[2022] KEHC 15933 (KLR)

Osonga v Diamond Trust Bank (K) Limited & another; Faulu Microfinance Bank Limited (Proposed Respondent) (Miscellaneous Application E018 of 2021) [2022] KEHC 15933 (KLR) (11 November 2022) (Ruling)

Neutral citation: [2022] KEHC 15933 (KLR)

Republic of Kenya

In the High Court at Kericho

Miscellaneous Application E018 of 2021

AN Ongeri, J

November 11, 2022

Between

Filex Muhoma Osonga

Applicant

and

Diamond Trust Bank (K) Limited

1st Respondent

CIC General Insurance Limited

2nd Respondent

and

Faulu Microfinance Bank Limited

Proposed Respondent

Ruling

1. The Application coming for consideration in this Ruling is the Chamber Summons dated 24/3/2022 seeking the following Orders:-i.Spentii.That there be stay of further proceedings in this matter pending the hearing and determination of this Application inter partes.iii.That Faulu Microfinance Bank Limited be enjoined to these proceedings as the 3rd Respondent.iv.That leave be granted to Faulu Microfinance Bank to apply to set aside the Arbitral Award made on 8th February, 2021 in Filex Muhoma Osonga vs Diamond Trust Bank Limited & CIC General Insurance Limited by Mr. Frank Muchiri, C.Arb.v.That costs of this Application be in the cause.

2. The Application is based on the following grounds:-i.By way of these proceedings, one Filex Muhoma Osonga seeks to have the Arbitral Award made on 8th February, 2021 in Filex Muhoma osongo -vs- Diamond Trust Bank Limited & CIC General Insurance Limited by Mr. Frank Muchiri, C.Arb recognized, adopted and enforced as an Order of this Court;ii.The dispute subject of the said Arbitral Award Inter alia relates to an unpaid Motor Vehicle Insurance Compensation claim against the 2nd Respondent’iii.The Proposed 3rd Respondent/Applicant as Financier of the attendant motor vehicle is entitled to the proceeds of the said Insurance Compensation claim as first loss payee as per the relevant Insurance Policy Contract;iv.Despite being a necessary party to the aforesaid Arbitration Proceedings, the said Filex Muhoma Osonga deliberately failed to enjoin the Proposed 3rd Respondent/Applicant as a party thereto and/or at the very least inform him of the said proceedings or even give notice of the existence of the said dispute at the material time;v.Due to such failure, the said Arbitral proceedings were undertaken without due regard to the aforesaid overriding contractual rights of the Proposed 3rd Respondent/Applicant rendering the resultant Award irregular and illegitimate;vi.The Proposed 3rd Respondent/Applicant is therefore entitled at law to challenge the said Arbitral Award and is therefore a necessary and proper party to these proceedings;vii.This matter is scheduled for mention five (5) days from the date hereof, on 29th March, 2022, for issuance of further directions and therefore unless this Application is placed before the Court for hearing on priority basis, the Proposed 3rd Respondent/Applicant will be unable to ventilate its position in the matter causing it immense and irreparable harm and loss; andviii.The interests of Justice would be best served by issuance of the orders sought herein.

