[2021] KEELC 4525 (KLR)

REPUBLIC OF KENYA

IN THE ENVIRONMENT AND LAND COURT AT MACHAKOS

ELC. APPEAL NO. 27 OF 2020

MUKA MUKUU FARMERS COOPERATIVE

SOCIETY LIMITED........................................APPELLANT/APPLICANT

VERSUS

STEPHEN MWANZIA KITHUKA...............................1ST RESPONDENT

JOSEPH MUTINDA MUTISYA.................................2ND RESPONDENT

FREDRICK MUITHYA MULI....................................3RD RESPONDENT

RULING

1. This Ruling is in respect of two Applications. The initial Application is dated 3rd August, 2020 in which the Appellant is seeking for the following orders:

a) That pending the hearing and determination of the Appeal this Honourable Court be pleased to issue an order of stay of execution of the Ruling and consequential Orders of the Tribunal made on 9th July, 2020.

b) That pending the hearing and determination of the Appeal this Honourable Court be pleased to stay the proceedings before the Cooperative Tribunal vide Tribunal Case No. 150 of 2020.

c) That the costs of and incidental to this Application be provided for.

2. In the Notice of Motion dated 21st September, 2020, the Appellant sought for the following orders:

a) That pending the hearing and determination of the Application dated 3rd August, 2020 the Honourable Court be pleasedto grant an order allowing the Respondent, it’s authorized agents, officials and/or employees to receive and collect any form of payments or monies due to it or from its members or non-members in the ordinary management and running of the affairs and business of the Respondent and in accordance with its By-Laws and the Cooperative Societies Act.

b) That the costs of and incidental to this Application be provided for.

3. The Applications are supported by the Affidavits of the Appellant’s Vice Chairman who deponed that on 28th April, 2020, the Honourable Chairperson of the Tribunal granted the Respondents ex-parteinterim orders of injunction restraining the Management Committee, Supervisory Committee and others from prequalifying any bidders, tendering, leasing or charging the Appellant’s property known as L.R. No. Donyo Sabuk/Donyo Sabuk/West/Block Nos. 1/3332, 3335, 3336, 3341, 3344, 3345 and 3375 pursuant to the invitation to Tender for Quarry Land Lease advertised in the Daily Nation on 27th March, 2020.

4. It was deponed that the Tribunal’s Chairman also issued an order restraining the Management Committee of the Appellant as currently constituted from dealing in any manner with the accounts and/or finances of the Appellant.

5. It was deponed that being dissatisfied with the said orders, the Appellant filed an Application under a Certificate of Urgency to discharge, vary and/or set aside the said orders which the Honourable Chairperson of the Tribunal failed to consider and directed parties to file submissions and comply with Order 11 of the Civil Procedure Rules. According to the Appellant’s Vice Chairman, the Tribunal extended the orders suo motodespite the glaring inconveniences, prejudice and harm that the said orders have occasioned the Appellant, it’s employees and members.

6. It was deponed by the Appellant’s Vice Chairman that on 9th July, 2020, the Honourable Tribunal delivered a substantive Ruling on the two Applications, in which Ruling the Tribunal allowed the Respondent’s Application and confirmed the order in their entirety and dismissed the Appellant’s Application seeking to set aside the interim orders.

7. The Appellant’s Vice Chairman deponed that because of the said freezing order, the Appellant is not been able and has not been able to pay its employees’ salaries and will not be able to pay their salaries for the subsequent months with the said order in force which is punitive and against their rights especially during these tough times of the Covid-19 pandemic.

8. It was deponed by the the Appellant’s Vice Chairman that the Appellant is not able to pay its recurrent bills, utilities, electricity bills, the mandatory income tax which is now overdue and accruing penalties, employees NHIF, NSSF and external service providers whose payments are overdue, among others.

9. It was deponed that the Appellant is not able to pay and/or receive payments to facilitate and process the sale and purchase of properties on behalf of its members who are desirous of disposing of their properties which are not subject of the dispute herein; that the Appellant being aggrieved by the said orders, especially the order restraining the Management Committee of the Appellant as currently constituted from dealing in any manner with the accounts and/or finances of the Appellant has filed an Appeal and that the Appeal raises valid and weighty legal issues and has high probability of success.

