[2004] KEHC 526 (KLR)

REPUBLIC OF KENYA IN THE HIGH COURT OF KENYA NAIROBI COMMERCIAL DIVISION, MILIMANI BANKRUPTCY CAUSE NO. 56 2002

SAMSON NYAMWEYA KEENGWE ………………………….DEBTOR

VERSUS

NATIONAL BANK OF KENYA LIMITED …………………CREDITOR

RULING

On 12. 02. 2002, the firm of Hamilton Harrison & Mathews, Advocates for the Judgement - Creditor ("the Creditor") issued a Request for Issue of a Bankruptcy Notice against Samson Nyamweya Keengwe Judgement Debtor ("the Debtor") for failure to pay the sum of Kshs.144,013. 75 together with interest thereon at 14% per annum from the 16. 09. 1998 until payment in full together with costs of Kshs.9,415/= Certified by the Registrar. The court subsequently issued a Bankruptcy Notice dated 21. 02. 2003.

The Debtor has taken exception to the issue of the Bankruptcy Notice and by a Notice of Intention to Raise a Preliminary Objection dated and filed on 2. 02. 2004, the Debtor has objected to the issue of the said Bankruptcy notice on the grounds that -

(a) That the Petition is grounded on proceedings which are fatally defective and which offend the clear stipulations of Section 3 (I) (g) and Section 4 of the Bankruptcy Act;

(b) That the Request for Issue of Bankruptcy Notice dated 20. 02. 2002 upon which the Court issued a Bankruptcy Notice dated 21. 02. 2002 offends the provision of Section 3 (I) (g) read with Rule 99 of the Bankruptcy Rules.

(c) That according to the Court record the Debtor Samson Keengwe Nyamweya has never been served with a Bankruptcy Notice.

In his submissions to the Court, Mr. Amollo Counsel for the Debtor told the Court the Creditor had not complied with requisite provisions of the law in issuing the Request for Issue of a Bankruptcy Notice in that the said request was not made by the Creditor but by one Esther Ndosi, an employee of the firm of Hamilton Harrison and Mathews, the Advocates for the Creditor. Mr. Amollo told the court that bankruptcy provisions are penal in nature and must be construed strictly. The Request for Issue of the Bankruptcy Notice ought to have been signed by the Creditor and not by a representative of the Creditor's legal advisers. For this reason of non compliance with the strict requirements of the bankruptcy provisions, the progeny of the request, that is to say, the ensuing Bankruptcy Notice dated 21st February 2002, is of no effect or a nullity as it offends the provisions of Section 3 (I) (g) as read together with rule 99 of the Bankruptcy Rules and that consequently no Bankruptcy Notice has ever been served upon the Debtor. In support of this contention, Counsel relied upon the case of Oraro & Rachier Advocates vs. Cooperative Bank of Kenya Ltd.(Civil Appeal No. 154 of 2000) page 2 where the Court said "…It is trite law that where rules of Court prescribe a procedure for the doing of any act, a departure from or a variation thereof may render the act done a nullity."

Upon this assault on the Request for Issue of a Bankruptcy Notice, Counsel for the Creditor, Miss Ndosi, submitted that the Creditor had complied fully with the provisions of Rule 99 of the Bankruptcy Rules. Besides, she submitted, the Bankruptcy Rules provide for forms and that at page 159, the Bankruptcy Act provides for Form BN, which may be signed by either the Creditor or the Creditor's Solicitor, or in our case, the Creditor's Advocate. The form of application shows that the Request for Issue of a Bankruptcy Notice was applied by oneEsther Mukenyi Ndosi, Advocate, employed in the said firm of Hamilton Harrison & Mathews, Advocates for the Creditor, and was signed by the said Advocate, and submitted that the Preliminary Objection had no basis and should be disallowed.

In response to this submission, Mr. Amollo, the Debtor's Counsel took a different view. Mr. Amollo submitted that his views is what is contemplated by the Forms themselves, that the expression, "CD" refer to the "Creditor" himself in terms of Rule 99 of the Bankruptcy Rules, and that the insertion in the form of the words "CD" means that "EF" or Solicitor must excluded, for if it were not so the form would have commenced with the expression "I CD or EF." Counsel submitted that if he were wrong on this view he would fall upon Rule 99 aforesaid, in support of his contention that No proper Request for Issue of a Bankruptcy Noticewas issued, and the progeny thereof is a nullity.

Those are the rival arguments of the rival parties. I now proceed to look at the relevant provisions of the Bankruptcy Act, and Rules thereunder. Mr. Amollo referred to Section 3 (I) (g) and Section 4.

Section 3 of the Bankruptcy Act (Chapter 53 Laws of Kenya) (the Act) sets out what constitutes acts of bankruptcy. Section 3 (I) (g) sets out that a debtor commits an act of bankruptcy where a creditor who has obtained a final decree or order serves a bankruptcy notice on the debtor and the debtor fails to comply with the requirements of the bankruptcy notice within the time specified (7 seven days), and finally says -

"… and for the purposes of this paragraph and of Section 4, any person who is, for the time being entitled to enforce a final decree or final order shall be deemed a creditor who has obtained a final decree or final order."

And Section 4 of the Act provides that the Bankruptcy Notice shall be in the prescribed form and shall require the debtor to pay the amount in the decree or sum ordered to be paid in accordance with the terms of the decree or order, or to secure or compound for it to the satisfaction of the creditor or the Court, and shall state the consequences of non compliance with the notice and shall be served upon the debtor in the prescribed manner.

