Background
1. This ruling determines the application dated 1/7/2023, which seeks the stay of execution of the ruling delivered and issued on 30/6/2023 in Nairobi CMCC No. 333/2016 as well as the stay of the proceedings in the same matter pending the hearing and determination of the appeal before this Court. The application is supported by an Affidavit sworn on even date by HAMZA ALI NOOR, the 2nd appellant.
2. The basis of the appeal before this court is a ruling in which the trial Court dismissed an application by the appellants. The said application sought to set aside warrants of arrest issued and also sought an order directed to the respondent (the Bank) to pursue the execution of the judgement delivered on 1/8/2017 with the Administrators of the 1st appellant (Allied EA Limited (under Administration).
3. It is contended by the appellants that the application in the lower Court was premised on the 1st appellant being placed under administration by African Banking Corporation Limited (ABC Bank) on 19/11/2018. They contend that pursuant to the provisions of Section 560(1)(d) of the Insolvency Act, 2015 all legal proceedings emanating from the 1st appellant’s lender/borrower relationship were stayed and could only be taken or continued with the consent of the administrator or with the approval of the insolvency Court.
4. It is the applicant’s case that all proceedings taken in the matter from 19/11/2018 to date are irregular, unlawful and void by operation of law and ought to be set aside. This includes the warrants of arrest issued by the trial Court on 18/2/2020 and reinstated on 2/12/2020 which were allegedly irregularly issued during the pendency of the moratorium of legal proceedings in this matter.
5. The appellants further contend that the Bank should pursue the recovery of the decretal amount from the judgment delivered on 1/8/2017 from the 1st appellant as the principal borrower first, before pursuing the guarantors.
6. The application is opposed through a Replying Affidavit deponed on 22/8/2023 by FELIX MUHATI, on behalf of the Bank.
7. The Bank takes issue with the appellants for filing multiple applications seeking the same prayers. It acknowledges that the 1st and 4th appellants having been placed under administration, left the Bank with an option of pursuing the decree and the judgment against the 2nd and 3rd appellants. This is because the judgment was entered against the appellants jointly and severally and hence the warrants of arrest.
Analysis and determination
8. Before I can proceed to analyze the substantive issues arising in the application, I will deal with a preliminary issue that the Bank has raised in response to this application, as to whether the application before the Court is sub judice.
9. It is not in dispute that this Court, (Mabeya J), in Noor & Another V Bank of Africa Limited & 2 Others, [2021] KEHC 1 (KLR) dealt with an application involving the 2nd and 3rd appellants also seeking stay of execution of the trial court’s orders. This Court made several observations including the fact that an imminent execution of a lawful order cannot be used to justify the fact that a party will suffer substantial loss.
10. On security this Court also stated that:
“… the respondents have an un-satisfied decree against the applicants hence the dispute is monetary. The applicants did not in any way offer security, or even allude to their willingness to offer security should the court so direct. The subject decree is dated 1/8/2017 for a sum of Kshs. 18,884,685.15/=. Almost four years later, the amount has not been fully settled. The applicants ought to have committed through their application that they were willing to abide by the court’s directions on security.”
11. In the end the Court pronounced itself thus:
“… the applicants have failed to meet the conditions necessary for the granting of stay orders. I thus find that their application lacks merit. Once the orders of the subordinate court are executed, the applicants will have an opportunity to show cause why they should not be committed to civil jail, in line with section 38 of the Civil Procedure Act.”
12. The only difference between that and this application is that the 1st and 4th appellants have now been brought into the picture. My reading of section 6 of the Civil Procedure Act is that the doctrine of sub judice extends to situations where substantially similar issues have been determined, between the same parties, or between parties under whom they or any of them claim. It follows therefore that the inclusion of the 1st and 4th appellants in this application does not change the fact that the issue of stay of execution had already been determined by this Court previously and the same extends to the 1st and 4th appellants.
13. I further rely on the explanatory notes under the said section and particularly note 4 which provides that:
“Any matter which might and ought to have been made ground of defence or attack in such former suit shall be deemed to have been a matter directly and substantially in issue in such suit.”
