Agricultural Finance Corporation v Lengetia Limited & Jack Mwangi [1985] KECA 58 (KLR)
The bottom line
#Kenya's Court of Appeal ruled you cannot sue a deep-pocketed company just to recover costs when it owes you nothing.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the first respondent had a sustainable cause of action against the AFC notwithstanding its joinder as co-defendant
- 2.Whether a plaintiff in genuine doubt as to whom to sue may properly join a party under order 1 rules 3 and 7 of the Civil Procedure Rules where there is no genuine liability
- 3.Whether interest under section 26 and costs under section 27 of the Civil Procedure Act could properly be awarded against the AFC when no principal sum had been adjudged against it
- 4.As between the two respondents, who should bear the interest and costs of the original litigation
Key legal issues
#Whether the AFC was contractually liable to the first respondent for the agricultural services
The AFC was not a party to the contract; the contract was between the first and second respondents, and the arrangement that payment would come from the AFC did not make the AFC a contracting party.
The invoices were addressed to the second respondent, not the AFC. The alleged promise by the AFC to pay lacked consideration from the first respondent. The AFC's admission that services were rendered at its request was in substance a confession and avoidance and did not render it a contracting party. No plea of guarantee or indemnity was made.
Whether the joinder of the AFC was proper under order 1 rules 3 and 7 of the Civil Procedure Rules
The joinder was improper because there was no genuine doubt as to whom to sue; the plaintiff's own advocates had repeatedly stated there was no cause of action against the AFC. The proper course, if any, was for the second respondent to join the AFC as a third party under order 1 rule 14.
Joinder presupposes genuine liability. Unlike Overseas Touring v African Produce Agency, where blame between two vehicle owners was genuinely in issue, here the correspondence showed no doubt. The Bullock order mechanism was inapplicable where no genuine doubt as to the law or facts exists.
Whether interest and costs could be awarded against the AFC
No. Interest under section 26 requires a principal sum adjudged against the party; costs under section 27 must follow upon an event after determination of the main issue. The judge decided neither, so both orders were made on a wrong premise.
The judge never decided the main issue of liability but assumed it, then ordered the AFC to pay interest on a sum it was never found liable to pay, and costs mostly incurred before it became a party. Both orders were therefore made in vacuo and fallacious.
Who should bear the interest and costs of the original suit
The second respondent should pay interest on the principal from filing of the original plaint until payment by the AFC at eight percent per annum, plus the first respondent's costs and court fees of Shs 10,587.
On the evidence the only possible conclusion was that the second respondent was liable for the principal sum, which was fortuitously paid by the AFC after proceedings commenced. The judge should have so ordered. As no judgment on liability was given against the second respondent, interest from judgment did not apply.
Legal principles established
#- A contract affects only the parties to it and cannot be enforced by or against a stranger to the contract, even if made for his benefit
- Interest under section 26 of the Civil Procedure Act can only be awarded as appurtenant to a principal sum adjudged
- Costs under section 27 of the Civil Procedure Act must follow upon an event, i.e. follow a determination of the main issue, not be made in vacuo
- Joinder of parties under order 1 rules 3 and 7 presupposes a genuine liability on the part of the proposed defendant; a party cannot be joined merely as a convenient body of substance able to pay costs
- A Bullock order as to costs is appropriate only where there is a genuine doubt as to whom to sue
Court orders
#- 1.Appeal against Masime J's decision allowed
- 2.Set aside the High Court order that the AFC pay the interest and costs
- 3.Substituted an order that the second respondent pays to the first respondent interest on the principal sum from the date of filing the original plaint until payment by the AFC (taken as August 15, 1980) at eight percent per annum
- 4.Second respondent to pay the first respondent's costs and court fees of Shs 6,500 plus Shs 4,087, making Shs 10,587
- 5.Costs of the appeal: the AFC to have only half its costs of the appeal, those costs to be borne equally by the first and second respondents
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
Lead judgment. Held that the AFC was not a party to the contract for agricultural services, that its joinder as co-defendant solely to recover costs was an abuse, and that interest under section 26 and costs under section 27 of the Civil Procedure Act could not be awarded against a party against whom no principal sum was adjudged. Allowed the appeal and substituted the second respondent as liable for interest and costs.
Accordingly, the judge's order, in my judgment, was made on a wrong premise. It was fallacious to join the AFC, not because they were liable in the main suit or on genuine cause of actionp. 5
Wrote the judgment
Concurred in allowing the appeal. Emphasised that the first issue was whether the first respondent had a sustainable cause of action against the AFC notwithstanding the joinder; the respondent was bound by its pleadings; and a non-successful litigant could not leave costs to the judge's discretion, citing Donald Campbell v Pollak and Devram Nanji.
This is, I must say with respect, a startling finding based on no concept known to the law.p. 6
Wrote the judgment
Agreed with the orders proposed and added brief observations: the principal contract was between Lengetia Ltd and Jack Mwangi trading as Jory Traders, the financing was a matter between the AFC and Jack Mwangi, and as Lengetia Ltd had no contract with the Corporation the judge's costs order was not possible.
However, as Lengetia Ltd had no contract with the Corporation, as the judge himself held, that result was not possible.p. 6
- On appeal from
- High Court of Kenya at Nakuru
- not stated in judgment
- Jurisdiction invoked
- First appeal to the Court of Appeal from the High Court (statutory appeal; specific provision not cited in judgment)
Relief refused
#First respondent's claim to recover interest and costs from the AFC
No contractual or other legal liability of the AFC; no principal sum was ever adjudged against it; the joinder was fallacious
Costs
AFC to have only half its costs of the appeal despite its success, such costs to be borne equally by the first and second respondents; second respondent to pay the first respondent's interest and costs of the suit below (Shs 10,587).
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
It was fallacious to join the AFC, not because they were liable in the main suit or on genuine cause of action, but as a convenient body who would be able to pay costs already incurred, and, moreover, to do so after they had discharged the principal debt, even though they were not liable for it.
The joinder of parties under rule 3 or rule 7 of order 1 presuppose a genuine liability on the part of one or both of the proposed defendants.
There can be no interest awarded under section 26 unless it is appurtenant to something, in this case the principal debt, and there was no “principal sum adjudged” as being due from the AFC to the first respondent in this case.
It was not an order of costs following upon an event, and was not therefore, an order as to the costs and incidental to a suit as section 27 of the Civil Procedure Act provides
I would set aside his order that the AFC pay the interest and costs in question, and I would substitute for it an order that the second respondent pays to the first respondent the interest and costs that I have just enumerated.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Agricultural Finance Corporation v Lengetia Limited & Jack Mwangi [1985] KECA 58 (KLR)", Case Analysis (1985). Civil Appeal (High Court at Nakuru appeal) - not stated in judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1985/58/eng@1985-05-30
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.