[2022] KEHC 10218 (KLR)

Patrick Kiogora Mugambi Karani (Suing as the Duly Appointed Attorney of M.H Enterprises LLC) v Lakhiani & another (Commercial Cause E585 of 2021) [2022] KEHC 10218 (KLR) (Commercial and Tax) (8 July 2022) (Ruling)

Neutral citation: [2022] KEHC 10218 (KLR)

Republic of Kenya

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

Commercial and Tax

Commercial Cause E585 of 2021

A Mshila, J

July 8, 2022

Between

Patrick Kiogora Mugambi Karani (Suing as the Duly Appointed Attorney of M.H Enterprises LLC)

Plaintiff

and

Hitesh Suresh Lakhiani

1st Defendant

Global Apparels (K) Ltd

2nd Defendant

Ruling

1. The Applicant filed a Notice of Motion dated 20th May 2021 under the provisions of Order 51 Rule 1 of the Civil Procedure Rules, Section 1A, 1B and 3A of the Civil Procedure Act; The Application was supported by the sworn Affidavit of Patrick Kiogora Mugambi who sought for orders that;a.The Court to grant conservatory orders in the interim restraining and/or prohibiting the Defendants jointly and/or severally either by themselves, their agents, servants, employees, appointees, nominees or any other person acting under their behest from using, interfering, utilizing, transferring, assigning or in any other way dealing with 50% shareholding of Suresh Rewachand Lakhiani (deceased) held with the 2nd Defendant pending the hearing and determination of the Application.b.The Court to grant conservatory orders in the interim restraining and/or prohibiting the Defendants jointly and/or severally either by themselves, their agents, servants, employees, appointees, nominees or any other person acting under their behest from using, interfering, utilizing, transferring, assigning or in any other way dealing with 50% shareholding of Suresh Rewachand Lakhiani(deceased) held with the 2nd Defendant pending the hearing and determination of the suit.c.Costs of the Application be provided for.

2. The Applicant stated that the donor advanced monies to Gem Trading LLC pursuant to a loan agreement and the deceased Suresh Rewachand Lakhiani guaranteed and offered his assets as collateral for the loan amount. The loan is unpaid.

3. The orders sought are necessary to preserve the said 50% shareholding in the 2nd Defendant/Respondent which are the substratum of the suit. The Applicant stands to suffer irreparable loss and damage if the shares are transferred before the hearing and determination of the suit.

Applicant’s Case 4. It was the Applicant’s case that the orders sought herein are injunctive orders seeking to preserve the aforementioned 50% shares held with the 4th Defendant by the said Suresh Rewachand Lakhiani (deceased). The principles for issuance of injunctive orders were laid out in the case of Giella Vs Cassman Brown [1973] EA 358.

5. The Applicant submitted that a ‘prima facie’ case has been established and stated that the substantive suit seeks a recognition of the foreign judgment delivered in Dubai and the transfer of 50% shares held by the deceased to the 4th Defendant.

6. The said judgment was delivered in favour of the donor as against 1st, 2nd and 3rd Defendants herein for the sum of AED 14, 080, 714. The judgment of the court of the first instance was upheld by the appellate court. None of the Respondents herein deny the existence of the above judgments and their findings thereto. The said judgments were delivered by courts of competent jurisdiction a fact that is not disputed by the Respondents.

7. It is also apparent on the face of it that the cause of action in the Dubai law courts was a breach of the agreement executed as between the donor herein and the 1st Respondent/Defendant which agreement was guaranteed by Suresh Rewachand Lakhiani (deceased) who equally executed the agreement. The same was not denied by the 2nd and 4th Respondents thus the Applicant established a prima facie case with a probability of success.

8. The Applicant deponed that the 50% shares held with the 4th Respondent by the deceased are the only viable collateral that would be utilized to recover the amount in default. By virtue of the judgments in the Dubai Courts the donor accrued certain proprietary interests over the 50% shareholding of the deceased with the 4th Respondent.

9. It was the Applicant’s position that the 2nd and 3rd Respondents have successfully moved the Court for issuance of letters of administration ad litem and this is indicative of their intent to administer the Estate of the deceased which includes the shares held with the 4th Respondent. Save for the 4th Respondent all other Respondents in the suit are foreigners with no known physical address or assets in the country. In the event the 50% shares held with the 4th Respondent are transferred to the 2nd and 3rd Respondents being the administrators of the Estate as permitted by the former’s regulations, then it is apparent that the suit will be rendered an academic exercise and the enforcing of the orders for the transfer of shares would thus be rendered incapable. This state of affairs shall occasion irreparable loss to the said donor hence the need for issuance of a temporary injunction to preserve the shares pending determination of the main suit.

