[2022] KEHC 469 (KLR)

Laico Regency Hotel - Nairobi v Burguret Farm Limited (Insolvency Notice E064 of 2020) [2022] KEHC 469 (KLR) (Commercial and Tax) (2 June 2022) (Ruling)

Neutral citation: [2022] KEHC 469 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Commercial and Tax

Insolvency Notice E064 of 2020

WA Okwany, J

June 2, 2022

Between

Laico Regency Hotel - Nairobi

Applicant

and

Burguret Farm Limited

Creditor

Ruling

1. Before this court for determination is the application dated 10th December 2020 wherein the applicant seeks the following orders: -1. Spent.2. Spent.3. The Statutory Demand dated 23rd November 2020, be struck out.4. The Costs of this Application be awarded to the Applicant.

2. The application is brought under Section 384 of the Insolvency Act and Order 51 Rule 1 (i) (a) of the Civil Procedure Rules.

3. The application is supported by the affidavit of the applicant’s Finance Manager Ms Purity Njoroge and is based on the following grounds: -1. That the Statutory Demand dated 23rd November 2020, and served on the Applicant on 27th November 2020, is in contravention of Section 384 of the Insolvency Act as it is signed by the Deputy Registrar and does not meet the definition of a demand as provided in Section 384 (1) of the Act.2. That the Applicant has not been served with any demand for Payment by the said Creditor.3. That there is no evidence whatsoever presented by the Creditor to the Applicant establishing a debt owed to it. Laicodenies owing any money to the Creditor.4. That there is no proven debt against the Applicant on the basis of which the Creditor can invoke the provisions of the Insolvency Act.5. That the Applicant is not an entity capable of being sued, making the Statutory Demand incompetent.

4. The respondent opposed the application through the replying affidavit of Mr. Shadrack Muli who states that the parties herein had a business engagement in which the respondent would regularly supply meat produce to the applicant. He states that the applicant defaulted in it payments and that demands for payment of arrears in the sum of Kshs. 424,866. 50 went unanswered. He further states that the Statutory Demand was duly sent to the applicant in accordance with Section 386 of the Insolvency Act.

5. I have considered the pleadings filed herein together with the parties’ submissions. The main issue for determination is whether the applicant has made out a case for the striking out the Statutory Demand dated 23rd November 2020

6. The applicant seeks orders for the striking out of the Statutory Demand on the basis that it contravenes the provisions of Section 384 of the Insolvency Act as it was signed by the Deputy Registrar and that no demand for payment had been issued to the applicant.

7. In a rejoinder, the respondent stated that the Statutory Demand served on the applicant was in form 32E as provided for by Regulation 77B of the Insolvency Regulationsand was issued by the respondents in compliance with Section 384 of the Insolvency Act.

8. Section 384 of the Insolvency Act No. 18 of 2015, provides that: -“(1)For the purposes of this Part, a company is unable to pay its debts-(a)If a creditor (by assignment or otherwise) to whom the company is indebted for hundred thousand shillings or more has served on the company, by leaving it at the company’s registered office, a written demand requiring the company to pay the debt and the company has for twenty-one days afterwards failed to pay the debt or to secure or compound for it to the reasonable satisfaction of the creditor;(b)If execution or other process issued on a judgment, decree or order of any Court in favour of a creditor of the company is returned unsatisfied in whole or in part; or(c)If it is proved to the satisfaction of the Court that the company is unable to pay its debts as they fall due.(2)A company is also unable to pay its debts for the purposes of this Part if it is proved to the satisfaction of the Court that the value of the company’s assets is less than the amount of its liabilities (including its contingent and prospective liabilities).(3)The insolvency regulations may increase or reduce the amount specified in subsection (1)(a).”

9. Regulation 77B to the Insolvency Regulations states as follows:-77B (1)For the purposes of section 425 of the Act an application for liquidation shall be-(a)by way of a petition in Form 32C as set out in the First Schedule; and(b)Accompanied by a verifying affidavit in Form 32D as set out in the First Schedule.(2)The petition for liquidation shall be accompanied by the following documents –(a)a statutory demand in Form 32E set out in the First Schedule if the reason for petition is indebtedness; and(b)A statement of financial position in Form 32 as set out in the First Schedule where necessary.In Re: Kipsigis Stores LimitedML HC IP No. 14 of 2016 [2017] eKLR Onguto J. held as follows:-[40]Clearly, an application to set aside or vacate a statutory notice on the basis of invalidity should be looked at in the light of the full circumstances of the case. The notice should not be set aside on the basis of a mere technicality. Rather regard should be had to all the circumstances including but not limited to whether the debt is owed as well as whether the overriding objective would be defeated by setting aside the notice. If no injustice flows from the consequences of non-compliance, then it would serve no purpose to set aside a statutory demand and to cause the statutory demand to be served again at cost.

10. I have perused at the Statutory Demand dated 23rd November 2020 and I note that it is substantially in form 32E as prescribed under Regulation 77B of the Insolvency Regulations. The demand sets out the substance of the respondents claim as against the applicant. My finding is that the mere fact that the Statutory Demand was signed by the Deputy Registrar does not make it defective.

11. I have also perused the demand letter attached to the respondent’s replying affidavit as exhibit BFL-3. The applicant did not challenge authenticity of the said letter. My finding is that the letter is sufficient proof that the applicants were duly served with the demand notice. The respondent also attached a statement dated 21st June 2020 marked as exhibit BFL-2 detailing the invoices that it had raised.

12. I find that the Statutory Demand complies with the statutory requirements and is therefore valid. I therefore find that the application dated 10th December 2020 is not merited and I therefore dismiss it with costs to the respondent.

DATED, SIGNED AND DELIVERED VIRTUALLY AT NAIROBI THIS 2NDDAY OF JUNE 2022. W. A. OKWANYJUDGEIn the presence of: -Ms Kedogo for Respondent.Mr. Adano for Applicant.Court Assistant- Sylvia