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Court of AppealPartially AllowedCivil Appeal 218 of 2008· [2012] KECA 171 (KLR)

Edward Lenjo Musamuli v Amesnet Enterprises Limited [2012] KECA 171 (KLR)

Court of Appeal of Kenya
16 March 2012
EGE. M. GithinjiMartha Karambu KoomeM. K. KoomeDavid Kenani MaragaD. K. Maraga
2,308 words in judgment
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The bottom line

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Kenya's Court of Appeal ruled that a court cannot strip a defendant of the right to defend a lawsuit simply because they fail to provide financial security.

What this practically means

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Executive summary

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The respondent, Amesnet Enterprises Limited, sued the appellant, Edward Lenjo Musamuli, in the High Court at Mombasa for agent's commission of KShs.4,350,000/- arising from the sale of the appellant's property, LR No. 1480/11/MN, to the Government of Kenya. It applied for attachment before judgment and for an order that the appellant furnish security of KShs.4,548,750/-. Sergon J, by ruling of 24th July 2008, refused attachment of the land but directed the appellant to furnish security of KShs.4,350,000/- within 30 days, failing which the respondent could obtain summary judgment. The appellant appealed. The Court of Appeal framed two issues: whether the security order was well founded, and whether the default clause removed the appellant's right to defend the suit. It held that the default clause was made in excess of jurisdiction and erroneous, since Order XXXVIII rule 6(1) contemplates only conditional attachment upon default. It further held that the respondent had not satisfied the pre-conditions of Order XXXVIII rule 5, because the property had been sold before the cause of action arose and with no intent to obstruct or delay execution. However, the court held that the inherent jurisdiction under Section 3A of the Civil Procedure Act could be invoked in the interest of justice. The appeal was allowed to the extent that the High Court ruling and orders were set aside, and in lieu thereof KShs.4,548,750/- held by the Settlement Fund Trustees was ordered conditionally attached, to be paid to the Registrar of the High Court within 30 days and deposited in an interest-bearing joint account. The appellant was given half the costs of the appeal.

Key legal issues

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01

Validity of the default clause converting non-compliance into loss of the right to defend

Holding

The default clause was made in excess of jurisdiction and was erroneous; grounds 3 and 6 of the appeal had merit.

Reasoning

Rule 6(1) of Order XXXVIII provides only that upon a defendant's failure to furnish security the court may order attachment of specified property. It does not permit depriving a defendant of the right to defend the suit. The High Court's clause permitting summary judgment on default went beyond the rule; the judge himself realised the error when he later dismissed the respondent's summary judgment application, leaving the appellant able to ventilate his defence at trial.

p. 3
02

Whether the requirements of Order XXXVIII rule 5 for furnishing security were satisfied

Holding

They were not; the learned Judge erred in granting an order of conditional attachment under Rule 5 of Order XXXVIII.

Reasoning

The suit property had been sold before the respondent's cause of action arose and to the very purchaser whose payment generated the claim, so it could not be conditionally attached without involving the purchaser. There was no evidence of intended disposal or removal with intent to obstruct or delay execution of a decree. Additionally, Rule 5(2) and Rule 6 require the property to be conditionally attached to be specified, which was not done.

p. 4
03

Availability of the court's inherent jurisdiction under Section 3A

Holding

The inherent jurisdiction could be invoked to preserve the appellant's expected balance of the purchase price pending trial, even though the Rules do not cater for such a case.

Reasoning

The respondent had procured a sale at KShs.85 million, was owed commission and mobilisation fees of KShs.4,350,000/-, and KShs.25 million remained unpaid to the appellant held by the Settlement Fund Trustees. Since the Rules made no provision for attachment of such a debt-like amount, the interest of justice justified invoking the inherent jurisdiction to secure it by conditional attachment out of the amount held by the Ministry.

p. 4

Legal principles established

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  • A default clause in a security-for-costs order providing that the defendant loses the right to defend the suit exceeds the court's jurisdiction under Order XXXVIII, whose only consequence for default is conditional attachment of specified property.
  • To obtain an order for furnishing security under Order XXXVIII rule 5, a plaintiff must show that the defendant is about to dispose of or remove the whole or part of his property with intent to obstruct or delay execution of a decree; the mere fact that a suit property is the defendant's only known asset is insufficient.
  • The court's inherent jurisdiction under Section 3A of the Civil Procedure Act may be invoked to secure amounts due to a plaintiff in circumstances not provided for by the Civil Procedure Rules, in the interest of justice.

Court orders

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  1. 1.The ruling and orders of the High Court of 24th July 2008 set aside
  2. 2.In lieu thereof, an order that out of the amount held by the Settlement Fund Trustees of the Ministry of Lands and Settlement on the appellant's account, KShs.4,548,750/- be conditionally attached
  3. 3.The Permanent Secretary, Ministry of Lands, to pay the said sum, if still held by the Ministry, to the Registrar of the High Court within thirty [30] days
  4. 4.Upon payment, the money to be deposited in an interest bearing joint bank account in the names of the parties or their respective advocates until the hearing and determination of the suit
  5. 5.Appellant to have half of the costs of the appeal

Authorities

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Legislation

  • Constitution of Kenyafair hearing rights (referred to generally)
  • Civil Procedure ActSection 3A
  • Civil Procedure RulesOrder XXXVIII Rule 5 (1) and (2), Rule 6 (1) (now Order 39 rule 6), Rule 12; Order XXII
  • Court of Appeal RulesRule 5(2)(b)

Cases cited (1)

  • NDIRANGU V ABDALLA
    [1984] KLR 746 (also referred to as (1984) KLR 747)
On appeal from
High Court of Kenya at Mombasa
H.C.C.C. No. 86 of 2008
Jurisdiction invoked
First appeal from the High Court under the Court of Appeal's appellate jurisdiction (Court of Appeal Rules; appeal against ruling of Sergon J)

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Edward Lenjo Musamuli v Amesnet Enterprises Limited [2012] KECA 171 (KLR)", Case Analysis (2012). Civil Appeal 218 of 2008. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2012/171/eng@2012-03-16

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