[2017] KEHC 1620 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT KIAMBU

CIVIL APPEAL NO. 152 OF 2017

UAP INSURANCE COMPANY LIMITED......APPELLANT/APPLICANT

VERSUS

EPHANTUS KANYUA NGUGI..................................1STRESPONDENT

CAROLINE WAMBUI MBURU.................................2NDRESPONDENT

(Suing on their own behalf and as the true Administrators of the

Estateof the late DANIEL MWATELE KANYUA – Deceased)

RULING

1. The Applicant seeks orders for a stay of execution of the ruling rendered between the parties in the lower Court. The intended appeal is from a ruling delivered in Thika CMCC No. 19 of 2017on 29/09/2017. The Application is supported by a Supporting Affidavit by Joseph Mwai, a Senior Legal Officer at the Appellant’s Company

2. The Application is opposed. In opposition, the Respondent’s advocates filed Grounds of Opposition and a lengthy Replying Affidavit by the Respondent.

3. Briefly, the facts are as follows. The Respondents commenced proceedings in Thika CMCC No. 654 of 2015. In those proceedings, the defendant was one, Jacob M. Karanja. He was sued as the owner of Motor Vehicle Registration No. KBH 874L. That Motor Vehicle was insured by the Appellant. The proceedings were with respect to a road traffic accident which was caused by the Motor Vehicle as a result of which Daniel Mwatele Kanyua (“Deceased”) died. The Respondents are the administrators of the Deceased’s estate.

4. In the wrongful death case, the parties recorded a consent on liability and trial proceeded on quantum of damages. Ultimately, judgment was entered against the Defendant for Kshs. 1,414,634/= inclusive of costs. It is noteworthy that the Appellant, under its right of subrogation entered appearance on behalf of the Defendant in that case and defended it to the end. The Respondent has made a big deal of the fact that the current advocates for the Appellant in this case were the same ones instructed by the Appellant to defend the wrongful death suit.

5. In any event, after judgment was entered and decree issued, the Appellant declined to pay the decretal sum. We can now learn from its defence advanced in the subsequent action against them by the Respondent (respecting which this appeal has been filed) that it refused to pay because it had come to the conclusion that it was not obligated to satisfy the decree because it had determined that its insured (James Karanja – the Defendant in Thika CMCC No. 654 of 2015) had taken a commercial vehicle insurance cover that did not, according to the Appellant, cover his employees under the general exceptions of the policy. The Appellant says that it discovered later that the Respondent was a casual employee of the insured at the time of the accident. As such, the Appellant says, it was entitled to refuse to satisfy the judgment since it had sufficient reasons.

6. Faced with this refusal to pay, rather than execute against the Defendant in the wrongful death case (Thika CMCC No. 654 of 2015), the Respondents filed a declaratory suit against the Appellant. The Appellant entered defence in that suit. The Respondents, then, promptly made an application for the defence to be struck out and that judgment be entered against the Appellant. That application was successful and it is the ruling delivered on 29/09/2017 which, consequently, disposed off the case that the Appellant is appealing against.

7. The Application for stay of judgment is primarily governed by the terms of Order 42 Rule 6 of the Civil Procedure Rules. The conditions to be met by an Applicant in order to be entitled to an order for stay are encapsuled in that Rule in the following terms:

6. (1) No appeal or second appeal shall operate as a stay of execution or proceedings under a decree or order appealed from except appeal case of in so far as the court appealed from may order but, the court appealed from may for sufficient cause order stay of execution of such decree or order, and whether the application for such stay shall have been granted or refused by the court appealed from, the court to which such appeal is preferred shall be at liberty, on application being made, to consider such applicationand to make such order thereon as may to it seem just, and any person aggrieved by an order of stay made by the court from whose decision the appeal is preferred may apply to the appellate court to have such order set aside.

(2) No order for stay of execution shall be made under sub-rule (1) unless—

The court is satisfied that substantial loss may result to the applicant unless the order is made and that the application has been made without unreasonable delay; and

Such security as the court orders for the due performance of such decree or order as may ultimately be binding on him has been given by the applicant.