14. The application before Mabeya J was filed on 15/5/2021. By this time the 1st and 4th applicants had already been placed under administration. It is not clear why the appellants opted not to enjoin them in that application to have the issues that they now raise with respect to the Companies adjudicated upon. The purpose of section 6 of the Civil Procedure Act is such that it extends to issues that ought to have been raised when the matter was first heard and determined before a Court of competent jurisdiction.
15. In light of this, it is my finding that the question of stay of execution has already been determined and that this Court has no jurisdiction to reopen the matter.
16. I do however note and this is confirmed in the Bank’s replying affidavit, that this Court did not deal with the import of Section 560 (1) (d) of the Insolvency Act. That in my view is the only new angle to the application before this Court. The argument by the appellants is that any execution herein is illegal and un-procedural noting that the 1st and 4th appellants had been placed under administration and that the warrants of arrest had been issued during the pendency of a moratorium against execution of the said companies.
17. The Bank does not deny this position and in fact acknowledges that since the judgment in the matter was against the appellants jointly and severally, that is the reason that the Bank chose to go against the 2nd and 3rd appellants and leave out the companies. The appellants have not on their part brought any evidence to show that there was a breach of section 560 (1) (d) of the Insolvency Act. The said section applies only to insolvent companies and cannot stop execution against guarantors of such companies.
18. There is also the argument by the appellants that the Bank cannot be lawfully permitted to pursue recovery of the alleged loan amount from the guarantors without first exhausting recovery options against the principal borrower.
19. This Court has time and again held that parties are bound by the strict terms of the contracts that they enter into and it is not up to this Court to rewrite those terms (see National Bank of Kenya Ltd V Pipeplastic Samkolit (K) Ltd & Another, [2001] eKLR). On this background, the Letter of Guarantee and Indemnity is the contract that contains the terms and conditions on which the 2nd and 3rd appellants contracted with the bank, regarding their guarantee to the 1st appellant.
20. By dint of Clause 3 of the said contract, the 2nd and 3rd appellants as guarantors assumed primary responsibility for the debt of the 1st appellant in case of default. The letters of guarantee signed by the 2nd and 3rd appellants were clear that they would pay up the default upon demand by the Bank of the sums due from the 1st appellant even though the 1st defendant was the principal debtor.
21. I have additionally looked at the ruling by the Learned Magistrate with respect to the effect of the 1st and 4th appellants’ insolvency. I am of the view that the trial Court correctly directed itself on the law. I find no fault with the finding that:
“It is silent to note that a contract must be interpreted in a manner that speaks of the parties’ intentions as it is mot the business of the Court to interfere with the freedom of contracts of the parties. A literal reading and interpretation of Clause 10 above suggests that the parties did not intend for the bankruptcy or liquidation of the principal debtor to limit or terminate the obligations of the Guarantor under the Guarantee. I see no reason that may have prohibited the parties from incorporating limitations in the guarantee if they wished otherwise. Moreover, this Clause speaks of a separate contract between the Respondent and the 2nd and 3rd Defendants and clearly extends beyond the insolvency of the 1st and 4th Defendants. That notwithstanding, the contended Section 560 (1) (d) of the insolvency Act explicitly speaks of the company or its property, the 2nd and 3rd Defendants cannot be said to be the Company of its property; thus I find no violation of the said statutory provision.”
22. On the allegations of illegality of the warrants of arrest, I therefore find that the same are as against the guarantors of the 1st and 4th appellants who are contractually liable for the debt. The applicants have not shown me any evidence that the Bank has pursued the companies that are under administration which as correctly pointed out, is what is subject to Section 560 (1) (d) of the Insolvency Act. There is nothing barring the Bank from going after the guarantors of the loan amount, being the 2nd and 3rd appellants.
23. The long and short of this is that the appellants have not proved that they have an arguable appeal for which substantial loss will be occasioned.
Disposition
24. Accordingly, I find that the application dated 1/7/2023 lacks merit and the same is hereby dismissed with costs.