[2022] KEHC 202 (KLR)

Kenya Akiba Micro Finance Limited v Chebii & 14 others (Civil Suit 644 of 2005) [2022] KEHC 202 (KLR) (11 March 2022) (Judgment)

Neutral citation: [2022] KEHC 202 (KLR)

Republic of Kenya

In the High Court at Machakos

Civil Suit 644 of 2005

MW Muigai, J

March 11, 2022

Between

Kenya Akiba Micro Finance Limited

Plaintiff

and

Ezekiel Chebii

1st Defendant

Moses Gituma

2nd Defendant

Joseph Yegon

3rd Defendant

Benard Barasa

4th Defendant

Charles Njogu

5th Defendant

Mathew Bett

6th Defendant

Duncan Macharia

7th Defendant

Grace Ndirangu

8th Defendant

Peter Ng’Ang’A

9th Defendant

John Mwangi

10th Defendant

David Yegon

11th Defendant

Felix Oduor

12th Defendant

Philemon Langat

13th Defendant

Central Bank of Kenya

14th Defendant

Investigation Department of Police

15th Defendant

Judgment

1. By Amended Plaint dated 5th April 2006 and filed on 7th of February 2006 prays for the following orders from this court;a.A declaration that having complied with all and singular requirements of the Companies Act, the Plaintiff has the inalienable and indefeasible right to trade and operate under the name Kenya Akiba Finance Limitedb.A declaration that the business operations of the Plaintiff never infringed upon any of the provisions of the Banking Act.c.A declaration that the acts perpetrated by the Defendant’s on the 2nd November 2005 were selective, illegal, unjustified and amounted to trespass and infringed the Plaintiff’s right to use its name and conduct its business under the name.d.An order for delivery of the Plaintiff’s particularized files, computers and computer accessories as in paragraph 19 of the Plaint and for payments of any consequential orders.e.A mandatory injunction compelling the 1st, 2nd and 14th Defendants to return and restitute to the Plaintiff the items seized and removed from its premises on the 2nd of November 2005f.A Mandatory injunction compelling the 14th Defendant to remove the freeze/embargo placed upon its bank accounts.g.Without prejudice to prayer (d) a declaration that the seizure by the 3rd to the 13th Defendants of the items pleaded to in paragraph 13 of the Plaint was illegal and unjustified and a breach of the rights of the Plaintiffh.Without prejudice to prayer (e) a declaration that the freeze / embargo placed by the Banking Fraud Investigations Unit upon the bank accounts held by the Plaintiff is illegal unjustified and breach of the rights of the Plaintiff.i.Judgment in the sum of Kenya Shillings 930,000,000j.Costs of the suit

Court Record 2. The 1st Defendant filed his statement of Defense on 5th of January 2006.

3. The 2nd Defendant filed his statement of Defense on 30th of June 2006.

4. The 14th Defendant filed a Defense on 6th of January 2006 and denied the allegations in the plaint and outing the Plaintiff to strict proof thereof. It justified its actions and averred that it was the lawful authority regulating the banking industry and had received numerous complaints about the Plaintiff.

5. The 15th Defendant filed his Defense dated 9th May 2006 on 10th May 2006 denying the contents of the plaint and asking the court to dismiss the suit against the 1st Defendant with costs.

6. Chamber summons dated 14th of November 2005 were filed by the Plaintiff were heard and allowed. The ruling delivered on 3rd of April 2006 by Justice Ochieng allowed the Plaintiff to enjoin 13 more defendants.

7. Subsequently, the Chamber Summons dated 14th November 2005 was abandoned in favor of a notice of motion Application dated 28th October 2011.

8. Parties attempted Court Annexed Mediation which was unsuccessful.

9. The 1st Defendant filed a statement of defense dated 5th January 2006 and filed it on the same day.

10. The 2nd Defendant filed his defense dated 26th January 2006 on 30th January 2006.

11. The Attorney General filed his defense dated 9th of May 2006 on 10th May 2006 in which he states that the Defendants were acting on complaints against the Plaintiff that they had received and that their actions were within the Law.

12. Application dated 27th March 2006 seeking leave to effect service via substituted service to the 3rd to 13th Defendants was heard and allowed by Justice Ochieng vide ruling of 23rd May 2006.

13. Chamber summons Application 10th of May 2007 seeking to have interested parties enjoined was found to be without merit and dismissed by Lady Justice Lessit .

14. The Notice of Motion dated 29th April 2010 was marked as withdrawn with no orders as to costs on 1st of July 2010

15. On 4th of May 2012, Justice Mabeya having heard the application by the Plaintiff dated 28th October 2011 issued the following orders,a.Defenses filed by and behalf of the Defendants be struck out.b.Interlocutory judgement on liability be entered and the matter proceed for assessment of damages.c.The 14th and 15th defendant release to the Plaintiff’s directors all the items seized in 2nd November 2005 from the Plaintiff’s offices.d.The 2nd Defendant, Moses Gituma be struck out of the proceedings.e.The Defendants pay costs of the Application.

16. An application for stay of execution was dismissed vide ruling delivered on 1st February 2013 by Justice Mabeya.

17. An interlocutory appeal was filed at the Court of Appeal and the Court set aside and dismissed Kenya Akiba Micro Finance Bank’s application dated 28th November 2011 and gave further orders the main suit be placed before any judge of the High Court except Justice Mabeya.

18. The 15th Defendant filed an Application dated 4th of April 2013 in which he sought for review of the judgment made in 4th of May 2012 which was dismissed on 24 of May 2013.

19. The matter proceeded to full hearing with the Plaintiff calling four witnesses while the 1st to 15th Defendant called two witnesses while the 14th Defendant called two witnesses.

Plaintiff’s Case 20. PW1 Gideon Mwiti Irea, the Director, General manager and majority shareholder of Plaintiff Company told the court that the Plaintiff was registered as a Company on 29th January 2004 and licensed to Conduct Hire Purchase Business on 19th February 2004.

21. In 2nd November 2005, some forty (40) officers and two (2) bank officials came into the Company Premises at 10am the Lornho House offices in town. They ordered the employees not to leave the premises, he sat with others as they put off computers and took inventories as well as customers’ title deeds and log books, company computers from the safe and collected files which they loaded in the parked 4 Land Rovers outside.

22. They also went to Kitengela and Ongata Rongai and seized and carried away various documents, files, tools of trade, electronics and other equipment before locking down the premises. During the incident, the Plaintiff’s bank accounts were frozen, four (4) of its Directors/ Shareholders arrested.

23. Mr Okonya, Mr Chebii and Mr Gituma all from (BFIU) came to his office and informed him that they were investigating the institution(s) that was /were conducting business as a bank.

24. At midnight PW1, Mr Kinoti Co Director, Mr Metiaki Manager -Kitengela Branch and Mr.Irungu of Ongata Rongai Branch and were taken to Marshall House and later taken to Kileleshwa Police Station. He said they were later charged in Court.

25. PW1 stated that the people who came talked to the Press and talked of a bogus bank. He referred to media reports at Pg 216-217. He identified 1st -13th Defendants as those who conducted the raid.

26. The Plaintiff contends that it is a limited liability company incorporated under the Companies Act, Cap 486 on 29th of January 2004, licensed on 19th February 2004 and is a member of the Association of Micro Finance Institution.

27. The Plaintiff was registered this way as at the time there was no Micro- Finance Act or a Regulatory body of Micro Finance except Association of Micro- Finance Institutions.

28. The Plaintiff states that on 31st October 2004, the 14th Defendant issued a public notice to the effect that;a.It acknowledged and embraced the de facto emergence and existence of Micro-finance institution whose business was to extend financial services to Micro and small enterprises in Kenyab.Purported to outlaw use of the word “finance” or “micro finance.”c.Purported to extend to all person or entities which were allegedly operation in breach of the provisions of the Banking Act a moratorium or amnesty which was to be in force until 31st January 2006.

