[2020] KEHC 8063 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

COMMERCIAL & ADMIRALTY DIVISION

HCCC NO. 450 OF 2011

(CONSOLIDATED WITH HCCC NO. 476 OF 2015 AND HCCC NO. 637 OF 2015)

FAROUK RAVATE......................................................................................1ST PLAINTIFF

JUSTIN SAMOURGOMPOULLE...........................................................2ND PLAINTIFF

VERSUS

ERIC AGBEKO........................................................................................1ST DEFENDANT

PHILLIP NYAMBOK.............................................................................2ND DEFENDANT

SPIRE BANK (FORMERLY KNOWN AS

EQUATORIAL COMMERCIAL BANK LIMITED)..........................3RD DEFENDANT

RAVASAM DEVELOPMENT COMPANY LIMITED............... INTERESTED PARTY

JUDGMENT

1. “Pleadings are the pegs on which evidence hangs” observed Estcourt J in a paper “Pleadings Tips and Traps”. So, when pleadings delve into evidence and go beyond a statement of material facts which either found a cause of action or defence, then they make for difficult reading.

2. In this matter I have read 93 paragraphs of pleadings! The paragraphs themselves contain long subparagraphs. The pleadings are more of an outline of evidence than a statement of facts upon which the parties herein base their cause or causes of action or defence. This Court has no intention of going down that winded and somewhat confusing path.

3. Three suits were consolidated into one, these proceedings. They are:-

1. HCCC No. 476 OF 2015 Ravasam Development Company Limited V Spire Bank Limited( formerly Equatorial Commercila Bank limited) and another.

2. HCCC No. 637 OF 2015 Farouk Ravate and another v Eric Agbeko and 2 others.

4. Farouk Ravate (Ravate) and Justin Samourgompoulle (Justin) are businessmen who are residents of the Island of Reunion and are the Plaintiffs in this cause. Desirous of making property development in Kenya, the two made all sorts of inquiries and this led them to Eric Agbeko (Agbeko or the 1st Defendant). Ravate who was the more involved of the two eventually enlisted the help of Agbeko in the Kenyan venture. The parties do not agree as to what role Agbeko was to play and it is one of the issues to be determined by this Court.

5. However, there is common evidence that Ravate sent money into Kenya for the purchase of LR No. 2/186 situate off Elgeyo Marakwet Road within Nairobi (the suit property or land) and later to develop it. The purchase price was Kshs.71,500,000. 00 and China Young Tai Engineering Company Limited (China Young) was engaged to construct an office block on the suit land at an agreed sum of Kshs.535,000,000. 00. These sums were paid by Ravate.

6. The suit property was registered in the name of Ravasam Development Company Limited (the Interested Party or Ravasam). It is the case of the Plaintiffs that they were to be the sole directors and shareholders of Ravasam but were “astounded to discover” (their words) that Agbeko and Philip Nyambok (Nyambok or the 2nd Defendant) had been registered as the sole directors and shareholders of the Interested Party. They allege fraud. The Further Amended Plaint filed in Court on 4th April 2018 sets out the particulars of the alleged fraud.

7. It is not contested that on the suit property now stands an office block named “Elysee Plaza”. The Plaintiffs contend that the money sent by them for the construction of the property was sufficient to complete it. They are unhappy that the 1st and 2nd Defendants have saddled Ravasam with debt which was put into their personal use.

8. One debt of grave concern to the Plaintiffs is that allegedly advanced to Ravasam by Equatorial Commercial Bank Limited (ECB) now known as Spire Bank Limited (The 3rd Defendant or Spire). The Bank is said to have advanced and/or lent Ravasam as well as its agents/contractors a sum of Kshs.336,000,000. 00. The Plaintiffs complain that the lending was made notwithstanding their lawyers writing to the Bank notifying it of the supposed fraudulent actions of Agbeko and Nyambok and requesting that the accounts of Ravasam be frozen and that the disbursement of the first loan of Ksh. 190,000,000. 00 be withheld. It has turned out that the loan was nevertheless disbursed.

9. The Plaintiffs allege a fraudulent collusion between the 1st and 2nd Defendants on the one hand and the Bank on the other. Some of which is said to be that the Bank deliberately ignored numerous warnings of the Plaintiffs and their lawyers as to alleged fraudulent dealings with the suit property. Secondly, that of the Kshs.190,000,000. 00 allegedly advanced to Ravasam only a small portion of the amount went to the construction of Elysee Plaza. Others are:-

36M. The Defendants have fraudulently conspired together to ensure that the Plaintiffs claims are defeated prior to determination of the Main Claim.

PARTICULARS OF FRAUD AGAINST THE THIRD DEFENDANT

a) The Third Defendant, through its employees, deliberately ignored numerous warnings by the Plaintiffs and A & K as to fraudulent dealings with the suit property and proceeded to disburse the balance of the loan of Kshs.190 Million, purportedly for the construction of the office blocks, when its own records show that only a tiny fraction of this amount went towards the construction.

b) The Third Defendant refused to listen to the repeated warnings of A & K and insisted on disbursing the loan amount of Kshs.190 Million irregularly showing a possibility that some of its employees may have stood to benefit from sharing the same with the First and Second Defendants.

c) The Third Defendant independently and consciously entered into the CA Consent via its former advocate, but then conspired with the First and Second Defendants to flagrantly breach the same by allowing the continuous marketing of the Suit property for sale by the First and Second Defendants, condoning the letting of the suit property to tenants, and entering into a Deed of Assignment for the rental income in flagrant disregard and to the exclusion to the legitimate claims of the Plaintiffs.

d) The Interested Party’s loan account with the Third Defendant was flagged by the Third Defendant’s auditors due to the serious irregularities by its employees and the auditors applied a penalty of Kshs.50 Million around March 2014, which the Third Defendant unlawfully charged to the Interested Party account.

e) The Third Defendant, in fragrant breach of the CA Consent and the doctrine of lis pendens, advanced the Vakkep Loan and accepted a corporate guarantee from the Interested Party and purported to secure it against the suit property; and

f) The Third Defendant unlawfully appointed a receiver over the suit property when it was well aware that the terms of the CA Consent prevented it from doing so, the origins of the loan were fraudulent and the Mortgage document dated 13th September 2011 was not properly executed by the Interested Party and was therefore void.

