[2025] KEHC 7907 (KLR)

Octagon Busiess and General Suppliers Limited v County Government of Kisumu; Prime Bank Limited (Interested Party) (Commercial Case E770 of 2024) [2025] KEHC 7907 (KLR) (Commercial and Tax) (3 June 2025) (Ruling)

Neutral citation: [2025] KEHC 7907 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts)

Commercial and Tax

Commercial Case E770 of 2024

JWW Mong'are, J

June 3, 2025

Between

Octagon Busiess and General Suppliers Limited

Plaintiff

and

County Government of Kisumu

Defendant

and

Prime Bank Limited

Interested Party

Ruling

1. What is before this Honourable Court is a Chamber Summons application filed under a Certificate of Urgency and brought under Article 159(1) (c) of the Constitution of Kenya; Section 1A, 1B and 3C of the Civil Procedure Act; Section 7(1) of the Arbitration Act and Rule 2 of the Arbitration Rules seeking the following orders:-1. Spent2. Spent3. THAT pending the hearing and determination of the intended Arbitration proceedings between the Plaintiff/Applicant and Defendant/Respondent; the Honourable Court be and is hereby pleased to issue a Temporary Injunction restraining the Defendant whether by itself or its agents, servants, employees, representatives, representatives, or anyone claiming under it from making demand, calling up, or in any way threatening to execute against Advance Payment Guarantee No. PBL/LG/23/844/10 dated 20th December 2023 for Kshs.38,481,843. 90/=(Kenya Shillings Thirty-Eight Million Four Hundred Eight Hundred Forty-Three Cents Ninety only) issued by the Interested Party on account of the Plaintiff.4. THAT the costs of this application be provided for.

2. The application is supported by the grounds set on its face and the supporting affidavit of MILKAH MUGO sworn on 11th December 2024. The application is opposed and the Respondents have filed a Replying Affidavit of TOM MBOYA OGOLLA sworn on 2nd February 2025. Both parties have filed written submissions which I have carefully considered.

3. From the pleadings filed before this court, the Respondent has accused the Plaintiff of forum shopping having filed an identical suit in Kisumu High Court being HCCCOMM No. E009/2024 - OCTAGON GENERAL SUPPLIERS LIMITED VS KISUMU COUNTY GOVERNMENT AND PRIME BANK LIMITED between the same parties and the suit in Kisumu was filed first in time and considered by the Kisumu High Court and directions issued pursuant to the same, annexed to the Respondent’s replying affidavit and marked TMO-2 are the said pleadings. The Respondent alleges that this suit was filed exactly 1 hour 10 minutes after the Kisumu suit and hence a clear demonstration of abuse of the court. The Plaintiff did not serve the said directions but instead moved the court to have the same marked as withdrawn thereafter. I note in the reply to the above issue, the Plaintiff has failed to explain the filing of the two suits in two separate High Courts and has instead argued that the reason for withdrawing of the suit in Kisumu because of some errors in the same including failure to serve the same.

4. I must on the outset state that the court frowns upon such conduct where parties file a suit in separate court and only move to withdraw one once they have achieved a desired outcome in another. I therefore agree with the Defendant that the Plaintiff has approached this court with dirty hands. Be that as it may, I will proceed to consider the substantive issue before me as to whether the Plaintiff is deserving of the injunctive reliefs sought in the present application.

5. I do not think it is in dispute that for an Order of Injunction to issue, the Plaintiff is required to satisfy the conditions set out in the case of Giella v Cassman Brown & Co., Ltd. [1973] E.A. 358 by demonstrating it has a prima facie case with a probability of success; that it will suffer irreparable injury which would not adequately be compensated by an award of damages and that; if the Court is in doubt, it should decide the application on the balance of convenience. These conditions are to be applied as separate, distinct and logical hurdles which the Plaintiff is expected to surmount sequentially which means that if it does not establish a prima facie case then irreparable injury and balance of convenience do not require consideration (see Nguruman Limited v Jan Bonde Nielsen& 2 others [2013] KECA 347 (KLR)

6. The parties also agree that what constitutes “a prima facie case” was set out by the Court of Appeal in Mrao Ltd v First American Bank of Kenya Ltd & 2 others [2003] KECA 175 (KLR) as follows:-A prima facie case in a civil application includes but is not confined to a “genuine and arguable case.” It is a case which, on the material presented to the court, a tribunal properly directing itself will conclude that there exists a right which has apparently been infringed by the opposite party as to call for an explanation or rebuttal from the latter.

7. A close look at the pleadings reveals that the application by the Plaintiff is brought under section 7 of the Arbitration Act which provides as follows:-“7. Interim measures by court (1) It is not incompatible with an arbitration agreement for a party to request from the High Court, before or during arbitral proceedings, an interim measure of protection and for the High Court to grant that measure. (2) Where a party applies to the High Court for an injunction or other interim order and the arbitral tribunal has already ruled on any matter relevant to the application, the High Court shall treat the ruling or any finding of fact made in the course of the ruling as conclusive for the purposes of the application.”