29. On 7th November 2005 they were charged in CMCCR 2474 of 2005 with five (5) counts of using the word “finance” without approval of the Minister of Finance contrary to various sections of the Banking Act, Cap 488 of the Laws of Kenya. Further, that the Directors were charged with other criminal cases and attempt to stop the prosecution in Misc.Civil Application number 1594 of 2005, 446 of 2006 and Constitutional Petition 513 of 2006 were not successful.

30. PW1 referred to Inventories taken during the raid at Pg 77-166 of PBD and List of customers who had taken loans at Pg 167-173 of PBDlist of over 6000 customers.

31. The locking of premises which were opened in 2006 and the landlord took furniture and sold to recover arrears of rent, the seizure of documents and other items and the accounts in Kenya Commercial Bank, Housing Finance Moi Avenue, Equity Bank Mama Ngina, these accounts were frozen and could operate them.

32. Central Bank of Kenya put up a Notice as shown at Pg 76 of Daily Nation on 30/10/2005 and outlawed the use of Finance without authority of the Minister for Finance and anyone using Finance was to regularize the use within 90 days. The raid occurred on 2/11/2005, a day after the raid, other Micro Finances were not raided.

33. PW1 was not informed or given any notice that the raid would take place and he was not informed of any impropriety.

34. PW1 was not under supervision of CBK but by Registrar of Hire Purchase as per the license.

35. PW1 denied that the Plaintiff operated as a bank as unlike they did not issue or receive cheques and did not have or use the clearing house. He did not advertise that it operated as a bank but a Company offering loans by receiving deposits on the Plaintiff’s Account as deposits and the same was recorded in the pass books. He referred the Court to Paragragh9,15,16 & 17 of his statement in PBD and confirmed Loan Agreements Pg 40-41 Loan Appraisal & Evaluation Form and Down payments and Deposits at Pg 42-45 and there is a distinction between microfinance and banking.

36. PWI informed the Court that since the search and seizure referred herein as raid, the Plaintiff incurred huge financial loss arising from unrecoverable loans, frozen bank accounts and goods carted away, 3,000 logbooks, loan files rubber stamps, company seals cheque book receipt books computers and other equipment.

37. PW1 relied on Inventories filed Pg 77, 101, 100, 107, 108, 112,119 82 & 83 of PBD on quantification of the loss is by the Raid. He also relied on the Audit Report filed on 24/10/2013 and he claimed loose cash of Ksh 1. 5 m that was in the offices at the time of the raid. PW1 sought damages of KSh 930,000,000/-

38. PW2 John Kinoti, PW 3 John Mukora Ngugi also reiterated and supported evidence of PW1 vide his witness statement of 14/6/2014 and relied on their statements filed on 16/6/2014 and 16th June 2014 respectively with regard to the business operations, the raid and subsequent arraignment in Court for Criminal proceedings.

39. PW4 George Munga Amollo relied on the statement of 20th May 2019, Practising Auditor while at Mussawa & Co in 2013 he received instructions from the Plaintiff to conduct a forensic audit of the Plaintiff after it was closed down by CBK of actual loss incurred by the Plaintiff between 2005-2013. He received documents as listed in his statement and Court record and undertook the exercise as per the documents filed by the Plaintiff as Supplementary List of documents on 25/10/2013 and produced as Exhibit 2. He tabulated the items at Page 23 of the Audit Report.

Case 40. DW1 Ezekiel Dave Chebii relied on his Written Statement of 17th March 2015 that he adopted as examination in chief and relied on the 14th Defendant’s List of Documents Defense Exhibit -1; Defendant’s Supplementary List of Documents of 17/3/2015 Defense Exhibit 2 & 14th Defendant’s Further Supplementary List of Documents of 4/2/2019 produced as Exhibit -3.

41. DW2 Joseph Onyango relied on witness statement filed on 17th March 2013 on Hire Purchase transactions registered at their office.

42. DW3 Bernard Baraza of BFIU relied on his statement of 11/3/2013on the investigations carried out that led to the search and seizure at the Plaintiff’s offices.

Pleadings 43. The 1st Defendant filed a statement of Defense dated 5th January 2006 and filed it on the same day denying the allegations of the Plaintiff.

44. The 2nd Defendant filed his Defense dated 26th January 2006 on 30th January 2006 also denying the allegations raised.

45. The Attorney General filed his Defense dated 9th of May 2006 on 10th May 2006 in which he states that the Defendants were acting on complaints against the Plaintiff that they had received and that their actions were within the Law.

46. The14th Defendant filed a Defense on 6th of January in which they denied any wrong doing and put the Plaintiff to strict proof thereof and opined that the investigations done by the police through the Banking Fraud Investigation Unit is what led to charges being preferred against the directors of the Plaintiff. Further, that the Plaintiff was involved in banking business and not just hire purchase business as alleged.

Plaintiff Submissions 47. The Plaintiff submitted on two major grounds, liability and quantum.

48. On the issue of liability on the question of who raided the Plaintiff Company, counsel submitted that the 1st and 2nd Defendant were attached to the 14th Defendant’s supervision department who oversaw the raid while the 3rd to 13th Defendants are police officers who were attached to the Banking Fraud Investigations Unit which is listed under the 14th Defendant in its organogram on page 248 of Plaintiff’s exhibit 1. Further, that the 14th Defendant’s witness admits that the officers were from the Banking Fraud Investigations Unit and the 14th Defendant and carried away computers, customer files, titled deeds, loan documents, receipt books and other office equipment and thus the blame shifting between the 14th and 15th Defendant did not hold water.

49. As regards whether the closure was justified in law, counsel submitted that the same was not justified as it was not carrying out a banking business within the meaning of Section 2(1) and 16 of the Banking Act. It never accepted deposits nor operated current accounts, savings account or their accounts that would constitute monies paid on terms. He contended that the 15th Defendant in its Defense and through DW2’s testimony admits that the Plaintiff is licensed to carry out Hire Purchase Business. He opined that no evidence was tabled to indicate that a complaint had been raised against the Plaintiff’s operations.

50. On the deposits, he opined that the deposits it held were those under Section 2 of the Hire Purchase Act and not under the Banking Act which are not related. Further, that it is answerable to the Licensing officer appointed under Section 19 of the Hire Purchase Act and not the Defendants. In addition, the association of Micro Finance Institutions had no issue with its operations.

51. Counsel submitted that the Defense had not proven its case beyond reasonable doubt in the lower court. Reliance was placed on Criminal Appeal 1 of 2017 Abdi Adan Mohamed vs Republic where the court discussed the issue of admissibility of judicial proceedings.

52. On Quantum, the Plaintiff while relying on a report by Murugu & Company Certified Public Accountants issued on 11th January 2012 and Massawa & Company certified public accountants in appendix 3 filed on 25th October 2013 submitted that both firms conducted forensic audits .The latter computed the loss incurred between 2nd November 2005 and 2nd November 2013 at Kshs 2,847,388,652 which report despite service remains uncontroverted. Reliance was placed on the case of HCOMM No. 731 of 2008 North End Trading Company Limited t/a Kenya Refuse handlers limited vs The City Council of Nairobi and Machakos Civil Appeal no. 113 of 2017 Beatrice Kanini Mutua vs Titus Mulinge Kativanga & Another

53. While making reference to the PKF report, he submitted that this report was only a critique of the Murugu Report and that the Plaintiff operated for over 20 months and not 6 months as averred by the defendants. That they filed a strategic report on 25th October 2013 detailing all their plans. Further, that they filed a loan agreement with Global Credit Limited for a sum of Kshs. 125,000,000/= as a credit facility to enhance its Hire purchase business. They also provided staff contracts as exhibit 9.

