Agriculture Finance Corporation & another v Kenya Alliance Insurance Company Ltd & another

High Court, at Nairobi

December 17, 2002

Ringera J

Civil Case No 1882 of 1999

Contract - insurance contract – application of law of contract to insurance contracts – validity of contractual limitation periods in a policy of insurance – interpretation of section 3(1) of the Law of Contract Act (cap 23) – whether a party can be estopped from relying on contractual limitation clauses if estoppel is not pleaded – whether contractual limitation clauses are unfair, unreasonable and unconscionable.

Insurance – contracts of insurance – application of the law of contract on insurance contracts – validity of contractual limitation periods in policy of insurance.

Estoppel - raising estoppel in suit - party seeking to rely on estoppel must plead it.

The plaintiffs were the joint owners of certain premises in Nairobi which was insured under a co-insurance policy involving three insurance companies, two of them being the defendants.

Clause 19 of the policy provided that the insurer would not be liable for any loss after the expiration of twelve months from the happening of the loss unless the claim was the subject of pending action or arbitration. In addition, clause 13 provided that if a claim was rejected and a suit was not commenced within three months after such rejection, all the benefits of the policy would be forfeited.

The insured premises was damaged by a bomb explosion and the defendants failed to meet the plaintiffs’ claim for compensation. The plaintiffs then filed this suit. The parties asked the court to determine the twin issues of whether the suit was incompetent and whether the plaintiffs had forfeited their claims by virtue of clauses 19 and 13 of the policy.

The plaintiffs argued that the document in which the clauses were contained was not a contract within the meaning of section 3 of the Law of Contract Act (cap 23) and alternatively, that the clauses were unfair, unreasonable and unconscionable and should not be enforced as a matter of public policy. They also sought to raise estoppel against the defendants.

Held:

1. The Law of Contract Act (cap 23) section 3 (1) applied to suits founded on a contract of guarantee or surety and it has no application to the contract of insurance in this case.

2. A party cannot raise a preliminary issue which is not part of its pleadings. There was no pleading by the plaintiffs that the subject clauses were unfair, unreasonable or capricious.

3.On whether clauses 13 and 19 were unfair, unreasonable or unconscionable, firstly, there was no pleading to the effect and the issue did not therefore arise for determination. Secondly, this Court did not see anything unreasonable, unfair or unconscionable in clauses limiting the time within which parties must make their claims on the contract between them or file suit as the case may be.

4. The clauses could not be stigmatized as unfair, unreasonable or unconscinable on the basis of the magnitude of the claim or the risk that had materialized. Legal principles are for application in insurance contracts irrespective of the nature of the risk or the magnitude of the loss.

5. The Limitations of Actions Act (cap 22) section 39 (1) (b) and (2) does not apply to contractual limitation periods. It applies only to periods prescribed by the Act itself.

6. A party who seeks to rely on estoppel must plead it. The plaintiffs here did not plead estoppel in their reply to the defence, and should have if they intended to safeguard their position against the defendants’ invocation of conditions 13 and 19 of the policy.

7. The argument by the plaintiffs that the defendants had not repudiated liability, was not an issue canvassed in pleadings or framed at trial.

Plaintiff’s suit struck out.

Cases

1. Atlantic Shipping and Trading Co Ltd v Louis Dreyfus & Co [1922] 2 AC 250; [1922] All ER 559 HL

2. Century Automobiles Ltd v Hutchings Biemer Ltd [1965] EA 304

Texts

Guest, A G, (1994) (Ed) Chitty on Contracts London: Sweet & Maxwell 27th Edn pp 1366-1367 para 28-084

Statutes

1. Law of Contract Act (cap 23) section 3

2. Limitation of Actions Act (cap 22) sections 2; 39(1)(b)

3. Civil Procedure Act (cap 21) section 3A

Advocates

Mr Kembi-Gitura for the Plaintiffs.

Mr Deverell for the Defendants.

Civil Practise and Procedure - stay of execution Order 9A Rules 10, 11, Order 22 rRule 11 Order 49 Rule 5  of Civil Procedure Rules - applicant's failure to file defence within 15 days as per the terms of consent orders - application dismissed

Adero Adero & another v Ulinzi Sacco Society Ltd

High Court, at Nairobi

December 17, 2002

Ringera J

Civil Suit No 1879 of 1999

Jurisdiction – dispute between co-operative society and its members–– dispute filed in High Court–– whether High Court has jurisdiction to determine the dispute – whether absence of requisite statutory tribunal meant that the High Court had jurisdiction.

Jurisdiction – dispute filed in Court lacking jurisdiction–– both parties consenting to refer the dispute to statutory tribunal having jurisdiction – acquiescence on both parties established–– whether parties by consent or acquiescence can confer jurisdiction on a body lacking it–– whether such conduct precludes a party from raising the issue at a late stage.

Civil Practice and Procedure – transfer of suit – suit filed in a court lacking jurisdiction – whether such Court can transfer it to a court of competent jurisdiction–– whether Co-operative Tribunal is a subordinate Court for purpose of transferring suit under Civil Procedure Act (cap 21) section 18.

The Plaintiffs were members of a registered co-operative society who filed a dispute with the society in the High Court. The Cooperative Societies Act, 1997 section 76 mandated a Cooperative Tribunal to deal with all disputes between members and any registered society. However, at the time the dispute arose, no tribunal had been constituted though it was later on constituted.

