[2022] KEHC 16171 (KLR)

Kituyi v Musimba (Insolvency Cause E013 of 2021) [2022] KEHC 16171 (KLR) (Commercial and Tax) (9 December 2022) (Ruling)

Neutral citation: [2022] KEHC 16171 (KLR)

Republic of Kenya

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

Commercial and Tax

Insolvency Cause E013 of 2021

A Mabeya, J

December 9, 2022

Between

Dr. Mukhisa Kituyi

Debtor

and

Hon. Dr. Patrick Mweu Musimba

Creditor

Ruling

1. Before Court is an application dated July 28, 2021. It was brought under sections 17 & 729, Rules 9,15,16 and 17 of the Insolvency Regulations, 2016 read together with the Insolvency (Amendment) Regulations.

2. The application sought orders that the Statutory Demand dated May 7, 2021 be set aside.

3. The grounds for the application were set out on its face and on the supporting affidavit of Dr Mukhisa Kituyi sworn on July 28, 2021. It was averred that on July 14, 2021, the applicant’s son brought the applicant the Statutory Demand dated May 7, 2021 that had been dropped in his house. That the service was improper as the applicant lives in Thigiri Ridge Gigiri, and his son lives in a separate house in Mountain View. That in the premises, the service was improper and therefore null and void.

4. That the parties had been engaged in Nairobi HCCC No E110 of 2018 wherein the court found in the respondent’s favor causing the applicant to file an appeal against that finding. That the appeal raised arguable grounds and ought to be allowed to proceed to its logical conclusion.

5. The respondent opposed the application vide the replying affidavit of Hon Patrick Mweu Musimba sworn on September 30, 2021. It was contended that the Statutory Demand dated May 7,2021 was issued to the applicant to pay Kshs 35 million plus costs of Kshs 663,610/= and interest as decreed in Nairobi HCCC No E110 of 2018. That the applicant admitted service of the Statutory Demand as the same was served at his last known residence on June 24, 2021 as per the Affidavit of Service dated September 29, 2021.

6. That the applicant had filed an application for stay of execution dated April 24, 2020 but the same was dismissed by the Court of Appeal on November 20, 2020.

7. The application was disposed of by way of written submissions. The applicant’s submissions were dated February 22, 2022 and those of the respondent March 8, 2022. The main issue for determination is whether the Statutory Demand ought to be set aside.

8. Regulation 17 (6) of the Insolvency Regulations, 2016lists the grounds upon which a court is to grant an application to set aside a Statutory Notice. The same provides: -“The court may grant the application if-a)The debtor appears to have a counterclaim, set-off or cross demand which equals or exceeds the amount of the debts specified in the statutory demand;b)The debt is disputed on grounds which appear to the court to be substantial;c)It appears that the creditor holds some security in respect of the debt claimed by the demand, and either paragraph (6) is not complied with in respect of the demand, or the court is satisfied that the value of the security equals or exceeds the full amount of the debt; ord)The court is satisfied, on other grounds, that the demand ought to be set aside.”

9. In the present case, save for a pending appeal against the decision from which the debt arose, the applicant does not dispute the debt. He has no counterclaim, set-off or cross demand that exceeds the debt amount. It is also evident that the respondent does not hold any security in respect of the debt. In the circumstances, it was upon the applicant to satisfy the Court that the demand on other grounds, ought to be set aside.

10. It was the applicant’s case that service of the Statutory Demand was defective and the Statutory Demand should thus be set aside. That the Statutory Demand was served on his son who resides in a different house from his residence.

11. Regulation 15 of the Insolvency Regulations provides for service of the Statutory Demand. It provides: -(5)The statutory demand specified in sub-regulation (3) shall be served on the debtor at least 21 days before the filing of the petition.(6)The service of the statutory demand shall be in accordance with the Civil Procedure Rules, 2010.

12. Section 729 of the Insolvency Act further states that:“A document that is required or permitted by or under this Act to be served on, or given to, a natural person may be served on, or given to, the person personally or by means of a letter addressed to the person at the person’s address last known to the server or giver of the document.”

13. The Court has seen the Affidavit of Service of Samuel Njoroge Muchai sworn on September 29, 2021. The Statutory Demand was served at the applicant’s last known home address at Mountain View Estate, Makadamia Court Gate No 194 at around 12:30pm. Though the applicant himself was not in, his son called the applicant then proceeded to inform the server that he could leave the Demand with him, as he was to meet with the applicant later and pass the demand to him. These averments were never denied nor challenged.

14. To this Court, that was proper and effective service. In any case, the applicant confirmed that his son gave him the Statutory Notice, meaning he was aware of the Demand. In other words, the applicant had knowledge and possession of the served document. The respondent thus correctly submitted that what is paramount is not personal service on the debtor, but rather that the service ensures that the debtor has knowledge or possession of the served document.

15. In Basil Criticos v Attorney General & 8 others & 4 others [2012] eKLR, the court observed as follows: -“The issue of knowledge of orders as being sufficient was until recently, alien in our jurisprudence. In Kariuki and Others v Minister for Gender, Sports, Culture and Social Services and Others, (2004) I KLR 588, it was held;‘... but in our law, service is higher than knowledge and since the service here was frustrated… I shall hold in accord with the existing law that there was no service”. This was made following the decision in Wangondu (supra).’However, the law has changed and as it stands today, knowledge supersedes personal service and for good reason. This has recently been held in Kenya Tea Growers Association vs Francis Atwoli & 5 Others, Petition No.64 of 2010 where I opined as follows;‘In the case before me, I am more than satisfied that even at the higher level of beyond reasonable doubt, when an individual has been served with and/or has knowledge of a court order but not only ignores it but in fact incites others to do the same, the threshold for contempt has been met… The point above is that where a party clearly acts and shows that he had knowledge of a Court order, the strict requirement that personal service must be proved is rendered unnecessary. That should be the correct legal position and I subscribe to it.”

16. This Court aligns itself with the aforesaid pronouncement. The applicant cannot dispute service of a document that was served at his last known address, to a person known to him. A person who eventually passed the document to him and thus is in its possession. The Court founds that service of the Statutory Demand was effective.

17. In view of the fact that the applicant’s application to stay the decree was dismissed by the Court of Appeal vide a ruling dated November 20, 2020, there is no justifiable reason to set aside the Statutory Demand dated Mayy 7, 2021.

18. The application is therefore without merit and is hereby dismissed with costs.

It is so ordered.DATED and DELIVERED at Nairobi this 9th day of December, 2022. A. MABEYA, FCIArbJUDGE