8. The law regarding the grant of stay of execution is well established in Kenya. Among the legion of authoritative cases establishing it, the judges of the Court of Appeal were both concise and emphatic in Rhoda Mukuma v John Abuoga:

It was laid down in M M Butt v The Rent Restriction Tribunal, Civil Application No Nai 6 of 1979, (followingWilson v Church (No 2) (1879) 12 Ch 454at p. 488) that in the case of a party appealing, exercising his undoubted right of appeal, the court ought to see that the appeal is not rendered nugatory. It should therefore preserve the status quo until the appeal is heard.

Granting a stay in the High Court is governed by Order XLI rule 4(2), the questions to be decided being

– (a) whether substantial loss may result unless the stay is granted and the application is made without delay; and (b) the applicant has given security.

9. Under our established jurisprudence, to be successful in an application for stay, Applicant has to satisfy a four-part test. It must demonstrate that:

a. The appeal it has filed is arguable;

b. It is likely to suffer substantial loss unless the order is made. Differently put, the Applicant must demonstrate that the appeal will be rendered nugatory if the stay is not granted;

c. The application was made without unreasonable delay; and

d. The Applicant must also demonstrate that it has given or is willing to give such security as the court may order for the due performance of the decree which may ultimately be binding on it.

10. The parties here expended a lot of their energies on the first question: whether the appeal as filed raises any serious issues for determination. It is only when an appeal is arguable that it will be taken to give “sufficient reason” to warrant a stay of execution. It is important to emphasize that to earn a stay of execution, one is not required to persuade the Appellate Court that the intended or filed appeal has a high probability or chances of success. All one is required to demonstrate is the arguability of the appeal: a demonstration that the Appellant has plausible and conceivably persuasive grounds of either facts or law to overturn the original verdict.

11. The Respondents say that the Appeal has absolutely no chance of succeeding in view of the provisions of section 10(4) of the Insurance (Motor Vehicle Third Party Risks) Act. In particular, the Respondents insist that the Act provides that exclusion from liability under the provisions of the Act requires an action to be commenced before or within three months after the commencement of an action against the Insured which the Insurance Company is required to satisfy.

12. On the other hand, the Appellant insists that the Defence it had filed in the lower Court raised serious triable issues and that it should not have been struck out. It insists that the issue of exclusion was the triable issue and that provisions of Section 10(1) permits the Insurance Company to avoid satisfying a judgment when it has sufficient reasons to do so.

13. This is what sections 10(1) and 10(4) of the Insurance (Motor Vehicle Third Party Risks) Act provides:

10 (1) If, after a policy of insurance has been effected, judgment in respect of any such liability as is required to be covered by a policy under paragraph(b) ofsection 5(being a liability covered by the terms of the policy) is obtained against any person insured by the policy, then notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled, the policy, the insurer shall, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment anysum payable thereunder in respect of the liability, including any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments.

10 (4) No sum shall be payable by an insurer under the foregoing provisions of this section if in an action commenced before, or within three months after, the commencement of the proceedings in which the judgment was given, he has obtained a declaration that, apart from any provision contained in the policy he is entitled to avoid it on the ground that it was obtained by the non-disclosure of a material fact, or by a representation of fact which was false in some material particular, or, if he has avoided the policy on that ground, that he was entitled so to do apart from any provision contained in it:

Provided that an insurer who has obtained suc declaration as aforesaid in an action shall not ther become entitled to the benefit of this subsection respects any judgment obtained in proceedi commenced before the commencement of that act unless before or within fourteen days after commencement of that action he has given notice ther to the person who is the plaintiff in the said proceedi specifying the non-disclosure or false representation which he proposes to rely, and any person to wh notice of such action is so given shall be entitled, if thinks fit, to be made a party thereto.

