NAIROBI, Respondents (Original Garnishees): Civil Appeal No. 12 of 1948.

# (Appeal from decision of the Supreme Court of Kenya)

Practice-Garnishee Proceedings-Kenya Civil Procedure Rules, Order XX-

Attachment of debts-Whether Garnishees had right of retention or: deduction—Reference to Supreme Court to ascertain amount, Order XX Rule 4—Costs.

The Appellants were the holders of a decree passed on the 23rd November,. 1946, against Taj and Walia, Ltd., Nairobi, as Judgment Debtors for Sh. 12,221 which remained unsatisfied. On the 26th March, 1945, the Judgment Debtorshad entered into an agreement with Local Government Housing Committee to supply stone on certain terms and conditions, and in accordance therewith, deposited with them Sh. 9,400 as security deposit. On the 1st September, 1945, by mutual agreement the Respondents were substituted as parties to the original. agreement in place of the Local Government Housing Committee and the deposit. of Sh. 9,400 was handed over to Council.

According to clause 9 (3) of the Contract the security deposit or any balance remaining to the Judgment Debtors' credit was to be repayable when the last consignment of stone had been delivered. In March, 1948, the Appellants applied' to the Supreme Court to have made absolute an order *nisi* against the Respondents as Garnishees to attach the sum of Sh. 9,400 said to be owing by them to the Judgment Debtors.

The Respondents objected to the attachment on the grounds that the Judg-ment Debtors had "fallen down" on their contract as a result of which the Respondents had to make other arrangements, that arising out of the Judgment Debtors' failure they had other claims against them which had not been. formulated, and claimed the right under Clause 9 (2) of the Contract to retain. the whole of the sum of Sh. 9,400 in respect of their claims.

The trial Judge held that the amount claimed from the Respondents was. not a debt of which the Judgment Debtors could have enforced payment at therelevant time, and refused the application.

The whole of Clause 9 of the contract is set out in the Judgment of thelearned Chief Justice of Zanzibar.

The Appellants appealed.

*Held* $(6-8-48)$ .—(1) (a) That under the terms of the contract (*clause* 9) the respondents had. not the right to retain the Sh. 9,400 as a forfeiture, but only to deduct the amount. lawfully due from the security deposit and return the balance to the Judgment Creditors.

(b) That the Judgment Debtors were entitled at the very least to recover the balanceof the security deposit.

(2) (a) Because the amount of a debt cannot be ascertained that does not defeat. the claim of a garnishor to attachment.

(b) That if the amount which the Respondents were entitled to deduct had not been? $\mathcal{C}$ ascertained it was clearly an amount capable of ascertainment. $\mathcal{A}_{\mathcal{A}}^{(1)}$

Dictum of Lopes, L. J., in Holtby v. Hodgson (1889) 24 Q. B. D. 103 at p. 108 quoted and applied.

O'Driscoll v. Manchester Insurance Committee (1915) 3 K. B. 499 referred to and followed.

(3) That the case be referred back to the Supreme Court for trial under Order XX, Rule 4 of the Civil Procedure Rules to determine the extent of the indebtedness of the Respondents to the Judgment Creditors.

Appeal allowed with costs. Order discharging the rule nisi set aside.

Per Edwards and Gray, C. J. J—That the costs of the proceedings in the Supreme Court already incurred and to be incurred be in the discretion of the Judge conducting the fresh trial.

Nazareth for the Appellants.

Schermbrucker for the Respondents.

