In the Matter of Cape Holdings Limited [2022] KEHC 13773 (KLR)

In the Matter of Cape Holdings Limited (Insolvency Cause E049 of 2021) [2022] KEHC 13773 (KLR) (Commercial and Tax) (12 October 2022) (Ruling)

Neutral citation: [2022] KEHC 13773 (KLR)

Republic of Kenya

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

Commercial and Tax

Insolvency Cause E049 of 2021

A Mabeya, J

October 12, 2022

IN THE MATTER OF AN APPLICATION BY SYNERGY INDUSTRIAL CREDIT LIMITED FOR LEAVE PURSUANT TO SECTINON 560(1) (D) OF THE INSOLVENCY ACT

Ruling

1. On 22/10/2021, Synergy Industrial Credit Limited applied under section 560 (d) of the Insolvency Act (“the Act”) seeking leave to proceed with execution. By a ruling of 10/12/2021, I allowed the application for reasons set out in that ruling. That ruling was appealed against and the orders stayed in the meantime. That appeal is yet to be determined.

2. On 18/5/2022, Cape Holdings Ltd (“the Company”) took out a Motion on Notice under various provisions of the law and sought my recusal. It also sought the stay of proceedings and the application dated 19/4/2022 pending the hearing and determination of CA No. 758 of 2021 and CA No. 788 of 2021 in the Court of Appeal.

3. The grounds were set out in the body of the Motion and the supporting Affidavit of Vruti Shah sworn on even date. The grounds for recusal were that I disregarded the law in the ruling of 10/12/2021 which demonstrates actual bias and prejudice against the applicant. That I made adverse pronouncements in the said ruling against the debenture holder and attacked the true intent of administration. That the ruling is a subject of various appeals and the applicant believes that the proceedings are already prejudiced against it and the debenture holders.

4. That apart from the aforesaid appeals, there was also CA (Application) No. 81 of 2016 challenging the judgment of 6/11/2020. That there was a complaint against the auctioneer before the Auctioneers Licensing Board. That the Administrator has undertaken his statutory duties to ensure that the objective of the Act is achieved.

5. Other grounds were that the respondent had made unsubstantiated allegations against administration. It was guilty of Mala fides as a creditor by refusing to attend the creditors meetings. That the respondent’s application dated 19/4/2022 was meant to prejudice all the pending proceedings.

6. The respondent opposed the application vide grounds of opposition which were to the effect that there existed no grounds for recusal. That the prayer for stay had no nexus at all with the pending appeals.

7. The parties filed their respective submissions dated 24th and 26th May, 2022, respectively. The Court has considered both the affidavits on record as well as the submissions.

8. Courts have pronounced themselves variously on recusal of a Judge from a matter. In Appl No. 5 of 2006 AG of Kenya vs Anyang Nyong & Others, the East Africa Court of Justice stated:“Judicial impartiality is the bedrock of every civilized and democratic judicial system. The system requires a judge to adjudicate disputes before him impartially, without bias in favour of or against any party to the dispute. There are two modes in which the court guards and enforce impartiality. First, a judge, either on his own motion or on application by a party, will recuse himself from hearing a cause before him, if there are circumstances that are likely to undermine or that appear to be likely to undermine his impartiality in determining the cause. Secondly, through appellate or review jurisdiction, a court will nullify a judicial decision if it is established that the decision was arrived at without strict adherence to the established principle that ensure judicial impartiality. The first is that a man ought not to be a judge in his own cause. The second, which additionally is intended to preserve public confidence in the judicial process, is that justice must not only be done but must be seen to be done.”

9. InShilenje vs Republic(1980) KLR 132 at 134 the Court held:“What the court has to consider is not merely the question whether there has been any real bias in the mind of the presiding judge against the accused, but also whether incidents have not happened which, though they may be susceptible of explanation and have happened without there being any real bias in the mind of the judge, are nevertheless such as are calculated to create in the mind of the accused a reasonable apprehension that he may not have a fair and impartial trial. It is not every apprehension of this sort which would be taken into consideration, but when it is of reasonable character and notwithstanding that there was to be no real bias on the matter, the fact that incidents have taken place calculated to raise such reasonable apprehension ought to be a ground for ordering a transfer.”