10. It was deponed that the Management Committee of the Appellant as currently constituted was duly elected into office in the Annual General Meeting; that the election of the Committee has never been challenged, and that unless the stay order sought herein is granted, the Appellant and the majority of its members and employees will suffer irreparably.

11. It was deponed that the Tribunal erred in giving the freezing order of injunction restraining the Management Committee of the Appellant from accessing the Appellant bank account and finances ­ex-parte without any tangible evidence of the alleged fraud and mismanagement; that the Appellant as a Society is expected to continue running based on the budget passed in the Annual General Meeting and that to issue freezing orders of its accounts and finances will automatically halt and/or cripple its operations.

12. In response, the 1st Respondent deponed that the orders that were issued by the Tribunal were based on the grounds that the Appellant had embarked on an illegal tendering process of approximately 600 acres of the Society’s land in contravention of the Society’s objectives and by laws and that the Society’s management committee was not properly constituted because one of the members of the committee, Michael Ngundo Kawinzi, was adversely mentioned in the inquiry report dated 1st October, 2008.

13. It was deponed that the inquiry report barred all the officials and members of the Appellant who had been adversely mentioned from seeking or holding elective positions or being employed in the cooperative movement in Kenya.

14. It was deponed by the 1st Respondent that Mr. Kawinzi is a member of the current Management Committee of the Appellant; that an Annual General Meeting of the Society cannot vary the findings of the Inquiry Report; that the Inquiry Report was done pursuant to the provisions of Section 58 of the Co-operative Societies Act and that the said Report was challenged by Mr. Kawinzi in High Court Miscellaneous Application No. 816 of 2008 which was dismissed.

15. The 1st Respondent deponed that an illegally constituted committee cannot enter into contracts on behalf of the Society; that the purported leasing of the Society’s 600 acres of land by the committee is null and void and that pursuant to Article 4(vi) of the Society’s by laws, the Appellant is barred from leasing any part of the Society’s land except the Central Farm.

16. The 1st Respondent finally deponed that the Respondents are apprehensive that quarrying of stones in the settlement area will render the entire parcel of land unfit for settlement; that the leasing of the Society’s land was done in contravention of the by-laws and that the Society’s committee is illegally constituted.

17. In his submissions, the Appellant’s advocate submitted that upon granting of the impugned orders at the ex-partestage, the Respondents served the said order on all the Applicant’s operational bank accounts and the banks relying on the said order froze the accounts.

18. It was submitted that the Respondent has over 2,000 members; that these members rely on the sale of their properties to fend for their lives and that with the court orders in place, the said members can neither pay nor receive the transfer, survey and search fees to effect land transactions for those who are selling or buying plots because of the freezing orders.

19. It was submitted that the Applicant has also employed a number of staff who are dependent on the monthly salaries for sustenance; that these employees have not been paid their salaries since the month of April, 2020 when the impugned orders were made and that the Applicant has recurrent bills and overheads to pay which are now due and this might lead to an array of claims and suits filed against the Applicant.

20. It was submitted that the general operations and management of the Appellant is done by delegates, which is the highest decision making organ of a Co-operative Society as provided under Section 27 (1) of the Co-operative Societies Act and that the objects of the Respondent are as outlined under Article 4 of its by-Laws, including organizing and promoting the economic interests of its members in accordance with the cooperative principles.

21. Counsel submitted that the Appellant acquired the suit properties as mandated under Clause 4 of its by-laws; that Clause 4(6) on the other mandates the Appellant to lease all or part of its acquired land to raise funds and that the use for which the land is leased is left for the Appellant’s General Meeting to determine.

22. It was submitted that the decision to lease out the suit land was made at the Appellant’s AGM of 2017 and 2018 and confirmed in the AGM of 2019 pursuant to the Appellant’s by-Laws and that the Respondents have not challenged the resolutions made in those AGMs.

