Niti Distributors Limited v Occidental Insurance Company Limited [2022] KEHC 10847 (KLR)

Niti Distributors Limited v Occidental Insurance Company Limited (Commercial Case 396 of 2014) [2022] KEHC 10847 (KLR) (Commercial and Tax) (9 June 2022) (Ruling)

Neutral citation: [2022] KEHC 10847 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Commercial and Tax

Commercial Case 396 of 2014

WA Okwany, J

June 9, 2022

Between

Niti Distributors Limited

Plaintiff

and

Occidental Insurance Company Limited

Defendant

Ruling

1. Through a ruling delivered on 22nd June 2019, the court ordered for stay of execution of the decree herein pending the hearing and determination of the defendant/Judgment Debtor’s appeal but on condition that the judgement debtor provides a Bank Guarantee for payment of a sum of Kshs 12,500,000 as security for the due performance of the decree.

2. A dispute however arose over whether the Bank Guarantee issued by the judgement debtor complied with the said court order of 22nd June 2019 thus prompting the judgment debtor to file an application dated 22nd September 2019 seeking orders to stay the execution and for a declaration that its Bank Guarantee satisfied the order issued on 22nd June 2019.

3. In a ruling delivered on 29th April 2021, the court clarified that the terms of the bank guarantee should have an automatic renewal clause upon its expiry. The decree holder however maintained that the bank guarantee issued by the judgment debtor did not have an automatic renewal clause as it was only renewable for 6 months.

4. The decree holder then initiated steps to execute the decree thus precipitating the filing, by the judgement debtor, of the application dated 11th June 2021, which is the subject of this ruling.

Application 5. Through the application dated 11th June 2021, the judgment debtor/applicant seeks the following orders: -i.Spent.ii.That pending the hearing and determination of the application herein, the stay of execution orders issued on the 27th day of June 2019 as against the judgment delivered on 7th February 2019 be reinstated and/or held to be in place and the plaintiff/ decree holder be ordered to comply with the same.iii.That the honourable court do certify that the Bank Guarantee issued by the defendant/judgment debtor and dated the 28th of May 2021 complies with the conditional stay orders issued on the 27th day of June 2019 and the Ruling of the Honourable court delivered on 29th April 2021 and the timeline issued therein and subsequently proceed to uphold the stay of execution orders pending the hearing and determination of the appeal.iv.The warrants of attachment issued on the 9th of June 2021 be unconditionally lifted.v.That the defendant/judgment debtor be awarded costs of this application.

6. The application is supported by the affidavit of applicant’s Legal Manager Mr. Bernard Ayuko and is based on the grounds that:-a.On 27th June 2021 the court directed the defendant to amend the bank guarantee already issued to the effect that it would renew automatically.b.The defendant has complied with the order to amend the bank guarantee within the timeline given.c.That the stay orders are thus still in place till the appeal is heard and determined.d.That the plaintiff/ decree holder has irregularly proclaimed the defendant and is due to attach its goods in seven days.e.That the intended execution will totally paralyse the defendant's business occasioning great loss and damage.f.The execution shall equally render the defendant's appeal nugatory and be in violation of its Constitutional right of appeal as an aggrieved party.g.That the intended execution is tantamount to a serious miscarriage of justice on the part of the defendant.

7. The decree holder/respondent opposed the application through the replying affidavit of its Finance Director Mr. Manish Shah who avers that the defendant did not comply with the court orders of 27th June 2019 and 29th April 2021. The respondent avers that the bank guarantee does not have an automatic renewal clause but is a replica of the other bank guarantees that were subject of the ruling delivered on 29th April 2021.

8. The respondent further states that the application is res judicata and an abuse of the court process.

9. Parties canvassed the application by way of written submissions. I find that the main issue for determination is whether the applicant has made out a case for the granting of the orders sought. At the center of this application is the issue of whether the bank guarantee issued by the applicant herein complies with conditional stay orders issued on the 27th of June 2019 and the Ruling of 29th April 2021. While the applicant contends that the bank guarantee is valid and in tandem with the court order, the respondent maintains that the bank guarantee falls short of the court’s ruling thus justifying its decision to proceed with the execution.

