Directline Assurance Company Limited v AKM Investments Limited & 3 others; Insurance Regulatory Authority (Interested Party) [2022] KEHC 16510 (KLR)

Directline Assurance Company Limited v AKM Investments Limited & 3 others; Insurance Regulatory Authority (Interested Party) (Commercial Case E247 of 2022) [2022] KEHC 16510 (KLR) (Commercial and Tax) (9 December 2022) (Ruling)

Neutral citation: [2022] KEHC 16510 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Commercial Case E247 of 2022

DAS Majanja, J

December 9, 2022

Between

Directline Assurance Company Limited

Plaintiff

and

AKM Investments Limited

1st Defendant

Triad Networks Limited

2nd Defendant

Stenney Investments PTY Limited

3rd Defendant

Sureinvest Company Limited

4th Defendant

and

Insurance Regulatory Authority

Interested Party

Ruling

1. On September 28, 2022, the court delivered a ruling allowing the 1st, 2nd and 4th Defendants’ applications striking out the suit on the ground that it was an abuse of the court process. The court also directed that Evans Nyagah, the Chief Executive Officer (‘’the CEO’’) of the Plaintiff to show cause why he should not be ordered to pay costs of the suit personally and on an indemnity basis.

2. The plaintiff has now filed the notice of motion dated October 12, 2022 seeking to stay the order directing the CEO to show cause pending hearing and determination of the plaintiff’s intended appeal to the Court of Appeal. The application is supported by Evans Nyagah’s affidavit sworn on October 12, 2022. It is opposed by the 1st Defendant through the notice of preliminary objection dated October 26, 2022 and by the 3rd defendant through the grounds of opposition dated October 24, 2022. The 2nd and 4th defendant also oppose the application through their grounds of opposition dated October 21, 2022 and the affidavit of the 4th defendant’s director, Kevin Dermont McCourt sworn on October 26, 2022. The parties through their counsel made brief arguments in support of their respective positions.

3. I have considered the parties’ arguments and note that the application before the court is principally for stay of execution and proceedings under order 42 rule 6(2) of the Civil Procedure Rules. In order to succeed, the applicant must demonstrate substantial loss may result unless the order of stay is made. It must also demonstrate that the application has been brought without undue delay and lastly, the applicant must give such security as the court may order for the due performance of the decree or order as the case may be. The principles were amplified in Kenya Women Microfinance Ltd v Martha Wangari Kamau KJD HCCA No. 14 of 2020 [2020] eKLR where the court cited with approval the what Warsame J., (as he then was) stated in Samvir Trustee Limited v Guardian Bank Limited NRB ML HCCC 795 of 1997 as follows:Every party aggrieved with a decision of the High Court has a natural and undoubted right to seek the intervention of the Court of Appeal and the Court should not put unnecessary hindrance to the enjoyment and exercise of that right by the defendant. A stay would be overwhelming hindrance to the exercise of the discretionary powers of the court…The Court in considering whether to grant or refuse an application for stay is empowered to see whether there exist any special circumstances which can sway the discretion of the court in a particular manner. But the yardstick is for the court to balance or weigh the scales of justice by ensuring that an appeal is not rendered nugatory while at the same time ensuring that a successful party is not impeded from the enjoyment of the fruits of his judgement. It is a fundamental factor to bear in mind that, a successful party is prima facie entitled to the fruits of his judgement; hence the consequence of a judgement is that it has defined the rights of a party with definitive conclusion. The respondent is asserting that matured right against the applicant/defendant…For the applicant to obtain a stay of execution, it must satisfy the court that substantial loss would result if no stay is granted. It is not enough to merely put forward mere assertions of substantial loss, there must be empirical or documentary evidence to support such contention. It means the court will not consider assertions of substantial loss on the face value but the court in exercising its discretion would be guided by adequate and proper evidence of substantial loss…Whereas there is no doubt that the defendant is a bank, allegedly with substantial assets, the court is entitled to weigh the present and future circumstances which can destroy the substratum of the litigation…At the stage of the application for stay of execution pending appeal the court must ensure that parties fight it out on a level playing ground and on equal footing in an attempt to safeguard the rights and interests of both sides. The overriding objective of the court is to ensure the execution of one party’s right should not defeat or derogate the right of the other. The Court is therefore empowered to carry out a balancing exercise to ensure justice and fairness thrive within the corridors of the court. Justice requires the court to give an order of stay with certain conditions.”

4. The plaintiff and its CEO, are apprehensive that the defendants may proceed and levy execution and that equally, the court could condemn him to pay costs notwithstanding that the suit was filed on the authority of the plaintiff’s board of directors and exercise of his powers under section 68 of the Insurance Act. They contend that unless the stay of proceedings is granted, the defendant will enforce the court’s ruling and the plaintiff’s appeal will be rendered nugatory and it will suffer irreparable loss and damage together with its CEO. That it will suffer substantial loss not only through money but freezing the functions of the Principal Officer.

5. Apart from submitting that the plaintiff has not made out a case for the grant of the orders sought, the defendants assail it on the ground that the order sought to be stayed is ‘negative’ and that no stay is available to a ‘negative order.’ The court’s order was that ‘Evans Nyaga, the Chief Executive Officer of the plaintiff, shall show cause why he should not be ordered to pay costs of the suit personally.’

6. In my view, there is nothing in the order that the ruling appealed from will impair the functions of the CEO. The court did not make any positive orders affecting the position. The court dismissed the application and left the issue of costs for determination at a later date. I agree with the Defendants that the dismissal order is a negative order incapable of execution as the court did not order any party to do or refrain from doing anything capable of being stopped (See Kanwal Sarjit Singh Dhiman v Keshavji Jivraj Shah NRB CA Civil Appeal NAI. No. 320 of 2006 [2008] eKLR). Since there is nothing to execute as the said Evans Nyagah has not been ordered to pay the costs, I can only conclude and agree with the Defendants that the Plaintiff’s application is at least premature. In any case, the Plaintiff has not demonstrated why these proceedings should be stayed because if anything, it is convenient that the plaintiff’s CEO presents his case at the earliest opportunity to show cause why he should not personally bear the costs of the suit.

7. For the reasons I have set out above, I find that the plaintiff’s application dated October 12, 2022 lacks merit and it is now dismissed with costs.

DATED AND DELIVERED AT NAIROBI THIS 9TH DAY OF DECEMBER 2022. D. S. MAJANJAJUDGECourt of Assistant: Mr M. OnyangoMs Achieng instructed by Orenge J and Associates Advocates for the Plaintiff.Ms Wambugu instructed by W. G. Wambugu and Company for the 1st Defendant.Ms Ndumia instructed by Kairu and McCourt Advocates for the 3rd Defendant.Mr Kimani, SC with Ms Sirawa instructed by Hamilton Harrison and Mathews Advocates for the 2nd and 4th Defendants.HC COMM NO. E247 OF 2022 RULING NO. 2 Page 2