The plaintiffs then made an application to the High Court seeking the transfer of the suit to the Cooperative Tribunal on the ground that the matter fell within the Jurisdiction of Tribunal as established under the Co-operative Societies Act, 1997.

Held:

1. As the subject matter of the suit was a dispute between a registered co-operative society and its members, the dispute should not have been filed in the High Court by dint of the provision of the Cooperative Societies Act, 1997 section 76.

2. The Jurisdiction either exists or does not ab initio and the nonconstitution of the forum created by statute to adjudicate on specified disputes could not of itself have the effect of conferring jurisdiction on another forum which otherwise lacked jurisdiction.

3. Jurisdiction cannot be conferred by the consent of the parties or be assumed on the grounds that parties have acquiesced in actions which presume the existence of such jurisdiction.

4. Jurisdiction is such an important matter that it can be raised at any stage of the proceedings and even on appeal.

5. Where a cause is filed in court without jurisdiction, there is no power in that court to transfer it to a Court of competent jurisdiction.

6. The Co-operative Tribunal is not a subordinate court and as such the High Court had no power under section 18 of the Civil Procedure Act to transfer any suit to it.

Application dismissed.

Cases

Kandara Farmers Co-operative Society Ltd & 9 others v Joseph Kanyua & 18 others High Court Civil Case No 2646 of 1998

Statutes

1. Civil Procedure Act (cap 21) section 18

2. Civil Procedure Rules (cap 21 Sub Leg) order L rule 1

3. Co-operative Societies Act 1997 (Act No 12 of 1997) section 76

4. Constitution of Kenya section 65

[RULING] Civil Practice and Procedure-injunctions-whether a claim of costs could be treated as a substantive claim-whether interlocutory judgment could be properly or regularly entered in based on such pleadings

[RULING] Civil Practice and Procedure-summons-where the hearing notice was filed by a person who was not licensed to serve such processes at the time-validity of service

Charles Omwata Omwoyo v African Highlands & Produce Co Ltd

High Court, at Nairobi

October 16, 2002

Ringera J

Miscellaneous Application No 308 of 2002

Civil Practice and Procedure – transfer of suit – whether the High Court can exercise its power under section 18 of the Civil Procedure Act (cap 21) to transfer a suit from a court without jurisdiction to a court with jurisdiction.

Advocate – mistake of advocate – filing suit in a court which has no jurisdiction to hear it – whether mistake or negligence of an advocate is a good ground for relief to favour a client – negligence as distinguished from a genuine error or mistake on the part of an advocate – consequences of advocate’s mistake – person who should bear the burden of mistakes.

The plaintiff made an application for an order to transfer the suit to another court. The issue for determination was whether the court had jurisdiction to transfer a suit from a court which was seized of it but had no jurisdiction to determine it to a court vested with jurisdiction. It was also argued that dismissing the application would be tantamount punishing the plaintiff for the mistake of his advocate.

Held:

1. The High Court cannot exercise its discretion to transfer a suit from one court to another if the suit is filed in the first place in a court which does not have the pecuniary and/or territorial jurisdiction to try it.

2. The Nairobi Resident Magistrate’s Court did not have the jurisdiction to entertain the plaintiff’s suit as the lowest court of competent jurisdiction to handle it was the Kericho Magistrate’s Court.

3. It may be that to dismiss the application for transfer would be to punish the plaintiff for the mistake of his advocate but if the court has no jurisdiction to do something it cannot do so in what is said to be in the interests of justice.

4. (Obiter) The interests of justice are forever best served by upholding the law and not bending it to suit the individual circumstances of cases before the court. But even if the court had discretion in the matter, it may be asked whether to file a suit in a court without jurisdiction may be treated as the kind of mistake by an advocate which the court may overlook.

5. (Obiter) Even if this matter had involved an exercise of discretion and not want of jurisdiction, this Court would have declined to exercise its discretion in favour of the applicant on the grounds that he found himself in a predicament as a result of his advocate’s alleged mistake. The time has come for legal practitioners to shoulder the consequences of their negligent acts or omissions like other professionals do in their fields of endeavour.

Application dismissed

Cases

1. Kagenyi v Musiramo [1968] EA 43

2. Mendonca v Rodrigues (1906-1908) 2 KLR 51

3. Mawji v Lalji & others Civil Application No 236 of 1992

4. Kettleman v Hansel Properties Ltd [1988] 1 All ER 38; [1987] AC 189; [1987] 2 WLR 312

Statutes

1. Civil Procedure Act (cap 21) sections 3, 3A, 18(1)(b)(ii) 11; 15

2. Civil Procedure Act section 18 [UGANDA]

[Ruling] – BANKRUPTCY LAW – discharge – application for discharge – where the official receiver and the creditors have no objections – validity of order

[Ruling]-Civil practice and procedure striking out-application to strike out as against the 2^nd and 3^rd Defendants on the ground that it was res judicata-where there had been an earlier suit which had been struck out and that the plaintiff had filed notice of appeal against the decision and was still pursuing proceedings for the purposes of the appeal-where the first suit had been struck out for being incompetent as it had been filed by an unqualified advocate-where the appeal had a slim chance of success-whether filing a second suit through a qualified advocate was the only way open to the plaintiff to file a competent suit- Section 7 and 3A of the Civil Procedure Act