Nairobi Milimani Law Courts & 2 others v Altons Automart

3. The appeal was commenced by way of a Memorandum of Appeal dated 11th March 2025 and a Record of Appeal dated 7th October 2025, pursuant to leave granted by this Court on 6th May 2025. II. FACTUAL BACKGROUND 4. The dispute arises from a claim for professional services rendered. On 14th March 2022, the Respondent engaged the Appellant to provide audit services (for the years of income 2016 to 2020) and VAT reconciliation services (for the period January 2016 to December 2021) at an agreed fee of KES 700,000.00. 5. The Respondent paid KES 350,000.00, leaving an outstanding balance of KES 350,000.00. Despite receiving fee notes and a formal demand letter dated 15th November 2022 (received, signed, and stamped by the Respondent’s employee or representative on 24th November 2022), the Respondent failed to clear the balance. 6. Consequently, the Appellant filed SCCCOMM No. E8016 of 2022 on 20th December 2022. The Statement of Claim and the accompanying documents were physically served on the Respondent on 21st December 2022. The Respondent’s representative/and or employee physically signed and affixed the company’s official stamp on the Acknowledgment of Service (Form No. SCC 1) on the same day. 7. The Respondent failed to file a response or enter an appearance within the statutory 15 days prescribed under HCCSCA NO. E292 OF 2025 Page 2 of 10

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Section 25(2) of the Small Claims Court Act, 2016. As a result, default judgment was entered by Hon. M. Mutua, RM/Adjudicator, on 27th February 2023. HCCSCA NO. E292 OF 2025 Page 3 of 10

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8. The Appellant subsequently served the Respondent with the Decree and a 10-day Notice of Entry of Judgment on 12th September 2023. Upon failure to pay, the Appellant commenced execution, and on 24th October 2023, the court bailiff (M/s Crater View Auctioneers) proclaimed the Respondent’s movable property. 9. It was only after this proclamation that the Respondent moved the trial court via a Certificate of Urgency and Notice of Motion dated 1st November 2023, seeking a stay of execution and orders to set aside the default judgment, claiming they had never been served with any court documents and that the suit was "totally new and alien." 10. The trial court delivered its ruling on 12th January 2024, allowing the Respondent’s application with costs. The court held that the Respondent had not been properly served, which it characterized as a "blatant disregard of the principles of natural justice" rendering the proceedings a nullity. III. THE APPEAL AND SUBMISSIONS 11. Dissatisfied with that determination, the Appellant filed this appeal on the following primary grounds: a. The learned Adjudicator erred in law and fact by finding that the Respondent had not been properly served, thereby ignoring overwhelming, uncontroverted documentary proof of service on the record. b. The trial court misdirected itself on the legal principles governing the setting aside of a regularly entered HCCSCA NO. E292 OF 2025 Page 4 of 10

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default HCCSCA NO. E292 OF 2025 Page 5 of 10

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judgment, failing to consider whether a "triable defense" or "sufficient cause" had been demonstrated. c. The trial court erred in setting aside the execution process and decree without any factual or legal basis. 12. This appeal was canvassed by way of written submissions. The Appellant filed its submissions dated 30th March 2026. The Respondent did not file a response, or submissions in this appeal despite being duly served with the Memorandum of Appeal, the Record of Appeal, and the hearing/mention notices. IV. ISSUES FOR DETERMINATION 13. Having examined the record, the grounds of appeal, and the Appellant's submissions, this Court identifies two critical issues for determination: a. Whether the default judgment entered on 27th February 2023 was regular; b. Whether the learned Adjudicator properly exercised Adjudicator’s judicial discretion in setting aside the default judgment and decree. V. DETERMINATION On the Regularity of the Default Judgment 14.A fundamental distinction exists in Kenyan law between a default judgment that is regularly entered and one that is irregularly entered. This distinction was articulated by the Court of Appeal in James Kanyiita HCCSCA NO. E292 OF 2025 Page 6 of 10

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Nderitu & another v Marios Philotas Ghikas & another [2016] KECA 470 (KLR), and adopted by this court in Kihara v Mathenge (Civil Appeal 86 of 2019) [2025] KEHC 7914 (KLR): "In a regular default judgment, the defendant will have been duly served with summons to enter appearance, but for one reason or another, he had failed to enter appearance or to file defence, resulting in default judgment In an irregular default judgment, on the other hand, judgment will have been entered against a defendant who has not been served or properly served with summons to enter appearance. In such a situation, the default judgment is set aside ex debito justitiae, as a matter of right." 15. In the present case, the learned Adjudicator held at paragraph 14 of the trial court’s ruling that: "...the Applicants herein were not properly served which action culminated to a blatant disregard of the principles of natural justice and thus any directive flowing therefrom is rendered a nullity. " 16. This Court finds that this holding was factually baseless and legally untenable. The record contains irrefutable, HCCSCA NO. E292 OF 2025 Page 7 of 10

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physical evidence of proper service: a) Exhibit "EA-1" is a demand letter showing the Respondent's official stamp and signature acknowledging receipt on 24th November 2022. HCCSCA NO. E292 OF 2025 Page 8 of 10

