Lochab Brothers v Kenya Furfural Co Ltd

Court of Appeal, at Nakuru

November 21, 1983

 Madan, Kneller JJA & Chesoni Ag JA

Civil Appeal No 78 of 1982

Company law - receivers - appointment of receivers out of court - appointment after attachment of goods - priority of assets seized in execution - whether receiver can sue in his own name - powers and duties of receiver.

Company law - debentures - title under a debenture duly registered - rights of a debenture holder.

Civil Practice and Procedure - parties - parties to an action - misjoinder and non-joinder of parties - whether suit can be defeated by reason of misjoinder or non-joinder of parties - amendment to cure defect in pleadings - locus standi.

Execution - execution proceedings - judgment in default of appearance - objection to execution - who may object - persons with locus standi - procedure after notice to proceed with attachment - when is execution complete - when objection proceedings should be lodged. T

he appellants filed a suit against the first respondent in the High Court claiming damages for goods sold and delivered and/or services rendered by the appellants. The first respondent failed to enter appearance and ex parte judgment was entered in favour of the appellants as prayed in the plaint. They obtained a decree and were granted warrants of attachment and sale of the first respondent’s movable property over which Development Finance Company of Kenya (DFCK) had a floating charge through two debentures properly registered in time at the Companies Registry under the Companies Act (cap 486). Execution proceedings were levied by the court brokers. The second respondents were appointed receivers and managers of all the property and assets charged to DFCK with powers to act jointly and severally and were entitled to exercise all the powers conferred upon receivers and managers by the said debenture and by statute and otherwise. The second respondent instituted objection proceedings under order XXI rule 57 and order XLVI rule 6 of the Civil Procedure Rules objecting to the attachment and seeking an order lifting the attachment of the goods. The court allowed the objection. The appellants appealed arguing that the learned judge had erred in failing to evaluate their arguments, in failing to find that the second respondents had no locus standi and could not bring proceedings in their own names, in holding that the second respondents were properly appointed and in holding that the execution was complete when the goods of the first respondent were attached by the court brokers.

Held:

1. Execution is completed after seizure and sale of the attached property, not before. Until then, it remains the property of the execution debtor and no property in the attached goods passes to the execution creditor.

2. Although the goods were under the control of the court broker but not having been sold, they remained subject to the floating charge created by the debentures, which crystallised by the appointment of the receiver, thus the decree holder (the appellants) were not entitled to proceed with the attachment.

3. A receiver cannot sue in his own name as receiver since he has no property vested in him and so acquires no right of action by his appointment. Nor can the court give a receiver leave to sue as receiver. The receiver’s duty is to take care of and receive the property which is put under his charge and he is not at liberty and is not entitled to bring an action in his own name. Thus the second respondents had no locus standi and they could not bring the proceedings in their own name. They were authorised to take proceedings only in the name of the company whose agents they were (Sartoris v Sartoris [1892] 1 Ch 11, 14, 22 & Parker v Dunn (1845) ER 195).

4. There was a non-joinder of parties. However, under order I rule 9 of the Civil Procedure Rules, a suit shall not be defeated by reason of the misjoinder or non-joinder of parties and the court may in every suit deal with the matter in controversy so far as regards the rights and interests of the parties actually before it. A mere misjoinder or nonjoinder which is capable of being cured will not defeat a claim and is no defence but that was not the case here. In this case, however, the receivers had no interest, legal or equitable, in the attached goods.

5. The legal interest was held by the debenture holder ie Development Finance Company of Kenya Ltd. The receivers weren’t entitled to bring objection proceedings against the execution creditors without joining the holders of the legal interest as parties. They had no locus standi and the action was a nullity in law.

6. Under order XXI rule 53 of the Civil Procedure Rules, any person entitled to or who has a legal or equitable interest in the attached property may object any time prior to payment out of court of the proceeds of sale of the attached property. The objection was therefore within time since the proceeds of sale had not been paid out of court before the objection.

7. If appointment of the receiver is made after attachment and sale of the goods but before the proceeds of sale are paid out, the execution creditors would have priority because the floating charge created by the debenture is crystallised by the appointment of the receivers after execution. If the receivers are appointed after attachment but before sale of the goods, the floating charge is valid and has priority over the seizure by the court broker.