10. It was the Applicant’s position that the balance of convenience tilts in favour of the Applicant as the donor herein already has a judgment in its favour from the Dubai Courts. The judgments therein affirmed that the deceased was in breach of the agreement executed as between him, the donor and the Respondent herein. It is also not disputed that the deceased offered his shares held with the 4th Respondent as collateral remedy against any such breach. It therefore follows that the Applicant herein will suffer greater harm in the event the order herein is declined and the suit ultimately succeeds.

11. The Applicant relied on the case of Paul Gitonga Wanjau vs Gathithis Tea Factor Company Ltd & 2 Others [2016] eKLR where the court in dealing with the issue of balance of convenience stated that the court will seek to maintain the status quo in determining where the balance of convenience lies.

12. On the other hand, the Respondents do not stand to lose much in the event the suit is declined ultimately the 50% shares held with the 4th Respondent shall be so retained.

Respondents’ Case 13. In response it was the 2nd and 3rd Respondents’ submission that the Orders being sought by the Plaintiff/Applicant in the present Application have already been determined pursuant to the Order of the Hon. Justice Majanja. in Nairobi High Court Commercial Case No. E789 of 2021: Harish Hitesh Lakhiani & Anor -versus- Ghanshyam Choithram Shahdadpuri & 2 Others, the Honourable Court (Majanja J.) considered the import and purport of the accompanying Notice of Motion and ordered that:a)An Order is hereby issued restraining the Defendant/ Respondent by himself, his servants and/or employees from disposing and/or transferring or in any other way dealing with the shareholding and/or Assets of Global Apparel (K) Limited pending hearing and determination of this Application inter partes.

14. Applications serve the purpose of preserving the main suit so as not to render it nugatory. A cursory look at the Prayers sought in the Plaint in Commercial Case No.E789 of 2021 are different from those sought in the present suit. Commercial Case No. E789 of 2021 seeks declaratory orders as to the ownership of the shareholding of Global Apparels Limited while the present suit seeks recognition of the Dubai Judgments. The facts and issues are different and should thus be handled independently.

15. It was the Respondents’ case that if the Court were to give any further orders in respect to the shareholding of Global Apparels Limited, it would then be overturning the Orders of Hon. Justice Majanja. Essentially, the Court will have descended to the arena of sitting on appeal on a matter dealt and determined by a court of equal status and jurisdiction.

16. Further, the respondents submitted that Hon.Justice Majanja in his Orders bars any party in their capacity as agents and/or employees and/or servants from disposing and/or transferring the shareholding and/or Assets of Global Apparels Limited, while the Plaintiff in the present suit wants the shares transferred or dealt with contrary to the Orders of Hon. Justice Majanja.

17. Therefore, if the sought Orders in the present application were to be given, the Plaintiff/Applicant may proceed to alter and/or transfer the shareholding of Global Apparel (k) Limited and reverse the Orders of Hon.Justice Majanja. The Application should thus be dismissed with costs.

18. The 4th Respondent submitted that in deed as per its Memorandum and Articles of Association regarding its management and sharing policy, the deceased has a 50% shareholding with it. The 4th Respondent is also aware that the deceased used the said shares as a collateral for repayment of a loan he had borrowed from the Plaintiff.

19. The 4th Respondent stated that it does not oppose the Plaintiff’s Application for reason that the orders sought by the Plaintiff/Applicant that is, the preservation of the shares pending the hearing and determination of the suit, does not in any way interfere with its management and operations.

Issues For Determination 20. The Court has considered the Application and the written submissions by the parties and has framed only one issue for determination;a.Whether the Applicant has made out a case to warrant the grant of interim orders sought;

AnalysisWhether the Applicant has made out a case to warrant the grant of interim orders sought; 21. The law on conservatory orders is well settled, inCentre for Rights Education and Awareness (Creaw) & another v Speaker of the National Assembly & 2 others [2017] eKLR the Court was emphatic that: -“A party who moves the court seeking conservatory orders must show to the satisfaction of the Court that his or her rights are under threat of violation; are being violated or will be violated and that such violation, or threatened violation is likely to continue unless a conservatory order is granted. This is so because the purpose of granting a conservatory order is to prevent violation of rights and fundamental freedom and preserve the subject matter pending the hearing and determination of a pending case or Petition.”

