[2023] KEHC 26243 (KLR)

Avenews Kenya Limited v Eastmeat Limited; Quickmart Limited (Interested Party) (Commercial Case E473 of 2023) [2023] KEHC 26243 (KLR) (Commercial and Tax) (1 December 2023) (Ruling)

Neutral citation: [2023] KEHC 26243 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts)

Commercial and Tax

Commercial Case E473 of 2023

JWW Mong'are, J

December 1, 2023

Between

Avenews Kenya Limited

Plaintiff

and

Eastmeat Limited

Defendant

and

Quickmart Limited

Interested Party

Ruling

1. On September 26, 2023, the applicant moved this Honourable Court by a Notice of Motion filed under a certificate of urgency seeking the following orders:-i.Spentii.Spentiii.That pending hearing and determination of the main suit, this Honourable Court be pleased to issue an order of temporary injunction directed at the respondent, its agents, servants, employees or any person acting under its instructions.a.Restraining them from removing, withdrawing, making debit transactions, utilizing or encumbering funds held in:-Bank: Kenya Commercial BankBranch: Ongata Rongai BranchAccount Number: 13xxxSwift code: KCxxxBank Code: xxxb.Restraining them from advising, writing to, or in any manner instructing the 1st Interested Party to settle any outstanding invoices to any account other than:-Bank: Absa Bank Kenya PLCBranch: Absa TowersAccount Name: Avenews KEAccount Number: 20xxxiv.That pending hearing and determination of the main suit, this Honourable Court be pleased to issue an order of mandatory injunction directing the 1st interested party to remit payment of all outstanding approved invoices between July 1, 2023 to September 5, 2023 under the agreements between the Applicant and the Respondent be deposited in a joint account of the Applicant and the Respondent at a commercial bank of their election and be appropriated between the parties as per agreements dated March 20, 2023 and July 13, 2023. v.That costs for this application be provided for.vi.That this honourable court be pleased to make such further orders as it may deem fit and just in the circumstances of this case.

2. The application was premised on the grounds set on its face and the supporting affidavit of Emmanuel Murai sworn on September 26, 2023. When the matter came up for directions exparte on September 28, 2023, this Honourable Court granted the temporary relief as sought under prayer 2 thereof freezing the Accounts of the 1st defendant held at Kenya Commercial Bank, Ongata Rongai Branch, Account number 13xxx.

3. The respondent upon being served with the said orders and the notice of motion herein immediately moved to court and a notice of preliminary objection challenging their being enjoined to a suit for breach of contract to which they were not a party. The Respondent simultaneously and at the same time filed its own notice of motion application and under Certificate of urgency seeking the following reliefs:-i.Spentii.That this honourable court be pleased to issue an order staying and setting aside order No. 4 issued on September 27, 2023 freezing the Bank Account of the Defendant/Applicant, Account Number 13xxx Kenya Commercial Bank at Rongai Branch, pending inter-partes hearing and determination of this application.iii.That this honourable court be pleased to issue an order staying and setting aside order No. 4 issued on 27th September 2023 freezing the Bank Account of the Defendant/Applicant, Account Number 13xxx Kenya Commercial Bank at Rongai Branch, pending inter-partes hearing and determination of the Notice of Motion dated 26th of September 2023. iv.That this honourable court be pleased to issue an order reviewing, varying, and / or setting aside the freezing Order issued on 27th September 2023 freezing bank accounts of the Defendant/Applicant Account Number 13xxx Kenya Commercial Bank, Rongai Branch.v.That applicant be at liberty to apply to the honourable court for such further directions and orders for purposes of meeting the ends of justice.vi.That the honourable court be so pleased to make any other orders or directions it deems fit for purposes of meeting the ends of justice; andvii.That the costs of this Application be provided for.

4. The said Application was supported by the grounds set on its face and the supporting affidavit of Cleophas Mwanzia Mulevu sworn on September 29, 2023. On October 5, 2023, the Interested Party upon being served with the two applications filed a Replying Affidavit, sworn on the same date by Simon Macharia, its Chief Finance Officer. Similarly, the Plaintiff, upon being served with the Defendant ’s Application, filed grounds of opposition thereto dated October 5, 2023. Both the Plaintiff and the Defendant filed written submissions to the two applications.

Analysis and Determination 5. There are two applications for determination before this Honourable Court. I have noted that although the application by the Defendant seeks orders lifting the interim orders granted to the plaintiff exparte, the same can be treated as a response to the plaintiff ’s application of September 26, 2023.

6. In considering the two application I have noted that the issue at crux of this suit is funds held in the account at Kenya Commercial Bank Account number 13xxx to which both the Plaintiff and the Defendant lay claim. The only reason the interested party has been drawn into the suit herein is because those funds emanate from the interested as payments for goods supplied to the interested party by the defendant. The plaintiff claims to be the financier of the defendant to procure the said goods. Having carefully considered and at length the two sets of applications and the responses filed thereto together with the written submissions, I am persuaded that the only issue is whether the plaintiff has met the threshold for grant of orders of injunction against the Defendant and the Interested Party.

