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Court of AppealPartially AllowedCivil Appeal (number not stated in the judgment; Notice of Appeal filed 27th July 2022)

Yooshin Engineering Corporation v Aia Architects Limited (Civil Appeal E074 of 2022) [2023] KECA 872 (KLR)

Court of Appeal
7 July 2023
SKS. Gatembu KairuPNP. NyamweyaGOG. V. Odunga
4,969 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 freed a contractor from depositing Kshs 413 million before defending a case, but confirmed that appearing in court waives complaints about unserved summons.

What this practically means

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Executive summary

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This appeal arose from a High Court ruling setting aside an interlocutory (default) judgment entered against the Appellant, a foreign contractor engaged on the LAPSSET project, conditionally - the Appellant was ordered to pay thrown away costs of Kshs 100,000.00 and to deposit the tender amount of Kshs 413,900,005.00 within 45 days. The trial judge had found that although summons to enter appearance were never served, the Appellant waived the defect by filing a memorandum of appearance and participating without objection; the judgment was therefore regular, and the deposit was justified by the Appellant's foreign status, lack of known Kenyan assets, and approaching completion of the contract. The Court of Appeal (Kairu, Nyamweya and Odunga, JJA) allowed the appeal in part. It affirmed the trial court's finding of waiver, holding on the authority of Nanjibhai Prabhudas that an unconditional appearance waives any irregularity in service. It affirmed the setting aside of the default judgment to permit trial on the merits, the defence having been found to raise triable issues, and affirmed the thrown away costs. However, it set aside the order requiring the deposit of Kshs 413,900,005.00, holding that once thrown away costs were awarded and triable issues existed, imposing a further onerous monetary condition was an error of principle: the judge relied on irrelevant factors drawn from Order 39 (attachment before judgment), whose conditions precedent are inapplicable to setting aside default judgments. The Court applied the established standard for interference with discretionary decisions and Kenya Power & Lighting Co Ltd v Abdulhakim Abdulla Mohamed. Costs of the appeal were awarded to the Appellant. The judgment binds lower courts on the irregular/regular default judgment distinction and the limited grounds for imposing conditions when setting aside regular default judgments.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the interlocutory judgment entered against the Appellant was regular or irregular, given the non-service of summons to enter appearance
  2. 2.Whether the Appellant waived its right to complain of non-service by appearing and participating in the proceedings
  3. 3.Whether the trial court was justified in setting aside the default judgment conditionally, on conditions that included the deposit of Kshs 413,900,005.00
  4. 4.Whether the conditions imposed were just, given that the intended defence raised triable issues and thrown away costs had already been awarded

Key legal issues

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01

Whether the interlocutory judgment was regular or irregular given non-service of summons

Holding

Although summons were never served, the Appellant, by filing a memorandum of appearance and participating in proceedings without raising the issue of non-service, waived its right to object, rendering the judgment regular and settable aside only on just terms.

Reasoning

The trial judge found summons were not served, but the Appellant filed a memorandum of appearance on 20th May 2019 and participated in proceedings without objection. Applying Nanjibhai Prabhudas v Standard Bank, a defect in service that has come to the defendant's knowledge is an irregularity capable of waiver, not a nullity. An unconditional appearance has always been regarded as waiving any irregularity in service.

p. 7
02

Whether the trial court's imposition of a deposit of Kshs 413,900,005.00 as a condition for setting aside the default judgment was a proper exercise of discretion

Holding

It was not. Having awarded thrown away costs and found the defence raised triable issues, it was an error of principle to additionally order the deposit; the conditions were based on irrelevant factors (foreign status, lack of assets) drawn from Order 39 attachment-before-judgment principles inapplicable to setting aside default judgment.

Reasoning

Discretionary decisions must rest on fixed principles and evidence, not private sentiments. The judge's reasons - the Appellant's foreign status and absence of fixed assets in Kenya - would be relevant only to an Order 39 application, whose conditions precedent are irrelevant to setting aside a default judgment. Absent evidence of intention to overreach, obstruct or delay, the overriding consideration is to do justice to both parties; the deposit of an unproved contested sum did not advance the overriding objective.

p. 8
03

The standard for appellate interference with discretionary decisions

Holding

An appellate court interferes only where discretion was exercised injudiciously - on a whim, capriciously, on wrong principle, on irrelevant considerations, or in disregard of relevant ones - not merely because the appellate court would have decided differently.

Reasoning

Guided by the Supreme Court in Apungu Arthur Kibira and Kacem v Bashir, the criteria for a successful appeal against a discretionary decision are stricter than for a general appeal. The same standard is restated in Mbogo v Shah: the court interferes where satisfied the decision is clearly wrong or the judge misdirected himself. That standard was met here because irrelevant factors were taken into account and relevant ones ignored.

p. 7
04

Whether a default judgment entered without service can attract conditions when set aside

Holding

Where a judgment is irregular because service was not effected, it must be set aside as of right without conditions; conditions may only be imposed where a regular judgment is being set aside, and such conditions must be just to both parties.

