Lantech Africa Limited v Geothermal Development Company; Central Bank of Kenya Limited & 3 others (Garnishee) (Miscellaneous Application E776 of 2020) [2023] KEHC 18172 (KLR) (Commercial and Tax) (26 May 2023) (Ruling)
Neutral citation:
[2023] KEHC 18172 (KLR)
Republic of Kenya
Miscellaneous Application E776 of 2020
A Mabeya, J
May 26, 2023
Between
Lantech Africa Limited
Applicant
and
Geothermal Development Company
Respondent
and
Central Bank Of Kenya Limited
Garnishee
Kenya Electricity Generating Company Limited
Garnishee
Co-operative Bank of Kenya Limited
Garnishee
Kcb Bank Kenya Limited
Garnishee
Ruling
1.Before Court are two preliminary objections filed by the respondent against the applicant’s motion dated 27/2/2023. The application sought to attach the debts owing from the 1st-3rd garnishees to the judgment debtor together with any receivables arising from the sale of steam by the 4th garnishee in order to answer to the decree issued on 28/1/2021.
2.The first preliminary objection was dated 8/3/2023. It was based on the ground that the citation of the Central Bank of Kenya as the first garnishee offended order 29 rule 2(c) of the Civil Procedure Act as read with section 4A(1) (e) & 44(1) of the Central Bank of Kenya.
3.The second preliminary objection was dated 28/3/2023. It was based on grounds that by an assignment dated 21/11/2018, the respondent assigned to the 2nd garnishee the steam charge receivables. That the 2nd garnishee held account no. 0xxx in the name of the respondent had a charge and title, benefit and interest in the monies therein from the steam generation. That that account cannot therefore be garnisheed.
4.The respondent filed its submissions dated 26/4/2023 and 24/4/2023 in support of the preliminary objections. The 4th garnishee also filed submissions dated 2/5/2023 in support of the objections. The applicant filed submissions dated 4/5/2023 in opposition to the preliminary objections.
5.The submissions were highlighted orally in court on 5/5/2023. This Court has considered those submissions and the affidavits on record.
6.A preliminary objection was in Mukisa Biscuits Manufacturing Co. Ltd v West End Distributors Ltd (1969) EA 696 held to consist of a point of law which has been pleaded, or which arises by clear implication out of pleadings, and which if argued as a preliminary point may dispose of the suit.
7.In that case, Charles Nebbold, JA stated that: -
8.A preliminary objection therefore is one which raises a pure point of law, which is argued on the assumption that all facts pleaded by the other side are correct. However, it cannot be raised if any facts have to be ascertained from elsewhere or if the court is called upon to exercise judicial discretion.
9.In Oraro v Mbaja [2005] 1KLR 141, the Court held that:-
10.The preliminary objection dated 28/3/2023 is based on the ground that there exists an Assignment Agreement dated 21/11/2018 wherein the respondent assigned the steam charge receivables to the 2nd garnishee. That the account held by the garnishee being Account No. xxx in the name of the respondent has a charge and title in favour of the 2nd garnishee and cannot be a subject of a garnishee order.
11.In paragraph 4 of the Supplementary affidavit, the applicant stated that it was a stranger to the said Assignment Agreement including appendix C that had been produced. It submitted that the agreement had not been produced and it had issued a notice to produce the said documents.
12.That although the alleged agreement was signed before the garnishee proceedings were instituted, the said account had been previously garnished for USD 5,000 to satisfy the claimant’s decree and that the 2nd garnishee has never objected despite allegedly having an interest in the account.
13.I have seen the document produced by George Ominde in his affidavit of 27/3/2023. It is titled “Appendix A Notice Of Assignment”. It is a Notice by the respondent addressed to the 4th garnishee notifying the latter of the assignment of the proceeds from contracts set out in Appendix C of the agreement to the 2nd garnishee. The same directs the 4th garnishee to pay all such proceeds to what is referred to as the Receivable Account No. xxx at the 2nd garnishee, Cooperative House Branch. That notice was properly executed and the same duly acknowledged by the 4th garnishee.
