Twiga Chemical Industries Limited v Rotam Agrochemical Co Ltd [2019] KECA 999 (KLR)
The bottom line
#Kenya's Court of Appeal ruled that a set-off counts as a defence, so a company whose defence was struck out gets to fight the case at trial.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the trial court exercised its discretionary power in a judicious manner in striking out the appellant's defence
- 2.Whether the suit should have been referred to arbitration
- 3.Whether there was any basis for striking out the defence
Key legal issues
#Whether an appellant can re-agitate on appeal an issue already decided in an unchallenged interlocutory ruling
No. The issue of referring the suit to arbitration was determined in the ruling of 13th March 2012 which was never challenged; the appellant cannot raise it again, whether as res judicata or estoppel, and the ground was also not specified in the memorandum of appeal.
The court held the arbitration ground was built on quick sand: it was not expressly set out in the grounds of appeal, contravening Rule 104(a) of the Court of Appeal Rules, and it had been dealt with in Mabeya J's earlier ruling of 13th March 2012, which none of the parties challenged. Raising it again on appeal was described as mischievous. The court relied on Mburu Kinyua v Gachini Tuti and Uhuru Highway Development Ltd v Central Bank of Kenya to confirm that res judicata applies to applications determined in the same suit.
Whether a set-off pleaded only in affidavit evidence, founded on a claim in a separate suit, can be struck out as frivolous and no defence at all
No. A set-off is in its nature a defence, and the trial court erred in law in holding that the set-off could not amount to a defence and was hence frivolous.
The court agreed the appellant was in effect pleading a set-off but rejected the legal conclusion that a set-off could not amount to a defence, finding no support for such a principle. Citing Kenya Oil Company Ltd v Kenya Ports Authority and Atkin's Encyclopaedia, it held a set-off is a defence rather than a cross-claim. Though not elegantly pleaded, the pleading disclosed a semblance of a defence curable by amendment, and the court may only strike out pleadings that are incurable by amendment.
Whether the set-off raised a triable issue entitling the appellant to defend
Yes. The set-off or counterclaim raised a triable issue, and even one bona fide triable issue entitles a defendant to unconditional leave to defend.
Relying on Souza Figuerido & Co. Ltd v Mooring Hotel Limited, Provincial Insurance Company of East Africa Ltd v Lenny M. Kivuli and Kenya Trade Combine Ltd v M. Shah, the court affirmed that a defendant need only show a bona fide triable issue, which need not be a defence that must succeed. Having examined the affidavit evidence under rule 29(1)(a) of the Court's rules without going into merits, the court found sufficient reason to interfere with the trial court's discretion.
The applicable standard for appellate interference with the exercise of discretion by a trial court
An appellate court will not interfere with discretionary power unless there was an error on principle or the trial judge was plainly wrong; the same standard the Supreme Court applies to interference with the Court of Appeal's discretion applies to interference by this Court with the trial court's discretion.
The court framed the sole issue as whether Mabeya J exercised his discretionary power judiciously. It cited the Supreme Court's recent exposition in Musa Sirma Cherutich v IEBC on when a discretion may be disturbed - where the court acted arbitrarily or capriciously, ignored relevant facts, or disregarded governing principles leading to an unjust order. Having found errors of law in the striking out, the court held there was sufficient reason to interfere.
Legal principles established
#- An appellate court will not interfere with the exercise of discretion by a lower court unless there is an error of principle or the lower court was plainly wrong
- A set-off raised by a defendant in its defence is in its nature a defence and cannot be disregarded merely because it arises from a separate cause of action
- The striking out of a defence is a drastic remedy to be resorted to sparingly, and it is only where a pleading cannot be salvaged by amendment that the court will utilise the procedure
- The principle of res judicata and estoppel applies to interlocutory applications heard and determined in the same suit, so a party cannot re-litigate an issue decided in an earlier unchallenged ruling
Court orders
#- 1.The ruling of the High Court (Mabeya, J.) made on 25th March, 2013 is set aside
- 2.The notice of motion dated 7th May, 2012 is dismissed
- 3.The respondent shall bear the costs of the dismissed motion
- 4.The respondent shall bear half the costs of the appeal
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya at Nairobi
- H. C. C. C. No. 553 of 2011
- Jurisdiction invoked
- First appellate jurisdiction under the Court of Appeal Rules over an appeal from the High Court; the judgment does not state a specific constitutional or statutory jurisdictional provision
Relief refused
#Referral of the suit to arbitration / setting aside of the refusal to refer to arbitration
The ground was not specified in the memorandum of appeal contrary to Rule 104 (a) of the Court's rules, and the issue of referring the suit to arbitration had been dealt with in an unchallenged earlier ruling; it cannot be re-agitated, whether as res judicata or estoppel
Costs of the appeal against the respondent in full
The appeal did not succeed wholly on the issues raised by the appellant, so the respondent was ordered to bear only half the costs of the appeal
Costs
The respondent shall bear the costs of the dismissed motion but shall bear half the costs of the appeal
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
In the end, we agree with the finding by the trial court that the appellant was in effect pleading a set-off. However, with respect, we do not accept the conclusion reached, as a matter of law, that the set-off could not amount to a defence, and was hence frivolous and a waste of the court's time. We find no support for such principle.
It is not for nothing that the jurisdiction of the court to strike out pleadings has been described variously as draconian, drastic, discretionary, a guillotine process, summary and an order of last resort.
It has always been held that a court may only strike out pleadings where they disclose no semblance of a cause of action or defence and are incurable by amendment.
in an application for summary judgment even one triable issue, if bona fide, would entitle the defendant to have unconditional leave to defend
We now do so by allowing this appeal with the result that the ruling of the High Court (Mabeya, J.) made on 25 th March, 2013 is hereby set aside. We substitute therefor an order dismissing the notice of motion dated 7 th May, 2012.
The respondent shall bear the costs of the dismissed motion but shall bear half the costs of the appeal which did not succeed wholly on the issues raised by the appellant.
Whether it be res judicata or estoppel, it is not open for the appellant to re-agitate the issue and ask us to reverse the trial court on the earlier ruling.
Issues in the judgment
#The opening paragraph states the impugned ruling was delivered by Mabeya, J on 25th March, 2016, whereas the appeal was filed in 2016 from a ruling dated 25th March, 2013 and elsewhere the judgment consistently refers to 25th March, 2013; the 2016 date appears to be a typographical error in the judgment.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Twiga Chemical Industries Limited v Rotam Agrochemical Co Ltd [2019] KECA 999 (KLR)", Case Analysis (2019). Civil Appeal No. 16 of 2016. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2019/999/eng@2019-02-08
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.