SIR BARCLAY NIHILL, C. J.—This is an appeal from an order by the Supreme Court of Kenya refusing an application to make absolute an order *nisi* against the Nairobi Municipal Council as Garnishee to attach a sum of Sh. 9,400 said to be owing by the Council to the Judgment Debtor. The facts in this case are simple and the main issue it seems to me for our determination is whether the Municipal Council as the heir and successor of the Commissioner of Local Government has a right of retention of the sum in question or only of deducting from it certain ascertainable sums. As my learned friend the Chief Justice of Zanzibar will in his judgment set out in full the relevant clauses in the agreement to deliver stones entered into between the Judgment Debtor and the Council 1 do not propose to do the same. It is sufficient to say that from my reading of clause 9 of the contract $I$ am satisfied that the Council has not the right to retain this sum as a forfeiture for the Judgment Debtor's failure to fulfil his contractual obligations but must at some time render an account showing what sum can lawfully be deducted from the Security Deposit and return the balance, if any to the Judgment Debtor. In other words the Judgment Debtor at the time of the order nisi had a right of action for the recovery of this money against the Council which the Council might or might not have been able to defeat by the proper rendering of an account. This aspect of the matter was I think overlooked by the learned Judge in the Court below when he held that the Judgment Debtor could not have enforced payment of the amount claimed by the Garnishee at the relevant time. He might and could have done so unless the Council with reasonable dispatch had satisfied the Court that they had incurred losses due to the Judgment Debtor's default which equalled or exceeded the deposit.

The learned trial Judge has sought to distinguish the case of O'Driscoll and another v. Manchester Insurance Committee (1915 3 K. B. p. 499) on the grounds that the circumstances are dissimilar but that case is authority for the rule that because the amount of the debt cannot be precisely ascertained that does not defeat the claim of a Garnishor to attachment. What the Appellant is entitled to garnish is the sum left over from the security Deposit after the just claims of the Council have been satisfied. The effect of the learned Judge's discharge of the Rule will be to deprive the Appellant of that sum. It may be that this sum will turn out to be a minus quantity but we cannot proceed on that assumption. If a sum is there the Appellant cannot be deprived of his right to garnish it. What is required in this case is the striking of an account between the Council and the Judgment Debtor in respect of the Security Deposit and it seems to me that Order XX rule 4 of the Kenya Civil Procedure Rules provides the machinery by which this can be done.

I would therefore allow this appeal with costs and set aside the order discharging the rule *nisi*, with a direction to the Supreme Court of Kenya to make order in such terms as it thinks fit under Order XX rule 4 for the purpose of determining the amount, if any, of the Municipal Council's indebtedness to the Judgment Debtor.

EDWARDS, C. J.—This is an appeal from a decision of the Supreme Court of Kenya whereby a garnishee order nisi which had been directed to the respondents was discharged, the learned trial Judge being unable to hold that the amount claimed from the respondents was a debt of which the Judgment Debtor could have enforced payment at the relevant time.

The Appellants are the holders of a decree passed on 23rd November, 1946, against Taj & Walia, Ltd., Nairobi, for Sh. 12,221 which remained unsatisfied. On 17th March, 1945, the tender of Taj & Walia, Ltd., for the supply, delivery and stacking of dressed building stone at a building site of houses for Africans at Makongeni, Doonholm Road, Nairobi, was accepted by the Local Government Housing Committee on behalf of the present respondents. An agreement was entered into between the Local Government Housing Committee and Taj & Walia, Ltd., on 17th June, 1946 (Exh. E before the Supreme Court) and a supplemental agreement was signed by the same parties on 17th July, 1946 $(Exh. F)$ .

