Automated Summary
Key Facts
The High Court at Bomet (Civil Case 3B of 2017) ruled on 27 April 2023 that Stanbic Bank Kenya Ltd's default judgment against Kipsigis Stores Limited, Alfred Kipkorir Mutai, and Samwel Cheruiyot Mutai (entered 6 July 2018) was set aside due to the applicants' counsel's failure to file defenses. The court required the applicants to deposit Kshs 500,000 as security and pay Kshs 500,000 in thrown away costs within 30 days, while granting them 14 days to file defenses. The judgment was set aside under the principle that a litigant should not suffer for their advocate's mistake, with conditions to protect the plaintiff's interests.
Transaction Type
Loan repayment dispute involving Kipsigis Stores Limited and individuals
Issues
- Whether the Applicants deserve grant of leave to file their defences out of time, considering their claim of being locked out of proceedings due to their former advocate's mistake and the Respondent's argument that the Applicants' inaction and delay warranted dismissal.
- Whether the default Judgment entered on 6th July 2018 ought to be set aside, given the Applicants' contention that it was defective due to the absence of a liquidated claim and the Respondent's assertion that it was regularly entered under Order 10 Rule 4(2) of the Civil Procedure Rules.
Holdings
- The Applicants were allowed to file their Defences out of time, but only after depositing security and paying the specified costs. The court emphasized that the Applicants must comply with the conditions to proceed.
- The Respondent's Notice of Motion Application dated 2nd October 2022 seeking a Review of the Court's Ruling was dismissed as overtaken by events following the setting aside of the Interlocutory Judgment.
- The court set aside the Interlocutory Judgment entered on 6th July 2018 with conditions requiring the Applicants to deposit security of Kshs 500,000 and pay thrown away costs within 30 days. The Applicants were granted leave to file their Defences within 14 days upon fulfilling these conditions.
Remedies
- The Plaintiff's Notice of Motion dated 2nd October 2022 seeking Review of the Court's Ruling dated 22nd June 2022 is dismissed without costs as it is overtaken by events following the setting aside of the Interlocutory Judgment.
- The Applicants are denied costs of the application for reason that they occasioned the Application, delay, and the attendant costs.
- The Interlocutory Judgment entered on 6th July 2018 is set aside on condition that the Applicants/Defendants deposit into court security of five hundred thousand shillings (Kshs 500,000/=) in the form of Cash or Bank Guarantee within 30 days of the ruling.
- The Applicants/Defendants are granted leave to file their Defences within 14 days from the date of the Ruling, contingent upon fulfilling the security deposit and thrown away costs requirements.
- The Defendants/Applicants shall pay the Plaintiff/Respondent five hundred thousand shillings (Kshs. 500,000/=) being thrown away costs within 30 days of the ruling.
Legal Principles
- The court applied the cardinal principle of natural justice, emphasizing that no one should be condemned unheard. This principle justified setting aside the default judgment as the Applicants were not properly served and had a meritorious defense. The court also referenced constitutional rights to a fair hearing and the duty to avoid injustice.
- The court exercised its discretion under Civil Procedure Rule Order 10 Rule 11 to set aside the default judgment. Key factors included the Applicants' lack of service, the existence of triable issues (e.g., overcharging interest), and the need to avoid injustice. Security was required to protect the Respondent's interests.
Precedent Name
- Mrao Ltd v First American Bank Of Kenya Ltd
- Murai v Wainaina
- Cieni Plains Company Limited & 2 others v Ecobank Kenya Limited
- Patel v EA Cargo Handling Services Ltd
- James Kanyiita Nderitu & Another v Lilian Atbo & Another
- K-Rep Bank Limited v Segment Distributors Limited
- CFC Stanbic Limited v John Maina Githaiga & Another
- Rayat Trading Co. Limited v Bank of Baroda & Tetezi House Ltd
- CMC Holdings Ltd v Nzioki
- Signature Tours and Travels v National Bank of Kenya Limited
- Job Kilach v Nation Media Group Ltd, Salaba Agencies Ltd & Michael Rono
- Morris & Company Limited v Victoria Minerals & Chemicals Limited & Another
- Philip Chemowolo & Another v Augustine Kubede
- Elizabeth Kavere & Another v Lilian Atbo & Another
Key Disputed Contract Clauses
- The Applicants disputed the Respondent's unauthorized increase of the penalty interest rate from 15% to 33%, claiming this adjustment violated contractual provisions and caused financial hardship.
- The Applicants contested the Respondent's unlawful variation of the interest rate from 8.86% to 15%, arguing this constituted a breach of the original loan contract terms.
Cited Statute
- Civil Procedure Rules
- Constitution of Kenya
- Civil Procedure Act
Judge Name
RL Korir
Passage Text
- 62. I have gone through the court record and the present Application and there is no draft Defence attached by the Applicants. However they have raised pertinent issues in their submissions i.e. they claim to have paid Kshs 60,270,600/= to the Respondent in satisfaction of their loan obligations...
- 49. The fundamental duty of the court is to do justice between the parties. It is, in turn, fundamental to that duty that parties should each be allowed a proper opportunity to put their cases upon the merits of the matter.
- 58. Consequently, I set aside the Interlocutory Judgement entered on 6th July 2018 with conditions that to be stated at the end of this Ruling.
Damages / Relief Type
- Declaration allowing repossession of specified vehicles and assets
- Outstanding loan amount of KES 69,444,104.56 plus interest at contractual rates
- Order compelling delivery of trailers, prime movers, and Nissan Navara pickup
- Costs of the suit awarded to the plaintiff