[2022] KEHC 16717 (KLR)

Karithi & 5 others v Africa Merchant Assurance Company Ltd (Insolvency Cause E004 of 2020) [2022] KEHC 16717 (KLR) (Commercial and Tax) (6 December 2022) (Ruling)

Neutral citation: [2022] KEHC 16717 (KLR)

Republic of Kenya

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

Commercial and Tax

Insolvency Cause E004 of 2020

DO Chepkwony, J

December 6, 2022

Between

Elizabeth Wawira Karithi

1st Petitioner

Anisia Muthoni Njeru

2nd Petitioner

Faith Muthoni Mwendia

3rd Petitioner

Silas Muriuki Kinoti

4th Petitioner

Abel Mwani

5th Petitioner

John Mwangi

6th Petitioner

and

Africa Merchant Assurance Company Ltd

Respondent

Ruling

1. Before this court for determination is a notice of motion application dated June 23, 2022 filed by Africa Merchant Assurance Company Ltd seeking for the following orders: -(a)Spent;(b)Spent;(c)Thatpending the hearing and determination of the insolvency petition herein, the honourable court be pleased to issue an order of stay against any and all proceedings in all matters subject of the insolvency petition herein, namely, EmbuCMCC No91 of 2018, Embu CMCCNo 24 of 2019, Embu CMCCNo90 of 2018, Runyenjes SPMCC No53 of 2017, Kiambu CMCC No 115 of 2019 and Ngong CMCC No 39 of 2019. (d)Thatthis honourable court be pleased to issue any other orders in the interest of justice and to preserve the subject matter of the insolvency petition herein; and(e)Thatthe costs of this application be provided for.

2. The grounds adduced in support of the application on its face are that the petitioners filed the present application on February 12, 2020 on the basis of an alleged non-payment of decrees obtained in the above listed matters wherein the applicant has as also filed responses contesting the debts allegedly owed. That whereas the petitioner and the claimant in the Embu CMCC No 24 of 2019 have commenced garnishee proceedings in which the applicant has a pending application seeking to stay the same PMCC No53 of 2017 is a declaratory suit against the applicant which is also pending. The applicant avers that unless those matters and proceedings therein are stayed, execution may proceed and the substratum of the insolvency proceedings defeated given that the same matters are subject of the present insolvency proceedings. Thus, for orderliness in the proceedings, the stay orders sought should be granted and in turn the applicant be accorded an opportunity to address the petitioner’s allegations in the insolvency petition herein.

3. The application is further supported by the affidavit of Grace Njuguna, applicant’s Assistant Legal Manager, sworn on June 23, 2022 wherein, besides reiterating the grounds of the application, she adds that unless the proceedings which are subject of the Insolvency are stayed, the same will be rendered nugatory and cause the applicant to suffer double jeopardy.

4. The petitioners opposed the application vide grounds of opposition dated July 5, 2022 citing the following grounds: -a.That the application is brought by a stranger to the proceedings contrary to the provisions of Order 9 rules 5 & 6 of the Civil Procedure Rules.b.That the application is misguided and unattainable as the company is not under liquidation as purported.(c)That the present application is an abuse of the court process.(d)That the application is an afterthought and is lacking in substance, unnecessary, vexatious and frivolous.(e)That the application is only meant to scuttle the process and further engage the petitioners in endless litigation.

5. On July 6, 2022, the parties were directed to canvass the application by way of written submissions and as the record shows, parties complied by filing their respective submissions.

6. For the applicant, its submissions are dated July 21, 2022 and a brief summary thereof is that the petitioners cannot seek liquidation and yet pursue other avenues to recover the alleged debts. That if allowed to continue doing this, it would not only defy the essence of liquidation proceedings but also place the Applicant under double jeopardy. Reliance has been placed in the case of Kinyanjui Njuguna & Co Advocates v Invesco Assurance Limited[2021]eKLR, where the court held thus;“where a creditor elects to pursue insolvency proceedings, as a way of realizing its funds, then it is imperative that it continues on the same course and to be seen seeking recourse from all avenues available.”

7. It was further submitted that the court by virtue of section 428 of the Insolvency Act, the company, or any creditor or contributory is under duty ensure an orderly system of liquidating the affairs of the company in the event of a liquidation order and in this case, such order would be disrupted by allowing the petitioners to pursue other avenues of execution. Further, that under section 428 of the Insolvency Act, the applicant is justified to seek stay of proceedings if the proceedings to be stayed are part of or form basis of the insolvency. Such view was supported with an excerpt from the case of Antony Obidulu v Sang Ju Park [2019] eKLR.

8. As to whether the application ought to be dismissed for the advocates failure to file a notice of change of advocates, the applicant relied on plethora of judicial cases to establish that courts have consistently held that the failure to file a notice of change by advocates is a mere procedural technicality which can be corrected by filing the requisite notice of appointment. Such authorities include the cases of Iway Africa Ltd v Infant Africa Ltd & Another[2019] eKLR, Adblu East Africa Limited & 2 Others v Jean Farhat& 2 Others [2020]eKLR, AbdirahmanAbdi Mohammed v Safi Petroleum Product Ltd & 6 Others(2011 ) eKLR and Kamlesh Mansukhlal DanjiPattni v Nasir Ibrahim Ali & 2 Others [2005]eKLR

Petitioner’s Submissions 9. The petitioner on the other hand filed submissions dated July 25, 2022 and pointed out three grounds for determination namely,a.Whether the application as filed is properly on record having been filed contrary to the provisions of Order 9 rules 5 & 6 of theCivil Procedure Rules.b)Whether the respondent is under liquidation; and,c)Whether the application is an abuse of the court process.