23. Counsel submitted that it is true that Mr. Kawinzi was adversely mentioned in the inquiry report of October, 2008; that the said Mr. Kawinzi was indeed expelled from the Society and that pursuant to the resolution passed in the SGM held on 12th March, 2016, Mr. Kawinzi’s expulsion was lifted and was reinstated as a member of the Society. Subsequently, it was submitted, Mr. Kawinzi was elected as a Member of the Management Committee in the Annual General Meeting of 15th December, 2017 and 18th December, 2018 and that his election has never been challenged.

24. Counsel submitted that it has been pronounced in countless judicial precedents that the test and threshold required for the grant of account freezing orders or Mareva injunction is slightly different from the test required for the grant of Interlocutory Injunction as set out in the locus classicuscase of Giella vs. Cassman Brown (1973) EA 358 and that the question that the Tribunal ought to have asked itself is whether or not the Respondent’s Application met the threshold for the grant of the Mareva injunction or a freezing injunction order.

25. It was submitted by the Appellant’s advocate that in the entire Application before the Tribunal, the Respondents did not demonstrate where and how the Appellant or its Management Committee or the Supervisory Committee would or intend to dissipate the Society’s funds or money in the bank accounts from the jurisdiction of the court if the orders are not granted at all.

26. Counsel submitted that the instant Appeal emanates from a Ruling of the Court on an interlocutory Application; that the substantive suit is still pending before the trial court and that the requirement for security has been held in many judicial precedents to be mandatory for money decrees. It was submitted that this being a dispute pitting the Society and its members, security for costs is not necessary.

27. The Respondent’s advocate submitted that the Appellant has no arguable case; that allowing the current Committee to run the affairs of the Society will be tantamount to sanctioning an illegality and that Mareva injunctions are granted for the purpose of preventing a Defendant to dissipating the assets with the intention of frustrating enforcement of a prospective Judgment and that the Application should be dismissed.

Analysis and findings:

28. In the Application dated 3rd August, 2020, the Applicant is seeking for an order of stay of execution of the Ruling of the Cooperative Tribunal in Nairobi Tribunal Case number 150 of 2020 pending the hearing and determination of the Appeal. In the same Application, the Appellant is also seeking for a stay of the proceedings pending before the Tribunal pending the hearing and determination of the Appeal.

29. The law governing Applications for stay of execution is Order 42 Rule 6(2) of the Civil Procedure Rules which provides as follows:

“(2) No order for stay of execution shall be made under sub rule (1) unless-

(a) the court is satisfied that substantial loss may result to the Applicant unless the order is made and that the application has been made without unreasonable delay; and

(b) such security as the court orders for the due performance of such decree or order as may ultimately be binding on him has been given by the Applicant.”

30. In considering if the Appellant will suffer substantial loss unless an order of stay of execution is granted, I am guided by the decision of the Court of Appeal in Kenya Shell Limited vs. Benjamin Karuga Kigibu & Ruth Wairimu Karuga (1982-1988) 1 KAR 1018in which the court stated as follows:

“It is usually a good rule to see if Order 41 Rule 4 of the Civil Procedure Rules can be substantiated. If there is no evidence of substantial loss to the Applicant, it would be a rare case when an Appeal would be rendered nugatory by some other event. Substantial loss in its various forms is the cornerstone of both jurisdictions for granting stay.”

31. In the case ofButt vs. Rent Restriction Tribunal [1979] eKLR,the Court of Appeal held as follows:

“It is in the discretion of the court to grant or refuse a stay but what has to be judged in every case is whether there are or not particular circumstances in the case to make an order staying execution. It has been said that the court as a general rule ought to exercise its best discretion in a way so as not to prevent the appeal, if successful from being nugatory, per Brett, LJ in Wilson v Church (No 2) 12 Ch D (1879) 454 at p 459. In the same case, Cotton LJ said at p 458:

“I will state my opinion that when a party is appealing, exercising his undoubted right of appeal, this court ought to see that the appeal, if successful, is not nugatory.”

