[2022] KEHC 14471 (KLR)

Lavington Security Limited v Commissioner for Co-operative Development & another (Civil Case 61 of 2019) [2022] KEHC 14471 (KLR) (Commercial and Tax) (13 October 2022) (Ruling)

Neutral citation: [2022] KEHC 14471 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Civil Case 61 of 2019

WA Okwany, J

October 13, 2022

Between

Lavington Security Limited

Plaintiff

and

Commissioner for Co-operative Development

1st Defendant

Lavington United Sacco Society Limited

2nd Defendant

Ruling

1. This ruling is in respect to the application dated July 7, 2022 wherein the 2nd defendant/applicant seeks orders that:-1. Spent.2. That this honourable court be pleased to issue orders directing the sum of Kshs 48,026,779/- together with all accrued interest thereon held in Mayfair-CIB bank limited in a joint interest earning account no xxxxxxxxxx in the name of professor Tom Ojienda & Associates/Wangwe & Company Associates & Paul O Ojwang be released to the 2nd defendant’s herein through it account;Bank: Co-operative Bank of KenyaAccount name: Lavington United Sacco Ltd.Account No: xxxxxxxxxxBranch: Green House forthwith.3. That the costs of the application be provided for.4. That such other and further relief be granted as this honourable court may deem fit and just to grant in the circumstances of this matter.

2. The application is supported by the affidavit of the applicants chief executive officer, Mr. Raphael Kiptui, who avers as follows:-1. That the plaintiff filed a suit against the 2nd defendant vide a plaint dated February 12, 2019. 2.That I am aware the plaintiff and 2nd defendant engaged in negotiation with a view of settling and reached an dated February 21, 2019 and addendum agreement dated February 21, 2019. (annexed and marked as RCK 1 arrears repayment agreement and addendum agreement dated February 21, 2019).3. That the agreement saw he plaintiff acknowledge being in default of making payment of its employees contribution to our company amounting to Kshs 49,009,985. 85 and further agreed as follows:-a.The plaintiff to make a payment of Kshs 6,009,958. 85 by March 31, 2019. b.The plaintiff shall repay the balance Kshs 43,000,000 in 5 equal instalments of Kshs 8,600,000 on or before August 31, 2019. c.The plaintiff to remain current in all future remittance as provide by the Act i.e. by the 7th day after deduction is made.d.The parties will have all administrative enforcement instruments relating to this matter suspended forthwith subject to specific performance.e.Any outstanding amount shall not continue to attract penalty interest.4. That the agreement was amended by an addendum agreement dated February 21, 2019 to which the outstanding amount of Kshs 49,009,985. 85 was revised downwards to kshs 32,009,985. 85 as follows:a.The plaintiff shall make a payment of Kshs 6,009,985. b.The outstanding balance of kshs 26,000,000 to be paid in 5 equal instalment of Kshs 5,200,000 on or before August 31, 2019. 5.That in line with the agreement the plaintiff and 2nd defendant executed a consent dated February 27, 2019 and the same was adopted as court order.6. The subsequent to the order, the plaintiff made payments of kshs 32,009,985. 85 by August 29, 2019 being the full amount of money owed as arrears. However, breached their obligations under the arrears repayment agreement by failing to remain current in all future remittance.7. The 2nd defendant served a demand letter dated September 18, 2019 to the plaintiff which was not honored. ( Annexed and marked as RCK 2 Demand letter dated September 18, 2019).8. That the 2nd defendant thereafter enlisted the 1st defendant to exercise its statutory powers under Section 35 of Cooperative Society ActCap 490 Laws of Kenya.9. The 1st defendant called for a meeting of the parties herein vide a letter dated October 8, 2019 in a bid to find a settlement between the plaintiff and the 2nd defendant to which the plaintiff failed to honor the invitation. ( Annexed and marked as RCK 3 is a copy of the letter of invitation).10. That consequently, the 1st defendant pursuant to Section 35 ofCooperative Society ActCap 490 Laws of Kenya issued a letter to demand Kshs 48,026,779 being the principal amount of Kshs 30,833,933. 70 for the period January 2019 to 31st September 2019 and a compounded interest at 10% per month thereof of Kshs 17,192,845. 30 and issued agency noticed dated October 30, 2019 to specified banks where the plaintiff holds accounts. (Annexed and marked as RCK 4 is a copy of the demand letter and Agency notices).11. That the plaintiff in turn filed an application that sought to declare it had fulfilled the terms of the arrears repayment agreement and the demand of Kshs 48,026,779 was ultra vires.(Annexed and marked as RCK 5 is a copy of the application dated October 23, 2019).12. That on the November 5, 2019 after hearing all the concerned parties, the Honorable Judge made orders to the effect a temporary injunction do issue against the defendants, by themselves, their agent and or servant from demanding a sum of Kshs 48,026,779 from the plaintiff and or commencing any legal recovery process thereof and or issuing agency notices of the plaintiff’s bankers in respect of the same pending the hearing and determination of its application.( Annexed and marked as RCK 6 is a copy of the court order dated November 6, 2019).13. That on the September 4, 2020 the Honorable judge dismissed the said application and found the plaintiff in breach of the arrears repayment agreement on the grounds of its failure to remain current in all future remittance as provided by the Act.( Annexed and marked as RCK 7 is a copy of the Court Ruling dated September 4, 2020).14. That the plaintiff further filed an application under certificate of urgency to review and set aside the above ruling. ( Annexed and marked as RCK 8 is a copy of the plaintiff’s application dated September 9, 2020).15. That the plaintiff with temporary injunction orders granted unsuccessfully attempted to access its monies held at Standard Chartered Bank(Kenya) Limited thus filed a contempt application against the defendant.( Annexed and marked as RCK 9 is a copy of the plaintiff’s application dated September 5, 2020).16. The Honorable court granted temporary injunction against the defendant restraining them from the demanding and or enforcing agency notices against the plaintiff’s Bankers or any other institution the plaintiff has a customer and bank relation subject to the plaintiff depositing the demanded amount of Kshs 48,026,779 into a joint interest earning account to be held in the advocates’ name.( Annexed and marled as RCK 10 is a copy of court order dated October 1, 2020).17. That the parties thereafter complied and opened an account at Mayfair- CIB Bank Limited Account no xxxxxxxxxx in the name of Professor Tom Ojienda & Associates/ Wangwe & company Associates & Pat O. Ojwang.18. That on June 23, 2022 the Honorable court dismissed both the plaintiff’s application for review and contempt.(Annexed and marked as RCK 11 is a copy of court order dated July 1, 2022).19. That I am advised by my counsel on record that with the dismissal of the plaintiff application the 2nd defendant is lawfully entitled to the money deposited to the joint account by virtue of the Agency Notices that were issued by the 1st defendant.