54. The Plaintiff alleged that he had justified the figures claimed in its bill of quantities. Further that he had proven its case and made reference to the Massawa Report that quoted the losses incurred at 2. 7Billion.

1ST to 13TH and 15TH Defendants Submissions 55. The 1st to 13th and 15th Defendants represented by the Attorney General, filed submissions dated 29th March 2021 in which they submitted on three realms. Firstly, as to whether the Plaintiff was carrying out illegal business, counsel submitted while relying on the witness statements filed that the defendants had received complaints that the Plaintiff did not reveal any legitimate hire purchase business but that of banking which included taking deposits, having savings, passbook , giving loans and taking securities. In addition, that Joseph Onyango, the Registrar in charge of registration of Hire purchase was of the opinion that the Plaintiff’s business does not amount to the Hire Purchase business known in law and that he had no record of transactions of the Plaintiff.

56. Counsel submitted that the Plaintiff did not produce any Hire purchase agreement to show he was engaged in hire purchase business, there was no registration of any hire purchase agreements, credit facility documents received by the 1st to 13th and 15th Defendant. Further, that the Plaintiff was taking deposits without a valid license contrary to section 16 of the Banking Act, the Plaintiff is illegally using the word “finance” and the Plaintiff cannot rely on the notice dated 2nd November 2005 by the 14th Defendant which is non consequential. Reliance was placed on the case of Republic vs Kenya Revenue Authority ex parte Shake Distributors Limited [2012] EKlr and Muturi & Wamiti Advocates vs Edward Mwaniki Karanja & 2 others [2017] Eklr where estopell against statute was discussed. Counsel contended that due to the undertaking of illegal business by the Plaintiff, he was not entitled to compensation and relied on the case of Scott vs Brown & Others [1892] Q. B.D 724 at page 728

57. As regards whether the raid was justified, Counsel submitted in the affirmative. He opined that the alleged illegal activities of the Plaintiff were contrary to law and an affront to a proper functioning market based financial system and the objects of the 14th Defendant are to ensure a proper functioning market based system under section 4(2) of the Central Bank of Kenya Act. Further, that the notice was of no consequence as the 14th Defendant cannot make a promise which goes against the express letter of the law.

58. Counsel submitted that the Plaintiff is not entitled to damages and the court should not enforce an illegality. He submitted that the amount claimed in special damaged was based on assumption, speculation and is unjustified. He relied on the evidence of Peter Kahi, the certified public accountant of PKF who told the court that the sum of Kshs 1,536,335,537. 00 was exorbitant, inappropriate and unsupported as the projections and assumptions were not backed by detailed strategies and a financial plan. That there was evidence of cash flow challenges as the Plaintiff issued bounced cheques as well as the income tax declaration of the plaintiff and accounts from 2004 that confirm that the Plaintiff was declaring losses.

59. Further, that the loss on fixed assets in the sum of Kshs 124,233,548. 00 was a duplication as the assets used in the earnings claimed and the company loans to external clients of Kshs 194,202,234. 00 was incorrect as the loans were fully secured by documents such as logbooks and title deeds and as such recoverable. In addition, that the company loans to employees in the sum of Kshs 4,941,740 was unsupported in that there were no employee contracts, loan agreements with clear offer letters, employee loan book and loan files and payroll evidencing recoveries therefore remains unproven.

60. Furthermore, that the Interest on loans from banks and other financial institutions in the sum of Kshs 221,831,308 is unsupported and unjustified in that no loan document was availed by the Plaintiff.

61. On lawsuit and litigation costs in the sum of Kshs. 6,721,728 he contended that no invoices nor receipts were produced.

62. As regards interest of Kshs 25,412,967. 00 that was based on loss of Kshs 12,500,000,000 compounded at 12% annually, he opined that no cash certificate was presented to support any cash that may have been taken during the raid.Counsel while relying on the case of Kenya Breweries Limited vs Kiambu General Transport agency [2000] eklr that special damages must be proven.

14TH Defendants Submissions 63. The 14th Defendant filed submissions dated 31st May 2021 in which he alleged that it was evident that the Plaintiff engaged in banking and took deposits without a license and used the word “finance” without the authorization of the 14th Defendant. He contended that the operation by officers from the Banking Fraud Investigation Unit was lawful following what they termed legitimate public complaints and the presence of its employees was to establish the nature of the Plaintiff’s business from the records at its premises.

64. The 14th Defendant submitted that they returned the documents they seized in compliance with an order of this Hon. Court. Further, that the Banking Fraud Investigation Unit lawfully shut down the Plaintiff.

65. Counsel opined that Civil Appeal number 328 of 2012 Central Bank of Kenya vs Kenya Akiba Finance Limited & 14others was not relevant nor admissible to this proceedings as it only proves that there was an acquittal.

66. As to the nature of the Plaintiff’s activities, he submitted that the Plaintiffs business was more than that of hire purchase and referred to the objects in the Plaintiff’s Memorandum of Association, the promotional material plugging its business with the quote “loans available”, that a term loan of 12 months was given to Mr. Sumanbhai secured by a guarantee while that to Mrs Scholastica Ndaba was for a specific purpose (purchase of cows/ building of a cow shed) and was secured by a title and that the Plaintiff took deposits and operated savings accounts on which interest was to be paid. Reference was made to the Plaintiff’ brochure setting out savings account opening requirements, Mr Sitoti Kimerei Maika’s demand for refund of his deposit and Jedidah Wanyonyi’s letter on Kshs 215,000 upon which he derived Kshs 6,600 monthly income.

67. He contended that the Plaintiff used the word finance without the consent contrary to the Banking Act and despite correspondence in December 2004 and January 2005 did not regularize this position. That the notice issued on 31st October 2005 did not cure nor excuse violation of section 3(1) of the Banking Act. Furthermore, that the Plaintiff was undertaking financial activities thus in violation of section 2, 16 (1) (2) and (5) of the Banking Act. He submitted that through the Plaintiff’s advertisements and brochures, it invited members of the public for deposits contrary to section 51 (1) of the Banking Act.

68. According to the 14th Defendant, the Banking Act was applicable and the argument by the Plaintiff that it was inapplicable because it was a micro finance did not hold water.

69. The 14th Defendant submitted that the Plaintiff the police operation conducted on 2nd November 2005 was done under the directions of Mr. Okonga, an assistant commissioner of Police and not the 14th Defendant and it is the Banking Fraud Investigations Unit that secured the exhibits and preferred charges against the directors of the Plaintiff. That its only role was to establish the nature of the business in light of the complaints and reference was made to Ezekiel Chebii’s testimony. While citing the case of Lavington Security Limited vs Judiciary [2021] Eklrhe submitted that a party cannot benefit from its own wrong.

70. As regards damages, Counsel submitted that since the Plaint had not been amended and the claim was for special damages, only Kshs 930,000,000 should be considered and the figure in the Massawa report disregarded as it has discrepancies.

Plaintiff’s Supplementary Submissions 71. The Plaintiff filed supplementary submissions in which he raises issues with the tone of the 14th Defendant and relies on the case of Mohamud Iltarakwa Kochale & 5 Others ( Suing on behalf of the residents of Laisamis Constituency and Larare Ward of Marsabit County vs Lake Turkana Wind Power Limited & 4 Others ; Aaron Iltele Leisantaam & 4 others [2019] eklr, George Gikubu Mbuthia vs Peter Njeru Mugo & 3 others [2006] Eklron counsel conducting themselves with decorum when addressing the court.

72. Counsel reiterated the contents of its submissions and stated that no counterclaim had been raised by the Defendants, the raid was unlawful, he was acquitted and that the raid terminated its business which was a going concern. He maintained his claim at Kshs. 930,000,000

73. He submitted that the issue of the legality of the business was addressed in Nairobi Criminal Case Number 2474 of 2005, Republic Vs Akiba Micro Finance Limited where the Plaintiff and its directors were found not to be in breach of the Banking Act in its business.

