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Court of AppealDismissedCivil Appeal No. 207 of 2009· [2017] KECA 300 (KLR)

George Gikubu Mbuthia v Consolidated Bank of Kenya Limited & another [2017] KECA 300 (KLR)

Court of Appeal
29 September 2017
AMAsike MakhandiaWilliam OukoW. OukoAMA.K. Murgor
1,861 words in judgment
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The bottom line

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Kenya's Court of Appeal dismissed a landowner's 31-year-old dispute with Consolidated Bank, ruling magazine articles cannot prove a company was under statutory management.

What this practically means

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Executive summary

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The appellant, registered owner of Nairobi Block/73/225, sued in 1986 to nullify the sale of the property by the chargee's exercise of statutory power of sale to the 2nd respondent. Over more than 31 years the suit remained unresolved amid numerous interlocutory applications, most of which the appellant lost. In the application giving rise to this appeal, the appellant sought to strike out the respondents' amended defences and counterclaims under order 6 rule 13(1)(b), (c) and (d) of the Civil Procedure Rules on the ground that they were filed without leave, the 1st respondent's predecessor, Jimba Credit Corporation Limited, allegedly having been placed under statutory management on 11th August 1986. Koome, J dismissed the application, finding no proof of statutory management beyond a magazine cutting, and inordinate delay of about 25 years. The Court of Appeal, in a single judgment of the court delivered by Makhandia, Ouko and Murgor, JJ.A, framed the sole question as whether the Judge exercised her discretion judicially. Applying Mbogo v Shah, the Court affirmed: the appellant bore the burden of proving statutory management, which required a court order, not a magazine article; the application was brought nearly 20 years late; it was res judicata a similar 2008 application dismissed by Lesiit, J and affirmed on appeal; and in any event no prejudice arose since the pleadings had been court-approved and the 1st respondent had taken over Jimba Credit Corporation Limited. The appeal was dismissed with costs.

Key legal issues

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01

Standard for interference with judicial discretion on appeal

Holding

The Court of Appeal will not interfere with the exercise of discretion by a judge unless satisfied the judge misdirected himself resulting in a wrong decision, or that the judge was clearly wrong resulting in misjustice.

Reasoning

Applying the oft-cited passage from Mbogo v Shah, the Court framed the single question as whether the learned Judge exercised her discretion judicially in declining to strike out the pleadings under order 6 rule 13. The appellant had to show a misdirection or clear wrongness; on the evidence before the Court, none was demonstrated, so the discretionary decision stood.

p. 2
02

Proof of statutory management as a precondition to invoking section 228 of the Companies Act

Holding

The burden lay on the appellant to prove that Jimba Credit Corporation Limited was under statutory management, and a magazine article was insufficient; a court order was required.

Reasoning

Although leave is required before commencing or continuing proceedings against a company in liquidation, the precondition is the fact of the winding-up or statutory management. The appellant relied only on a Weekly Review magazine cutting asserting statutory management on 11th August 1986. Since statutory management is a judicial process, only a court order could establish it, and the Judge could not assume its existence without proof.

p. 3
03

Delay and res judicata in strike-out applications

Holding

Although a striking-out application may be brought at any stage, being discretionary relief it must be brought timeously; and the application was res judicata the earlier application of 25th November 2008 which Lesiit, J had dismissed, a dismissal affirmed on appeal.

Reasoning

The defences were filed in 1989, 1990 and 1992, yet the appellant waited nearly 20 years to apply to strike them out. Further, an earlier application seeking a declaration that the amended defences and counterclaims were a nullity had been fully litigated and dismissed, and that dismissal was upheld in this Court, rendering the present application res judicata.

p. 3
04

Absence of prejudice notwithstanding want of leave

Holding

Even assuming no leave had been granted, the appellant suffered no prejudice because the amended defences and counterclaims were approved by the court and the 1st respondent had taken over Jimba Credit Corporation Limited.

Reasoning

The Court reasoned that the protective purpose behind the leave requirement was not engaged: the pleadings had received judicial approval, and the corporate continuity between the predecessor in statutory difficulty and the 1st respondent meant no party's rights were compromised. In those circumstances the want of leave, if any, could not justify striking out the pleadings.

p. 4

Legal principles established

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  • An appellate court will not interfere with the exercise of a judge's discretion unless the judge misdirected himself in some matter, or it is manifest from the case as a whole that the judge was clearly wrong in the exercise of discretion resulting in misjustice
  • No action or proceeding may be commenced or continued against a company subject to a winding-up order or with an interim liquidator appointed except by leave of the court
  • A party asserting that a company was placed under statutory management bears the burden of proving it, and a magazine or newspaper article is not sufficient proof; a court order is the proper evidence, since statutory management is a judicial process

Court orders

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  1. 1.The appeal is dismissed
  2. 2.The appellant to pay the costs of the appeal

Authorities

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Legislation

  • Civil Procedure Rules (repealed)order 6 rule 13(1)(b), (c) and (d)
  • Companies Act (repealed)section 228
  • Companies Act (repealed)section 235
  • Advocates Actsection 35(1) and (2)
  • Registered Land Act (repealed)section 109(2)(b)(i)
  • Registered Land Act (repealed)section 39(1)
  • Registered Land Act (repealed)section 65(1)

Cases cited (3)

  • Mbogo v Shah
    [1968] EA 93
  • Kenya Commercial Finance Company Limited V Kipng'eno Arap Ngeny & Another
    Civil Appeal No. 100 of 2001
  • Mwethaga V Thabiti Finance Company Limited & Others
    C.A No. 120 of 1998
On appeal from
High Court of Kenya at Nairobi
H.C.C.C. No. 937 of 1986
Jurisdiction invoked
First appellate jurisdiction over the High Court (Constitution of Kenya, 2010, Article 164; appeal as of right against exercise of judicial discretion)

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, "George Gikubu Mbuthia v Consolidated Bank of Kenya Limited & another [2017] KECA 300 (KLR)", Case Analysis (2017). Civil Appeal No. 207 of 2009. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2017/300/eng@2017-09-29

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