[2022] KEHC 15463 (KLR)

Hamptons Hospital Limited & another v Medileads Agencies Limited (Civil Appeal E067 of 2022) [2022] KEHC 15463 (KLR) (15 November 2022) (Ruling)

Neutral citation: [2022] KEHC 15463 (KLR)

Republic of Kenya

In the High Court at Kisumu

Civil Appeal E067 of 2022

RE Aburili, J

November 15, 2022

Between

Hamptons Hospital Limited

1st Appellant

Tumaz & Tumaz Enterprises Limited

2nd Appellant

and

Medileads Agencies Limited

Respondent

Ruling

1. This ruling determines the applicant’s Notice of Motion dated September 5, 2022 which seeks the following prayers:a.spent.b.That there be stay of proceedings in Kisumu CMCC No 521 of 2019 Medileads Agencies Limited v Hamptons Hospital & anor pending the hearing and determination this application inter partes.c.That there be stay of proceedings in Kisumu CMCC No 521 of 2019 Medileads Agencies Limited v Hamptons Hospital & anor pending the hearing and determination of the appeal.d.Other orders or directions as may appear to this court and convenient to grant.e.Costs of the application be in the cause.

2. The application is predicated on grounds on the face of the motion and the affidavit sworn by Julius Mwale, the appellants’ director. Mr Mwale deposes that the appeal arose from the decision of the learned trial magistrate who dismissed their application in which they had sought to strike out the respondent’s plaint for want of form and jurisdiction. He further deposes that the appeal has already been filed and the court’s Deputy Registrar has already written to the subordinate court for the original trial record and they have also requested for typed proceedings for the preparation of the Record of Appeal.

3. The deponent states that despite the forgoing, the trial court has listed the matter for mention on November 28, 2022 for purposes of taking a hearing date and that the granting of stay orders herein as sought guarantees their right to fair hearing as guaranteed by Article 50 (1) of the Constitution. He deposes that the trial court lacks jurisdiction to try the matter and that a continuation of that suit will render the instant appeal nugatory. Further, that a grant of the orders sought herein will enable the court effectively adjudicate on the issue of jurisdiction with no prejudice on the respondents.

4. The respondent opposed the application by way of a replying affidavit sworn by one Bernard Odawo Omondi, the respondent’s director on September 30, 2022 where it is deposed that the respondent sued the 1st appellant in November, 2019 for breach of contract which suit proceeded ex-parte and judgement entered in the respondent’s favour. Thereafter, the 1st appellant filed an application to set aside the judgement and the application was allowed.

5. That Upon the grant of the aforestated orders, the respondent filed an application to enjoin the 2nd appellant and the same was allowed. That subsequently, vide an application dated January 31, 2022, the appellants sought to strike out the suit. The application was declined thus the instant appeal and the application. He avers that the appeal and the application are geared at interfering with the respondent’s rights as a litigant, impede its right to access justice, the right to be heard expeditiously and the right to a fair trial.

6. The deponent therefore contends that the application does not meet the threshold for grant of orders of stay of proceedings.

7. The court directed the parties to make oral submissions. By consent of the parties, the applicant adopted his submissions in a similar Civil appeal E068 of 2022 where counsel had made their respective arguments and the respondent was accorded an opportunity to rebut.

8. Mr Mbeka counsel for the applicants/appellants submitted that the court has the discretion to grant the orders sought as was stated in Re Global Tours and Travel Limited-Winding Up Cause No 43 of 2000. Citing Niazsons (K) Ltd v China Roads & Bridge Corporation (Kenya) Ltd-Nrb HCC 126 of 1999 and Ezekiel Mule Musembi v H Young & Co Ltd CA 24 of 201. Counsel submitted that the application and the appeal are not vexatious for the reason that where the appeal may be rendered nugatory if suit is heard and determined, stay of proceedings ought to be granted pending appeal.

9. Counsel further submitted that the appellants will suffer substantial loss since the suit relates to breach of contract and interest at the rate of 21% and therefore urged this court to accord them an opportunity to ventilate on the appeal which if unsuccessful, the respondent will be compensated for by way of payment.

10. Opposing the application, the respondent through counsel, Mr Mshindi submitted that the application is incompetently before this court as leave to appeal was not sought. That the issue of summons abating is not provided for under either section 75 of the Civil Procedure Act or Order 43 of the Civil Procedure Rules and that therefore the appeal together with the application are therefore fit for striking out.