 8. A debenture usually creates a floating charge on a company’s assets, and only where the charge has been crystallised eg, by appointment of receivers by seizure and sale, do the rights of the debenture holder have priority over those of the execution creditor. When a debenture creates a floating charge over the whole movable property of a company which is a going concern, it attaches to the property as it varies from time to time. If the company’s property is subsequently attached in execution, that property, although in the custody of the court broker, remains the property of the company and is therefore subject to the floating charge. On appointment of a receiver, the floating charge becomes fixed charge over the movable property of the company as at that date including any attached property which has not yet been sold.

 9. (Obiter Madan JA) “There is a difference of title between a letter of hypothecation and a debenture. To hypothecate property is to charge it with the payment of a sum of money on the performance of an obligation giving the person in whose favour it exists neither the right to the possession of the property nor the right to sell it, but merely the right of realisation by judicial proceedings in case of default by the person who made the hypothecation.”

Appeal allowed.

 Cases

1. Rhodes v Dawson (1886) 16 QBD 548

2. Sacker, Re, ex p Sacker (1888) 22 QBD 179

3. Sartoris v Sartoris [1892] 1 Ch 11

4. Campbell v London Pressed Hinge Company Ltd [1905] 1 Ch 576

5. Kantichandra v Rahman (1930) 127 IC 59

6. Carver v MacJohn [1938/39] 18 KLR 97

7. Quresh v Patel (1951) 18 EACA 1

8. Colonial Blankets Trading Co v National & Grindlays Bank Ltd [1962] EA 537

9. Noor Khan v Ramji Kanji & Co and Others [1966] EA 506

10. Dodhia v National & Grindlays Bank Ltd [1970] EA 195

11. Mackenzie (Kenya) Ltd v Pharmico Ltd [1976] KLR 270

12. Queensway Trustees Ltd v Official Receiver [1982-88] 1 KAR 128

13. Thomson Smith Aikman and Mbo-I-Kamiti Farmers Company Ltd v Bernard Kimani Muchoki Civ App No 9 of 1982 (unreported)

14. Parker v Dunn (1845) 50 ER 195

15. Wildy v Mid Hants Rly Co 16 WR 409

Texts

1. Schmitthoff, C.M. (1976) Palmer’s Company Law, London: Stevens & Sons, 22nd Edn para 43-15, p 464

 2. Jacob, I.H. et al,(Eds) (1980) Atkin’s Encyclopaedia of Court Forms in Civil Proceedings, London: Butterworths, 2nd Edn Vol XXXIII p 147 para 20

3. Jacob, I.H. et al,(Eds) (1982) The Supreme Court Practice, London: Sweet & Maxwell, Vol I p 207 para 15/6/2; para 17/1/10

4. Burke, J. (1977) Jowitt’s Dictionary of English Law, London: Sweet & Maxwell, 2nd Edn Vol I p 933

Statutes

1. Companies Act (cap 486) sections 99, 224

2. Sale of Goods Act (cap 31) sections 2(1), (2); 27(1)

3. Civil Procedure Rules (cap 21 Sub Leg) order 1 rules 9, 10; order XXI rules 38, 53, 56, 57; order XLVI rule 6

Advocates

RL Aggarwal for Appellant

RO Kwach for Objectors

Odongo v Republic

Court of Appeal, at Nakuru October 7, 1983

Madan, Kneller JJA & Chesoni Ag JA

Criminal Appeal No 82 of 1983

Criminal law - house breaking and stealing -handling stolen property by dishonestly retaining-contrary to sections 304(1),279(b) and 322(1) of the Penal Code (cap 63) - doctrine of recent possession - proof of offence of handling stolen property - essential elements of the offence.

Evidence - unsworn statement - co-accused’s unsworn statement undermining accused’s defence - statement not amounting to a confesion - whether such statement evidence against co-accused - weight given to such statement - meaning of evidence against a co-accused.

