REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT MALINDI

INSOLVENCY/BANKRUPTCY CAUSE NO. 1 OF 2018

IN RE INVESCO ASSURANCE COMPANY LIMITED ..........DEBTOR/APPLICANT

VERSUS

DAMA CHARO NZAI...................................................................................1^ST CREDITOR

LNC (minor suing through mother and next friend ZJK) .......................2^ND CREDITOR

DODI MOHAMED OMAR alias DODI MOHAMED.............................. 3^RD CREDITOR

HHM (minor suing through                                                                                                       

mother and next friend DMO) .................................................................... 4^TH CREDITOR

LJC (minor suing through                                                                                                           

mother and next friend ZJK) ........................................................................ 5^TH CREDITOR

ZAWADI JOSEPHINE KATANA................................................................. 6^TH CREDITOR

MANGISI MWAVADU MAGUDA alias                                                                                      

MAGISI MAVACHO MAGUNDA ................................................................7^TH CREDITOR

RAMLA BONA MAKORANI alias RAMLA BOMA MAKORANI...........8^TH CREDITOR

FLORENCE WAMBUI CHIMBA................................................................. 9^TH CREDITOR

MADINA OMAR BWAMADI.....................................................................10^TH CREDITOR

SAFARI MITSANZE IHA............................................................................11^TH CREDITOR

BGC (minor suing through                                                                                                          

mother and next friend DCN) .....................................................................12^TH CREDITOR

EGC (minor suing through                                                                                                         

mother and next friend DCN) ................................................................... 13^TH CREDITOR

MONICA WAMUYU MUGANGA alias MONICA JACOB..................14^TH CREDITOR

GEORGE THOYA IHA.............................................................................15^TH CREDITOR

PT alias PHT (minor suing through mother and next friend MWM......16^TH CREDITOR

SYLVESTER KAI JEZA alias SYLIVISTER KAI JEZA ......................17^TH CREDITOR

JAMES IHA KIRAO.................................................................................. 18^TH CREDITOR

SALIM HASSAN RAJAB alias SALIM HASSAN RAJABI.................. 19^TH CREDITOR

CHISHENGA KITI MWATSUMA alias CHISENGA KITT.................. 20^TH CREDITOR

LEWIS GAMBO DECHE......................................................................... 21^ST CREDITOR

ALBERT KATIMBO RANDU .................................................................. 22^ND CREDITOR

FEISAL MOHAMED NURIE alias FEISAL MOHAMED alias                                            

FEISAL MOHAMED NOOR alias FAISAL MOHAMED..................... 23^RD CREDITOR

ELAMO WARAB KHALIF alias ELAMO NOOR..................................24^TH CREDITOR

NYEVU KAZUNGU KANIKI...................................................................25^TH CREDITOR

WN alias ON (minor suing through                                                                                         

mother and friend HMK).........................................................................  26^TH CREDITOR

STEPHEN KAHINDI KARISA ............................................................... 27^TH CREDITOR

HELLEN MWENDA KATANA................................................................28^TH CREDITOR

NYAMAWI SANGA TEMBO.................................................................. 29^TH CREDITOR

CHRISTINE CHONGA MWAMBOGO.................................................30^TH CREDITOR

FK ( suing through father and next friend                                                                            

ECK)..........................................................................................................31^ST CREDITOR

EC ( suing through mother and next friend                                                                          

KCK)........................................................................................................ 32^ND CREDITOR

ABY ( minor suing through father and next friend                                                               

LBY)............................................................................................................33^RD CREDITOR

JONATHAN MUNGAMBA CHARA........................................................34^TH CREDITOR

REHEMA KITSAO alias REHEMA HARE............................................. 35^TH CREDITOR

KANZE KAZUNGU MBITHA (legal representative of the Estate of                                    

MARIELA KARISA KATANA(deceased).................................................36^TH CREDITOR

LUCY HAWADESA MOROA................................................................. 37^TH  CREDITOR

EUNICE HAWAYU DEYE......................................................................... 38^TH CREDITOR

PJ (minor suing through mother and next friend                                                                      

 EHD)...............................................................................................................39^TH CREDITOR

JS (minor suing through mother and next friend                                                                       

 EHD)................................................................................................................40^TH CREDITOR