22. The principles with regard to the granting of interim or conservatory orders were outlined by the Supreme Court in the case of Gatirau Peter Munya vs. Dickson Mwenda Kithinji & 2 Others, Supreme Court Application NO. 5 of 2014 [2014] eKLR, where the Court held that: -(85)These are issues to be resolved on the basis of recognizable concept. The domain of interlocutory orders is somewhat ruffled, being characterized by injunctions, orders of stay, conservatory orders and yet others. Injunctions, in a proper sense, belong to the sphere of civil claims, and are issued essentially on the basis of convenience as between the parties, and of balances of probabilities. The concept of “stay orders” is more general, and merely denotes that no party nor interested individual or entity is to take action until the Court has given the green light.(86)“Conservatory orders” bear a more decided public-law connotation: for these are orders to facilitate ordered functioning within public agencies, as well as to uphold the adjudicatory authority of the Court, in the public interest. Conservatory orders, therefore, are not, unlike interlocutory injunctions, linked to such private-party issues as “the prospects of irreparable harm” occurring during the pendency of a case; or “high probability of success” in the supplicant’s case for orders of stay. Conservatory orders, consequently, should be granted on the inherent merit of a case, bearing in mind the public interest, the constitutional values, and the proportionate magnitudes, and priority levels attributable to the relevant causes.”

23. The principles required to be satisfied before granting conservatory orders or interim conservatory orders comprises of the following: -a)First, an Applicant must demonstrate an arguable prima facie case with a likelihood of success, and to show that in the absence of the conservatory orders, he/she is likely to suffer prejudice.b)The second principle is whether the grant or denial of the conservatory relief will enhance the constitutional values and objects of a specific right or freedom in the Bill of Rights.c)Thirdly, the court should consider whether, if an interim conservatory order is not granted, the substratum of the matter will be rendered nugatory.d)The final principle for consideration is whether the public interest will be served or prejudiced by a decision to exercise discretion to grant or deny a conservatory order.

24. Before delving into the consideration of the above mentioned principles, it is noteworthy that the Respondent stated that the Orders being sought by the Plaintiff/Applicant in the present Application have already been determined pursuant to the Order of the Hon. Justice Majanja. in Nairobi High Court Commercial Case No. E789 of 2021: Harish Hitesh Lakhiani & Anor -versus- Ghanshyam Choithram Shahdadpuri & 2 Others.

25. The court has perused the above-mentioned order and it reads as follows;“An Order is hereby issued restraining the Defendant/ Respondent by himself, his servants and/or employees from disposing and/or transferring or in any other way dealing with the shareholding and/or Assets of Global Apparel (k) Limited pending hearing and determination of this Application inter partes.”

26. The instant Application is dated 20th May 2021 and the above-mentioned order was issued on 13th September 2021 prior to the determination of the present Application. The order is clear in that it restrains the Defendants and any other party in their capacity as agents and/or employees and/or servants from disposing and/or transferring or in any other way dealing with the shareholding and/or Assets of Global Apparel (k) Limited.

27. There is no evidence that the said order has since been set aside, varied or appealed against; the Order of 13th September 2021 remains and is still in place; The applicant is seeking the very same orders already issued in respect to the same subject matter;

28. This court is satisfied that the Applicant has not made out a case to warrant the grant of interim orders pending the hearing and determination of the suit herein; and further this court lacks jurisdiction to deal with a matter which has already been determined by a court of concurrent jurisdiction.

Findings and Determination 29. In the light of the foregoing this court makes the following findings and determinations;i.i. This court finds that the application seeking conservatory order is superfluous as there exists a determination on the same issues and the orders sought were granted by a court of concurrent jurisdiction;ii.ii. The application is found to be incompetent and it is hereby struck out with costs to the Respondents.

Orders Accordingly.DATED, SIGNED AND DELIVERED ELECTRONICALLY AT NAIROBI THIS 8TH DAY OF JULY, 2022. HON. A. MSHILAJUDGEIn the presence of;Muriuki holding brief for Morara for the plaintiff/ApplicantMuthiani holding brief for Nyakwana for the 4th defendantNthei holding brief for Wachira for the 2nd and 3rd defendantsNo appearance by the 1st defendantJasmin--------------------------------Court Assistant