Resort Clubs Limited v First Assurance Company Limited & United Insurance Company Limited [2015] KEHC 530 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI

CIVIL CASE NO.1318 OF 2004

RESORT CLUBS LIMITED…….PLAINTIFF/RESPONDENT

VERSUS

FIRST ASSURANCE COMPANY  LIMITED…….1STDEFENDANT/APPLICANT

UNITED INSURANCE COMPANY LIMITED…2ND DEFENDANT

RULING

Before  me for determination  is the 1st defendant/applicant’s application dated 5th August  2011 filed on  26th August  2011 seeking for  dismissal of the suit  herein for  want of prosecution and costs.  The application is predicated on the grounds that:

There has been inordinate delay on the part of the plaintiff to bring the suit against the 1st defendant   to conclusion.

The said   delay is prejudicial to the 1st defendant’s interests as it may not be able to secure the attendance of its witnesses due to lapse of time.

The plaintiff’s has shown lack of interest in its suit hence the dismissal of the suit will not prejudice its interests.

The application is further  supported by the  affidavit sworn on  5th August  2011 by  Ben Musundi advocate  setting out the  history  of the suit which was filed on 2nd December 2004  as a result  of an alleged cause of action which arose  on 4th December 1998 and defence filed on 1st February2005 but that  there  has been inactivity  in the matter which is prejudicial to the  1st defendant  hence it  should be  dismissed  with costs.

The plaintiff filed replying affidavit  sworn on 22nd September  2014  by Benson Mugo  Mukunya, the Managing Director  of  the  plaintiff company, and a further replying  affidavit  sworn on 11th December 2014 contending  that the delay in setting down  the suit for  hearing  has been due to  the fact that the 2nd defendant  has been under statutory management  since 2005 to date  with extensions of a  moratorium and that the  firm of F.N. Wamalwa advocates  have refused  to receive  any process on behalf of  the 2nd defendant yet they have  also declined to formally cease acting.  In their view, the case  cannot proceed  to hearing  without representation of the second defendant  and that the plaintiff is not aware of who the statutory  manager for  the 2nd  defendant   is even after writing  to the Insurance Regulatory Authority on 9th November  2012  seeking to know  who the statutory manager  and or  the liquidating agent  is and  that to date no reply has been received.

The application was argued orally on 16th November 2015 with the 2nd defendant being absent.  Mr Mahoho represented the 1st defendant whereas Mr Mboha represented the plaintiff.

Mr Mahoho submitted, reiterating the contents of the application, grounds and supporting affidavit.  He  emphasized  that since the  suit was  filed in 2004 no documents  have been exchanged to demonstrate  interest  to have the  suit  ready  for hearing  and determination  and  as at 26th August  2011  when this  application, was filed, 7 years  had lapsed and is now 11 years  since filing  of the  suit.   He maintained that the delay has been inordinate, inexcusable and prejudicial to the 1st defendant.  Further, that  there  is no attempt  to explain  the delay and that  if the  plaintiff  was unable  to proceed  against  the 2nd defendant  for reasons that it  was still under statutory management, it should have sought leave to  enjoin  the statutory manager  whose  name is not  necessary.  He  relied  on the case of Governors  Baloon  Safaris Ltd V Skyship Company Ltd  & Another HCC 461 of 2008  wherein  it was held that failure to conclude a matter expeditiously diminishes  legitimate expectation of a  defendant  that a suit once  filed should be determined  expeditiously  as per Article  159(2) (b) of the  Constitution.  He also  relied   on HCC 876/2001 Anthony Kaburi Kano & 2 Others V   Ragati Tea Factory Ltd & Others   where  14 months  delay  was considered  inordinate  delay   and that   there has  to be a balance  between  interests  of parties.