ASHA HADADA NJUGUNA alias ASHA HADIDA NJUGUNA................41^ST CREDITOR

GUIYATO DHADHO JEURI alias GUYATO DHADHA JEURI...............42^ND CREDITOR

HAZIJAH MKEAMARI NJIGI alias  MKEAMARI  DHIDHA................43^RD CREDITOR

MARYAN YAHYE MOHAMED alias MARIAM YAHYA..........................44^TH CREDITOR

MWANADIE  MALIKA MUSA.................................................................... 45^TH CREDITOR

OMAR ABIO WARU alias OMARI ABIO......................................................46^TH CREDITOR

ELIZABETH NYADZUA KOLE.................................................................... 47^TH CREDITOR

NADRA HABUYA NTIWANDA alias NADRA H. NTIWANDA................ 48^TH CREDITOR

SO ( minor suing through mother                                                                                                   

and next friend MMM)....................................................................................... 49^TH CREDITOR

MOHAMED OMAR FADHILI ( legal representative of the estate of                                            

MARIAM ABOUD MAULID-deceased).......................................................... 50^TH CREDITOR

DAMA NZAI RUWA ........................................................................................... 51^ST CREDITOR

JUMWA GONA KENGA alia JUMWA GONA................................................. 52^ND CREDITOR

MGANGA KENGA KASHINDO alias MUGONDA KENGA......................... 53^RD CREDITOR

KADHENGI BAYA GUNGA alias KANIKI KATHENGI............................... 54^TH CREDITOR

BENDERA KAINGU NGOMBO alias BENDERA KAINGU.......................... 55^TH CREDITOR

JUMWA KIPONDA MWAVUO alias                                                                                                    

JUMWA KIPONDA CHARO.................................................................................. 56^TH CREDITOR

KR alias K (minor suing through                                                                                                             

mother and next friend NCK) .................................................................................... 57^TH CREDITOR

ENF (minor suing through                                                                                                                          

mother and next friend JKM ...................................................................................... 58^TH CREDITOR

CORAM:     Hon. Justice R Nyakundi

                     Kibet Rop Advocates for The Applicant

                     Wambua Kilonzo Advocates for The Respondent

RULING

Background

The Debtor/Applicant filed an application vide a Notice of motion dated 1^st July 2020 filed on 28^th July 2020 seeking inter alia the following;

a.  Interim order staying proceedings in Insolvency cause no 1 of 2018 pending the hearing and determination of the application

b.  Interim orders staying proceedings in Insolvency cause no 1 of 2018 pending conclusion of fraud investigations

c.  Pending hearing and determination of the application over Kshs. 5,000,000 Paid by the Applicant to the Respondent/creditors (whether held by themselves or by their advocate) be deposited in court in accordance with order 40 rule 11 of the civil procedure Rules 2010

d.  The1^st,2^nd,3^rd,4^th, 5^th, 6^th,11^th, 12^th,13^th,14t, 16^th,18^th,19^th,20^th,21^st,22^nd and 29^th creditors/petitioners and their respective claims be struck out

e.  The amount of money paid by the Applicant to the creditors (whether held by themselves or by their agent0 whose claims have turned out to be fraudulent be compelled to refund the applicant pursuant to section 204B (6) of the insurance act

f.   That the court do issue such other orders and give such directions as it may deem fit to meet the ends of justice and the protection of the constitutional rights of the applicants.

g.  Costs of the application.

The application was premised on grounds and averments of the supporting affidavit of PAUL GICHUHI, the Applicant’s legal manager. In his supporting affidavit, he states that the Respondents/creditors filed and insolvency claim being Insolvency no. 1 of 2018 wherein the Respondents falsely claim that the Applicant is unable to pay its debts.

He further states that the Applicant receives claims both genuine and fraudulent from the whole country which takes long time to ascertain genuine and fraudulent claims and that the Applicants always asks various court to allow them carry out investigations before proceeding any further which prayer is declined in most cases.

As regards the present case, he avers that they carried out preliminary investigations whose outcome indicate that a number of claims in Insolvency no. 1 of 2018 are based on fraudulent claims which are in total violation of section 204B of the Insurance Act. These being 1^st,2^nd,3^rd,4^th, 5^th, 6^th,11^th, 12^th,13^th,14t, 16^th,18^th,19^th,20^th,21^st,22^nd and 29^th claims and that the Applicant had lodged a complaint with the Fraud investigations unit of the IRA and the DCI.