74. While referring to the cases of Otieno Ragot & Co. Advocates vs National Bank of Kenya Limited [207] Eklr, Jonathan Junior Nyamasyo Katete vs Gideon Muange Muasa [2021] Eklr and Wangui Kathryn Kimani vs Disciplinary Tribunal of Law Society of Kenya & Another [2017] Eklr he submitted that courts cannot grant orders that have not been specifically sought.

75. The Plaintiff submitted that Nairobi Criminal Case Number 2474 of 2005, Republic Vs Akiba Micro Fnance Limited had already determined the question of carrying out a business contrary to the Banking Act and the same had been determined by the court through its judgment of 3rd September 2011 which decision has not been appealed not reviewed. Further, that Civil Appeal No 328 of 2012 Central Bank of Kenya vs Kenya Akiba Finance Limited & 14others is relevant, necessary and admissible to these proceedings. Reference was made to section 34 of the Evidence Act, Cap 80 of the Laws of Kenya.

76. While relying on the case of Accredo AG & 3 others vs Steffano Uccell & another [2019] Eklr, Kenya Commercial Bank Limited Vs Muiri Coffee Estate Limited & Another [201] eKLR he contended that previous court decisions have to be treated as resolving issues with finality.

77. He submitted that the defendants are jointly and severally liable for the raid of its business that was a going concern and is entitled to the orders sought.

78. According to the Plaintiff, the raid, seizure and retention of records, computers accessories and securities was illegal as not even search warrants were obtained as provided under Section 152 the Penal Code, Section 119 and 120 of the Criminal Procedure Code, Cap 75, Section 180 of the Evidence Act.

79. He opines that the Mussawa report should not be treated as a forensic report and relies on the cases of Wilfred Gisebe Gisebe & 2 Others Vs County Government of Kisii & 2 others [2017] Eklr and Standard Newpapers Limited & Another vs Attorney General & 4Others [2013] Eklr which among other issues also addresses the issue of infringement of the right to privacy and invasion of private property.

Analysis And Determination 80. I have considered the pleadings, the evidence adduced, the issues and the submissions made as well as the authorities relied upon by the parties herein and find the following to be the issued for determination:-1. Whether the business operations of the Plaintiff contravened the Banking Act2. Whether the raid by the Defendants was justified3. Whether the Defendant should be ordered to return the Plaintiff’s items particularized files, computers and computer accessories4. Whether a mandatory injunction should be issued against the 1st, 2nd and 14th Defendants to return and restitute to the Plaintiff the items seized and removed during the raid.5. Whether the freeze/embargo placed upon the Plaintiff’s bank accounts by the 14th Defendant should be removed.6. Whether the rights of the Plaintiff have been infringed by the acts of the Defendants7. Whether the Plaintiff is entitled to damages in the sum of Kenya Shillings 930,000,0008. Who should bear costs of the suit

81. On the first issue of whether the Plaintiff contravened the Banking Act, we will begin by looking at the history of the dispute between the parties. In a letter dated 16th December 2004 from the General Manager Mr. Irea to the director of Bank Supervision, CBK, the Plaintiff stated that besides being registered by the Registrar of companies, he also had hire purchase licenses, KRA pin number and a city council license for operating a medium financial services company for which they paid Kshs 65,000. The attachments referred to in the letter are however not provided. He further gave the company profile including that of its managers and concluded by asking the 14the Respondent to be satisfied after perusal of its documents, that they were carryout out a legitimate business.

82. The 14th Defendant through the Senior Manager, Financial Institution Supervision responded vide a letter dated 29th of December 2004 acknowledging that the Plaintiff had been licensed to carry out hire purchase business under the Hire Purchase Act and reiterating the provisions of section 3 (c) of the Banking Act and concluded by telling the Plaintiff“Please be advised accordingly”

83. On 6th of January 2005, the Plaintiff wrote back to the 14th Respondent’s agent indicating that they had sought consent from the Ministry of Finance on use of the word “finance” and he would revert back with the Minister’s decision.

84. From the record, the Permanent Secretary in the Ministry of Finance then, Joseph Kinyua wrote to the Governor Central Bank on 24th of October 2005 whose contents read:-Re: Kenya Akiba Micro Finance LtdIt has been brought to our attention that the above institution has been irregularly taking deposits from the public and may not be using the funds properly.Please have your inspection/bank fraud team look into this matter and appraise Treasury in due course on actions the Bank will have taken.

85. The 14th Defendant then issued a general notice on 31st October 2005 stating inter alia that;………………“The attention of the Central Bank of Kenya has, however been drawn to recent media reports and advertisements indicating that a number of entities are using the word “finance” or its derivatives like “microfinance” as part of their business name to solicit deposits from members of the public .The Central Bank of Kenya would like to bring to the attention of the public that Section 3(1) of the Banking Act precludes unauthorized use of the terms “finance,” or “bank” or any of their derivatives, or indeed any other word indicating the transaction of financial business as defined in the Act, except for institutions that are currently licensed and operate under the Banking Act and Building Societies Act. Secondly, Section 16 of the Banking Act, precludes any person or institution, not licensed under the Act, from soliciting, taking or accepting deposits.It is to be noted that any persons or entities set up as a business through incorporation as companies bearing the names “finance” and related derivatives like “microfinance” and issues advertisements, brochures, circulars or other documents inviting persons to make a deposit, are in contravention of the Banking Act, and are liable to an offense punishable in accordance with the provisions of the Act.All persons or entities in breach of the Banking Act are therefore given up to January, 31, 2006 to stop the use of the protected words and taking deposits from members of the public. Failure to do so will lead to appropriate legal action being taken against such entities or persons.

86. Subsequently, a memo from the Director, Financial Institutions supervision to the Director Banking Fraud investigations dated 1st November 2005 indicates that the Plaintiff is in violation of section 3,16 and 51 of the Banking Act and asked that the matter be urgently investigated with a view to instituting legal action under section 3 (2) of the Banking Act.

87. The offices of the Plaintiff in Lonrho House in Nairobi, Kitengela and Ongata Rongai were raided on 2nd November 2005 by the 1st to 13th Defendants and some items were seized and taken away before locking down the premises and arresting down four directors/ shareholders of the Plaintiff. It is not denied that the 12th and 13th Defendant are employees of the 14th Defendant while the 1st to the 11th Defendants are police officers.

88. The directors of the Plaintiff were then charged and acquitted of five counts in Nairobi Chief Magistrate’s court criminal case number 2474 of 2005.

89. Section 109 of the Evidence Act, Cap 80 Laws of Kenya provides as follows:The burden of proof as to any particular fact lies on the person who wishes the court to believe in its existence, unless it is provided by any law that the proof of the fact shall lie on any particular person.

90. In addition, Section 112 of the Evidence Act provides that;In civil proceedings, when any fact is especially within the knowledge of any party to those proceedings, the burden of proving or disproving the fact is upon him

91. The Court of Appeal case of Anne Wambui Ndiritu –vs- Joseph Kiprono Ropkoi & Another [2005] 1 EA 334 held that:“As a general proposition under Section 107 (1) of the Evidence Act, Cap 80, the legal burden of proof lies upon the party who invokes the aid of the law and substantially asserts the affirmative of the issue. There is however the evidential burden that is case upon any party the burden of proving any particular fact which he desires the court to believe in its existence which is captured in Sections 109 and 112 of the Act.”

92. In the case of Kabogo Gitau vs. George Thuo & 2 Others [2010] 1 KLR 526 stated that:“In ordinary civil cases, a case may be determined in favour of a party who persuades the court that the allegations he has pleaded in his case are more likely than not to be what took place. In percentage terms, a party who is able to establish his case to a percentage of 51% as opposed to 49% of the opposing party is said to have established his case on a balance of probabilities. He has established that it is probable than not that the allegations that he made occurred.”