In response, Mr Mboha for the plaintiff opposed the application relying on the replying and further replying affidavit sworn by Mr Mugo.  He conceded that there had been delay in prosecuting the suit herein but argued that the delay is excusable as reasons had been advanced through the affidavit.  Mr Mbola further argued that the plaintiff had been encumbered by the moratorium placed on the second defendant.  Further, that the plaintiff was unable to extricate the suit against one defendant as each of the defendants  were blaming one another for the default.  Mr Mboha stated that they did not know the statutory manager for the 2nd defendant despite inquiring from the Insurance Regulatory Authority in 2012.   On the authorities relied on by the applicant, counsel for the plaintiff/respondent contended that the power to dismiss a suit for want of prosecution is discretionary which should not be exercised capriciously but judiciously.  Further, that  this court should  strive to sustain  the  suit  and not  to terminate  it prematurely  where  reasons for  delay are  preferred  so that a plaintiff  is  given  an opportunity  to ventilate  its  grievances.

Mr Mboha maintained that no prejudice would be occasioned to the 1st respondent corporate entity as any of its officers can come and testify in the suit on its behalf. Further, that the delay herein is not intentional    unlike in HCC 876/2011 where no excuse was given for the delay.  He urged the court to dismiss the application with costs to the plaintiff.

In a brief   rejoinder Mr Mahoho contended that Order 9 of the Civil Procedure   Rules is clear on  the  issue of   an advocate  on record and when he can  cease  acting and there was no order on  record stopping the claim from  proceeding against  the statutory manager  hence the excuse  for the  delay  was not  credible.  He urged this court to exercise its discretion and dismiss the suit   against the 1st defendant with costs.

In   deciding  the fate of this  application  by the 1st  defendant, I  must give  a brief  background  of this  case.   By a plaint dated 22nd November 2004   signed  by Mugo Mukunya, Managing Director  of the plaintiff Company, and filed  on 2nd December  2004, the plaintiff  claimed that it  was the registered  proprietor  of business  premises on LR  12715/208  North West  of Arthi River  Township which  was insured against  a fire policy No. 98/05/302/58 and 98/05/302/59 with the 1st defendant First  Assurance  Company Ltd and a second    fire policy  No. 94/5/F/4406 insured with  the 2nd defendant  United  Insurance Company Ltd  of the same  premises together   with the Casino Equipment, against  fire and other perils.

That on 4th December 1998 a fire occurred on the said premises destroying the building, business and the equipment and despite demand; the defendants had refused to compensate the plaintiff for the loss.  The plaintiff sued for compensation for the value of the destroyed property by fire, assessment of the quantum, interests   and costs.

Both defendants entered appearance filed defences on 1st February 2005 and 30th December 2004 respectively, denying the claim.  The  2nd defendant  averred  that the policy  issued by the 1st defendant  covered  the  plaintiff’s claim upto a maximum of  kshs 40,000,000 vis a vis  a maximum of kshs 30,000,000 insured by the 2nd  defendant  and that it  could only be responsible   after  exhaustion   by the 1st defendant. The 2nd defendant further contended  that  Mugo Mukunya  lacked capacity to institute  proceedings  for and  on behalf  of the plaintiff company  hence the  suit was  incompetent  and incurably defective.  The  1st  defendant contended that  the plaintiff had failed to disclose  material  facts  related to the risk  to be covered by the 1st  defendant, was guilty of breach of policy terms  and that the plaintiff had fraudulently  started the fire with the intention  of seeking insurance compensation.   On  29th April 2008 the 1st defendant filed and  delivered  interrogations  which were  responded  to on 22nd April  2010 and  from thence, no action   was taken  by the plaintiff  to  set  down the  suit for hearing  until  this application was filed  on         26th August  2011, which was  over one year  and 4 months.

I have carefully considered   the matter.  The  plaintiff’s   main defence   to the application for dismissal of this suit  for want of prosecution is that   the 2nd  defendant  was placed  under statutory  management in 2005;  is under moratorium since then  to date;  and that it does not  know the name of  the statutory manager.  In addition, that the 2nd defendant’s advocates on record F.M. Wamalwa  and Company have refused   to appear  on behalf  of the 2nd defendant while at  the same time  they  have refused to formally cease acting. In their view, the  2nd defendant’s position  has hindered  the plaintiff from prosecuting  the suit, which  suit cannot  proceed against  the 1st defendant alone as  the 2nd defendant  contends in its defence  that  the 1st defendant is liable  in  the 1st  instance, to compensate  the  plaintiff  which claim must be  exhausted  before resorting  to the 2nd  defendant for compensation.

