[2017] KEHC 9787 (KLR)

REPBULIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

MILIMANI LAW COURTS

COMMERCIAL & ADMIRALTY DIVISION

CIVIL CASE NO. 214 OF 2017

AFRICAN BANKING CORPORATIONLTD..…….................PLAINTIFF

VERSUS

NOMADS QUINTESSENCE AGRI SOLUTIONS LTD.....DEFENDANT

RULING

1. The dispute herein revolves around a facility for Kshs. 50,000,000/= (the facility) granted by African Banking Corporation Limited (ABC Ltd.) to Nomads Quintessence Agri Solutions Limited for settlement of letters of credit.

2. African Banking Corporation is aggrieved by certain matters and has filed suit against Nomads. In the meantime, it seeks the following orders set out in the Notice of Motion of 17th May, 2017;-

1. Spent

2. THAT this Honourable Court be pleased to issue a temporary injunction restraining the Defendant by itself, his servants agents and/or whomsoever from diverting the funds payable from the Ministry of Agriculture, Livestock and Fisheries arising from the contract for the supply, delivery, installation, testing and commissioning of milk cooling tanks to any other Bank account pending the hearing and determination of this application interpartes.

3. THAT this honourable Court be pleased to issue a temporary injunction restraining the Defendant by itself, his servants, agents and/or whomsoever from diverting the funds payable from the Ministry of Agriculture, Livestock and Fisheries arising from the Contract for the supply, delivery, installation, testing and commissioning of milk cooling tanks to any other Bank account pending the hearing and determination of this suit.

4. THAT further or in the alternative the Honourable Court be pleased to issue a mandatory injunction compelling the Defendant by itself, this servants, agents to advise the Ministry of Agriculture Livestock and Fisheries to pay the proceeds of the Contract for the supply, delivery, installation, testing and commissioning of milk cooling tanks to the Defendants Account number 001215001002377 held at ABC Bank pending the hearing and determination of this application.

5. THAT further or in the alternative the honorable Court be pleased to issue a mandatory injunction compelling the Defendants by itself, his servants, agents to advise the Ministry of Agriculture Livestock and Fisheries to pay the proceeds of the contract for the supply, delivery, installation, testing and commissioning of milk cooling tanks to the Defendants Account number [particulars withheld] held at ABC Bank pending the hearing and determination of this suit.

6. Any other or further or better that this Honorable Court may deem and just and convenient to grant in the circumstances.

7. That the costs of this application be provided for.

3. The case of African Banking Corporation is presented by two Affidavits of Faith Nteere and one of Evalyn Gachoki.

4. Through Letters of Offer dated 11th August 2014 and 6th January 2015, African Banking Corporation had offered the facility to Nomads. Nomads accepted the said offer. The facility was to be secured, inter alia, with two master Letters of Credit from Kenya Commercial Bank for Kshs. 115,118,000/= and an irrevocable undertaking by Nomads that all proceeds shall be routed through the Bank.

5. It is common ground that Nomads tendered and was awarded 2 Contracts by the Ministry of Agriculture, Livestock and Fisheries (MOALF) designated contract Numbers MOALF/DLP/203/2013-2014 (hereinafter contract 203) and MOALF(DLP/205/2013-2014(hereinafter Contract 205). Another two contracts were awarded to Nomads by the Smallholder Diary Commercialization Programme through MOALF. These are contracts designated MOALF/SDCP/IFAD/ICB/01/2013-2014 (hereinafter contract 01) and MOALF/SDCP/IFAD/ICB/02-2014(hereinafter contract 02). The case for African Banking Corporation is that it financed all the four contracts through the facility aforesaid.

6. Speaking through its officers, African Banking Corporation deposed that Nomads wrote to the Ministry of Agriculture, Livestock and Fisheries(MOALF)requesting that the proceeds of the contracts be channeled through African Banking Corporation as it was a guarantor of the said contracts.

7. The two master letters of credit from Kenya Commercial Bank have since expired and is now unenforceable. And African Banking Corporation is apprehensive that a certain event has left it exposed. African Banking Corporation states that Nomads has asked MOALF to make payments in respect to the contracts to Spire Bank and not to itself.

