Cofftea Machinery Services Limited v Phoenix Properties Limited (Insolvency Cause E164 of 2024) [2026] KEHC 7917 (KLR) (Commercial and Tax) (4 June 2026) (Ruling)

Cofftea Machinery Services Limited v Phoenix Properties Limited (Insolvency Cause E164 of 2024) [2026] KEHC 7917 (KLR) (Commercial and Tax) (4 June 2026) (Ruling) Neutral citation: [2026] KEHC 7917 (KLR) Republic of Kenya In the High Court at Nairobi (Milimani Commercial Courts) Commercial and Tax Insolvency Cause E164 of 2024 BK Njoroge, J June 4, 2026 Between Cofftea Machinery Services Limited Applicant and Phoenix Properties Limited Respondent Ruling 1.This Ruling is in respect of an application by the debtor/Applicant seeking to set aside a statutory demand. Background Facts 2.The Applicant filed the Notice of Motion dated 18th March, 2025 and sought the following orders;1.Spent.2.This Honourable Court be pleased to strike out the Statutory Demand dated 1" August 2024 Issued by Respondent against the Applicant, forthwith.3.This Honourable Court be pleased to declare that the Statutory Demand is invalid, unlawful, and incapable of enforcement on the grounds that the Applicant company was dissolved on 26th June 2007 pursuant to Section 339(5) of the Companies Act (Cap 486) (repealed).4.This Honourable Court be pleased to issue an order barring the Respondent from taking any further insolvency proceedings against the Applicant.5.The costs of this application be borne by the Respondent. 3.The Application was supported by the Affidavit of Divyesh Indubhai Patel. He stated that the Applicant was dissolved on 26th June, 2007 under Section 339(5) of the repealed Companies Act and has not been reinstated. That therefore, pursuant to Section 400 of the Companies Act, 2015, it ceased to exist as a legal entity incapable of being subjected to any legal or insolvency proceedings. Despite this, the Respondent is said to have unlawfully issued a statutory demand against a non-existent entity, rendering the demand a nullity void ab initio and unenforceable. The Applicant contended that it stands to suffer irreparable harm if liquidation proceedings are pursued, and maintains that the present application has been brought in good faith, without undue delay, and in the interest of justice. 4.In response, the Respondent filed the Replying Affidavit sworn on 24th April, 2025. The Respondent stated that the Applicant seeks to set aside a statutory demand dated 1st August, 2024 on the basis that it was dissolved in 2007. However, the application is incompetent and time-barred, having been filed outside the twenty-one (21) days required under the Insolvency Regulations. This is despite evidence showing the Applicant was served on 19th August, 2024. The Applicant is further accused of failing to comply with procedural requirements. This is including properly supporting the application with necessary documentation, and deliberately omitting proof of service. 5.On the merits, the Respondent argued that dissolution does not extinguish the Applicant’s liabilities, as the law permits enforcement against a struck-off company and allows the Court to wind it up. The Respondent also relied on the judgment in Equip Agencies Limited & 6 others v Phoenix Properties Limited [2019] KECA 1030 (KLR). This was delivered in its favour arising from a lease dispute. The Applicant participated in those proceedings and was found liable for substantial sums, including rent arrears, mesne profits, and costs. Accordingly, the Respondent maintained that the Applicant’s obligations remain enforceable notwithstanding its dissolution. Issues for determination 6.The Court has carefully considered the Application, the response, and the Applicant’s written submissions, and the issue for determination is;a)Whether the Statutory Demand should be set aside. Analysis 7.The Court’s power to set aside a statutory demand is anchored both in its inherent jurisdiction and in statute, and is expressly provided for under Regulations 16 and 17 of the Insolvency Regulations. In particular, Regulation 17(6) empowers the Court to set aside a statutory demand where:a.the debtor appears to have a counterclaim, set-off, or cross-demand equal to or exceeding the amount demanded;b.the debt is disputed on grounds which appear to the Court to be substantial;c.the creditor holds security whose value equals or exceeds the debt; ord.the Court is satisfied, on other grounds, that the demand ought to be set aside. 8.Further, Regulation 16(1) of the Insolvency Regulations, 2016 provides that a debtor may apply to set aside a statutory demand within twenty-one (21) days. This is from the date of service of the demand, or where the demand has been advertised, from the date of the advertisement’s first appearance. 9.It is clear that the Regulation confines the Court’s jurisdiction to setting aside a statutory demand to four grounds only, namely: where there is a counterclaim/set‑off/cross‑demand equal to or exceeding the debt; or where a debt is genuinely disputed on substantial grounds; or where security equal to or exceeding the debt; or where other sufficient reason. 10.Before delving any further into the merit of the Application, it is notable that the Respondent pointed out that the Application was filed out of time contrary to Regulation 16(1) of the Insolvency Regulations, as it ought to have been filed by 22nd August, 2024 or at the latest by 9th September, 2024. The Applicant deliberately failed to annex a stamped copy of the statutory demand to conceal the delay. Consequently, the Application is incompetent and should be struck out for non-compliance with the applicable Regulation. 