The  1st defendant  on the other  hand  maintains  that no  good reason has been  advanced  for the delay  in having  the suit determined  and that  the plaintiff  need not  know the name of  the statutory  manager  before enjoining  him/her to the suit  to take the  place of the 2nd defendant  since the  position  is a statutory one. Further, that nothing prevented the plaintiff from enjoining the 2nd defendant’s statutory manager.  In  addition, the defendant  maintains  that it  will suffer  prejudice due  to the delay as its witnesses  may  not be able to attend to the suit  due to  lapse  of time.

The applicable law for dismissal of suit for want of prosecution is found in Order 17 Rule 2 of the Civil Procedure Rules which enact:

“ Where  no application has been  made or  step taken by either  party for one year, the court  may give  notice in writing  to  the parties  to show cause  why the  suit should  be  dismissed and  if cause  is not  shown to its  satisfaction, the court  may dismiss  the suit.

2(3) a party to the suit  may  also apply for dismissal of the  suit for  want of  prosecution  if no steps have  been  taken to prosecute  the suit for  a period  of one year.”

The court’s discretion to dismiss  suit under  Order 17 of the Civil Procedure  Rules  must however  be exercised on the basis that  it is in the interest  of justice   regard being  had to whether the court  is satisfied  that the party instituting  suit has lost interest  in it; that the default has been inordinate  intentional, unreasonable  and contumelious, or  inexcusable; and is likely to cause serious  prejudice  to the defendant  on account  of that delay, either  as between the defendant  and plaintiff  or between  each other  or between them and a third party.  See Halsbury’s Law of England VOL. 37 paragraph 448. In Ivita Vs Kyumba [1984] KLR 441 the court was categorical that:

“ The test  applicable  for  dismissal  of a suit  for want  of prosecution  is whether  the delay is prolonged  and inexcusable, and   if it is, whether  justice can be done  despite  the delay.  Thus, even if  the delay  is prolonged, if the  court is  satisfied  with the  plaintiff’s  excuse  for the delay  and that  justice can still be  done to the parties, the action  will not be dismissed but it will be ordered  that it be set down  for hearing at the earliest  time.  It is a matter of and in the discretion of the court.”

Applying the above principles to this case and from the background that I have provided   to this suit, it is not in dispute that over  1 year  and  4 months  had lapsed  between the last action of the plaintiff  answering to the  interrogatories  and the filing  of this application in 2011.  As at 2010, the plaintiff was no doubt aware by Mr Mugo Mukunya’s own affidavit that the 2nd defendant had been placed under statutory management from 2005.  In my view that act  in itself of placing  the 2nd defendant  under statutory  management  changed the status of the 2nd defendant and  it was therefore  entirely  upon the plaintiff  to act as  appropriate  to substitute  the 2nd defendant  with the statutory  manager, as indeed, no proceedings  could have  continued  against it  without  leave of court and  without  a substitution with the statutory manager. It is  ironical for the plaintiff to claim that it  did not know the  name of the statutory manager  and  that it  wrote to the Insurance Regulatory Authority in 2012  seeking  to know the name thereof  but that  it has not received  any reply to date.

I say ironical because the position  of statutory  manager is a statutory  one and  any search  at the Registrar  of Companies  or a visit to the Liquidated  company premises would reveal who  that statutory manager gazetted to manage  the affairs of the company  is.  In any event, the  plaintiff did not require  the actual  name of the statutory manager  in order to  have (him) substituted  or enjoined  to these proceedings  as there is  no such legal requirement for  the name of the statutory manager. In the Court of Appeal case of LochabBrothers V Kenya Furfural Company Ltd [1983] KLR Madan, Khella and Chesoni JJA held:

“A receiver cannot sue in his own name as a receiver since he has no property vested in him and so acquires no right of action by (his) appointment.   Nor can the court give a receiver leave to sue as receiver.  The receiver’s duty is  to take care  of and receive the property which is put under (his) charge and ( he) is not at liberty  and is  not entitled  to bring  an action in his  own name .  Thus the second respondents had no locus standi and they could bring proceedings only in the name of the company whose agents they were.”

