Doge v Kenya Canners Ltd [1985] KECA 80 (KLR)

IN THE COURT OF APPEAL

AT NAIROBI

(Coram: Hancox, Nyarangi JJA & Platt Ag JA)

 CIVIL APPEAL NO. 11 OF 1983

Between

DOGE ....................................................................APPELLANT

AND

KENYA CANNERS LIMITED..............................RESPONDENT

(Appeal from the High Court at Nairobi, Gachuhi J)

JUDGMENT

The respondent company sued the appellant in the High Court for vacant possession of a house which, so it alleged in its plaint, was given to the appellant, in the course of this employment as:

“a house to stay in one of the plaintiff’s estates.”

The plaint then goes on to say that the appellant was formally removed as a director by a resolution at an extraordinary general meeting of the respondent held on May 29, 1980. Prior to that his services with the respondent were allegedly determined by a notice served on his servant or agent on April 18, 1980, within thirty days thereof. These facts are sworn to in the affidavit of the financial director of the respondent. Mr Bachman, filed on October 23, 1980, in support of its notice of motion claiming summary judgment and seeking that the appellant’s defence be struck out. Gachuhi J awarded summary judgment to the respondent but made no order on the second part of the motion, and it is from his decision on the first part of it that the appeal is brought.

The defence, as finally amended, amounted to a specific denial of almost all of that which had been alleged in the plaint. However, the counterclaim goes on to state that the appellant’s services were only terminable by retirement at the request of either party and was conditional on payment of his retirement benefits. Having said that the appellant goes on to advance his contentions as to his occupation and possession of the house. They are as follows:-

“The defendant further avers that in consideration of the services rendered to the plaintiff by him during a period extending over 15 years the plaintiff set aside a portion of between 90 and 100 acres out of its lands comprised in LR 12157 on which portion stood a dilapidated house and gave it to the defendant to make his permanent home.

The defendant thereafter renovated the said house and went into possession thereof and cleared the piece of land and developed the same at considerable expenses to him and the defendant contends that the plaintiff is now estopped by conduct or otherwise from demanding the return of the said gift or ejecting the defendant from the said house.

 Alternatively and without prejudice to the foregoing the defendant contends that he is entitled in law to have the said portion demarcated and excised from the plaintiff’s said land and thereafter transferred to him.”

 It will be seen that the factual basis of the respondent’s claim disputed, and, if correct, would mean that the appellant’s possession of the house was independent of, and not conterminous with, his contract services with the respondent, whether as a director or otherwise. The averments in the counterclaim were verified by the appellant’s affidavit in reply to that of Mr Bachman, filed on November 28, 1980, in which he additionally points out that he received a house allowance. This would only be payable, under the company’s policy towards its employees in the event of the employee not being provided with a house or where he would have to pay for his own electricity and other services directly rather than having them added to the company’s bill as being provided by it. The appellant exhibited to his affidavit an agreement for the supply of electricity with the East African Power and Lighting Company Limited showing another element in support of the fact that the house he occupied was not, in the true sense, a company house.

In my judgment it is not necessary to deal with the first part of the argument of Mr Muthoga, who appeared for the appellant, which was that the summary judgment provision, order XXXV rule 1 of the Civil Procedure Rules, was not applicable to this case since the defence on record had not been struck out under order VI rule 13 and that none of the conditions specified in order XXXV rule 1(b) were satisfied. I say this because I consider that, in its context the counterclaim, (on which in any event, the judge reached no specific decision) is not severable from the defence, although it would have been better and more sensible for the allegations therein to be pleaded in the amended defence as an answer to paragraphs 3 and 4 of the amended plaint. The facts there alleged, which I have set out, in my view constitute one or more triable issues and therefore an arguable defence.

Mr Le Pelley sought to persuade us that there could be no factual basis for the appellant’s contention, and that the suggestion that the property had been set aside for him as a gift “in consideration of” his fifteen years service with the company (which was in any event denied by Mr Bachmann) could not stand up to analysis because there was no formal or informal document, or admission on the part of the company, nor even conduct by them, which could possibly form the basis of the title to the house being vested in the appellant. His occupation of the house for those fifteen years was fully consistent with the continued ownership of the company. Similarly, any licence which the defendant may have had to occupy would be determined on the conclusion of his employment.

