REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

ANTI-CORRUPTION AND ECONOMIC CRIMES DIVISION - MILIMANI

CIVIL APPLICATION NO. 36 OF 2019

ASSETS RECOVERY AGENCY...............APPLICANT/RESPONDENT

VERSUS

JARED KIASA OTIENO...........................RESPONDENT/APPLICANT

RULING

1. Through an Originating summons dated 22^nd August 2019 and filed the same day pursuant to Sections 81 and 82 of the Proceeds of Crime and Money Laundering Act (POCAMLA), the Asset Recovery Agency (hereinafter referred to as the applicant) sought orders as below:

(1) Spent

(2) that this honourable court issues a preservation order against the respondent, his employees, agents, servants or any other persons acting on his behalf prohibiting the sale, transfer or disposal of or dealings with the following motor vehicles:

(i) KCD 966L Porche Panamera 2015; and

(ii) KCU 966C Bentley, Continental GT 2019.

(3) That the respondent be directed to surrender the original logbooks of the motor vehicles and the motor vehicles specified in prayer 2 above to the applicant within 7 days herein.

(4) That an order directing the Director General of National Transport and Safety Authority to register a caveat against the records of each of the motor vehicles specified in order 2 above.

(5) That the Honourable Court make any other ancillary order it may deem fit for the proper, fair effective execution of its orders.

2. The application is based on grounds that on or about 17^th May 2019, the applicant received information relating to the then on-going criminal investigations involving the respondent herein for allegedly obtaining fraudulently USD 3,000,000 from Simuong Group Company Limited.   That pursuant to the said investigations, the respondent was charged with various charges among them, obtaining money by false pretences contrary to section 313 of the Penal Code vide Criminal Case No. 844 of 2019.

3. That the applicant opened an Inquiry File No. 8 of 2019 with a view to inquiring into the activities of the respondent in relation to the aforesaid criminal offence which also amounts to an offence committed under the POCAMLA.   It was on the basis of this argument that the applicant sought to preserve the assets (motor vehicles) the subject of this suit. It was argued that, unless the orders sought are issued, there is imminent danger on the respondent disposing, transferring and or dissipating the said assets and therefore continue enjoying economic advantage of the property obtained through crime.

4. Upon considering the ex-parte application, the court issued preservation orders for a period of 90 days and that the orders be gazetted as required under the law.

5. Aggrieved by these orders, the respondent/applicant one Jared Kiasa Otieno moved to this court on 6^th September 2019 vide a notice of motion application of even date seeking;

(a) that pending the interpartes hearing of this application, this honourable court be pleased to revoke, discharge, revert or vary the orders of preservation issued on 26^th August 2019 prohibiting the sale, transfer or disposal off or other dealings with motor vehicle KCD 966L Porche Panamera 2015 and KCU 966C Bentley, Continental GT 2019.

(b)  that pending the interpartes hearing of this application, a temporary order of injunction to issue restraining the respondent whether by itself, its representatives, servants, agents, and or assigns from publishing a notice of the preservatory order in the Kenya Gazette pursuant to Section 83(1) of the proceeds of Crime and Anti-Money Laundering Act.

(c) That the costs of the application and interest thereon be provided for.

(d) That the court to grant any other relief it deems fit and just in the circumstances.

Respondent’s/applicant’s case

6. The application herein is premised upon grounds set out on the face of it and an affidavit sworn on 6^th September 2019 by Jared Kiasa Otieno the respondent/applicant. According to the respondent/applicant, there is no connection between the criminal proceedings preferred against him and the alleged money obtained by false pretences with the purchase of the two motor vehicles in question.

7. That the investigating officer in Criminal Case No. 844 of 2019, Cpl. Onyango testified in court confirming that the two motor vehicles in issue are not connected or related with the criminal charges.  He attached a copy of the criminal proceedings in the Criminal court (JKO – 2) to confirm what the investigating officer told the court.

8. He further stated that the two motor vehicles were registered under his name with motor vehicle KCD 966L having been purchased the year 2014 and motor vehicle KCU 966C purchased in 2018 yet the criminal proceedings relating to obtaining money by false pretences was allegedly committed this year (2019).

9. He contended that the preservation order in place is punitive with the sole purpose of punishing him for making honest and genuine investment in the said property.

Applicant’s/respondent’s case

10. In response, the applicant/respondent (Asset Recovery) reiterated the averments contained in the affidavit in support of its application for preservation.  It argued that the application seeking vacation of the preservation orders does not meet the threshold set under Section 89(1) of the POCAMLA. It was further argued that the Applicant’s investigations are limited to the period of the alleged offence as per the charge sheet.

