Ndegwa (Suing as the Legal Representative and Administrator of the Estate of Stephen Mwangi Muriithi - Deceased) v Multiple Hauliers (E.A) Limited & another [2022] KEHC 12099 (KLR)

Ndegwa (Suing as the Legal Representative and Administrator of the Estate of Stephen Mwangi Muriithi - Deceased) v Multiple Hauliers (E.A) Limited & another (Miscellaneous Civil Application E014 of 2022) [2022] KEHC 12099 (KLR) (19 July 2022) (Ruling)

Neutral citation: [2022] KEHC 12099 (KLR)

Republic of Kenya

In the High Court at Naivasha

Miscellaneous Civil Application E014 of 2022

GWN Macharia, J

July 19, 2022

Between

Grace Nyawira Ndegwa

Applicant

Suing as the Legal Representative and Administrator of the Estate of Stephen Mwangi Muriithi - Deceased

and

Multiple Hauliers (E.A) Limited

1st Respondent

Joseph Mwanzia Ngata

2nd Respondent

Ruling

1. Before court is a Notice of Motion dated 17th January, 2022 brought by the Plaintiff under Article 159(2) of the Constitution, Section 560 (1) (d) of the Insolvency Act, Section 3A of the Civil Procedure Act and Order 1 Rule 10(2) of the Civil Procedure Rules, 2010.

2. The Plaintiff is seeking leave of this court to continue with the suit against the 1st Respondent in CMCC No. E387 of 2021 at the Chief Magistrate’s Court in Naivasha. She also prays that Anthony Makenzi Muthusi and Julius Mumo Ngonga of Ernst & Young LLP be joined as Co-Defendants in the said suit. Lastly, she prays that the costs of this application be borne by the Respondents.

3. The application is supported by the Plaintiff’s Affidavit in which she avers that she is the widow and Administrator of the Estate of Stephen Mwangi Muriithi who succumbed to fatal injuries as a result of road traffic accident on 29th March, 2021. Vide a Plaint dated 1st July, 2021, she instituted Naivasha CMCC No. E387 of 2021 against the Respondents herein for special and general damages arising out of the said accident. The Defendants filed their Defence and supporting documents on 9th July, 2021. Thereafter, parties attended court for a pre-trial conference on 25th August, 2021 and the hearing of the suit was slated for 3rd November, 2021. However, on 2nd November, 2021, the Respondents raised a Notice of Preliminary Objection seeking that the suit against the 1st Respondent be struck out as it had been placed under administration through Gazette Notice No. 5916 of 18th June, 2021 and the consent of the Administrators had not been sought prior to filing the suit. As she was completely unaware of this position, she filed the instant application to prevent the suit in the lower court from being struck out.

4. The Respondents did not file any response to this application hence it is essentially unopposed.

5. In her written submissions, the Applicant submitted that Section 560(1) (d) of the Insolvency Act clothes this Court with Jurisdiction to grant leave to the Applicant to proceed with Naivasha CMCC E387 of 2021 against the 1st Respondent. Further, she contended that the delay, if any, in seeking leave from this Court was inadvertent and therefore excusable. Lastly, it was her submission that the Respondents do not stand to suffer any prejudice if leave to proceed with the suit is granted.

Determination 6. The main issues that arise for determination are: whether leave should be granted to the Applicant to continue with the subject suit against the 1st Respondent; and, whether the 1st Respondent’s Administrators should be enjoined to the said suit as co-defendants.

Whether leave should granted to the Applicant to continue with the subject suit 7. I have seen the Gazette Notice No. 5916 of 18th June, 2021 through which the 1st Respondent Company was placed under administration and Anthony Makenzi Muthusi and Julius Mumo Ngonga of Ernst & Young LLP appointed as its joint administrators. It is trite law that administration creates an automatic moratorium on all other legal processes against a company so long as it is still in place. See: Nakumatt Holdings Limited & another v Ideal Locations Limited [2019] eKLR. This means that once administration takes effect, no legal proceedings can be validly undertaken or continued against the company prior to obtaining permission of court or the consent of the administrator. Section 560(1) (d) of the Insolvency Act provides as follows in this regard;“(1)While a company is under administration—d.A person may begin or continue legal proceedings (including execution and distress) against the company or the company’s property only with the consent of the administrator or with the approval of the Court.”

8. Section 560A of the Insolvency Act lays down the factors that a court ought to take into account in determining whether to give approval. These include the statutory purpose of the administration; the impact of the approval on the applicant particularly whether the applicant is likely to suffer significant loss; the legitimate interests of the applicant and the creditors of the company, giving the right of priority to the proprietary interest of the applicant; and the conduct of the parties. See also the case of Owiti, Otieno and Ragot Advocates v Mumias Sugar Co. Limited (Under Administration) [2020] eKLR.

9. It is noteworthy that the court clothed with jurisdiction to grant such approval is the High Court. This is evinced by the definition of “court” under Section 2 of the Insolvency Act to wit:“The High Court, and if there is an insolvency division of that Court, means that division.”

10. In the instant case, the Applicant brought her claim against the Respondents shortly after the 1st Respondent had been placed under administration. It is a claim for both special and general damages arising from the fatal injury sustained by her deceased husband in a road traffic accident. She alleges that the accident involved the 1st Respondent’s motor vehicle which was being driven by its agent.

11. In my considered view, if the leave sought is not granted, the Applicant is likely to suffer significant harm as the suit in the lower court will be struck out yet her claim is time bound by limitation of actions. Granting the leave sought will enable the Applicant to promptly ascertain whether or not her claim against the 1st Respondent is merited. In the premises, I find that the prayer for leave to continue with the proceedings in the lower court against the 1st Respondent is merited and is hereby allowed

Whether the joint administrators of the 1st Respondent Company should be joined to the subject suit as Co-defendants 12. As a general rule, a person qualifies to be joined as a Co-defendant in a suit only when it is shown that the orders sought therein will legally affect the person’s interests and/or will bind the person. See: Departed Asians Property Custodian Board v Jaffer Brothers Ltd [1999] 1 EA 55.

13. In the instant case, the Applicant seeks to be awarded damages for personal injuries arising from alleged acts of negligence by the Respondents. It is clear therefore, that the joint administrators of the 1st Respondent Company will not be required to settle the Applicant’s claims in their personal capacity. This means that it is unnecessary to join them as Co-defendants in the trial court’s suit. They may however be joined as Interested Parties as they have a legal interest and/or duty in the matter. See: Kahindi Mumba Chome & 23 others v ARM Cement Plc Limited (Under Administration) [2021] eKLR.

Disposition 14. Accordingly, the Notice of Motion dated 17th January, 2022 is allowed in the following terms;a)The Applicant is granted leave of this court to continue with the proceedings in Naivasha CMCC No. E387 of 2021 against the 1st Respondent Company which is under administration.b)The Applicant is at liberty to enjoin, by applying in the trial court that the 1st Respondent’s joint Administrators, Anthony Makenzi Muthusi and Julius Mumo Ngonga of Ernst & Young LLP, in Naivasha CMCC No. E387 of 2021 as interested parties.c)There will be no orders as to costs.

DATED AND DELIVERED AT NAIVASHA THIS 19TH DAY OF JULY, 2022. ..................................G.W.NGENYE-MACHARIAJUDGEIn the presence of:1. Mr.Munyendo for the Applicants.2. Ms. Mukami holding brief for Mr. Mureithi for the Respondents.