[2017] KEHC 1039 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

COMMERCIAL & ADMIRALTY DIVISION

WINDING UP CAUSE NO 1 OF 2000

IN THE MATTER OF TERRACE HOTELS LIMITED

AND

IN THE MATTER OF COMPANIES ACT (CAP 486 OF THE LAWS OF KENYA)

GICHUHI MACHARIA……………..…………..1ST PETITIONER

DUNCAN MWAURA KAMAU………………..2ND PETITIONER

VERSUS

KIAI MBAKI……………..……………………1ST RESPONDENT

WAWERU MUGO……………………………2ND RESPONDENT

THIONGO KIUNGA…...………………………3RD RESPONDENT

RULING

1. These Winding Up proceedings, which are in respect to Terrace Hotel Limited, have been in Court for a long time. Filed 17 years ago, the matter is yet to come to an end.

2. Before Court now is a Notice of Motion dated 23rd February 2017 seeking the following Orders:-

1. Spent

2. THAT pending the hearing and determination of this Application there be a stay of execution of the Award granted by Allen Waiyaki Gichuhi FCI Arb sole Arbitrator made on 6th October 2014 and confirmed by the Honorable Court on 4th December 2015.

3. THAT the Consent Order made on 1st November 2012 and adopted by this Court on 1st November 2012 referring this matter to Arbitration be set aside.

4. THAT the final Arbitral Award made by Allen Waiyaki Gichuhi FCI Arb on 6th October 2014 and adopted by this Court on 4th December 2015 and all other consequential Orders be set aside.

5. THAT the costs of this Application and the suit be provided for.

3. Onesmus Mwangi Mwaura (The Applicant) is the administrator of the Estate of Duncan Mwaura (Deceased) who alongside Gichuhi Macharia (now dead) presented these Winding Up proceedings. It is a common fact that Duncan Mwaura Kamau who was the 2nd Petitioner herein died on 7th October 2005.

4. It is pointed out by the Applicant that through a consent adopted by the Court on 1st November 2012, this matter was referred to Arbitration. The Arbitrator appointed was Allen Waiyaki Gichuhi FCI Arb, who made an Award on 6th October 2014 and which was adopted by the Court on 4th December 2015. The desire of the Applicant is that the Referral Order and the Award and its adoption be set aside.

5. At the heart of the grievances by the Applicant is that at the time of the adoption of the Referral Order, the 2nd Petitioner was dead and the Arbitration proceeded without the participation of his Estate and this would be in contravention of the cardinal principle that a party cannot be condemned unheard. He accuses the 1st Petitioner (acting through his guardian) as deliberately misleading the Court and Arbitrator on all occasions from 1st November 2012 until 14th October 2016 and thereof caused a serious miscarriage of justice to the Estate of the Deceased.

6. Making reference to excerpts of the Arbitral record, the Applicant takes the view that the sole Arbitrator was not certain as to whether the 1st and 2nd Petitioners herein appeared before him as the 1st and 2nd Respondents in the Arbitration proceedings. He asserts that the proceedings before the Arbitrator locked out the 2nd Petitioner and the fact that the final Award gave the 1st Petitioner 61% of the entire value of Terrace Hotel while the 2nd Petitioner only received a paltry 8. 5% share creates an impression that there was a great miscarriage of justice.

7. The Applicant’s position was supported by the Respondents herein. Their Counsel reiterated that there had been no substitution made in respect to the Deceased 2nd Petitioner and the process was flawed as a result of non disclosure by Counsel.

8. Mr. Wangalwa appearing for the Applicant understood that the application was an attack of the Consent order of 1st November 2012. He sought to clarify that the application attacks the process leading to making of that consent. He the stated,

‘Issues of whether interest of 2nd Petitioner were catered for in Arbitration is a matter for another day”

9. Counsel for the Applicant correctly, in my view, identified the gravamen of the Application. The issue is whether the referral made on 1st November 2012 vide the Consent Order of that day was lawful given that the 2nd Petitioner was dead at the date of that consent and that his Estate had not been formally brought into the matter by way of substitution.

