[2024] KEHC 11839 (KLR)

UAP Old Mutual Holdings Limited v Nzioka (Civil Appeal E846 of 2022) [2024] KEHC 11839 (KLR) (Civ) (4 October 2024) (Judgment)

Neutral citation: [2024] KEHC 11839 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Civil

Civil Appeal E846 of 2022

RC Rutto, J

October 4, 2024

Between

UAP Old Mutual Holdings Limited

Appellant

and

Fredrick Nzioka

Respondent

(Being an appeal from the judgment delivered by Hon. Keyne G. Odhiambo (RM & Adjudicator) on 30th September, 2022 in Nairobi SCCCOMM No. E2929 of 2022)

Judgment

1. This appeal arises from a judgment and decree entered in Nairobi SCC COMM NO. E2929 of 2022. In the said claim, the Respondent herein (Claimant) sued the Appellant together with Daniel Kipkemei Tallam for payment of money that resulted from costs awarded in a suit.

2. The facts as set out in Nairobi SCC COMM No. E2929 of 2022 are that one Daniel Kipkemei Tallam filed a civil suit CMCC No. 3257 of 2013, he did not prosecute the suit and the matter was dismissed with costs to Fredrick Nzioka, the Respondent herein. That the said Fredrick Nzioka, also the Respondent in CMCC No. 3257 of 2013 sought costs as provided in the certificate of costs issued on 4th August, 2021. He then proceeded to file a claim at the Small Court Claim Court seeking the awarded costs amounting to Kshs. 68,200/- by the Appellant together with Daniel Kipkemei Tallam.

3. The Appellant proceeded to file its Response to the Statement of Claim dated 19th August, 2022 where it denied the claim stating that the suit is bad in law, fatally defective and blatant abuse of the court process as it discloses no cause of action.

4. The learned Adjudicator, upon analysing the evidence before court delivered his judgment on 30th September, 2022 in favour of the (Claimant) Respondent herein for the sum of Kshs. 68,200/= with costs and interest.

5. The Appellant being aggrieved with the entire judgment, lodged this appeal on 18th October, 2022 setting out the following grounds of appeal:1. The Learned trial Adjudicator misdirected himself and erred both in law and in fact by allowing the Claimant's claim against the Appellant.2. The Learned trial Adjudicator misdirected himself and erred in law and in fact in failing to find that the Claimant's Claim against the Appellant could not stand as it was premised on wrong principles and the wrong application of the law making the whole suit a non starter and defective ab initio.3. That the Learned trial Adjudicator erred in law and fact by failing to find that under The Insurance (Motor Vehicle) Third Party Risks Act Cap 405 Laws of Kenya, a Declaratory suit against an insurer only lies in personal injury claims and not in material damage claims.4. That the Learned trial Adjudicator erred in law and fact by failing to find that the Appellant was not a party to civil suit number 3257 of 2013 and therefore could not be sued for costs arising out of a matter where the Appellant was not a party to.5. That the Learned trial Adjudicator erred in law and fact by failing to find that the Respondent's claim against the Appellant was based on assumptions and could therefore not stand since the Respondent was not privy to the Appellant's relationship with the Defendant sued in civil suit number 3257 of 2013. 6.That the Learned trial Adjudicator erred in law and in fact in failing to address himself on the gist of the law whether it is proper to file a declaratory suit in a Material Damage claim.

6. The Appellant prayed that the appeal be allowed with costs. Additionally, that the judgment delivered on 30th September, 2022 be set aside and the claim dismissed.

7. This appeal was canvassed by way of written submissions as per Section 30 of the Small Claims Court Act. The Appellant filed their submissions, dated 11th June 2024, in support of the appeal, while as of the time of preparation of this judgment, the Respondent's submissions were not on the court record.

Appellant’s submissions 8. Despite raising six grounds of appeal, the Appellant condensed them into two issues, namely: (1) whether the court erred in condemning the Appellant to pay costs despite not being a party in CMCC No. 3257 of 2013 and (2) whether the court erred in not finding that declaratory suits against the insurance companies only lies in personal injuries and not in material damage claims.

9. Regarding the first issue, the Appellant relied upon Section 27 of the Civil Procedure Act and the case of Republic v Rosemary Wairimu Munene ex parte Applicant and Ihururu Dairy Farmers Cooperative Society Limited. It was the appellant’s submission that the trial court erred when it failed to recognize that the Appellant was not a party in the said suit much as the suit was filed under the doctrine of subrogation. He further submitted that the costs should have been borne by the Plaintiff in the said suit. He added that the Plaintiff would have moved the court to have the costs settled by the Appellant in this case, the Plaintiff’s insured.

10. On the second issue, the appellant relied on Section 5(b) and 10(1) of the Insurance (Motor vehicle Third Party Risks) Act and submitted that the trial court misapprehended the law by allowing a declaratory claim against an insurance company who was not a party to the primary suit. In conclusion, they urged the court to dismiss the appeal with costs.

Analysis and Determination 11. This court has considered the grounds of appeal, the proceedings of the lower court, and the submissions filed by the Appellant. To begin with, the duty of this court as the appellate court squarely falls under Section 38 of the Small Claims Court Act which restricts the jurisdiction of the High Court on appeals from the Small Claims Court to matters of law only.