As regards the counterclaim, Mr Le Pelley submitted that the learned judge’s order granting summary judgment could not have any effect otherwise than as a dismissal of the counterclaim, and he relied on certain passages from Camille v Merali [1966] EA 411, at page 414 in support of this. At letter F on that page Sir Charles Newbold, P said:-

 “In these circumstances, no matter what the defendant proved if she were given unconditional leave to defend, the judge, at the end of the trial, would nevertheless have to enter judgment for the amount claimed in the plaint. Thus, in my view, the decision of the judge refusing her unconditional leave to defend and entering judgment for the plaintiffs on the plaint was correct.”

In a certain sense Mr Le Pelley’s argument in this respect is correct, inasmuch as the facts recited in the counterclaim should have been included in the defence and then repeated as the basis of the counterclaim, and, if that is so, then the granting of summary judgment would ipso facto destroy the counterclaim. However, I think, with respect, that Mr Le Pelley has misapprehended the effect of Sir Charles Newbold judgment, for the learned president had just said:

“... I do not consider that the defendant’s claims would give rise to a set off “(which had been claimed)” though they would clearly give rise to a counterclaim.”

That was because the lessee’s claim for damages for the disrepair of the premises concerned could not amount, at law or in equity, to a set off, but only to a counterclaim. So that case did not decide that summary judgment on a claim would necessarily dispose of the counterclaim. As stated in that case, and in the 1979 Rules of the Supreme Court, in the relevant commentary, the proper order where there is a plausible though not necessarily bona fide counterclaim is to give judgment on the claim and to stay execution until the trial of the counterclaim, which in this case Mr Muthoga says is still extant.

If the counterclaim appears to be bona fide then unconditional leave to defend should be given: See also rule 2(2) of order XXXV of our rules.

It may be that the facts raised by the appellant will not stand up in court and will prove to be untrue. I respectfully agree with the words of Madan JA in Gupta v Continental Builders Ltd, [1978] KLR, 83 at page 89 where he said:

“What happens is that the court merely does not accept the prima facie issues as genuine. This is exactly the task which the court is required to perform on an application for summary judgment.”

 I appreciate the force of Mr Le Pelley’s argument regarding the question of whether there was a gift of the property to the appellant. However, I do not necessarily equate the question of possession, which is at issue in this case, with that of title. It may be that all the appellant can show is a limited right of occupation of the premises without having title to them. An estoppel might arise on the facts of the case. But I do not think that it can fairly be said that no triable issues or arguable defences were set up by the appellant, and I would note in passing that the respondent did not see fit to file a reply or a defence to the counterclaim.

One factor has impressed me in this appeal and it is that the respondent did not plead that the house was provided to the appellant as part of his terms of service, as is envisaged under the company’s housing policy and as frequently happens in the relationship of employer and employee in Kenya, but “in the course of his said employment”. I regard that as one of the factors, and only one, which leads me to conclude that leave to defend should have been given in this case.

For these reasons I would allow the appeal, set aside the order of the judge granting summary judgment, and direct that the case should proceed to hearing in the ordinary way. It is clearly desirable that the counterclaim, if it is pending, should be decided at the same time as the claim. I would award costs to the appellant. As Nyarangi JA agrees and Platt Ag JA concurs in the result those are the orders of this court.

Nyarangi JA. I agree with the judgment prepared by Hancox, JA which I have had the advantage of reading in draft, and which sets out the facts and background relative to this appeal.

The judgment of the High Court (Gachuhi J) did not deal with the counterclaim of the appellant as defendant except for the brief remark that:

“a claim for possession would not ... be defeated by a counterclaim of damages or ownership where facts of title is not pleaded”.

There is no statement of defence to the counterclaim and it could not be held at this stage of the litigation that success or failure of the counterclaim will have no effect on the appellant’s claim that he was given about 100 acres plus the house on it where to make his permanent home. The counterclaim does in my judgment entitle the appellant to defend to the extent of the counterclaim: rule 2(2) of order XXXV of the Civil Procedure Rules. The counterclaim raises one triable issue which is relevant to the notice of motion. The one triable issue suffices for leave unconditionally to appear and defend: HD Hasmani v Banque du Congo Belge [1938] 5 EACA 89 and, with due respect to the judge it was not possible to form an opinion as to the merits of the counterclaim: Kundanlal Restaurant v Devshi & Company [1952] 19 EACA 77 and treat it as a defence to the defendant’s claim when in fact the counterclaim was here a cross-action: The Supreme Court Practice 1979 Vol 1, paragraph 15/2/4 page 166 and was not intended to serve as a defence: paragraph 15/2/7 page 168.