10. A determination of the above issue calls for a perusal and interpretation of the contentious clause of the said bank guarantee which provides that: -“…. If no claim is received by the Bank in writing as per the terms of this bank Guarantee till the close of business hours on the 29th Day of November 2021, this bank Guarantee will stand extended and shall automatically renew for a sequential period of six (6) months from the date of first lapse till the first written demand is made accompanied by the necessary court order authorizing release”

11. The key word in the clause is the term ‘sequential’. According to the applicant, sequential means that the bank guarantee shall keep renewing itself for a period of six months from the date of first lapse until the first written demand. The respondent, on the other hand, argued that ‘sequential period of six months’ means that the bank guarantee will be renewed for a period of six months only.

12. Concise Oxford English Dictionarydefines the term ‘sequential’ as follows: -“…forming or following in a logical order or sequence”.

13. My understanding of the above clause is that the bank guarantee is to remain in force for an initial period up to the 29th day of November 2021 and thereafter be renewed automatically for a sequential period of six months until such a time when the first written demand is made. It is clear that the automatic sequential renewal for six months provision should not be read in isolation but must be considered in the context of the entire clause. My take is that the six months run one after the other until the first written demand is made.

14. I find that the bank guarantee complies with the conditional stay orders issued by this court as it is not only automatically renewable but is also to remain in place until such a time that a written demand will be made. I also note that the guarantee is clear that the bank only be discharged upon Civil Appeal No. 132 of 2019 being successful. I therefore agree with the applicant’s position that from the wording of the guarantee, it shall keep renewing after every lapse for a sequential period of six months.

15. The respondent also argued that the instant application is res judicata since the court had already pronounced itself on the terms of the bank guarantee. According to the respondent, the judgment debtor cannot seek to re-litigate the same issue.

16. The doctrine of res judicata is captured under Section 7 of the Civil Procedure Act. The doctrine ousts the jurisdiction of a court to try any suit or issue which had been finally determined by a court of competent jurisdiction in a former suit involving the same parties or parties litigating under the same title. A close reading of the section reveals that for the bar of res judicata to be effectively raised and upheld, the party raising it must satisfy five essential elements which are stipulated in conjunctive as opposed to disjunctive terms. The doctrine will apply only if it is proved that:-i.The suit or issue raised was directly and substantially in issue in the former suit.ii.That the former suit was between the same party or parties under whom they or any of them claim.iii.That those parties were litigating under the same title.iv.That the issue in question was heard and finally determined in the former suit.v.That the court which heard and determined the issue was competent to try both the suit in which the issue was raised and the subsequent suit.

17. In the present case, it is not disputed that this court has on more than one occasion rendered itself on the issue of conditional stay of execution pending appeal and directed the applicant to furnish security by way of a bank guarantee. As I have already stated at the beginning of this ruling, the parties herein are unable to agree on whether the wording of Bank Guarantee issued by the judgement debtor complies with the said court order of 22nd June 2019. Following this disagreement, the decree holder moved to execute thus prompting the judgment debtor to file a second application dated 22nd September 2019 seeking orders to stay the execution and for a declaration that its Bank Guarantee satisfies the order issued on 22nd June 2019.

18. In a ruling delivered on 29th April 2021, the court clarified the terms of the bank guarantee with respect to its automatic renewal upon expiry. The judgment debtor then issued another Bank Guarantee that was, once again, rejected by the decree holder who moved to execute the decree thus precipitating the present application.

19. From the above narration of the sequence of events that led to the filing this application, it is clear that technically speaking, the issues of stay of execution and the bank guarantee are res judicata as they have already been deliberated upon by this court in at least two rulings. The cause of disagreement however is whether the latest bank guarantee presented by the judgment debtor satisfies the automatic renewal requirement as ordered by this court in the ruling of 29th April 2021.

20. My finding is that the issue of the last bank guarantee and whether it complies with the court order has not been determined by this court and cannot therefore be said to be res judicata.

21. Having found that the bank guarantee issued by the applicant on satisfies the automatic renewal requirement, I find that the application dated 11th June 2021 is merited and I therefore allow it with orders that costs shall abide the outcome of the appeal.

DATED, SIGNED AND DELIVERED VIRTUALLY AT NAIROBI THIS 9TH DAY OF JUNE 2022. W. A. OKWANYJUDGEIn the presence of: -Mr. Kioko for Mutua for Plaintiff/Respondent.Mr. Muriuki for Defendant/Applicant.Court Assistant:- Sylvia