He further averred that the Respondents have contravened the procedure provided for in the insurance Act and only seek to liquidate the company under the insolvency Act which was highly publicized creating a wrongful perception in the eyes of the general public. That it is in the interest of justice that all the proceedings in Insolvency cause no. 1 of 2018 be stayed pending the hearing and determination of the application.

The Respondents/Creditors filed its response through a replying affidavit sworn by one Geoffrey Kilonzo advocate for the Respondent’s/creditors.

He avers that the application is incompetent and bad in law, a fishing expedition, a tactic meant to delay the finalization of the petition, a tactic meant to ensure that the petitioners do not get their day in court, a desperate attempt by an insolvent insurance company to stay afloat against the dictates of the law, not merited but malicious and motivated by ill will and an abuse of court process and therefore the application ought to be dismissed with costs.

He avers that the petition discloses that the petitioners have genuine decrees from various courts which they are unable to execute the said decrees against the   Applicant since the applicant had nothing executable which amounted to committing an act of bankruptcy because the applicant could not pay its debts or judgment decrees thus violating the provisions of section 384 (b) of the insolvency Act which states that a company is unable to pay its debts if;

“Execution or other process issued on a judgment, decree or order of any court in favor of a creditor of the company is returned unsatisfied in whole or in part;’’

That the jurisdiction of this court was invoked under section 15 (1) and 17(1) of the Insolvency act. Section 15 (1) states that;

A bankruptcy application may be made to the court in accordance with the provisions of this part (a) by one of the person’s creditors or jointly by two or more of them; (b) by the debtor; or (c) by the supervisor of any person who is for the time being bound by a voluntary agreement proposed by the debtor and approved under Division I of part IV.’’

Section 17(1) of the Insolvency Act provides that;

“one or more creditors of a debtor make an application to the court for an order of bankruptcy to be made in respect of the debtor in relation to a debt or debts owed by the debtor to the creditor or creditors.’’

He further stated that the said decrees against the applicant are still valid because they have not been set aside or reviewed as the same had been reached after inter party hearing and no appeals were preferred. He urged the court to strike out the applicant’s application.

Parties filed submissions in respect of the application. The Applicant submits that, the Covid -19 pandemic has caused a global economic recession which affected the economic situation in the sector in which the Applicant operates. That there has been reduction in gross written premiums in insurance and reinsurance companies leading to vulnerability and volatility in financial markets.

The applicant further submits that grounds under section 384 of the Insolvency Act have not been met. That they have demonstrated the willingness and ability to pay the monies owed.

The applicant also submitted that it would not be just and equitable for the respondent to be liquidated. They placed their reliance in the case of RE Eagle Africa insurance brokers Kenya limited [2014] eKLR where the court held that a company is deemed solvent if it has paid off part of the undisputed claim and in Re Matter of Al’amin insurance Brokers Ltd v The matter of Companies Act [2009] eKLR where the court held that a disputed debt should not lead to the placing of a company under administration.

They submitted that the Applicant had paid off part of it’s debt and the fact that it challenges the amounts stated in the petition which challenge was uncontroverted is enough grounds to convince the court to go slow on adjudging the applicant and cited the case of Re Ukwala Supermarket limited [2019] eKLR  where it was opined that liquidating a company is a draconian step which as the retired justice Kwach in Matic General contractors limited vs. Kenya Power Lighting and Company Limited (2001) LLR 487 (CAK) said amounts to ‘corporate execution’

The applicant further submitted that for the court to adjudge them insolvent, it must be satisfied that the respondent is likely to be unable to pay its debts and that the order if made is reasonably likely to achieve the objective the petitioner seeks. They relied on the case of Re Nakumatt Holdings Limited [2017]eKLR.

The respondent/Creditors submitted that the debtor was keen on misleading the court. That section 41 of the insurance Act deals with capital adequacy of insurance companies and categorically states that an insurer shall at all times maintain capital adequacy ratio of 100% whereas section 122 of the insurance act says that for purposes of section 384 of the Insolvency Act, an insurer is taken to be unable to pay its debts if it has not observed the solvency margins as per section 41 of the Insurance Act.