3. The plaintiff/respondent opposed the application through the replying affidavit of its Director Mr. Jonah Kiprotich Telo who avers that despite the dismissal of the plaintiff’s application to review the court’s ruling of September 4, 2020, the plaintiff’s plaint still remained undetermined in respect to several prayers to wit:-i.An order of declaration that the Agency Notices issued by the 1st defendant dated January 3, 2019 to Standard Chartered Bank Limited, Family Bank Limited, Co-operative Bank of Kenya, Transnational Bank Limited, UBA Bank Kenya Limited and Jamii Bora Bank Limited declaring them to be agents of the 2nd defendant and requiring each one of them to remit the sum demanded of Section 35 of the Co-operative Societies Act Cap 490 Laws of Kenya and are illegal, null and void and are hereby set aside or quashed:ii.An order that accounts be taken to ascertain such sum ( if any) due from the plaintiff to the 2nd defendant;iii.An order of injunction restraining the 1st defendant, its servants and or agents from enforcing and effecting the agency notices dated January 3, 2019 issued to Standard Chartered Bank Limited, Family Bank Limited, Co-operative Bank of Kenya, Transnational Bank Limited, UBA Bank Kenya Limited and Jamii Bora Bank Limited and demanding payments from the said banks pursuant to the said notices.

4. The respondent avers that the release of the money held in the joint interest earning account will have the effect of prematurely determining the suit thus rendering the trial process an exercise in futility.

5. It is the respondents contention that the issue of whether the plaintiff’s employees withdrew their membership from the 2nd defendant is one of the key issues to be determined at the hearing and that if the court eventually finds that there was mass withdrawal of membership, then it will follow that no deductions were made from the said members to warrant the remittals made during the period in dispute.

6. The respondent contends that it is in the interest of all the parties to preserve the amount in dispute until the hearing and determination of the matter.

