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Court of AppealAllowedCivil Appeal No. 204 of 2012· [2013] KECA 461 (KLR)

CFC Stanbic Limited v John Maina Githaiga & another [2013] KECA 461 (KLR)

Court of Appeal
19 July 2013
WKW. KaranjaJMJ. MohammedJOJ. O. Odek
2,862 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Court of Appeal let a bank defend a KShs.15 million lawsuit, ruling its lawyer's missed deadline shouldn't destroy its case.

What this practically means

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Executive summary

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This is a single judgment of the Court of Appeal at Nairobi (Karanja, Mohammed and Odek, JJ.A) in two consolidated appeals (Civil Appeal Nos. 204 and 205 of 2012) by CFC Stanbic Limited against two rulings of Mutava, J in HCCC No. 400 of 2011, in which the High Court declined to set aside an ex parte judgment of KShs.15 million entered against the bank for refusing the respondents access to funds in their account. The respondents argued the proposed defence was res judicata, ownership of the money having been determined in criminal and judicial review proceedings. Allowing the appeal, the Court held there were triable issues raising a prima facie defence; that the bank's failure to enter appearance was the inadvertent mistake of its counsel despite timely instructions and should not be visited on the litigant; that the issue of ownership of the funds was not res judicata since the bank was not a party to the criminal proceedings and the acquittal and judicial review did not determine ownership; and that the claimed 15% monthly compounded interest rested on no proved contractual rate, interest being discretionary under sections 26 and 27 of the Civil Procedure Act and special damages needing to be pleaded and proved. The Court set aside both High Court rulings and the ex parte judgment, granted the bank leave to defend the suit within fourteen days, and awarded costs of the appeal and of the High Court to the appellant. The judgment now binds subordinate courts on the tests for setting aside ex parte judgments, the advocate's-mistake principle, and the elements of res judicata.

Key legal issues

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01

Interference with the High Court's discretionary refusal to set aside ex parte judgment

Holding

The appeal court found the judge's discretion ought to have been exercised in the appellant's favour because triable issues existed and the default was counsel's inadvertent mistake.

Reasoning

The Court restated the Mbogo v Shah standard for interfering with discretion and the Chemwolo v Kubendi test on regular judgments. It found no evidence of deliberate obstruction or delay, held the draft defence raised triable issues warranting trial, and held the advocate's failure to enter appearance, despite timely instructions, should not be visited on the litigant. The twin rulings of the High Court were therefore set aside.

p. 4
02

Whether the ownership of the funds was res judicata

Holding

The issue of ownership of the funds was not res judicata and should be heard and finally determined on its merits.

Reasoning

The respondents had been acquitted in the criminal case for lack of evidence under section 210 of the Criminal Procedure Code, which did not determine ownership. The appellant, though a party to the judicial review proceedings, was not a party to the criminal proceedings, and the judicial review addressed non-disclosure, natural justice and unreasonableness, not ownership. The elements of res judicata were therefore not met.

p. 5
03

Interest and special damages

Holding

The applicable commercial rate of interest and the total interest payable had to be proved by evidence; failing proof, interest is discretionary under sections 26 and 27 of the Civil Procedure Act.

Reasoning

The respondents compounded interest at 15% monthly with no computation and produced no documentary evidence of the contractual rate. Relying on Shah v Guilders International Bank, the Court held that where no rate was agreed, the court has a discretion under section 26 to award and fix interest across three stages, and special damages must be pleaded and proved. These were matters for trial at the High Court.

p. 5

Legal principles established

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  • A court of appeal will not interfere with the exercise of discretion by a single judge unless the judge misdirected himself and arrived at a wrong decision, misapprehended the law, or failed to take into account a relevant matter.
  • Before setting aside an ex parte judgment, a court must consider whether the proposed defence raises triable issues raising a prima facie defence, whether the default was due to an inadvertent or excusable mistake, and whether it is in the interests of justice to do so.
  • A litigant should not suffer because of his advocate's oversight; a counsel's mistake in failing to enter appearance should not be visited on the client.
  • Where a regular judgment has been entered, the court will not usually set it aside unless satisfied that there are triable issues raising a prima facie defence.
  • For res judicata to apply, the matter must be directly and substantially in issue in both suits, the parties must be the same or litigating under the same title, and the matter must have been finally decided in the previous suit.
  • Where parties have by agreement fixed the rate of interest payable, the court has no discretion and must enforce the agreed rate unless it is shown to be illegal, unconscionable or fraudulent; otherwise section 26 of the Civil Procedure Act confers a discretion covering three stages.
  • Special damages must be pleaded and proved.

Court orders

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  1. 1.The order of the High Court dated 1st March, 2012 is set aside and replaced with an order allowing the application dated 21st November, 2011
  2. 2.The order of the High Court dated 24th April, 2012 is set aside and replaced with an order allowing the application dated 16th March, 2012
  3. 3.The ex parte judgment entered on 8th November, 2011 is set aside
  4. 4.The appellant is granted leave to defend the suit in the High Court and to file and serve the memorandum of appearance and defence within fourteen (14) days of the date of the judgment
  5. 5.Costs of this appeal and before the High Court to the appellant

Authorities

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Legislation

  • Criminal Procedure CodeSection 210
  • Criminal Procedure CodeSection 121
  • Civil Procedure Act, Chapter 21, Laws of KenyaSection 7
  • Civil Procedure Act, Chapter 21, Laws of KenyaSection 26 (and S 26(1))
  • Civil Procedure Act, Chapter 21, Laws of KenyaSection 27
  • Court of Appeal RulesRule 103

Cases cited (8)

  • MBOGO & ANOTHER V SHAH
    (1968) EA 93
  • AHMED V COMMISSION OF CUSTOMS & EXCISE
    (2000) 2 EA 93
  • HOUSING FINANCE COMPANY OF KENYA V RICHARD NDERE JOHNSON
    [2010] eKLR
  • CHEMWOLO & ANOTHER V KUBENDI
    (1986) KLR 492
  • LEE G MUTHOGA V HABIB ZURICH FINANCE (K) LTD & ANOTHER
    Civil Application No. NAI 236 OF 2009
  • KENYA HOTEL PROPERTIES LTD V WILLISDEN INVESTMENTS LTD & 4 OTHERS
    [2013] eKLR
  • SHAH V GUILDERS INTERNATIONAL BANK LTD
    [2003] KLR
  • Mulla Code of Civil Procedure 16th Edition Vol 1
    page 161
On appeal from
High Court of Kenya at Nairobi
HCCC No. 400 of 2011
Jurisdiction invoked
Appeal under the Court of Appeal Rules (Rule 103 on consolidation); first appeal against discretionary rulings of the High Court

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (25)

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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, "CFC Stanbic Limited v John Maina Githaiga & another [2013] KECA 461 (KLR)", Case Analysis (2013). Civil Appeal No. 204 of 2012. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2013/461/eng@2013-07-19

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