10. In the end the Plaintiffs seek the following multiple orders:-

a) A declaration that the First and Second Plaintiffs are the true and rightful directors of the Interested Party;

b) An order striking out from the records of the Registrar of Companies, the names of the First and Second Defendants as directors of the Interested Party and replacing them with the First and Second Plaintiffs;

c) A declaration that the Third Defendant’s rights, if any, to the suit property are subordinate to the Plaintiffs prior claims as ultimate beneficial owners of the Interested Party.

d) A declaration that any legal charge that may have been created without the written instructions of the Plaintiffs over the suit property is void;

e) A declaration that the corporate guarantee by the Interested Party in favour of the Third Defendant, to secure the Vakkep Loan, is void;

f) A declaration that the Third Defendant’s right of recovery in relation to the Loan or in respect of the Vakkep Loan, or any other claims it may assert in relation to the construction, development and/or use of the suit property, lie as against the First and Second Defendants personally and not against the Plaintiffs, Interested Party or its assets.

g) A permanent injunction be issued to restrain the Defendants whether by themselves, their agents, employees, assigns, servants or otherwise howsoever and any persons whatsoever from selling, disposing of, charging, pledging, diluting, dealing, interfering with and/or intermeddling in any manner whatsoever with;

i. The Interested Party’s Company’s property known as L.R Number 2/186, situated off Elgeyo Marakwet Road within Nairobi’s Kilimani area (“the suit property”);

ii. The shares and shareholding in and of the Interested Party Company;

iii. All other properties, funds and assets belonging to the Interested Party Company;

Or otherwise disposing of the Interested Party’s Company properties or interest in properties of any description and whatever situated.

h) A permanent injunction be issued to restrain the Defendants whether by themselves, their agents, employees, assigns, servants or otherwise howsoever and any persons whatsoever from withdrawing or otherwise dealing with the Interested Party’s bank account with any bank;

i) A permanent injunction be issued to restrain the Defendants whether by themselves, their agents, employees, assigns, servants or otherwise howsoever from issuing, allotting or transferring any shares in the Interested Party or causing or permitting any shares in the Interested Party to be issued, allotted or transferred or otherwise dealt with without the consent of the Plaintiff.

j) An order requiring the First and Second Defendants to account for all the monies, assets, and property that they have unlawfully misappropriated from the Interested Party;

k) A mandatory injunction do issue to compel the First and Second Defendant to transfer all shares held by the First and Second Defendants to the First and Second Plaintiffs through their companies Heaven Heights Properties Limited and BDI Ocean Indien respectively or to the direction of the First Plaintiff within 30 days pursuant to the Defendant’s signed declaration of trust, failing which the Registrar of Companies do make the necessary share transfers;

l) A permanent injunction preventing the Third Defendant whether by itself, its agents, employees, assigns, servants or otherwise howsoever from enforcing the void legal charge over the suit property whether by sale or appointment of a receiver or otherwise;

m) A permanent injunction preventing the Third Defendant whether by itself, its agents, employees, assigns, servants or otherwise howsoever from enforcing the void corporate guarantee issued by the Interested Party in favour of the Third Defendant.

n) An order requiring the Defendants to account to the Plaintiffs for their occupation and use of the suit property and any monies earned in relation to the same, including full particulars of the rental income derived;

o) An order of restitution of all documents, agreements, monies, assets, accounts, or any other property unlawfully taken from the Interested Party by the First and Second Defendants;

p) An order to refund the Kshs.50 Million penalty that the Third Defendant was to pay following its auditor’s finding of serious irregularities by its employees, which funds were unlawfully charged form the Interested Party’s account.

q) Damages in respect of the First and Second Defendant’s breach of trust and fraud;

r) Damages in respect of the Defendants’ fraudulent conspiracy against the Plaintiffs;

s) Interests in (o) and (p) above from the dates when the monies were deducted from the Interested Party’s account and or when they were misappropriated to the disadvantage of the First and Second Plaintiffs and or the Interested Party until payment in full;

t) Interests in (q) and (r) above at Court rates from the date of delivery of judgment until payment in full.

u) Such other relief as the Court may deem just to grant; and

v) Costs and interest.

11. Agbeko, Nyambok and Ravasam filed a joint Amended Statement of Defence dated 12th July 2018. They state that neither of the Plaintiffs have been shareholders or directors of Ravasam. That having been introduced to Ravate by one Bouffier Gerald Henry Clement (Clement), Ravate, Justin, Clement, Agbeko and Nyambok agreed that a special purpose vehicle in the nature of a limited liability company be registered for the purpose of holding and developing L.R. No. 2/186. At that time, it was understood by the parties ,that the role of Ravate and Justin were to be part financiers of the project. Agbeko, Nyambok and Ravasam hold that the Plaintiffs were not and are not commercially interested and invested parties in the development of the suit property.

12. In this regard, the case of Agbeko and Nyambok is that Ravate and Justin were categorical, right from the incorporation of Ravasam, that their names were not to appear as shareholders or directors of Ravasam for the reason that they did not want to attract taxation on their investment in Kenya. The details of the circumstances surrounding incorporation are discussed in detail later in this decision.

13. Agbeko, Nyambok and Ravasam pray as follows as against the Plaintiffs:-

1. A declaration that there was no fraud or impropriety or conspiracy in the registration of the 1st and 2nd Defendant as shareholders and directors of the 3rd Defendant Company; management and appropriations Interested Party or Plaintiffs funds and dealing or transacting in the subject matter.

2. An enquiry as to damages occasioned to the Defendants or such of them as the Hon. Court may deem deserving and resulting from the subsistence of the orders obtained ex parte.

3. That the Court do order the parties to agree on the shareholding and stakes of each party in the Interested Party failure to which the parties to make submissions of the same for the Court to render a decision.

4. Damages in favour of the 1st and 2nd Defendants for defamatory and insults hurled at the Defendants over allegations of fraud, conspiracy, embezzlement and siphoning of monies.

5. Dismissal of the Plaintiffs’ suit with costs.

14. As against the Bank, Agbeko, Nyambok and Ravasam allege that a Charge dated 13th September 2011 registered in favour of the Bank over the suit land is void and unenforceable because it was not executed in accordance with the provisions of the Memorandum and Articles of Association of Ravasam. It is alleged that no resolution authorizing the creation of the charge was made.

15. On another but connected front, an allegation is made that the security document was not executed by directors of Ravasam. In this regard it is alleged that one Lorenzo Makonnen(Lorenzo) who is neither a director nor secretary of the company or authorized to act for the Company purportedly executed the Charge.

16. In addition, that the Bank has levied exorbitant, illegal and non-contractual charges and penalties. Two instances of the alleged illegality can be stated. First, that in March 2014, the Bank charged a penalty of Kshs.50,000,000. 00 without explanation. Second, that the 3rd Defendant debited the Company account with Kshs.156,300. 000. 00 which was allegedly paid to Vakkep Building Contractors Limited(hereinafter the Vakkep facility).

17. On the basis of a supposed default, which is contested by Ravasam, the Bank appointed Ponangipalli Venkata Ramana Rao (Rao) as a receiver over the suit property. This would be in exercise of power granted to the Bank under the terms of the Charge. Ravasam avers that the appointment was made in bad faith, is unlawful, oppressive and premature.

18. What about the case for the Bank? It states that on 17th August 2011 it entered into a credit agreement with Ravasam in which it was to lend Ravasam a term loan to finance part completion of a commercial building on the suit land. That during the period between the year 2012 and 2014, the Bank advanced and/or lent Ravasam as well as Ravasam’s agents/contractors a sum of Kshs.336,000,000. 00. As part security of that facility, a Charge over the suit land was created in favour of the Bank.

19. The Bank contends that Ravasam defaulted in repayment of the loan and owes it Kshs.937,843,211. 00 as at 14th May 2018 which it seeks to realize.