3. The Application is supported by the Affidavit of James Wachira Muragein which he deposed as follows: -i.That Filex Muhoma Osonga seeks to have the arbitral award made on the 8/2/2021 in Filex Muhoma Osonga vs. Diamond Trust Bank Limited & CIC General Insurance Limited by Mr. Frank Muchiri, C. Arb, adopted and enforced as an order of this honorable court;ii.That the dispute, subject of the said arbitral award inter alia, relates to an unpaid motor vehicle insurance compensation claim made by Filex Muhoma Osonga against the 2nd respondent arising from the theft of Motor vehicle registration number KCF 803Y;iii.That the proposed 3rd respondent as financier of motor vehicle registration number KCF 803Y is entitled to the proceeds of the aforesaid insurance compensation claim; in that on or about the 29th of October, 2015, the proposed 3rd respondent and Filex Muhoma Osonga entered into a contract of lending whereby the former financed the latter’s purchase of the aforesaid motor vehicle by advancing a sum of Kshs. 4,050, 000;iv.That the only instance where the aforesaid entitlement of the 3rd respondent would be extinguished at law is where the said Filex Muhoma Osonga had fully repaid the loan advanced to him, as the said credit facility is in heavy arrears as Filex Muhoma Osonga has failed to make any repayments since the month of September 2019;v.That the 2nd respondent as the insurer of the said motor vehicle registration number KCF 803Y formally confirmed to the proposed 3rd respondent that the latter’s aforesaid interest had been noted on the attendant comprehensive insurance policy;vi.That sometime in the year 2019, Filex Muhoma Osonga reported to the proposed 3rd respondent that motor vehicle registration number KCF 803Y had been stolen;vii.That since then, the next communication received regarding the said motor vehicle were letters dated 28/12/2021 and 11/01/2022 from Filex Muhoma Osonga’s advocates seeking the release of the attendant original registration certificate (logbook) to them, ostensibly due to the ruling and order of this honorable court of 17/12/2021;viii.That on the 12th of January, 2022, the proposed 3rd respondent responded to the said advocates informing them of its entitlement to the proceeds of the aforesaid insurance compensation claim;ix.That on the 14/1/2022, the proposed 3rd respondent received a letter from the aforesaid advocates falsely alleging that not only was the former aware of the aforesaid arbitration proceedings but also erroneously alleging that it was imposing its own conditions to the ruling and order aforesaid;x.That the proposed 3rd respondent tasked its advocates to peruse the court file to find out about the aforesaid arbitration proceedings and the present suit;xi.That the proposed 3rd respondent is not only a necessary party to this suit but also entitled at law to set aside the aforesaid arbitral award.

4. The Application is opposed by the Applicant Filex Muhoma Osongawho filed a Replying Affidavit on 08/6/2022 in which he deposed as follows: -i.That the application dated the 24th of March, 2022, together with the affidavit of James Wachira Murage is inept, incompetent, fatally defective and an abuse of the court process and ought to be struck out;ii.That the deponent to the application, being an officer of this court has a duty, first to this court, in assisting the court determine this matter in an efficient and cost-effective manner for he is bound and bestowed with the duty to tell the truth in his averments;iii.That by alleging that the institution became aware of the matter as recently as the 28th of December, 2021 and further on 11th January, 2022 is pure falsehood aimed at eliciting unfounded claims by the applicant whereas the applicant is aware that he furnished them with a copy of the award at their branch office in Kayole-Nairobi;iv.That the applicant’s contention emanates from the ruling of this honorable court issued on the 17th December, 2021 directing them to fill out the claim form, surrender the logbook and duplicate keys of motor vehicle registration number KCF 803Y to the 2nd respondent for purposes of settling his claim as awarded by the arbitral tribunal on the 8th of February, 2021;v.That prior to lodging the arbitral proceedings, he personally visited the applicant’s company to report loss of motor vehicle registration number KCF 803Y FAW Lorry, since the said lorry had been jointly registered in the names of the applicant’s company and himself for speedy and quick investigations in accordance with the terms of the asset finance agreement signed on the 27th of October, 2015;vi.That he was advised to follow the matter with the police as they carried out their independent investigations since they had the motor vehicle fitted with a tracker;vii.That he later paid a visit to the applicant’s company to find out the progress made and was advised by the applicant company’s officers to pursue the matter against the 1st and 2nd respondents before the arbitral tribunal with the promise that they would facilitate every piece of document at their disposal that he may require at the hearing;viii.That true to their word on the 4th of December, 2019 while preparing to lodge claim against the 1st and 2nd respondents at the arbitral tribunal, the applicant furnished him with a letter of offer, copy of logbook for motor vehicle registration number KCF 803Y, bundle of bank account statements and bundle of loan statements via email;ix.That following the positive response received from the applicant’s company, he made an inquiry as to whether they would pursue the claim at the arbitral tribunal as claimants but got a negative response based on explanation that the documents facilitated to him would advance his claim;x.That the prayer sought by the applicant to have the arbitral award made on the 8th of February, 2021, set aside, has no legal backing and it has only been made in attempts to frustrate him from enjoying the fruits of his judgement which he has pursued since 2019;xi.That the applicant is out to benefit from his sweat and brow yet he has pursued the case singlehandedly with the knowledge of the applicant, whose only requirement was that he clears the arrears as at the year 2019, when he first reported the moto vehicle missing;xii.That the applicant should not be allowed to use this honorable court as a conduit for ill gain and benefit from its negligence, recklessness and unprofessionalism as they have never made any effort tangible or otherwise into the disappearance of motor vehicle KCF 803Y four years down the line;xiii.That the applicant had a duty to act with due care, skill and diligence during the subsistence of their relationship but instead has aimed its guns at maligning him in their application while hiding under the guise as first loss payee and yet they were not privy to the contract that gave rise to the arbitral proceedings;xiv.That the applicant has fronted itself being the financier therefore entitled to the full decretal amount, alleging that he is in heavy arrears for failure to service the loan since September, 2019, seven months after loss of asset and reporting the incident to them;xv.That the applicant’s entitlement to the decretal amount on the basis of financier’s interest does not arise as the same was never noted in the insurance policy as provided for at section 1, clause 2 of the insurance policy, therefore their claim must fail for clearly having demonstrated laxity and statutory negligence on their part;xvi.That the applicant’s institution has never served him with any notices decrying the alleged arrears, warranting them to demand the decretal amount;xvii.That his relationship with the applicant was governed by the agreement executed on the 27th of October, 2015, which obligated him under clause 7. 5 to inform them of material arbitral proceedings at Nairobi, therefore to state that they were only made aware of pending litigations upon requesting them to surrender the logbook is immoral and conduct unbecoming on their part;xviii.That despite having reported loss of the motor vehicle and pursuing the case before the arbitral tribunal, he diligently continued to service the loan whereas the applicant failed to honor its end of the bargain to either produce its findings or call him for a meeting to restructure the loan;xix.That it is his firm belief that the application has been accentuated by malice, greed and unjust enrichment for the applicant chose not to facilitate in the proceedings at the arbitral tribunal or in the very least commence legal proceedings against him for failure to service the loan;xx.That he acknowledges owing the institution arrears amounting to Kshs. 1, 550, 912. 02, since he has a customer-bank relationship with the applicant and he does not intend to renege on his obligation despite the fact that they chose to hang him out at a time that he needed their services;xxi.That the applicant has chosen to show up at the penultimate stage armed with unmerited application just when he has fulfilled the directions of this honorable court pursuant to the order issued on 17th December, 2021, is in bad faith clearly designed to deny him from finalizing the matter contradicting their correspondence to his advocate and 2nd respondent beseeching them to comply with the court’s directive;xxii.That litigation must surely come to an end and the fact that the applicant has shown interest at this stage irks of deceit and total disregard to the rules of natural justice and fairness.

