Occidental Insurance Company Limited v Dulu [2022] KEHC 10446 (KLR)

Occidental Insurance Company Limited v Dulu (Civil Appeal E003 of 2021) [2022] KEHC 10446 (KLR) (9 May 2022) (Ruling)

Neutral citation: [2022] KEHC 10446 (KLR)

Republic of Kenya

In the High Court at Malindi

Civil Appeal E003 of 2021

SM Githinji, J

May 9, 2022

Between

Occidental Insurance Company Limited

Appellant

and

Alphonse Tunu Dulu

Respondent

(Being an Appeal from the Ruling of the Learned Chief Magistrate, Dr Julie Oseko in Civil Suit No. E104 of 2020 of the Malindi Chief Magistrate’s Court dated the 15th December, 2021)

Ruling

1. Before this Court for determination is a Notice of Motion dated January 11, 2022 brought under order 42 rule 6 of the Civil Procedure Rules,2010 and section 3A of the Civil Procedure Act. The appellant seeks a stay of execution of the ruling delivered in Malindi CMCC No. E104 of 2020 on December 15, 2021, pending hearing and determination of the instant appeal.

2. Briefly, the facts giving rise to this appeal are as follows: The respondent filed a declaratory suit against the appellant in Malindi CMCC No. E104 OF 2020 – Alphonse Tunu Dulu v Occidental Insurance Company Limited seeking judgment against the Appellant for the sum of Kshs. 204,262/- being an award in a judgment in the primary suit Malindi CMCC No. 391 of 2018 Alphonse Tunu Dulu v Ali Cars Limited and Crispas Mwondu Maina.

3. The Appellant then filed in the declaratory suit, a statement of defence which was eventually struck out on 15th December 2021 for being an abuse of the court process, and judgment delivered in favour of the Respondent for Kshs. 204,262/- together with costs and interests.

4. On 11th January 2022 the Appellant then filed the present appeal challenging the ruling delivered in the declaratory suit.

5. In the supporting affidavit sworn on 11th January 2022, Mr. Nanji deposed that the appeal raises strong grounds with high prospects of success. He added that the decretal sum is substantial and if paid to the Respondent will not be recoverable in the event the appeal is successful. The Appellant was however willing to deposit the decretal sum in a joint interest earning account.

6. The Respondent swore an affidavit on 20th January 2022 in reply. He asserted that the appeal was not arguable for failure to obtain a declaration denying liability despite being served with a statutory notice and a notice of intention to file a declaratory suit. He added that the Respondent is a police officer and very much capable of refunding the decretal sum. The Respondent urged the court to dismiss the application and discharge the interim orders issued.

7. Directions were taken on 25th January 2022, for disposal of the application by way of written submissions. Both sides have complied with the directions, by filing their respective written submissions.

Appellant’s Submissions 8. It is the Appellant’s submission that it has satisfied the conditions for grant of stay of execution pending appeal as outlined under order 42 rule 6 of the Civil Procedure Rules,and in the case of Wycliff Kipkemboi Kibet V Horkyngs Kiliru Aganda Alunda [2019] eKLR.

9. The appellant argues that it is incumbent for the respondent to prove that he will indeed be able to refund the decretal sum as it was explained in Nairobi Civil Application No. 238 of 2005 National Industrial Credit Bank LimitedvAquinas Francis Wasike & another [UR]. That the pay slips exhibited did not show with certainty that the Respondent is able to refund the entire decretal sum.

10. The Appellant averred that a job is not guaranteed and that in any case, only 2/3 of his salary could be attached in the event that the decretal sum is to be refunded. That if stay is not granted in this case, it would cause the Appellant undue hardship that will render the appeal nugatory. It relied on the cases of G.N. Muema p/a [sic] Mt. View Maternity & Nursing Home V Miriam Maalim Bishar & another [2018] eKLR; Housing Finance Company of Kenya V Sharok Kher Mohamed Ali Hirji & another[2015] eKLR; Kenya Hotel Properties Limited V Willesden Properties LimitedCivil Application Nai No. 322 of 2006 [UR] 178/06.

11. The appellant explained that the appeal was filed expeditiously and without any delay as envisaged under section 79G of the Civil Procedure Act, and order 5 rule 4 of the rules thereto.

12. Making reference to the case of Housing Finance Company of Kenya V Sharok Kher Mohamed Ali Hirji[supra], the Appellant explained what is considered an arguable appeal. That an applicant need not show that an appeal is likely to succeed but have at least one arguable issue that will be determined in favour of the applicant.

13To the Appellant, the court at this stage should not be concerned with the merits and demerits of the appeal especially where summary judgment has been issued. It cited the case of Cannon Assurance Limited v Juliet Moraa Nyamari [2015] eKLR to buttress this point.

Respondent’s Submission 14. The respondent identified two issues for determination. First, whether the appellant has an arguable appeal and second, whether the appellant has met the conditions for granting an order for stay.