In accordance with the terms of the tender Taj & Walia, Ltd. hereinafter referred to as the "judgment debtors") deposited with the Housing Committee a<br>sum of Sh. 9,400 which was later handed over to the respondents who still hold this deposit. The relevant clause of Exh. E is Clause 9 $(3)$ which is in the following terms. "The Security deposit or any balance thereof remaining to the credit of the contractor shall be repayable without interest to the contractor when the last consignment of stone has been duly delivered and stacked on the place designated by the Commissioner for Local Government or his duly authorized representative always referred to as 'the C. R.'. The trial Judge had before him an affidavit sworn by Mr. Kent, the Deputy Municipal Treasurer of the respondent Council, who attended at the trial and gave evidence, confirming his affidavit and being cross-examined on it on behalf of the Appellants. He deposed that in August, 1946, the respondents had to go elsewhere for the supply of stone. Mr. Kent swore that the final default by the Judgment Debtor in the delivery of stone took place about October, 1946. Mr. Kent, who gave evidence on 15th March, 1948, deposed that "About 18 months ago, as defendant (judgment debtors) had fallen down on the contract we had to make other arrangements". The trial Judge, in citing Clause 9 (3) above referred to, held that the facts in the case of O'Driscoll and another v. Manchester Insurance Committee (1915) 3 K. B. p., 499 were distinguishable from the facts in the instant case. He held that in the O'Driscoll case "there was no question but that a debt was absolutely due although the amount had not been ascertained. Here it cannot be held that there was a debt". Clause 9 (2) reads "The C. R. reserves the right to deduct from the security deposits any expenses and/or pecuniary losses sustained by the C. R. by reason of the contractor's breach or disregard of any of the conditions of this contract". In my view, the condition referred to in Clause 9 (3) never came into operation because the last consignment of stone was not duly delivered and stacked for the simple reason that the respondents obtained stone from other sources because of the alleged default of the judgment debtors. Nevertheless, I am of the opinion that the respondents could not be allowed to retain the whole sum of Sh. 9,400 indefinitely. I consider that the test which should have been applied by the learned trial Judge was "Could the judgment" debtor have enforced payment of Sh. 9,400 or of any part of it on 9th December, 1946, the date of the garnishee order nisi?" I think that if the judgment debtor had brought an action at that time the proper issue fit to be tried would have been "What sum have the Municipal Council proved that they are entitled to deduct from the deposit of Sh. 9,400 in respect of any expense and/or pecuniary losses as stipulated for in Clause 9 (2)". I consider that the matter should go back

to the Supreme Court for trial under Order XX, Rule 4, Kenya Civil Procedure Rules, 1927. The respondents should surely by the end of 1948 be in a position. to establish the amount of expenses and losses, especially when one remembers that the final default alleged against the judgment debtors took place, according. to Mr. Kent, as far back as October, 1946.

I would accordingly set aside the order of the Supreme Court of Kenya of 24th March, 1948, and remit the matter to that Court for trial as stated above. The appellants are, in my view, entitled to their costs of this appeal against the Municipal Council, Nairobi. The costs of the proceedings in the Supreme Court already incurred and to be incurred should be in the discretion of the Judge of the Supreme Court conducting the fresh trial.

SIR JOHN GRAY, C. J.—On March 26, 1945, the judgment debtors entered into a contract with the Commissioner of Local Government for the supply, delivering and stacking of dressed building stone at the housing site for Africans, Makongeni Area, Nairobi.

Clause 9 of the conditions annexed to and forming part of that contract. reads as follows: $-$

"(1) Immediately upon acceptance of the whole or part of his Tender and before signing the Contract, the Contractor shall deposit with the C. R. a sum. equal to three per cent (3%) of the Contract Amount as Security Deposit for the due performance and completion of this contract."

"(2) The C. R. reserves the right to deduct from the Security Deposit any expense and/or pecuniary losses sustained by the C. R. by reason of the Contractor's breach or disregard of any of the Conditions of this Contract."

"(3) The Security Deposit or any balance thereof remaining to the credit. of the Contractor shall be repayable without interest to the Contractor when the last consignment of stone has been duly delivered and stacked on the place. designated by the C. R.".

In accordance with above conditions the judgment debtor deposited the sum of Sh. 9,400 as a security deposit. On or about September 1, 1945, with the consent of the judgment debtor, the present garnishees were substituted for the Local Government Housing Committee as a party to the original contract and the sum of Sh. 9,400 was handed over to them.

On December 9, 1946, the judgment creditors obtained a garnishee order $nisi$ in the usual form attaching "all debts owing or accruing due from the garnishee to the judgment debtor".