20. As to the legality of the Charge, the Bank states that if indeed the charge instrument was signed by a non-director then that was a fraud perpetrated by Ravasam. It is said that Ravasam misrepresented Lorenzo as being a director and allowed him to sign a mortgage meant to secure Kshs.180,000,000. 00 to be advanced by the Bank. Ravasam is assailed for obtaining this facility on the basis of a fraud and this Court is asked to find that the claim by Ravasam falls foul of the principle of ex turpi causa non oritur actio ("from a dishonourable cause an action does not arise")

21. In a Counterclaim dated 19th February 2016 made in HCCC 476 of 2016 the Bank seeks the following orders:-

a) A declaration that the Mortgage and Variation of Charge are valid.

b) Judgment as against the Plaintiff in the sum of Kshs.700,341,287. 56.

c) Compound interest on the of Kshs.700,341,287. 56 from 14th December 2015 until the date of payment in full.

cc) In the alternative and without prejudice to the foregoing, an order directing the Plaintiff to execute a Valid Charge in favour of the 1st December in respect of the property known as L.R. No. 2/186-Elysee Plaza.

d) Costs of the Counter-Claim

e) Any other relief which the Court may deem fit to grant.

22. Each party proposed separate issues for determination. This Court has looked at those proposals against the pleadings filed and curves out the following for determination: -

i. Do the 1st and 2nd Defendants hold shares in Ravasam in trust for the Plaintiffs?

ii. If so, is the Trust sustainable in law?

iii. If the answers to (i) and (ii) above are in the affirmative, is the claim by the Bank sustainable in view of the notice of 4th October 2011 by the Plaintiffs?

iv. Is the Charge over the suit property defective, null and void and if so what is the effect of the Charge?

v. If the facility to Ravasam is lawful, is the Bank guilty of levying unlawful, exorbitant or otherwise uncontractual charges on the facility?

vi. What are the appropriate orders to make?

Of the relationship between the Plaintiffs and the 1st and 2nd Defendants.

23. It is acknowledged by the competing sides that Ravate and Justin (or at least Ravate) invested at least Kshs.606,500,000. 00 both in the purchase of the suit property and its development. This without doubt is a substantial investment. It is also common cause that the suit property is registered in the name of Ravasam. So are the Plaintiffs the real owners of Ravasam or simply financiers as alleged by the 1st and 2nd Defendants?

24. Although there was lengthy evidence as to how Ravate and Agbeko met, this Court would think that for purposes of resolving the first issue, the circumstances surrounding the incorporation of Ravasam are illuminating. In his written testimony to Court, Agbeko states as follows:-

27. It has always been understood by the interested participants in the proposed development on L. R No. 2/186 that the 1st and 2nd Plaintiffs’ role in the project was as financiers and remain as such as they have in a nutshell attempted to demonstrate in the heavily worded Further Amended Plaint. (Captured in the Statement of Mr. Bouffier Gerald Henry Clement)

28. The 1st Plaintiff has admitted the 1st Defendant’s involvement in the promotion of the Interested Party.

29. The agreement of the parties led to the incorporation of the Interested Party with its shareholding and directorship as it is and the Plaintiffs cannot feign ignorance.

30. The 1st and 2nd Plaintiffs were categorical from the commencement of the incorporation of the Interested Party that they did not want to have their names appear as shareholders or directors of the Interested Party and expressly instructed so to their advocates citing the issue of taxation in their home country.

25. But then again he stated that:-

32. The Plaintiffs had intended to hold his shares through companies incorporated in Mauritius called Heaven Heights Properties Limited and BDI Ocean Indien. The Plaintiffs hesitated to execute the memorandum and articles of association yet the sale and purchase transaction with respect to L. R No. 2/186 was ongoing.

26. Agbeko presses that he and Nyambok executed a document of 22nd July 2008 referred as “acknowledgment as to shareholding” (P exhibit page 7) because Ravate asked for it so as to explain the purpose of transferring large sums of money to Kenya to his bankers in Mauritius. More shall be said about this document.

27. Ravate does not doubt that he and Justin are the true owners of Ravasam and in fact explains that the name of the company combines the first three letters of his surname (Ravate) and the first three of those of Justin (Samourgompoulle). It was his evidence that he expressly instructed his advocate, then one Koech, to incorporate the Company with him and Justin as the only directors and shareholders. Yet this evidence not quite in tandem with the contents of his email of 18th July 2008 (D. Exhibit in page 3) to Koech in which he instructs the advocate to proceed with incorporation using nominees. See the written authority to the Advocate of 18th July 2008 (P. Exhibit 5 & 6) duly signed by the two Plaintiffs ;

AUTHORITY TO REGISTER RAVASAM

DEVELOPMENT COMPANY LIMITED USING NOMINEES

We, Ravate Farouk and Samourgompoulle Justin hereby authorize Mr. Philemon Koech, Advocate of KIPKENDA, LILAN & KOECK ADVOCATES to register Ravasam Development Company Limited using such two nominees as the said firm shall appoint. That the said Nominee will hold 1 share each for purposes of registration only and that they shall sign Transfer forms for the said shares in our names RAVATE FAROUK and SAMOURGOMPOULLE JUSTIN

Dated at L,il de la ReUnion this 18th day of July 2008

Signed by:

RAVATE FAROUK

SAMOURGOMPOULLE JUSTIN

28. Ravate states that Agbeko was only an employee of the company hired at a salary of Kshs.50,000. 00 per month. In this regard, is a contract of service dated 28th April 2009 (Plaintiff exhibit Pages 58-59) in which Agbeko is described as an employee of Ravate to provide coordination, supervisory and related services to the employer in respect of the project. The project being the construction of Elysee Plaza.

29. In cross-examination and consistent with his client’s case, counsel for Agbeko and Nyambok suggested to Ravate that the “acknowledgment of shareholding” was merely to be used for purposes of bringing the funds into Kenya. He responded;

“All that I am confirming is that all these(sic), I sent all this money and this document was given to me by my Advocate”.

30. This Court is unable to find that this important document was to be used by the Plaintiffs as a document of evidence to his bankers merely for purposes of processing the transfer of funds into the country. The evidence is not sufficiently cogent. Further, while Agbeko and Nyambok suggest that the nominee arrangement was a ploy by the Plaintiffs to evade payment of tax in their place of residence being the Island of Reunion, the Defendants led no evidence to this effect and no serious effort, if any, was made to extract a concession of that nature from Ravate. The allegation against Ravate and Justin was that the two were engaged in tax evasion (a crime) and which required proof to the standard required by law. Higher than a balance of probability yet not beyond reasonable doubt. This threshold was not met by the 1st and 2nd Defendants.

31. That leaves the acknowledgment of shareholding unscathed. The law is that in the absence of fraud or rectification or such like circumstances, Agebko’s oral evidence cannot be admitted to add to or vary a contract, deed or other written instrument (See for example the decision of Khamoni J in Housing Finance Company of Kenya Limited v Palm Homes Limited & 2 others [2002]2 KLR referred to this Court by Counsel for the Plaintiffs). This court reaches a conclusion that the acknowledgment meant what it said and it is the duty of this Court to uphold the intention of the makers which is explicitly and readily revealed therein. For good measure I reproduce it:-

ACKNOWLEDGMENT AS TO SHAREHOLDING

We, ERIC AGBEKO GHANIAN PASSPORT NUMBER H097885 of Post Box Office Number 46937 Nairobi and PHILIP NYAMBOK ID No. 0300788 of Post Box Office Number 46937 Nairobi do hereby confirm that we are holding one share each in RAVASAM DEVELOPMENT COMPANY limited in trust for MR. FAROUK RAVATE and MR. JUSTIN SAMOURGOMPOULLE of Reunion Islands, Republic of France or any entity that they will incorporate.

