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WKA Advocates Newsletter

Edition #23

KENYA: INSTITUTION OF SUITS

AGAINST STATE CORPORATIONS
On 15th March 2024, Hon. Judge Dr. Nixon Sifuna of the High Court delivered a ruling in the case
of ABSA Bank Kenya PLC (ABSA) vs Kenya Deposit Insurance Corporation (KDIC). He declared
Sections 13A and 21 of the Government Proceedings Act and Order 10 Rule 8 of the Civil
Procedure Rules as unconstitutional and shall therefore remain inoperative unless otherwise
vindicated by a higher court or amended by the Parliament in order to align with the
provisions of the Constitution of Kenya, 2010.

Section 13A of the Government Proceedings Act provides that no proceedings against the
Government shall lie or be instituted until after the expiry of a period of thirty days after a
notice in writing in the prescribed form has been served on the Government in relation to
those proceedings.

Section 21 of the Government Proceedings Act provides for the satisfaction of Orders against
the government. It provides that where an Order has been issued by the court in favour of any
person against the Government in any civil proceedings by or against the Government, the
proper officer of the court shall, on an application made by a person at any time after the
expiration of twenty-one days from the date of the order or, in case the order provides for the
payment of costs and the costs require to be taxed, at any time after the costs have been
taxed, whichever is the later, issue to that person a certificate in the prescribed form
containing particulars of the order. Provided that, if the court so directs, a separate
certificate shall be issued with respect to the costs (if any) ordered to be paid to the
applicant.

Section 21 (4) of the same Act continues by denoting 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 the Government, or
any Government department, or any officer of the Government as such, of any money or
costs.”

The whole Section 21 also applies to any civil proceedings by or against County Governments.

Order 10 Rule 8 of the Civil Procedure Rules provides that no judgment in default of
appearance or pleading may be entered against the Government without the leave of the
court and any application for leave shall be served not less than seven days before the return
day.

The main rationale behind Hon. Judge Dr. Nixon Sifuna’s decision is that the three laws are
discriminatory, curtail meaningful access to justice, and impede the smooth administration of
justice, therefore violating the Constitution of Kenya 2010, particularly, Article 48.

TRIAL COURT: IN BRIEF

COMMERCIAL CASE NO. E411 OF 2023 BETWEEN ABSA BANK PLC AND KENYA DEPOSIT
INSURANCE CORPORATION

ABSA Bank was obligated to make annual deposit contributions to KDIC. It dutifully made those
payments, but later realized that it had by innocent mistake overpaid by a margin of
Kshs.215,346,841/=.

ABSA Bank, the Plaintiff instituted a suit against KDIC, the Defendant on 14th October 2022. ABSA
Bank sought a refund of the sum of Kshs.215,346,841/=, an overpayment on premiums it allegedly
overpaid. It also sought interest on the said amount at commercial rates from the date of
payment of each premium till payment in full. It also submitted that the said overpayment unless
refunded would amount to unfair enrichment.

The Plaintiff obtained Summons to Enter Appearance from the Court and served them upon the
Defendant. The Defendant entered appearance but failed to file its Defence within 14 days which
prompted ABSA Bank, in accordance with Order 10 Rule 10 of the Civil Procedure Rules, to file a
letter dated 6th January 2023 which requested the Court to grant interlocutory judgment against
the Defendant.

In response, the Defendant filed a Notice of Motion seeking to stop the pending determination
and be granted an enlargement of time to enable it to file its Defence out of time in this suit.

The Defendant claimed that it is the Government hence the legal proceedings against it such as
this suit, were to be commenced after the issue of a 30-day Notice by the Plaintiff as required by
Section 13A of the Government Proceedings Act. Due to the fact that the Plaintiff did not issue
that Notice, the Defendant, therefore, submitted that this suit was fatally defective.

The Defendant also argued that, being the Government, Order 10 Rule 8 of the Civil Procedure
Rules provided that no interlocutory judgment might be entered against it without the leave of
the Court and therefore, the request by the Plaintiff for Judgment was fatally defective and not for
granting.
The High Court outlined the following issues for determination:

Whether section 13A of the Government Proceedings Act, the Act itself as a whole, and
Order 10 Rule 8 of the Civil Procedure Rules apply to the Defendant as a state
corporation;
whether Sections 13A and 21 of the Government Proceedings Act and Order 10 Rule 8 of
the Civil Proceedings Act are unconstitutional; and
whether the Defendant should be granted an enlargement of time to file its Defence.

