Challenge Engineering Works Ltd v Kingsley Construction Company Ltd

The Notice of Motion 3. Subsequently, the Decree Holder brought the Notice of Motion dated 15th March 2025 (hereafter the Application) seeking the following orders: i. Spent. ii. Spent. iii. An order be and is hereby issued attaching Kshs. 27,997,823 and costs of Kshs. 5,764,839 to be paid to the judgment debtor account with the garnishee accounts held in various bank accounts, being money due and owing to the Decree Holder pursuant to the Decree made on 1st February, 2023. iv. A Garnishee Order Absolute be issued directed to the Garnishee, Commissioner of Domestic Taxes to release and/or remit to the Decree Holder the sum of Kshs. 29,997,823 and costs Kshs. 5,764,839 held in their accounts and which was to be credited to the judgement debtor as per the court order issued in Citation Kingsley Construction Company Limited vs Commissioner of Domestic Taxes (2025) KETAT 122 (KLR), that the same shall be in satisfaction of the Decree made on 1st February, 2023. v. The Garnishee do appear before this Honourable Court on an appointed date and time to show cause why the garnishee order nisi should not be granted and made absolute and that the sum of Kshs. 29,997,823 and costs of Kshs. 5,764,839 be released to the Decree Holder and further costs of these Garnishee proceedings. vi. The costs of this application be borne by the Judgment Debtor. sic 4. The Application was brought under Sections 1A, 1B and 38(c) of the Civil Procedure Act (CPA); Order 23, Rules 1 and 2 of the Civil Procedure Rules (CPR); and Section 23 of the Government Proceedings Act. It is supported by the grounds found on the face of it and in the Supporting Affidavit sworn by Kantilal Khimji Karsan Patel, a Director of the Decree Holder. 5. In sum, the grounds are that since the entry of the consent judgment, the Judgment Debtor has failed to satisfy the resulting decree, while the decretal amount continues to accrue interest at a rate of 12%p.a. from the date of filing suit; that it is his knowledge, that the Judgment Debtor is owed a sum of Kshs. 68,263,914/-by the Commissioner of Domestic Taxes (hereafter the Garnishee) pursuant to a court order issued in Kingsley Construction Company Limited v Commissioner of Domestic Taxes (2025) KETAT 122 (KLR) through the latter’s Garnishee accounts, which accounts are well funded and hence capable of satisfying the decretal sum herein, plus costs and interest and that unless the orders sought in the instant Application are granted, the Decree Holder is apprehensive that the Judgment Debtor will likely proceed to withdraw and/or transfer the funds being held by the Garnishee, thereby causing the Decree Holder to suffer substantial loss. 6. It is deposed, further, that the Decree Holder, being rightfully entitled to enjoy the fruits of its judgment, it is only fair and in the interest of justice that the orders sought herein be granted. The Replying Afidavit 7. The Judgment Debtor has opposed the Application through his Replying Affidavit sworn by its Head of Finance, Evelyn Mutungi, on 18th May 2021 where it is deposed that as per the terms of the consent judgment, the decretal balance of Kshs. 29,487,823/- was to be paid by way of equal monthly instalments of Kshs. 1,000,000/-; that contrary to the averments being made in the Application, the https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16600/eng@2025-10-13 2

