REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

CIVIL CASE NO. E149 OF 2021

REGENCY CO-OPERATIVE SAVINGS & CREDIT            

SOCIETY LIMITED.............................................PLAINTIFF

VERSUS

LIBYAN ARAB AFRICAN INVESTMENTS                           

CO. KENYA LTD. & 4 OTHERS...................DEFENDANTS

RULING

The plaintiff’s Notice of Motion dated 17^th June 2021 seeks the following orders;-

1. Spent

2. THAT pending the hearing of this Application and suit herein summons do issue to the 5^th  Defendant, to appear before the Honourable Court and show cause why he should not furnish security for the decree that may be passed against the Defendants herein;

3. THAT pending the hearing of this Application and suit a warrant of arrest do issue against the 2^nd and 3^rd  Defendants to show cause why they should not furnish security for full payment of the Principal sum of Kshs. 14, 233,542.70 and Kshs. 28,519,819.70 being compound interest on the principal sum at 7% per month totaling to Kshs. 42,753,362.4C and their appearance in court.

4. THAT pending the hearing of this Application and suit a temporary injunction do issue restraining the defendants whether by themselves, agents, servants, employees, advocates or any other person or entity claiming proprietary rights or any interests whatsoever through the defendants from leasing/charging /selling/alienating/wasting or otherwise dealing with Land Reference Number 209/9514.

5. THAT pending the hearing of this Application and suit temporary injunction restraining the defendants whether by their servants, or agents or employees or advocates or otherwise howsoever from removing, transferring, disposing or charging or in any manner interfering with any of defendants' assets whatsoever, including land, shares and monies deposited in their accounts and held in all and any banks operating in Kenya and or from the jurisdiction of this court.

6. Any other relief that the court deems fit to grant in the interest of justice.

7. Costs of this Application be provided for.

The application is supported by two affidavits by Joseph Kibagendi, the plaintiff’s vice Chairman on 17^th June and 22^nd October, 2021 respectively. The respondents filed a replying affidavit sworn by Jamal Ahmed, the Caretaker Manager of the 4^th respondent on 14^th July,

Parties agreed to determine the application by way of written submissions.

Counsel for the applicant submitted that the applicant is a Co-operative Society registered under the Co-operative Societies Act, Cap. 490 Laws of Kenya.  Its membership is drawn from the 4^th respondent.  The dispute arises from the fact that members of the plaintiff who work for the 4^th respondent had their contributions to the plaintiff deducted from their salaries but the said deductions were not remitted to the plaintiff.  The period involved is between January 2018 to March 2020.  The total amount involved is Kshs.14,233,542/70.  According to the applicant, that amount has attracted interest totaling Kshs.28,519,819/70 and continues to attract interest.

It was further submitted that the respondents are both non-citizens and non-residents and the 4^th respondent has closed shop.  The applicant is apprehensive that the defendants are likely to lease/alienate/dissipate and/or remove their properties from the jurisdiction of this court thereby defeating the applicant’s interest.  It was argued that the circumstances of the case calls for the grant of an order calling upon the defendants to furnish security.  Counsel referred to the case of INTERNATIONAL AIR TRANSPORT ASSOCIATION & ANOTHER –V- AKARIM AGENCIES COMPANY LIMITED & 2 OTHERS (2014) eKLR where the court held:-

“Order 39 rule 1 and 5 of the CPR is about giving security for appearance or satisfaction of a decree which may be passed against the Respondent. The Respondent may be called upon to show-cause why he should not give security for satisfaction of the decree which may be passed against him. Rule 1 is more draconian and may result into the arrest of the Respondent….Rule 5 on the other hand is milder and deals with situations where the Respondent is about to dispose of or remove property from the jurisdiction of the court …..both of these rules share two common things, namely: 1) both serve the purpose of preventing the Respondent from doing any act that will obstruct or delay execution of the decree that may be issued against the Respondent; and  2) the standard of proof is that set out in the case of GIELLA v CASSMAN i.e. establish prima facie case of the conditions set out in the particular rule.”   

 The applicants further urged the court to issue summons to the 5^th respondent and warrant of arrest against the 2^nd and 3^rd respondents so as to show cause why they should not furnish security equivalent to the sum of KShs.42,753,362/40.  The defendants are not disputing that the hotel business has closed down and that the money was deducted from the members of the sacco. There is no guarantee that the plaintiff will be able to execute any decree issued by the court against the respondent. Counsel relies on the Ugandan case of MAKUBUYA –V- SONGDOH FILMS (U) LTD & ANOTHER (Miscellaneous Application – 321 of 2018 (2018) UGHCCD 93 where Justice Musa SSekaana observed as follows on the issue of arrest and attachments before judgment:-

“Therefore such supplemental proceedings are taken recourse to in aid of an ultimate decision of the suit and are initiated with a view of preventing the ends of justice being defeated. It is a sort of a guarantee against a decree becoming infructuous for want of property available from which the plaintiff can satisfy the decree.”

