[2015] KEHC 872 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT GARISSA

CIVIL CASE NO. 1 OF 2015

DAHIR SADIK AUSAAD ................................PLAINTIFF/ APPLICANT

V E R S U S

MODOGASHE CONSTRUCTION LTD )

JELLE MAALIM ABDI )

ABDI BASHIR ABDI )

FIRST COMMUNITY BANK ).............DEFENDANTS/ RESPONDENTS

RULING

On the filing of a plaint herein asking for permanent injunctions, damages for loss occasioned, and damages for acts or commissions as well as costs of the suit, the plaintiff through counsel filed a Notice of Motion on the same date of filing the plaint which was 10th April 2015, which is the subject of my present decision.

This Notice of Motion has been brought under Order 51(1) and Order 40(1),(2) of the Civil Procedure Rules 2010, as well as Section 1A, 3, 3A and 63 of the Civil Procedure Act Cap 21 of the Laws of Kenya. The prayers are as follows:-

That this application be certified as urgent and be heard exparte in the first instance.

That the defendants and all their agents, representatives, servants and employees be restrained from managing, running, overseeing or in any way transacting the daily business operations of the 1st defendant in exclusion of the applicant.

That the 2nd and 3rd defendants and all their agents, representatives, servants, and employees be restrained from interfering, wasting, using, withdrawing or spending monies belonging to the 1st defendant/respondent and banked with the 4th defendant pending hearing and determination of this application.

That a temporary injunction do issue restraining the 2nd and 3rd defendants and all their agents from interfering, wasting, using, removing or disposing off the assets, to wit motor vehicle registration nos. KHMA 664E (crawler tractor) and KHMA 697E (roller/grader/crane) belonging to the 1st defendant until hearing and determination of the application.

That in the alternative the court to order the detention, preservation and/or freezing and subsequent disclosure of the statement for account No. 29772189, held by the 1st defendant with the 4th defendant pending the hearing and determination of this application and suit.

That in the alternative the court be pleased to order that there be no transfer and or disposal of the motor vehicles registration No.s KHMA 664E (crawler tractor) and KHMA 697E (roller/grader/crane) held by and under the 1st defendant pending the hearing and determination of this application and suit.

That costs of this application be provided for.

Before the application was heard the court granted prayer 6 pending the determination of this application. The said prayer is however still alive with regard to the request that it is granted pending hearing and determination of the suit. With regard to the other prayers in the application, it is evident that prayer 1, 3 and 4 have been spent. Prayer 1 is for certification of the application as urgent which was done. Prayer 3 is for restraining orders pending hearing and determination of the application. Prayer 4 is for issuance of temporary injunction until hearing and determination of the application. In effect therefore once this ruling is delivered above prayers 3 and 4 will which have been spent. What remains for decision for the court therefore is prayer 2, 5, 6, and 7.

The application has several grounds. It was also filed with a Supporting Affidavit sworn by the plaintiff on 7th April 2015. The main contention of the plaintiff in the grounds, as well as the Supporting Affidavit are that he was a co-founder and director and shareholder of the 1st defendant company, which was incorporated in May 2007. That he together with the 2nd and 3rd defendants as shareholders and directors opened a bank account in the name of the 1st defendant company with Equity Bank Ltd through a board resolution. However, without his knowledge the 2nd and 3rd defendants opened a different Company Account No. 29772189 which was operated with the 4th defendants bank at their Garissa Office.

He contended that he was aware that the said 2nd and 3rd defendants operated the said bank account irregularly, illegally and unlawfully and that there was never a board resolution authorizing the opening of that account. He also stated that as Directors of the 1st respondent he and the 2nd and 3rd defendants procured the motor vehicles KHMA 664E and KHMA 697E above which were being used to his exclusion.

He complains that a large sum of money to the tune of Kshs 90 million was about to be deposited in the disputed bank account being payment for previous works undertaken by the 1st defendant/respondent, and believed that the 4th defendant would irregularly, illegally and unlawfully allow the 2nd and 3rd defendants to draw funds or otherwise operate the account without his knowledge and consent and in the process waste, mismanage, and misappropriate the funds. He maintained that he would suffer irreparable damages if the said bank account and assets were wasted, mismanaged, and misappropriated. He asked for grant of the orders sought.

In response to the application, the 2nd defendant on behalf of the 1st and 3rd defendants filed a replying affidavit which he swore on 8th May 2015. He deponed that it was true that the plaintiff and the 2nd and 3rd defendants had incorporated the 1st defendants Company on 28th May 2007. He stated however that between the incorporation and the year 2009, the company remained dormant and the plaintiff opted to cease being both a Director and shareholder and was reimbursed his initial contribution of 15,000/=. He stated that in a meeting of the 1st defendant held on 25th August 2009 the reimbursement was agreed to and the plaintiff was infact paid Kshs 30,000/= in cash and as such the plaintiff ceased to be a member and participant of the company.