10. On the first issue of whether the application is filed contrary to Order 9 rules 5 & 6 of the Civil Procedure Rule, the petitioners argued that although under the said provision a party is at liberty to change its advocates, the former advocate shall be considered as the advocate on record unless notice of change of advocate is filed. The Present application was filed by the Firm of Kiakan Law Advocates LLP without filing any notice of change of advocates and in total ignorance that the firm on record for the respondent/applicant is Mburugu & Kanyonge Associates Advocates. He sought the court to dismiss the application for being filed by a stranger and referred the court to among other decisions, the case of Adblu East Africa Ltd & 2 Others v Jean Farhat & 2 Others [2020] eKLR andJohn Kipkoech LeleivStephen Kipchirchir Meli & 3 Others [2022] eKLR, where the court dismissed pleadings filed by an advocate not properly on record.

11. On the second issue, on whether the respondent/applicant is under liquidation for the orders sought to be granted, it was submitted that unless the court makes such liquidation order vide section 431(2) of the Insolvency Act, then liquidation proceedings may not have commenced.

12. Lastly, on whether the application is an abuse of court process, it was submitted that the suit was merely filed to frustrate the petitioners and scuttle the process of execution. Reliance has been placed on the case of Salya Bham Gandi v Director of Public Prosecution & 3 Others[2018]eKLR.

Analysis and Determination 13. I have carefully considered the application by Africa Merchant Assurance Company dated June 23, 2022, the submissions made, and the case law relied on. In my humble view, there are two issues arising for determination,a.Whether the application should be dismissed for having been filed by an advocate not properly on record.(b)Whether the applicant has made a case for stay of proceedings in the primary suits as sought.Whether the application should be dismissed for being filed by an advocate not properly on record

14. The application dated June 23, 2022 has been filed by the Firm of Kiskan Law Africa LLP Advocates. However, while it has not been disputed that the Firm of Mburugu & Kanyonge Associates advocates first came on record for the respondent/applicant and filed among other pleadings the answer to the present petition, Kiskan Law Africa LLP Advocates later came on board and filed the present application on behalf of the respondent/applicant but no notice of change of advocates was ever filed. The respondent/applicant argues that failing to file such notice of change is a procedural technicality which cannot interfere with the orderliness of the pleadings filed and instead the court ought to focus on the merits of the application. On the other hand, the petitioners maintain that before a notice of change is filed as provided for under Order 9 rule 5 of the Civil Procedure Rules, the former advocate is considered to be the proper advocate on record. The decisions cited by the parties are also divergent on the subject and whereas one school of thought expresses that the failure to file a notice of change as a technicality which can be cured by subsequent filing of notice of appointment, the other school of thought is adamant that for orderliness, an advocate is only considered to be properly on record once the notice of change is filed.

15. In my opinion, I stand guided by Order 9 rule 5 of the Civil Procedure Rules, 2010which provides for change of advocates as follows:“A Party suing or defending by an advocate shall be at liberty to change his advocate in any cause or matter, without an order for that purpose, but unless and until notice of any change of advocate is filed in court in which such cause or matter is proceedings and served in accordance with rule 5, the former advocate shall, subject to rules 12 and 13 be considered the advocate of the party until the final conclusion of the cause or matter, including any review or appeal.”

16. What I gather from the above provision is that unless and until a notice of change of advocate is filed and duly served, an advocate on record for a party remains the advocate for that party subject to removal from record at the instance of another party under rule 12 of the same Order or withdrawal of the advocate under rule 13 of the same Order.

17. In addition, Order 9 rule 7 of the Civil Procedure Rules states that:-“Where a party, after having sued or defended in person, appoints an advocate to act in the cause or matter on his behalf, he shall give notice of the appointment, and the provisions of this order relating to a notice of change of advocate shall apply to a notice of appointment of an advocate with the necessary modifications.”

18. It is therefore evident from the above provision that a notice of change or appointment of advocate has to be filed before such advocate wishes to come on record for a party or replace another advocate who is on record. That is the only way for an advocate to be considered to be formally on record for a party and finding otherwise would trash the intent and purport of Order 9 rule (5) and (7) above. Representation must be procured within the law, and the court’s overriding objective was never intended to be a panacea for such procedural short falls as intimated by the applicant herein. Thus, the only recourse available for the Firm of Kiskan Law Africa LLP Advocates, is to file a notice of appointment of advocates stating that they were acting jointly or in collaboration with the advocates on record or file a notice of change of advocates given that the Firm of Mburugu & Kanyonge Associate Advocates is already in record for the respondent.

19. I am further persuaded to agree that if newly appointed advocates are allowed to assume legal representation of parties without notifying the court and other parties in the suit and advocates already on record for the party in question, this would create total confusion and chaos in the conduct of court proceedings. It would also be unclear as to whom the proper advocate for service of pleadings on behalf of such party would be and, in my view, that was not the intent of the law.

20. It then follows that the application dated June 23, 2022 is incompetent for having been filed by an advocate not properly on record for the applicant. Consequently, the application is struck out with costs to the petitioner/ respondents.

It is so ordered.

RULING DELIVERED VIRTUALLY, DATED AND SIGNED AT NAIROBI THIS 6TH DAY OF DECEMBER 2022. D.O CHEPKWONYJUDGEIn the presence of:Mr. Njagi counsel for PetitionerCourt Assistant - Sakina