We further affirm that we have no other claim to any shares in RAVASAM DEVELOPMENT COMPANY LIMITED other than as such trustees or unless otherwise directed by the said MR. FAROUK RAVATE and MR. JUSTIN SAMOURGOMPOULLE

Dated at Nairobi this 22nd day of July 2008

Signed by the said:

ERIC AGBEKO

And

PHILIP NYAMBOK

32. Agebko and Nyambok declare that they hold one share each in Ravasam as trustees of Ravate and Justin. In addition, that they claim no personal shares in the Company. Yet, I am told by the Defendants that for what it is worth that document is of no significance in law because it infracts statute and the Memorandum and Articles of the Company.

33. Now, at the time of the making of the document and incorporation of Ravasam, the operative law in regard to company matters was the repealed Companies Act (Chapter 486). For that reason, the document and circumstances under which it was made must be interrogated against the provisions of the retired statute.

34. The Defendants point to Sections 119 and 120 of the Act for the argument that the document is of no consequence as it cannot confer upon the Plaintiffs any interest in the Company. This invites the Court to examine the true purport of these two provisions. As I turn to do so I note that Counsel did not give this rather decisive matter the type of attention it may have required and the Court has had to do some research on its own.

35. Section 119 reads as follows:-

S. 119. Trusts not to be entered on register.

No notice of any trust, expressed, implied or constructive, shall be entered on the register, or be receivable by the registrar.

36. This Court observes that the remarks of Akiwumi JA in Vadag Establishment v Shretta EALR [2001]2 EA 574(CCK) are often quoted when the provision is under consideration. There the Judge said;

“Vadag Establishment, it was alleged by Yashvin Shretta, held its shares in trust for Zorba Ltd, whilst Numised AG held half of its shares in trust for Zorba Ltd and the other, half in trust for Patcham Holding Ltd. The point to be made here is that the fact that Vadag Establishment and Numised AG held shares in trust for Zorba Ltd and Patcham Holding Ltd, who were not contributories to the Company did not make them shareholders of the Company as to qualify them to be parties not only, to the petition but also, to the alternative remedy that were adopted in place of petitions and whereby, the petition as such was rejected. … Similarly, S.119 of the Companies Act reiterates the lack of legal standing of the beneficiaries of trusts for the purpose of the Companies Act, under which the petition was instituted and the order for the alternative remedy….”

37. The brief facts in that case are that a contributory of a company had petitioned for its winding up. It was common cause that the other registered contributories held shares in trust of some beneficiaries. The issue that attracted the holding by the Judge was whether the beneficiaries whose names did not appear in the register of members could be parties to the winding up petition. That was the context in which the Learned Judge made his observations.

38. In commenting on the provisions of Section 126 of the UK Companies Act 2006 whose wording is all but our provisions, the Authors of Halsbury’s Laws of England Volume 14 Fifth Edition state;

“Although a member, to the company, is merely a trustee (or legal Mortgagee) of shares registered in his name, he is liable to the company for calls and other obligations of membership, and this liability is not limited to the amount of the trust estate. He is, however, entitled to be indemnified against all such liabilities by the beneficiary, but he cannot maintain a claim to enforce this right, unless the liability has been or is about to be enforced against him. The right of indemnity may be assigned to the liquidator of the company, and enforced by him”.

39. In Palmer’s Company Law Manual it is observed;

“There is nothing to prevent trustees from becoming members of a company but the CA 1985, S.360 provides that no notice of any trust – express, implied or constructive – may be entered on the register of any company registered in England and Wales. The rationale behind the rule (which does not apply is Scotland) is that the relationship between trustee and beneficiary is of no concern to the company which should be entitled to assume that it can deal solely with the registered holders.

In all these cases (in English law, but not in Scots Law) the trustee as registered holder will be personally responsible for all matters and liabilities arising in respect of the shares although he will in turn be entitled to an indemnity from the beneficiaries. An English company’s rights as against the trustee are not therefore limited to the trust property”.

40. To be gleaned from the decision and commentaries is that even where the company is aware that a registered member holds a share as a trustee, the member is not absolved from the responsibilities, obligations or liabilities that accrue from membership. Nevertheless, the trustee member is entitled to indemnity against liabilities by the beneficiary. In addition, and this is from the decision, the beneficiaries lack legal standing to institute petitions or such like proceedings under the repealed Companies Act against the Company, a preserve of registered members. However, nothing in the three passages I have set out suggests that the effect of this provision is to outlaw or bar trust arrangements in regard to shares in a company. Quite to the contrary, it recognizes that they may exist but that rights of the beneficiaries as against the Company (and perhaps against third parties as I shall be proposing) are circumscribed because no notice of such Trust is to be entered in the register of members. This leads to another matter.

41. Section 119 and 120 are found under the part of the Act dealing with “Register of Member”. The register of members is prima facie evidence as to the membership of a company. This in fact is the import of Section 120 of the Act which provides;

“S.120. Register to be evidence

The register of members shall be prima facie evidence of any matters by this Act directed or authorized to be inserted therein.”

42. In my view one policy objective of Section 119 when read with Section 120 is that members of the public and any third party dealing with a company must be deemed to deal with the company on the basis of membership of the company as reflected in the registry and will not be required to look beyond the information in the register to find out whether Trusts exist and if so their nature. In that sense the two provisions, construed together, protects third parties against claims based on a Trust of which they do not have notice.

43. That said, the provisions of Sections 119 and 120 cannot be read as invalidating a Trust arrangement entered by a registered member with a beneficiary. The Trust arrangement although not enforceable as against a third party who has no knowledge of it or the company remains valid between the parties and is enforceable as between the Trustee and Beneficiary. The arguments around Sections 119 and 120 of the repealed statute cannot aid the 1st and 2nd Defendants in invalidating the Trust arrangement between them and the Plaintiffs.

44. I turn to another related argument put forward by Agbeko and Nyambok. The Court is told that the trust arrangement is in breach of the Memorandum and Articles of Association of Ravasam and this Court was, in this regard, asked to follow the decision in Pioneer General Assurance Society Ltd & 4 Others v Aulfikarali Nimji Javer & 3 Others [2008] eKLR. This Court has looked at the Memorandum and Articles of Association of Ravasam but would also be alive to the provisions of Section 11 of the repealed act which provided;

“S. 11. Adoption and application of Table A

(1) Articles of association may adopt all or any of the regulations contained in Table A.

(2) In the case of a company limited by shares and registered after the

commencement of this Act, if articles are not registered, or, if articles are registered, in so far as the articles do not exclude or modify the regulations contained in Table A, those regulations shall, so far as applicable, be the regulations of the company in the same manner and to the same extent as if they were contained in duly registered articles.”

45. Article 1 of the Articles of Association of the Company reads:-

“Subject as hereinafter provided the Regulations contained in Part 1 of Table “A” in the First Schedule to the Companies Act (hereinafter referred to as Table “A”) shall apply to the Company”.

46. While the articles have excluded certain regulations from the template articles of the schedule, Regulation 7 on trusts is neither excluded nor modified. It is therefore part of the rules of the Company. That Regulation states;

“7. Except as required by law, no person shall be recognized by the company as holding any share upon any trust, and the company shall not be bound by or be compelled in any way to recognize (even when having notice thereof) any equitable, contingent, future or partial interest in any share or any interest in any fractional part of a share or (except only as by these regulations or by law otherwise provided) any other rights in respect of any share except an absolute right to the entirety thereof in the registered holder.”

47. What is to be made of this article? I would think that this article supplements the provisions of Section 119 and the following passage from Halsburys aptly sets out the scope of that regulation;

“Where a company’s articles of association supplement the statutory provision by expressly providing that the company is entitled to treat a shareholder as the absolute owner of his registered shares, and is not to be bound to recognize any equitable interests, and such notices do not affect the company or its officers or agents with any trust, but, where the company in which the shares are held claims to have a lien or charge on the shares for its own benefits, the company is liable to be affected with notice of the interests of third parties, and the provisions of the articles will not protect the company if, in the face of notice that the shareholder is not the beneficial owner of the shares, it makes advances or gives credit to the shareholder”.

48. Again other than limiting the rights of the beneficiary as against the Company, it does not bar the holding of a share upon a trust. The fact that a company does not recognize a person holding a share upon a trust and treats a registered shareholder as the absolute owner of his shares does not mean that it does not allow its members to enter trust relationships. As a corollary it does not mean that a trust arrangement is not enforceable as between the contracting parties.

49. What about Article 9(1)? It reads:-

9(i) A share may be transferred by a member or other person entitled to transfer to any member selected by the transferor; but save as aforesaid, and save as provided by sub-Article (vi) or (viii) hereof, no shares shall be transferred to a person who is not a member so long as any member (or any person selected by the Directors as one whom it is desirable in the interests of the Company to admit to membership) is willing to purchase the same at the fair value.

50. Article 9(1) bars transfer of shares to a non-member before the preemptive rights of a member are exhausted. An argument can be made that in so far as the Company does not recognize a person as holding any share in trust, then a Trustee attempting to transfer shares he holds in trust to its true owner will not be permitted to circumvent the provisions of Article 9(1). However, in the matter at hand the beneficiaries to all the shares of the Company seek the Courts intervention to enforce the trust deed and to have their ownership registered in place of the Trustees. As there are no other registered members than Agbeko and Nyambok, Article 9(1) cannot be invoked.There is no other member to call the right of pre-emption.

51. There is yet another argument set up by the 1st and 2nd Defendants. It contended that under Section 29 (1) of the repealed Act a body corporate cannot be a member of a company in which it is a holding company. This argument is made in the context that on instructions of Ravate and Justin, Agbeko and Nyambok had executed notices of transfer of the shares they held in Trust to two Companies nominated by Ravate and Justin, namely Bdi Ocean Indien and Heaven Heights Properties Limited( Plaintiffs Exhibit Pages 23 to26).

52. Section 29(1) of the repealed statute reads-

[29] Membership of holding company

(1) Except in the cases hereafter in this section mentioned, a body corporate cannot be a member of a company which is its holding company, and any allotment or transfer of shares in a company to its subsidiary shall be void.

53. The implication of this law cannot be fully understood without reflecting on the meaning of a holding company. The meaning of holding company and subsidiary is given in Section 154 of the said Act and reads;

154. Meaning of “holding company” and “subsidiary”

(1) For the purposes of this Act, a company shall, subject to the provisions of subsection (3), be deemed to be a subsidiary of another if, but only if—

(a) that other either—

(i) is a member of it and controls the composition of its board of directors; or

(ii) holds more than half in nominal value of its equity share capital; or

(b) the first-mentioned company is a subsidiary of any company which is that other’s subsidiary.

(2) For the purposes of subsection (1) the composition of a company’s board of directors shall be deemed to be controlled by another company if, but only if, that other company by the exercise of some power exercisable by it without the consent or concurrence of any other person can appoint or remove the holders of all or a majority of the directorships; but for the purposes of this provision that other company shall be deemed to have power to appoint to a directorship with respect to which any of the following conditions is satisfied, that is to say—

(a) that a person cannot be appointed thereto without the exercise in his favour by that other company of such a power as aforesaid; or

(b) that a person’s appointment thereto follows necessarily from his appointment as director of that other company; or

(c) that the directorship is held by that other company itself or by a subsidiary of it.

(3) In determining whether one company is a subsidiary of another—

(a) any shares held or power exercisable by that other in a fiduciary capacity shall be treated as not held or exercisable by it;

(b) subject to paragraphs (c) and (d), any shares held or power exercisable—

(i) by any person as a nominee for that other (except where that other is concerned only in a fiduciary capacity); or

(ii) by, or by a nominee for, a subsidiary of that other, not being a subsidiary which is concerned only in a fiduciary capacity, shall be treated as held or exercisable by that other;

(c) any shares held or power exercisable by any person by virtue of the provisions of any debentures of the first-mentioned company or of a trust deed for securing any issue of such debentures shall be disregarded;

(d) any shares held or power exercisable by, or by a nominee for, that other or its subsidiary (not being held or exercisable as mentioned in paragraph (c)) shall be treated as not held or exercisable by that other if the ordinary business of that other or its subsidiary, as the case may be, includes the lending of money and the shares are held or power is exercisable as aforesaid by way of security only for the purposes of a transaction entered into in the ordinary course of that business.

(4) For the purposes of this Act, a company shall be deemed to be another’s holding company if, but only if, that other is its subsidiary.

(5) In this section, “company” includes anybody corporate, and “equity share capital” means, in relation to a company, its issued share capital excluding any part thereof which, neither as respects dividends nor as respects capital, carries

any right to participate beyond a specified amount in a distribution.

54. If this Court were to grant Ravate and Justin their wish then each of the two nominee companies will hold equal shares in Ravasam. The result being that Ravasam cannot be the subsidiary of either of them because neither company would have a controlling share on Ravasam. That outcome does not breach the provisions of Section 29.

55. I turn to the one other aspect in regard to first issue. Perhaps sensing that he could not entirely defeat the claim by the Plaintiffs, Agbeko stated;

87. That the payment of stipends as a Director of the Interested Party is a matter of right and not favour. Our interest over the suit property pursuant to the understanding between the parties is beyond being mere employees. That is the bitter truth that the Plaintiffs are, albeit in vain, trying to renege.

88. The relationship between us and 1st Plaintiff is commercial in nature and we have significant commercial interest in the Interested Party.

89. That the shareholding division of the Interested Party has never been agreed or attempted to be agreed as between the various interested parties and without inviting this Court to address or mediate over the issue, this suit is an abuse of the Court process.

56. On the evidence, neither Agbeko nor Nyambok have satisfied the Court that they made any financial contribution to Ravasam. Yet even if they had, they have not demonstrated that it was with the authority of Ravasam, Ravate and Justin or that the three acquiesced to such contribution. Any contribution would have to be gratuitous.

OF THE CLAIM BY THE BANK

57. On 14th July 2011, the board of directors of Ravasam resolved to borrow the sum of Kshs.200,000,000. 00 from ECB (3rd Defendants Document Pages 027&028). Subsequently, Ravasam applied for that facility and on 2nd August 2011, ECB acceded to the request but for a lesser sum of Kshs.180,000,000. 00 (3rd Defendants Documents Pages 013 & 028). A credit Agreement was entered between the two on 18th August 2011 (3rd Defendants Documents Pages 042 to 052). A term of the letter of offer was that as part security for the facility, a mortgage would be registered over the suit property in favour of ECB and a mortgage was duly prepared and registered on 6th October 2011 (See 3rd Defendants Document Page 053-073).