11. Mr Mshindi further submitted that the application does not meet the threshold under Order 43 Rule 6(2) of the CPR. He further submitted that the application was not filed timeously since the ruling was delivered on June 9, 2022 while the application was filed on September 21, 2022. On this point, he relied on the authorities in Millicent Wamathai Njogu v Pauline Nyambura Waweru [2022]eKLR and Stephen Omondi Juma v Sprocer Awuor Rabote [2022]eKLR.

12. Counsel further submitted that the application is not merited due to the absence of either resolutions or ratification authorizing Mr Mwale to swear the affidavit on behalf of the company.

Analysis and determination 13. The application seeks for a stay of proceedings in the subordinate court pending the hearing and determination of the appeal. The appeal emanates from the ruling of Hon K Cheruiyot SPM dismissing an application which had sought to strike out the respondent’s suit on the grounds that the suit had abated and secondly that the suit offended the provisions of Section 10 of the Arbitration Act.

14. Whereas there is no provision in our laws providing for the grant of stay of proceedings, precedent has established that the standard for the grant is stringent and high. Halsbury’s Laws of England, 4th Edition, Vol 37 page 330 provides that:This is a power which, it has been emphasized, ought to be exercised sparingly, and only in exceptional cases.It will be exercised where the proceedings are shown to be frivolous, vexatious or harassing or to be manifestly groundless or in which there is clearly no cause of action in law or in equity. the applicant for a stay on this ground must show not merely that the plaintiff might not, or probably would not, succeed but that he could not possibly succeed on the basis of the pleading and the facts of the case.

15. In Re Global Tours & Travel Limited, [2000]LLR 1061, Ringera, J (as he then was) was held that:“As I understand the law, whether or not to grant a stay of proceedings or further proceedings on a decree or order appealed from is a matter of judicial discretion to be exercised in the interest of justice…the sole question is whether it is in the interest of justice to order for stay of proceedings and if it is, on what terms it should be granted. In deciding whether to order a stay, the Court should essentially weigh the pros and cons of granting or not granting the order. And, in considering those matters, it should bear in mind such factors as the need for expeditious disposal of cases, the prima facie merits of the intended appeal, in the sense of not whether it will probably succeed or not but whether it is an arguable one, the scarcity and optimum utilization of judicial time and whether the application has been brought expeditiously.”

16. From the above, the considerations that the court ought to consider in determining whether to grant the stay of proceedings or not are: the decision whether to grant or refuse an order of stay is discretionary, the need for expeditious disposal of cases, the merits of the intended appeal; and whether the application has been brought forth expeditiously.

17. This court is alive to the fact that in exercising discretion, the court is bound to act judiciously and in furtherance of the overriding objectives provided for in the Civil Procedure Act, to mete out justice and issue appropriate orders to ensure the ends of justice are met.

18. On the need to dispose of cases expeditiously, the Court of Appeal in Muchanga Investments Limited v Safaris Unlimited (Africa) Ltd & 2 Others [2009] KLR 229 held that:“No party should have a right to squander judicial time. Hearing time should be allocated by the court on a need basis and not as a matter of routine. Judicial time is the only resource the courts have at their disposal and its management does positively or adversely affect the entire system of the administration of justice…Litigants are not entitled to the uncontrolled use of a trial judge’s time. Other litigants await their turn. Litigants are only entitled to so much of the trial judges’ time as is necessary for the proper determination of the relevant issues.”

19. The application in the subordinate sought to strike out the respondent’s suit for abatement and failure to invoke the arbitration process. If ultimately, the suit offended the aforestated principles, then the suit would have automatically collapsed and much judicial time saved. If the appeal is finally dismissed, the parties would have to proceed to hearing of the suit on its merits.

20. On the issue of the merits of the appeal, the Court of Appeal in David Morton Silverstein v Atsango Chesoni [2002] eKLR held that;“We do not have to decide these points in this application; they will be conclusively determined in the intended appeal. What we have to do in this application is to determine whether the point is an arguable one, that is, that it is not a frivolous one.”

21. This court is equally not prepared to delve deep into whether the appeal filed may ultimately be successful or not. However, from the appellant’s Memorandum of Appeal, among the grounds therein is the contention that the suit had abated by operation of the law and that the jurisdiction of the court pursuant to the arbitration clause stipulated in the contract was ousted.

22. In my considered view, an appeal on a point of law is a valid point that can be taken on appeal notwithstanding the fact the appeal may not be successful ultimately. In the circumstances, I find the appellants to have established this requirement to the required standard.