15. The Respondent submitted that whether or not the Appellant has an arguable appeal is dependent on whether the provisions of section 10[4] of the Insurance [Motor Vehicle Third Party Risks] Act Cap 405 absolve the appellant from any liability in respect of the accident.

16. To the respondent, the appellant has no arguable appeal for reasons that it failed to obtain a declaration denying liability and that the respondent is not privy to the contract between the insured and the insurer thus not aware of the terms of the policy. That it was upon the Appellant to obtain a declaration denying liability.

17. He relied on the case of BlueShield Insurance Company Limited V Samuel Nyaga Ngurukiri[2008] eKLR.

18. On the second issue, the Respondent submitted that order 42 rule 6 is clear on the conditions to be met before such orders are granted. To the Respondent, there is no proof of substantial loss since the decree is monetary and money can always be refunded even through a suit. He relied on the case of Kenya Shell Limited V Benjamin Karuga Kibiru & another [1986] eKLR; Standard Assurance Company Limited v Alfred Mumea Komu [2008] eKLR; NBI HC Civil Case No. 41 of 1995 United Builders 7 Contractors [Africa] Limited V Standard Chartered Bank Limited.

19. The Respondent argued that the fact that the process of execution was in motion did not amount to substantial loss. The Appellant has failed to demonstrate that it stands to suffer any substantial loss. The case of James Wangalwa & another v Agnes Naliak Cheseto [2012] eKLR was cited in support.

20. It is the Respondent’s submission that the argument by the appellant that he might lose his job was only but speculations.

21. Finally, citing the case of Hilaa Abdullah AminvSaumu Umazi Binzi & Saha Dzuya Angatsi Misc Civil Case No. 20 of 2021, the respondent submitted that a successful party should not be deprived of the fruits of judgment just for the reason of an appeal being preferred more so where the applicant was found 100% liable.

Analysis and Determination 22There is really only one issue for determination, and that is whether the order of stay of execution is deserved.

23Grant of stay of execution pending appeal is provided for under order 42 rule 6 of the Civil Procedure Rules, the relevant part of which states as follows:“(1)No appeal or second appeal shall operate as a stay of execution or proceedings under a decree or order appealed from except in so far as the court appealed from may order but, the Court Appealed from may for sufficient cause order stay of execution of such decree or order, and whether the application for such stay shall have been granted or refused by the court appealed from, the court to which such appeal is preferred shall be at liberty, on application being made, to consider such application and to make such order thereon as may to it seem just, and any person aggrieved by an order of stay made by the court from whose decision the appeal is preferred may apply to the appellate court to have such order set aside.(2)No order for stay of execution shall be made under subrule (1) unless—(a)the court is satisfied that substantial loss may result to the applicant unless the order is made and that the application has been made without unreasonable delay; and(b)such security as the court orders for the due performance of such decree or order as may ultimately be binding on him has been given by the applicant.(3)…(4)…(5)…(6)Notwithstanding anything contained in subrule (1) of this rule the High Court shall have power in the exercise of its appellate jurisdiction to grant a temporary injunction on such terms as it thinks just provided the procedure for instituting an appeal from a subordinate court or tribunal has been complied with.”

24. The Court of Appeal in Rhoda MukumavJohn Abuoga [1988] eKLR was emphatic on this subject. It held as follows:“It was laid down in M M Butt v The Rent Restriction Tribunal, Civil Application No Nai 6 of 1979, (following Wilson V Church (No 2) (1879) 12 Ch 454 at p. 488) that in the case of a party appealing, exercising his undoubted right of appeal, the court ought to see that the appeal is not rendered nugatory. It should therefore preserve the status quo until the appeal is heard.Granting a stay in the High Court is governed by Order XLI rule 4(2), the questions to be decided being– (a) whether substantial loss may result unless the stay is granted and the application is made without delay; and (b) the applicant has given security.”

25. It follows therefore that an applicant for stay of execution of a decree or order pending appeal is obliged to satisfy the conditions set out in order 42 rule 6(2) and the established jurisprudence in that regard namely;a)that substantial loss may result to the applicant unless the order is made,b)that the application has been made without unreasonable delay,c)that such security as the court orders for the due performance of such decree or order as may ultimately be binding on the applicant has been given and (d) the appeal filed is arguable.

26It is also trite that the power to grant or refuse an order for stay of execution pending appeal is discretionary and such discretion should be exercised in a manner so as not to render a pending appeal nugatory.

27. On whether the appeal filed is arguable, it is important to note that to earn a stay of execution, one is only required to answer the question whether the appeal raises a serious issue for determination.

28. It is not a requirement that one persuades the appellate court that the intended appeal has a high probability or chances of success. All one is required to demonstrate is that the appeal is arguable.

29. The Respondent says that the Appeal has absolutely no chance of succeeding in view of the provisions of section 10(4) of the Insurance (Motor Vehicle Third Party Risks) Act. In particular, the Appellant ought to have obtained a declaration denying liability of the accident.