For the purpose of Section 3 (I) (g), the Creditor is no doubt the National Bank of Kenya, the decree holder in the suit giving rise to the Petition in Bankruptcy. Section 4 of the Act does however, require that the Bankruptcy Notice shall be in the prescribed form and require the debtor to -

(a) Pay the amount in the decree or in accordance with the terms of the decree or final order, or

(b) Secure or compound the amount in the decree to the satisfaction of the creditor or the Court.

(c) State the consequences of non-compliance with the notice.

(d) Serve the Bankruptcy Notice on the Debtor in the prescribed manner;

The first issue to be determined therefore is whether the Creditor complied with the requirements of Section 3 (I) (g) and Section 4 of the Act, or more immediately whether the Request for Issue of a Bankruptcy Notice was in accordance with those provisions.

Counsel for the Debtor urged the Court to find that since the Request for Issue of a Bankruptcy Notice was not signed by the Creditor, but by its Advocate, it did not comply with the requirements of the said provisions of the Act, and that such Request, for Issue of a Bankruptcy Notice; and its subsequent progeny, the Bankruptcy Notice issued by the Deputy Registrar on 21. 02. 2002 was itself a nullity and would not confer on the Creditor the right to file a Petition in Bankruptcy.

Section 4 of the Act requires that the Bankruptcy Notice be in the prescribed form and that such form should contain the requirements set out in that Section. The actual formulation was left to the Rules Committee under Section 122 (1) of the Act to make rules for carrying into effect the objects of the Act. Rule 4 of the Bankruptcy Rules (the Rules) prescribes the form. It provides that the forms in the Schedule to the Rules where applicable, and where they are not applicable forms of a similar character with such variations as circumstances may require shall be used(emphasis mine), and that where more prolix forms are used the costs therefore shall be borne by or disallowed to the party using them unless the court otherwise directs. A Request for Issue of Bankruptcy Notice is prescribed under Form 4 and an Affidavit of Service of such notice is prescribed under Form 6.

Rule 317 (2) provides that save as provided by the Rules, the rules of procedure of the High Court shall not apply to any proceedings in bankruptcy. Rule 99 of the Rules provides that a Creditor desirous that a bankruptcy notice may be issued shall produce (emphasis mine) to the Registrar an office copy of the judgment or order on which the notice is founded and file the notice together with a request for issue of the Notice. Rule 100 (1) provides that every bankruptcy notice shall be endorsed with the name and place of business of the Advocate actually suing or, if no Advocate is employed, with a memorandum that it is sued by the creditor in person. Every Bankruptcy Notice shall also be endorsed with the particulars set out in Rule 100 (2). Which are not the concern of the Ruling.

Finally section 133 (1) of the Act provides that - "No proceedings in bankruptcy shall be invalidated by any formal defect or by any irregularity, unless the court before which an objection is made to the proceedings is of the opinion that substantial injustice has been caused by the defect or irregularity, and that the injustice cannot be remedied by any order of the court."

Having considered the rival parties arguments, and the above provisions of the Bankruptcy Act, and the Rules thereunder and in particular the provisions of Section 133 (1) that no proceedings in Bankruptcy shall be invalidated by any formal defect or by any irregularity, I am of the opinion that because of the essential penal consequences of Bankruptcy, its provision must be construed strictly.

Form 4 (Request for Issue of Bankruptcy Notice) which appears to suggest that an Advocate acting for a Judgment Creditor may sign a Request for Issue of a Bankruptcy Notice, is in direct conflict with the clear and mandatory language of both Rules 99 and 100 (1) of the Bankruptcy Rules. Rule 99 requires the Creditor, and not his Advocate to express his desire to issue a Bankruptcy Notice. Rule 100 (1) makes the issue even clearer, every bankruptcy notice shall be endorsed with name and place of business of the Advocate and where no Advocates is employed with a Memorandum that it is sued by the Creditor in person. This rule defines the role of the Advocate, namely to sign the endorsement. The creditor must sign the Request for Issue of a Bankruptcy Notice. Reference in Form 4 to signature by the Advocate is in my opinion an error, and must mean and refer to the endorsement required under Rule 100 (1) when an Advocate is employed in the matter. In my view further signature by the Advocate of the Request for Issue of the Bankruptcy Notice was a formal defect and irregularity for purposes of section 133 (1) o f the Act.

There is a further defect and irregularity, that is, the Affidavit of service a Bankruptcy Notice was not in the prescribed form. The Affidavit of service of Alexander James Ndegwa filed on 23. 10. 2003 not having been in the prescribed form is contrary to the requirements of Section 4, and is excluded by the provisions of Rule 317 (2) referred to above.

Ordinarily these formal defects would have nullified these proceedings in bankruptcy, but by virtue of express provisions of Section 133 (1) that no proceedings in bankruptcy shall be invalidated by any formal defect or by any irregularity, except on the grounds that substantial injustice has been caused by the defect or irregularity, and that the injustice cannot be remedied by any order of the court.

I do not think that substantial injustice has been caused to the judgement debtor. There is a valid decree subsisting against him. It has been subsisting for over 15 years. It is a small sum of money. He has made proposals to liquidate the same, but has failed to follow up his promises. He is lucky that the Bankruptcy proceedings did not proceed faster. I think that these defects can be remedied.

I direct that the Request for Issue of a Bankruptcy Notice be reissued under the hand and signature of the Judgment Creditor, and that the Bankruptcy Notice be reissued and served upon the debtor and Return of Service of a Bankruptcy Notice be made in the manner prescribed by the Bankruptcy Rules. There shall be orders accordingly.

Delivered and dated at Nairobi this 17th day of November 2004

ANYARA EMUKULE

Ag. JUDGE