10. The Applicant had submitted that no Consent could have been made on behalf of the Estate of the 2nd Petitioner as to do so would breach the provisions of Section 45 of the Law of Succession Act which frowns upon intermeddling of a Deceased Estate. Section 45 provides:-

“(1) Except so far as expressly authorized by this Act, or by any other written law, or by a grant of representation under this Act, no person shall, for any purpose, take possession or dispose of, or otherwise intermeddle with, any free property of a deceased person.

(2 Any person who contravenes the provisions of this section shall—

(a) be guilty of an offence and liable to a fine not exceeding ten thousand shillings or to a term of imprisonment not exceeding one year or to both such fine and imprisonment; and

(b) be answerable to the rightful executor or administrator, to the extent of the assets with which he has intermeddled after deducting any payments made in the due course of Administration.

11. It was submitted that one Advocate represented both the 1st and 2nd Petitioner and was guilty of non-disclosure of Deceased’s death. Counsel was certain that the Court could not have adopted that Consent if this information had been disclosed.

12. Crucial to the determination of the matter before Court is whether the Deceased or his Estate were still party to the proceedings as at the date of Consent and whether therefore the Consent could not have been entered without the participation of his Estate.

13. The General law is that, at Common law, suits or actions are prosecuted by and against living persons. In respect to Civil Proceedings, Order 24 of the Civil Procedure Act is dedicated to providing procedure in the event of the Death and Bankruptcy of Parties.

14. This dispute was filed in the setting of the now repealed Companies Act (Chapter 486). That statute was still in operation on 12th November 2012 when the consent order was adopted as an order of Court. Both the Repealed Companies Act and the Companies (Winding Up) Rules made thereunder are silent on how to treat the death of a Petitioner. However, the Winding Up Rules Anticipated that there would be instances where the Act or the Rules has not provided the practice, procedure or regulations to be applied. The Rules gave a fallback position in Rule 203 as follows;-

“In all proceedings in or before the Court, or any Judge, registrar or officer thereof, or over which the Court has jurisdiction under the Act or these Rules, where no other provision is made by the Act or these Rules, the practice, procedure and regulations in such proceedings shall, unless the Court otherwise directs, be in accordance with the Rules and practice of the Court.”

15. The procedure of this Court in Civil Proceedings is governed by the Civil Procedure Act and the Civil Procedure Rules. Order 24 of the Civil Procedure Rules sets out the law on how a legal representative of a Deceased Party can step into the shoes of the Deceased Party where the cause of action survives or continues. It also provides the consequences where no application is made within the prescribed by, the legal representative of a Deceased Plaintiff or Defendant to be made a Party to the suit. Where no such application is made, then the suit abates as far as the Deceased Plaintiff is concerned or as against the Deceased Defendant. I would think that one of the objects of this Rule is that, if a cause of action or right survives or continues after the Death of a Deceased Party, then it should not abate. On the other hand, by providing a prescribed time within which a legal representative of Deceased Party can move Court to be made a Party to the proceedings, the other Parties are not unduly handicapped or prejudiced by a lengthy impasse in the proceedings that can be brought about by the death of a party. The design of the Rule, therefore, is that a suit does not abate because of the Death of a Party but when his/her Legal Representative fails to apply to be made a Party within the prescribed time.

16. Given these laudable objects, there should be no reason, in my view, why the Provisions of order 24 of the Civil Procedure Rules in respect to Death should not apply, with necessary modifications, to Winding Up proceedings under the Provisions of the Repealed Act. A modification that comes to mind is that where a sole Petitioner dies, a person/persons who are already Party/Parties to the Petition and who would be entitled to present a Petition (like creditors or contributories) should be permitted to apply to be substituted as Petitioner/Petitioners before the proceedings are allowed to abate. That said, one hopes that the Rules Committee which is mandated to make Rules providing for the procedure in Insolvency matters (Section 697 of the Insolvency Act) will consider making rules in respect to the Death of Parties under the present Statutory Framework.

17. Let me now apply the provisions of Order 24 to the scenario of the matter at hand. Prior to the death of the Deceased, there were 2 Petitioners to this cause. The Applicant makes it clear that the causes of Action of the two Petitioners were distinct and so the cause of Action of the Deceased did not survive or continue to the surviving Petitioner (The 1st Petitioner). In this regard the provisions of Order 24 Rule 3 of the Civil Procedure Rules would be relevant and provides:-

"(1) Where one of two or more plaintiffs dies and the cause of action does not survive or continue to the surviving plaintiff or plaintiffs alone, or a sole plaintiff or sole surviving plaintiff dies and the cause of action survives or continues, the court, on an application made in that behalf, shall cause the legal representative of the deceased plaintiff to be made a party and shall proceed with the suit.