They further submitted that in the instant case, the petition is not premised on section 41 of the insurance Act but section 384 of the Insolvency Act more particularly where warrants of attachment and sale have been returned to court unexecuted and clear evidence has been rendered in the pleadings.

They also submitted that the current application appears to be an appeal through the window and asked the court not to sit on appeal against its own judgment without necessarily being asked to review it. Further the issues raised in the current application had been considered in the rulings of Justice Korir and Justice Nyakundi.

Issues for determination

·   Whether the application dated 1^st July 2020 has any merit and whether the prayers sought should be granted

Analysis and Determination

As demonstrated above the genesis of all this litigation is the judgment of the court pronounced by the session judge W. Korir on 21.11.2019. Approximately soon thereafter a similar application was filed by the applicant to seek review of the previous decision which was also denied by this court on 3.12.2019. The court rejected the applicant’s contention to review the ruling by the judge W. Korir for lack of error apparent on the face of the record or existence of new or additional evidence which was not availed at the initial trial.

From these same facts the applicant has brought another application, canvassed as a different cause of action, and it seeks a re-determination of issues which were raised in the first two applications in the first and second instances before the court. In such a scenario the court looks behind the res judicata doctrine under Section 7 of the Court Procedure Act to determine whether under the facts of the case, re-litigation is justified within the provisions of Section 7 (4) of the Act. thus:

“res judicata affects those matters which should have but were not made part of the claim in the earlier suit which are deemed to have been substantially and directly in issue, in such a suit and the failure to canvass the issue could only be blamed on the applicant”

The characterization of the right to a dispute in respect of the application of resj udicata was decided in Abdul Hassanali Khaliif v Southern Credit Banking Corporation Ltd Mombasa High Court Civil Case No 270 of 2005. In that case the court observed that “res judicata relates to a matter already adjudicated upon or a matter on which judgment has been pronounced and it is applicable to interlocutory application in that a party whose application has been dismissed is barred from following a similar application on the same grounds” See also Samuel Kiiru Gitau v John Kamau Gitau Ndumbi High Court Civil Case No. 1249 of 1998. In Maria Kavina Sentamu v Kikondo Kyaterekea Growers Cooperative Society (1996), 1 KARL 160. Henderson v   Henderson (1843) 3 Hare 100 al 45.  The court held inter alia that in deciding whether a second suit or application is brought on the same facts or as a different cause of action, the following guidelines form part of the yardstick to be taken into account.

(a)  existence of a previous suit in which the matter was in issue

(b)  The parties were the same or litigating under the same title

(c )  A competent court heard the matter initial

(d)   The issue had been raised once again in a fresh suit

By what test is a trial court supposed to determine whether the circumstances of a case are sufficient to justify the application of res judicata? I guess, in my view the test emerges from an appraisal behind each judgment and the specific circumstances of each case to determine whether there exist facts in issue, adjudicated upon by the previous court to cast beyond the shadow of doubt on the finality of the litigation.

It is noted that the primary functions of the doctrine of res judicata is to prevent a party from being vexatious in his litigation against the opposite party. Without much strain if the plaintiff was to be allowed to press, the same claim time and time again after a decision on the same set of facts has been rendered, no doubt the other party plainly suffers economic and physiological expense which is mainly enormous. Whichever angle one looks at the parameters of litigation to accede to repetitive adjudication between the same parties and substantially on the same cause of action is an intolerable burden on our court system.  Similarly, multiplicity of suits on the same cause of action does undermine the integrity of the justice system in a society, where public confidence is a key pillar to meet the ends of justice. 

In the instant case it cannot be gainsaid that the first and second applications did consider the provisions of the insurance Act in so far as it affects the rights of the applicant. Since there was no appeal in those other rulings, I feel compelled that any altered circumstances are expressly and impliedly stated along identical lines.

Its worthy to note that in the light of the pleadings in the two notice of motions filed before this court clearly show that the dispute has not mutated to a different cause of action.  It’s on record that both courts of competent jurisdiction investigated the issues on the indebtness of the applicant and finally concluded that insolvency proceedings shall commence henceforth. Certainly res judicata would apply to the case herein under scrutiny.

