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Court of AppealPartially AllowedCivil Appeal No. 264 of 2003· [2015] KECA 977 (KLR)

Fursys (Kenya) Limited v Southern Credit Banking Corporation Limited

Court of Appeal
30 January 2015
3,127 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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What this practically means

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Executive summary

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The appellant sued the respondent for damages arising from a winding-up petition the respondent had filed, advertised, and then withdrawn by consent, the consent recording that the petition was struck out as scandalous, frivolous, vexatious and an abuse of court process. When the respondent filed a defence pleading justification for the petition and denying the consent's terms, the appellant applied to strike out the defence as an abuse of process. Nyamu J dismissed the application, holding it was not a clear case for summary procedure. The Court of Appeal allowed the appeal in part. It held that the consent decree remained in force and binding, and that the respondent could not plead justification for the petition it had consented was an abuse of process; the offending paragraphs of the defence (paragraph 6, parts of paragraph 7) were struck out. However, the court declined to strike out the entire defence or enter judgment, holding that the consent had not compromised the respondent's underlying cause of action for recovery of any debt, and that estoppel by record only precluded the respondent from resiling from the consent's characterisation of the petition, not from proving indebtedness. The suit was remitted to the High Court for hearing and final disposal, with half the costs of the appeal to be borne by the unsuccessful party below. The judgment is a single judgment of the full bench of Waki, G.B.M. Kariuki and Mwilu JJ.A, delivered on 30 January 2015.

Key legal issues

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01

Effect of a consent decree in subsequent proceedings

Holding

The consent decree striking out the Winding Up Petition was in force and binding; the respondent could not deny it or plead justification for the petition.

Reasoning

The consent recorded that the petition was struck out as scandalous, frivolous, vexatious and an abuse of process. The decree extracted on that consent was never set aside; the respondent's unprosecuted application to amend it left the decree intact. Pleading to the contrary in the defence was approbation and reprobation, frivolous and vexatious, and liable to be struck out.

p. 4
02

Scope of estoppel arising from the consent

Holding

The respondent remained free to sue for any debt owed, but was estopped from resiling from the position that the petition was struck out as an abuse of process; estoppel by record did not determine whether the debt existed.

Reasoning

The court held the consent did not compromise the respondent's cause of action for recovery of money, so the respondent could still sue. However, estoppel by record requires the same right to be claimed in both proceedings; it precluded resiling from the consent's characterisation of the petition but did not settle the question of indebtedness.

p. 5
03

Exercise of discretion to strike out pleadings

Holding

The striking-out jurisdiction is discretionary, to be exercised judicially, sparingly and only in plain and obvious cases, without embarking on the merits.

Reasoning

The application was premised on Order 6 Rule 13(1)(d) and Rule 16 of the Civil Procedure Rules and Section 3A of the Civil Procedure Act. The court reaffirmed D.T. Dobie & Muchina and the summary judgment principles: a defendant showing a bona fide triable issue must be allowed to defend, but pleadings at variance with a consent decree are not reasonable or serious.

p. 3

Legal principles established

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  • A consent decree remains binding and sacrosanct unless set aside; a party cannot in separate proceedings deny the consent or the decree founded on it.
  • A party who consented that a petition was an abuse of process cannot plead justification for filing it in a later suit; such inconsistent pleading is vexatious and may be struck out.
  • Estoppel by record operates only where parties to the litigation or their privies claimed or defended in the same right in the former proceedings as in the later ones.
  • The power to strike out pleadings is drastic and must be exercised sparingly, cautiously and only in plain and obvious cases.

Court orders

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  1. 1.Paragraphs 6, 7(i) (by deleting the words 'and 6 above'), 7(ii) and 7(iii)(g) of the respondent's statement of defence dated 3.9.2002 struck out
  2. 2.Appeal allowed to the extent of those striking-out orders
  3. 3.Suit No.723 of 2001 remitted to the High Court at Milimani Commercial Courts, Nairobi, for hearing and final disposal
  4. 4.Half of the costs of the appeal to be borne by the unsuccessful party in the suit in the superior court below

Authorities

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Legislation

  • Companies ActCap 486
  • Civil Procedure RulesOrder 6 Rule 13(1)(d)
  • Civil Procedure RulesOrder 6 Rule 16
  • Civil Procedure ActSection 3A

Cases cited (8)

  • D.T. Dobie & Company (Kenya) Ltd v. Muchina
    [1982] KLR 1

    Obiter dictum of Madan JA on sparing exercise of the power to strike out pleadings without embarking on merits

  • Souza Figuerido v. Moorings Hotel
    [1959] EA 425

    Cited in relation to the principles stated in Kundanlal Restaurant v Devshi

  • Kundanlal Restaurant v. Devshi & Co.(2)
    (1952) 19 E.A.C.A 77

    A defendant showing a bona fide triable issue is to be allowed to defend without condition

  • Jacobs v. Booth's Distillery Co.
    (1901) 85 T.L.R. 262

    Condition of payment into court seldom imposed where a reasonable ground of defence is set up

  • Wing v. Thurlow
    10 T.L.R. 53, 151

    Discretionary power to impose conditions only where defence is a sham

  • Ward v. Plumbley
    6 T.L.R. 198

    Conditions should not be applied where there is a fair probability of a defence

  • Bowes v. Caustic Soda Co.
    9 T.L.R. 328

    Conditions should not be applied where there is a fair probability of a defence

  • City Printing Works (Kenya) Ltd v. Bailey
    [1977] KLR 85

    Defendant must show a reasonable, bona fide or plausible defence; court considers merits disclosed by pleadings and affidavits

On appeal from
High Court of Kenya at Nairobi
H.C.C.C No. 723 of 2001
Jurisdiction invoked
First appellate jurisdiction over the High Court under the Constitution and the Appellate Jurisdiction Act (not expressly cited in the judgment)

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, "Fursys (Kenya) Limited v Southern Credit Banking Corporation Limited", Case Analysis (2015). Civil Appeal No. 264 of 2003. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2015/977/eng@2015-01-30

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