93. This issue was also discussed by the House of Lords in the case of Miller –vs- Minister of Pensions [1947] 2 All ER 372where Lord Denning stated that:“That degree is well settled. It must carry a reasonable degree of probability, but not so high as is required in a criminal case. If the evidence is such that a tribunal can say: we think it more probable than not; the burden is discharged, but, if the probabilities are equal it is not.This, burden on a balance or preponderance of probabilities means a win however narrow. A draw is not enough. So, in any case in which the tribunal cannot decide one way or the other which evidence to accept where both parties…are equally (un) convincing, the party bearing the burden of proof will loose because the requisite standard will not have been attained.”

94. The Plaintiff alleges that the business it ran was that of Hire purchase in line with its Memorandum and Articles of Association and has produced various agreements between itself and third parties to show that it gave out loans. Letters approving different loan amounts were also produced. The Plaintiff stated that the deposits received were under Hire Purchase and not the Banking Act contrary to the Defendants allegation that the Plaintiff was engaged in banking business due to the fact that it operated a current account, received deposits, having savings, passbook, giving loans and taking securities and not hire purchase business as he claims.

95. Section 2 of the Banking Act defines a bank as;a company which carries on, or proposes to carry on, in Kenya but does not include the Central Bank.

96. R.P. Christen, T.R. Lyman and R. Rosenberg in the book Microfinance Consensus Guidelines; guiding principles on regulation and supervision of microfinance defines “microfinance” as;“the provision of banking services to lower-income people, especially the poor and the very poor. “

97. On the other hand, a banking business in the same Act is defined as under section 2;a.the accepting from members of the public of money on deposit repayable on demand or at the expiry of a fixed period or after notice;b.the accepting from members of the public of money on current account and payment on and acceptance of cheques; andc.the employing of money held on deposit or on current account, or any part of the money, by lending, investment or in any other manner for the account and at the risk of the person so employing the money;

98. A current account is defined by the Banking Act as;an account maintained by a bank for and in the name of, or in a name designated by, a customer of the bank into which money is paid by or for the benefit of such customer and on which cheques and other bills of exchange may be drawn by, and transfers and other banking transactions made on the instructions of, the customer;

99. A hire purchase business is defined under Section 2 of the Hire Purchase Act as:-a business, whether carried on alone or with other business, of entering into hire-purchase agreements, whatever the hire-purchase price under any agreement;

100. It is also important to define a “financial business” as per section 2 of the Banking Act which provides that it is;(a)the accepting from members of the public of money on deposit repayable on demand or at the expiry of a fixed period or after notice; and(b)the employing of money held on deposit or any part of the money, by lending, investment or in any other manner for the account and at the risk of the person so employing the money;

101. I note that this company was incorporated in 2004 and the Micro Finance Act was enacted in 2006,thus the Plaintiff was incorporated at the time when micro finance businesses were not regulated by its own Act. The Banking Act before 2005 did not have provisions regulating the micro finance institutions.

102. The Plaintiff has produced a copy of its incorporation certificate under the Companies Act, renewable licenses for the year 2004 and 2005 issued by the licensing officer Hire Purchase business and loan agreements between itself and various customers to indicate that it was indeed conducting a hire purchase business.

103. Further to this there are pass cards that have been produced that indicate the deposit was being done by various clients and interest would be received. There are complaint letters indicating that the monies paid as loan charges to secure different amounts of loans had been paid however the client had not received the loan. From the documents filed , it appears as if a Stephen Kimani Gitonga, he paid the loan charges in June 2005 and as at 7th November 2015 had not received the loan amount. Another alleged client by the name of Jedidah Wanyonyi Nyongesa in her letter dated 8th November 2005 she indicates that she was depositing money with the Plaintiff and she had a savings pass book. In addition, the credit facility dated 21st March 2005 indicates a loan agreement and other contracts.

104. The Plaintiff’s advertisements in the newspaper are titled “Loans Available” and further indicate that the Plaintiff:“finances buying of new and used vehicles as well as bridging finance, start up capital & working capital for small and medium business projects with is a requirement of 10% down payment with the balance being paid in instalments.”

105. From the brochure on page 45 of the 14th Defendant’s bundle, the Plaintiff has advertised for opening of a savings account.

106. There is also an advertisement for “Super Plus Plan” which is indicated as an investment plan with monthly earing depending on the saved amount.

107. However, there is a complaint letter from John Mwangi Mwaura wherein he indicates that he opened a savings account.

108. There is also a brochure calling upon members of the public to open “current accounts” with the Plaintiff company among other services that are indicated. However, the Plaintiff opines that the account it was operating was a current account under the Hire Purchase Act and not one under the Banking Act.

109. It is also important to note that this question was also discussed in the trial court case of Nairobi Criminal Case Number 2474 of 2005, Republic Vs Akiba Micro Finance Limited where the Plaintiff and its directors were found not to be in breach of the Banking Act in its business. This judgment still stands as no Appeal has been preferred.

110. The suit before us is a civil suit in which the Plaintiff seeks civil remedies and the suit. Bearing in mind that this Court’s standard of proof is on a balance of probability, I must address this issue independently as I exercise this court’s powers under the Constitution.

111. Was the Plaintiff accepting from members of the public of money on deposit repayable on demand or at the expiry of a fixed period or after notice? There is indication of a few complaints of individuals who deposited money with the Plaintiff which monies would accrue interest that they would receive monthly payments or loans for purchase of vehicles.

112. Was the Plaintiff accepting from members of the public of money on current account and payment on and acceptance of cheques? This is true, there is evidence that among the items that were carted away during search and seizure were cheque books and receipt books.

113. Was the Plaintiff using the money held on deposit or on current account, or any part of the money, by lending, investment or in any other manner for the account and at the risk of the person so employing the money? There is evidence of advertisement to obtain loans, loan application forms, Loan Evaluation Forms.

114. This court thus partly agrees with the Plaintiff that it was operating a current account under the Hire Purchase Act as the nature of the transaction required the deposit of some monies. However, advertising to secure loans, in the form of a loan amount in an account held in the customer’s name that would be returned upon the expiry of a certain period or would be refunded in the form of the security that was deposited on top of the loan amount was not hire purchase. As far as receipt of deposits and then the Plaintiff charged interest is concerned, then the Plaintiff was also operating a current account under the Banking Act.

115. The Plaintiff did not present any Hire Purchase Agreements executed between the customers and the Plaintiff which is what it was licensed to do and ought to have been the Plaintiff’s core business.

116. From the Memorandum and Articles of Association of the Plaintiff, the company profile and the transactions it undertook, the Plaintiff was engaged in a financial business and included banking business as prescribed in the Banking Act.

117. I find on a balance of probability, the Plaintiff’s advertisements, transactions were contrary to the Hire Purchase License and the Plaintiff held out as a Finance institution operating banking services by use of the word Finance and was not licensed under the Banking Act.

118. As to whether the raid conducted on 2nd of November 2005 was legally justified.

119. A claim made whose foundation is that an illegality has been conducted against the Plaintiff/Applicant immediately call into issue the burden of proof. It follows that whoever claims that a Constitutional/ Statutory entity acted without jurisdiction or in excess of jurisdiction is within facts pleaded facts and proved before Court. As elucidated above by provisions of Evidence Act and caselaw he who alleges must prove the claim to obtain legal redress.

120. In the present case the Defendants are alleged to have unlawfully and illegally and without just cause raided the Plaintiff’s business premises and seized business equipment documents and ultimately shut the Plaintiff’s business.