14.My view is that the existence of the aforesaid assignment is a matter of fact within the knowledge of three parties, the respondent, the 2nd garnishee and the 4th garnishee. Indeed, in the supplementary affidavit of Aquinas Wasike of 4/5/2023, all he stated was that the applicant was a stranger to that document. There was no positive averment that the said documents do not exist.
15.The fact that the applicant is a stranger to the document produced by the 4th garnishee, does not mean that the same does not exist. In my view, the document produced by the 4th garnishee is a prima facie evidence of the assignment agreement notified therein.
16.In the case relied on by the respondent of Barclays Bank of Kenya Ltd v Kepha Nyabera & 191 others [2013] eKLR, the Court of Appeal was categorical that where funds held in an account are charged to a 3rd party, the same cannot be a subject of garnishment.
17.The question that arises is, are there funds held by the 2nd garnishee in the account disclosed as Receivable Account No. xxx that belong to the respondent? Order 23 rule 6 of the Civil Procedure Rules provides: -
18.As I have already stated, the Court has seen the Notice of Assignment and Acknowledgement. The same clearly states that the proceeds from steam charge by the respondent is to be deposited in the aforesaid Receivables Account. It was sworn and not denied that the said funds are for the maintenance of 59 wells at Olkaria. The same is assigned to the 2nd garnishee. Having been assigned as such, the Court finds that the amounts held therein are not a debt by the 2nd garnishee to the respondent that is due and recoverable by the respondent.
19.The applicant submitted that the alleged assignment was executed on 21/11/2018 before the garnishee, that already a sum of US$ 5,000 had been paid therefrom in a previous garnishee proceeding, that the 2nd garnishee had stated that the account belonged to the respondent and it had not objected to garnishment. That may be so, the fact that there had been no objection previously on the existence of the assignment cannot be an estoppel. Those were separate and independent proceedings.
20.Accordingly, the Court is satisfied that the funds in the Receivables Account are not available for garnishment and the objection succeeds to that extent. However, the other accounts are subject to garnishment.
21.The Court now turns to the objection dated 8/3/2023. It was based on the ground that the citation of the Central Bank of Kenya as the first garnishee offended order 29 rule 2(c) of the Civil Procedure Act as read with section 4A(1) (e) & 44(1) of the Central Bank of Kenya.
22.The respondent extensively submitted that it was a government agency thus execution cannot be levied against it unless in the prescribed form. That it was within the confines of the Government Proceedings Act and that order 29 of the Civil Procedure Rules applied to it.
23.The Court has seen the ruling of 10/2/2023. The issue of whether the respondent was a government agency or not was considered extensively and determined at paragraphs 37-47 of that ruling. The Court found that the respondent did not qualify to be a government entity. Respectfully, the attempt by the respondent to re-open the issue is {{term{refersTo |title Already heard and determined on merits by a competent court and therefore may not be pursued further by the same parties;
a cause of action may not be relitigated once it has been judged on the merits; finality.} res judicata}}.
24.That ruling has not been set aside or reviewed. Any attempt to determine that issue how will be tantamount to sitting on appeal against the decision of a court of equal jurisdiction. That ground is dismissed.
25.The other issue raised was that the 1st garnishee is a government entity within the meaning of the Government Proceedings Act. That in the premises, it cannot be a subject of garnishee proceedings.
26.It is trite that execution of decrees against the government is not undertaken as in the ordinary civil cases but must be in accordance with provisions of the Government Proceedings Act (“the Act”). The appropriate procedure is to be found in section 21 of Government Proceedings Act and order 29 Civil Procedure Rules.