23. The other aspect relating to time is whether the application was brought timeously. The ruling in the subordinate court was delivered on 9th June, 2022 and the instant application filed on 21st September, 2022. The memorandum of appeal was filed on 8th July, 2022. According to the appellants, the application was provoked by the listing of the matter in the subordinate court for purposes of fixing the same for hearing. In the circumstances, I find that there was no delay in preferring the application.

24. The other issue to be considered is whether in declining the application for stay, the appeal will be rendered nugatory. In the instant application, if the appeal is successful, the suit in the trial court will be liable to be struck out. In the inverse, if the appeal fails, the matter will proceed to hearing. In the circumstances, the final determination on the appeal either way will have a direct bearing on the fate of the primary suit.

25. The respondent submitted in contention that no leave to appeal was obtained prior to filing the appeal s the issue of striking out of pleadings does not fall under sections 75 of the Civil Procedure Act and Order 43 of the Civil procedure Rules. My finding on this issue is that no leave was required before an appeal was file din this case for reasons that the matter falls within the provision of Order 43 of the Civil Procedure Rules on pleadings generally. The said provision stipulates that:“Appeals from Orders [Order 43, rule 1. ](1)An appeal shall lie as of right from the following Orders and rules under the provisions of section 75(1)(h) of the Act—(a)Order 1 (parties to suits);(b)Order 2 (pleadings generally);….”

26. Under Order 2 Rule 15 of the Civil Procedure Rules, pleadings may be struck out. The said provision is as follows:“15. Striking out pleadings [Order 2, rule 15. ](1) At any stage of the proceedings the court may order to be struck out or amended any pleading on the ground that—(a) it discloses no reasonable cause of action or defence in law; or(b) it is scandalous, frivolous or vexatious; or(c) it may prejudice, embarrass or delay the fair trial of the action; or(d) it is otherwise an abuse of the process of the court,and may order the suit to be stayed or dismissed or judgment to be entered accordingly, as the case may be.(2) No evidence shall be admissible on an application under subrule (1)(a) but the application shall state concisely the grounds on which it is made.(3) So far as applicable this rule shall apply to an originating summons and a petition.

27. Accordingly, I find that the respondent’s objection to the appeal on account of want of want of leave to appeal is not merited and is dismissed.

28. The respondent also challenged the application by the appellants on account that there is no authorization of the deponent Mr Mwale to swear an affidavit on behalf of the 1st and 2nd appellants and that neither is there any resolution filed in court. My finding on this ground of objection to this application is that the failure to file the same with the plaint does not render the appeal incompetent.

