1. I have considered the Notice of Motion application dated 31st August, 2023 and 1st September, 2023 together with the affidavit sworn in support sworn on 31st August, 2023 and 1st September, 2023, the supplementary affidavit, and the replying affidavits sworn in opposition to the various applications sworn on 4th October, 2023 and 15th September, 2023, the submissions of counsel, and the relevant law.
2. The applicants are seeking to set aside the statutory demand of the respondent creditor.
3. Counsel for the applicants submitted that the statutory demand as against the 2nd and 3rd debtor is not valid. The parties did not enter into a commercial transaction with the creditor and did not receive credit facilities/services from the creditor.
4. Counsel contended that the debt is between the creditor and the 1st debtor only. The directors and the Company are separate entities as per the decision in Solomon vs Solomon, and the corporate veil has not been lifted to render the directors liable for the debts of the Company.
5. Counsel submitted that the 2nd and 3rd applicant have submitted sufficient cause to establish that they are not liable, and that the statutory demand ought to be set aside against the 2nd and 3rd debtor.
6. In respect of the application relating to the 1st debtor, Counsel submitted that the statutory demand is not valid because the debtor is able to pay its debts if given an opportunity to do so.
7. In opposition to the application, Counsel for the respondent submitted that there is a debt owed to the respondent pursuant to the arbitral award published on 25th February, 2016. This has been admitted.
8. Counsel further contended that this court has no jurisdiction to set aside a statutory demand because no procedure exists under the Insolvency Act/ Regulations.
9. I have considered the submission of the parties together with the affidavits sworn in support and in opposition together with the applicable law.
10. I have looked at the arbitration award published on 25th February, 2016 and it is evident that the 2nd and 3rd applicants/ debtors were not parties to the said arbitration. The award is expressly in respect of the 1st debtor only. Similarly, the ruling dated 7th December, 2018 for recognition and enforcement of the award relates to that party only.
11. Based on the above, I am satisfied that there is no judgment against the 2nd and 3rd applicants/ judgment debtors as stated in the Statutory Demand dated 9th August, 2023, which is also the basis upon which the demand has been made.
12. Accordingly, I find that the application dated 31st August, 2023 is with merit in this respect.
13. As regards, the company/ 1st debtor, I am satisfied that the company was indeed a party to the arbitration and the resulting award, and that the debt is therefore valid. The same has been affirmed by the various courts.
14. Counsel for the applicants and the respondent both confirmed that the challenge to the award was dismissed by the High Court, and once again, dismissed on appeal, at the Court of Appeal. Counsel for the applicant further admitted that the Supreme Court has since declined to grant leave to appeal. Therefore, no live matter exists before the Supreme Court in respect of the debt claimed by the respondent.
15. Accordingly, there is no doubt that the statutory demand is proper in respect of the 1st debtor. On the face of it, the application dated 1st September, 2023 cannot be sustained, and would appear to be without merit.
16. However, having stated the above, it is most untidy for the respondent to have lumped together parties that were not the subject of the arbitration and resulting award with the party that was, namely the 1st debtor. Having done so, I do not think that the court may set aside the demand against two of the parities, but say that it continues to be in force against the third. To my mind, a demand is ether valid or invalid. The oversight is incurable defective.
17. Further, I am persuaded that this court, as a court of unlimited and original jurisdiction has the jurisdiction to strike out a statutory demand that is defective. In Libyan Arab African Investments Company Kenya Limited [2021] eKLR, the court said as much in the following terms:
“Since it is common ground that PART V of the Regulations apply to personal bankruptcies and not liquidations or insolvencies of companies, does this mean that a company has no recourse when a statutory demand has been served upon it? I do not think so. I say so and repeat the court’s holding in DAC Aviation (EA) Limited v Stevenson Kibara Ndung’u & 8 others (Supra) that the court still retains inherent jurisdiction to strike out a statutory demand that is not well founded and amounts to an abuse of the court process notwithstanding that a specific provision does not exist in the Regulations and that the factors underlined in Regulation 17(6) of the Regulations governing the exercise of discretion to strike out a statutory demand in case of bankruptcy are equally relevant in the case of insolvency of a Company.”
18. Guided by the above, and based on the reasons stated above, and the further reasons put forward by Counsel, I find that the statutory demand dated 9th August, 2023 is defective. The same is hereby set aside with costs.
19. The file is marked as closed.