Mr Le Pelley’s argument that the appellant did not provide sufficient specific allegations on which he should be heard is not without substance. However, as Hancox JA states there are matters of conflict which could not be determined without oral or other evidence. I do not find that the averments relied upon by the appellant are evasive: Joshi v Uganda Sugar Company Ltd [1968] EA 570 and in my view the few averments that appear general could yet be effectual and valid during or after a hearing: Shah v Patel [1961] EA 397. If the defence has to be amended yet again, it is not likely that the nature of the action would be changed. As a general rule leave to amend a pleading should not be refused unless the court is satisfied that the party applying is acting mala fide: McCoy v Alibhai [1938] 5 EACA 70 and leave to amend a defence should be given if it is sought at an early stage of the litigation: Kara v Makay [1950] 17 EACA 16.

On the supporting affidavits of the appellant and having regard to the further amended defence and counterclaim I would not hold that the appellant as defendant’s claims are:

“wantonly brought without the shadow of an excuse, so that to permit the action to go through its ordinary stages up to trial would be to allow the defendant to be vexed under the form of legal process when there could not at any stage be any doubt that the action was baseless”

 See Dyson v Attorney-General [1911] 1 KB 410 per Fletcher Moulton LJ at page 418-419. Nor can it be held that no matter what the appellant proved if he were given unconditional leave to defend the judge after the trial would yet have to enter judgment for the respondents: See Elizabeth Edmea Camille v Amin Mohamed EA [1966] EA 411 at page 414, F-G as per Sir Charles Newbold P (as he then was). Having examined the issues proffered and the extent of the conflict in the allegations and bearing in mind that the action is not being tried upon affidavits I have no doubt that the appellant should have unconditional leave to defend. I would allow the appeal with costs.

Platt Ag JA. I concur in the result. The general situation has been set out by Hancox JA.

Mr Muthoga’s first submission for the defendant/appellant (I shall generally refer to the parties as the plaintiff and defendant) was that order XXXV of the Civil Procedure Rules could not be applied until an existing defence had been struck out.

The motion in this case, brought by the plaintiff, Kenya Canners Limited sought orders for vacant possession of the premises from the defendant, mesne profits and costs; and secondly an order striking out the defence as showing no reasonable cause of defence. The first order sought fell under order XXXV rule 1 of the rules, and the second fell under order VI rule 13. There was a defence and counterclaim to the plaint. The point of the motion was to seek a summary judgment for possession, and that fell within order XXXV rule 1(1)(b) in the sense that the plaintiff portrayed the defendant as a trespasser. The final form of the plaint, that set out in the amendment of October 7, 1980, prayed for (a) vacant possession of the premises, and (b) mesne profits. It is clear therefore that the motion followed the lines of the amended plaint.

The grounds in the plaint for giving judgment were as follows:

1. in paragraph 3 of the amended plaint it was said that “the defendant was employed by the plaintiff and in the course of his said employment he was given a house to stay in on one of the plaintiff’s estates;
2. in paragraph 4 of the plaintiff claimed ownership of the land and house in question;
3. in paragraph 5A it was said that “the defendant was formally removed as a director by resolution of an extraordinary general meeting of the shareholders of the company held on May 29, 1980. Such removal takes effect under section 135 of the Companies Act notwithstanding any agreement;”
4. in paragraph 6 it was said that “the defendant has failed to vacate the said house and remains in occupation of the house as a trespasser.”

On the other hand, the further amended defence set up the following case, as from the date of filing, February 6, 1981:

1. in paragraph 2, the defendant denied that “he was given a house to stay in as duty house as alleged (in paragraph 3 of the plaint) or at all;
2. the defendant denied in paragraph 3 that the plaintiff was entitled to ownership and possession of the house in question;
3. the defendant denied notice to deliver up vacant possession;
4. the defendant denied that he was properly removed as a Director of the Company.

Then in the counterclaim:

1. the defendant claimed damages for unlawful dismissal;
2. the defendant claimed that his purported removal as a director was illegal and unlawful;
3. paragraph 9A must be stated in full:

 “The defendant further avers that in consideration of the services rendered to the plaintiff by him during a period extending over 15 years the plaintiff set aside a portion of between 90 and 100 acres out of its lands comprised in LR 12157 on which portion stood a dilapidated house and gave it to the defendant to make his permanent house.”