8. The court is empowered by the law to grant interim measure of protection to a party seeking the same before it while a dispute is being adjudicated by an Arbitral Tribunal. To do so, the court must be satisfied that indeed there is an arbitral proceeding ongoing between the parties or the party before it has intentions of referring the dispute to arbitration in line with an arbitral clause within a contract.

9. Both parties agree that there is indeed a contract for the Construction of Roads and Drainage Works/Water Supply and Sewerage Works/Public Lighting (Kibuye, Sangoros /Swahili, Bondeni, Shauri Moyo and Shauri Yako) within Kisumu County and that the Plaintiff was awarded the said Contract. The Respondent has submitted that the Plaintiff having won the said contract was advanced the sum of Kshs.38,481,843. 90/= as advance payment and that it upon this advance that the Plaintiff provided an irrevocable Advance Payment Guarantee held by the Interested Party and that the same was held to the benefit of the Defendant.

10. It is the position taken by the Defendant that the Plaintiff is in breach of the conditions of the contract and this has necessitated the calling up of the Advance Payment Guarantee from the Interested Party to protect the funds so advanced as the same appears not to have been utilized for the purpose for which they were advanced and that appropriate notices were issued to the Plaintiff. The Plaintiff on their part argue that the Defendant has failed to honour the payment of its certificates under the contract and the said call up is premature and unwarranted and if the Defendant is allowed to proceed with the intended action, the Plaintiff will be highly prejudiced.

11. I have considered the arguments by both parties; as stated earlier in this ruling, the nature of orders being sought by the Plaintiff are in the form of injunctive orders restraining the Defendants from proceeding with the intended calling up of the Advance Payment Guarantee from the Interested Party. For this court to grant the said orders, it must be satisfied that the principles set out in Giella(supra) for a grant of an injunction have been met. The first of such principle is whether the Plaintiff has established a prima facie case with a likelihood of success as defined in Mrao(supra). Parties have confirmed that they are in a contractual relationship and indeed a partial advance payment was made to the Plaintiff against the Irrevocable Advance Payment Guarantee issued by the Interested Party. Parties further confirm that indeed there is a dispute before the Dispute Adjudication & Arbitration Board(DAAB) that is yet to be concluded. I am therefore satisfied that indeed the Plaintiff has established that it has a prima facie case.

12. The second tenet that this court is called to establish is whether failure to grant an Interim Injunction will occasion the Plaintiff irreparable harm incapable of being remedied by an award of damages. Irreparable harm has been defined by the courts in the following paragraph in Halsbury’s Laws of England is as follows:-“It is the very first principle of injunction law that prima facie the court will not grant an injunction to restrain an actionable wrong for which damages are the proper remedy. Where the court interferes by way of an injunction to prevent an injury in respect of which there is a legal remedy, it does so upon two distinct grounds first, that the injury is irreparable and second, that it is continuous. By the term irreparable injury is meant injury which is substantial and could never be adequately remedied or atoned for by damages, not injury which cannot possibly be repaired and the fact that the Plaintiff may have a right to recover damages is no objection to the exercise of the jurisdiction by injunction, if his rights cannot be adequately protected or vindicated by damages. Even where the injury is capable of compensation in damages an injunction may be granted, if the act in respect of which relief is sought is likely to destroy the subject matter in question.

13. From what can be surmised from the affidavits filed by the parties, the irrevocable Advance Payment Guarantee issued to the Defendant by the Interested Party was to safeguard advance payments made to the Plaintiff for part performance of the contract. It is therefore a protection measure to the Defendant in the event that the Plaintiff did not apply the said funds for the purpose for which they were given. The Defendant is the County Government of Kisumu. The Plaintiff has not demonstrated that if these funds are called up, in the event of it being successful, the Defendant will be incapable of refunding the said funds. In other words, it has not been demonstrated that there is a likelihood of the Plaintiff not recovering the said funds if it succeeds in the arbitral process. I am satisfied therefore that the second principle or tenet for grant of a Temporary Injunction has not been met. In line with the Court of Appeal decision in Nguruman (supra) the principles for a grant of an injunction are to applied sequentially and if one of them fails, the court need not consider the third parameter. I will therefore not proceed to determine where the balance of convenience would lie in the present application.

14. In sum, I find that the Applicant has not established the threshold for a grant of an interim measure of protection as envisioned by Section 7 of the Arbitration Act in form of a Temporary Injunction. This therefore means that the court has found the application to be without merit and the same is hereby dismissed with costs to the Defendant and the Interested Party. It is so ordered.

DATED, SIGNED AND DELIVERED VIRTUALLY AT NAIROBI THIS 3RD DAY OF JUNE 2025J.W.W. MONG’AREJUDGEIn the Presence of:-Ms. Ndegwa for the Plaintiff/Applicant.Mr. Qeu for the Defendant/Respondent.Mr. Ogunde for the Interested Party.Amos - Court Assistant