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Judgment Debtor has been complying with the set terms, save in an instance where internal wrangles between the Decree Holder and its auctioneers resulted in certain delays in the payment process and that pursuant to a letter dated 1th November 2024 drawn by the Decree Holder, it was agreed that subsequent payments would be made through Maurice Osundwa t/a Mamuka Auctioneers, which terms the Judgment Debtor has complied with. 8. It is further deposed that the instant Application is premature and unfounded for the reason that the Decree Holder has failed to adhere to the relevant tax procedure set out under 47 of the Tax Procedure Act namely that it ought to firstly be confirmed whether there is an overpayment on tax funds being held by the Garnishee and whether such overpayment would warrant a refund; that in any event, the Judgment Debtor is entitled to apply any overpaid taxes in settling its outstanding tax liabilities and that no legal obligation therefore exists to have overpaid funds transferred to the Decree Holder. 9. For those reasons the Judgment Debtor has urged that the instant Application be struck out with costs. The Preliminary Objection 10. 11. The Garnishee on its part, has filed a Notice of Preliminary Objection dated 21st May 2025 seeking the dismissal of the Application on the following grounds: a. That the instant application offends the provisions of section 21 (4) of the Government Proceedings Act. b. That the suit herein offends the provisions of section 5(1) of the Kenya Revenue Act, 1995 since the Garnishee is an agent of the Government in collection and receipt of revenue. c. That the instant suit is an outright abuse of the court process and ought to be dismissed with costs to the Garnishee.” sic The Application and the Preliminary Objection were canvassed together, by way of written submissions. Submissions 12. In respect of the Preliminary Objection, the Decree Holder has argued that garnishee proceedings are regulated by Order 23 of the CPR, a position which was echoed by the Court of Appeal in Kenya Electricity Transmission Company Limited v Spedag Interfreight Kenya Limited & 4 others [2024] KECA 542 (KLR) and that no provision exists in the State Corporations Act precluding a decree holder from instituting garnishee proceedings against a state parastatal. Reference was made to the case of Kenya Revenue Authority v Habimana Sued Hemed & another [2015] KECA 488 (KLR) in which the Court of Appeal held that state bodies are not immune from execution proceedings. The Decree Holder has argued that in the circumstances, the Preliminary Objection ought to be dismissed. 13. To support the orders being sought in the Application, the Decree Holder has reiterated that it is not in dispute that the Judgment Debtor is indebted to it, pursuant to the consent judgment and resulting decree on record; that in a separate case namely Kingsley Construction Company Limited v Commissioner of Domestic Taxes (2025) KETAT 122 (KLR), an award was made in favour of the Judgment Debtor and against the Garnishee herein, to the tune of Kshs. 68,263,914/- in the year 2025; that subsequently, it was ascertained by the Garnishee that the monies owed were available in the Judgment Debtor’s accounts, which position remains undisputed. 14. The Decree Holder has therefore urged that the Application be allowed as prayed. https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16600/eng@2025-10-13 3

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15. To support the Preliminary Objection, the Judgment Debtor has contended that the Garnishee herein is an officer under the Kenya Revenue Authority (KRA) and established under the KRA Act Cap. 469 Laws of Kenya; that the KRA is an agent of the Government tasked with the collection, accounting and assessment of revenue; that Section 21(4) of the Government Proceedings Act referenced in the Preliminary Objection, therefore bars execution and attachment orders as against government bodies, including the Garnishee and that the Garnishee enjoys statutory immunity. 16. The Judgment Debtor has relied on the case of Permanent Secretary Ministry of Roads & another v Fleur Investments Limited [2015] eKLR where the Court of Appeal held that government funds are not subject to attachment and the case of Kenya Revenue Authority v Export Trading Company Limited [2015] eKLR in which the Judgment Debtor where the court determined that funds held with KRA are not available for disbursement to third parties. 17. It is the Judgment Debtor’s submission that there is nothing verifying the existence of excess funds being held with the Garnishee and that in any event, Section 47 of the Tax Procedures Act lays out the procedure for ascertaining and offsetting any and all tax related liabilities and that consequently, no funds being held with the Garnishee would be available for attachment at this stage. 18. The Judgment Debtor’s ultimate submission is that the Preliminary Objection is meritorious and ought to succeed and that the court ought to deem the instant Application incompetent and unsustainable. 19. On its part, the Garnishee had not filed any written submissions, as at the time of writing this ruling. Analysis and Determination 20. I have considered the Application, the Replying Affidavit, the Preliminary Objection and the rival submissions. In respect of the Preliminary Objection, I am guided by the case of Mukisa Biscuit Company v West End Distributors Limited (1969) EA 696 which defined a preliminary objection in the following manner: “ A Preliminary Objection is in the nature of what used to be a demurrer. It raises a pure point of law which is argued on the assumption that all the facts pleaded by the other side are correct. It cannot be raised in any fact that has to be ascertained or if what is sought is the exercise of judicial discretion.” 21. The Supreme Court of Kenya in Independent Electoral & Boundaries Commission v Jane Cheperenger & 2 others [2015] eKLR rendered itself thus in respect of what constitutes a preliminary objection:: “ It is quite clear that a preliminary objection should be founded upon a settled and crisp point of law, to the intent that its application to undisputed facts, leads to but one conclusion: that the facts are incompatible with that point of law.” 22. To my mind, the Preliminary Objection raised herein has challenged the competency of the Application on the basis of two (2) statutory provisions, firstly Section 21(4) of the Government Proceedings Act which stipulates that: “ Save as aforesaid, no execution or attachment or process in the nature thereof shall be issued out of any such court for enforcing payment by the Government of any such money or costs as aforesaid, and no person shall be individually liable under any order for the payment by https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16600/eng@2025-10-13 4

