STALLION INSURANCE COMPANY LIMITED v IGNAZZIO MESSINA & C S.p.A [2007] KECA 305 (KLR)
The bottom line
#Kenya's Court of Appeal refused to rescue an insurer from a default judgment, ruling you cannot spring new arguments or unstamped documents on appeal.
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 appellant should be permitted to raise a new issue of law (the form of the summons reducing the period for entry of appearance) for the first time on appeal
- 2.Whether an unstamped guarantee is inadmissible in evidence so as to defeat enforcement of the performance guarantee (ground 7)
- 3.Whether the superior court misdirected itself in rejecting the appellant's explanation for the delay in entering appearance
- 4.Whether the draft defence disclosed triable issues warranting setting aside of the default judgment
Key legal issues
#Whether a new point of law may be raised for the first time on appeal
No - Rule 101 of the Court of Appeal Rules prohibits arguing grounds not specified in the memorandum of appeal; leave may be given only upon a judicial exercise of discretion, weighing fairness, delay and prejudice.
The appellant sought to argue, eight years after the events, that the summons reduced the statutory period for entry of appearance. This was neither pleaded before the superior court nor in the memorandum of appeal. Applying North Staffordshire Railways v Edge and United Marketing Company, the court held that a fresh point should not be entertained without the benefit of the lower court's judgment, especially where the appellant's case below was conducted on an entirely different basis and the change would be grossly prejudicial.
Whether an unstamped guarantee is enforceable
The Stamp Duty Act provides relief by permitting stamping on payment of duty and penalty; a party that drew and issued the instrument cannot benefit from its own failure to stamp it, and the point, raised for the first time on appeal, fails.
Following Diamond Trust Bank Kenya Ltd v Jaswinder Singh Enterprises and Suderji Nanji Ltd v Bhaloo, the court endorsed the procedure that the party producing an unstamped document be given an opportunity to pay stamp duty and penalty before inadmissibility is declared. Since Stallion itself issued the performance guarantee, it could not invoke the omission, and in any event the issue had not arisen before the superior court.
Whether the superior court properly exercised its discretion in refusing to set aside the default judgment
Yes - the explanation for the delay lacked a proper factual basis (the clerk never swore an affidavit and the notice of entry of judgment was served), and the draft defence raised only fanciful, not triable, issues.
Applying Patel v E.A Cargo Handling Services and Evans v Bartlam, the discretion is unconditional but must be exercised judicially, considering the explanation for default and whether a serious defence exists. There was an undenied affidavit of service of the notice of entry of judgment and a 16-day delay before action. The draft defence's denial of the USD 750,000 guarantee flew in the face of unchallenged documentary proof, and the guarantee was expressly enforceable by Ignazzio on simple request.
The standard for appellate interference with discretionary decisions
An appellate court will not interfere with a lower court's exercise of discretion unless the judge misdirected himself, acted on wrong principles or matters, or the decision is clearly wrong resulting in misjustice.
The court adopted the classic statements of Sir Clement De Lestang V-P and Sir Charles Newbold P in Mbogoh & Anor v Shah. Since the superior court correctly identified and applied the relevant principles, interference would amount merely to substituting the appellate court's own discretion, which the appellate court will not do.
Legal principles established
#- An appellate court will not allow a party to argue an issue not raised in the memorandum of appeal or in the courts below without leave, and a party who fought a case on a specific basis cannot alter its case on appeal to the prejudice of the other side.
- A party issuing an unstamped instrument cannot rely on its own failure to stamp it to defeat enforcement; before holding a document inadmissible for non-stamping the court should give the party producing it an opportunity to pay the stamp duty and penalty.
- The discretion under Order IXA rule 10 to set aside a default judgment is unconditional; proof of a defence and explanation for delay are matters for consideration, not conditions precedent.
- An appellate court will not interfere with the exercise of discretion by an inferior court unless satisfied the decision is clearly wrong, that the judge misdirected himself, or acted on wrong matters and arrived at a wrong conclusion.
- A performance guarantee expressed to be payable irrevocably and unconditionally on first written request is enforceable directly by the beneficiary without proof of the underlying debt, and cannot be contradicted by implied terms.
Court orders
#- 1.Appeal dismissed in its entirety
- 2.Costs of the appeal to be paid to the respondent
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya at Nairobi, Milimani Commercial Courts
- H.C.C.C No. 216 of 2000
- Jurisdiction invoked
- First appellate jurisdiction over the High Court (discretionary ruling under Order IXA rule 10 of the Civil Procedure Rules)
Relief refused
#Reversal of the ruling and unconditional leave to defend the suit
The appellant failed to show the superior court erred in the exercise of its discretion; the explanation for delay lacked a proper factual basis and the draft defence raised only fanciful issues
Leave to argue the new ground on the form of the summons to enter appearance
The issue was not pleaded in the memorandum of appeal nor raised below; allowing it would be grossly prejudicial after eight years of litigation
Rejection of the guarantee for non-stamping (ground 7)
Stallion issued the guarantee and cannot benefit from its failure to stamp it; the party producing an unstamped document should first be given an opportunity to pay duty and penalty
Costs
Costs of the appeal shall be paid to the respondent.
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.
In the result, the appeal is for dismissal in its entirety and we so order. Costs of the appeal shall be paid to the respondent.
It is, of course, within the discretion of the court to allow arguments on unpleaded issues, but there must be a judicial exercise of that discretion.
Clearly therefore the discretion exercisable is in terms unconditional and the matters which the court ought to have regard to are part of the judicial exercise of that discretion, since it cannot be whimsical or capricious.
In our view, the performance guarantee had no ambiguities and was plainly enforceable against Stallion. The amount stated therein had become due and was payable by them.
We have no reason therefore to interfere with the exercise of that discretion otherwise we would be simply substituting our discretion for that of the superior court.
Issues in the judgment
#The memorandum of appeal is dated 29th January 2001 and the judgment recites this appeal was filed in January 2001, yet the respondent's reply affidavit is described as sworn by Captain Giordano Gelasini before the superior court; the judgment also refers to the introduction of the new issue 'in March 2007' which is consistent with the delivery date, so no material internal contradiction arises from dates.
The memorandum of appeal is dated 29th January 2001, but the draft defence refers to the guarantee being for USD 500,000 while the judgment elsewhere records Stallion's confirmation 'up to USD 750,000 or Kshs.46,500,000' in a letter dated 22nd October, 1998 - described as confirming the guarantee in 1998, which predates the 31st October 1991 confirmation; the 1998 date appears to be an error in the judgment.
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (2)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Malusha v Swaleh & another (Civil Appeal E051 of 2022) [2025] KECA 761 (KLR)[2025] KECA 761 (KLR)9 May 2025applied
- Charles v Cheto (Civil Appeal E046 of 2022) [2025] KECA 784 (KLR)[2025] KECA 784 (KLR)9 May 2025applied
Cite this brief
#Cite this brief
Caselaw, "STALLION INSURANCE COMPANY LIMITED v IGNAZZIO MESSINA & C S.p.A [2007] KECA 305 (KLR)", Case Analysis (2007). Court of Appeal appeal against ruling in H.C.C.C No. 216 of 2000. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2007/305/eng@2007-05-25
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.