5. The 1st Respondent Bank, Diamond Trust Bank Kenya Limited also opposed the Application dated 24/03/2022 and filed a Replying Affidavit sworn by Francis Kariuki dated 8/7/2022 in which he deposed as follows: -i.That there existed a tripartite between the applicant, 1st respondent and 2nd respondent an Insurance Premium Finance Agreement dated the 7th of June, 2018, through which the 1st respondent financed premium payments for a motor vehicle KCF 803Y;ii.That the aforementioned IPF agreement had an arbitral clause within the meaning of section 4 of the Arbitration Act No. 4 of 1995;iii.That pursuant to the aforementioned arbitral clause, the applicant commenced arbitral proceedings via a statement of claim dated the 5th of December, 2019 and amended via an amended statement of claim dated the 6th of May, 2020;iv.That the same was served upon the 1st and 2nd respondents herein and the 1st respondent filed a statement of response dated the 14th of April, 2020;v.That despite being served with the aforementioned documents, the 2nd respondent failed and/or neglected to file a statement of response or any documents in response to the applicant’s claim;vi.That the arbitrator issued several orders of directions and other correspondences informing all the parties of the directions or proceedings taken in the matter and severally invited the 2nd respondent to participate in the matter;vii.That the matter proceeded for hearing on the 19th of August, 2020 and 11th September, 2020 wherein the applicant and 1st respondent’s witnesses testified, however the 2nd respondent failed and/or neglected to participate despite being notified;viii.That the arbitrator issued a final award dated the 8th of February, 2021, and following the award the 1st respondent proceeded to settle the award made against it amounting to Kshs. 63, 879. 75 being half the travel expenses incurred by the applicant of Kshs. 108, 000 plus accrued interest at 14% p.a;ix.That the 2nd respondent failed and/or neglected to apply to set aside the arbitral award within the three (3) months of the delivery of the award contrary to the provisions of section 35(3) of the Arbitration Act no. 5 of 1995 hence the arbitral award ought to be adopted as an order of the court;x.That the proposed 3rd respondent was not a party to the IPF agreement hence was not a proper party to the arbitration proceedings;xi.That the 1st respondent was not a party to the letter of offer dated the 27th of October, 2015, hence was not privy to the terms therein and further the arbitral proceedings related to the cancellation of the insurance policy under the IPF agreement;xii.That should the proposed 3rd respondent seek to recover the facility advanced via the letter of offer dated the 27/10/2015, they ought to file a separate suit instead of seeking to set aside the arbitral proceedings herein when they don’t have a judgement against the applicant;xiii.That the applicant and 1st respondent spent considerable time and resources in participating in the arbitration proceedings and jointly incurred costs of Kshs. 550, 880 hence it would defeat the cause of justice to further delay this matter by setting aside the arbitral award by parties who are intent on frustrating the expedient disposition of disputes;

6. The parties filed written submissions as follows: -The applicant submitted that the proposed 3rd respondent’s interest as a financier, having not been noted on the insurance policy, were not a party to the said insurance policy and IPFA, they derived no interest or benefit from the arbitral award, and further that the proposed 3rd respondent were correctly not enjoined in the arbitration proceedings since it was not privy to the agreements which were subject to the dispute.

7. The applicant also submitted that despite the proposed 3rd respondent having been informed of the existence of the arbitral proceedings, failed to seek to be enjoined in the proceedings to secure their interests as the financier and first loss payee, and only waited for the outcome of the arbitration proceedings before advancing their claim.

8. The applicant submitted that instead of the proposed 3rd respondent delaying the execution of the arbitral award by seeking to be enjoined in these proceedings at this stage, it has the option of instituting a separate suit to recover the outstanding balances from the applicant.

9. The applicant submitted that this application to set aside the arbitral award has been brought to court more than one year after the arbitral award was made, which is against the express provisions of section 35(3) of the Arbitration Act. It was further submitted that this application having not been made under section 34 of the Arbitration Act, and in the absence of any law allowing for extension of time, this application must fail for offending the provisions of section 35 (3) of the Arbitration Act.

10. It was submitted by the applicant that the proposed 3rd respondent made averments that the Arbitral Award made on the 8th of February, 2021 is irregular and illegitimate but it has not demonstrated this claim. It was submitted that for the proposed 3rd respondent to succeed in setting aside an arbitral award, they ought to have demonstrated and furnished proof in accordance with section 35(2) of the Arbitration Act, which provides for circumstances where a party may apply to set aside the arbitral award.

11. The applicant submitted that the Arbitration Act is a strict code that applies exclusively in the conduct of arbitration proceedings, and in proceedings challenging an arbitration award in the high court, and it does not have provisions for a party to be enjoined in an application to set aside an award, where such a party was not a participant in the arbitration proceedings.

12. The 1st respondent submitted that the applicant has satisfied the requirements of section 36 of the Arbitration Act, hence the application for enforcement ought to be allowed. It was also submitted that the 2nd respondent despite being notified of the arbitral proceedings and the arbitral award, they neither participated in the arbitration nor did they challenge the award within the 3-month period prescribed under section 35 of the Arbitration Act, hence there is no justifiable reason not to adopt the award as an order of this honorable court.

13. The 1st respondent submitted that there was no privity of contract between the applicant, 1st respondent and 2nd respondent on the one hand and the proposed 3rd respondent, as the proposed 3rd respondent was not a party to the Insurance Premium Finance Agreement dated the 7/06/2018.

14. It was submitted by the 1st respondent that the letter of offer dated the 27th of October, 2017, did not involve the 1st and 2nd respondents hence cannot be binding on them, as they were not parties to the said agreement, hence the parties to the tripartite IPF agreement were free to pursue the arbitration proceedings without the involvement of the proposed 3rd respondent.

15. The 1st respondent submitted that the proposed 3rd respondent was notified of the existence of the arbitration proceedings, and they declined to be enjoined; and further, that the proposed 3rd respondent has brought the application with the aim of recovering the amounts advanced under the letter of offer dated the 27th of October, 2015, instead of filing a suit in the magistrate’s court and obtain a judgement.

16. The proposed 3rd respondent submitted that it constitutes a necessary party to these proceedings, and ought to be joined to these proceedings as the 3rd respondent.

17. It was submitted by the proposed 3rd respondent that if it decided to institute separate proceedings to set aside the arbitral award that is sought to be enforced as a judgement in this matter, there would be two suits over the same subject matter, with the possibility of not only relevant parties not being included in either proceedings but also of issuance of conflicting orders/judgements that would result in immense inconveniences and protracted litigation, which can only be avoided by the joinder of Faulu Microfinance Bank Limited as the 3rd respondent to these proceedings.

18. It was submitted by the proposed 3rd respondent that it intends to apply for setting aside of the arbitral award on grounds that it was a necessary party to the attendant arbitration proceedings but was not enjoined, and were thereby denied the right to be heard prior to hearing and determination of a dispute affecting its rights.

19. It was further submitted by the proposed 3rd respondent that it is a necessary and proper party to these proceedings and ought to be enjoined as the 3rd respondent, and that the affidavit evidence adduced constitutes sufficient grounds at law for an application for setting aside of the attendant arbitral award.

20. The 2nd Respondent did not join in the application but sought leave to file an Affidavit dated 3/10/2022 to annex the policy document.

21. The said Affidavit was sworn by Lydia Mwangiand she deposed as follows: -i.That the policy of insurance that was taken out by the applicant was based on a proposal form, in which the applicant indicated that the insurance should be in his name and that of the proposed 3rd respondent;ii.That the 2nd respondent did issue an insurance quote that was accepted, and thereafter it issued a policy in the name of the applicant and the proposed 3rd respondent;iii.That the 2nd respondent wrote to the 3rd respondent vide its letter dated the 23/12/2015 advising that its interests had been noted in the insurance policy;iv.That the proposed 3rd respondent was a party to the insurance contract and its interests had been noted in the policy.

22. The sole issue for determination is whether the proposed 3rd Respondent ought to be enjoined to these proceedings.

23. The Applicable law is as follows:- Order 1 rule 10(2) of the Civil Procedure Rules, provides that:- “The court may at any stage of the proceedings, either upon or without the application of either party, and on such terms as may appear to the court to be just, order that the name of any party improperly joined, whether as plaintiff or defendant, be struck out, and that the name of any person who ought to have been joined, whether as plaintiff or defendant, or whose presence before the court may be necessary in order to enable the court effectually and completely to adjudicate upon and settle all questions involved in the suit, be added.”

24. The Court of Appeal in JMK v MWM & Another(2015) eKLR stated as follows:- “Order 1 Rule (10) (2) of the Civil Procedure Rules empowers the court, at any stage of the proceedings, upon application by either party or suo moto, to order the name of a person who ought to have been joined or whose presence before the court is necessary to enable the court effectually and completely adjudicate upon and settle all questions involved in the suit, to be added as a party.”

25. In Kaushik Panchamatia & 3 Others V Prime Bank Limited & Another; District Lands Registrar Kisumu East District & 3 Others (intended Interested Parties)(2021) eKLR, the court stated that: - “Under order 1 rule 10 (2) of the Civil Procedure Rules, in appropriate cases, the court can order the joinder of a party at any stage of the proceedings. The joinder should not delay a suit or materially affect the rights of the parties. Such joinder assists the court in determining the matters in controversy between the parties. The court must also keep at the back of its mind that no party should be denied an opportunity to present its case in the best way it knows how.”

26. I find that it is in the interest of Justice to bring on board all parties and lay before the Court all issues for determination.

27. I allow the Application and direct that Faulu Microfinance Bank Limited be and is herein enjoined to these proceedings as the 3rd Respondent.

28. Faulu Microfinance Bank Limited having been enjoined to these proceedings as the 3rd Respondent is at liberty to seek any further orders.

29. The costs of the application to abide the cause.

DELIVERED, DATED AND SIGNED AT KERICHO THIS 11TH DAY OF NOVEMBER, 2022A. N. ONGERIJUDGE