7. In the locus classica case of Giella v Cassman Brown Company limited, (1973) E.A at page 353 and elaborated in the Court of Appeal case of Nguruman Limited v. Jan Bode Nielsen & 2 others, (2014) eKLR, the court stated that “In an interlocutory injunction application, the applicant has to satisfy the triple requirements to:-(a)Establish his case only at a prima facie level,(b)Demonstrate irreparable injury if a temporary injunction is not granted, and(c)allay any doubts as to (b) by showing that the balance of convenience is in his favour.”

8. I have considered the facts of this case and in order for a grant of an order of injunction to issue, the facts of this case must be put through the three-step test set out above. The first step is to establish whether a prima facie case has been established. In the case of Mrao Limited v First American Bank & 2 others (2003) eKLR, Justice Bosire observed as follows:-“So what is a prima facie case? I would say in Civil cases, it is a case which on material presented to the court, a tribunal properly directing itself will conclude that there exists a right which has apparently been infringed by the opposite party as to call for an explanation or a rebuttal from the latter…The evidence must be that of an infringement of a right, and the probability of success of the Applicant’s case upon trial. That is clearly the standard, which is higher than an arguable case.”

9. In bringing the suit and the application to restrain the defendant from diverting funds from a mutually agreed account at Absa Bank to Kenya Commercial Bank, the Plaintiff argued that both parties entered into a contract where the Plaintiff was availing funds to the defendant to facilitate the purchase of goods supplied to the interested party for sale and that once funds were received in the agreed bank Account at Absa Kenya PLC, the same loans due to the plaintiff would then be settled.

10. In bringing the current suit, the plaintiff accuses the defendant of breaching the contract and diverting or instructing the interested party to make payments to a different account at Kenya Commercial Bank, to which the Plaintiff had no control and hence exposing it to extreme prejudice and potential loss of the funds so advanced.

11. The defendant denied the existence of a contract with the plaintiff and filed a notice of Preliminary Objection seeking to be removed from the suit herein. The defendant argues that it is a stranger to the allegations as contained in the pleadings and that it has not signed any contracts for financing with the Plaintiff or at all. The defendant argues that it is a stranger to any contractual arrangements as alleged by the Plaintiff.

12. In establishing that indeed a contract between the plaintiff and the defendant existed to create a binding relationship between the parties, the Plaintiff attached two separate financing agreements. It is worth noting that the two agreements are created by the plaintiff and signed for by one Meshack Mwau(Eastmeats supplies-Quickmart) for the first loan agreement of Kes 16,000,000/-. The signature appended to the said agreement is stated to belong to Meshack Mwau of National ID 2xxx. The agreement goes ahead to describe the party signing for the borrower as one Meshack Mwau of (Eastmeat- Quickmart) CR/2015/213510. A second agreement for Kes 25,000,000/- is similarly executed by Meshack Mwau. From the documents attached by the Plaintiff to the application for injunction, there is no extract of a CR12 from the Companies Registrar to confirm is Meshack Mwau is a director or shareholder of the Defendant. The documents presented here by the Plaintiff do not shed light as to who are the subscribers of the defendant which has been described in the pleadings a limited liability company incorporated in Kenya. Without such a document, this court is at pains to make the connection between the Defendant and Meshack Mwau, the party to the annexed financing agreements.

13. The decision of the House of Lords in Salomon v Salomon created a bedrock principle of corporate personality, and also a very significant limited liability concept. It found that a company was formed in compliance with the regulation of the Companies Act and therefore, it is a separate person, not the agent of its controller. The English decision set parameters as to the fact that a company is a separate legal person from the shareholders and directors therein. A contract that seeks to bind a company must be signed in accordance with the Companies Act and must be under seal witnessed by its directors. I note that the Plaintiff has not exhibited any documents executed by the Defendant as a company and the Board resolutions to borrow have not been annexed either.

14. Flowing from above, I am satisfied that the Plaintiff has failed the first test of Giella v Cassman Brown case (supra) of establishing a prima facie case to warrant a grant of an order of injunction as sought in the application before me. The decision of the Court of Appeal in Nguruman Limited(cited above) urged the court to apply the principles in Giella sequentially and that if the first test failed, the court need not bother to determine the second test. Having found that the Plaintiff has not established a prima facie case, I will therefore not proceed to interrogate the test on irreparable injury.

15. The upshot of the above findings is that the application by the plaintiff cannot stand. The same is devoid of merit as the plaintiff has not demonstrated the existence of a binding contract between itself and the defendant. The same is hereby struck out in its entirety and the orders issued by the court thereto vacated and set aside. The application filed by the defendant is therefore successful and is allowed with costs to the defendant. It is so ordered.

DATED, SIGNED AND DELIVERED VIRTUALLY AT NAIROBI THIS 1ST DAY OF DECEMBER, 2023. J.W.W. MONG’AREJUDGEIn the Presence of:-1. Ms. Ouma for the Plaintiffs/Applicants.2. Mr. Ouma for the Defendant/Respondents.3. Ms. Kayugira for the Interested Party.4. Amos - Court Assistant