Peter Odiwuor Ngoge T/A O.P. Ngoge & Associate Advocates v The Statutory Managers of United Insurance Co.Ltd & another (Constitutional Petition 111 of 2018) [2022] KEHC 11686 (KLR) (Constitutional and Human Rights) (19 May 2022) (Judgment)
Neutral citation:
[2022] KEHC 11686 (KLR)
Republic of Kenya
Constitutional Petition 111 of 2018
HI Ong'udi, J
May 19, 2022
Between
Peter Odiwuor Ngoge T/A O.P. Ngoge & Associate Advocates
Applicant
and
The Statutory Managers of United Insurance Co.Ltd
1st Respondent
Insurance Regulatory Authority
2nd Respondent
Judgment
1.The petition dated March 23, 2018 as amended on March 16, 2020 was filed under Articles, 2(5), 10, 19, 20, 21, 22, 23, 27, 28, 29, 40, 43, 47 and 258 of the Constitution, Articles 1, 2, 3, 4, 5, 8, 14, 15, 16, 17, 18, 19, 22 and 24 of the African charter and Articles 6, 7 and 11 of the International Covenant on Economic, Social And Cultural Rights (1966).In view of this the petition seeks the following orders: -a.That leave be given forthwith to your humble petitioner to institute this petition against the said Statutory Managers, and against the Insurance Regulatory Authority under Articles 22 and 258 of the said Constitution with a view to uphold, promote and protect the alleged fundamental Human Rights of your humble petitioner and his client.b.That upon granting leave as sought in (a) above, the said Statutory Managers and the Insurance Regulatory Authority be compelled jointly and severally forthwith to honor and replace the said post-dated cheques with interests at the courts rates from the month of June 2004 until payment is made in full, in final settlement of the award in Mombasa CMCC No 4813 OF 2001.c.That further or in the alternative, upon granting leave as sought in (a) above, the Statutory Managers of United Insurance Company Limited and the Insurance Regulatory Authority be jointly and severally compelled to pay to your humble petitioner the sums of Ksh 911,956.60 with interest at courts rates from the January 1, 2005 until payment is made in full in final settlement of the consent judgment entered by the parties advocates in Mombasa CMCC No 4813 of 2001 against United Insurance company limited.d.That general damages be assessed and awarded to your humble petitioner to redress violations of the alleged fundamental Human Rights.e.That the costs of this petition be borne by the respondents herein: that is the statutory Managers of United Insurance Company Limited and the Insurance Regulatory Authority.f.That the Honorable Court be pleased to award any other or further orders which it deems fit and just to grant in the circumstances.
Background of the Case
2.The premise of instant petition originates from a consent judgment entered into in the case of Mombasa CMCC No 4813 of 2001.The consent was entered in favour of Rosemary Akoch Wafula against United Insurance Company Limited. The Petitioner an advocate of the High Court of Kenya was the legal counsel of Rosemary Akoch Wafula.
3.The legal relationship commenced by virtue of a road traffic accident that led to the case of Mombasa CMCC No 4385 of 1998. Subsequently, Rosemary Akoch Wafula instructed the petitioner to lodge the above declaratory sent against United Insurance Co Ltd on December 6, 2001.
4.In response to the said suit, United Insurance Company Limited through the firm of Ogola & Ochwa Co Advocates filed a memorandum of appearance and a statement of defence on the December 16, 2001 denying the claims meted out against it.
5.This however changed on April 2, 2004 when the parties decided to settle the matter by entering into a written agreement to the effect that payment of the decreed sums would be made by United Insurance Company Limited. The parties agreement which noted that the decreed sums would be paid by instalments was thereafter filed in Court.
6.According to the petitioner the agreement was not honoured. In fact United Insurance Company Limited went ahead and issued several postdated cheques and one banker’s cheque as at January 1, 2005. United Insurance Company Limited was soon after placed under statutory management. At that point the total balance of the decretal sum stood at Ksh 911,956.60/=.
7.In view of this the instant petition was lodged against the statutory managers of United Insurance Company Limited for them to honour the consent judgment.
The Petitioner’s case
8.The petitioner’s case as articulated in the petition is that the 1st respondent’s refusal to honour and replace the post-dated cheques violated his rights under Article 10, 26, 27, 28, 29, 40, 43 and 47 of the Constitution by curtailing his socio-economic rights . In like manner that the 2nd respondent under Section 3A of the Insurance Act, Chapter 487 is mandated to ensure that no bouncing cheques are issued by insurers to their victims, in settlement of valid Insurance claims. Considering this, the declared moratorium under Section 67 (C) of the Insurance Act cannot shield the respondents from civil and criminal liability and negligent omission arising from the bounced cheques.
9.The petition was supported by the petitioner’s sworn affidavit dated March 23, 2018 where he avers that when United Insurance Company failed to honour the terms of the consent judgement, he instructed auctioneers to levy execution proceedings against its movable assets.