Paragraph 9B states:-

 “The defendant thereafter renovated the said house and went into possession thereof and cleared the piece of land and developed the same at considerable expenses to him and the defendant contends that the plaintiff is now estopped by conduct or otherwise from demanding the return of the said gift or ejecting the defendant from the said house.”

Paragraph 9C states:-

“Alternatively and without prejudice to the foregoing the defendant contends that he is entitled in law to have the said portion demarcated and excised from the plaintiff’s said land and thereafter transferred to him.”

The defendant claimed:-

1. damages for wrongful dismissal;
2. a declaration that he was wrongfully dismissed as a Director, and that he still is and continues to be one;
3. an order excising and thereafter transferring the portion demarcated to the defendant;
4. alternatively the valuation of the improvements carried out by the defendant;
5. general damages

There was no defence to the counterclaim. The central issue on the motion dealt with the relationship of the defendant to the land, but this issue was best illustrated by the contrary assertions in the plaint and counterclaim. The defence was used merely to deny baldly the allegations in the plaint. The trial court noticed that there was no defence to counterclaim or reply to defence. In view of the nature of the defence no reply would be expected; the issues were clearly the denial in the defence. The positive defence lay in the counterclaim. It could have been expected in the defence. The learned judge, noting the absence of a reply to defence and defence to counterclaim, nevertheless treated the counterclaim more or less as the defence, and in doing so was well within his discretion.

In the case of a counterclaim, in relation to a plaintiff’s application for summary judgment, order XXXV rule 2(2) permits a defence protanto on the counterclaim. But there is a wider view. The first test is to see whether the counterclaim arises out of the same subject matter as the action. If it is totally foreign, the counterclaim may be disregarded. If it arises out of the same subject matter of the action and is connected with the defence, then unconditional leave to defend may well be granted, because in these circumstances, the counterclaim ought to be considered as the defence. On the other hand, merely to counterclaim does not necessarily entitle a defendant to leave to defend. If there is no defence to the claim, the order may grant judgment on the claim for the plaintiff with costs, with an order for stay of execution until the trial of the counterclaim, or further order of the court. (See Supreme Court Practice 1979 pages 143 and 144). In the case before the High Court, the counterclaim was the real defence to the action; it arose out of the subject matter of the contract; it was connected with the defence, and therefore it was properly treated as the defence. In the end, the learned judge granted possession, and on that basis, of course, allowed mesne profits to be assessed later.

Even so, Mr Muthoga contended that the defence ought to have been struck out first, and it was said that there was authority for that proposition. It has not been shown to the court, but in any case there is no ground for thinking that it could apply to the circumstances of this case. Order XXXV does not prescribe that there should be no defence, and rule 4 thereof supposes that there may be cases where a defence has been filed. Moreover, it is clear that if a more pertinent defence arises from the affidavits filed in the motion for summary judgment, a defence filed may be allowed to be amended. But the real point is that whether or not there is a defence, the plaintiff will have to show that there is no defence and the defendant will be able to take advantage of order XXXV rule 2(1) to show either by affidavit or oral evidence or otherwise, that he should have leave to defend. Once the defendant has not fulfilled his duty, judgment will be given whether or not there is a defence on record. It simply means that the defence which maybe looked at and other matters did not persuade the court that any real issue remained for trial. Therefore, while there is no objection to the defence being struck out, it is not sine qua non.

In this case, the learned trial judge did not strike out the defence and counterclaim, but simply gave judgment on the plaint for possession. What then did he think of the counterclaim? Mr Le Pelley submitted that the judgment posed impliedly passed answered the counterclaim so that it was rejected on the point of possession. I would accept that proposition on the basis that the learned judge must have treated the counterclaim as the real defence. From the judge’s decision the defendant has now appealed.

The main question which then arises on the appeal is whether the learned judge had before him a sufficiently clear case upon which to grant summary judgment for possession to the plaintiff. It seemed from the way in which Mr Muthoga presented his case, that the defence and counterclaim were the main ground for applying for leave to defend. In my view, it is to the affidavits and oral evidence that the court must principally look, in accordance with rule 2(1) of order XXXV. Affidavits and oral evidence are provided for to put something more real before the court, than mere pleading, which may or may not be substantiated.