Reasoning

The Court drew the Bouchard distinction between irregular judgments (set aside ex debito justitiae, no conditions attach) and regular judgments (set aside on just terms within a wide judicial discretion). Where a regular judgment is set aside, conditions - such as thrown away costs - may be imposed, but not every case warrants conditions beyond costs; the court must ask itself whether conditions, if any, are just to both plaintiff and defendant.

p. 6

Legal principles established

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  • Where default judgment is entered without service of summons to enter appearance, it is irregular and must be set aside ex debito justitiae as a matter of right, regardless of whether a defence exists, and no conditions may be imposed; but where the defendant has appeared and participated without raising non-service, the defect is waived and the judgment becomes regular, settable aside only on just terms at the court's discretion.
  • An unconditional appearance to an action waives any irregularity in service; procedural defects are not nullities unless of a most fundamental nature.
  • Where a regular default judgment is set aside and the intended defence raises triable issues, imposing an onerous monetary deposit as a further condition is an error of principle; the overriding consideration is to do justice to both parties.
  • An appellate court will not interfere with the exercise of discretion by the High Court unless it is shown that the discretion was exercised injudiciously - based on error of law or principle, taking into account irrelevant considerations, failing to take account of relevant considerations, or that the decision is plainly wrong.
  • The conditions precedent for granting an attachment-before-judgment order under Order 39 of the Civil Procedure Rules are irrelevant to, and cannot be imported into, the determination of conditions for setting aside a default judgment.
  • In interlocutory appeals, the Court may only express its views on a prima facie basis so as not to embarrass or tie the hands of the trial court that will ultimately hear the case.

Court orders

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  1. 1.The appeal is allowed
  2. 2.The decision setting aside the interlocutory (default) judgment and directing that the matter go to trial on merits is affirmed
  3. 3.The award of thrown away costs of Kshs 100,000.00 to the Respondent is affirmed
  4. 4.The order directing the Appellant to deposit Kshs 413,900,005.00 as a condition for setting aside the ex parte judgment is set aside
  5. 5.Costs of the appeal awarded to the Appellant

The bench

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One judgment of the whole court — no separate or dissenting opinions.

SK
majority
PN
majority
GO
majority
On appeal from
High Court of Kenya (station not stated)
Not stated
Jurisdiction invoked
First appeal to the Court of Appeal under Article 164 of the Constitution (provision not expressly cited in the judgment)

Relief refused

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A complete reversal of the trial court's ruling (the Appellant sought to overturn the setting aside itself and the finding of waiver)

The Court affirmed the setting aside of the default judgment, the award of thrown away costs, and the finding that the Appellant waived the non-service of summons by appearing and participating without objection

p. 8

Costs

We award the costs of this appeal to the Appellant. (The trial court's award to the Respondent of thrown away costs of Kshs 100,000.00 was affirmed.)

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

Accordingly, we allow the appeal and while we afirm the decision setting aside the judgement and directing that the matter goes to trial on merits and awarding the Respondent thrown away costs of Kshs 100,000.00, we hereby set aside the order directing the Appellant to deposit the sum of Kshs 413,900,005.00 as a condition for setting aside the ex parte judgement. We award the costs of this appeal to the Appellant.
p. 8Final orders - appeal partially allowed; deposit condition set aside; costs to Appellant
where the judgement is irregular in the sense that service was not efiected, or that the judgement was improperly or prematurely entered, then such a judgement is irregular and must be set aside as a matter of right. It does not matter whether the defendant has a defence or not.
p. 6Irregular default judgment set aside ex debito justitiae
Where the defendant enters an unconditional appearance to an action it has always been regarded as an act which waives any irregularity.
p. 7Waiver of irregularity in service by unconditional appearance
The overriding consideration in an application to set aside a default judgment where the intended defence raises triable issues and, absent evidence of intention or deliberate action by the Appellant to overreach, obstruct or delay the cause of justice, is to do justice to both parties
p. 8Overriding consideration in setting aside default judgment where triable issues exist
in an appeal from a decision based on an exercise of discretionary powers, an Appellant has to show that the decision was based on a whim, was prejudicial or was capricious.
p. 4Standard for appellate interference with discretionary decisions
it was an error of principle for the Learned Judge to have, in addition, ordered the Appellant to deposit Kshs 413,900,005.00. That decision was arrived at on consideration of irrelevant factors and on failure to consider relevant ones.
p. 8Deposit condition vitiated by error of principle

Issues in the judgment

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minor

The judgment does not state the names of the parties in the title or heading; party names must be inferred from the narrative and the certified copy ends abruptly after the bench signatures.

minor

The judgment does not state the civil appeal number of the present appeal, nor the case number of the decision appealed from; only a prior related appeal (Civil Appeal No. 147 of 2019) is identified.

minor

The record suggests a possible date discrepancy in the narrative: the Respondent is stated to have requested judgment on 8th October 2019, yet judgment was entered on 18th October 2022, and the Appellant's application dated 17th October 2019 is described as seeking setting aside of 'any judgement in default (if any)'.

minor

The judgment describes the agreement as a 'sub tenancy agreement' in respect of construction of the LAPSSET project, which appears internally inconsistent with the contractual context described elsewhere in the judgment.

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (11)

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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, "Yooshin Engineering Corporation v Aia Architects Limited (Civil Appeal E074 of 2022) [2023] KECA 872 (KLR)", Case Analysis (2023). Civil Appeal (number not stated in the judgment; Notice of Appeal filed 27th July 2022). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2023/872/eng@2023-07-07

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