8. Nicholas Kiptoo Arap Ronoh tells the story on behalf of Nomads. That is contained in his Affidavit of 23rd June 2017. Stripped to its core, the position of Nomads is that African Banking Corporation only financed 2 out of 4 contracts, the two being MOALF/DLP/203/2013-2014 and MOALF/DLP/205/2013-2014. That it is in respect to these two contracts only that the Ministry was to make payments through its account in African Banking Corporation and that it has not reneged on this position.

9. The main prayer in the motion before Court is for an order of Temporary injunction. While an order for mandatory injunction is sought as an alternative or further order. The principles applicable to the grant of the two are different with that of a Mandatory injunction being more stringent. Giella vs Cassman Brownsets out the principles for grant of the Temporary Injunction, as follows:-

a) An Applicant must show a prima facie case with a probability of success.

b) An Interlocutory Injunction will not normally be granted unless the Applicant might otherwise suffer irreparable loss which would not be adequately be compensated by an award of damages.

c) If the Court is in doubt, it will decide an application on the balance of convenient.

10. The test for the grant of a mandatory order at interlocutory stage is more rigorous. Generally, special circumstances must exist. It will be granted where the case is clear and the Court feels an assurance that a matter ought to be decided at once or if the act done is simple and can be easily remedied or if a Party has attempted to steal a march on the other (see vol. 29 Halsburys Laws of England and Magnate Ventures Limited & Eng. Kenya Limited (2002) KLR 538).

11. The strength or otherwise of the case of African Banking Corporation depends on whether there is evidence that it financed the 4 contracts and whether there was a contractual understanding between it and Nomads that the proceeds of all the 4 contracts would be paid through Nomads’ Accounts domiciled at African Banking Corporation.

12. Both letters of offer (11th August 2014 and 6th January 2017) set out the purpose of the facilities granted by African Banking Corporation to Nomads as twofold:-

a) To facilitate issuance of usance letter of credit for the Borrowers Importation of Milk Cooling Plant

b) To facilitate settlement of Letter of Credit

In the earlier letter, Nomads is required to avail to the Bank a copy of the signed contract Agreement between itself and MOALF.

13. A condition to the grant of both facilities was that Nomads was to give an irrevocable undertaking that all proceeds shall be routed through African Banking Corporation. Whether that undertaking was issued is unclear. However, there is a letter dated 20th August 2014 from Nomads to MOALF informing the Ministry of a change in respect of the receiving bank from Chase Bank to African Banking Corporation. In that letter Nomads states that African Banking Corporation are the guarantors to contracts No. 203 and 205. This Court does not find a similar letter in respect to contracts 01 and 02.

14. The stance taken by Nomads is that even African Banking Corporation itself would be aware that its (African Banking Corporation’s) interests are limited to contracts 203 and 205 and cites African Banking Corporation’s own letter of 19th May, 2015. This is what the Bank tells the Principal Secretary, MOALF;-

“Dear Madam,

RE: TENDER NO.MOAL & F/DLP/203/2013-2014 AND MOAL & F/DLP/205/2013-2014

Reference is made to the two contracts for Kes 20,205,000 and Kes 94,963,000.

Nomands Quitessence Agr Solutions (K) Ltd is our client from July 2014 running Account Number 0012150010002377 with African Banking Corporation.

The Client approached us to finance the two said projects secured by two Master LCs from Kenya Commercial Bank. The Master LCs attached have since expired.

We financed the client to a tune of Kes.12,161,429 with a tenor of 4 months starting January 2015. However we note that the project has faced numerous delays hence overshooting its completion period. Currently 6 sites out of the 19 are running and at various stages of completion as per the report from our client and the State Department of Livestock engineers who inspected the project on the week of 13th – 17th April, 2015.

The delays have affected the repayment of the facility by our client hence the loan is in arrears of Kes.12,856,320 and continue to accrue interest at eh penalty rate. To enable us continue supporting our client to ensure completion of this noble projects, we request the following from the Ministry:-

Payment for the sites that are complete/or where the Milk Cooler have already been delivered but awaiting the Civil Works to be complete.

Renewal of the balance of the Master LC’s to cover the period until completion or

ABC Bank is ready to issue an advance payment guarantee against the funds received, to help in the management of the same to project finalization.

As noted, we are committed to the completion of the projects as a way of uplifting our farmers.