10.He deposes that United Insurance Company transmitted to Girmat Auctioneers one fraudulent current cheque and several postdated cheques vide a letter dated June 21, 2004. He avers that when he presented the cheques to the bank they were dishonoured. Owing to this, he instructed Girmat Auctioneer’s to renew the warrants of attachment once again in fresh execution proceedings.
11.He avers that United Insurance Company issued the Auctioneers with a bankers cheque dated 11th August 2004 for Ksh 100,000/= being part payment of the decreed sums. This is the only cheque that was honoured before United Insurance Company was placed under statutory management.
12.He deposes that he wrote a letter to the 1st respondent dated February 9, 2018 regarding the account but did not get a response. Further that his attempts to have the 1st respondent pay the balance of the decreed sums plus accrued interest was in vain. He makes known that the total balance of the decreed sums stood at Ksh 911, 956.60 as at January 1, 2005.
13.He prays that the 1st respondent be compelled by this Court to pay the outstanding decreed sum with interest. Additionally that the 2nd respondent having deliberately failed to carry out its statutory and supervisory obligations by permitting the United Insurance Company Ltd to issue bouncing post-dated cheques is precluded, under Section 120 of the Evidence Act, from asserting that the said statutory declaration of moratorium disentitles the petitioner from lodging the instant petition against the 1st respondent.
The Respondents’ Case
The 1st Respondent Case
14.The 1st respondent in response to the petition filed a replying affidavit dated July 13, 2019 sworn by Christopher Onyango, the operations manager. He avers that the violations stated by the petitioner occurred prior to the moratorium declaration and so the 1st respondent did not participate in the actions complained of. He notes that contrary to the petitioner’s allegation, the 1st respondent made a response to their letter dated February 9, 2018 vide their letter dated February 26, 2018.
15.He deposes that one of the reasons United Insurance Company Limited was placed under statutory management was the issue of dishonored cheques as provided under Section 67(c),(e) and (g) and Section 203 of the Insurance Act. He informs that this was an issue that had plagued other creditors correspondingly.
16.He avers that the 1st respondent declared a legal moratorium for all classes of creditors under Section 67(c) of the Insurance Act which applied equally to all the creditors. He deposes that by dint of the declared moratorium all payments were automatically stayed by virtue of Section 67(10) of the Act. Additionally, the 1st respondent obtained specific orders from the High Court staying enforcement of decrees by the creditors as well as suspending the running of time for the purposes of limitation.
17.He avers that the 1st respondent taking the above into consideration has acted as required by the law. He deposes that the law contemplates the two outcomes in the end of liquidation or revival of United Insurance Company. He notes that where the company is liquidated the Company Act and Insolvency Act outline clear procedures on how the creditors will be paid.
18.He further deposes that pursuant to the orders of the High Court in Nairobi High Court Miscellaneous No 67 of 2012 all creditors were invited for a meeting at Kenyatta International Convention Centre on February 20, 2018. This was vide a notice in the local daily newspaper. In the meeting, a collective agreement was made with regards to the way forward in dealing with United Insurance Company Limited’s liabilities and agreeing that payment would be made as a matter of priority to the creditors.
19.Owing to this agreement, he informs that the High Court sanctioned the formation of a Claims Settlement Committee charged with the responsibility to address grievances by various parties such as the petitioner. Considering this, he contends that the petitioner has come to the court prematurely.
20.Additionally, he avers that the petitioner is essentially asking this Court to exercise its jurisdiction by lifting off the moratorium status in his case to the detriment of the other creditors. Moreover, he notes that if the case concerns fraud, there are other legal platforms the petitioner can utilize such as the criminal and civil court to prosecute the matter. He as a result deposes that the petitioner’s claim does not raise the constitutional issues as alleged.
21.He nonetheless deposes that the petitioner’s grievance is among those of other claimants which are active issues before the High Court’s Commercial Division in Miscellaneous Case No 67 of 2012; Sammy M Makove v Kenya Reinsurance Corporation and others hence sub judice. It is the 1st respondent’s case that the petition is defective.
22.The 1st respondent filed a further replying affidavit dated August 30, 2021 in response to the amended petition. This affidavit was similarly sworn by Christopher Onyango and reiterated the contents of its first affidavit verbatim.
The 2nd Respondent’s Case
23.The 2nd respondent in opposing the amended petition filed its replying affidavit dated October 8, 2021 and sworn by Godfrey Kiptum, the Commissioner of Insurance and Chief Executive Officer of the 2nd respondent. He deposes that this Court has no jurisdiction to entertain the matter since the balance of the decree sum of Ksh 911, 956.60 was entered in favour of Rosemary Akoch Wafula who was the plaintiff in CMCC No 4385 of 1998. Considering this, the petitioner has no locus standi to personally file this petition for compensation.
24.He avers that the petitioner's dispute is commercial in nature. He notes that other than alleging violation of his constitutional rights, the petitioner has not demonstrated, with reasonable precision, the manner in which the 2nd respondent has infringed on his rights. As a result, he states that the petition does not disclose a justiciable issue to invoke this Court’s jurisdiction.
25.He further deposes that the petitioner's attempt to attribute the alleged issuance of dishonoured cheques to the 2nd respondent has no legal basis. This is because the 2nd respondent acted in good faith by enforcing its regulatory and supervisory discretion in relation to United Insurance Company Limited’s conduct of business. In fact, he states that by a letter dated April 6, 2004, the 2nd respondent wrote to the company and asked it to explain its failure to pay its creditors and why regulatory action should not be taken against it.
26.It is it’s disposition that the 2nd respondent and the company on 19th and April 28, 2004 held meetings to discuss the measures to be taken by the company with an aim of improving its liquidity ratio. He informs that in the said meetings it was agreed, amongst other things, that:
27.He depones that following the company’s failure to provide any satisfactory progress report as requested on May 21, 2004, it was on July 15, 2005, placed under the statutory management of Mr Johnson Githaka, the then Managing director of Kenya Re-insurance Corporation. He declared a moratorium on the same day pursuant to Section 67 C (10) of the Insurance Act.
28.The 1st respondent on March 31, 2006 issued the 2nd respondent with an interim report which concluded that the company was insolvent. The 2nd respondent then informed the shareholders vide a letter dated June 12, 2006 that they were to make a proposal to rescue the company by June 16, 2006. This was unsuccessful. The 1st respondent as a result recommended to the 2nd respondent that the company be wound up pursuant to Section 123 of the Insurance Act on the grounds of insolvency.
29.He deposes that on July 26, 2006, the 2nd respondent instructed its advocates to file a winding up petition against the company. He makes known that the winding up proceedings are still pending determination at the High Court in Nairobi under HC Winding up Cause No 22 of 2006 (in the Matter of United Insurance Company Limited).
30.He avers that in light of this the functions of the 2nd respondent are exercised in the general public interest as opposed to the interest of specific members of the public. He therefore states that the 2nd respondent discharged its duty pursuant to the law in stopping the company from engaging in insurance business without liquidity and in breach of the Insurance Act.
31.He deposes further that contrary to the petitioner’s assertions, the petitioner never complained to the 2nd respondent concerning the issuance or replacement of the allegedly dishonoured cheques. He as a result depones that the amended petition is an attempt to circumvent the moratorium on payments by the company to its policyholders and other creditors and to compel the 2nd respondent to pay the debts owed by the company.
32.Likewise, he deposes that the amended petition is an attempt to circumvent the court orders issued on October 27, 2009, in HCCC No 748 of 2009 (Commercial and Tax Division), which stayed the enforcement of all decrees issued against the company and remains in force to date. He adds that the petitioner ought to exercise the available avenues provided by law to raise his complaint on the dishonoured cheques to him by the company through the Claims Settlement Committee established by the orders of the High Court in Nairobi HC Misc Cause No 67 of 2012, dated April 10, 2018. He as a result contends that the petition is bad in law and so has no merit.
The Petitioner’s response
33.The petitioner in reply to the 1st respondents’ affidavits filed further affidavits dated July 26, 2018 and October 14, 2021 and another dated October 14, 2021 in response to the 2nd respondent’s replying affidavit.
34.While reiterating and maintaining his stand, the petitioner averred that the Claims Settlement Committee is not recognized as a valid legal Insurance entity under the Insurance Act. He in addition deposes that since he is not a secured creditor of the company, the prospects of him getting payment of the bounced cheques through the Claims Settlement Committee is remote and unlikely in the event that the company is placed under liquidation. This he avers is because he will have to forfeit the bounced cheques to the secured creditors of the Company because their legal interest will be ranked in terms of priority.
35.In light of this he avers that the High Court in Nairobi High Court Miscellaneous Case No 67 of 2012 contravened the doctrine of separation of powers by creating the Claims Settlement Committee to carry out the statutory obligations of the respondents thereby usurping the role of Parliament. He urges this Court to find the Committee unconstitutional. Secondly, he depones that the Committee was set up in bad faith as it bars unsecured creditors from seeking alternative judicial remedies in violation of their rights under of Article 48 of the Constitution.
36.Turning over to the 2nd respondent’s averments, the petitioner deposes that he has locus standi since he represented Rosemary Akoch Wafula in whose favor the cheques were drawn and are to be transmitted to. As such he has a valid legal, interest to reclaim the said cheques from the respondents herein.
37.Its his disposition that by deliberately refusing to ensure that the bounced cheques were paid to him by the 1st respondent contrary to Section 3A of the Insurance Act, the 2nd respondent discriminated against him; denied him the right to be protected by the Law; subjected him to unlawful and degrading treatment as a barrister and as a human rights defender and subverted his socio- economic rights as well as the socio- economic rights of his client contrary to Articles 10, 19, 20, 21, 27, 28, 29, 40, 43 and 48 of the Constitution meriting this Court’s intervention.
The Parties’ Submissions
The Petitioner’s submissions
38.The petitioner filed two sets of written submissions dated April 4, 2019 in support of the petition and further submissions dated July 26, 2021 in support of the amended petition. Similarly, the petitioner filed further submissions dated January 12, 2022 in response to the respondents submissions.
39.In the first submissions, he submits that the supervision and regulation of insurance business in Kenya rests on the 2nd respondent. He as a result urges this Court to find that the 2nd respondent allowed the directors of the company to issue him with fraudulent postdated cheques contrary to Section 3A and 67(C) of the Insurance Act. He in addition asserts that the said directors because of the moratorium are shielded from accountability under the criminal justice system. This is since placing the company under the moratorium prevents lifting of the corporation veil to allow prosecution of the directors.
40.Counsel further submits that the respondents are precluded under Section 120 of the Evidence Act from asserting that the petitioner is one of the unsecured creditors after unlawfully permitting the directors to issue the petitioner with fraudulent postdated cheques contrary to Section 3A and 67(c) of the Insurance Act. Counsel in addition submits that since the mandate of the respondents is stipulated in statute the same cannot be delegated to the Claims Settlement Committee. This he says is ultra-vires to the law.
41.Turning over to the second set of submissions, the petitioner submits that the Court in the Misc Civil Suit No 1345 Of 2005(0S) Kensilver Express Ltd &3 Others-Vs The Commissioner of Insurance & 4 Others (2007) eKLR observed that the respondents are one joint and collusive entity. He observes that the respondents have discriminated against him and his client and subjected him to cruel and degrading treatment as a Barrister by allowing the company to issue him with bouncing cheques and thereafter deliberately refusing to replace the said cheques in contravention to Section 3A of the Insurance Act, Articles 10, 27, 28, 29, 40 and 48 of the Constitution and Articles 6(d) and 7(2) of the East African Treaty meriting grant of the prayers sought jointly and severally against the respondents.
42.Counsel further submits that by allowing issuance of the bouncing cheques the respondents have upheld a culture of impunity in the Insurance Industry contrary to Article 10 of the Constitution on top of curtailing the socio-economic rights of his client contrary to Articles 40 and 43 of the Constitution as read with Articles 14,15,16 and 17 of the African Charter.
43.He additionally submits that the respondents by refusing to replace the said cheques eroded his reputation as a barrister and subjected him to psychological and emotional distress. This was in violation of Articles 8 and 14 of the African Charter as read with Article 16 of the United Nations Basic Principles on the role of Lawyers and section 3A of the Insurance Act.
44.In closing, Counsel submits that by issuing him with the bouncing postdated cheques in settlement of the said insurance claim contrary to Section 3A of the Insurance Act and thereafter refusing to replace the said cheque, the respondents subverted and continue to subvert Articles 6 (d) and 7 (2) of the East African Treaty. In view of this, he prays that the petition be allowed and he be granted general damages of Ksh 300 Million as redress for the gross violations of his rights jointly and severally against the respondents.
45.In response to the respondents’ submissions to the petition, Counsel submits that the issues for determination are:-i.Whether the respondents are jointly and severally liable to pay the petitioner the bounced post-dated cheques;ii.Whether the petitioner’s remedies lie with the Claims Settlement Committee as established by the Commercial Division of the High Court at Milimani in Nairobi HC Misc Cause no 67 of 2012 at the instance of the respondents;iii.Whether the petitioner has locus standi to bring the amended petition;iv.Whether the petitioner’s pleadings raise any constitutional issue; andv.Whether the petitioner is entitled to the reliefs sought in the amended petition against the respondents.
46.On the first issue, Counsel submits as earlier stated that Sections 3A and 67((4) of the Insurance Act and the decision in Misc Civil Suit No 1345 Of 2005(0S) Kensilver Express Ltd &3 Others-Vs The Commissioner Of Insurance & 4 Others (supra) show that the respondents are jointly and severally liable to pay the said post-dated cheques which were issued to the petitioner by the Company.
47.On the second issue he submits that the Claims Settlement Committee as established by the Commercial Division of the High Court in Milimani HC Misc Case No 67 of 2012 is unconstitutional since its establishment infringed the doctrine of separation of powers. That the High Court usurped the role of the legislature to enact an organ to manage the insurance industry after the company was placed under moratorium. As such he argues that the respondents are precluded from asserting that the petitioner’s remedies lie in the Commercial Division of the High Court.
48.In addition, he asserts that the Claims Settlement Committee has usurped the roles and powers of the respondents and the Policy Holders Compensation Fund as granted to them under Sections 3A, 67 C and 123 of the Insurance Act to the detriment of the policy holders and victims. In the same way, he submits that only the secure creditors will benefit from the Claims Settlement Committee. In essence, he submits that the meeting which took place at the Kenyatta International Conference Center was a mere public relations exercise meant to divert the attention of policy holders and victims as the meeting could not give the petitioner an effective remedy regarding re-issuance of the said bounced cheques.
49.On the third issue, Counsel submits that since the said cheques were issued to him in settlement of the consent Judgment he has locus standi and a legitimate legal interest in his capacity as the drawee of the said post-dated cheques. Moreover, he submits that the United Nations Declaration on Human Rights Defenders as read with Articles 22 and 258 of the Constitution gives the petitioner the requisite locus standi to institute this petition on his own behalf and his client.
50.On the fourth issue, he submits that the petition raises weighty constitutional issues which should not be trivialized by the respondents. He argues that his pleadings aver in a precise manner the constitutional provisions and principles said to have been violated and how they have been violated by the respondents. He argues therefore that the petitioner’s pleadings meet the constitutionality test set out in Anarita Karimi Njeru-Vs- Republic N0 1 (1979) I KLR 54.
51.Finally, he submits that due to the deliberate refusal on the part of the respondents to re-issue the said cheques he is entitled to all the prayers sought jointly and severally against the respondents, with, an award of general damages.
The 1st Respondent’s Submissions
52.The firm of Millimo, Muthomi and Company Advocates on behalf of the 1st respondent filed two similar sets of written submissions dated September 10, 2018 and November 10, 2021. Counsel identified the issues for determination as:i.Whether the Court has jurisdiction to hear and determine this petition.ii.Whether the statutory manager is liable for the alleged breaches committed against the petitioner.
53.On the first issue, Counsel submits that while this matter has been brought as a constitutional petition, the petitioner raises issues of fraud against the 1st respondent in regard to the alleged bouncing cheques. He contends that this essentially amounts to fraud which is a criminal offence. In this regard, it is argued that the Constitutional Court cannot be called to investigate criminal matters outside its jurisdiction.
54.Counsel notes further that the procedure for trying criminal offences and the degree of proof therein is distinct from the procedure applicable to Constitutional Petitions as noted in the case of Silas Make Otuke v Attorney General & 3 others [2014] eKLR. Additional reliance was placed in the case of Kimani Waweru & 4 others v Central Bank of Kenya & 7 others [2018] eKLR. Counsel therefore submits that the petitioner’s introduction of extraneous criminal issues in the Constitutional Court is purely emotive, and intent on subverting the ends of justice which is an abuse of the court process.
55.Turning over to the second issue, Counsel submits that the alleged breaches are facts and issues which occurred prior to the moratorium declaration. As such the 1st respondent did not commit any of the actions complained of. Relying on a similar matter in the case of Joseph Mbuthia Gichuru v Kenya Reinsurance Corporation Ltd[2012] eKLR Counsel submits that the Court elaborating the role of a statutory manager noted that the claim was solely against the Insurance Company with which the sale agreement was entered into. In this way, the statutory manager was not a party to it and so grant of sought orders would run afoul the spirit of the statutory management exercise.
56.Counsel in light of this argues that the instant petition is an attempt to use this Court to enforce the alleged decree yet the law provides clear procedures under the Companies Act and or Insolvency Act for companies under statutory management. More so, granting the sought orders would be in breach of the subsisting orders by the same court.
57.Of essence to note Counsel says, is that the Court decision in Nairobi Misc Suit No 1345 of 2005 (OS) Kensilver Express Ltd & 3 others versus Commissioner of Insurance and four Others (supra) which the petitioner has relied on heavily was appealed against and there exists a stay order as granted by the Court of Appeal in the case of Commissioner for Insurance & 2 others versus Kensilver Express Limited & 3 others [2008] eKLR which is still active.
58.In view of the foregoing Counsel submits that a Statutory Manager while performing his duties diligently and in good faith is expressly protected under the cited law from any cause of action. Considering this he submits that the petition is misdirected, premature, vexatious, incompetent and fatally defective and ought to be dismissed with costs to the respondents.
The 2{{^nd}} Respondent’s submissions
59.The Attorney General on behalf of the 2nd respondent filed written submissions dated October 15, 2021 by learned counsel Betty Mwasao in opposition to the petition. Counsel submits that the issues for determination are:i.Whether the petitioner has locus standi.ii.Whether the petition raises constitutional issues.
60.On the first issue, she submits that the petitioner does not have locus standi as it is trite law that an advocate does not have locus standi to sue in his name for a remedy belonging to, or on behalf of his client. Counsel notes that it was admitted by the petitioner that he acted for the decree holder (his client) in his capacity as advocate and as such, the only interest he has in seeking for the payment of the decree is his client’s interest. This therefore does not grant him locus standi. Counsel contends hence that the foundation of filing a constitutional petition under Article 22(2) and 258 (2) of the Constitution stops the petitioner from filling this suit in his name.
61.Additionally Counsel submits that no evidence has been provided to show that the petitioner is instituting this petition since his client cannot act in her name, or that the petition is brought on behalf of a class of individuals or that the petitioner is acting in the public interest. She accordingly argues that it is clear from the issues arising from the petition and the reliefs sought that the claim is in private law and so not a constitutional issue.
62.To buttress this point, Counsel cited the case of Kenya Reinsurance Corporation v VE Muguku Muriu T/A M/S VE Muguku Muriu & Company [1996] eKLR, where it was held that the respondent’s advocate had no locus standi to sue in his own name claiming damages on behalf of his client. To this end she submits that this Court lacks jurisdiction to issue the orders sought by the petitioner.
63.On the second issue, Counsel submits that other than making mere allegations, the petitioner has not demonstrated with actual evidence how the 1st and 2nd respondents in conducting their statutory obligations violated his and his client’s rights. In addition, that the petitioner’s allegations are not corroborated by the sworn evidence of his client who ought to be the proper party to institute this petition.
64.She further submits that on its part the 2nd respondent produced evidence that demonstrates that it duly discharged its responsibilities by enquiring about the complaints raised on the Company’s failure to settle claims against it. In the end, she submits that the 2nd respondent made an informed decision to place the company under statutory management based on the interest of the public and breach of the Insurance Act by the company.
65.The Company was immediately thereafter placed under moratorium which obliges the 1st respondent to preserve the assets of the Company. Considering this, Counsel argues that seeking to have this Court to compel the 1st respondent to pay the alleged claim would amount to preferential treatment to one party. This is because all the payments to the policy holders and creditors are suspended for the period of the moratorium as held in the case of Stephen Kiarie Chege Vs Insurance Regulatory Authority & another [2009] eKLR,
66.In light of this Counsel submits that the petition does not meet the constitutionality test set out in the case of Anarita Karimi Njeru vs Republic No 1 (1979) I KLR, 54.Additional reliance was placed on the case of Leonard Otieno Vs Airtel Kenya Limited [2018] eKLR. Counsel therefore submits that the petition is not supported by any factual, evidential or legal basis to warrant petitioning of the jurisdiction of this Court.
Analysis and Determination
67.I have considered the background of this case and perused the pleadings and submissions of the parties. I have as well considered the issues raised by the parties. It is my view that the main issues for determination are:i)Whether this Court has jurisdiction to entertain this petition;ii)Whether the Petitioner has locus standi to file this suit;iii)Whether the respondents are liable for the alleged violations and if so whether they violated the petitioner’s rights under Article 10, 26, 27, 28, 29, 40, 43 and 48 of the Constitution; andiv)Whether the petitioner is entitled to the reliefs sought.
Whether this Court has jurisdiction to entertain this petition
68.The jurisdiction to hear this matter was challenged by the 1st respondent who stated that the constitutional Court lacks jurisdiction to entertain the dispute since the matter raises criminal issues. It was similarly argued by the 2nd respondent that the dispute is commercial in nature hence ousting this Court’s jurisdiction. In view of this it was contended that the petitioner’s dispute ought to have been entertained by the commercial or criminal courts.
69.It has been observed by our Courts that jurisdiction is everything and without it a Court cannot entertain a matter before it. It is accordingly imperative to answer this issue as the first question as observed in the case of Owners of the Motor Vessel 'Lillian S' v Caltex Oil (Kenya) Ltd [1989] KLR 1. The Court in this matter held that:-
70.This Court’s jurisdiction, flows from the Constitution under Article 165. With reference to the High Court’s jurisdiction, this Article provides as follows:-(3)Subject to clause (5), the High Court shall have--(a)Unlimited original jurisdiction in criminal and civil matters;(b)Jurisdiction to determine the question whether a right or fundamental freedom in the Bill of Rights has been denied, violated, infringed or threatened;(c)Jurisdiction to hear an appeal from a decision of a tribunal appointed under this Constitution to consider the removal of a person from office, other than a tribunal appointed under Article 144;(d)Jurisdiction to hear any question respecting the interpretation of this Constitution including the determination of--(i)The question whether any law is inconsistent with or in contravention of this Constitution;(ii)The question whether anything said to be done under the authority of this Constitution or of any law is inconsistent with, or in contravention of, this Constitution;(iii)Any matter relating to constitutional powers of State organs in respect of county governments and any matter relating to the constitutional relationship between the levels of government; and(iv)A question relating to conflict of laws under Article 191; and(e)Any other jurisdiction, original or appellate, conferred on it by legislation.
71.It is clear from the above reading that the Constitution confers on this Court broad jurisdiction. Accordingly this Court has original and unlimited jurisdiction to entertain both civil and criminal matters. Based on this, it is clear that this Court has the necessary jurisdiction to entertain the instant petition contrary to the respondent’s assertion. That said it is worthy to note that the various divisions of the High Court are not be confused with independent separate Courts with varied jurisdictions.
72.The proper question therefore is whether this High Court division is best suited to answer the questions before it. This is the essence of the various divisions of the High Court. This is what was appreciated by the Court in the case of Silas Make Otuke v Attorney General & 3 others (supra) that was relied on by the 1st respondent in making his argument. The Court in choosing not to delve into the criminal aspect observed that:
73.From the foregoing, I am inclined to find no merit in the respondents argument that this Court lacks jurisdiction. That said, it is observed that while the petitioner alludes to the fraudulence of the cited cheques, this is not the main argument of the petition as can be seen from the prayers sought. This Court will therefore deal with the matters as raised.
Whether the Petitioner has locus standi to file this suit
74.The locus standi of the petitioner was challenged by the 2nd respondent. It was observed that since the petition arose from a declaratory suit made out in favour of his client in Mombasa CMCC No 4813 of 2001, the petitioner lacked the capacity to file the petition in his capacity as the advocate. The petitioner in rebuttal noted that issuance of the cited cheques to him in the settlement granted him the locus standi and a legal interest in the matter on his behalf and his client.
75.The law on locus standi for constitutional petitions is envisaged under Article 22 and 258 of the Constitution. The Articles read as follows:-(1)Every person has the right to institute court proceedings claiming that a right or fundamental freedom in the Bill of Rights has been denied, violated or infringed, or is threatened.(2)In addition to a person acting in their own interest, court proceedings under clause (1) may be instituted by--(a)A person acting on behalf of another person who cannot act in their own name;(b)A person acting as a member of, or in the interest of, a group or class of persons;(c)A person acting in the public interest; or(d)An association acting in the interest of one or more of its members.
76.Speaking to the law on locus standi the Court of Appeal in the case of In the Mumo Matemu v Trusted Society of Human Rights Alliance & 5 others [2013] eKLR held as follows:-
77.It goes without saying that the scope of locus standi is wide. The petitioner has throughout the suit asserted that the lack of issuance of the declaratory sum in the postdated cheques infringed upon his constitutional rights. The petitioner later on made known that the suit was also on behalf of his client.
78.From the foregoing, what is apparent is that the Consent Judgment was made out in favour of Rosemary Akoch Wafula, the petitioner’s client. In the same way the petitioner categorically made known that the consent judgement was premised on the parties agreement on how the decree sum would be paid to the petitioner’s client by United Insurance Company Limited.
79.The Court in the case of Nelson Andayi Havi t/a Havi & Company Advocates v Jane Muthoni Njage t/a JM Njage & Company Advocates [2015] eKLR while determining whether the advocates were entitled to sue in their own capacity in a professional undertaking noted as follows:-
80.Borrowing from this analogy, it is clear that the consent judgement being between the parties ought to have been pursued as such. In this regard, my understanding of the Constitution directive in Article 22 and 258 is that where a person cannot sue in their own capacity, the reason why they are unable to approach the court for the relief ought to be demonstrated by the party suing on their behalf (See Mumo Matemu case). This essentially means that the party must prove this fact so as to be deemed to have the requisite locus standi in a constitutional petition.
81.It is my considered view as such that the petitioner did not have the requisite locus standi to institute this suit. This is because the declaratory judgment he pegs his case on was an agreement made as between the parties not the advocates as in a professional undertaking. The petitioner’s argument therefore that he has legal standing by virtue of receiving the amounts is arbitrary as its basis is not established in law. Secondly, while the petitioner submitted that the petition was made on behalf of the client the reasons why she could not pursue the matter in her capacity were not cited neither proved. The client did not issue him with the authority to file the suit.
82.While it is clear that the petitioner has no locus standi to sustain the present suit, I find it prudent to make a finding on the following issue for completeness of this matter.Whether the respondents are liable for the alleged violations under Article 10, 26, 27, 28, 29, 40, 43 and 48 of the Constitution
83.The foundation of this case as can be discerned from the pleadings is the 1st respondent’s refusal to honor and replace the post-dated cheques and the 2nd respondent’s lack of supervisory vigilance to prevent issuance of the bouncing postdated cheques by United Insurance Company Limited. In view of this the petitioner contended that the respondents actions violated his rights under Article 10, 26, 27, 28, 29, 40, 43 and 47 of the Constitution.
84.The respondents opposed this notion vehemently noting that the violations occurred prior to the moratorium declaration. Further that the 2nd respondent sufficiently carried out its mandate in light of the various complaints made and so cannot be faulted.
85.The respondents mandate is set out under the Insurance Act, Cap 487. To begin with the Act divulges the purpose of the statute as one to regulate the business of insurance and other connected purposes. To facilitate this objective the Act establishes the Insurance Regulatory Authority, the 2nd respondent under Section 3 of the Act. Accordingly Section 3A outlines the functions of the 2nd respondent as:a)Ensure the effective administration, supervision, regulation and control of insurance and reinsurance business in Kenya;b)Formulate and enforce standards for the conduct of insurance and reinsurance business in Kenya;c)License all persons involved in or connected with insurance business, including insurance and reinsurance companies, insurance and reinsurance intermediaries, loss adjusters and assessors, risk surveyors and valuers;d)Deleted by Act No 1 of 2014 sec 3 [No 1 of 2014 s 3;]e)Deleted by Act No 1 of 2014 sec 3 ;f)Advise the Government on the national policy to be followed in order to ensure adequate insurance protection and security for national assets and national properties;g)Issue supervisory guidelines and prudential standards from time to time, for better administration of the insurance business of persons licensed under the Act;h)Conduct inquiries and Share information with other regulatory authorities and to carry out any other related activities in furtherance of its supervisory role;ha)Educate the public regularly on the right to independently select an underwriter or broker from a list of underwriters or brokers licensed by the Authority;hb)Regulate the business of bank assurance offered by banks in the same manner as the ordinary insurance business including capital requirements and disclosures; andi)Undertake such other functions as may be conferred on it by this Act or by any other written law.
86.Accordingly, the Act requires the 2nd respondent to inspect and control the business of insurers under Section 67C. This is by intervening in management of insurance business where the conditions set out under Section 67C (1) are present. When Section 67C is invoked, the 2nd respondent is required to appoint a statutory manager.
87.The 1st respondent upon being appointed as statutory manager declared a moratorium over the company. In view of this the 1st respondent is required while carrying out this mandate to be mindful of the stated principles under Section 67C (4) of the Act. This Section states that:-
88.Undoubtedly, the 1st and 2nd respondents’ roles are legally sanctioned in the management of the Insurer’s business and should be carried out in accordance with the dictates of the law with the public’s interests in mind.
89.In the case of Joseph Mbuthia Gichuru (supra) the Court noted as follows:
90.Suffice to say the dispute herein stems from an agreement between the petitioner’s client and United Insurance Company Limited, which was one of the defaulted judgment decrees. A look at the facts of the case reveals that the 2nd respondent inspected the company and in the end made a decision to place it under statutory management and a moratorium declared.
91.This information was duly relayed to the petitioner vide the letter dated February 26, 2018.The petitioner on the other hand does not disclose as to whether he actioned the instructions of the 1st respondent’s letter. Additionally the respondents through a notice communicated the statutory management to the stakeholders and this was discussed in the meeting held on February 20, 2018 at KICC.
92.From the foregoing, I am satisfied that the petitioner’s action as framed is only sustainable against the company due to their prevailing agreement. This is in line with the dictates of statutory management and liquidation if it comes to it. Accordingly the terms of the agreement cannot be enforced against third parties who were not part of the contract.
93.In the same way, the 1st and 2nd respondents as statutory bodies are required to carry out their mandate as stipulated by the Act. The Act does not mandate the respondents to make out any payment to the stakeholders but manage the company with the interests of all parties involved. One of these ways was the establishment of the Claims Settlement Committee to handle and receive the claims against the company. The petitioner however contested its mandate and did not file his claim with it. He even claims that he committee is unconstitutional though it was set up by the High Court and the decision has not been overturned. How then can this court with equal status declare it unconstitutional?
94.This Court takes cognizance that where the law outlines powers and functions of a body and the same are carried out in accordance with the law and constitutional principles, it will not interfere. The Court cannot be used as a weapon to undermine and usurp the dictates of the law as pleaded by the petitioner.
95.In view of the foregoing the obvious conclusion is that the respondents are not liable for the alleged violations under Article 10, 26, 27, 28, 29, 40, 43 and 48 of the Constitution. If anything I find that the petitioner’s claims bear no legal basis and fails the constitutional threshold. Furthermore there are matters filed before the Commercial and Tax division where orders have been issued staying any actions by the respondents until the Moratorium is settled. This is for obvious reasons, and in compliance with the law as bestowed on the respondents.
96.My finding is that even if the petitioner had been found to have locus he would not have succeeded in his claims. The result is that the petition lacks merit and is dismissed with costs.Orders accordingly.
DELIVERED VIRTUALLY, SIGNED AND DATED THIS 19TH DAY OF MAY, 2022 IN OPEN COURT AT MILIMANI, NAIROBI.H. I. Ong’udiJudge of the High Court