28.Order 29 rule 2(2) of the Civil Procedure Rules, on the other hand, provides that: -
29.Sections 2 of the State Corporations Act, cap 446 defines a state corporation in the following terms: -
30.The 1st garnishee is established under section 4A 1 (e) of the Central Bank of Kenya Act, (“the CBK Act”) which provides that the object of the Bank is to act as banker and advisor to, and as a fiscal agent of the Government. Under section 44, of the CBK Act, the Bank also performs the function of fiscal agent and banker for other public entities.
31.Section 21(4) makes reference to the government, any government department, or any officer of the government. Does the 1st garnishee fall under any of these considering that no specific reference is made at all to State Corporations? Black’s Law Dictionary, 8th Edition defines the term “government” as being: -
32.In Association of Retirement Benefits Scheme v Attorney General & 3 others [2017] eKLR the Court cited with approval the Indian Supreme Court case of International Airport Authority of India & others [1979] Sc.R 1042 where in the test for determining whether an entity was a Government body or not, was considered as follows:-
33.From the foregoing, though the 1st garnishee does not meet the strict definition of a government as defined in Black’s Law Dictionary, it has most of the attributes defined in the foregoing authority.
34.The 1st garnishee is 100% owned by the state such that it becomes an agent or instrumentality of the government. It also enjoys a monopoly status as the banker and advisor to government. Its functions are also closely related to government functions in the control of the economy such that the 1st garnishee becomes so intrinsically related to the government that it cannot be separated therefrom. The functions of the 1st garnishee are so important to the running of the government such that it can only be considered as an agency of the government.
35.Having found that the 1st garnishee is a government entity, the next question would be whether garnishee proceedings can be brought against it. Better put, is the CBK the government for purposes of the Government Proceedings Act?
36.The 1st garnishee, though a recognized state corporation and agent of the government is an independent entity. It is capable of suing and being sued on its own behalf. Indeed, it does not rely on the government’s Attorney General to represent it in legal proceedings as is the case herein. The 1st garnishee carries its functions without interference by any arm of government, all that it does is cooperate with other state organs to achieve the objectives of the government.
37.While defining what independence means in Communications Commission of Kenya and 5 others v Royal Media Services and 5 others, [2014] eKLR, the Supreme Court of Kenya held that: -
38.These are the parameters under which the 1st garnishee performs its functions. Undeniably closely related with government, but independent of control. In this Court’s view, the 1st garnishee is amenable to the usual legal processes and consequences including execution as the CBK Act does not provide any specific protections from execution against CBK.
39.In Petition No. 513 of 2013: Ikon Prints Media Company Limited v Kenya National Highways Authority & 2 others [2015] eKLR, it was held that: -
40.And in Tom Ojienda & Associates v National Land Commission & another [2019] eKLR, the court dealt with a similar issue. A preliminary objection was raised on grounds that the Court had no jurisdiction to hear and determine the Garnishee application by dint of section 21(4) of the Government Proceedings Act and order 29 rule 2(2)(c) of the Civil Procedure Rules. The court held that: -
41.In view of the foregoing, proceedings against the 1st garnishee cannot be said to be proceedings against the government such that execution cannot issue against it. Moreover, what is before Court is garnishee proceedings and not execution proceedings against CBK.
42.In the circumstances, this Court holds that though the 1st garnishee is a government agency, garnishee proceedings can be brought against it. The 1st garnishee would only be absolved by bringing sufficient reasons that the funds in its hands are not payable or are not a debt due or payable to a judgment debtor.
43.Consequently, the preliminary objection dated 8/3/2023 is dismissed with costs to the claimant.
44.Accordingly, the preliminary objection dated 8/3/2023 is dismissed with costs. The preliminary objection dated 28/3/2023 is allowed. The decree nisi issued herein on 28/2/2023 against Account No xxxx is hereby raised. The order on the rest remains in situ.It is so ordered.
DATED AND DELIVERED AT NAIROBI THIS 26TH DAY OF MAY, 2023.A. MABEYA, FCIArbJUDGE