(2) Where within one year no application is made under subrule (1), the suit shall abate so far as the deceased plaintiff is concerned, and, on the application of the defendant, the court may award to him the costs which he may have incurred in defending the suit to be recovered from the estate of the deceased plaintiff:

Provided the court may, for good reason on application, extend the time.”

18. It being common ground that the Deceased died on 7th October 2005, and his legal representative not having made an application to be made a party herein within one year of the Deceased death, the cause in respect to the Deceased abated. So far as the Deceased Petitioner was concerned these proceedings had long abated on the date the Consent was entered. In that event the Deceased Petitioner or his Estate would not be eligible to participate in the proceedings. Indeed the Deceased cause having abated on his first anniversary of his death there was no Petition by him or his Estate on a day thereafter.

19. Did Counsel for the Petitioner fail to disclose the Death of the Deceased Petitioner to the Court on the date of adoption of the Consent? The Court record of 1st November 2012 shows the coram as follows:-

Havelock J.

Court clerk Alex

Mr. Ojwang for Petitioner

Mr. Musyoka for Respondent

There was no indication that Mr. Ojwang was appearing for more than one Petitioner.

20. Importantly, however, there is evidence from the Court proceedings that the issue of the Death of the Deceased had been disclosed to Court as early as 22nd January 2009. The Respondents herein had requested for the dismissal of this Petition vide a Notice of Motion dated 30th January 2008. In an affidavit sworn in support of the Motion, the 2nd Respondent had stated that it was within his knowledge that the Deceased had died on 7th October 2005 and he produced a copy of a Certificate of Death in proof thereof. Mr. Musyoka then appearing for the Respondent told Court,

“The Petition in this matter was filed by two people, Gichuhi Macharia and Duncan Mwaura Kamau in their capacity as contributors of the company. Duncan Mwaura Kamau died on 7. 10. 2005. Gichuhi Macharia is therefore the only Petitioner”.

Indeed in a Ruling delivered on 4th February 2009 Hon. Kimaru J. observed,

“Since Duncan Mwaura Kamau, the co-petitioner of Gichuhi Macharia is Deceased, the only person who could have prosecuted the Petition is the said Gichuhi Macharia”.

21. The Court was therefore seized of the information of the Death of the Deceased at the time of adopting the Consent of 1st November 2012. At any rate the only Petitioner was Duncan Mwaura Kamau who was prosecuting the Petition through his duly appointed Administrators and Managers Titus Thuo Macharia and Anthony Macharia Gichuhi.

22. In the Circumstances the Court order made on 1st November 2012 and adopted by this Court on the same day referring the matter to Arbitration cannot be faulted for want of participation of the Deceased’s Estate. Clearly then, the Application of 23rd February 2017 is for dismissal. However two issues warrant a short comment.

23. The Application before Court was not about the merit of the Arbitrator’s Award. Neither was it on whether or not the Arbitrator made findings in respect to persons who did not participate in the Arbitral Proceedings. It was simply whether the Referral Order was lawful and proper.

24. Second, by dint of the provisions of Order 24 Rule 3 of The Civil Procedure Rules, the Petition abated in so far as the Deceased Petitioner is concerned on the first anniversary of his death which occurred on 7th October 2005. Looking at the Record, the legal Representative to the Deceased Petitioner has not moved Court under the provisions of Order 24 Rule 7(2) for the Revival of the abated Petition and no such order has been made. The legal Representative will have to reflect on whether he is properly before Court and if, really, the Motion before Court could have been mounted in an abated Petition.

25. Otherwise the Notice of Motion of 23rd February 2017 is hereby dismissed with costs.

Dated, Signed and Delivered in Court at Nairobi this 1st Day of December, 2017.

F. TUIYOTT

JUDGE

PRESENT;

Wangalwa for 2nd Applicant/Petitioner

Kadeira holding brief for Kachomo for Respondents

No Appearance for 1st Petitioner

Alex - Court Clerk