121. The 1-15 Defendants received complaints from Government Agencies on complaints with regard to the Plaintiff’s conduct of business. There were complaints by the following on the Plaintiff’s operations to customers;a.Stephen Kimani Gitonga vide letter of 5th October 26005for Credit facility of Ksh 250,000/-,purpose of facility, interest and conditions; he made deposits but had not obtained the loan.Pg 17-31 & 157 of 1-13th & 15th defendant’s bundle of 11/10/2018. b.Hellen Matika Osita vide letter of 18/5/2005 who sought refund of Ksh 524,500/- paid in March 2005 and complained of being taken round and round by the Plaintiff.Pg 32-42 & 133 of the same bundlec.Harris Thuku Mwangi vide letter of 16/3/2005 that the disbursement of funds by the plaintiff on 27/6/2005 was not acceptable as he waited for long and had applied for a loan in September 2004. Pg 54-56 of the same bundle.d.Letter from Vijay Morjoria to Governor of CBK complained of the Plaintiff’s delay in granting a loan sought from 18/10/2004 of Ksh 8. 5 m to buy a sawmill. The author indicated he was constrained to ask how such an institution would be licensed and allowed to operate when it was abundantly clear that they had no capacity to provide services they purport to give.

122. These Complaints brought into focus the Plaintiff’s conduct of business, that contrary to hire purchase business the plaintiff was taking deposits, paying interest and giving customers savings pass book.

123. Therefore, by Internal Memo from Financial Institutions Supervision CBK to Banking Fraud Investigations indicated that the Plaintiff was operating contrary to Sections 3(1) using the word finance without the Minister’s approval , Section 16 , by carrying on deposit taking business without holding a valid license Section 51 of Banking Act. The plaintiff was issuing Advertisements inviting general public to make deposits and falsely representing that they are authorized to accept deposits. The Permanent Secretary in the Ministry of Finance then, Joseph Kinyua wrote to the Governor Central Bank on 24th of October 2005 and sought investigations of Plaintiff’s business arising from complaints received.

124. The Plaintiff relied on proceedings and judgment of Nairobi Chief Magistrate’s court criminal case number 2474 of 2005 and asserted that all accused persons in the plaintiff’s management were acquitted of the charges that included the use of Finance without authority claim. The plaintiff urged that the issue of liability was thus conclusive the Plaintiff to prove damage loss and seek compensation.

125. This Court acknowledges the acquittal of Accused persons from criminal charges and the matter was on the basis of the standard of proof beyond reasonable doubt where as in civil proceedings the standard of proof is on a balance of probabilities.

126. The Court shall not comment on the judgment as there is no appeal in this Court but this Court is to determine the issues raised from the evidence adduced unless such evidence was tendered in another Court of competent jurisdiction and determined then the decision on the issue would be binding to this Court. The doctrine of res judicata applies as follows;

127. The test to determine whether a matter is res judicata was well laid in the case of DSV Silo –vs- The Owners of Sennar [1985] 2 All ER 104and repeated in the Kenyan case of Bernard Mugo Ndegwa –v- James Nderitu Githae and 2 others [2010]eKLR. The applicant, alleging res judicata, must show that ;(a)The matter in issue is identical in both suits,(b)That the parties in the suit are substantially the same,(c)There is a concurrence of jurisdiction of the court(d)That the subject matter is the same and finally,(e)That there is a final determination as far as the previous decision is concerned.

128. The Plaintiff also relied on the letter by the Plaintiff dated 6/1/2005 to CBK 14th Defendant that the plaintiff wrote to Minister of Finance seeking consent to continue using the word Finance in respect of their Company and would revert in due course. By the time the search and seizure was conducted it was almost 10 months and the Plaintiff had not obtained the requisite consent.

129. The 14th Defendant released a general notice giving people who were in contravention of the Banking Act a grace period from 31st October 2005 to January 2006 to stop the use of the protected words and taking deposits from members of the public failure to which legal action would be taken. The complaints were to CBK who forwarded to BFIU the investigative arm.

130. The plaintiff complained that the search and seizure was conducted at the plaintiff’s premises a day or 2 later and he was not notified or given an opportunity to be heard. The plaintiff took the view that it was carrying out legitimate business and on 2/11/2005 without any special notice inquiry or consultation or any basic sense of decorum the Defendants invaded the Plaintiff’s premises.

131. The right to be heard was discussed in the case of Administrator, Transvaal and Others v Traub and Others 1989 (4) SA 731 (A) where the court observed that:“The maxim (‘Audi Alterem Partem rule) expresses a principle of natural justice which is part of our law. The classic formulations of the principle 18 state that, when a statute empowers a public official or body to give a decision prejudicially affecting an individual in his liberty or property or existing rights, the latter has a right to be heard before a decision is taken (or in some instances thereafter …), unless the statute expressly or by implication indicates the contrary”

132. Halsbury’s Laws of England Judicial Review (Volume 61 (2010) 5th Edition) Para. 639 states as follows with respect to the right to notice and opportunity to be heard: -“The rule that no person is to be condemned unless that person has been given prior notice of the allegations against him and a fair opportunity to be heard (the audi alteram partem rule) is a fundamental principle of justice. This rule has been refined and adapted to govern the proceedings of bodies other than judicial tribunals; and a duty to act in conformity with the rule has been imposed by the common law on administrative bodies not required by statute or contract to conduct themselves in a manner analogous to a court. Moreover, even in the absence of any charge, the severity of the impact of an administrative decision on the interests of an individual may suffice in itself to attract a duty to comply with this rule.…However, the nature of an inquiry or a provisional decision may be such as to give rise to a reasonable expectation that persons prejudicially affected should be afforded an opportunity to put their case at that stage; and it may be unfair not to require the inquiry to be conducted in judicial spirit if its outcome is likely to expose a person to a legal hazard or other substantial prejudice. The circumstances in which the rule will apply cannot be exhaustively defined, but they embrace a wide range of situations in which acts or decisions have civil consequences for individuals by directly affecting their interests or legitimate expectations.”

133. The Notice published by 14th Defendant on 31st October 2005 was to general public and including the Plaintiff who was put on notice as early as 29/12/2004 by the 14th Defendant through a letter by Senior Manager Financial Institutions Supervision who had already written to the Plaintiff on contravention of Section 3 ( c ) of Banking Act and ended with that the Plaintiff was advised accordingly. The Plaintiff wrote to the Minister seeking consent but there was no response on the matter. The plaintiff cannot state that he was not informed of the anomaly.

134. The right to be heard and not to be condemned unheard is a cardinal rule of natural justice and is important to the legal process. However, the right must be balanced with and considered alongside the overriding public interest and cannot override that concern bequeathed to a regulator. A regulator has a duty to protect the innocent public from unregulated institutions, where intervention is in good faith then it is upheld. Herein, the Plaintiff was put on notice early on almost 10 months by the 14th defendant. The upsurge of complaints militated against engaging the Plaintiff before the search and seizure was conducted. This Court finds public interest demanded swift action and the Plaintiff had been made aware of the concerns the regulator had with its conduct of business.

135. The 14th Defendant by virtue of Section 4(2) of Central Bank Act one of its principal objects is ensure a proper functioning market based financial system. In the course of carrying out its mandate , it received complaints and since it was not supervising the Plaintiff at the time as it was licensed under Hire Purchase Act , the complaints were referred to BFIU under CID seconded to the 14th Defendant and whom the 14th Facilitated to carry out investigations including the search and seizure of 2/11/2005.

136. It was argued by the Plaintiff that the 14th Defendant and 1- 13th & 15th Defendants were under the 14th Defendant’s umbrella. The organogram at Pg 10 of 14th Defendant’s bundle of documents shows BFIU was under CID but affiliated to 14th Defendant for investigations.DW3 an officer under BFIU vide his statement deposed that as at 2005, BFIU was under Director CID who reported to Commissioner of Police vide Sections 14 (1) & 14 (A) of Police Act repealed.