The appellant was convicted of house breaking and stealing contrary to section 304(1) and 279(b) of the Penal Code (cap 63) and, in the alternative, of handling stolen goods by way of dishonestly retaining them contrary to section 322(1) of Penal Code. He was sentenced to four years’ imprisonment for house breaking, four years with five strokes for stealing and the statutory minimum of seven years’ imprisonment for handling stolen goods. His first appeal in the High Court against conviction and sentence was dismissed and he filed a further appeal in the Court of Appeal.

The appellant’s co-accused had, in an unsworn statement, given evidence which supported the prosecution’s case and undermined the appellant’s defence. In the alternative charge, the appellant had been said to have dishonestly retained stolen property. He had, however, given an explanation as to how he had come by that property.

Held:

1. An unsworn statement by an accused cannot be used against another co-accused (Patrisi Ozia v R [1951] EA 36).As the second accused’s statement was unsworn and was not a confession, it was not evidence against his co-accused, the appellant, and the trial magistrate should not have used it.

2. There is no miscarriage of justice where a co-accused’s unsworn statement undermining the defence of an accused person is used but where the conviction is not based on that statement but on other evidence from other independent witnesses.

3. In the alternative charge of handling stolen property (otherwise than in the course of stealing), the prosecution had to prove that the goods were stolen; that the appellant had knowledge or reason to believe that they were stolen; that he dishonestly undertook or assisted in their retention, removal, disposal or realization and that such retention, removal, disposal or realization was by or for the benefit of another person. The prosecution proved that the goods were stolen but did not prove the other three factors.

5. In the offence of handling stolen property by dishonestly retaining it under section 322(1) of the Penal Code, it is essential to prove that the accused received and retained the goods. The charge is not established if the explanation given by the accused as to his innocence in how he had come by the suspected stolen goods is reasonable and might possibly be true even if the court is not convinced that it is true(Kipsaina v Republic [1975] EA 253).

6. For the charge of retaining stolen goods to succeed, the knowledge or reason to believe the goods to have been stolen must relate to the time of the retention, removal, disposal or realisation for the benefit of another; there is no offence of retaining property for oneself (Mumbi v Republic [1970] EA 345).

Appeal against conviction on the main count of housebreaking and stealing dismissed. Appeal against alternative charge of handling stolen goods allowed.

Cases

1. Murdoch v Taylor [1965] AC 574 [1965] 1 All ER 406

2. Patrisi Ozia v R [1951] EA 36

3. Ezera Kyabamanamaizi v R [1962] EA 309

4. Usin and Another v Republic [1973] EA 467

5. Chaama Hassan Hasa v The Republic [1976] Kenya LR 6

6. Kipsaina v Republic [1975] EA 253

7. Mumbi v Republic [1970] EA 345

Statutes

Penal Code (cap 63) sections 279(b), 304(1), 322(1)

Julius Lopeyok Wero v Republic

Court of Appeal, at Nakuru October 7, 1983

Madan, Kneller JJA & Chesoni Ag JA

Criminal Appeal No 50 of 1983

Pleas - plea bargaining - charge of murder - state counsel expressing that state would accept plea of guilty to reduced charge of manslaughter - charge reduced to manslaughter- accused pleading guilty to reduced charge upon advice by advocate - reduced charge explained to accused - court satisfied that accused pleading to all elements of charge – accused convicted - whether conviction safe.

Criminal law - provocation - defence of - nature of the defence – accused pleading provocation - accused acting in heat of passion - whether grave and sudden provocation an issue of fact - accused killing person he believed to practice witchcraft on his children - no act of witchcraft performed on accused or person under his care and in his presence - accused’s customary belief that wizards should be put to death – whether accused was provoked - whether accused’s customary belief a defence.

Sentencing - severity of sentence - plea of guilty to manslaughter – case bordering between murder and insanity - killing inspired by customary belief - plea of guilty taken into account on sentencing - accused first offender and in remand for fourteen months - sentence of eight years’ imprisonment - whether sentence proper.