Counsel for the plaintiff further contend that the defendants’ position that their operations were affected by Covid-19 cannot be the reason for the non-remittance of the deductions. The defendants made remittance from 2011 to 2017 despite the fact that economic sanctions were imposed on Libya by the United Nations in 2011.  The plaintiff is not making any claim for deductions made after March, 2020.  The only available assets are in the hands of the defendants’ advocates on record who have confirmed that they have instructions to settle the principal sum but have not guaranteed payment of the interest.

Counsel for the respondent submitted that due to civil/political unrest in Libya, the United Nations Security Council imposed sanctions on Libyan individuals and entitled in 2011. The 1^st defendant was affected by those sanctions. This led to the closure of all bank accounts of the 1^st defendant. The defendants made frantic efforts to secure some money to settle certain liabilities including the plaintiff’s claim and offered to pay the deducted amount but the plaintiff’s officials refused to accept the payment.

It was further submitted for the defendants that the court has discretion to order for security for costs which discretion has to be exercised judicially and on case to case basis. Counsel made reference to the case of JAYESH HASHMUK SHAH –V- NAVIN HARIA & ANOTHER, (2015) eKLR where the Court observed that in an application for security for cost, the applicant ought to establish that the Defendant if unsuccessful in the proceeding, would be unable to pay cost due to poverty.  It is not enough to allege the Defendant will be unable to pay cost in the extent that he is unsuccessful.  The same must be proven.

Further reliance was placed on the case of SHAH –V- SHAH (1982) KLR 85 where the court stated as follows:-

"The principle general rule is that security for cost is normally required from the Plaintiff residing outside the jurisdiction however, a court has discretion to be exercised reasonably and judicially to refuse to order security for cost. The test on an application of cost is not whether the Plaintiff has established a prima facie case but whether the Defendant has shown a bona fide defence.”

The respondents maintain that the 1^st and 4^th defendants are locally registered companies with known physical address and known assets.  The respondents have also stated that they are willing and ready to pay the principal amount.  According to the respondents, Order 39 of the Civil Procedure Act on security for costs is not applicable as it applies in situations where a defendant has been called upon to furnish security for costs but has failed to do so or intends to delay or obstruct the execution of a decree that may be passed against him. It can only be granted when a party is in violation of a court order.  Counsel referred to the case of INTERNATIONAL AIR TRANSPORT ASSOCIATION & ANOTHER –V- AKARIM AGENCIES COMPANY & 2 OTHERS (2014) eKLR where GIKONYO J stated:-

 “Order 39 rule 1 and 5 of the CPR is about giving security for appearance or satisfaction of a decree which may be passed against the Respondent. The Respondent may be called upon to show-cause why he should not give security for satisfaction of the decree which may be passed against him. Rule 1 is more draconian and may result into the arrest of the Respondent….Rule 5 on the other hand is milder and deals with situations where the Respondent is about to dispose of or remove property from the jurisdiction of the court …..both of these rules share two common things, namely: 1) both serve the purpose of preventing the Respondent from doing any act that will obstruct or delay execution of the decree that may be issued against the Respondent; and  2) the standard of proof is that set out in the case of GIELLA v CASSMAN i.e. establish prima facie case of the conditions set out in the particular rule.”   

Counsel for the respondents further contend that the plaintiff has failed to establish the principles relevant to establish the principles relevant for the grant of injunctions as established in the case of GIELLA –V- CASSMAN BROWN & CO LIMITED (1973) E.A, 358.  According to the respondents, the applicants have failed to demonstrate that the defendants’ assets are in the verge of being disposed or move about of the court’s discretion there is no dispute as the sacco deductions are available.

Analysis and determination

The application is brought under Order 39 Rules 1, 2 and 5 which states as follows:-

“1. Where at any stage of a suit, other than a suit of the nature referred to in paragraphs (a) to (d) of section 12 of the Act, the court is satisfied by affidavit or otherwise—

 (a) that the defendant with intent to delay the plaintiff, or to avoid any process of the court, or  to obstruct or delay the execution of any decree that may be passed against him—

 (i) has absconded or left the local limits of the jurisdiction of the court; or

 (ii) is about to abscond or leave the local limits of the jurisdiction of the court; or

 (iii) has disposed of or removed from the local limits of the jurisdiction of the court his property or any part thereof; or

 (b) that the defendant is about to leave Kenya under circumstances affording reasonable probability that the plaintiff will or may thereby be obstructed or delayed in the execution of any decree that may be passed against the defendant in the suit, the court may issue a warrant to arrest the defendant and bring him before the court to show cause why he should not furnish security for his appearance: Provided that the defendant shall not be arrested if he pays to the officer entrusted with the execution of the warrant any sum specified in the warrant as sufficient to satisfy the plaintiff’s claim; and such sum shall be held in deposit by the court until the suit is disposed of or until the further order of the court.

 2. (1) Where the defendant fails to show such cause the court shall order him either to deposit in court money or other property sufficient to answer the claim against him, or to furnish security for his appearance at any time when called upon while the suit is pending and until satisfaction of the decree that may be passed against him in the suit, or make such order as it thinks fit in regard to the sum which may have been paid by the defendant under the proviso to rule 1.