11. In response to the respondent/applicant’s averment at paragraph 6 and 7 of the affidavit in support of the application, the applicant/respondent contended that Cpl Otieno did not confirm that the two motor vehicles are not related with the criminal case.

11. That the fact that the prosecution in the criminal case does not intend to rely on the two motor vehicles as exhibits does not stop the agency from investigating on how they were obtained and seek forfeiture orders.

12. They further alleged that payment for motor vehicle KCU 966C was made as recent as 2019 by the firm of Onkundi and Co. Advocates in favour of R. J. That one of the payments was made on 11^th February 2019 for Kshs 10 million and another one on 28^th February 2019 for Ksh 10 million (See JM1). Regarding an order injuncting gazettement of the preservation, it was averred that the same is spent as the said orders were gazetted on 20^th September 2019 (See Gazette notice marked SJM 2).

Respondent’s /applicant’s submissions

13. During the hearing, Mr. Ong’udi literally adopted the averments contained in the affidavit in support of their application. Counsel submitted that the preserved property does not fall under Section 82(2)(b) of POCAMLA. Counsel referred the court to the definition section on what constitutes proceeds of crime and the time frame thereof.  He urged the court to find that the criminal activity giving rise to the criminal charges relating to obtaining money by false pretences allegedly took place after the motor vehicles had been purchased.

14. He further submitted that there was no connection between the money allegedly obtained by false pretences with the money used to purchase the motor vehicles. That it was for that reason that the two motor vehicles were released by the prosecution in the criminal case as they were not exhibits.

Submissions by the applicant/respondent

15. In his response, Mr. Githinji for the applicant/respondent also reiterated the averments contained in the affidavit in support of their application and replying affidavit to the application dated 6^th September 2019.  Learned counsel submitted that the respondent/applicant has not satisfied the requirements under Section 89 of POCAMLA that the preservation orders are likely to cause unnecessary hardship. To support this proposition, counsel relied on the decision in the case of ASSETS RECOVERY AGENCY v PAMELA ABOO [2018] eKLR.

16. He further submitted that the two motor vehicles constitute proceeds of crime and that any issues arising therefrom should be canvassed along the main forfeiture proceedings.   Mr Githinji further submitted that part of the purchase price for KCU 966L having been made sometime 2019 which falls within the alleged crime period, there is reasonable ground to believe that the money was part of the criminal proceeds.

Determination

17. I have considered the application herein, affidavit in support, replying affidavit and submissions by both counsels.    Issues that emerge for determination are:

(1) Whether the two motor vehicles are proceeds of crime.

(2) Whether the application has met the threshold for revocation or rescission of the preservation orders.

18. Considering that the two issues are interrelated, I will address them concurrently. The authority to seek preservation of assets whose acquisition is related to commission of crime is anchored under Section 82 of POCAMLA which provides –

(1) The Agency Director may, by way of an exparte application apply to the court for an order prohibiting any person, subject to such conditions and exceptions as may be specified in the order, from dealing in any manner with the property.

(2) The court shall make an order under Subsection (1) if there are reasonable grounds to believe that the property concerned-

(a) has been used or is intended for use in the commission of an offence;

or

(b)   is proceeds of crime.

(3) A court making a preservation order shall at the same time make an order authorizing the seizure of the property concerned by a police officer, and any other ancillary orders that the court considers appropriate for the proper, fair and effective execution of the order.

(4) Property seized under sub-section (3) shall be dealt with in accordance with the directions of the court that made the relevant preservation order.

19. However, the court issuing the preservation orders under Section 82 has the power to vary or rescind those orders after satisfying the criteria or conditions set out under Section 89 of POCAMLA.   Section 89 provides:

(1) A court which makes a preservation order—

(a)  may, on application by a person affected by that order, vary or rescind the preservation order or an order authorising the seizure of the property concerned or other ancillary order if it is satisfied—

(i)  that the operation of the order concerned will deprive the applicant of the means to provide for his reasonable living expenses and cause undue hardship for the applicant; and

(ii)  that the hardship that the applicant will suffer as a result of the order outweighs the risk that the property concerned may be destroyed, lost, damaged, concealed or transferred; and

(b) shall rescind the preservation order when the proceedings against the defendant concerned are concluded.

(2) When a court orders the rescission of an order authorising the seizure of property under paragraph (a) of subsection (1), the court shall make such other order as it considers appropriate for the proper, fair and effective execution of the preservation order concerned.

20. It is apparent that, a court issuing preservation orders must be satisfied firstly; that the property concern has been used or is intended for use in the commission of an offence. In the instant case, there is no claim that the two motor vehicles the subject of the preservation order have been used or are intended for use in the commission of an offence. In the circumstances, that ground is not available for the applicant (agency).

