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12 November 1968


Criminal Appeal No. 22 of 1968


Court of Appeal for East Africa


The Commissioner of Income Tax



Irish Electrical Co. LTD











Commissioner Of Income Tax v. Irish Electrical, Judgment, File No. 22 of 1968 (CAEA, Nov. 13, 1968)

Represented By:


Editor's Note:

Appeal from a judgment and order of the High Court of Kenya at Nairobi (Farrell, J.) dated 6th February, 1968 in Civil Case No. 991 of 1967


LAW, J.A.:

[1] This is an appeal by the Commissioner of Income Tax from a decision of the High Court of Kenya (Farrell, J.) on a case stated under Order XXXIV of the Civil Procedure Code. In those proceedings the appellant was the unsuccessful plaintiff. The agreed facts and the questions of law for the Court's determination are set out in the case stated as follows: �

"1. That the plaintiff is a corporation sole under and by virtue of section 148A of the East African Income Tax (Management) Act, 1958.
2. That the defendant is a company incorporated in Ireland.
3. That on or about the 10th day of June, 1966, the plaintiff began to destrain upon certain goods and chattels of one Mulji Jetha Ltd. at its premises at River Road, Nairobi, under his powers contained in section 125 of the East African Income Tax (Management) Act, 1958.
4. That the said Mulji Jetha Ltd. on the same day obtained an interim injunction restraining the plaintiff from completing the said distraint, and the plaintiff did not thereafter continue with the distraint.
5. That at the time the said Mulji Jetha Ltd. served the injunction aforesaid upon the plaintiff; the plaintiff had seized the said goods and chattels and had at the request of the said Mulji Jetha Ltd. agreed to leave them on its premises pending the sale thereof.
6. That the said Mulji Jetha Ltd. thereafter applied to this Honourable Court for a permanent injunction preventing the plaintiff from distaining upon the said goods and chattels, in High Court Civil Suit No. 594 of 1966.The suit was dismissed on 29th July, 1966 and the interim order referred to in paragraph 4 discharged.
7. That on or about 19th July, 1966, while the proceedings referred to in para 6 were in train, the defendant purported to attach the said goods and chattels at the premises of Mulji Jetha Ltd. in execution of a decree obtained by it in High Court Civil Suit No. 474 of 1966, and seized and took physical possession of them.
8. That the plaintiff and the defendant thereafter agreed that the defendant complete its attachment of the said goods and chattels without prejudice to the rights of the plaintiff, and that the proceeds thereof be held upon trust for the plaintiff and the defendant jointly until it may be determined whether the plaintiff or defendant is entitled to them.

[2] The questions of fact and of law upon which the opinion of this Honourable Court is sought are as follows: �-

1. The plaintiff, having commenced distraint upon the said goods and chattels and having been temporarily restrained from completing the distraint by an interim order of the Court, which order was later discharged, was the defendant lawfully entitled to attach the said goods and chattels in execution of its decree?
2. Whether the plaintiff or the defendant is entitled to the proceeds of the sale of the said goods and chattels? "At the trial of the case stated the following document headed
"Sequence of Events" was put in by agreement:�

[3] Mr. Goslin of the Income Tax Department served the warrant on the Managing Director of Mulji Jetha Ltd. at 10.30 a.m.
[4] Mr. Goslin was accompanied by Mr. Pirbhai who took an inventory of the furniture and sent his assistant to get a Gold Appraiser. No inventory of the gold or jewellery was taken.

[5] Mr. Goslin and Kr. Pirbhai stayed at the premises until they heard of the injunction at about noon when they left." The learned judge decided the case stated in favour of the defendant (now respondent) finding that the plaintiff (now appellant) discontinued the distress proceedings on being served with the interim injunction, "as he was bound to do"; that the appellant did not continue in possession and that "the only reasonable interpretation of what happened is that he abandoned the distress reluctant as he may have been to do so".

[6] In other words, the learned judge inferred from the admitted facts that there had been an abandonment of the goods and chattels distrained upon by the appellant, and he held that there was no legal impediment to the execution subsequently levied by the respondent upon the same goods and chattels, and he decided the case stated in favour of the respondent.
From this decision the appellant appeals. Before dealing with arguments raised on this appeal, the history of events should I think be completed by setting out the material portions of the interim injunction.

[7] It was ordered: - �

"That the defendant (the present appellant) his servants or agents are hereby restrained from levying distress upon or removing from the plaintiff's (Mulji Jetha Ltd.) premises any goods or effects the property of the plaintiff therein pending the hearing of the said summons.
That the plaintiffs (sic) their servants or agents are hereby restrained from disposing of or removing from the said premises any of the goods or effects therein the property of the plaintiff pending the hearing of the said summons.
That the plaintiff will indemnify the defendant against any loss which he may suffer as a result of this order."

[8] With reference to this last paragraph, I would remark in passing that there is not much point in ordering an applicant for an interim injunction restraining a distress to indemnify against any loss the person seeking to levy a distress, because such an indemnity is likely, as in this case to be valueless.

[9] The better practice seems to be as stated in Halsbury's Laws of England, 3rd Edition, Volume 12,
paragraph 319 at pages 168-169, that is to say to refuse an injunction (unless it is a flagrant case) except upon the condition of the applicant paying the amount claimed into court; to which condition I would suggest the possible alternative of the applicant providing independent security to indemnify against any consequent loss if he cannot raise the amount claimed.

