GARNISHEE QUESTION NOV 2014

GARNISHEE QUESTION

Mabona Muthusi had sued Cloud Co. Ltd for Kshs.2,500,000 that the company was indebted to him as a debenture holder. Judgment has now been passed in favour of Muthusi. While extracting the decree, Muthusi through a preliminary decree to order for taking accounts for the company, realized that Cloud Co. Ltd did not have any liquid assets, but had sufficient book debts totaling Kshs.15,000,000 to be able to satisfy his decree. In particular, Kilo Enterprises had a 90-day credit account outstanding as at the time of the judgment. Kilo Enterprise owed Cloud Ltd Kshs.2,600,000. Muthusi has now come to the offices of Smith Tabata Advocates where you are a pupil. He is seeking advice as to how he will ensure his judgment as against Cloud Co. Ltd is satisfied and the decretal amount paid over by the debtors of Cloud Co. Ltd. Your pupil-master has asked you to brief him on the procedure as well as advise him on the preliminary requirements to be met to effect a successful procedure for execution of the decree of Mabona Mathusi. Proceed to advise your pupil master.

The facts incline towards a garnishee proceedings. Garnishee proceedings is a court order made so that a person who is owed as a decree holder can obtain full or part payment from a third party whom in fact owes or holds money for the judgment debtor. In this instance Kilo enterprises owes cloud co an outstanding amount of 2,600,000. Cloud Company is the Judgement debtor to Muthusi who is the decree holder.

An application for a garnishee order presupposes that the decree holder has sufficient information about the affairs of the judgment debtor to conclude that there is an attachable debt due or accruing from a particular third party to the judgment debtor. Muthusi whle extracting a preliminary decree for accounts found out that there are book debts amounting to 15,000,000/=.

The 2,600,000/= is a debt that is attachable as it is due. For a debt to be attachable the debtor creditor relationship must exist between the judgement debtor and the garnishee. In this instance it is in existence.

The effect of a garnishee order is to place the Decree holder in the shoes of the judgment debtor in relation to the debt sought to be attached and the judgment creditor can acquire no better rights in the debt than those of the judgment debtor.

The decree holder will apply to court for an order nisi through an ex-parte application and affidavit seeking for the attachment of the debt.   The decree holder must serve the garnishment notice on the garnishee, and also on the judgment debtor, at least seven full days before the date set for hearing the order nisi. When the ex parte garnishment order is served on the garnishee it operates to attach, to the extent of the amount specified in the notice. In this instance, it will be 2,500,000/=.

In court for the decree nisi hearing, garnishee is entitled to show cause why he should not pay to the decree-holder the debt due from him to the judgment-debtor. In other words, the garnishee has the right to oppose a garnishee application.

The court has to determine whether there is a debt due from each Garnishee to the Judgment-Debtor capable of being attached.

After hearing the application inter parties: The court may issue a decree order absolute.  Garnishee proceedings are to be conducted in the same record of the suit giving rise to the decree against the judgment debtor. New proceedings need not be instituted at all.