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b) Exhibit "EA-2" is the official Acknowledgment of Service (Form No. SCC 1). This document contains the physical signature of the Respondent and their official company rubber stamp clearly dated 21st December 2022. 17. Under Rule 36 of the Small Claims Court Rules, 2019, a completed acknowledgment of service constitutes prime, probative evidence of service. 18. The Respondent did not file a further affidavit in the trial court to challenge the authenticity of their stamp or signature on these documents, nor did they seek to cross-examine the process server. A party cannot simply issue a bare denial of service in an affidavit when confronted with their own signed and stamped acknowledgment of receipt. 19. Consequently, this Court holds that the Respondent was fully, physically, and regularly served with the Statement of Claim. Because they failed to respond within the statutory 15 days, the default judgment entered on 27th February 2023 was entirely regular. The trial court’s finding of nonservice was a flagrant misdirection of fact and law. On the Exercise of Discretion to Set Aside the Judgment 20. Because the default judgment was regular, it could not be set aside ex debito justitiae (as a matter of right). It could only be set aside through the proper exercise of judicial discretion based on settled legal principles. As established in Simba v Weruma & 2 others (Environment and Land Appeal E015 of 2024) [2025] KEELC 3342 (KLR) and Section 11(4) of the HCCSCA NO. E292 OF 2025 Page 9 of 10

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Small Claims Court Rules, 2019, a court considering whether to set aside a HCCSCA NO. E292 OF 2025 Page 10 of 10

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regular default judgment must satisfy itself of the following three- pronged criteria: a) Whether the applicant has shown an excusable mistake or a reasonable explanation for the default; b) Whether the application was brought without inordinate delay; and c) Whether the applicant has exhibited a draft defense that raises triable issues. 21. An examination of the Respondent’s application reveals a total failure to meet any of these standards as this Court elucidates below: a) No Reasonable Explanation for the Default The Respondent’s only explanation was a claim of nonservice. They offered no alternative explanation for why they sat on their rights from December 2022 until the proclamation of attachment in late October 2023. A party who is regularly served but chooses to remain passive cannot claim they were condemned unheard. b) Inordinate Delay The default judgment was entered on 27th February 2023. The Respondent was formally served with the Decree and Notice of Entry of Judgment on 12th September 2023. Yet, they took no action until 1st November 2023, only after their goods were proclaimed for auction. In the context of this case, this represents an unexplained, inordinate delay of over eight months from the judgment date, and nearly two months from the date of formal service of the decree. HCCSCA NO. E292 OF 2025 Page 11 of 10

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c) Total Absence of a Draft Defense or Triable Issues Crucially, the Respondent did not annex any draft Response to Claim (draft defense) to their application. Under Kenyan jurisprudence, a court cannot exercise its discretion to set aside a regular default judgment unless it is satisfied that the defendant has a prima facie defense on the merits. As noted in Patel v East Africa Cargo Handling Services Limited (1974) EA 75, the court must see a "triable issue" before reopening a case. 22. By failing to attach a draft defense, the Respondent gave the trial court absolutely no material or substrate upon which to exercise its discretion. The court could not possibly determine whether a defense existed. Misdirection by the Trial Court 23. Instead of analyzing these mandatory guidelines, the learned Adjudicator misdirected herself by applying the principles of a stay of execution under Order 42 Rule 6(2) of the Civil Procedure Rules (analyzing "substantial loss" and "security"). She completely ignored the fact that the application before her was to set aside a judgment and grant leave to defend. 24. To set aside a final decree without a draft defense, and in the face of undisputed proof of physical service, is a clear abuse of judicial discretion. It deprives a diligent litigant of the fruits of their judgment without any legal justification. HCCSCA NO. E292 OF 2025 Page 12 of 10

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VI. DISPOSITION 25. In the upshot, this Court finds that the trial court's decision was tainted by serious misdirection, disregard of uncontroverted evidence, and a failure to apply the correct legal tests. The appeal is meritorious and must be allowed. 26. Accordingly, the Court orders as follows: a) The Appeal is hereby allowed. b) The Ruling and Order of the Small Claims Court at Nairobi (Hon. Gillian Simatwo, Adjudicator) delivered on 12th January 2024 in SCCCOMM No. E8016 of 2022 is set aside in its entirety. c) The Default Judgment entered on 27th February 2023, the Decree, and the consequential execution processes (including the warrants and proclamation of attachment) are hereby fully reinstated. d) The Appellant is awarded the costs of this Appeal and the costs of the proceedings in the lower court. DATED, SIGNED, AND DELIVERED AT NAIROBI THIS 23rd DAY OF JULY 2026. E.K OGOLA HCCSCA NO. E292 OF 2025 Page 13 of 10

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JUDGE HCCSCA NO. E292 OF 2025 Page 14 of 10

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In the presence of: Mwalegho for the Appellant Court Assistant: Gisielle Muthoni HCCSCA NO. E292 OF 2025 Page 10 of 10

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