29. This court had the opportunity to deliberate on a similar issue in the case of.. where I applied myself to various other decisions of the High Court and the Court of Appeal and I stated as follows:“In Court of Appeal in Nairobi Civil Appeal No 42 of 2007 East African Safari Air Ltd v Anthony Ambaka Kegode [2011] eKLR stated as follows on the question of whether a suit would be fatally defective and amenable for striking out for failure to file an authority by the advocate to file suit on behalf of the plaintiff:“It is our view that the proper thing for the High Court to have done was not to strike out the proceedings (for want of authority by the advocate to file suit) but to stay the same pending ratification if it was of the view that the evidence of ratification was not clear. Here is what Palmer states: -“If an individual shareholder, without authority to do so, initiates litigation in the name of the company, the normal practice upon a motion to strike out the company’s name is for the court to adjourn, whilst ordering that a meeting of the shareholders be held to see if the company supports the litigation, if it does not, the motion will succeed and the solicitor who commenced the proceedings without authority of the company will be personally liable for the Defendant’s costs."In D.T. Dobie & Company (Kenya) Limited v Joseph Mbaria Muchina & another [1980] eKLR the court held that:“A court of justice should aim at sustaining a suit rather than terminating it by summary dismissal. Normally a law suit is for pursuing it.No suit ought to be summarily dismissed unless it appears so hopeless that it plainly and obviously discloses no reasonable cause of action, and is so weak as to be beyond redemption and incurable by amendment. If a suit shows a mere semblance of a cause of action, provided it can be injected with real life by amendment, it ought to be allowed to go forward for a court of justice ought not to act in darkness without the full facts of a case before it.”In the case of Faith & Hope Properties Kenya Ltd v James Muchiri Waweru & another [2021] eKLR the court held that:“This court is in agreement with above pronouncements. The mere fact that the Plaintiff did not file its resolutions authorizing the swearing of the Verifying Affidavit by one of its Directors and the firm of S. J. Nyang and Company advocates to file the suit on its behalf cannot be a ground for invalidating the suit.”Similarly, even before 2010, in the case of Assia Pharmaceuticals v Nairobi Veterinary Centre Ltd. Nairobi (Milimani) HCCC No 391 of 2000 it was held that:“It is settled law that where a suit is to be instituted for and on behalf of a company there should be a company resolution to that effect……As regards litigation by an incorporated company, the directors are as a rule, the persons who have the authority to act for the company; but in the absence of any contract to the contrary in the articles of association, the majority of the members of the company are entitled to decide even to the extent of overruling the directors, whether an action in the name of the company should be commenced or allowed to proceed. The secretary of the company cannot institute proceedings in the name of the company in the absence of express authority to do so; but proceedings started without proper authority may subsequently be ratified.”[emphasis added].In Arthi Highway Developers Limited v West End Butchery Limited & 6 others [2015] eKLR, the Court of Appeal cited the case of United Assurance Co Ltd v Attorney General: SCCA No 1 of 1998 where the Supreme Court of Uganda held that:“…it was now settled, as the law, that, it does not require a board of directors, or even the general meeting of members, to sit and resolve to instruct Counsel to file proceedings on behalf and in the names of the Company. Any director, who is authorized to act on behalf of the company, unless the contrary is shown, has the powers of the board to act on behalf of that Company.” [emphasis added].In Fubeco China Fushun v Naiposha Company Limited & 11 others [2014] eKLR, Gikonyo J. while dealing with a case where a director’s powers to authorize the filing of an application on behalf a company had been challenged, stated that:“In the case before me, Caroline Wairimu Kimemia is a director of the Defendant Company and she duly authorized the Advocates on record to commence this Application. That fact is not denied and I am surprised the person laying the objection is the Plaintiff and not the Defendant Company. The Plaintiff has also not presented any material or affidavit from the other directors denying the authority of Caroline Wairimu Kimemia as a director in the Defendant Company. As such, I do not think the Court is in any position to dispute the authority of Caroline Wairimu Kimemia or the instructions to the advocate on record to defend the interest of the company. Therefore, in the absence of evidence to the contrary, I find the affidavits filed to be in order and the advocate herein to be properly on record for the Defendant.”In the instant case, the verifying affidavit was sworn by on 17th July, 2019 by Dr. Eliud Kirenger, the Director General of the plaintiff/appellant herein and he deposed as follows:“That iam an adult of sound mind and disposition, retained in the employment of the plaintiff herein in the capacity of Director General duly authorized and competent to make and swear this affidavit.”It follows therefore, that in the absence of any evidence that the deponent was never authorized by the appellant corporation to swear that verifying affidavit and or to instruct counsel on record to file suit on its behalf, I find and hold that the trial court erred in dismissing the appellant’s suit “for failure to comply with the mandatory provisions of Order 4 Rule 1 (4),” having found that the plaintiff had proved that the defendants had failed to account for the sums of money pleaded in the plaint.This court appreciates that the intention behind order 4 rule 1 (4) of the Civil Procedure Rules was to safeguard the corporate entity by ensuring that only an authorized officer could institute proceedings on its behalf. However, in the present case, the Director General having sworn an affidavit that he had authority to swear the affidavit verifying the correctness of the averments in the plaint, and in a case where the Director General was safeguarding the interests of the Corporation, the question is, who else would be the one complaining of lack of authorisation? See the Court of Appeal decision in the case of Spire Bank Limited v Land Registrar & 2 others [2019] eKLR.”

30. There is no contrary evidence that Mr Mwale who swore the affidavit in support of this application was not authorized to swear the affidavit on behalf of the 1st and second appellants or that he is the director of the two appellant companies. I find that failure to file the authorization or the resolution is not fatal to the application.

31. Having considered all the relevant considerations in the matter, I am inclined to allow the application for stay of proceedings in Kisumu CMCC 521 of 2019; Medileads Agencies Limited v Hamptons Hospital & anor pending the hearing and determination of the appeal with the condition that the record of appeal is filed in the appeal herein within 30 days from the date of this ruling failure of which the orders herein shall lapse unless extended by the court. Costs shall be in the cause.

Dated, Signed and Delivered at Kisumu this 15th Day of November, 2022R.E. ABURILIJUDGE