Megarry J, as he then was, followed Wilson (supra) in Erinford Properties Limited v Cheshire County Council [1974] 2 All ER 448 at p 454 and also held that there was no inconsistency in granting such an injunction after dismissing the motion, for the purpose of the order is to prevent the Court of Appeal’s decision being rendered nugatory should that court reverse the judge’s decision. The court will grant a stay where special circumstances of the case so require, per Lopes LJ in the Attorney General v Emerson and Others 24 QBD (1889) 56 at p 59. The special circumstances in this case are that there is a large amount of rent in dispute between the parties and the appellant has an undoubted right of appeal.”

32. Although the parties herein went into great length to argue the merits of the pending Appeal, it is not for this court to go into those issues at this stage, lest it makes a determination on issues that should be dealt with while hearing the Appeal. For now, this court is only required to determine if indeed the Appellant will suffer substantial loss unless the order staying the decision of the Tribunal is not granted.

33. The court is also required to determine if the Application for stay of execution was made without unreasonable delay, and if security should issue for the due performance of the decree.

34. In the order of the Tribunal dated 9th July, 2020, the Tribunal restrained the Appellant by itself or through its Management Committee, Supervisory Committee, employees, officials, servants or agents from prequalifying any bidders, tendering, leasing, charging, transferring or in any manner dealing with the properties known as L.R. No. Donyo Sabuk/Donyo Sabuk West Block Nos. 1/3332, 3335, 3336, 3341, 3344, 3345 and 3375 pursuant to the invitation tender for Quarry Land Lease advertised in the Daily Nation on the 12th March, 2020 pending the hearing of the Claim.

35. The Tribunal further restrained the Management Committee of the Appellant as currently constituted from dealing in any manner from the accounts and finances of the Appellant pending the hearing of the Claim. The Tribunal further directed that the matter be heard and concluded expeditiously and on priority basis within 60 days.

36. The main reason that the Tribunal gave for the grant of the said temporary orders was as follows:

“…This is in light of Section 28 of the Cooperative Society Act and based on the questioned legality of the current membership of the management Committee and their decisions. There is a clear indication of violation of the rights of the Claimants and there is required further evidence to enable the Tribunal to establish whether the violation is fatal to the Management of the Society’s business.”

37. Indeed, the issue of whether the Appellant’s Management Committee is legally in the office is to be determined by the Tribunal. Considering that the said Management Committee had proposed to lease approximately 600 acres of the Appellant’s land for quarrying purposes, and view of the irreversible consequences that quarrying has on land, the Appellant will not suffer any substantial loss in the event the said leasing of the suit property is stayed pending the hearing of this Appeal.

38. To the contrary, it is the Respondents, and the entire membership of the Appellant who will suffer substantial loss in the event it is found by the court that the current Management Committee of the Appellant is in the office illegally and that it had breached the Appellant’s by laws in leasing out the suit property for quarrying purposes.

39. Having found that the issue of the legality of the Appellant’s Management Committee has to be determined first, the said Committee cannot, in the meantime, deal with the finances and accounts of the Appellant, safe for the payment of the salaries of the employees of the Appellant and the statutory deductions whose payments cannot await the determination of the Appeal.

40. Indeed, the payments of the salaries and statutory deductions cannot be affected by the decision of this court on whether the Management Committee of the Appellant is in the office legally or not. The said payments have to be made as and when the same are due, and cannot be a subject of the current claim. However, any other dealing with the finances and accounts of the Appellant must abide by the interim orders of the Tribunal, or the decision of this court upon hearing the Appeal.

41. Considering that the Tribunal had directed the parties to file their respective witness statements and documents within 21 days, and the claim to be heard on priority basis, I decline to order for a stay of proceedings. The parties herein should abide by the said directions and ventilate their respective cases expeditiously.

42. For the reasons I have given above, I make the following orders:

(a) The Notice of Motion dated 3rd August, 2020 is dismissed with costs.

(b) Pending the hearing and determination of the Appeal, the Appellant, it’s authorized agents, officials and or employees to access the Appellant’s bank accounts and finances for the purpose of paying outstanding and continuing salaries, wages, utility bills and statutory deductions only, and not for any other purpose not specified in this order.

(c) Each party to bear its own costs.

DATED, DELIVERED AND SIGNED IN MACHAKOS THIS 29TH DAY OF JANUARY, 2021.

O.A. ANGOTE

JUDGE