Looking then at the plaintiff’s case as against the case for the defence, the curious situation that is revealed is that neither side was able to realistically explain how the defendant took up occupancy of the house and the land, nor what was the result of the defendant repairing the house and supplying electricity to it.

 For the plaintiff, there is the vague pleading in paragraph 3 of the amended plaint that in the course of the defendant’s employment, the defendant was given a house to stay in on one of the plaintiff’s estates. What does that really mean? Was the occupancy of the house a term of employment? Was the house given as a gift, or simply on licence, depending on the defendant’s continued employment. Unfortunately, Mr Bachman, in his affidavit filed on October 23, 1980 does not reveal on what terms, the defendant occupied the house. He is very clear on the steps taken to terminate the defendant’s services. All he can say is that he personally had no knowledge of any gift; and that the company’ secretaries, Queensway Trustees Limited, told him that they could not find any mention in the minutes that the company had made a gift to the defendant of the house in question. There is apparently no evidence as to how the defendant took up occupation of the house; why the 90 to 100 acres of land were marked off; and why the company allowed the defendant to renovate the house? The activities of the Queensway Trustees Limited are strictly speaking hearsay at this stage without an affidavit from the person who searched the records. But apparently title did not pass, because there was no conveyance.

 If that be so, then paragraph 3 of the plaint may be misleading. Although it says that the house was “given” to the plaintiff to reside in, it seems that no gift inter vivos was intended; and Mr Le Pelley puts his case on the basis of a licence. Even so, the use of the house and approximately 100 acres with it ought to have been minuted somewhere, one would have thought. Certainly, it does not seem to have been a permitted occupation as one of the terms of his employment, since the documents annexed to the defendant’s affidavit do not cover housing allocated to a director. But one cannot be certain on what terms the defendant was allowed to use the house, and in particular whether one of the terms, expressed or implied, was that the defendant would vacate the house in the event that he ceased to be an employee or director of the plaintiff company.

On the other hand, the allegations in the affidavit of Mr Doge filed on November 28, 1980 are no better. He says that the house was occupied by him, not as a duty house, but “his house as pleaded in the defence.” He renovated a dilapidated house at enormous cost, and arranged to have electricity installed at a cost of Kshs 76,000. Going with the house is a portion of land of between 90 and 100 acres reserved and demarcated for him, on which he had carried out landscaping, and the construction of a cattle dip at a cost of over Kshs 300,000. So then what were the terms of the defence as referred to in the affidavit?

Paragraph 9A states that in consideration of the services rendered to the plaintiff by the defendant, during a period extending over 15 years, the plaintiff set aside a portion of between 90 and 100 acres and gave it to the defendant as his permanent house. In this statement, the time scale is difficult to appreciate. But presumably the gift was made after the 15 years had elapsed. It must have been made shortly before or at the time that he was forced to vacate his directorship. The board could hardly have anticipated 15 years’ service. If that is so, when was the 100 acres demarcated? Apart from these ambiguities the defence was put forward in three documents in which the defence was built up or made clearer each time.

 It will now be plain that while one would sympathise with the learned judge, who tried hard to get the issue clarified, one must ask on what basis the plaintiff allowed the defendant to occupy the land and then take it away from him. The learned judge gave the defendant time to put his defence more clearly; should he not have required the plaintiff to state his case more clearly first, so that the defendant knew precisely the case against him? In my opinion, the learned judge could not be certain whether or not there was a reasonable defence until the plaintiff put its case on a clear basis. It sounds as if the two sides were using the words “give,” and “gave” with different meanings (see paragraph 3 of the plaint and paragraph 9A of the defence respectively).

 In these circumstances, there is doubt whether it can be said that there is no defence to the plaint as it stands.

Consequently I would allow the appeal on ground 6 of the memorandum of appeal, namely that there were clearly triable issues. I agree with the terms proposed by Hancox JA.

Dated and delivered at Nairobi this 2nd day of April , 1985.

A.R.W HANCOX,

.........................

JUDGE OF APPEAL

 J.O NYARANGI

.........................

JUDGE OF APPEAL

H.G PLATT

.........................

AG. JUDGE OF APPEAL

I certify that this is a true copy of the original

DEPUTY REGISTRAR