Thus, the plaintiff in this case did not require the name of the statutory manager to substitute the 2nd defendant in this matter since learning of its placement under statutory management.  In addition, it took this court, in the process of writing this ruling, less than one minute to establish   the statutory manager for United Insurance, by simply undertaking an internet search for information that is readily available.  Therefore, in my view, no party with an interest  in a matter of this nature  could  have  waited  since 2005  to get  to know   the name of  the statutory manager of United Insurance  Company by feigning  ignorance of who the statutory manager  of the said  company (under  statutory management is and moreso when the deponent of the plaintiff’s affidavit I reply is an advocate of the High Court of Kenya who appears before this court very often.

Further and in addition, the plaintiff’s  replying  affidavit  filed on  12th June  2009 annexed exhibit “BMM2” which  is  a declaration  of extension of  moratorium dated 5th April 2012.  The said declaration states:

“ Notice  is given that  in exercise of the  powers vested under Section 67 C(3)  of the Insurance  Act, the High Court  of Kenya  sitting at Nairobi pursuant  to an order made on the 28th  March 2012  extended  the appointment  of Kenya  Reinsurance  Corporation Limited  as statutory manager  of United Insurance  Company Ltd  with effect  from 28th March 2012.

TAKE  FURTHER  NOTICE that in exercise  of the powers conferred by Section 67 C(10) of the Insurance Act, the statutory  manager of United  Insurance Company Ltd  declares   an extension of the moratorium on the payment  of the said insurer  of its police  holders and all other  creditors  for a further period of six (6) months  with effect  from the date  of this notice.

Dated the 28th March 2012

KENYA REINSURANCE CORPORATION LTD:  STATUTORY MANAGER.”

The above  document is the plaintiff’s own exhibit, yet  it claims  to lack knowledge/information on who the statutory  manager for United Insurance Company is or was and  that it wrote to the Insurance  Regulatory Authority as per annexture “BMM3”  a letter  to  Insurance Regulatory Authority dated  9th November  2012  seeking information when  United Insurance Company  was placed under receivership and who  their receiver  manager  or liquidating  agent is.  This was barely 9 months after the notice of 28th March 2012 extending the moratorium.

Again, Annexture  ‘BMM1’ annexed  to the further replying  affidavit  sworn on  11th November  2014  shows   another declaration of a moratorium and the statutory manager  is named  as  Mr Evanson Munene  Waruhiu, giving  the contact  address as Kenya Re Towers, Ragati Road,with a telephone  and email contact just like  the other  Declaration of 28th March 2012.

It is the plaintiff who had instituted suit against the 1st defendants, who had no legal or equitable counterclaim suit against it.  It was  therefore  incumbent  upon the plaintiff  to seek leave of  court to enjoin  the statutory  manager of the 2nd defendant, and not  to wait for  the statutory manager  to locate suits  pending  against  the Insurance Company.  This court  also  declines  to accept  the explanation  that  the plaintiff was unable  to proceed with  the suit  because  the  2nd defendant’s advocates F.N. Wamalwa  & Company refused to accept  service of court  process  on its behalf and or to cease acting for  the 2nd  defendant company  which is  under statutory management. The record  is clear that  F.N. Wamalwa  Advocates  were instructed  by the  2nd defendant  when it was in sound state  but following  the placing  of the 2nd defendant under  statutory  management, it  cannot be  expected  that the said advocates  retained  instructions  unless  retained  by the statutory  manager  since the company  in liquidation had no  capacity  on its own accord  to retain  the advocate.   It was therefore expected that the plaintiff effects service of all relevant court documents on the statutory manager and not the firm of F.N.Wamalwa & Company Advocates.

I have  perused  the record  and seen several  notices  of hearing served  upon F.N. Wamalwa  and Company Advocates by the plaintiff’s advocate on behalf  of  the 2nd defendant and which notices were all received  under protest  ever since  the company  was placed under statutory management, advising the  plaintiff’s counsel that the advocates  have no  instructions.  There is therefore  no ground  upon which the plaintiff should  insist  that the firm of  F.N. Wamalwa  & Company  should  receive court process on behalf of the second defendant or that it  formally apply  to cease acting for the 2nd defendant.  The act of ceasing to act is a procedural issue which in my view does not bar the plaintiff from serving the statutory manager with appropriate documents relating to   this suit.  It therefore  behoves this court to learn  that the  plaintiff has  continued  to drown into the sea  of ignorance and desperation as  to what to do with  its suit, which ignorance cannot serve  as a defence for the delayed  prosecution of this suit.