137. In Tom Odhiambo SC vs Director of Public Prosecutions [2020] eKLRwhere the Court considered whether the investigations carried out by the Respondents were carried out in accordance with the law and due process and stated;The 1st issue is whether there is a complaint which the Respondents acted upon….the other evidence is whether the Respondents indeed acted upon sufficient information in seizing the Petitioner [property]

138. In this case, the letters of complaints laid a basis for investigations to be carried out by Law Enforcement Agency BFIU. The 14th and 15th Defendant are the custodians of the banking sector in terms of helping in regulating the banking industry and have a procedure by which they can check businesses in the event of any suspicion.

139. A perusal of the Banking Act under section 3 is a proviso that states;No person shall in Kenya—(a)transact any banking business or financial business or the business of a mortgage finance company unless it is an institution or a duly approved agency conducting banking business on behalf of an institution which holds a valid licence;(b)unless it is a bank and has obtained the consent of the Central Bank, use the word “bank” or any of its derivatives or any other word indicating the transaction of banking business, or the equivalent of the foregoing in any other language, in the name, description or title under which it transacts business in Kenya or make any representation whatsoever that it transacts banking business;unless it is a financial institution or mortgage finance company and has obtained the consent of the Central Bank, use the word “finance” or any of its derivatives or any other word indicating the transaction of financial business or the business of a mortgage finance company, or the equivalent of the foregoing in any other language, in the name, description or title under which it transacts business in Kenya or make any representation whatsoever that it transacts financial business:

140. Section 4 (1) of this Act provides that licenses are to be granted by Central Bank upon successful consideration of the Application by an institution intending to transact banking business, financial business or the business of a mortgage finance company in Kenya

141. The burden of proving that the search and seizure was justified is on the Defendants. The 14th Defendant took part in the raid by sending DW1 and another of its officers to accompany the BFIU who had specific mandate to conduct investigations but had comply with the law and due process and in this case since the search and seizure ought to have complied with Section 76(1) of Constitution of Kenya (repealed) and Section 118 of Criminal Procedure Code as was held in the case of Standard Newspapers Limited & Anor vs Attorney General & 4 others [2013]eKLR where the Court LJ Mumbi Ngugi (as she then was) considered;Section 14(1) of Police Act (repealed) sets out the powers and mandate of Police……[for] maintenance of law and order, preservation of peace, protection of life and property, prevention and detection of crime, apprehension of offenders, the enforcement of all laws and regulations with which it is charged

142. Section 19 of Police Act (Repealed), which spells out the discharge of Police functions conducted lawfully by applying for summons warrant, search warrants or such other legal process to be issued against the other persons before Courts of Law.

143. Section 20 of Police Act (Repealed) which spells out instances where the Police may pursue investigations without a warrant where the Officer has reasonable grounds to believe something necessary for the purposes of such investigation is likely to be found in any place and that the delay occasioned by obtaining a search warrant under Section 118 will in his opinion substantially prejudice such investigation, the Officer shall record in writing the grounds for such belief, produce certificate of appointment and items seized shall be placed before a Court of Law and dealt with according to the law.

144. In this case, there were complaints on the Plaintiff’s conduct of business that necessitated investigations that were conducted by BFIU personnel accompanied by CBK Officers and whatever was taken was recorded in Inventories that were duly signed by parties and the Officers was subjected of Criminal proceedings.

145. The procedure for inspection of institutions is provided under Section 32 (2) of the Banking Act. The Banking Act is an Act of Parliament to amend and consolidate the Law regulating the business of banking in Kenya and for connected purposes and the Central bank of Kenya is the Regulator with supervisory role in the Banking Sector. The inspection envisaged in this Section is with regard to banking institutions and the Plaintiff was not one of them at the time, it was registered under Hire Purchase Act.

146. The 1st to 13th and 15th Defendants contend that the alleged crime committed was a cognizable offence that did not require a warrant. Searches such as this one are provided for under Section 180 of the Evidence Act and Section 118 and 121 Criminal Procedure Code.

147. Section 180 of the Evidence Act provides for the initial procedure to facilitate investigation into a bank account and reads as follows:(1)Where it is proved on oath to a judge or magistrate that in fact, or according to reasonable suspicion, the inspection of any banker’s book is necessary or desirable for the purpose of any investigation into the commission of an offence, the judge or magistrate may by warrant authorize a police officer or other person named therein to investigate the account of any specified person in any banker’s book, and such warrant shall be sufficient authority for the production of any such banker’s book as may be required for scrutiny by the officer or person named in the warrant, and such officer or person may take copies of any relevant entry or matter in such banker’s book.

148. Section 118 of the Criminal Procedure Code provides:“Where it is proved on oath to a court or a magistrate that anything upon, with or in respect of which an offence has been committed, or anything which is necessary for the conduct of an investigation into an offence, is, or is reasonably suspected to be, in any place, building, ship, aircraft, vehicle, box or receptacle, the court or a magistrate may by written warrant (called a search warrant) authorize a police officer or a person named in the search warrant to search the place, building, ship, aircraft, vehicle, box or receptacle (which shall be named or described in the warrant) for that thing and, if the thing be found, to seize it and take it before a court having jurisdiction to be dealt with according to law

149. Section 121 (1) of the Criminal Procedure Code provides that;When anything is so seized and brought before a court, it may be detained until the conclusion of the case or the investigation, reasonable care being taken for its preservation.

150. In Criminal Application No. 9 of 2003 Erastus Kibiti Stephen vs. Euro Bank Ltd. and the Commissioner of Police, the court observed that:“Section 180(1) does not encompass the freezing of a bank account. On the plain reading of the Section, this is indeed so. But one may loudly wonder why the law should permit the inspection of Banker’s books…when it does not safeguard the funds existing in those accounts…How else would the investigator ensure that the horse has not bolted from the stable as it were before he finalizes his inspection? The answer, I think, lies in enacting a law whether substantive or procedural to resolve that difficulty.”

151. The Court of Appeal in the case of Samuel Watatua & Another v Republic, Court of Appeal, Nairobi, Criminal Appeal No. 2 of 2013 (unreported), stated that;-“A reading of Section 180 of the Evidence Act together with Sections 118 and 121 of the Criminal Procedure Code leaves no doubt in anybody’s mind that the Court, upon application, has power not only to authorize access by police to bank accounts of suspected criminals but also to freeze those accounts for the purposes of preserving evidence and the subject matter of the alleged crime.”And further,“In this case, we find that the limitations in Section 180 of the Evidence Act together with Sections 118 and 121 of the Criminal Procedure Code are in consonance with Article 24 of the Constitution.”

152. The 1st to 13th and 15th Defendants have produced warrants to investigate account issued on 8th November 2005 in Chief Magistrate case number 681,680,679,677,676, 675,674, all of 2005 to Inspector William Nyakundi. However, we note that these warrants were issued five (5) days after the raid was conducted and related to investing the Plaintiff’s bank Accounts. Section 20 of the Police Act now repealed was applicable in 2005 and allowed for instances of search and seizure without a warrant subject to conditions.

153. As to the question of whether the Defendant should be ordered to return the Plaintiff’s items particularized files, computers and computer accessories.

154. Section 121 (1) of the Criminal Procedure Code provides that:When anything is so seized and brought before a court, it may be detained until the conclusion of the case or the investigation, reasonable care being taken for its preservation

155. Section 121(3) further directs that:If no appeal is made, or if no person is committed for trial, the court shall direct the thing to be restored to the person from whom it was taken, unless the court sees fit or is authorized or required by law to dispose of it otherwise.

156. From the record, the Chief Magistrate court in Criminal Case number 2474 of 2005 issued as part of its final directions an order to the effect that the seized items should be returned to the Plaintiff and the said order has never been complied with.

157. I also notice from the record that both parties had come to a consensus on the return of the seized goods to the parties.