58. It is common ground that on 5th October 2011 (3rd Defendants Document Pages 155 & 156), the firm of Anjarwalla and Khanna Advocates wrote a letter to ECB on behalf of Ravate informing the Bank that Agbeko and Nyambok held the shares in Ravasam in trust of its clients. This is an important letter and is reproduced herein;

Anjarwalla and Khanna Advocates,

5th October 2011

Equatorial Commercial Bank,

NAIROBI

Attn: Ms Susan Ndungu/Thiaka Njuguna

Dear Sirs

Ravasam Development Company Limited (“the Company)

We act for Mr. Farouk Ravate (our ‘Client’) and refer to the above matter.

Please find enclosed a declaration of trust signed by Mr. Eric Agbeko and Mr. Philip Nyambok confirming that they are holding their shares in the Company on trust for our client.

It has come to our client’s attention that Mr. Agbeko and Mr. Nyambok have not only acted in breach of their duties as trustees but also in our view acted fraudulently including producing banking facilities with Equatorial Commercial Bank. We are instructed to take all necessary actions to ensure that Mr. Agbeko and Mr. Nyambok are removed from acting on behalf of the Company including instituting proceedings in Court against them.

Accordingly we are putting Equatorial Commercial Bank on notice and require that you immediately freeze the Company’s bank accounts. If you have advanced any monies to Mr. Agbeko and/or Mr. Nyambok using the company’s assets as security any such loans would have in our view been entered into fraudulently and consequently we expect that you freeze such payments immediately.

Note that our client will hold Equatorial Bank responsible for any loss and damage that our client incurs on account of Equatorial Commercial Bank’s failure and/delay in freezing the accounts.

Yours faithfully

Zul Alibhai

For: Anjarwalla and Khanna

59. On the date of the letter the Bank had already issued the letter of offer, executed the credit agreement and the mortgage instrument. Although it would appear that the mortgage itself was registered a day after the lawyer’s letter on 6th October 2011. In the letter of 5th October 2011, the lawyers for the Plaintiff ask ECB to freeze the accounts of Ravasam and to desist from making any further payments. It turns out that by this date ECB had already paid out Kshs.14,305,666. 15 to the Company.

60. It is now common cause that the remainder of the loan was disbursed either directly to Ravasam or to the order of Ravasam under the control of Agbeko and Nyambok. I say common cause because, although the Counsel for the Plaintiffs and the 1st and 2nd Defendants extensively questioned the Bank’s witness on how the loan was disbursed, Ravate had in his written statement of 5th May 2018 expressed stated that;

“However, in actual sense, the thir (sic) Defendant only issued a loan of Kshs.180,000,000. 00”.

61. As for Agbeko, he states as follows in his statement of 4th October (perhaps September)2018 and filed on 6th September 2018;

“The Interested Party sought and successfully obtained credit from Equatorial Commercial Bank in the sum of Kshs.180,000,000. 00 for the completion of the stalled works over the suit property and the said works were under the watch and supervision of a team of professional construction Consultants”.

62. In the face of such express admissions, Ravate, Justin, Agbeko, Nyambok and Ravasam cannot be permitted to approbate or reprobate on whether the loan was actually advanced by the Bank.

63. The significance of Sections 119 and 120 of the repealed Companies Act then becomes apparent. There is no evidence that by the time ECB entered into the credit agreement with Ravasam, it was aware that Agbeko and Nyambok held the directorships and shares only as Trustees. ECB did not have notice of the trust arrangement and even if it disbursed a substantial portion of the loan after receiving the notice, there was already a contract between Ravasam and the Bank in terms of the credit agreement and the Bank was obliged to perform its obligation under the contract. When Ravate and Justin nominated Agbeko and Nyambok to hold their shares and directorship, they would have been or should have been aware that this type of arrangement is fraught with risk. Ravate and Justin cannot therefore prejudice a third party only because they did not authorize or sanction the actions of their two nominees. As the third party (the Bank) had no notice of the Trust arrangement, then Ravasam is liable to it. In respect to the contracts entered prior to the notice, Rasavam is liable to the Bank. Ravate and Justin made their bed and must lie on it. For this reason, the Plaintiffs cannot impeach the grant of the first facility on this ground and indeed reading the prayers in their pleadings, I see no attempt to do so. Perhaps a recognition by the Plaintiffs themselves that on this facility a challenge on this ground is on quicksand.

64. What, however, the Plaintiffs sought to question is the legality of the Charge. They seek that it be declared void as it was taken without the written instructions of the Plaintiffs. On this they are joined by Agbeko, Nyambok and Ravasam but for a different reason. The three state that the Charge was unlawful because it was signed by a stranger, one Lorenzo.

65. Let me examine the latter argument first. It is true that Lorenzo was not a director of Ravasam at the time he signed the charge document. But emerging from the evidence of Agbeko is that Lorenzo was a director of Bear Afric (k) Ltd which claimed to be a partner of Ravasam See (Board resolution of Bear Afric dated 27th July 2011 – 3 Defendants Exhibit page 029). Indeed in this resolution Bear Afric states that it will support Ravasam in the “payment of interest payable in the first 12 months of the loan of Kshs.190,000,000. 00 from Equatorial Commercial Bank of Kenya”.

66. In the course of cross-examination of Agbeko by Mr. Muchiri for the Bank, Agbeko made some very telling revelations. Agbeko knew Lorenzo as he was a director of Bear Afric (k) Ltd a company said to be a partner of Ravasam. At the time the charge was taken, Nyambok was unwell having suffered from a stroke, a fact well known to Agbeko. As to how he came to sign the Charge, Agbeko gave a somewhat evasive answer. He said he was unable to explain as he had travelled and could not quite tell in what circumstances Lorenzo signed.

67. But it cannot be gainsaid that Agbeko was at the center of negotiating the facility with the Bank and one of the conditions was that a Charge over the suit property would be taken. He knew or ought to have known about Article 22 0f the Articles of the Company which reads;

“The seal shall not be affixed to any instrument except by the authority of a resolution of two Directors or at least one Director and the Secretary on some other person approved by the Board, and the Directors or the Director and the Secretary or the other person as the case may be, shall sign every instrument to which the seal is so affixed in their presence”.

68. I have to find that Agbeko was well aware that, in addition to himself, some other person, and not Nyambok who was unwell, had signed the Charge. That person was Lorenzo. The Company (under the control of Agbeko and Nyambok) had represented to the Bank that Lorenzo was a director of the Company or was otherwise duly authorized by the Company to execute the charge. Ravasam cannot draw an advantage from the actions of the misconduct of its own directors. The principle of ex turpi causa non oritur actio (Latin for "from a dishonorable cause an action does not arise") continues to endure as legal doctrine that frowns upon such a stance. The Court has little hesitation in agreeing with the lawyers for the Bank that Ravasam cannot set up the argument of a defective charge when it was not only substantially responsible for the defect but also benefitted from funds advanced on the basis of the charge.

69. As to the attempt by Ravate and Justin to disown the charge for lack of authority, I have already held that at the time the charge was taken Agbeko and Nyambok were the registered members and directors of Ravasam and the company was therefore bound by the actions of the two. Related, while the Charge was registered a day after the disclaimer notice, the notice came after the facility letter and credit agreement had been duly executed by the contracting parties. In so far as the registration of the Charge was one of the conditions under the agreement, perfection of the security had to proceed in spite of the warning letter. On this occasion the letter had come a moment too late.

