[2023] KEHC 19426 (KLR)

Mwangi v Mohamed; Rodex East Africa Ltd (Interested Party) (Miscellaneous Application E599 of 2021) [2023] KEHC 19426 (KLR) (Commercial and Tax) (30 June 2023) (Ruling)

Neutral citation: [2023] KEHC 19426 (KLR)

Republic of Kenya

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

Commercial and Tax

Miscellaneous Application E599 of 2021

FG Mugambi, J

June 30, 2023

Between

Said Ali Mwangi

Applicant

and

Zameer Kassam Ali Mohamed

Respondent

and

Rodex East Africa Ltd

Interested Party

Ruling

1. This ruling determines the application dated 11th August 2021 brought under section 5 of the Judicature Act, Rule 81 and 12E of the Civil Procedure (Amendment No 2) Rules 2012 of England and all other enabling provisions of the law.

2. The application seeks the following orders;i.Spentii.That the respondent be summoned before the court to show cause why they should not be committed to civil jail for blatantly failing to comply with the orders issued by this Honourable court on July 11, 2021. iii.That on failing to show cause, the respondent be committed to prison for a maximum period of 6 months for contempt of this Honourable Courts Order issued on July 11, 2021. iv.That this Honourable Court be pleased to issue such other orders as it may deem appropriate to uphold its dignity and the rule of law.

3. The application is premised on the grounds on the face of it. It is supported by an affidavit sworn by Said Ali Mwangi on August 11, 2021 and written submissions dated October 27, 2021.

4. The incorporation of the 3rd party Company, which is the interested party herein, is not contested. According to the applicant, the parties had an equal shareholding of 50 per cent each in the Company which was incorporated for the business of importation and application of a new brand of household paints known as Rodex Paints.

5. In order to source for funds for operations, the parties opened an account at the Bank of Baroda Nakuru Branch but the bank was apprehensive about offering a facility to a new company. Since the respondent was a regular customer of the bank, having opened an account for his personal company, it was agreed that Mahir Nakuru Automotive would be used to secure an overdraft facility. The applicant and the respondent provided security for the facility under the name of Mahir Nakuru Automative Ltd for the use of Rodex East Africa Ltd.

6. According to the applicant the parties’ intention was that the funds would be transferred to the accounts owned by the interested party where the applicant was a signatory. The respondent failed to facilitate the arrangement. The applicant contends that it did not have access to the Mahir Nakuru Automotive account and was therefore not in a position to oversight the account because the respondent imported all the paints for which the interested party carried out projects.

7. The applicant submitted that there was also non-disclosure of stock movement and books of account and that the respondent on several occasions would use the overdraft facility to benefit his own company. The respondent in addition failed to repay the overdraft facility.

8. This state of affairs resulted in a dispute which was referred to arbitration. The applicant’s claim included prayers for discovery by the applicant. The arbitrator’s award was dated January 26, 2021 and was adopted as an order of the court on June 11, 2021. The award provided in part that the respondent’s Notice of Motion succeeds to the extent that the Claimant shall furnish the Respondent with all the requested company documentation, books of account and bank statements.

9. The Managing Director of the respondent’s company was served with the court order but according to the applicant, he had failed to produce the books of account as ordered by the court although he avers that he has produced all the books of accounts.

10. The application was opposed by the respondent through a replying affidavit dated August 23, 2021 sworn by Zameer Kassam Ali Mohamed and submissions dated March 11, 2022. In his defense the respondent contended that it provided all the information ordered to be produced in the arbitral award and even resent the same to the applicant on July 9, 2021. It was contended by the respondents that the documents that were not produced were documents that were not available and the position was explained to the applicant. The respondent further stated that this Honourable Court on July 11, 2021 confirmed this position, in Misc Application 327/21.

11. The respondent took issue with the applicant for failing to disclose to the court what part of the orders were disobeyed by the respondent. He further averred that the applicant had introduced new issues that were not before the arbitral tribunal.

12. The applicant in a further affidavit sworn on October 27, 2021 detailed the information that the applicant was yet to be supplied with.

Analysis 13. I have considered the pleadings, the response and the submissions on record. The main issue for determination is whether the respondent was in breach of the court orders issued on July 11, 2021.

14. The law governing Contempt of court in Kenya is Section 5 of the Judicature Act which provides that;a.“(1). The High Court and the Court of Appeal shall have the same power to punish for contempt of court as is for the time being possessed by the High Court of justice in England, and that power shall extend to upholding the authority and dignity of the subordinate courts.”