158. During the hearing of the notice of motion application dated 11th of May 2012 at the Court of Appeal, Mr. Simani learned counsel indicated that his client had partly complied with the order by returning most of the confiscated items. Further, vide letter dated 14th May 2012 informs the 15th Respondent that it is not in possession of the confiscated items and asks the 15th Respondent to comply with the order.

159. A document dated 4th of June 2012 with a stamp of the 15th Defendant indicates that the following items were collected by Mr. Gideon Mwiti and it is signed by CI Mwahiko, IP Lekariap, CPL Wakp, Mr. Mwiti, Mr. Mwangagi and Mr. Mulwa. The items include;i.Five (5) Logbooksii.Six (6) title deedsiii.One(1) land certificateiv.One (1) share certificatev.Three (3) computersvi.One thousand Eight Hundred and Seventy two (1872) customer filesvii.One (1) Plaintiff company sealviii.Five (5) Plaintiff company stampsix.Twenty (20) computer discketsx.Three hundred and twenty (320) customers pass bookxi.four (4) CPUs

160. It has been over 15 years since this order was issued. One wonders why the same has not been fully complied with.

161. Court orders are supposed to be fully complied with. I therefore direct that the Defendants fully comply with the order of the Court within 21 days from this judgment failure to which the Plaintiff may pursue legal redress.

162. As to whether a mandatory injunction should be issued against the 1st, 2nd and 14th Defendants to return and restitute to the Plaintiff the items seized and removed during the raid, the same is also granted.

163. As regards whether the freeze/embargo placed upon the Plaintiff’s bank accounts by the 14th Defendant , this Court takes the view that during the hearing of the case, the Court obtained constructive knowledge from the warrants obtained from Court to investigate the Plaintiff’s Accounts in various banks there are funds that belong to the Company and 3rd parties depositors. These funds are commingled and would require tracing of funds for the Plaintiff released to the Plaintiff and those of depositors’ innocent 3rd Parties. Of importance the evidence on record confirms funds in the following banks;a.Barclays bank -Merub.Stanbic Bankc.Equity bankd.Cooperative banke.HFCK Headquartersf.KCB Kitengela & Voi Branches

164. There is also List of Depositors pg 5-11 of depositors and amounts of deposits. The stated accounts have funds of 3rd Parties who have not been notified and/or heard and it would be a violation of 3rd Parties’ rights without their knowledge approval consent that all funds in all accounts in all banks are released to the Plaintiff Company without reference to depositors who have waited over the years. Therefore, at this stage this court in the absence of hearing the 3rd Parties depositors cannot release and/or freeze these accounts and release funds. The parties shall institute proceedings as arising out of this matter for determination of ownership of funds within the Commercial & Tax Division and may consider the same suit to avoid limitation of actions may not be successfully invoked. At this stage for reasons advanced the prayer is not granted.

165. It is trite law that special damages must not only be pleaded but must also be strictly proved. The Court of Appeal in Capital Fish Limited Vs The Kenya Power and Lighting company Limited (2016) eKLRopined while relying on the case of Provincial Insurance Company East Africa Limited vs Mordekai Mwanga Nandwa, KSM CACA 179 of 1995(ur)that;“… It is now well settled that special damages need to be specifically pleaded before they can be awarded. Accordingly, none can be awarded for failure to plead.

166. Furthermore, In the case of David Bagine v Martin Bundi [1997] eKLR, the Court of Appeal, referred to the judgment by Lord Goddard CJ in Bonhan Carter v Hyde Park Hotel Limited [1948] 64 TLR 177), and again observed that:“It is trite law that the Plaintiff must understand that if they bring actions for damages it is for them to prove damage. It is note enough to note down the particulars and, so to speak, throw them at the head of the court saying ‘this is what I have lost’, I ask you to give me these damages; they have to prove it.”

167. PW2 stated that the company had a client base of over 6000 customers and over 300 employees and in the course of the raid the Defendants carried away the customers records and the companies tools of trade thus paralyzing operations.

168. The Plaintiff also filed strategic plan for the period from 2005 to 2013. The Plaintiff produced cash certificate as exhibit 8 to prove loss of cash

169. The Plaintiff abandoned the initial report by Murungu in his submissions, one that all the defendants challenge and relied on a forensic audit report on claims based on losses incurred between 2nd November 2005 and 2nd November 2013 hereinafter referred to as the “Massawa Report” and pegs the loss at Kshs.2,847,388,652 broken down as follows;Loss of income Kshs 1,789,396,000Company loan to external clients Kshs. 381,707,839Fixed Assets Kshs 90,027,012Law suit and litigation fees Kshs 252,554,000Loss on cash and interest thereon Kshs 39,949,540Company loans to employees Kshs 1,082,190Funds borrowed externallyand interest thereon Kshs. 301,672,071

170. I note that the total in the report is not the same as that claimed in the Plaint however the Plaintiff has reiterated even in his submissions that he is only claiming Kshs 930,000,000.

171. The 14th Defendant produced the PKF report disputing the claimed amount on the basis that the sum of Kshs 1,536,335,537. 00 was exorbitant, inappropriate and unsupported as the projections and assumptions were not backed by detailed strategies and a financial plan. That there was evidence of cash flow challenges as the Plaintiff issued bounced cheques as well as the income tax declaration of the plaintiff and accounts from 2004 that confirm that the Plaintiff was declaring losses.

172. The Plaintiff operated for slightly over 20 months from February 2004 to November 2005. They filed a strategic report on 25th October 2013 detailing all their plans. Further, that they filed a loan agreement with Global Credit Limited for a sum of Kshs. 125,000,000/= as a credit facility to enhance its Hire purchase business. They also provided staff contracts as exhibit 9.

173. The Plaintiff alleged that he had justified the figures claimed in its bill of quantities. Further that he had proven its case and made reference to the Massawa Report that quoted the losses incurred at 2. 7Billion.

174. As regards Law Suits and Litigation costs, the Plaintiff will be entitled to party and party costs in the event that he is awarded costs. Nonetheless, the Plaintiff has only attached invoices and not receipts to prove payment.

175. From the above outline, the Plaintiff has not proved special damages as required, the figures are different from the pleadings, the forensic report is not based on actual audit. The Plaintiff would have availed certified audited accounts of the previous year to inform the special damages sought if the Court found the search & seizure or called raid were illegal.

Disposition1. The Court finds the Plaintiff carried out its business not as specified in the license a hire purchase business. No Hire Purchase agreements were executed, produced or availed as evidence in Court.

2. The Court finds that the Plaintiff’s business infringed the provisions of the Banking Act.

3. The Court finds the search and seizure by the 1st 13th & 15th Defendants of the 2nd November 2005 was lawful.

4. An order for delivery of the Plaintiff’s particularized files, computers and computer accessories as in paragraph 19 of the Plaint is granted.

5. A mandatory injunction compelling the 1st, 2nd and 14th Defendants to return to the Plaintiff the items seized and removed from its premises on the 2nd of November 2005 is granted.

6. A Mandatory injunction compelling the 14th Defendant to remove the freeze/embargo placed upon its bank accounts and for payments of any consequential orders is withheld to allow 3rd Parties’/ Depositors to be heard and be paid their share from the funds in the said accounts.

7. The Court finds the seizure by the 3rd to the 13th& 15th Defendants of the items pleaded to in paragraph 13 of the Plaint was not illegal and justified and not a breach of the rights of the Plaintiff

8. The freeze / embargo placed by the Banking Fraud Investigations Unit upon the bank accounts held by the Plaintiff is illegal, unjustified and breach of the rights of the Plaintiff & 3rd Parties.

9. Claim in the sum of Kenya Shillings 930,000,000 is not due and not proved as special damages and is dismissed.

10. Each Party to bear its own Costs of the suit.DELIVERED SIGNED & DATED IN OPEN COURT ON 11THMARCH 2022 (VIRTUAL CONFERENCE)M.W. MUIGAIJUDGE