21. The only ground therefore remaining and upon which reliance is placed in obtaining the preservation orders is the allegation that the two motor vehicles were obtained using proceeds of crime.

22. According to the applicant/respondent, the two motor vehicles were acquired using 3 million USD (money) obtained by false pretences by the respondent/applicant from Simuong Group Ltd to whom he had pretended of selling gold which never was giving rise to the criminal charge of obtaining money by false pretences.

23. On the other side, the respondent claimed that the two motor vehicles have no connection with the money allegedly obtained by false pretences forming the subject matter of the criminal proceedings.  He claimed that they were bought way before the alleged offence of obtaining by false pretences was allegedly committed.

23. According to the charge sheet presented before court on 21^st May 2019, the respondent/applicant is charged with 12 others with the offence of conspiracy to defraud contrary to section 317 of the Penal Code (Count 1). Particulars are that, on diverse dates between 8^th day of February 2019 and 25^th February 2019 in Nairobi within Nairobi County, jointly with others not before court conspired with intent to defraud Southern ChantHavong a Director of Simuong Group Company from Lao of US Dollars 3,000,000 equivalent to Kshs 300,000,000/= by means of fraudulent tricks and displayed heavy metal boxes allegedly marked with genuine gold bars  having an office trading in the name of Nivone safe keeping Ltd  falsely pretended that you were carrying a genuine business.

24.   Count II – the respondent/applicant was charged with 3 others with obtaining by false pretences contrary to section 313 of the Penal Code.    Particulars are that on diverse dates between the 8^th day of February 2019 and 25^th day of February 2019 at Kaputei Gardens House Number 12 along Kaputei road within Kileleshwa area in Nairobi County with intent to defraud, jointly with others not before court obtained from Southern ChantHavong ADirector with Simoung Group company Dollars 3,000,000 which is equivalent to Ksh 300,000,000/= by falsely pretending that they had a genuine land for sale a fact they knew to be false.

24. From the official search NTSA office attached to the applicant’s/respondent’s affidavit (marked SJ-2), motor vehicle KCD 966L was registered in the respondent’s/applicant’s name on 8^th June 2015. This is a further confirmation and corroboration to the respondent’s/applicant’s averment that he bought the motor vehicle sometime 2014 way before the alleged offence of obtaining 3 million dollars arose as evinced from the charge sheet.

25. It is incumbent upon the applicant/respondent to establish a prima facie case upon which any reasonable jury would lay a basis for issuing or sustaining preservation orders.See Ethics and Anti-corruption Commission v Ministry of Medical Services and Another [2012] eKLR where the court stated that:

“However, it is in my view that for the Court to grant the orders under section 56 (1) a prima facie case must be presented before court that the property in question has been the subject of some corrupt dealings. It is not enough for the Commission to simply walk into Court with a request and expect the said orders to be granted. Where the said orders are granted and it turns out that either the Court was misled or no prima facie case existed that the property was acquired as a result of corrupt conduct, the Court would be perfectly entitled to vacate the orders. It is therefore not correct for the Commission to submit that by granting the orders sought by the 2^nd respondent herein, the Court will be stopping the Commission from conducting investigation. The Commission is free to conduct its investigations but in a lawful manner. If the conduct of the investigations infringes upon the rights of an individual, the individual is entitled to complain and if the complaint is valid, the Court is empowered to bar the Commission from improper use of the powers vested in the Commission. The Commission’s power is meant for the good of the public and not for the purposes, for example, of settling personal scores.” 

26. Similar position was held in Ethics and Anti-Corruption Commission v National Bank of Kenya and Another [2011] eKLR where the court stated that:

“provided there are some evidential facts at the exparte stage to enable the court in the exercise of its preservation, to find that reasonable grounds have been established there are no other valid preconditions to the grant of the exparte order ...”

(See also Assets Recovery Agency v Jane Wambui Wanjiru & 2 others [2019] eKLR.

27. From the evidence and material placed before this court by both parties, it is apparent that motor vehicle KCD 966L has no connection with the alleged crime of obtaining money by false pretences. In other words, there is no causal link with the alleged proceeds of crime to the tune of US dollars 3 million or part of it. I do not find any primafacie evidence to fortify continued preservation of the said motor vehicle (KCD 966L).

28.  Therefore, continued preservation of this motor vehicle will amount to exerting unnecessary and undue hardship on the applicant which will in turn deny him the right to enjoy his private property as provided under Article 40 of the Constitution.