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the Government, or any Government department, or any officer of the Government as such, of any money or costs.” 23. From a reading of Section 21(1), which precedes the above-cited sub-section, it is apparent that the entire Section applies to: “ civil proceedings brought by or against the Government, or in proceedings in connection with any arbitration in which the Government is a party, any order (including an order for costs) is made by any court in favour of any person against the Government, or against a Government department, or against an officer of the Government…” 24. The present proceedings are in the nature of Garnishee, which are regarded as being special proceedings. This position was reaffirmed by the Court of Appeal in the case of Kenya Electricity Transmission Company Limited v Spedag Interfreight Kenya Limited & 4 others [2024] KECA 542 (KLR) cited in the submissions by the Decree Holder, where the Court rendered itself thus: “ In our view, garnishee proceedings are special proceedings ... Strictly speaking, they are not even execution proceedings since the property of the garnishee is not in jeopardy in such proceedings. In garnishee proceedings, the decree holder steps into the shoes of the judgement debtor and demands that the payment due from the garnishee to the judgement debtor be paid to the decree holder or judgement creditor instead. That is the only relationship between the garnishee and the judgement creditor or decree holder. Accordingly, the issue of privity of contract, strictly speaking, has no place in garnishee proceedings since the liability of the garnishee to pay the decree holder is not contractual, but kicks in by operation of law.” 25. The Court of Appeal went further to appreciate that the appropriate provision pertaining to garnishee matters is Order 23 of the CPR, which caters for the procedure for attachment of debts, including garnishee proceedings. 26. In view of the foregoing binding decision and upon a perusal of the Government Proceedings Act, the court has not come across any material to indicate that the provisions of the said Act limit or bar the institution of garnishee proceedings. The court is thus not satisfied that the provisions of the said Act would necessarily impede the present proceedings. 27. The second provision upon which the Preliminary Objection rides is Section 5(1) of the KRA Act, which provides thus: “ The Authority shall, under the general supervision of the Cabinet Secretary, be an agency of the Government for the collection and receipt of all revenue.” 28. Section 3(2) of the said Act establishes KRA and provides that it shall be a body corporate with perpetual succession, and that it shall be an agency of the Government for the collection and receipt of all revenue. Moreover, the Act provides for the appointment of Commissioners such as the Garnishee, to perform various functions on behalf of the KRA. 29. Suffice it to say that, the question remains whether the Garnishee and by extension the KRA, would be immune from execution in whatever capacity. The Judgment Debtor, whilst supporting the preliminary objection, has argued that no execution whatsoever can proceed against the KRA and that any funds held by the said body are not eligible for disbursement to third parties. https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16600/eng@2025-10-13 5

