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Court of AppealPartially AllowedCivil Appeal No. 232 of 1997· [1998] KECA 1 (KLR)

Dhanjal Investments Limited v Shabaha Investments Limited [1998] KECA 1 (KLR)

Court of Appeal of Kenya
16 February 1998
ROR.S.C. OmoloASA.B. ShahSBS.E.O. Bosire
1,714 words in judgment
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The bottom line

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Kenya's Court of Appeal ruled that a defendant with a genuine triable defence must be allowed to defend a case without paying money into court first.

What this practically means

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Executive summary

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The Court of Appeal (Omolo, Shah and Bosire, JJ.A.) allowed an appeal against a ruling of Ang'awa J of the High Court at Mombasa in Civil Case No. 38 of 1997. The judge below had declined to enter summary judgment against the appellant (defendant) but granted only conditional leave to defend, conditioned on the defendant depositing Kshs.38,700,000/= in a joint account within seven days, failing which summary judgment would be entered. The dispute arose from a 1995 agreement for the sale of the Piccolo Beach Hotel for Kshs.43 million, of which only 10% had been paid. The defendant's defence was that the plaintiff had warranted, under special condition 7, that no litigation was pending against the property, while the plaintiff's shareholders were already being sued for specific performance of a share sale agreement, and a caveat had been lodged on the title; the defendant argued it had bought a 'litigation' rather than the property. The Court of Appeal held that the defence raised bona fide triable issues which the learned judge had not found, and could not be found, to be sham. Applying the long-settled line of authority from Kandanlal Restaurant v Devshi & Co. and Souza Figuerido & Co. Ltd v Moorings Hotel Ltd, the Court held that a defendant showing a bona fide triable issue must be allowed to defend without conditions. It set aside the deposit condition, granted unconditional leave to defend and prosecute the counterclaim, awarded the appellant the costs of the appeal (not certified for two counsel), made the costs of the application below costs in the cause, and directed that the title deed remain in the custody of the Court until further orders. This ruling binds subordinate courts and the High Court on the summary judgment principle.

Key legal issues

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01

Conditional leave to defend on summary judgment where triable issues exist

Holding

Where the defendant raises bona fide triable issues, leave to defend must be unconditional; a payment-in condition is only appropriate where the defence is a sham or consented to.

Reasoning

The Court traced the settled law from Kandanlal Restaurant v Devshi & Co. and Souza Figuerido & Co. Ltd v Moorings Hotel Ltd, adopting the Annual Practice extract that a defendant showing a bona fide triable issue is to be allowed to defend without condition, and that payment into court should only be ordered where the defence is a sham or the defendant consents. The learned judge had not found the triable issues to be sham, nor could the Court of Appeal say so. The condition of depositing Kshs.38 million within seven days was therefore unwarranted and was set aside, with unconditional leave granted.

p. 2
02

Existence of triable issues on the defence

Holding

The pleadings and arguments raised substantial triable issues, including non-disclosure of pending litigation and caveat matters concerning the sale agreement.

Reasoning

The defence alleged that the plaintiff contracted to sell the suit property while litigation (H.C.C.C. No. 289 of 1994 and H.C.C.C. No. 85 of 1996) was pending between the plaintiff's shareholders and purchasers of the shares, contrary to special condition 7 confirming no pending litigation. The Court held that the points raised by both counsel raised substantial issues and declined to comment further lest the trial court be hampered. It expressly declined to find the issues sham.

p. 2

Legal principles established

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  • Where a defendant shows a bona fide triable issue, he must be allowed to defend without conditions; a condition of payment into court should not be imposed where a reasonable ground of defence is set up.

Court orders

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  1. 1.Appeal allowed
  2. 2.Order of the superior court imposing the condition to deposit shs.38 million within seven days set aside
  3. 3.Unconditional leave given to the defendant to defend the suit and prosecute the counterclaim
  4. 4.Appellant to have the costs of the appeal, not certified for two counsel
  5. 5.Costs of the application in the superior court to be costs in the cause in that court
  6. 6.Title deed relating to the suit property to remain in the custody of the Court until further orders

Authorities

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Cases cited (6)

  • Kandanlal Restaurant v. Devshi & Co.
    [1952] 19 E.A.C.A. 77
  • Souza Figuerido & Co. Ltd vs. Moorings Hotel Limited
    [1959] E.A. 425
  • Jacobs vs. Booth's Distillery Co.
    [1901] 85 L.T. 262
  • Wing vs. Thurlow
    10 T.L.R 53, 151
  • Ward v. Plumbley
    6 T.L.R. 198
  • Bowes v. Caustic Soda Co.
    9 T.L.R. 328
On appeal from
High Court of Kenya at Mombasa
Civil Case No. 38 of 1997
Jurisdiction invoked
First appeal to the Court of Appeal from an interlocutory ruling of the High Court (no specific constitutional/statutory provision stated in the judgment)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (10)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Dhanjal Investments Limited v Shabaha Investments Limited [1998] KECA 1 (KLR)", Case Analysis (1998). Civil Appeal No. 232 of 1997. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1998/1/eng@1998-02-16

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.