The garnishees object to this attachment and in support of their objection. the Deputy Municipal Treasurer of the Council has filed an affidavit setting out $(inter\ alia)$ : —

"9. That the said Taj & Walia, Limited (i.e. the judgment debtor), having. defaulted in the full supply of stone as provided in the said contract the said Municipal Council had to obtain stone from other sources at an additional cost. to the Municipal Council of Sh. 1,749/54."

"10. That the said Taj & Walia, Limited, in breach of paragraph 1 of the said Specification (Exhibit C) failed to supply properly dressed stone which resulted in the use of an unnecessary amount of mortar in the erection of the said building and the payment to George Blowers & Son, one of the Contractors for the said buildings, the sum of Sh. 1,928/28 for excess mortar necessary for the said building."

"11. That the Council has been informed that the present contractor for the said buildings M. Narain Singh and Gurbux Singh, Limited, also have a claim against the said Municipal Council for excess mortar necessary owing to the stone supplied by the said Taj & Walia, Limited, not being properly dressed."

"12. That the said Municipal Council have further claims against the said Taj & Walia, Limited, arising out of the failure of the said Taj & Walia, Limited, to carry out the terms of the said Contract, but which claims have not yet been formulated."

"13. That the said Municipal Council claims the right under Clause 9 (2) of the Conditions attached to the said Contract to retain the whole of the said sum of Sh. 9,400 in respect of the claims above referred to."

The learned trial Judge upheld the objection and discharged the garnishee order *nisi*. Against that order of discharge the judgment creditors now appeal.

For the judgment creditors it is contended that this security deposit is a debt which is either due or *debitum in præsenti solvendum in futuro* by the garnishees and therefore a debt which is attachable under Order XX of the Kenya Civil Procedure Rules. For the respondents it is contended that this is merely a contingent liability which is incapable of attachment.

In Holtby v. Hodgson (1889), 24 Q. B. D. 103 at p. 108, Lopes, L. J. said: "What is the test whether a debt is attachable? That it is owing by the garnishee. and that it is a debt of which the judgment debtor, can enforce payment if he desires to do so". Applying this test to the facts of the present case, it seems clear to me that under Clause 9 (3) of the contract the judgment debtor is entitled at the very least to recover the balance of the security deposit. Though the garnishees allege that under that clause they have a right of retention, the right which they in fact have is clearly only a right of deduction. It may be that the amount, which the garnishees are entitled to deduct from the security deposit has so far not been ascertained, but it clearly is an amount which is capable of ascertainment. As said in O'Driscoll v. Manchester Insurance Committee (1915). 3 K. B. 499, the mere fact that the exact amount of the debt cannot for the moment be definitely ascertained is not a ground for refusing to attach the debt.

For the judgment creditors it is alleged that the garnishees are not entitled to make the deductions which they claim to be entitled to make, but I rather gather that learned counsel for the judgment creditors was latterly not disposed to dispute their right to deduct Sh. 1,749/54 in respect of short delivery of stone. But I do not think it is necessary for this Court to go into the matters raised by counsel in respect of the other deductions which the Municipal Council are seeking to make, because I am of the opinion that in allowing this appeal the proper direction to give is that which was made by Rowlett, J., in O'Driscoll $v$ . Manchester Committee (supra) directing a further inquiry as to the extent of the garnishee's liability to the judgment debtor. At such further inquiry the question as to the legality of any such deductions can be fully investigated.

I would therefore allow this appeal with costs to the appellants. I would set aside the order discharging the order nisi and would send the case back to the Supreme Court so that the question as to the extent of the indebtedness of the garnishees to the judgment debtor may be tried and determined in the manner provided by Order XX, Rule 4, of the Kenya Civil Procedure Rules. As regards costs in the Court below I agree with the order suggested by my brother Chief Justice of Uganda.