[2019] KEHC 2934 (KLR)
The court held that once the insolvency petition was filed, any challenge to the statutory demand or the petition itself must be brought within the insolvency cause and not through separate miscellaneous proceedings. The court found that the applicant's continued prosecution of the miscellaneous application, after...
Source-derived case information.
- Citation
- [2019] KEHC 2934 (KLR)
- Parties
- Applicant: Kwale International Sugar Company Ltd; Respondent: Epco Builders Limited
- Court
- High Court
- Court Station
- High Court at Nairobi (Milimani Commercial Courts)
- Jurisdiction
- Kenya
- Case Number
- Miscellaneous Application E272 of 2019
- Procedural Posture
- Miscellaneous Application / Ruling on Preliminary Objection and Application to Set Aside Statutory Demand
- Outcome
- Application and entire proceedings struck out; each party to bear its own costs.
- Judges
- F Tuiyott
- Legal Topics
- Insolvency Proceedings, Statutory Demand, Abuse of Process
- Source Language
- en
Source-derived case record
Summary, issues, holding and outcome
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Parties
Kwale International Sugar Company Ltd
Applicant
Epco Builders Limited
Respondent
Procedural Posture
Miscellaneous Application / Ruling on Preliminary Objection and Application to Set Aside Statutory Demand
Legal Issues
- 1 Whether the applicant can challenge the statutory demand and insolvency petition through miscellaneous proceedings after the insolvency petition has been filed.
- 2 Whether the continued prosecution of the miscellaneous application constitutes an abuse of court process.
Ratio Decidendi
The court held that once the insolvency petition was filed, any challenge to the statutory demand or the petition itself must be brought within the insolvency cause and not through separate miscellaneous proceedings. The court found that the applicant's continued prosecution of the miscellaneous application, after the filing of the insolvency petition, was an abuse of court process. The preliminary objection by the respondent was upheld, and the application and entire miscellaneous proceedings were struck out as they were no longer efficacious. However, since the proceedings were initially filed before the insolvency cause, the court ordered that each party bear its own costs.
Court Disposition
Application and entire proceedings struck out; each party to bear its own costs.
Orders
- The application dated 17th July 2019 is struck out.
- The entire miscellaneous proceedings are struck out.
Full Case Text
Judgment text and source record
33 paragraphs
REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT NAIROBI
COMMERCIAL & ADMIRALTY DIVISION
MISC. APPLICATION E272 OF 2019
IN THE MATTER OF: INSOLVENCY ACT, NO. 18 OF 2015
IN THE MATTER OF: INSOLVENCY REGULATIONS, 2016
AND
IN THE MATTER OF: THE APPLICATION TO SET ASIDE
STATUTORY DEMAND
BETWEEN
KWALE INTERNATIONAL SUGAR COMPANY LTD.................DEBTOR/APPLICANT
VERSUS
EPCO BUILDERS LIMITED. ..................................................CREDITOR/RESPONDENT
RULING
1. Once Nairobi Insolvency Petition No. 7 of 2019 was filed, then these proceedings commenced as a miscellaneous application were no longer tenable.
2. By an amended Application which is dated 17th July 2019 the Applicant seeks four substantive prayers being:-
3. This Honourable Court be pleased and do hereby issue an order restraining the purported Creditor/Respondent herein from proceedings to file the purported intended petition and advertising the intended Insolvency Petition.
4. A declaration be issue that Nairobi Insolvency PetitionNo. 07 of 2019 is null and void ab initio, and hence be struck out and/or dismissed with costs to the Applicant.
5. The Honourable Court be pleased and do hereby grant an order of mandatory injunction compelling the Respondent to recall the malicious advertisement of the purported illegal Insolvency Petition, Nairobi Insolvency Petition No. 07 of 2019, published in the Daily Nation Newspaper of 8th July 2018 at page 44 and publish an apology in the same manner in which it published the malicious advertisement of the purported insolvency petition.
3. A short chronology of events demonstrates the difficulty which the Applicant faces. Earlier, on 1st July 2019, the Applicant filed a Notice of Motion herein seeking two main orders:-
2. The statutory demand from the Respondent dated 7th June 2019 and served upon the Applicant on 12th June 2019 be set aside.
3. This Honourable Court be pleased and do hereby issue an order restraining the purported Creditor/Respondent herein from proceeding to file the purported intended petition and advertising the intended Insolvency Petition.
4. The Motion was served on the Respondent on 3rd July 2019 and on 5th July 2019, the Respondent filed Nairobi Insolvency Petition No. 7 of 2019. This is a Petition in which the Respondent seeks an insolvency order against the Applicant. The filing of the Petition was before the Applicant had obtained any orders herein much less prosecuted his application. This forced the Applicant to amend his application as to now framed.
5. Undoubtedly, it is within the right of the Applicant to challenge the propriety and validity of the statutory notice and subsequent insolvency proceedings, but once the insolvency proceedings had been filed then the challenge had to be mounted within the insolvency cause. Examples are not lacking that this is the approach (See in ReGenghis Capital Limited [2019] eKLR and in Re Kipsigis Stores Limited [2017] eKLR which, incidentally, are authorities in the Applicant’s bundle).
6. As there was no order restraining the Respondent from filing the Petition, then it would be an abuse of court process to use satellite proceedings to impugn and challenge the main cause.
7. For that reason, I uphold the Preliminary Objection by the Respondent and strike out not only the application of 17th July 2019 but these entire proceedings. They are no longer efficacious. However, as the proceedings were filed before the insolvency cause was filed and would, at commencement, be a proper way of challenging the validity of the statutory notice, I order that each side bears its own costs.
Dated, Signed and Delivered in Court at Nairobi this 18th Day of October 2019
F. TUIYOTT
JUDGE
PRESENT:
Muga for Applicant
Okwatch for Respondent
Court Assistant: Nixon