On the whole there does not seem to be sufficient strength in the motion to support it in light of the advantages which accrue by the application on the cause of action estoppel. This legal concept was asserted in Carl Zeiss Stiftung v Rayner & Keeler Ltd. No. 3, cited in sydia  Matheson v Letieth Watts (2018) JMCA Civil 144.  which set down the test in the ‘cause of action’ estoppel in these terms;

1.  That there has already been a judicial decision by a competent court or tribunal,

2.  That decision is of a final character,

3.  The decision relates to the same question as that sought to be put in issue by the plea in respect of which the estoppels is claimed, and

4.  The decision must have been between the same parties or their privies as the parties between whom the question is sought to be put in issue.

 “A party is precluded from contending the contrary of any precise point which, having once been distinctly put in issue has been solemnly and with certainty determined against him. Even if the objects of the first and second actions are different the finding on a matter which came directly (not collaterally or incidentally) in issue in the first action and which is embodied in a judicial decision that is final, is conclusive in a second action between the same parties and their privies. The principle applies whether the point involved in the earlier decision is one of fact or law or a mixed question of fact and law. It is established on some authorities that this form of estoppels arises where a particular issue, forming a necessary ingredient in a cause of action, has been litigated and decided and one of the parties seeks to re-open it in subsequent proceedings between the same parties involving a different cause of action to which the same issue is relevant: Arnold v National Westminster Bank Plc. (No. 1) [1991[ 2 AC 93, 105 In those circumstances the earlier decision acts as a Bar to raising the issue in the subsequent matter.

Given the above background the Applicants brought an application dated 27^th November 2018 seeking orders restraining the creditors herein from proceeding to file the intended petition and advertising the intended insolvency petition and setting aside the statutory demand. This application was heard and determined by Justice Korir vide a ruling delivered on 21^st February 2019. The upshot of the ruling was the honorable judge declined to set aside the statutory demand but suspended the same for a period of six months on condition that the applicant/debtor pay to the creditors a sum of Kshs. 10 million within 60 days from the date of the ruling. Further, the Applicant was to file a proposal in court on how it intended to liquidate the balance within the period of suspension of the demand notice. Failure to which, the statutory notice stood automatically reinstated for any balance outstanding at that time.

The Applicants further filed a notice of motion under a certificate of urgency on 20^th June 2019 seeking declaratory orders pending the final determination of the appeal to be instituted in the court of appeal. The court rendered itself through a ruling delivered on 3^rd December 2019 where it declined to allow the application.

Noteworthy, is the fact that the Applicant failed to honor the order of the court to pay the creditors the sum of Kshs. 10 million within 60 days from the ruling but instead filed a notice of appeal. Further up to the time of the current application, the conditions of the ruling have not been met.

I do agree with the Creditors that there are no grounds as to why the bankruptcy proceeding should be stayed. One of the maxims of equity state that “He who seeks equity must come with clean hands.’’ The Applicant has not demonstrated good will on his end as he has not complied with the conditions of the ruling of Justice Korir.

The applicant further raises the issue of the Covid -19 Pandemic. The court is aware of the prevailing pandemic and even the time the same rocked the country sometime mid-March 2020 which was approximately a year after the referenced conditions had been met. There is no explanation offered why the same were not met and have not been made up to this time.

The debtor is indeed on piecemeal litigation whose aim is to delay the matter which is nothing but an abuse of the court process. The Applicant has not set aside the conditions as set out in the ruling by justice Korir. In allowing this present application the court will be aiding the applicant is disobeying the ruling and also abusing the powers of this court.

In the premises having examined the notice of motion, the affidavit and written submissions of Learned Counsel on both sides and on the basis of the reasons stated above, the application is res judicata and the applicant is estopped in pursuing this same issue again and again.

The motion is struck out for being vexatious and an abuse of process with costs to the respondent.

DATED, SIGNED AND DELIVERED AT MALINDI THIS 24^TH DAY OF MARCH, 2021

……………………………………………..

R. NYAKUNDI

JUDGE

NB:    This Judgment is dispatched electronically to the respective emails of the advocates in the matter.

(wambuakilonzoadvocates@gmail.com and info@kibetropadvocates.co.ke)