12. What constitutes, points of law, has been settled. In the case of Peter Gichuki King'ara Vs IEBC & 2 Others, Nyeri Civil Appeal No. 31 Of 2013, (Court of Appeal) (Visram, Koome & Odek, JJA) of 13. 02. 2014, the Court of Appeal stated as follows:“[I]t is trite law that the exercise of judicial discretion is a point of law and that the trial court in denying a prayer of scrutiny is exercising judicial discretion. The Court concluded that it would not be feasible for the Court of Appeal to order for a recount and scrutiny as this would involve matters of fact that were within the jurisdiction of the trial court. The court further held that the question of whether the trial judge properly considered and evaluated the evidence and arrived at a correct determination that is supported by law and evidence – with the caveat that the appeal court did not see the witness demeanor – is an issue of law.”

13. Based on the above authority, I note that the grounds of appeal submitted by the Appellant raise issues of law and fact, however this court will limit itself to the issues of law to wit;Whether the court erred in condemning the Appellant to pay costs while it was not a party in CMCC No. 3257 of 2013; Was there breach of 5(b) and 10(1) of the Insurance (Motor vehicle Third Party Risks) Act?

14. I note that, besides the Certificate of Costs issued on 4th August 2021, filed by the Respondent as evidence of the claimed amount of Kshs 68,200/- there is no further information regarding the details of the claim in CMCC No. 3257 of 2013. However, based on the Small Claims Court findings, where the adjudicator stated that “suit CMCC No. 3257/2013 was instituted by UAP Old mutual under the doctrine of subrogation” and where when analysing the dispute, the adjudicator noted that “Applying the above-stated test, it is right to hold that in a subrogation claim, the insured only donates his name for the institution of the suit. The insured is not personally liable for the cost of the action…” it follows that the appellant through the doctrine of subrogation, sued the Respondent herein in CMCC No. 3257 of 2013.

15. Thus, in determining the issue herein, I will begin from the above stated position of the small claims court. Notably, the Appellant has not rebutted the above assumption both in its ground of appeal and submissions. The Appellant has only stated at page 2 of his submissions that, “It is our contention that the trial court erred in not recognizing that the appellant was not a party in the said suit. In as much as the suit was brought by the Plaintiff therein under the doctrine of subrogation, the court was wrong in its finding. We submit that the costs should have been borne by the Plaintiff in the said suit who would certainly have moved the court to have the costs settled by the Appellant herein being the plaintiff’s insured. In any other case, the Plaintiff therein could have settled the costs and recovered the same from appellant herein since there was privity of contract of insurance.”

16. The doctrine of subrogation is not a foreign concept. It is the principle under which an insurer that has paid for a loss incurred under an insurance policy is entitled to all the rights and remedies belonging to the insured against a third party with respect to any loss covered by the policy. In Kenya Power & Lighting Company Limited v Julius Wambale & another [2019] eKLR, the High court stated as follows;“The parameters within which the principle of subrogation applies are now well settled. The doctrine applies where there is a contract of insurance and following crystallization of the risk insured, the insurer had compensated its insured for financial loss occasioned thereby usually by a third party. Under this doctrine, the insurer is in law entitled to step into the shoes of the insured and enjoy all the rights, privileges and remedies accruing to the insured including the right to seek indemnity from a third party.”

17. In light of the above, by virtue of the doctrine of subrogation, the insurer, the Appellant herein, assumes all rights and remedies of the insured, regardless of whether it used its insured’s name. It is therefore my view that any costs arising from the exercise of those rights and remedies are paid, or payable, by the Appellant. Moreover, since the Appellant filed the suit in CMCC No. 3257 of 2013 after assuming those rights, and as the suit was thereafter dismissed with costs, it follows that the Appellant is liable to pay for those costs.

18. To buttress this position, I am guided by the Court of Appeal’s decision in the case of Africa Merchant Assurance Company v Kenya Power & Lighting Company Limited [2018] eKLR on an application that was filed seeking leaving to appeal to the Supreme Court on the ground that the appeal raises an issue of general importance on the issue whether the applicant or any insurance company for that matter, has capacity to institute a suit in its own name under the doctrine of subrogation where an insured by contract or assignment relinquishes his/her right to seek legal recourse to the insurer. The court held that: -“26. … The essence of the doctrine of subrogation is not in contention. It allows an insurer after compensating an insured for any loss under the insurance contract to step into the shoes of the insured. In that, the insurer is entitled to all the rights and remedies the insured might have against a third party in respect of the loss compensated...

27. ... As it stands, the law in that respect is settled, that is, that an insurer cannot under the doctrine of subrogation institute a suit in its own name against a third party. See this Court’s decisions in Octagon Private investigation Security Services vs. Lion of Kenya Insurance Co. [1994] eKLR and Michael Hubert Kloss & another vs. David Seroney & 5 others [2009] eKLR.”

19. Clearly, the Appellant cannot now claim to evade liability for paying costs simply because the party suing in CMCC No. 3257 of 2013 was its insured, especially since it is not in doubt that the suit was filed under the doctrine of subrogation. The Appellant’s argument that the costs should be borne by the Plaintiff in CMCC No. 3257 of 2013 is misguided. Having assumed the insured’s rights and remedies by filing the suit, the Appellant subsequently abandoned those rights, leading to the suit’s dismissal. Therefore, this court finds no breach of Section 5(b) and 10(1) of the Insurance (Motor vehicle Third Party Risks) Act and sees no reason to interfere with the trial court’s decision on this issue.

20. In conclusion and for the reasons set out above, the court finds that the subject appeal lacks merit and the same is hereby dismissed with costs to the respondent.

Orders accordingly.

RHODA RUTTOJUDGEDELIVERED, DATED AND SIGNED THIS 4TH DAY OF OCTOBER 2024For Appellants:For Respondent:Court Assistant: