The Old Mutual signage at their building on Kimathi Street, Nairobi.
Old Mutual General Insurance Kenya Limited has suffered a blow after the High Court rejected its application to quash a demand of more than Sh388 million by an aircraft leasing firm arising from an accident in August 2022.
Consequently, the court directed the Nanyuki-based Tropic Air Limited to present the liquidation petition after 90 days after the ruling on February 13, 2025.
The insurer sought to set aside a statutory demand issued by Tropic Air, on January 10, 2024 and suspend any further proceedings against the company.
Tropic Air, which operates a fleet of Cessna aircraft and helicopters, demanded payment of $3 million (about Sh388 million) after its helicopter was involved in an accident in Turkana in 2022.
Justice Peter Mulwa dismissed the application by the underwriter saying failure to act on the statutory demand was prima facie evidence of insolvency of the insurer.
The judge said it was upon the debtor (Old Mutual General Insurance) to adduce evidence to demonstrate that it was solvent and in a position to repay the debt.
“Given the above reasons, I am not satisfied there are sufficient grounds to set aside the statutory demand of January 10, 2024.
"I reject the Notice of Motion application lodged on January 31, 2024 with costs to the creditor (Tropic Air),” said Justice Mulwa.
Litigation costs
He assessed the litigation costs at Sh60,000 to be paid by Old Mutual.
The insurer challenged the demand saying it was made in bad faith and constituted an abuse of the court process.
According to the insurer, the demand by the aircraft firm was an attempt to pressure them to pay the claim without valid grounds for liquidation, arguing that the amount sought was disputed and not justified.
Old Mutual told the court that Tropic Air had not shown evidence that the insurer was unable to pay its debts.
To buttress the insurer’s case, Mr Frankline Nyaga said in an affidavit that the debt was disputed and an appeal against the Insurance Regulatory Authority's judgment was ongoing.
Mr Nyaga stated that a stay of execution was granted, and the insurer argued that the demand should not proceed while the appeal was pending.
But in response, the director of Tropic Air Mr James David Roberts explained that the debt stemmed from an accident involving an aircraft in August 2022, for which compensation was sought.
Mr Roberts said despite a legitimate claim being raised, the insurer failed to compensate, and the Insurance Regulatory Authority (IRA) had directed Old Mutual to pay on November 3, 2023 but it did not comply.
Formal legal challenge
The insurer, according to court records, later withdrew the appeal and thus the decision of the insurance regulator remained unchallenged.
The judge noted that the insurer contended that the demand was not valid due to the ongoing appeal and the fact that the debt was disputed.
“However, upon review, I note that the insurance firm has since withdrawn the appeal,” said the judge.
The withdrawal of the appeal, according to the ruling, “raises significant concerns regarding the credibility and strength of the insurer’s claim of a substantial dispute over the debt.”
Justice Mulwa said Regulation 17(6) of the Insolvency Regulations states that the court may set aside a statutory demand if the debt is disputed on substantial grounds.
However, the judge argued that the withdrawal of the appeal had left Old Mutual without a formal legal challenge to the debt, which further weakened the claim of substantial dispute. Therefore, “It thus means there is no longer an active challenge to the debt,” added the court.
The firm’s helicopter crashed into Lake Logipi in Turkana County on August 4, 2022. There were no fatalities but the passenger and the crew were evacuated to Nairobi for treatment.
In a letter to Old Mutual dated November 3, 2023, the IRA had directed the insurer to settle the claim within 30 days.
