https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7919

Equip Agencies Ltd v Phoenix Properties Ltd (Insolvency Notice E170 of 2024) [2026] KEHC 7919 (KLR) (Commercial and Tax) (4 June 2026) (Ruling) Neutral citation: [2026] KEHC 7919 (KLR) Republic of Kenya In the High Court at Nairobi (Milimani Commercial Courts) Commercial and Tax Insolvency Notice E170 of 2024 BK Njoroge, J June 4, 2026 Between Equip Agencies Ltd Debtor and Phoenix Properties Ltd Creditor Ruling 1.This is a Ruling in respect of a Debtor’s application seeking to set aside a statutory demand. Background Facts 2.The Debtor filed the Notice of Motion dated 18th March, 2025 seeking the following orders;1.Spent.2.The Honourable Court be pleased to set aside and/or strike out the statutory demand issued by the Respondent against the Applicant dated 1st August 2024, in its entirety.3.This Honourable Court be pleased to grant an interim order restraining the Respondent from presenting or proceeding with any liquidation petition against the Applicant pending the hearing and determination of this application.4.The costs of this application be borne by the Respondent.5.This Honourable Court be pleased to grant any further orders it deems just and appropriate in the circumstances. 3.The Application was supported by the Affidavit of Divyesh Indubhai Patel who contended that the statutory demand dated 1st August, 2024 is defective, invalid, and amounts to an abuse of the court process, as there exists a genuine dispute over the alleged debt of Kshs. 309,003,638.98. It further argued that the purported debt is the subject of ongoing Court proceedings and/or an appeal, rendering the demand premature and unenforceable. Additionally, the Applicant has a valid counterclaim or set-off which significantly reduces the alleged debt below the statutory threshold prescribed under the Insolvency Act. 4.The Applicant also maintained that the statutory demand is being used as a coercive tool rather than for legitimate insolvency purposes, thereby constituting an abuse of process. It warned that unless the Court intervenes, the Respondent may proceed with liquidation proceedings, which would cause irreparable harm and prejudice to the Applicant. 5.In reply, the Respondent filed the Replying Affidavit, sworn on 24th April, 2025. The Respondent contended 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. 6.The Respondent averred that the Court of Appeal confirmed there was no counterclaim against it and that the Applicant has not paid any rent or decretal sums since 2002, and has not lodged any appeal against the ELC judgment. Therefore, the statutory demand dated 1st August, 2024 was properly issued and is not an abuse of the court process, as the debt arises from a valid judgment that remains unpaid. 7.The Respondent further argued that the Applicant has failed to meet the threshold for setting aside a statutory demand under Regulation 17(6) of the Insolvency Regulations, having neither provided evidence of a counterclaim nor demonstrated a genuine dispute of the debt. Insolvency proceedings are a lawful means of debt recovery, especially for long-outstanding debts, and that the Applicant’s continued occupation of the premises without payment demonstrates bad faith. Accordingly, the Application is an abuse of court process and should be dismissed with costs. Issues for determination 8.The Court has carefully considered the Application, the response, and the written submissions, and the issue for determination is;a.Whether the Statutory Demand should be set aside. Analysis 9.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. 10.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 from the date of service of the demand, or where the demand has been advertised, from the date of the advertisement’s first appearance. 11.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. 12.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. 13.The Applicant argued that it obtained leave from this Honourable 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. 14.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 simply placed the matter before Hon. Adisa 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” 15.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. 16.The Court observed that indeed the Applicant has not disclosed when it received the statutory demand, as pointed out by the Respondent, and it has also not stated why it did not file the application to set aside the statutory demand within 21 days, as provided in Regulation 16(1)(a) of the Insolvency Regulations. 17.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. 18.The Applicant, having not even attempted to seek leave to file the Application out of time before filing the application to set aside the statutory demand, there is no competent application before the Court seeking to set aside the statutory demand. 19.The Application fails. 20.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 21.The Applicant’s Application by way of a Notice of Motion dated 18th March, 2025 is hereby struck out. 22.The Respondent is awarded the costs thereof. 23.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.