https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1105

Kwale International Sugar Company Ltd v Epco Builders Ltd & 2 others (Civil Application E001 of 2025) [2026] KECA 1105 (KLR) (12 June 2026) (Ruling) Neutral citation: [2026] KECA 1105 (KLR) Republic of Kenya In the Court of Appeal at Nairobi Civil Application E001 of 2025 W Karanja, AO Muchelule & WK Korir, JJA June 12, 2026 Between Kwale International Sugar Company Limited Applicant and Epco Builders Limited 1st Respondent Catholic Archidiocese Of Mombasa 2nd Respondent Southern Engineering Company Limited 3rd Respondent (Being an application for grant of certification and leave to appeal to the Supreme Court on grounds of general public importance under Article 163(4) (b) of the Constitution of Kenya in respect of the Judgment of the Court of Appeal at Nairobi (D. Musinga (P), Gatembu & Mativo, JJ.A.) dated 7th February 2025 in Civil Appeal No. 208 of 2020 Insolvency Cause 07 of 2019 ) Ruling 1.Before we delve into the motion that is before us, it is important to state the brief history as follows. 2.The appeal arose from a ruling of the High Court (Okwany, J.) (hereafter, the superior court) dismissing Kwale International Sugar Company Limited’s application to set aside a statutory demand, strike out an insolvency petition by EPCO Builders Limited (the 1st respondent herein), and restrain publication of an insolvency advertisement. The dispute stemmed from a construction contract in which the 1st respondent claimed it had completed works certified under the contract and was owed substantial sums allegedly acknowledged and partly paid, while the applicant contended that the debt was not validly established, was disputed, and subject to an arbitration clause that should have been invoked before insolvency proceedings were commenced. The superior court held that the insolvency petition should proceed to a hearing on its merits, finding that no bona fide dispute sufficient to defeat the petition had been shown, that the objections largely related to quantum rather than liability; that arbitration did not bar the insolvency process; and that any defects in the statutory demand were technical and non-prejudicial, while declining to recall the advertisement. On appeal, the court in its judgment delivered on 7th February 2025 dismissed the appeal and upheld the continuation of the insolvency proceedings, agreeing that a bona fide dispute had not been established and that technical defects in the statutory demand were not fatal; however, it held that although the superior court reached the correct outcome, it erred in making conclusive findings on contested factual issues at an interlocutory stage, and directed that the insolvency petition proceed to hearing before a different Judge. 3.It is common ground that the petition is presently pending before the superior court (Mulwa, J.) and has not yet been heard or determined on its merits. 4.What is before this Court is a motion dated 6th March 2025 brought under Rules 41(2) and 44 of the Court of Appeal Rules, 2022, in which the applicant seeks leave to appeal to the Supreme Court against part of the judgment of this Court delivered on 7th February 2025 by a bench comprising D. Musinga (P), Gatembu, and Mativo, JJA. 5.The application arises from insolvency proceedings relating to a contract dated 12th June 2012 between the applicant and the 1st respondent for the construction of a sugar factory in Kwale at a contract sum of Kshs. 2.2 billion. A dispute subsequently arose over payments claimed by the 1st respondent, leading to the institution of insolvency proceedings against the applicant for an alleged debt of Kshs.405,829,019.76 together with interest. In response, the applicant filed an application before the superior court seeking to strike out the insolvency petition on grounds that no valid statutory demand had been issued, that the debt was genuinely disputed on bona fide grounds, and that the contract contained an arbitration clause requiring referral of disputes to arbitration. 6.At the hearing of that application, the 1st respondent contended that there was no legal basis for setting aside a statutory demand against a corporate entity and, therefore, the superior court lacked jurisdiction to entertain the application. In its ruling delivered on 23rd April 2020, the superior court (Okwany, J.) held that there was no express provision for setting aside a statutory demand in such circumstances, and found the application to be incompetent. The court nevertheless proceeded to consider the merits and held that any defect in the statutory demand was technical and non-prejudicial, that the debt was not bona fide disputed, and that there was therefore no need to refer the matter to arbitration. It accordingly allowed the insolvency proceedings to proceed. 7.In seeking certification, the applicant frames several issues as being of general public importance, including whether there is jurisdiction to set aside a statutory demand issued against a corporate entity and, if so, the source and scope of that jurisdiction; whether Regulation 77B of the Insolvency Regulations requires a statutory demand to be signed by the Deputy Registrar and whether failure to comply constitutes a substantive defect or an excusable technicality; whether, in the absence of an express and unequivocal admission of debt, disputes may properly be resolved within insolvency proceedings; and whether insolvency proceedings may be commenced where there exists an arbitration clause and potential counterclaims subject to arbitration. 8.It is further contended that these issues meet the threshold of general public importance on the basis that there is alleged inconsistency in decisions of the superior courts on whether statutory demands against corporate entities may be set aside; that courts have applied provisions intended for personal bankruptcy (Regulations 16 and 17 of the Insolvency Regulations) to corporate insolvency proceedings; and that there is uncertainty and divergence in judicial approaches to the interpretation and effect of Regulation 77B concerning the validity and form of statutory demands. 