[10] A mere undertaking to indemnify is not a satisfactory condition to impose upon an applicant for an injunction who, from the nature of his application, is likely to prove insolvent. Mr. Lutta, for the appellant, began by submitting that the distress in this case was completed before the issue of the interim injunction, which in his submission was accordingly superfluous and without effect.

[11] I do not think we can entertain this argument.

[12] Paragraphs 3 and 4 of the case stated, and paragraph 1 of the questions for decision, make it clear that the matter was submitted to the High Court on the basis that the distraint had been commenced, but not completed, and it is clear from rule 4 of Order XXXIV that a party to a case stated is bound by the statements contained therein.

[13] Mr. Lutta further submitted that the learned judge erred in holding that the appellant abandoned possession of the goods and chattels on Mulji Jetha Ltd.'s premises when his representatives left the premises on hearing of the issue of the injunction. Mr. Lutta submitted that the effect of an interlocutory injunction is merely to preserve the status quo pending determination of the issues between the parties, and that the appellant, in obeying the court's order restraining him from proceeding with the distress and removing the debtor's goods, cannot be said to have done any act from which the inference could reasonably be drawn that he intended to abandon the distress.

[14] Mr. Lutta relied on Swann v. The Earl of Falmouth 108 ER 1112, and in particular on the following extract from the judgment of Bayley J.:�

"if therefore he (the landlord) quitted possession of the goods whilst they remained on the premises, that was an abandonment of the distress but the mere leaving of the goods in a place where he has the right to keep them, without anything to indicate an intention to abandon the distress, cannot operate as an abandonment."

[15] Mr. Lutta referred to sub-section (3) of section 125 of the East African Income Tax (Management) Act, 1958, which gives the Commissioner the right to leave goods which have been seized on the premises pending sale, and he submitted that no inference of intention to abandon the distress could be drawn from the appellant's action in this respect. Mr. Couldrey for the respondents conceded that the appellant had possession of the goods when he levied the distress, but submitted that he abandoned possession on hearing of the issue of the interim injunction.

[16] Mr. Couldrey relied on the case of Hunt v. Hooper 152 ER 1365, in which it was held that where a sheriff was issued with a writ of fieri facias for execution, and the judgment creditor instructed the sheriff not to execute the writ until further orders, such an instruction was equivalent to a withdrawal of the writ, and Mr. Couldrey submitted that it makes no difference whether the order of stay comes from the attaching creditor or from the court � the effect is the same, there is in fact an abandonment of the creditor's rights.

[17] I find myself unable to agree with this submission.

[18] In Lumsden v. Burnett (1898) 2 QB 177, possession of distrained goods was given up by the sheriff On the strength of a document signed by the debtor's daughter? a child of 13, without the authority or knowledge of the debt to undertaking to allow the sheriff to re-enter at any time to resume possession, and undertaking not to remove the goods from the premises.

[19] The Court of Appeal was unanimous that in these circumstances the sheriff went out of possession with the intent of returning, and not of abandoning possession. Smith L.J. said (at p. 182):�

"the question is always one of fact, and is whether the sheriff by going out of possession, as he did here, abandoned the possession."

[20] In my view the fact s of the present appeal are stronger than the facts in Lumsden's case (supra) in favour of the appellant, who went out of possession not on the strength of an undertaking given by an unauthorized person, but in obedience to the terms of an interim injunction issued by the High Court restraining him from taking any further steps in the distress, pending the determination of the debtor's suit for a permanent injunction, which was in the event dismissed.

[21] In my view, a distraining creditor can only be said to have abandoned a distress if there is evidence of some intentional and deliberate act on his part indicating that in quitting the premises he intends not to return.

[22] In this case the appellant left the goods and quit the premises solely because of the issue of the interim injunction, intending to return if the application for a permanent injunction was dismissed, and assuming that the status quo would be maintained in the interval.

[23] I can find no evidence at all in the record to support the finding that the appellant wilfully abandoned the distress, or intended to abandon it, and I am satisfied that in fact he did not abandon it.

[24] For these reasons I would allow this appeal, set aside the order of "the High Court declaring that the respondent is entitled to the proceeds of sale of the debtor's goods, and substitute an order that the appellant is entitled to those proceeds.

[25] The parties have agreed that there should be no order as to the costs of this appeal.


[26] I have read and entirely agree with the judgment of Law, J.A.

[27] It appears from paragraph 5 of the Case Stated that the appellant, the Commissioner of Income Tax, had already seized the goods and chattels the subject of the levy, at the time that he was served with the interim injunction and had at the request of the debtor Mulji Jetha Ltd. agreed to leave these on the premises pending the sale. The purpose of the interim injunction was to ensure that matters were kept status quo until the question was finally disposed of.

[28] This is in accordance with rule 1 of Order XXXIX of the Civil Procedure (Revised) Rules, 1948, and is also apparent by reference to the interim injunction itself.

[29] With respect, on the facts of this case, I cannot agree with the learned trial judge that the appellant had abandoned the distress.

[30] It is clear that he only obeyed the order of the Court and proceeded no further on the matter whilst the interim injunction was pending. On the discharge of the interim injunction the matter reverted to the original position i.e. that the appellant had already seized these goods and these were in his constructive possession on the premises of the debtor in accordance with the agreement between the debtor and himself.

[31] There was at this stage therefore no need for the appellant


[32] I have had the advantage of reading in draft the judgment prepared by Law, J.A.

[33] I am in complete agreement with it.

[34] Duffus, Acting Vice President also agrees, there will be an order in the terms proposed by law, J.A.








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