I reiterate  that the plaintiff has not made  any efforts  to enjoin  the statutory manager  of the 2nd defendant to this suit  which was commenced  in 2004 before the  2nd defendant was  placed under statutory management  in 2005,  I accept the 1st defendant’s submission  that under   such circumstances, the  reason for  the delay preferred  by the plaintiff are not  plausible  and I do not  accept  those reasons.  The plaintiff appears to have lost interest in this suit, which delay, in my view, is prejudicial to the 1st defendant.  As pointed out, a suit whose  cause of  action  arose  in 1998, it is  possible  that witnesses  may be unavailable and  documents  may also not  be found to support  the defence  case.  Employees of companies come and go and or die. The  plaintiff  had options for disposing of  this suit, by either proceeding against the  1st defendant alone or  seeking leave of court to enjoin the statutory manager  since 2004 but has not  attempted either of the options.  Delay defeats equity and the provisions of Article 159 (2) are clear that justice shall not be delayed.

As there has been delay in seeking  to have this suit prosecuted with the  plaintiff  clearly not being keen to  proceed with  the case against  any of  the defendants, this court  rejects  the  submission that it should lean towards sustaining  suits rather than terminating  them prematurely.  The plaintiff has not demonstrated interest in amending the proceedings, which amendments the court would be inclined to examine and determine on merits, removing the party who may stall justice.   In its submissions, it still wishes to archive this suit perpetually or until the 2nd defendant is revived.  It is not known when the 2nd defendant will be resurrected.   That delay denies justice to the 1st defendant   who is anxious to have the suit out of its way.  The 1st defendant has, in my view, waited long enough.  This suit has been sterile  since 2010 and  looking back to the reason given  by the plaintiff for the delayed  prosecution, from 2005  when  the 2nd  defendant was placed under statutory  management  since, according  to the  plaintiff, it  could not prosecute the suit against  the 2nd defendant and  therefore   did nothing  to have the suit  prosecuted.

It is for  those reasons, that I  find this  application  meritorious and grant it, dismissing  the plaintiffs  suit against  the 1st defendant .  As against  the 2nd defendant, it is  clear that  the 2nd defendant  is unrepresented  having  been placed under  statutory  management  since 2005 hence there  has been no legal representation on its behalf and the statutory  manager  has never  been  notified of this pending   suit inviting  it to  seek leave  to be enjoined  or the  plaintiff seeking leave  to enjoin  it to these proceedings.  I would therefore  hesitate  to dismiss  the suit  against  the 2nd defendant as no application is  before me  seeking orders   of dismissal.  This court  has the under Section 3A , 63(e) of the Civil Procedure  Act and Article  159 (2) (b) of the Constitution, to make  such orders  as may be  expedient  for the ends of  justice  to prevent  abuse of its  process, and to  salvage justice  from defeat.

Albeit  the plaintiff alleges  that  it shall be  prejudiced if the suit  is dismissed since its claim  against  the defendants is inseparable, I have  carefully perused the pleadings  in the lower  court and  the documents  on record.  There is no evidence that   the defendants jointly insured the plaintiff’s property and that therefore the claims herein against them are inseparable.  The allegation that each of  the defendants  refused to settle  the claim by each shifting  the plaintiff to be compensated  by the other  does not  in itself  show the  joint  policy.  The plaint as filed is clear that the insurance policies were separate and the contracts of insurance made independently at different times.   The plaintiff can therefore still pursue its claim separately and obtain a remedy against either of the defendants independently. Having dismissed the plaintiff’s suit against the 1st defendant, I proceed and award costs of the application and of the dismissed suit to the 1st defendant.

Dated, signed and delivered in open court at Nairobi this 7th day of October 2015.

R.E. ABURILI

JUDGE