10. In the present case, the ground for recusal is that this Court would be biased. That in the ruling of 10/12/2021, the Court pronounced itself harshly against the applicant. The actual words complained of are to be found at para 38 of that ruling. These are:“Courts in this country are under a duty to support and enforce legal relations that are entered into in good faith. Legal processes that are entered with ulterior motive, have no place in the halls of justice. Justice will shy away from recognizing processes that are visibly engaged in with the intention of frustrating lawful processes.”

11. The applicant complain that the above statement was a negative and grave pronunciation against the contract entered into between the applicant and the Company.

12. Far from that, what was before the Court was not the validity or otherwise of the contract between the company and the bank. The Court was making an observation on the timing of the administration in question. In order to understand the basis for the said paragraph 38, one must read the 4 preceding paragraphs which I now set out hereunder:“34. Taking into consideration the foregoing, the Court can but only agree with the applicant’s contention that the timing of the administration was not meant for the purpose known under the Act. It is meant to buy a Moratorium for the Company to enable it evade its legal obligations under a lawful decree in the said suit.

35. As guided by the case of Owiti, Otieno and Ragot Advocates Case (Supra), the conduct of the parties must be taken into consideration when considering an application for approval. The bank and the Company cannot be said to be acting in good faith in this matter. The Court notes that the decree being sought to be executed is for money had and received more than 10 years ago. The matter has dragged over in our courts for that period. In order to warn everyone about the suit property, the applicant not only placed a caveat over the title but advertised a Caveat Emptor in the dailies in September, 2011. The whole world, including the bank, was thereby forewarned about the suit property. To that extent the applicant can be said to have been acting in good faith.

36. With such a Caveat, that property was not free to be given as a security. The Court of Appeal entered a judgment in favour of the applicant in November, 2020 and injuncted everyone from deriving any benefit from the suit property. Less than a month later, in December, 2020, the bank and the Company created a debenture the subject of the administration. The debenture must have been crafted to float over the assets of the Company to cushion it on a rainy day, which was on its way.

37. In April, 2021, the bank and the Company knew of the decree Nisi. The applicant wrote to the bank twice asking about the indebtedness, if any, of the Company. The bank remained mute. The bank then waited for 5 months to purport to enforce its rights barely two days after the Apex Court of this land had closed any legal avenue to the Company in its attempts to avoid the decree made against it. Can that be a conduct that a Court of law and equity should contenance? I do not think so.”

13. From the foregoing it is clear that the Court was not making any adverse inference on the contract between the Bank and the Company as alleged in the application. It was only expressing a view regarding the timing of the administration.

14. In any event, this court is fully impartial and has no predetermined mind. It will deal with the matter dispartionately and uphold the rule of law. The allegation that the applicant would not be accorded fair hearing has no basis. The prayer for recusal is dismissed.

15. As regards the prayer for stay, the applicant submitted that because of the existence of several matters in the Court of Appeal, dealing with the present proceedings will be subjudice. That the outcome of the appeal will have a direct bearing on the conduct of the parties in these proceedings. The cases of Re-Estate of Kithumbu Nyaga Elija (deceased) [2021] eKLR and Muthee Giciami & Anor vs Kevin Oduor Odhiambo [2021] e KLR were cited in support of those submissions.

16. It was further submitted that an application by the respondent dated 29/4/2022 was a collateral attack on the pending appeals.

17. Having considered the submissions, stay of proceedings is an order to be made in the discretion of the court where circumstances permit. With case backlog in our courts, it is unwise to encourage the culture of packing cases in court. Once an order of stay of proceeding is made, the case remains in limbo until an appeal is determined.

18. The reasons advanced are not convincing. The contention that proceeding with these proceedings will be subjudice the pending appeals does not hold. Firstly, the pending appeal challenges this Court’s ruling that allowed execution to proceed notwithstanding the pendency of the administration. There are no stay of execution proceedings that are pending before this Court so as to be said to be subjudice the pending appeal.

19. Secondly, as regards the application dated 29/4/2022, this Court cannot comment on it through the present application. The applicant should have responded to that application and raise the issues it raises now at that forum.

20. In view of the foregoing, I hold the view that that prayer also has no basis and is declined.

21. The totality of the foregoing is that the application dated 18/5/2022 is without merit and is dismissed in its entirety with costs.It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 12TH DAY OF OCTOBER, 2022. A. MABEYA, FCIArbJUDGE