15. In order to successfully prove civil contempt, four elements must be proven. These were laid out in North Tetu Farmers Co Ltd v Joseph Nderitu Wanjohi[2016] eKLR as follows;“The applicant must prove to the required standard (in civil contempt cases which is higher than civil cases) that:-(a)the terms of the order (or injunction or undertaking) were clear and unambiguous and were binding on the defendant;(b)the defendant had knowledge of or proper notice of the terms of the order;(c)the defendant has acted in breach of the terms of the order; and(d)the defendant's conduct was deliberate.

16. As to the standard of proof required, the Court in Gatharia K Mutikika v Baharini Farm Limited[1985] KLR 227, opined that it must be higher than proof on a balance of probabilities, almost but not exactly, beyond reasonable doubt. The standard of proof beyond reasonable doubt ought to be left where it belongs, to wit criminal cases. It is not safe to extend it to offences which can be said to be quasi-criminal in nature.

17. The objective of punishment for contempt must be emphasized as the obedience of court orders. In Econet Wireless Kenya Ltd V Minister for Information & Communication of Kenya & another[2005] KLR 828, Ibrahim, J (as he then was), underscored the importance of obeying court orders, stating that:“It is essential for the maintenance of the rule of law and order that the authority and the dignity of our courts are upheld at all times. The Court will not condone deliberate disobedience of its orders and will not shy away from its responsibility to deal firmly with proved contemnors. It is the plain and unqualified obligation of every person against whom an order is made by court of competent jurisdiction, to obey it unless and until the order is discharged. The uncompromising nature of this obligation is shown by the fact that it extends even to cases where the person affected by the order believes it to be irregular or void. “

18. It is not in doubt that the respondent was aware not only of the award but of the court order that adapted the award. It is also not in doubt that the award and hence the order were very clear in terms of the documents to be produced. Clause 91 of the ruling by the arbitrator was clear. It required that the respondent produces all documents and books of account as sought by the applicant and the same were listed.

19. The applicants advocates wrote to the respondents advocates on July 9, 2021 enclosing the award, court order and asked to be furnished with the relevant documents as ordered. The applicant wrote again on July 19, 2021, seemingly in response to a letter from the respondent, alleging to have supplied all the documents as required. The applicant communicated back to the respondent that the documentation was incomplete.

20. For the avoidance of doubt, the documents required as per the award and court order were;i.All importation documents from 2015ii.An account of all funds received from Elegant Properties project from 2015 to dateiii.ETR receipts for all taxes paid by the Interested party from 2015 to dateiv.An account of all stock and sales from inception to datev.All financial statements from 2015 to datevi.An account of all dividends and allowances paid from 2015 to datevii.A statement of all the creditors and debtors accounts of the interested partyviii.An account of stock of paint worth 50,000,000 that was available on January 2020ix.An account of any report done over the interested party and referred to in the claim by PKF consulting and Equatorial Registrar servicesx.Production of all tax remittances paid by the interested party from inception to date.xi.A thorough statement account of the overdraft facilities granted to Mahir Nakuru Automotive Ltd.

21. The court has taken the liberty to compare this list with the documents as averred in the further affidavit by the respondent. The list produced in the latter includes; trial balances as at the end of each year since 2015, debtor and creditors ledger, cashbooks and petty cashbooks, stock sheet as at the end of each year, supplier statement/ageing list of suppliers, ageing list of debtors, bank reconciliations, any audited accounts, audit report of PKF consulting over Rodex, all importation documents from 2015 to date, an account of all funds received from Elegant Properties project from 2015 to aate, ETR.

22. The list also includes receipts for all taxes paid by the interested party from 2015 to date; an account of all stock and sales from inception to date; and all financial statements from 2015 to date, an account of all dividends and allowances paid from 2015 to date; a statement of all creditors and debtors accounts of the Interested Party; and an account of stock of paint worth Kshs 50,000,000 that was available on January, 2020.

23. The list presented by the respondent in the further affidavit is quite different from the list that was provided for in the arbitral award. Apart from this, I take the view that from the record it is evident that the documents requested were presented. In order to establish that a party was in contempt of the orders of the court it must be shown that there was willful and deliberate disobedience of court orders.

24. In the premises, the court finds that it has not been sufficiently demonstrated by the applicant that the respondent willfully disobeyed the court orders. The court is mindful of the seriousness of contempt proceedings and the criminal implication where a party stands to lose their liberty.

25. The court does not find the respondent in contempt of the orders of the court issued on July 11, 2021. Consequently, the application dated August 11, 2021 is dismissed with costs to the respondent.

DATED, SIGNED AND DELIVERED IN NAIROBITHIS 30th DAY OF JUNE 2023F. MUGAMBIJUDGECourt Assistant: Ms. Lucy Wandiri.