 (2) Every surety for the appearance of a defendant shall bind himself, in default of such appearance, to pay any sum of money which the defendant may be ordered to pay in the suit.

 5. Where defendant may be called upon to furnish security for production of property.

 (1) Where at any stage of a suit the court is satisfied, by affidavit or otherwise, that the defendant, with intent to obstruct or delay the execution of any decree that may be passed against him—

 (a) is about to dispose of the whole or any part of his property;

 (b) is about to remove the whole or any part of his property from the local limits of the jurisdiction of the court, the court may direct the defendant, within a time to be fixed by it, either to furnish security, in such sum as may be specified in the order, to produce and place at the disposal of the court, when required, the said property or the value of the same, or such portion thereof as may be sufficient to satisfy the decree, or to appear and show cause why he should not furnish security. (2) The plaintiff shall, unless the court otherwise directs, specify the property required to be attached and the estimated value thereof.

 (3) The court may also in the order direct the conditional attachment of the whole or any portion of the property so specified.”

The application is also brought under Order 40 Rule (1a) of the Civil Procedure Rules.  The said orders states:-

“(a) that any property in dispute in a suit is in danger of being wasted, damaged, or alienated by any party to the suit, or y g wrongfully sold in execution of a decree.”

There is no dispute that the 1^st respondent was the employer of the members of the plaintiff, Regency Cooperative Savings and Credit Society Limited.  It is also agreed that the 1^st respondent has closed shop.  The plaintiff is apprehensive that its members may not be able to recover the deducted contributions and interest that is payable by the 1^st respondent.

The respondents on their part maintain that they are willing to pay the deducted principal sums and at all times have been ready to make that payment.

The second prayer to the application is summoning he 5^th defendant, Tawfik Ramadhan Masod to show cause why he should not furnish security for the decree that may be passed against the defendants. The plaintiff at paragraph (9) of the grounds in support of the application states that it is apprehensive that the defendants are likely to lease or sale or alienate or dissipate and or remove their properties from the jurisdiction of this court. There is also contention that the defendants are likely to delay or obstruct the court process and also delay the execution of any expected decree.

The other prayers in the application seek warrant of arrest against the 2^nd and 3^rd defendants so that they can furnish security for the claimed principal sum of Kshs.14,233,542/70 and the accumulated interest.  The plaintiff is also seeking orders of injunction generally restraining the defendants from interfering with plot number 209/9514 and any other assets.

The respondents’ explanation is that the United Nations Security Council imposed sanctions on Libyan Individuals and entities.  The sanctions affected the 1^st defendant’s operations and its accounts were closed.  There is a notice of closure of the 1^st defendant’s accounts from Barclays Bank.  (Now Absa Bank) dated 14^th June, 2011.  Other notices are from SBM bank dated 15^th March, 2021, Ecobank dated 8^th April, 2019 and Kenya Commercial Bank dated 20^th April, 2011.  According to the respondents, the plaintiff is very much aware on the reasons why the deductions were not paid.  The defendants have expressed their willingness to immediately settle the principle sum.

From the pleadings herein, it is clear that there is dispute on the amount of interest payable to the plaintiff.  The defendants contend that the plaintiff has been demanding more than double what is entitled to its members.

The 1^st defendant owns the property known as Laico Regency Hotel which is located at Nairobi City Centre.  The hotel was operating until sanctions were imposed on Libya due to political unrest in that country.  There is no evidence currently that the property is being sold or is about to be leased to a Third Party.  The only security the 2^nd, 3^rd and 5^th defendants can provide to the court against any expected decree will be the property known as Land Reference number 209/9514.  There is no immediate threat to that property.  Once the principal sum is paid, the next issue will be the determination of the interest payable and any decree obtained will be executed against the defendants.  It will be imprudent for the court to issue summons and warrants at this stage of the proceedings.

Similarly on the issue of injunction, the plaintiff is claiming a liquidated known amount which can be fully satisfied through the sale of the 1^st defendant’s property.  There is no evidence that the 2^nd, 3^rd and 5^th defendants are about to leave Kenya with the sole intention of escaping settlement of the expected decree.

I do therefore find that the application herein lacks merit and the same is hereby dismissed.  The applicants are also seeking any other relief that the court shall deem fit to grant in the interest of justice.  I do find that in order to mitigate the accrual of the interest on the principal sum and noting that the defendants are willing to pay that amount, the interest of justice will be served if that amount is paid to the plaintiff.  The hearing and determination of the matter may take some time.

In the end, I do find that the application dated 17^th June 2021 lacks merit and the same is hereby dismissed.  Costs shall follow the outcome of the main suit.  The defendants/respondents are hereby ordered to pay to the plaintiff the principal sum of Kshs. Fourteen Million Two Hundred and Thirty Three Thousand Five Hundred and Forty two and Seventy cents (Kshs.14,233,542/70) within thirty (30) days hereof.

 DATED AND SIGNED AT NAIROBI THIS 15TH DAY OF MARCH, 2022

S.J. CHITEMBWE

JUDGE