On the issue of whether Section 13A of the Government Proceedings Act, the Act itself as a
whole, and Order 10 Rule 8 of the Civil Procedure Rules apply to the Defendant as a state
corporation, the Court held that the Government Proceedings Act despite having provisions
relating to Government, it does not apply to all governmental entities and agencies. It only
applies to the departments and directorates of Government that fall under the direct control of
the Central Government. These exclude governmental entities such as County Governments,
and state corporations.

The Court also held that the Defendant being a state corporation (a body corporate with
perpetual succession, common seal, and capacity to sue and be sued in its name) and not the
National Government, suits by it and against it are principally governed by the Deposit Insurance
Act and the State Corporations Act. Accordingly, neither the provisions of the Government
Proceedings Act, nor Order 10 Rule 8 of the Civil Procedure Rules apply to the Defendant.

The Court further stated that the Defendant’s objection to this suit that a 30-day Notice was
required before the suit commenced and that the Court’s leave was required before entry of
interlocutory judgment, were wholly misconceived and without any statutory or other legal basis
at all.

On the issue of whether Sections 13A and 21 of the Government Proceedings Act and Order 10
Rule 8 of the Civil Procedure Rules are unconstitutional, Hon. Justice Dr. Nixon Sifuna stated, “I
find section 13A (and even section 21) of the Act discriminatory in the sense of discriminating
against ordinary litigants and giving preferential, differential, differentiated, and
discriminatory treatment to the Government in litigation. This is juridically unsupportable, as
in litigation, every party is equal before the law and should be treated equally. In litigation, there
should be neither a “Goliath” nor a “David”.”

Sections 13A and 21 of the Government Proceedings Act undermine the access to justice by
delaying it and subsequently causing a clog in the process of the Court.

Therefore, the Court declared that Section 13A is unconstitutional and discriminatory meaning
that any notice served thereunder shall be unnecessary and of no legal consequence. Similarly,
the requirement of service of the notice shall be of no legal consequence and shall not in
whatsoever manner affect the legality of any suit against the Government.

Further, the Court held that Order 10 Rule 8 of the Civil Procedure Rules is unconstitutional and
discriminatory and the requirement of application of leave of court for entry of interlocutory
judgment shall be unnecessary; hence failure to apply for the leave shall be of no legal
consequence and without any penalty.
On the issue of whether the Defendant should be granted an enlargement of time to file its
Defence, the Court held that the Defendant intentionally failed to file its Defence within the
stipulated time and therefore did not grant an enlargement of time to the Defendant but granted
a judgment in default of defence in favour of the Plaintiff against the Defendant in accordance
with Order 10 Rule 10 of the Civil Procedure Rules. The Plaintiff’s claim being a liquidated demand,
the judgment was a final one and not an interlocutory one.

The Plaintiff was awarded a refund of Kshs.215,346,841/= plus interest at the court rate of 14% per
annum from the date the suit was filed to the date of the judgment.

It is worth noting that the Courts are upholding, protecting, and promoting constitutionalism in
Kenya by reviewing outdated, unconstitutional, and discriminatory laws and declaring them
inoperative. This plays a crucial role in upholding the rule of law and protecting individual rights.
The courts are headed in the right direction by interpreting the laws and ensuring that all laws
and statutes are in line with the Constitution of Kenya, 2010 which is the supreme law of Kenya.
The Parliament of Kenya has a huge role to play in amending the laws that have been declared
unconstitutional and discriminatory by the courts. One of the laws that should be revisited and
amended by the Parliament is the Government Proceedings Act as it is outdated because it was
enacted during the colonial period and most of its provisions are unconstitutional.

Sections 13A and 21 of the Government Proceedings Act having been declared unconstitutional
have resulted in City Lawyer Donald Kipkorir giving instructions to auctioneers to seize assets
belonging to the Nairobi County Government over a debt of Kshs.1.69 billion of unpaid legal fees.
This is due to the fact that executions of orders against the County Governments and National
Government for enforcement of payment of debts have been allowed by the courts for the reason
that Section 21 (4) of the Government Proceedings Act is unconstitutional.

We hope this information is helpful in understanding the institution of suits against state
corporations. Please note that the contents of this newsletter are intended to provide a general
guide to the subject matter. It should not be relied upon without legal advice on its contents.

Should you require further information or legal assistance on Compliance or any other legal issue,
kindly feel free to contact us at info@wka.co.ke, www.wka.co.ke, +254 798 03 580, Nairobi Hub:
Parklands, Valley View Business Park, 6th Floor, City Park Drive, Off Limuru Road.

Authors
Founding Partner Associate

William Karoki Florence Mwende

 

WKA Advocates | We Make it Easy | Integrity |Competence | Justice

www.wka.co.ke info@wka.co.ke +254 798 035 580