He stated further that through the said changes were not formally effected with the Registrar of Companies the plaintiff had not from 29th August 2009 participated in the management and other affairs of the company.

He stated also that the two vehicles were registered in the name of company but the deponent had been using his own personal lorries and trucks to carry out contracts of the 1st defendant. He stated that the plaintiff did not contribute to the subsequent acquisition of assets of the 1st defendant, including motor vehicles KHMA 664E and KHMA 697E. He stated also that the bank account No. 29772189 was held in concurrence and knowledge of the remaining Directors of the Company. He also deponed that the plaintiff had previously filed Garissa CM Civil suit No. 43 of 2014 seeking similar remedies as in the present case, and upon preliminaries objection being raised against the jurisdiction of the court, the plaintiff withdrew the suit and todate he had not paid costs. He opposed the application of the plaintiff.

The 4th defendant filed a Replying Affidavit sworn by its Bank Manager Garissa Branch Omar Abdi Hassan. It was deponed in the said affidavit sworn on 15th July 2015 that the Bank Account was opened on 9th September 2010 when the 1st defendant presented the Memorandum and Article of Association with its certificate of incorporation. Presented were also minutes of a meeting of the 1st defendant held on 29th August 2009 whereby the plaintiff was to be refunded his share contribution, and a letter dated 5th September 2009 by the plaintiff addressed to 2nd defendant whereby the plaintiff transferred all his shares in the 1st defendant to the 2nd defendant. On the basis of the above therefore the 1st defendant was allowed to open a bank account with signatories being the 2nd and 3rd defendants.

He deponed that the 4th defendant had since caused a search to be conducted at the Companies Registry and they found that the 2nd and 3rd defedants seemed to be the shareholders. He deponed that he was aware that the vehicles KHMA 664E and KHMA 667E were registered in the joint names of the 1st and 4th defendants in order for the 4th defendant to safeguard its interest in various loans disbursed to the 1st defendant, the last of which was disbursed on 20th May 2014.

The application was argued orally. M/s Njalale for the plaintiffs submitted that the plaintiff was apprehensive that the defendants were committing acts which might bind him without his consent. As such he would suffer irreparable damage if the orders sought were not granted. That was the reason why he was seeking restraining orders.

Counsel submitted that the 2nd and 3rd defendants who were actually blood brothers of the plaintiff were wasting money belonging to the 1st defendant in which the plaintiff was a director, by depositing such money with the 4th defendant. With regard to the vehicles, counsel argued that the three Directors bought the subject vehicles, and that though restraining orders were issued by the court on the vehicles, the 2nd and 3rd respondents had disobeyed the same. That was why the plaintiff wanted the restraining orders granted pending hearing of suit. The counsel added that a contempt of court application might be heard in the process.

Counsel submitted further that the 4th respondent had allowed the 2nd and 3rd defendant to ran a bank account without a board resolution which was wrong. It was therefore necessary for restraining orders to be issued in respect of the said bank account pending determination of the suit.

Counsel gave the history of the incorporation of the 1st respondent in 2007 and stated that the company had undertaken many engineering projects for different clients. However the plaintiff discovered merely a year ago that a bank account in the name of the company was being run by the 4th respondent without a board resolution. Counsel stated that infact, the 4th defendant knew that the plaintiff was a director of the company but continued to run the account to the exclusion of the Plaintiff. According to counsel the plaintiff had continued to provide support to the company and was infact an active director who deserved the disclosure of the bank transactions.

Mr. Mutembei counsel for the respondents opposed the application. He emphasized that after the 1st defendant company was incorporated in May 2007 there was nothing to show that the plaintiff continued to be a director in the form of returns or any other documents. Counsel relied on the company’s minutes which showed that at a meeting on 29th August 2009, the plaintiff asked to be refunded his contribution at a time when the company was dormant, and he was so refunded. There was also a letter dated 5th September 2009 which showed that he acknowledged the refund. Counsel submitted that after the company started getting lucrative contracts, the plaintiff had suddenly resurfaced and wants to benefit from its activities, which was wrong.

Counsel submitted that the plaintiff will not suffer irreparable loss if the orders sought were not granted, as he had not shown his contribution in the manning of the company and also in purchase of the motor vehicles. According to counsel, the record also showed that in September 2009 when the bank account was opened, the plaintiff was not a Director of the Company and as such the 2nd and 3rd defendants were right in applying to be the only signatories to the account. Counsel submitted also that there was a letter from the Assistant Registrar of Companies showing that the company had only 2 Directors. Counsel stated that the plaintiff had failed to satisfy the requirements for the grant of a temporary injunction as stated in the case of Giella -vs Cassman Brown and Company Ltd 1973 EA. Counsel urged that the application be dismissed with costs.