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30. Upon my perusal of the Judgment Debtor’s submissions and further reference to the Kenya Law database, I did not come across the findings referenced in the supporting authorities to the said submissions, and trace the specific citations referenced in the respective authorities. As it stands therefore, the Judgment Debtor did not cite any verifiable supporting judicial authorities. 31. I hold the view that the Judgment Debtor and the Garnishee have not demonstrated the manner in which the instant Application offends Section 5(1) of the KRA Act, or that the KRA is necessarily immune from execution (or litigation). In finding so, I draw guidance from the Court of Appeal’s decision in Kenya Revenue Authority v Habimana Sued Hemed & another [2015] KECA 488 (KLR) thus: “ There are three arms of Government, and they are clearly defined and recognized universally over the ages. We do not need to redefine them here. Kenya Revenue Authority collects taxes for the Government, and they do a good job of it. It is nonetheless an autonomous, corporate, statutory body specifically with power to sue and be sued. The appellant cannot hide behind the cloak of the Attorney General when it is accused of breaching the law or otherwise violating people’s rights purely in order to take advantage of the 30 days statutory notice! It would be ridiculous, nay, fallacious even, for one to imagine that KRA would be immunized, or shielded by the law against issuance of injunctive orders against it, even where such orders are merited and may be necessary for preservation of property, and protection of peoples’ fundamental rights as happens many times. We cite with approval the words of Mbogholi Msagha J in Gurdoba Enterprises Limited vs Kenya Revenue Authority (civil case No. 676 of 1998), where he opined that; “Kenya Revenue Authority …must submit itself to the rigors of litigation and stop operating under the shadow of the Government when it comes to legal proceedings.” Ojwang J (as he then was) faced with a similar situation in Menginya Salim Murgani vs Kenya Revenue Authority, HCCC No. 1139 0f 2002) was of similar persuasion when he stated in reference to the appellant: “the body parliament intended was a responsible and accountable one, empowered to discharge its legal obligations without resorting to reserved privilege when obligations fall upon it”. 32. I similarly wish to reiterate that the instant proceedings being garnishee in nature, constitute special proceedings. 33. Consequently, the preliminary objection fails and is hereby dismissed with no order as to costs. 34. Now I turn to the Application, the applicable provision is Order 23 of the CPR which sets out the manner and procedure for attaching debts by way of garnishee proceedings. Order 23 (1) CPR provides that: “ (1) A court may, upon the ex parte application of a decree-holder, and either before or after an oral examination of the judgment-debtor, and upon affidavit by the decree-holder or his advocate, stating that a decree has been issued and that it is still unsatisfied and to what amount, and that another person is indebted to the judgment-debtor and is within the jurisdiction, order that all debts (other than the salary or allowance coming within the provisions of Order 22, rule https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16600/eng@2025-10-13 6

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42 owing from such third person (hereinafter called the “garnishee”) to the judgment-debtor shall be attached to answer the decree together with the costs of the garnishee proceedings; and by the same or any subsequent order it may be ordered that the garnishee shall appear before the court to show cause why he should not pay to the decree- holder the debt due from him to the judgmentdebtor or so much thereof as may be sufficient to satisfy the decree together with the costs aforesaid. (2) At least seven days before the day of hearing the order nisi shall be served on the garnishee, and, unless otherwise ordered, on the judgment-debtor. (3) Service on the judgment-debtor may be made either at the address for service if the judgment-debtor has appeared in the suit and given an address for service, or on his advocate if he has appeared by advocate, or if there has been no appearance then by leaving the order at his usual residence or place of business or in such manner as the court may direct. (4) An order nisi shall be in Form No. 16 of Appendix A.” Order 23, Rule 4 provides thus: “ If the garnishee does not dispute the debt due or claimed to be due from him to the judgment-debtor, or, if he does not appear upon the day of hearing named in an order nisi, then the court may order execution against the person and goods of the garnishee to levy the amount due from him, or so much thereof as may be sufficient to satisfy the decree, together with the costs of the garnishee proceedings; and the order absolute shall be in Form No. 17 or 18 of Appendix A, as the case may require.” 35. From the foregoing, it is apparent that following an ex parte application by a decree holder and upon ascertaining that a decree remains unsatisfied, the court may order that a garnishee order nisi be issued and served upon a garnishee, in the manner set out hereinabove, and further order the garnishee to attend court on a specific date in order to show cause as to why the debt owing to the decree holder should not be satisfied by the debt due from the said garnishee to the judgment-debtor or to ascertain whether the funds being held by the garnishee are sufficient to satisfy the decree together with any resultant costs. Upon the court’s satisfaction that the provisions of Order 23, Rule 4 have been complied with or effected, it may direct that the garnishee order nisi be made absolute. 36. In the present instance, it is not disputed that a consent judgment was entered in favour of the Decree Holder and against the Judgment Debtor, for the total sum of Kshs. 34,487,823/-, payable on various terms; including the term that a down payment of Kshs. 5,000,000/- would be made on or before 28th February 2023 while the remaining balance of Kshs. 29,487,823/- would be paid by way of monthly instalments of Kshs. 1,000,000/- at the end of each month. That the Judgment Debtor would in addition pay the Party and Party costs and court filing fees totaling Kshs. 1,500,000/- in three (3) instalments with effect from 28th February 2023. That in default of any one (1) instalment cheque, the entire outstanding balance would become due and execution would proceed. The said judgment was adopted as an order of the court on 27th April 2023. 37. From a further perusal of the record, it is apparent that the Decree Holder is now claiming a decretal balance of Kshs. 29,997,823/- plus costs Kshs. 5,764,839/- from the Judgment Debtor. In contrast, the Judgment Debtor has averred that payments have consistently been made towards satisfying the https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16600/eng@2025-10-13 7