The appellant was charged with murder but he was convicted of manslaughter and sentenced to eight years’ imprisonment after he pleaded guilty to the reduced charge. On his appeal, he admitted that he had pleaded guilty but claimed that the evidence of the prosecution had been fabricated. The facts, which the appellant admitted in full, were that he had had a quarrel with the deceased during which he struck him (the deceased) with a walking stick. About an hour later, he and his co-accused went to the deceased’s home from where they dragged him away and threw him in a lake. A post-mortem revealed that the deceased had died of fractures on his headbones. The state counsel informed the court that the appellants were Pokots and their belief that the deceased had occult powers which he used to harm their children was provocation in law and their advocates pleaded leniency, adding that the appellant thought it was right to kill a wizard.

Held:

1. Where an accused person upon the advice of his advocate offers a plea of guilty to a charge of manslaughter which the Republic has said it will accept and which the trial judge considers appropriate for reducing the charge of murder to one of manslaughter, and the judge carefully explains it to the accused and proceeds to convict him after being satisfied that he was pleading guilty to all its elements, such a conviction is safe.

2. Where a person accused of killing another raises the defence of provocation, it is a question of fact whether the accused, in all the circumstances of the particular case, was acting in the heat of passion caused by grave and sudden provocation when he killed that person. There was no act of witchcraft against the appellant or a person under his immediate care performed in his presence so as to anger him to such an extent as to deprive him of his power of self-control and to induce him to assault the person allegedly doing the witchcraft.

3. The sentence of eight years’ imprisonment for manslaughter where the case was on the borderline between murder and manslaughter was legal, appropriate and not manifestly excessive.

Appeal dismissed.

Cases

1. Republic v Fabiano Kinene s/o Mukye and Others (1941) 8 EACA 96

2. R v Atma Singh (1964) 9 EACA 69

Statutes

No statute referred to.

Bhandari Construction Company v Standard

Joinery & Building Company

Court of Appeal, at Nakuru October 6, 1983

Madan, Kneller JJA & Chesoni Ag JA

Civil Appeal No 5 of 1983

Judicial discretion - power to dismiss suits - dismissal of suit for failure to supply particulars within time specified in court order - application to dismiss made after supply of particulars and filing of defence - plaintiff’s offer to pay costs - suit dismissed - whether discretion to dismiss suit wrongfully exercised.

Civil Practice and Procedure - interlocutory pleadings - particulars - request for - order by court to supply particulars within prescribed time - failure to supply within stipulated time - effect of - application to dismiss on grounds of failure to supply on time - factors to be considered – exercise of discretion to dismiss - principles applicable.

The appellant sued the respondent in the High Court for the recovery of money on account of goods sold and services rendered. After the appellant failed to comply with a request for further particulars, the respondent obtained an order requiring the appellant to supply the particulars within seventy days. After the particulars were supplied, the respondent, who had by then filed a defence, applied for an order dismissing the appellant’s suit on the grounds that the particulars had been supplied late and that they hadn’t been in the prescribed form. The court granted the order sought notwithstanding that the appellant had offered to pay the respondent the costs of the application. The appellant appealed.

Held:

1. It amounts to wrong exercise of discretion to dismiss an action for failure to supply further particulars where the particulars have been supplied before the order for dismissal is granted and after a defence has been filed. The fact that the particulars had been supplied, a defence filed and an offer made to pay costs to compensate the defendant should have been taken into account. (Obiter Madan JA) “Costs is the soothing balm which cures most procedural grievances in legal proceedings.”

2. An order for dismissal should be absolutely and perfectly precise in terms and ought to state clearly that unless it is not carried out, the action will be dismissed. The dismissal of an action at an interlocutory stage is a very serious matter and may well work serious injustice unless carefully exercised (Albalian v Innous [1936] 2 All ER 838).

3. The defence, in which the respondent denied all liability and claimed that it had fully settled the appellant’s claim before the filing of the suit, indicated that the dismissal of the action would occasion injustice.

Appeal allowed.

Cases

1. Reiss v Woolf [1952] 2 All ER 3

2. Albalian v Innous [1936] 2 All ER 838

Statutes

Civil Procedure Rules (cap 21 Sub Leg) Appendix B, Form No 15

Advocates

RL Aggarwal for Appellant

CV Patel for Respondent