28. It is not automatic that preservation orders once obtained must be confirmed pending forfeiture proceedings.    There must reasonable ground to believe that the property was obtained through proceeds of crime as defined under Section 2 of POCAMLA.  Unlike forfeiture under Section 55 of ACECA where a respondent is required to explain sources of income of unexplained property, under POCAMLA, the Agency/Applicants must prove a nexus between the property sought to be preserved and seized with the alleged proceeds of crime or money laundering.   There has to be a correlation between the two.

29. Accordingly, it is my holding that the respondent/applicant has satisfied the criteria for rescinding preservation orders issued by the court herein in respect of motor vehicle KCD 966L.  

30. Regarding motor vehicle registration number KCU 966C, the applicant contends that the same was bought using suspected proceeds of crime.   The motor vehicle was registered in the respondent’s/applicant’s name on 8^th April 2019 as per the official search from NTSA (S52) attached to the applicant’s affidavit in support of preservation orders.

31. The agency further attached a bank statement in respect of Onkundi and company advocates showing various financial transactions into their Dollar Account No. 1000054724 Stanbic Kenya by Simuoung Group Co. Ltd used for payment of business transactions. Part of these monies can be traced to being part of the purchase price for the said motor vehicle. In particular, the applicant pointed out a sum of 50,000 US Dollars received from Simuong Company on 4^th March 2019, 40,000 US Dollars on 21^st March 2019, 1 million US Dollars on 8^th February 2019 and 2,051,28 US Dollars on 26^th February 2019.

31. The bank statement further reflects payment of 10,000 US Dollars on 11^th February 2019 and a further similar amount on 28^th February 2019 in favour of East Africa Ltd who sold the motor vehicle to the respondent/applicant.

32. The respondent/applicant does not deny that part of the said motor vehicle’s purchase price was made sometime February 2019 a date that falls within the period the respondent was suspected reasonably to have obtained money by false pretences from the complainant in the criminal case.

33. In his further affidavit filed on 25^th October 2018, at paragraph 10, the respondent/ applicant admits that part of the purchase price was made in February 2019.  He however does not explain how he managed to raise or the source of the 20,000 US Dollars (2,000,000) to pay part of the purchase price during the material time when the criminal offence was allegedly committed.

34. Unfortunately, having established reasonable suspicion as to the source of income used to purchase the motor vehicle, the burden automatically shifted to the respondent to prove that the money used to purchase the motor vehicle in full or part was from legitimate sources of income.  (See Assets Recovery Agency vs Pamela Abao [2018] eKLR.

35. The only duty imposed on the applicant is to raise a red flag based on reasonable suspicion that money suspected to be out of proceeds of crime may have been used to acquire the subject property. The applicant does not deny paying some of the purchase price for the motor vehicle in question during the material time when he is alleged to have obtained money by false pretences. He has not adduced any evidence to prove the source of the money used to buy the motor vehicle either in full or in part. The applicant has substantially discharged its mandate. The respondent did not attach any sale agreement to show when motor vehicle KCU 966C was bought and how payment was made either in full or part and whether the money was out of legitimate source of income.

36. There is no proof nor allegation that the respondent will be deprived of his reasonable living expenses or suffer undue hardship and that the hardship far outweighs the risk that the property concerned may be destroyed, lost, damaged, concealed or transferred. These are some of the requirements that must be satisfied before an order of preservation can be varied or rescinded.

37. The respondent already has a motor vehicle KCD 966L. He is not likely to suffer any hardship in terms of operations of business or movement. Preservation of this motor vehicle will not deprive him of any reasonable living expenses. In a nutshell, the respondent has not discharged his burden of proof. The threshold required under the Act is not the same as proof beyond reasonable as in criminal case.

38. Regarding restraining orders against gazettement of the preservation orders I am in agreement with Mr. Githinji that the same is overtaken by events as the orders have since been gazetted.

39. For the above reasons stated, the application seeking variation or rescission of preservation of motor vehicle KCU 966C fails and the same is disallowed.   Accordingly, I am inclined to make the following orders:

(a) That preservation orders issued on 26^th August 2019 and then rectified on 4^th September 2019 in relation to motor vehicle registration No. KCD 966L are hereby rescinded and set aside.

(b) That the preservation orders made on the 26^th August 2019 and then rectified on 4^th September 2019 in respect of motor vehicle KCU 966C shall remain in force.

(c) That motor vehicle KCU 966C shall remain in police custody at the nearest police station possible or as the Asset recovery Agency may determine.

(d) That the registration documents shall be surrendered and kept by the Assets Recovery Agency for safe custody and that a caveat shall be placed by NTSA in respect of Motor KCU 966c pending further investigations subject to expiry of the preservation period

(e) Each party to bear own costs.

DATED, DELIVERED AND SIGNED THIS 20^TH DAY OF NOVEMBER 2019

J. N. ONYIEGO

JUDGE