30. On the other hand, the appellant insists that it was not obligated to obtain a declaration under the said section 10[4] as it had been averred that the motor vehicle was not being used in accordance with the policy. Therefore, failure to obtain the declaration within the prescribed time did not make the Appellant liable.

31. The said section 10(4) of the Insurance (Motor Vehicle Third Party Risks) Actprovides:“No sum shall be payable by an insurer under the foregoing provisions of this section if in an action commenced before, or within three months after, the commencement of the proceedings in which the judgment was given, he has obtained a declaration that, apart from any provision contained in the policy he is entitled to avoid it on the ground that it was obtained by the non-disclosure of a material fact, or by a representation of fact which was false in some material particular, or, if he has avoided the policy on that ground, that he was entitled so to do apart from any provision contained in it:Provided that an insurer who has obtained such a declaration as aforesaid in an action shall not thereby become entitled to the benefit of this subsection as respects any judgment obtained in proceedings commenced before the commencement of that action, unless before or within fourteen days after the commencement of that action he has given notice thereof to the person who is the plaintiff in the said proceedings specifying the non-disclosure or false representation on which he proposes to rely, and any person to whom notice of such action is so given shall be entitled, if he thinks fit, to be made a party thereto.”

32. My understanding of the above provision is that while an Insurer, in this case the Appellant, is permitted to avoid satisfaction of a judgment/decree under certain conditions, that right is only actuated upon compliance with section 10(4) of the said Act. I am guided by Ngugi J in the case of UAP Insurance Company LimitedvEphantus Kanyua Ngugi & another (Suing on their own behalf and as the true Administrators of the Estate of the late Daniel Mwatele Kanyua – Deceased) [2017] eKLR. The learned Judge in an almost similar case observed that;“14. Looking at these two sub-sections of the Insurance (Motor Vehicle Third Party Risks) Act, I would agree with the Respondents that the Appeal herein does not appear eminently arguable. Indeed, section 10(1) of the Act does not seem to say what the Appellant says it does. It is true that an Insurer is permitted to avoid satisfaction under certain conditions – but that right is only triggered upon complying with section 10(4) of the Act. The Insurer does not plead to satisfying the terms of section 10(4). It may be that the Appellant has a good cause against the insured. However, if it failed to adhere to the terms of section 10(4), it is hard to see how it can avoid settling a judgment against a third party who duly gave notice to the Insurer under sections 10(2)(a) of the Act. For sure this does not defeat the Insurer’s claim against the Insured – but once an Insurer fails to perfect their right to refuse to settle a judgment under section 10(4), it’s only recourse remains to go after the Insured for reimbursement of sums paid out if it becomes convinced that the event was not covered in the Insurance Policy.15. In the face of these provisions of the law, I am not persuaded at this point that the Appellant has an arguable appeal sufficient to warrant a stay of execution.”

33. I have weighed the grounds of appeal enumerated in the memorandum of appeal, and also given the foregoing position, I am not convinced that the appeal is arguable to warrant a stay of execution.

34. Besides, the appellant has failed to demonstrate that it will suffer substantial loss if the order for stay is declined.

35. The case, cited by the respondent, of James Wangalwa & Another V Agnes Naliaka Cheseto [supra] aptly expounded on what amounts to substantial loss as follows:“No doubt, in law, the fact that the process of execution has been put in motion, or is likely to be put in motion, by itself, does not amount to substantial loss. Even when execution has been levied and completed, that is to say, the attached properties have been sold, as is the case here, does not in itself amount to substantial loss under Order 42 Rule 6 of the CPR. This is so because execution is a lawful process. The applicant must establish other factors which show that the execution will create a state of affairs that will irreparably affect or negate the very essential core of the applicant as the successful party in the appeal ... the issue of substantial loss is the cornerstone of both jurisdictions. Substantial loss is what has to be prevented by preserving the status quo because such loss would render the appeal nugatory.”

36. The Appellant’s argument herein is that it will suffer substantial loss for the reason that the Respondent will not be able to refund the decretal sum. However, the appellant failed to show what loss that is that it stands to suffer if the order for stay is not granted. This argument is in my view just apprehensive and does not outweigh the right of the Respondent to enjoy the fruits of judgment. The matter involves a monetary decree of 204, 262/=. Respondent is an employee under pay and can raise the same.

37. While the Application was filed timeously and the Appellant has demonstrated that it is willing to furnish security for the due performance of the judgment within 30 days, having failed to satisfy the other two mandatory requirements for the grant of stay of execution, I am inclined to dismiss the Notice of Motion dated 11th January 2022 with costs to the Respondent.

RULING READ, SIGNED AND DELIVERED VIRTUALLY AT MALINDI THIS 9TH DAY OF MAY, 2022. ...................................S.M. GITHINJIJUDGEIn the Presence of1. Miss Nasimiyu Advocate for the Appellant/Applicant2. Mr Wambua Kilonzo Advocate for the Respondent – Miss Nyambuto holding his brief.Miss Nasimiyu;-I pray for 30 days stay to appeal against the ruling.Court; -Stay is granted....................................S.M. GITHINJIJUDGE