In response to counsel submissions, M/s Njalale learned counsel for the plaintiff submitted that annextures 3, 4, 5 and 6 which counsel for the defendants referred to, were filed in court on the date of making submissions. Counsel submitted that infact a Criminal case had already been reported to the police on this matter, and that she would want the makers of the documents filed on the hearing date to be cross examined.

This is an application for injunctive or restraining orders. As I have said earlier in this ruling, the prayers that are live are prayer 2, 5, 6 and 7. Prayer 2 asks for restraining orders against running the business of the company to the exclusion of the plaintiff. Prayer 5 is a prayer for preservation or freezing as well as disclosure of the statement of account in the bank account held with the 4th defendants. Prayer 5 is a prayer against transfer of the motor vehicles, and prayer 7 is a prayer for costs.

None of the counsel who have appeared before me have addressed the court specifically on the merits or otherwise or the implications of each and every prayer. Counsel have addressed the court generally about the surrounding facts or background of the case and the grant of restraining orders globally under the principles in the case of Giella -vs- Cassman Browm Ltd(1973) EA 358.

In the case of Giella -vs- Cassman Brown Ltd(supra), the court gave the parameters under which an application for a temporary injunction will be considered. Firstly, an applicant has to show or demonstrate an prima facie case with probability of success. Secondly, an injunction will not generally be issued unless the applicant will otherwise suffer irreparable loss which cannot be adequately compensated in the form of damages if that injunction is not granted. Thirdly, if the court is in doubt, then it will decide the application on the balance of convenience.

The application was filed in April this year. It was argued on 20th July this year. I note however that the replying affidavit of the 4th defendant and annexed documents, especially letter from the Assistant Registrar of Companies regarding the directorship of the company, were filed on 20th July 2015 the date of hearing of the application. These documents also included the board resolutions of the 1st defendant of 29th August 2009, and the letter of transfer of shares of 5th September 2009. In my view, that the bringing of such information on the hearing date, information if it was not already in the knowledge of the other counsel, was an ambush.

Having said so, it is clear to me that the plaintiff was a member and a Director of the 1st defendant in 2007 when it was incorporated. He has been said to have ceased being a director and shareholder in August 2009. However no record has been produced from the Registry of Companies to show that he ceased to be a director of the company in 2009. The information from the affidavit of the 2nd defendant is that no returns were filed on the same. In my view, the presumption is that he remains a shareholder and a director unless particulars are provided on his ceasing to be so.

The plaintiff has complained about the activities of the other Directors and their opening of a bank account without his involvement. It is instructive to note that of the documents referred to in the Replying Affidavit of the 4th defendant, there is no indication that there was a board resolution to open the bank account. What appears to have been relied upon were minutes of 29th August 2009 while the bank account was actually opened in 2010. In my view, that issue also needs to be interrogated. Because of these consideration, I find that the plaintiff has a prima facie case with probability of success. He has satisfied the 1st requirement for the grant of an injunction.

The 2nd requirement is that he is required to show that he will suffer irreparable loss or damage if the orders sought are not granted. This now goes to the specific prayers.

Prayer 2 is for granting a mandatory injunction that the plaintiff should be involved in the day to day transactions of the company. In my view this prayer cannot be granted by this court at this preliminary stage. Firstly, it is not one of his requests in the plaint. Therefore, in my view, it cannot arise at a preliminary stage in order to protect his interest before the determination of the case. Secondly, in my view granting the prayer would determine the whole case. He has not himself given any evidence of recent specific activities which he has participated in running the company. Therefore before the court interrogates that issue, in my it should not grant such a prayer. In my view the plaintiff will not suffer irreparable loss or damage if prayer 2 is not grant, and I will thus decline to grant this prayer.

Prayer 5 is for preservation or freezing and subsequent disclosure of the statement of the bank account held by 1st defendant with the 4th defendant. Since in my view the plaintiff has demonstrated a prima facie case and an interest as a possible director and shareholder of the company and its income, I am of the view that if this prayer is not granted he will suffer irreparable loss or damage. It is not known how much money is in that account and how much money has left that account from the time it was opened. In my view the prayer is justified and he has satisfied the two main requirements for the grant of injunctive orders.

Prayer 6 is for restraining orders against transfer or disposal of the motor vehicles. With regard to this prayer, I also find that since the plaintiff has established a prima facie interest in the as a possible director and shareholder of the company and an interest in the company assets, if this prayer is not granted he will suffer irreparable loss and damage.

As for the balance of convenience, I do not find it necessary to go into it because, as I have said with regard to prayer 5 and 6, the plaintiff has satisfied the requirements of a prima facie case as well as irreparable loss and damage. Therefore the balance of convenience does not come into play.

As for costs under prayer 7, I will order that costs be in the cause, as the litigation herein is still in progress.

Consequently I allow the application and grant prayers 5 and 6. I order that the costs of the application be in the cause.

Dated and Signed at Garissa this 30th day of September 2015.

GEORGE DULU

JUDGE