We also request that the Ministry note our interest in the projects and that any payment to the client must be routed through their account with African Banking Corporation. Our senior management is ready and willing to meet with you at your convenience to discuss the options given and find the best way forward for these projects.”

15. ABC does not think the matter to be that simple. There is a letter of 4th June 2014 in which Nomads seeks to be updated by African Banking Corporation about letters of credit for Contract NO. 02. Further that prior to signing the letter of offer of 5th January 2015, Nomads made a request for financial accommodation to facilitate contracts 01, 02, 203 and 205. To buttress its position that it financed all the 4 contracts, the Court is asked to give regard to a Progress Report dated 12th November 2015 by Nomads to the Bank in respect to contracts 01,02 and 205. In that Report, Nomads states that project 205 and 02 are completed and closed as follows:-

“we are liasing with Ministry to release the payments for completed sites as soon as possible.”

16. I make the following observations on the rival positions. In the letter of 19 May 2015 by African Banking Corporation it limits its interest to contracts 203 and 205. Suggestive that its interests were only in respect to the two contracts. That would support the position taken by Nomads.

17. On the other hand, there are pieces of evidence that seem to extend the Bank’s interest to contracts No.01 and 02. For instance the Letter of 4th June 2014 in which Nomads is requesting African Banking Corporation to keep it updated in respect to contract NO.02. Then there is the Progress Report of 12th November, 2015. Included in that Report is progress of contract NO.1. Further still Nomads assures the Bank that it was liaising with the Ministry to release the payments for the completed sites. Some of the completed sites were those under contract No.1. A question to be asked is why Nomads found it necessary to interact with the Bank on projects which the Bank had not financed. No explanation was forthcoming from Nomads.

18. These can be taken in the context of the Letter of 5th December 2014 in which Nomads writes as follows, in part to African Banking Corporation Ltd:-

“Reference is hereby made to our request and your subsequent approval of an LC to facilitate our Contracts Nos.MOALF/SCDP/IFAD/ICB/01/2013-2014. MOALF/SCDP/IFAD/ICB/02/2013-2014, MOALF/DLP/205/2013-2014 AND MOALF/DLP/205/2013-2014 for supply, delivery, installation, testing and commissioning of 19 No milk cooling tanks and accessories. Kindly allow us to express our sincere gratitude for the said facility, which will assist us meet our obligation regarding the said contracts”.

The impression is that contracts 01 and 02 were also financed by ABC.

19. From this evidence it cannot be said that the case for African Banking Corporation is frivolous. In fact it is one that may succeed. In other words the Bank has made out a prima facie case with a probability of success. But in view of the Banks own Letter of 19th May 2015 I am not ready to go as far as saying that it will certainly succeed. For that reason the Bank may not be deserving of an order for Mandatory Injunction.

20. In respect to the Plea for an Interlocutory Injunction, the Court must still consider whether the Bank is likely to suffer irreparable harm that cannot be compensated in Damages in the event that the order is not granted. There is no contention that the Master Letters of Credit from Kenya Commercial Bank that had partly secured the payment to African Banking Corporation have expired. If the monies held to the Credit of Nomads by MOALF are routed elsewhere other than African Banking Corporation, then the Bank is exposed. The only other security that the Bank held will have melted away and this would expose it to substantial loss. For this reason this Court is inclined to give the Bank some protection by way of Temporary restraining Orders.

21. In reaching this decision I have had to think of whether my order imperils the position of Spire Bank. This is the Bank that Nomads asserts were the financiers of Contracts 01 and 02. To this assertion, African Banking Corporation had responded that Equatorial Commercial Bank (the predecessor to Spire Bank) had only issued Performance Bonds (and not finance) for contracts NO.2013 and 205. What Nomads failed to do was to provide any evidence that Contracts 01 and 02 were financed by Equatorial (or Spire) and had that evidence been provided this Court would have been reluctant to grant an order that would have prejudiced Spire Bank.

22. As it is, this Court is persuaded that African Banking Corporation is deserving of Prayer 3 of the Notice of Motion of 17th May 2017. As the Application partly failed, each party shall bear its costs.

Dated, Signed and Delivered in Court at Nairobi this 1st Day of December, 2017.

F. TUIYOTT

JUDGE

PRESENT;

Karanu for the Plaintiff/Applicant

No Appearance for the Defendant/Respondent

Alex - Court clerk