70. Is Ravasam nevertheless bound by any facilities granted and contracted after the unequivocal notice of 5th October 2011? I would think that from then on the Bank was fully knew aware that the Plaintiffs had a claim of ownership and directorship of Ravasam and that Agbeko and Nyambok were incurring further debt to Ravasam without authority of the possible real owners, in fact contrary to their instructions. If the Bank granted any facilities after the date of the Notice, then it would be doing so at its own peril.

71. To be noted, and this is not insignificant, is that as early as 11th November 2011, the Bank applied to be joined as an interested party in this suit (450 0f 2011). In the Summons of 11th November 2011 seeking joinder, the Bank justified the need to participate in the proceedings on grounds, inter alia, that the orders sought by the Plaintiffs relate directly to and affected its rights over the suit land. It was more than ever before alive to the fact that ownership of Ravasam was in dispute and had even escalated to litigation with the possible outcome that the Plaintiffs claim will prevail of over that of Agbeko and Nyambok. That notwithstanding, the Bank proceeded to grant further facilities to Ravasam on the urging of Agbeko and Nyambok. Now that the Court has reached a decision that the real owners of the Company are the Plaintiffs, the inevitable holding of the Court is that Ravasam is not liable for the facilities made or granted on the strength of agreements entered after 5th October 2011. These include the guarantee of Ksh 219,494,010. 25 to Vakkep and the restructuring arrangements.

72. In doing so I have had to consider whether there is any merit in the proposition by Counsel for the Bank that the Plaintiffs have no cause of action against the Bank. An argument that the two are not Ravasam and that by dint of Sections 119 and 120 of the Repealed Act their beneficial ownership of the company could not be registered in law. For this argument the Bank relies on a passage in the decision of Lord Wrenbury in Northern Assurance Co Ltd [1925] All ER 51 where he stated;

“This appeal maybe disposed of by saying that the corporator, even if he holds all the shares, is not the corporation, and that neither he nor any creditor of the company has any property, legal or equitable, in the assets of the corporation. Further, I have read and concur in the judgment delivered by my noble and learned friend Lord Sumner. I think the appeal should be dismissed”.

73. This Court has already discussed the effect of Sections 119 and 120 of the Repealed Act and held that the Bank would be insulated only in so far as it did not have notice of the Plaintiffs claim as to ownership. As to whether Ravasam can benefit from the remedies sought by the Plaintiffs, this answer of the Court is in the affirmative. The two have been found to be the true owners of the Ravasam and on 5th October 2011 duly warned the Bank of the consequences of acting on the instructions of Agbeko and Nyambok. How then were the two to seek remedy given that the Bank continued to make further advances to Ravasam on the instructions of Agbeko and Nyambok? Other than through a Court order ,the Plaintiffs could not remove Agbeko and Nyambok as directors and shareholders because their beneficial ownership was not registrable. That issue was now the subject of litigation. In addition, and this would be obvious, the Plaintiffs could not cause Ravasam to resolve to commence action against the Bank as the two were not directors of the company. Further, the option of a derivative action was not open to them as that applies to completely different circumstances. I think and hold that the Plaintiff’s cause of action against the Bank are, in these unique circumstances, well grounded and indeed justified.

74. This is the appropriate place to examine the veracity of another a related aspect of the Plaintiff’s case. It asserts that the Defendants have put the suit land in further peril as these proceedings have been alive in disregard of the rule of lis pendens.

75. In Mohamed Sheikh Abubakar V Zakarius Mbaya [2019] eKLR the Court of Appeal remarks on the doctrine of lis pendens and its essence;

“Our position, like the High Court, is fortified by the doctrine of lis pendens which is based on the legal maxim ‘ut lite pendente nihil innovetur’. It simply means that during litigation nothing new should be introduced. See the Supreme Court of India decision in KN Aswathnarayana Setty (D) Tr. LRs. & Others vs. State of Karnataka & Others [2013] INSC 1069.

19. The essence of said doctrine is that it prohibits a party to a suit from transferring or as in this case, altering the status of the suit premises, while the suit is pending. See this Court’s decision in Maithene Malindi Enterprises Limited vs. Kaniki Karisa Kaniki & 2 others [2018] eKLR.”

76. From the instrument that conveyed the suit land from AFC to Ravasam (Plaintiffs documents pages 47 to 52), it is apparent that the suit land was registered under the provisions of the repealed Government Lands Act. Although the statute was repealed by the Land Registration Act, the decision of the Court of Appeal in Naftali Ruthi Kinyua v Patrick Thuita Gachure & Another [2015] eKLR is proposition that the doctrine of lis pendens continues to apply in respect to land registered under the repealed statute that was subject to the provisions of the Indian Transfer of Property Act. The Court of Appeal held;

“The necessity of the doctrine of lis pendens in the adjudication of land matters pending before the court cannot be gainsaid, particularly for its expediency, as well as the orderly and efficacious disposal of justice. Having said that, with the repeal of section 52 of the ITPA by the Land Registration Act (LRA) Number 3 of 2013,the question arises as to whether the doctrine remains applicable to the circumstances of the present case. We consider that its applicability must be considered in the light of Section 107 (1) of the LRA which provides the saving and transitional provisions of this Act, and which stipulates,

“Unless the contrary is specifically provided for in this Act, any right, interest, title, power, or obligation acquired, accrued, established, coming into force or exercisable before the commencement of this Act shall continue to be governed by the law applicable to it immediately prior to the commencement of this Act.”

The effect of this provision is to allow for the continued applicability of the rights and interests ensuing from legislation that governed titles of properties established prior to the repeal of such legislation. Given that the concerned property involved land eligible for registration under the Registration of Titles Act (now repealed), having regard to section 107 (1) of the LRA, it is evident the rights flowing from section 52 of the ITPA including those under doctrine of lis pendenswould remain applicable to the circumstances of this case.

Furthermore, lis pendens is a common law principle, and in addressing the relevance of common law principles within the Kenyan context, section 3 (1) of the Judicature Act Cap 8 stipulates that,

“The jurisdiction of the High Court, the Court of Appeal and of all subordinate courts shall be exercised in conformity with-

a. the Constitution;

b. subject thereto, all other written laws, including the Acts of Parliament of the United Kingdom cited in Part I of the Schedule to this Act, modified in accordance with Part II of that Schedule;

c. subject thereto and so far as those written laws do not extend or apply, the substance of the common law, the doctrines of equity and the statutes of general application in force in England on the 12th August, 1897, and the procedure and practice observed in courts of justice in England at that date:

Provided that the said common law, doctrines of equity and statutes of general application shall apply so far only as the circumstances of Kenya and its inhabitants permit and subject to such qualifications as those circumstances may render necessary.”

Similarly, in the light of this provision, the doctrine of lis pendens would remain applicable to this case.

77. The Government Lands Act being one such statute then this matter falls within the ambit of that Rule. It is inevitable therefore that this Court conclude that all further charges registered during the pendency of this suit abridged this important doctrine of lis pendens

78. As I turn to conclude the case against the Bank, I need to consider one other limb of the claim by the Plaintiffs. In paragraph 36M of the Further Amended Plaint, the Plaintiffs aver;

“The Interested Party’s loan account with the Third Defendant was flagged by the Third Defendant’s auditors due to the serious irregularities by its employees and the auditors applied a penalty of Kshs.50 Million around March 2014, which the Third Defendant unlawfully charged to the Interested Party account”.