11.The Applicant argued that it obtained leave from the Court (Hon. Noelle Kyanya) on 18th March, 2025 to file the application out of time, and therefore, the application is properly on record both factually and legally. The Applicant added that leave was granted in the presence of Counsel for the Respondent herein, who at the time did not raise any objection and up to date the said leave has neither been reviewed, set aside, nor appealed against, and thus remains in situ. 12.The Court has perused the Court record and particularly on 18th March, 2025 and, notably, the Applicant did not mention the issue of seeking leave and the record itself doesn’t indicate that the same was discussed. Hon. Noelle Kyanya the Deputy Registrar simply placed the matter before Hon. Adisa the Deputy Registrar and issued a mention date.“Njoroge – RespondentCreditor – AWe haven’t put in our response as we haven’t been served with the claim – we pray for 14 days to comply.DR – Mn 18/3/2025Ouma – CreditorDebtor – Chirchir h/b Mrs. NjorogeOuma – its related to E164, E165, E166, E167, E168 and E169 which is coming before Hon. Adisa on 20/3/25. I pray it be placed before her so that directions are given wholesomely.DR – Matter is placed before Hon. Adisa on 20/3/25 for mention alongside the other matters” 13.Regulation 16 of the Insolvency Regulations, 2016, provides as follows: -1.The debtor may, apply to the Court for an Order to set aside the statutory demand-a.Within twenty-one days from the date of service on the debtor of the Statutory demand;- orb.If the demand has been advertised in a Newspaper, from the date of the advertisement’s appearance, whichever is earlier.2.Subject to any Order of the Court under Regulation 17(7), time limited for compliance with the statutory demand shall cease to run from the date on which the application is lodged with Court.3.The debtor’s application shall be in Form 7 set out in the First Schedule and shall be supported by an affidavit which shall be in Form 8 set out in the Frist Schedule.4.The affidavit referred to under paragraph (3) shall-a.Specify the date on which the statutory demand came into the debtor’s possession.b.State the grounds on which the debtor claims that it should be set aside.c.Annex a copy of the statutory demand. 14.The Court observes that indeed the Applicant has not disclosed when it received the statutory demand, as pointed out by the Respondent. It has also not stated why it did not file the application to set aside the statutory demand within twenty-one (21) days, as provided in Regulation 16(1)(a) of the Insolvency Regulations. 15.The Statutory Demand is dated 1st August, 2024, and therefore, the Application to set aside should have been made around 22nd August, 2024. Notably, the present Application was filed on 18th March, 2025, over seven months later. In addition, the Applicant did not seek the leave of this Court to file the Application out of time. 16.The Applicant also contended that it was lawfully dissolved and struck off the register on 26th June 2007 under Section 339(5) of the repealed Companies Act, as confirmed by Gazette Notice No. 7483, a fact not disputed by the Respondent. On this basis, the Applicant argued that upon dissolution, it ceased to exist as a legal entity and therefore lacks the capacity to be sued or subjected to any legal or insolvency proceedings. 17.Accordingly, the Applicant submitted that the statutory demand issued in 2024 is legally untenable. This is because the Insolvency Regulations presuppose the existence of a debtor company capable of receiving and responding to such demand. A company that ceased to exist in 2007 cannot validly be served or engaged in legal processes, and the law does not recognize actions taken against a non-existent entity. 18.In contrast, the Respondent maintained that dissolution of a company does not in any way waive the liabilities of the Companies that were owing prior to dissolution. 19.It is noteworthy that the Gazette Notice No.7483 published on 23rd July, 2021 is a Notice of Intention to strike out a company under Section 897(3) of the Companies Act 2015 contrary to the Applicant’s assertion that it was dissolved on 26th June, 2007. 20.On this issue, the Court agrees with the Respondent that there is no notice of striking out as required under Section 897(4) of the Companies Act 2015 and as it stands there is no evidence that the Applicant was indeed dissolved. 21.The above notwithstanding, it is the Court’s finding that the Applicant, did not even attempted to seek leave to file the Application out of time before filing the application to set aside the statutory demand. Therefore, there is no competent application before the Court seeking to set aside the statutory demand. 22.The Application fails. 23.As to costs the same lie at the Court’s discretion. Costs ordinarily follow the event. This Court will not deny a successful party their costs unless for cogent reasons. The successful Respondent is awarded costs to be paid by the Applicant. Determination 24.The Applicant’s Application by way of a Notice of Motion dated 18th March, 2025 is hereby struck out. 25.The Respondent is awarded the costs thereof. 26.It is so ordered. DATED, SIGNED AND DELIVERED AT MILIMANI THIS 04TH DAY OF JUNE, 2026.NJOROGE BENJAMIN K.JUDGEIn the presence of;Mr. Odhiambo for the Debtor/Applicant.Mr. Ouma for the Creditor/Respondent.Mr. John Paul - Assistant.