Mombasa Trade Centre Ltd v Blue Shield Insurance Co. Ltd (Under Statutory Management) [2013] KEHC 1670 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT MOMBASA

MISCELLANEOUS CIVIL APPL. NO. 17 OF 2013

IN THE MATTER OF:        BLUESHIELD INSURANCE COMPANY LIMITED

(UNDER STATUTORY MANAGEMENT)

AND

IN THE MATTER OF:        THE COMPANIES ACT, CAP 486 OF THE LAWS OF

KENYA

AND

IN THE MATTER OF:        AN APPLICATION FOR LEAVE TO INSTITUTE CIVIL

SUIT

BETWEEN

MOMBASA TRADE CENTRE LTD ……………….. PLAINTIFF/APPLICANT

V E R S U S

BLUE SHIELD INSURANCE CO. LTD ………….. DEFENDANT/APPLICANT

(Under Statutory Management)

RULING

This Court on 22nd February 2013 granted leave to the Plaintiff to institute Civil Suit against M/s Blue shield Insurance Company Limited (under statutory management).  That suit was to be filed before the Chief Magistrate's Court Mombasa to recover accrued rent arrears and vacant possession of the premises on Plot No. MSA/Block XXV/100.

The order was granted by Muya, J.  I am now considering the Notice of Motion dated 3rd June 2013.  By that Motion the Defendant seeks an order that the exparte order granted on 22nd February 2013 by Muya, J be set aside or vacated.

In considering the Motion I need to be very clear that I am not seating on appeal against the Order of Muya, J however as I understand the present Motion is a keen to an application for review.

The Defendant stated by the Affidavit of Eliud Muchoki Mureithi the Statutory Manager of Blue Shied that Blue Shied was placed under statutory managed on 16th September 2011 by the Commissioner of Insurance.  This was pursuant to Section 64C o f the Insurance Act Cap 487.  The statutory manager was appointed in accordance with the provisions of Section 67(C)(2)(i) of Cap 487 with effect from 16th September 2011.  On being appointed the Statutory Manager did claim a moratorium on all payments for a period of 12 months ending on 14th September 2013.  That further the High Court at Nairobi in Misc. Civil Case No. 586 of 2012 and HCCC 465 of 2012 (OS)  gave orders to fleeze payments of debts and stayed proceedings and or claims against BlueShields.  The Defendant through its Statutory Manager's affidavits in respect to the application for leave to file the suit stated-

“8.  That in the application dated 22nd February, 2013 the Plaintiff did not disclose the existence of orders staying the institution of proceedings against Blue Shield Insurance Company Limited.

That if the Plaintiff had brought to the attention of the court the existence of previous court orders then the court would have arrived at a different decision.

That the Plaintiff abused the court process by not disclosing to court that there were orders barring the institution of suits against the Defendant/Applicant.

That subsequent to the granting of the orders herein the Plaintiff instituted Mombasa CMCC No. 394/2013 against the Defendant notwithstanding the existence of the orders of the High Court.

That it is important to stay the proceedings in CMCC No. 394 of 2013 pending the hearing and determination of this application.

That the Defendant seeks the protection of the court and to set aside the exparte orders granted on 22nd March 2013 as there is no winding up order and or appointment of interim liquidator.”

The Defendant also sought for the vacation of the order of 22nd February 2013 on the ground that there was in the lease agreement between the parties an arbitration clause and that the dispute between the parties should have been referred to arbitration.

The application was opposed by the Plaintiff.  The Plaintiff argued that the Defendant should challenge the orders of 22nd February 2013 before the Chief Magistrate's Court in CMCC No. 394 of 2013.  That is where the Plaintiff has filed the suit pursuant to the leave granted by this Court.

The Plaintiff also submitted that the moratorium and the Court orders freezing recovery from Blueshield related to debts that were incurred before the appointment of the Statutory Manager and not after.

On the argument that there was an Arbitration Clause the Plaintiff submitted that the Statutory Manager being a stranger to the arbitration clause could not invoke it.

I began by stating and it is worth repeating that in considering the Defendant's Motion I cannot do so as though I am sitting as an Appellant Court which I am not.

Essentially I see the Defendant raising two issues why the orders of 22nd February 2013 should be vacated.  Firstly, it is argued that the Plaintiff failed to disclose to the Court that Blue Shield was under Statutory Manager and that there were orders of the High Court freezing the collections of debts against it.  Secondly, that the order should be vacated because of the existence of the Arbitration Clause.

On the first issue I would state that to the contrary the Plaintiff before Muya, J clearly stated that a Statutory Manager had been appointed.  Further the Plaintiff stated that that Manager had inturn declared a moratorium. The Plaintiff also stated that the High Court had issued orders stopping the collection of debts against Blue Shield. To demonstrate that the Plaintiff made those disclosures I reproduce paragraph 5 and 6 of the Plaintiff’s supporting affidavit sworn on 22nd February 2013-

“5.   THAT the Statutory Manager of M/s Blue Shield Insurance Company Limited subsequent to his appointment declared a moratorium on payment and obtained orders from the High Court staying and barring all manner of proceedings against the said company.  I annex hereto and mark as “AJ-5(a) & (b)”, Photostat copies of the letter dated 7th November, 2011 addressed to the Applicant’s Advocates on record by M/s Rachier & Amollo Advocates and the Order issued in HCCC No. 465 of 2011 (O.S) on the 2nd day of November, 2011 at the instance of the Statutory Manager respectively, to attest to the foregoing facts.

6.  THAT the Applicant and the Statutory Manager of M/s Blue Shield Insurance Company Limited engaged in several protracted correspondences and discussions with a view of facilitating the hand over of vacant possession of the demised premises to the Applicant and the payment of the rent arrears that accrued during the period subsequent to the appointment of the Statutory Manager without much success.”

It follows that Muya, J as he granted the order on 22nd February 2013 well had in mind the state of affairs with regard to Blue Shield. Therefore there cannot be a basis for the vacation of the orders of 22nd February 2013 on the basis that the Plaintiff did not make disclosure.

On the second issue the Court was made to understand that the Defendant has filed a defence to the Plaintiff’s suit before the Magistrate's Court where the Plaintiff filed a suit pursuant to the leave granted.  That being so under Section 6(1) of The Arbitration Act the Defendant ought to have sought stay of the Chief Magistrate's Court case before entering appearance or otherwise acknowledge the claim.  Having filed a defence the Defendant cannot now seek to rely on the Arbitration Clause.   Whether or not an Arbitration Clause exist should certainly have been raised before the Chief Magistrate's Court and not this Court.  In that regard I am guided by the case AGIP (K) LTD -VS- KIBUTO CIVIL APPEAL NO. 43 OF 1981 where it was stated-

“An application for stay of proceedings pending the enforcement of Arbitration Clause should be made by way of Notice of Motion supported by an affidavit and cannot be distinguished as a point of law in a pleading …  The defence and counterclaim in this case constituted a step taken and invoked the jurisdiction of the Court, after which it was no longer open for the Defendant to apply for stay.”

Following the defence filed by Blue Shields in the Magistrate Court case Blue Shields cannot invoke the Arbitration Clause.  The filing of that defence was a step taken as understood under Section 6(1).

In the end the Defendant's Motion will fail and in my humble view that will not close the door into the Defendant's face.  The Defendant in my view is open to argue that the Plaintiff's claim before the Chief Magistrate's Court is unrecoverable.

The Notice of Motion dated 3rd June 2013 is dismissed with costs to the Plaintiff.

Dated  and  delivered  at  Mombasa   this   1st   day    of    November,   2013.

MARY KASANGO

JUDGE