7. The plaintiff further states that it has lodged an appeal in the matter and that releasing the secured amount will prejudice the proceedings before the Court of Appeal.

8. It is the plaintiff’s case that the 2nd defendant will not suffer any prejudice if the money remains in the joint interest earning account pending the hearing and determination of the suit.

9. Parties canvassed the application by way of written submissions. The main issue of determination is whether the 2nd defendant has made out a case for the release of the money held in the joint interest earning account.

10. I have perused the courts ruling of September 30, 2020 in which an order was made allowing prayer no 2 of the application dated September 9, 2020. In the said ruling, Odero J. stated as follows:-“In order to meet the ends of justice and not to render the upcoming application nugatory, I do hereby grant interim orders in terms of prayer (2) of the Notice of Motion dated September 9, 2020, subject to the plaintiff/applicant, depositing the amount Kshs 48,026,779. 00 into a joint earning account held in the names of all three (3) advocates within thirty (30) days of the date of this ruling.

11. Prayer no 2 of the application dated September 9, 2020 was for interim order as follows:-“That pending hearing and determination of this application interpartes the Honourable court be pleased to issue and order of temporary injunction restraining the respondents, by themselves, their agents and or servants from demanding a sum of Kshs 48,026,779 from the applicant and or commencing any legal recovery proceedings thereof and/or from issuing to and/or enforcing. Agency Notices against the applicant’s bankers, any institution the applicant has customer bank relationship with and/or the applicant’s bank accounts herein below listed:-LAVINGTON SECURITY LIMITED BANK ACCOUNT

Family Bank Kilimani Branch xxxxxxxxxx

Family Bank Laptrust Branch xxxxxxxxxx

Co-operative Bank xxxxxxxxxx

Jamii Bora Bank – Ngong road A/C xxxxxxxxxx

Kenya Women Finance Bank xxxxxxxxxx

Middle East Bank Current Ac xxx xxxxxxxxxx

Middle East Bank Savings Ac xxx xxxxxxxxxx

National Bank Limited xxxxxxxxxx

Standard Chart Bank-xx xxxxxxxxxx

Standard Chartered xx xxxxxxxxxx

Standard Chartered A/C xx xxxxxxxxxx

Standard Chartered A/C -xx xxxxxxxxxx

Standard Chartered Savings A/C xxxxxxxxxx

Trans National Bank Ltd xxxxxxxxxx

Transnational Bank – salary A/C xxxxxxxxxx

United Bank of Africa (UBA) xxxxxxxxxx

12. The applicant’s case was that since the application dated September 9, 2020 had already ben determined in its favour when the application for review was rejected, then it follows that the amount deposited in the joint interest account as a condition for the interim injunction should be released to them.

13. My finding is that while it is true that an order for the deposit of the said sum of Kshs 48,026,779 was made as a condition for the granting of the interim order of injunction, the 2nd defendant is yet to establish its case and entitlement to the said sum. I find that the said order for conditional deposit cannot be equated to a conditional deposit for stay of execution.

14. As can be seen from the extract of the interim orders issued on September 30, 2020, the same were to restrain the respondents from demanding the sum of Kshs 48, 026,779 from the plaintiff. In effect therefore, the subsequent dismissal of the application dated September 9, 2020 connotes that the respondents can now go ahead and demand the said sum. The plaintiff, on its part, still disputes owing the said sum.

15. My finding is that the issue of whether the plaintiff owes the defendants the disputed sum can only be determined, with finality after hearing the merits of the main suit.

16. For the reasons I have stated in this ruling I find that it will serve the interest of justice to expedite the hearing of the main suit so that the issue of the party entitled to the amount deposited in the joint interest account can be dealt with conclusively.

17. Consequently, I decline to grant the orders sought in the application and direct parties to fix the main suit for hearing within 45 days from the date of this ruling.

18. For avoidance of doubt reiterate that the sum of Kshs 48,026,779 held in the joint interest-earning account shall remain in the said account pending the hearing and determination of the main suit.

DATED, SIGNED AND DELIVERED VIRTUALLY AT NAIROBI THIS 13THDAY OF OCTOBER 2022. W. A. OKWANYJUDGEIn the presence of: -Mr. Abdulahi for 3rd defendant/respondent.Mr. Muriuki for Ms Wanga for 2nd defendant.Ms Nthiga for 1st defendant.Mr. Okore for plaintiff/RespondentCourt Assistant- Sylvia