9.The motion is opposed by the 1st respondent. 10.When the application came up for hearing on a virtual platform, learned counsel Mr. Kongere was present for the applicant while learned counsel Ms. Ludia was present for the respondents. 11.Mr. Kongere submitted that this matter was a straightforward application for certification under Article 163(4)(b) arising from insolvency proceedings that had already been remitted to the superior court and were still pending at the pre-trial stage. He argued that the issues raised relating to statutory notice requirements, jurisdiction, arbitration, and disputability of the debt had featured in the litigation, remained unresolved, and were likely to recur in similar disputes. In his view, they raised questions of general public importance warranting Supreme Court guidance to avoid repetitive litigation, particularly as the superior court had not yet heard the matter on its merits. He further contended that earlier proceedings had left aspects of these issues open and that appellate clarification would assist the superior court on remittal and promote legal certainty. 12.Ms. Ludia opposed the application, submitting that it did not meet the threshold for certification as the issues raised were either fact-specific, already determined, or improperly introduced at different stages of the proceedings. She argued that questions relating to insolvency regulations, statutory demand, arbitration, and jurisdiction had been addressed in earlier rulings and did not transcend the interests of the parties. She further submitted that no conflicting Court of Appeal authorities had been demonstrated, that the applicable principles on insolvency and bona fide disputes were settled, and that a prior Supreme Court petition in the matter had been struck out at a preliminary stage. She also contended that the applicant’s parallel proceedings pointed to forum shopping rather than genuine issues of general public importance, and urged that the matter proceed to hearing in the superior court on its merits. 13.Having considered the motion dated 6th March 2025, the record, and the submissions of counsel, the Court notes at the outset that the dispute arises from insolvency proceedings founded on a construction contract dated 12th June 2012 between the applicant and the 1st respondent. The 1st respondent commenced insolvency proceedings alleging non-payment of substantial sums, while the applicant opposed the proceedings on the basis that the debt was bona fide disputed, that no valid statutory demand had been issued, and that the contract contained an arbitration clause requiring disputes to be referred to arbitration. 14.The superior court (Okwany, J.) dismissed the applicant’s application to strike out the insolvency petition, finding that no bona fide dispute had been established, that the objections largely related to quantum rather than liability, and that any defects in the statutory demand were technical and non- prejudicial. On appeal, this Court, in its judgment delivered on 7th February 2025, upheld the decision permitting the insolvency proceedings to proceed, but clarified that the superior court ought not to have made conclusive findings on contested factual issues at an interlocutory stage. The Court accordingly directed that the insolvency petition be heard afresh on its merits before a different Judge of the superior court. It is common ground that the petition remains pending before the superior court and has not yet been determined on its merits. 15.The applicable principles for certification are well settled as set out in Hermanus Phillipus Steyn v Giovanni Gnecchi- Ruscone (2013) eKLR, namely; that an issue of general public importance must transcend the circumstances of the parties, have a significant bearing on the public interest, and must have arisen in and been addressed by the courts below; that the burden lies on the applicant to demonstrate such significance; and that purely factual disputes, or dissatisfaction with interlocutory determinations, do not in themselves meet the threshold. 16.Applying those principles, we are not persuaded that the applicant has met the threshold for certification. The issues sought to be raised arise in ongoing proceedings that have been expressly remitted to the superior court for hearing and determination on their merits. This Court’s judgment did not finally determine the substantive factual and contractual disputes, but instead directed that they be ventilated before the superior court. In these circumstances, the proposed appeal would risk fragmenting the litigation process and pre-empting issues that are properly within the jurisdiction of the superior court at first instance. 17.Further, while the questions framed may in a general sense raise legal issues capable of recurrence, the applicant has not demonstrated the existence of conflicting appellate authority or uncertainty in the law requiring clarification by the Supreme Court at this stage. The matters complained of remain subject to determination in the pending superior court proceedings and may, if necessary, be pursued through the ordinary appellate structure after final judgment. 18.Accordingly, we find that the application is premature and does not satisfy the constitutional threshold for certification under Article 163(4)(b). The motion dated 6th March 2025 is hereby dismissed, with the consequence that the insolvency petition shall proceed to hearing before the superior court in accordance with this Court’s earlier directions. 19.Each party shall bear its own costs. DATED AND DELIVERED AT NAIROBI, THIS 12TH DAY OF JUNE 2026.W. KARANJA........................................JUDGE OF APPEALA.O. MUCHELULE........................................JUDGE OF APPEALW. KORIR........................................JUDGE OF APPEALI certify that this is a true copy of the original.SignedDEPUTY REGISTRAR.