14. Looking at these two sub-sections of the Insurance (Motor Vehicle Third Party Risks) Act, I would agree with the Respondents that the Appeal herein does not appear eminently arguable. Indeed, section 10(1) of the Act does not seem to say what the Appellant says it does. It is true that an Insurer is permitted to avoid satisfaction under certain conditions – but that right is only triggered upon complying with section 10(4) of the Act. The Insurer does not plead to satisfying the terms of section 10(4). It may be that the Appellant has a good cause against the insured. However, if it failed to adhere to the terms of section 10(4), it is hard to see how it can avoid settling a judgment against a third party who duly gave notice to the Insurer under sections 10(2)(a) of the Act. For sure this does not defeat the Insurer’s claim against the Insured – but once an Insurer fails to perfect their right to refuse to settle a judgment under section 10(4), it’s only recourse remains to go after the Insured for reimbursement of sums paid out if it becomes convinced that the event was not covered in the Insurance Police.

15. In the face of these provisions of the law, I am not persuaded at this point that the Appellant has an arguable appeal sufficient to warrant a stay of execution.

16. In any event, even if I had concluded that the Appellant has an arguable appeal, it has failed to satisfy the second element in order to be entitled to a stay of execution: it has not demonstrated that it will suffer substantial loss if the order for stay is not granted.

17. In the Supporting Affidavit filed, the Appellant dedicated two paragraphs in this regard. This is what it said:

(6) That I have been informed by our advocates on record that the Respondents advocates are likely to commence execution proceedings anytime and if the intended execution proceedings commence, the Appellant will suffer substantial irreparable loss and damage.

(7) That I have been informed by our advocates on record which information I verily believe to be true that if the stay of execution is not granted herein the already filed Memorandum of Appeal runs the risk of being rendered nugatory.

18. In the Supporting Affidavit sworn by Joseph Mwai, the Appellant has not as much as bothered to express any apprehension at all that it will not be able to recover any decretal sums paid to the Respondent. The assumption seems to be that execution of a valid court judgment automatically means that the judgment debtor will suffer “substantial” and “irreparable” loss and that, therefore, a judgment-debtor who has appealed is entitled to a stay of execution. This assumption is impermissible in our law. A right of appeal does not at all mean an automatic stay. The Applicant did not as much as claim that the Respondents are impecunious in its Supporting Affidavit. It merely asserted that the appeal will be rendered nugatory. It is true that the legal position in Kenya is that once an Applicant for stay credibly raises the issue of lack of means by a Respondent (judgment-creditor) to refund decretal amounts, the evidential burden is shifted to the Respondent to demonstrate that she has the resources to repay any amounts paid to her.

19. Here, however, the Applicant did not as much as make the claim in its Application. The first time the Appellant makes this claim is its Written Submissions. Needless to say, such an assertion by counsel in his submissions cannot be substitute for evidence. In any event, making such an assertion at the point of submission denies the other party a chance to respond with evidence to rebut any presumption created or meet any evidential burden created.

20. It is not automatic that the Court will assume that a Judgment-Creditor is impecunious once an applicant for stay in a money decree says that his appeal will be rendered nugatory. Indeed, the opposite is the case as demonstrated inKenya Hotel Properties Ltd v Willsden Properties Ltd Civil Application number NAI 322 of 2006(UR).

21. It follows that the Applicant has not even attempted to show what substantial loss they would suffer if stay of execution is not granted. It has, therefore, failed to satisfy this mandatory requirement for the grant of stay.

22. Based on this analysis, it is, therefore, my conclusion that the Applicant has not demonstrated that the appeal is arguable or that it will suffer substantial loss unless stay is granted.

While the Application was filed timeously and the Appellant has demonstrated that it is willing to furnish security for the due performance of any decree which might ultimately be binding on it, having failed to satisfy the other two mandatory requirements for the grant of stay of execution, it follows that its Application dated 12/10/2017 fails.

23. Consequently, the Application dated 12/10/2017 is hereby dismissed with costs.

24. Orders accordingly.

Dated and delivered at Kiambu this 7thday of December, 2017.

.......................

JOEL NGUGI

JUDGE