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decree on a monthly basis, and has annexed copies of receipts to support this averment. The Judgment Debtor has termed the instant Application as premature and in contravention of Section 47 of the Tax Procedure Act. 38. Upon the perusal of the record, it is apparent that while the Judgment Debtor issued cheques on various dates towards settling the decree amount and tendered copies of various cheques, there is nothing credible on record to indicate that the Judgment Debtor made consistent payments, in adherence with the terms of the consent judgment. There is equally nothing credible to indicate that the decretal amount has been fully settled. In the circumstances, the Decree Holder would be well within its rights to proceed with execution under the terms of the consent judgment. 39. As earlier indicated, partial payments were previously made by the Judgment Debtor, though it is not certain how much of the decretal amount was satisfied as at the time of filing the instant Application. 40. However, contrary to the averments being made in the instant Application that interest on the outstanding decretal sum was to accrue at a rate of 12% p.a., upon the court’s perusal of the consent judgment, it did not come across any clause to that effect. The consent judgment made no provision regarding interest. Consequently, the court is not convinced that there would be any justification for claiming interest. 41. Separately, it is clear from the record that when the instant Application came up in court ex parte on 3rd April 2025, this court directed that a garnishee order nisi be issued against the Garnishee. A service thereof was effected upon the Garnishee through the Legal Department of the KRA. 42. From the record, it is also clear that the Judgment Debtor received an award against the Garnishee in a separate recent case namely Kingsley Construction Company Limited vs Commissioner of Domestic Taxes (2025) KETAT 122 (KLR) whereby the Tax Appeals Tribunal vide a decision rendered on 7th February 2025, ordered the Garnishee to refund the various amounts set out in the referenced applications filed in the matter, within a period of 60 days. 43. As earlier mentioned, the Judgment Debtor has averred that pursuant to Section 47 of the Tax Proceedings Act, the Decree Holder has no basis upon which to claim the amounts sought to be refunded, until the procedure and timelines issued by the Tribunal are complied with. 44. Upon the court’s reference to the abovementioned Section, it is clear that the same sets out the procedure for applying for an offset or refunds on overpaid taxes. Be that as it may, the court has not come across any legal provision therein that prevents or disallows a decree holder from taking out garnishee proceedings on overpaid sums in taxes. Resultantly, the averments by the Judgment Debtor in this regard are unsustainable. 45. In view of all the foregoing circumstances, the court is satisfied that there is merit in the instant Application. Nevertheless, in view of the fact that the Garnishee is yet to be summoned to show cause in the matter, it would not be prudent for order (iv) of the Application to be granted at this stage, since the same seeks to have the garnishee order nisi made absolute. 46. Consequently, the Notice of Motion dated 15th March 2025 partially succeeds and is hereby allowed in the following terms: i. The Notice of Preliminary Objection dated 21st May 2025 is hereby dismissed with no order as to costs. ii. An order be and is hereby issued attaching Kshs. 27,997,823 and costs of Kshs. 5,764,839 to be paid to the judgment debtor account with the garnishee accounts held in various bank https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16600/eng@2025-10-13 8

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accounts, being money due and owing to the Decree Holder pursuant to the Decree made on 1st February, 2023. 47. iii. The Decree Holder and the Judgment Debtor shall reconcile their accounts on the decretal amounts so far paid and shall prepare and file a detailed and conclusive record of sums already paid by the Judgment Debtor and received by the Decree Holder towards satisfying the decree, within twenty one (21) days of this day. iv. The Garnishee herein be and is hereby directed to appear before this Honourable Court on a date convenient to the court and the parties to be set in court to show cause as to why he/she should not be ordered to settle the outstanding decretal sum plus any arising costs from the debt due from him/her to the Judgment Debtor. v. The Decree Holder shall have the costs of the Application, to be borne by the Judgment Debtor. Orders shall issue accordingly. DATED, SIGNED AND DELIVERED THIS 13TH OCTOBER 2025. S. N. MUTUKU JUDGE https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16600/eng@2025-10-13 9

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