79. In his evidence, Ravate does not tender evidence to support this claim. As to the Bank, its witness, Mr. Asin denies that any such penalty was ever imposed notwithstanding an earlier intention expressed by the Bank in a letter of 20th March 2014 (3rd Defendants Exhibit Page 363). As there is no evidence that the intention to levy that penalty was carried through, I cannot hold that the Plaintiffs have made out a case in that respect.

80. Now, this Court has found that Agbeko and Nyambok are trustees of Ravate and Justin of their shares in Ravasam. One main duty of a Trustee to its beneficiary is to account to its beneficiary and to provide information requested by the beneficiary in respect to the Trust property as long as the request is reasonable. If there is any need for support of this position see the decision in Merlo vs Duffy[2009] EWHC296 (ch). From the evidence, Agbeko and Nyambok have never accounted to Ravate and Justin since assuming the responsibility as Trustee. The request for an order of accounts against the two Defendants is with merit.

81. As I turn to conclude, this Court considers the argument by Agbeko and Nyambok that to grant the wish of the Plaintiffs for transfer of the shares to Heaven and BDI would be to turn Ravasam to a foreign entity. My attention is then drawn to the provisions of Article 65 of the Constitution which reads;

“Landholding by non-citizens;

65. (1) A person who is not a citizen may hold land on the basis of leasehold tenure only, and any such lease, however granted, shall not exceed ninety-nine years.

(2) If a provision of any agreement, deed, conveyance or document of whatever nature purports to confer on a person who is not a citizen an interest in land greater than a ninety-nine year lease, the provision shall be regarded as conferring on the person a ninety-nine year leasehold interest, and no more.

(3) For purposes of this Article—

(a) a body corporate shall be regarded as a citizen only if the body corporate is wholly owned by one or more citizens; and

(b) property held in trust shall be regarded as being held by a citizen only if all of the beneficial interest of the trust is held by persons who are citizens.

(4) Parliament may enact legislation to make further provision for the operation of this Article.”

82. First, this Court is not aware of any law that bars the incorporation of a company in Kenya which is wholly owned by persons who are not citizens. Second, even if, on reconstitution, Ravasam is regarded as a foreign entity and that the interest in the suit land is either a freehold or a leasehold of more than ninety nine years, then the provisions of Sub article (2) are a self-correcting mechanism. The interest in the suit land will automatically be regarded as a leasehold interest of ninety nine years. As the Bank who hold a charge do not complain of any possible prejudice if the change is made,I do not perceive this argument as sufficient to deny a deserving order to the Plaintiffs.

83. In the upshot I make the following orders:-

83. 1 I declare that the first and second Plaintiffs namely Farouk Ravate and Justin Samourgompoulle are the true and rightful Directors of Ravasam Development Company Limited.

83. 2 The names of Eric Agbeko and Philip Nyambok shall be struck out from the records of Ravasam Development Company Limited and be replaced with those of Farouk Ravate and Justin Samourgompoulle.

83. 3 A mandatory injunction is hereby issued to compel Erick Agbeko and Philip Nyamboke to transfer all shares held by them in Ravasam Development Limited to the 1st and 2nd Plaintiffs through Heaven Heights Properties Limited and Bid Ocean Indien respectively or to the directions of the Plaintiffs within 30 days pursuant to the signed declaration of trust, failing which the Registrar of Companies do make the necessary share transfers.

83. 4 An order of permanent injunction do issue restraining the 1st and 2nd Defendants whether by themselves, agents, employees, assigns, servants or otherwise howsoever and any persons whatsoever from selling, disposing of, charging, pledging, diluting, dealing, interfering with and/or intermeddling in any manner whatsoever with:

a) The Interested Party’s Company’s property known as L. R Number 2/186 situated off Elgeyo Marakwet Road within Nairobi’s Kilimani area (“the suit property”);

b) The shares and shareholding in and of the Interested Party Company.

c) All other properties, funds and assets belonging to the Interested Party Company.

83. 5 A permanent injunction do issue restraining the 1st and 2nd Defendants whether by themselves, their agents, employees, assigns, servants or otherwise howsoever and any persons whatsoever from withdrawing or otherwise dealing with the Interested Party’s bank account with any Bank.

83. 6 A permanent injunction do issue restraining the 1st and 2nd Defendants whether by themselves, their agents, employees, assigns, servants or otherwise howsoever from issuing, allotting or transferring any shares in the Interested Party or causing or permitting any shares in the Interested Party to be issued, allotted or transferred or otherwise dealt with without the consent of the Plaintiff.

83. 7 The 1st and 2nd Defendants to account for all the monies, assets, and property that they have unlawfully misappropriated from the Interested Party.

83. 8 An order of restitution of all documents, agreements, monies, assets, accounts, or any other property unlawfully taken from the Interested Party by the 1st and 2nd Defendants.

83. 9 The first and second Defendant shall within 90 days hereof render an account of monies, assets, property and affairs of Ravasam Development Limited including but not limited to the occupation and use of LR. No. No. 2/186 (the suit property upto the times of the judgment).

83. 10 It is hereby declared that the corporate guarantee by Ravasam Development Company Ltd. in favour of the 3rd Defendant Bank to secure the loan to Vakkep and the variations of the charge dated 11th May 2015 are void and the third Defendant has no right to recover from Ravasam in respect thereof.

83. 11 A declaration is hereby made that the mortgage dated 13th September 2011 is valid.

83. 12 An account be taken by the Plaintiffs, Ravasam Development Limited and the 3rd Defendant Bank in respect to the repayment of the facility of Kshs.180,000,000. 00 made pursuant to the credit Agreement of 18th August 2011.

83. 13 For purposes of Order 83. 12 above the parties to the Accounts shall within 21 days hereof appoint a joint accountant failing which each party shall appoint their accountant and the accountants so appointed shall appoint an umpire.

83. 14 The Accounts ordered above shall be concluded and completed within 90 days and the report of the joint account or of the accountants and umpire as the case may be shall be filed with Court within 90 days.

83. 15 Final orders in respect to the claim for damages by the Plaintiffs against the Defendants and the Counterclaim by the 3rd Defendant against Ravasam Development Limited shall be made upon receipt of the all accounts ordered above.

83. 16 Prayer (p) of the Plaintiffs claim in the Further Amended Plaint dated 29th March 2018 is dismissed.

83. 17 All the prayers in the joint Amended Defence dated 12th July 2018 on behalf of the 1st, 2nd and Interested Party are hereby dismissed.

83. 18 The Plaintiffs shall have costs of their claim against the 1st and 2nd Defendants.

83. 19 The Order of costs as between the Plaintiffs and the 3rd Defendant shall await the final orders of this Court.

Dated, Signed and Delivered in Court at Nairobi this 20th Day of January 2020.

F. TUIYOTT

JUDGE

PRESENT;

Ondali & Mailu for 1st Plaintiff

Cohen for Ahmed Nassir for 2nd Plaintiff

Kingara for 1st & 2nd Defendants & Interested Party

Muchiri for 3rd Defendant

Court Assistant: Nixon