[2022] KEHC 14143 (KLR)

In re Gifted Hands Schools Limited (Insolvency Petition E169 of 2019) [2022] KEHC 14143 (KLR) (Commercial and Tax) (7 October 2022) (Ruling)

Neutral citation: [2022] KEHC 14143 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Insolvency Petition E169 of 2019

A Mshila, J

October 7, 2022

Ruling

1. The respondent/applicant filed a motion dated May 26, 2022 dated May 26, 2022 brought under Section 1A, 1B, 3A, 3B of the Civil Procedure Act and Article 159 of the Constitutionof Kenyaand any other enabling laws for orders;a.Spentb.That the court to grant leave to the applicant/respondent to file response out of timec.That costs be in the cause

2. The application was based on the grounds on the face of it and on the supporting affidavit of Tabitha Ogango. She indicated that the delay to file the response on time was occasioned by the previous advocates who did not pass on the handing over notes together with the files.

3. The application was opposed by the replying affidavit of John Maina Kiarie dated June 2, 2022 who indicated that the averments by Tabitha Oganago are a distortion of facts and an attempt to mislead the court on what has been happening in the matter.

Applicant’s case 4. The respondent/applicant indicated that she was served with the petition herein and handed it over to her then advocates Odero & Asiemo and Company Advocates to respond accordingly. The country however went through the Covid 19 pandemic which caused the law firm and courts to be inaccessible. This resulted in the Applicant losing touch with the case. When government lifted the restriction, she appointed M/S Muhatia Pala and Associates Advocates to take over who swiftly realised that not all was well with the proceedings.

5. The Applicant contended that the law applicable to Article 159 of the Constitutionwas explained by the Court of Appeal in Abok James Odera t/a AJ Odera & Associates v Patrick Machira & Co Advocatesthat defined the goals of oxygen rules objectives and that failure by the previous advocate to file and inform the respondent ought not to be visited upon the respondent.

Respondent’s case 6. It was the petitioner/respondent’s case that the debt subject of this petition is not disputed. No valid grounds have been put forward to show that the company has any valid defence or response to the petition. The company was duly served with the statutory demand which was neither complied with nor set aside which is prima facie evidence of admission of debt.

7. The petitioner/respondents argued that the circumstances of this case do not entitle the company to the discretionary reliefs sought. The respondent/applicants had an opportunity to respond when they were served with the statutory demand. It is also not disputed that COVID 19 struck the country in March 2020 and had an effect on the economy but the debt in question arose way before the pandemic. It is therefore dishonest for the applicants to blame the pandemic for their inability to settle a debt that became due three (3) years before the pandemic.

8. The petitioner/respondents argued further that the applicant has not attached a draft response to the petition to demonstrate the grounds upon which it intended to oppose the petition and thus the court has no way of knowing if its merited or not.

9. The respondent/applicant has also not attached any proof of its financial capability to offset the debt and that it would be prejudicial for the company to be allowed to file a response and present any evidence after the respondents had testified and closed their case. The respondent/applicant had a duty to follow up on its case and should not have sat back to hear from their advocates.

Issues for determination 10. After carefully perusing the application, affidavits and rival submissions the only issue for framed for determination which is whether the application for leave to file a defence out of time is merited.

Analysis 11. Order 50, Rule 6 of theCivil Procedure Rulesprovides: -“Where a limited time has been fixed for doing any act or taking any proceedings under these Rules, or by summary notice or by order of the court, the court shall have power to enlarge such time upon such terms (if any) as the justice of the case may require, and such enlargement may be ordered although the application for the same is not made until after the expiration of the time appointed or allowed:Provided that the costs of any application to extend such time and of any order made thereon shall be borne by the parties making such application, unless the court orders otherwise”

12. In view of the foregoing the jurisdiction to enlarge time is a discretionary one. However, like all discretions it must be exercised judiciously.

13. In the present case the petitioner/respondent filed his petition on November 29, 2019. It was after several mention services that were effected to which the respondent/applicant entered appearance on December 17, 2019. Under the rules they were obliged to file a defence within 14 days from the date of appearance that is by December 31, 2019. The matter proceeded on and the petitioner’s case was heard and closed. At this time the applicants had not yet filed their defence.

14. There was however a notice of change of advocates filed on March 2, 2022 where the firm of Muhatia Pala and Associates took over from Odero Osiemo and Company Advocates. It was thereafter that the instant application herein was filed.

15. The respondent/applicant has laid blame on the COVID 19 pandemic for the delays and her former advocates for failing to adequately prosecute the matter. The Petitioner/Respondent on the other hand have argued that the circumstances of this case do not entitle the applicant to the reliefs sought as no sufficient reasons have been put forward.

16. A key question therefore arises as to whether the Applicant should be denied their constitutional right to access to justice as enshrined under Article 48 of the Constitutionof Kenya?

17. InRichard Murigu Wamai v Attorney General & another [2018] eKLR, the court cited with approval the case ofSebel District Administration vs Gasyali & Others (1968) EA 300, where the Court observed: -“In my view the Court should not solely concentrate on the poverty of the applicant’s excuse for not entering appearance or filing a defence within the prescribed time. The nature of the action should be considered, the defence if one has been brought to the notice of the court however irregularly should be considered, the question as to whether the Plaintiff can reasonably be compensated by costs for any delay occasioned should be considered, and finally I think it should always be remembered that to deny the subject a hearing should be the last resort of a court. It is wrong under all circumstances to shut out a defendant from being heard. A defendant should be ordered to pay costs to compensate the plaintiff for any delay occasioned by the setting aside and be permitted to defend.”

18. This court associates itself with the above holding and having considered all the rival arguments, it is apparently clear that the Applicants had been abandoned by the advocate and they have provided sufficient reasons for the failure to take a particular step and the omission is found to excusable. This court is therefore satisfied that sufficient reasons have been shown for the granting of the application and that it is in the best interest of justice that time be enlarged and the Applicant be allowed to file their defence out of time to enable the matter to be decided on merit.

19. To compensate the respondent, this court allows the application dated May 26, 2022 on condition that the applicant pays the respondent throw away costs.

Findings and determination 20. For the forgoing reasons this court makes the following findings and determination:i.The application is found to have merit and it is hereby allowed;ii.The applicant to pay thrown away costs to the respondent assessed in the sum of Kshs 20,000/- within 14 days of the date hereof.iii.The applicant to file and serve the defense within 14 days of the date hereof. Leave granted to the respondent to file reply to defence within fourteen (14) days of service.iv.Mention on October 25, 2022 before the Deputy Registrar for case management.Orders accordingly.

DATED SIGNED AND DELIVERED ELECTRONICALLY AT NAIROBI THIS 7THDAY OF OCTOBER, 2022. HON.A.MSHILAJUDGEIn the presence of;Muriungi for the PetitionerNo appearance by the RespondentLucy-------------------------Court Assistant