[2022] KEHC 15341 (KLR)

Temple Point Resort Limited v Salama Beach Hotel Limited (Civil Case E034 of 2018) [2022] KEHC 15341 (KLR) (Commercial and Tax) (11 November 2022) (Ruling)

Neutral citation: [2022] KEHC 15341 (KLR)

Republic of Kenya

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

Commercial and Tax

Civil Case E034 of 2018

A Mshila, J

November 11, 2022

Between

Temple Point Resort Limited

Plaintiff

and

Salama Beach Hotel Limited

Defendant

Ruling

Background 1. The notice of motion dated April 29, 2019 was brought under order 45 rule 51 of the Civil Procedure Rules, section 1A, 1B & 3A of the Civil Procedure Act, article 40, 48, 50 & 159 (d) of the Constitution of Kenya for the following orders;a.The court to grant leave to the defendant's/ applicant's advocates, Gichuki Karuga & Co Advocates, to come on record after Judgment.b.The court to issue a stay of execution against the judgment in favour of plaintiff/respondent issued on September 24, 2018 and the subsequent decree therein against defendant /applicant for a sum of 690,801. 89 Euros pending hearing and determination of this application.c.The court to set aside, vary and/or review the judgment/ruling entered on September 24, 2018 by Hon Mr Justice J. Makau together with the consequential orders/ decree arising therefrom.d.The court to give further orders and/or directions as it may deem fit and just to grant.e.The costs of this application be borne by the respondent.

2. The application was supported by the sworn affidavit of Steffano Uccelli who stated that the court entered a judgment in favour of plaintiff/respondent on September 24, 2018 subsequently issuing a decree against the defendant/ applicant for a sum of € 690,801. 89 Euros. The aforesaid judgment and decree were both fraudulently obtained by concealment and/or suppression of material facts from the court and making false representations to the court thereby profoundly prejudicing the proper administration of justice.

3. The defendant/applicant stands to suffer great prejudice and irreparable loss as the plaintiff/respondent acting on the fraudulently acquired decree herein has already filed an Insolvency Petition No E016 in Commercial & Admiralty Division in the High Court of Kenya in Nairobi which is coming up for hearing on May 6, 2019.

4. The plaintiff/respondent deliberately and in deceit failed to disclose to the court the existence of two judgments of the Court of Appeal civil appeal No 36 of 2015, Court of Appeal civil application No 19 of 2015 and civil suit,No 118 of 2009 at the High Court of Kenya at Malindi substantially touching on the issues at hand in this matter.

5. The defendant's law firm on record herein Kerandi Manduku & Company Advocates purported to represent Salama Beach Hotel Limited in this matter and went on to file memorandum of appearance, statement of defence and a subsequent statement of admission without proper instructions and/or authority from the legal, bonafide and lawful directors cum shareholders of the company that is Isaac Rodrot, Mario Scotti Camuzi And Steffano Uccelli.

6. The aforementioned defendant's law firm Kerandi Manduku & Company Advocates were rather instructed by one Hans Juergen Langer a fraudster who was ordered out of the ownership and management of Salama Beach Hotel Limited by the High Court and Court of Appeal decisions in civil suit, No 118 of 2009 and Court of Appeal civil appealNo 36 of 2015 in Malindi.

7. The statement of admission dated July 17, 2018 that led to the subsequent judgment and decree against the defendant/ applicant herein was filed with the sole purpose of fraudulent misrepresentation and concealment of material facts therefore an act of compromise meant to defeat fair administration of justice.

8. The filing of the above mentioned statement of admission is a further act of cleverly circumventing the aforesaid Court of Appeal and High Court judgments with a view of frustrating the bonafide and legal directors of Salama Beach Hotel therefore debarring them from enjoying the fruits of the judgments made in their favour.

9. The proceedings to obtain the said judgment on admission and the subsequent decree against defendant/ applicant for a sum of 690,801. 89 Euros € were defective and illegal issued on account of some mistake and/or error apparent on face of the record, wherefore are null and void abinitio.

10. The plaintiff/respondent with a further act of concealing the material facts relating to the subject matter herein filed his claim in Nairobi instead of Malindi where both the plaintiff and the defendant are domiciled thereby abusing the jurisdiction of this court.

11. If the application herein is not heard and orders herein granted, the applicant will suffer prejudice and financial embarrassment, irreparable loss and damage in case their properties are attached pursuant to the planned liquidation.

Applicant’s Case 12. It was the applicant’s case that it attached all the judgments and rulings in the issue which have been delivered by the High Court of Kenya and the Court of Appeal to its support affidavit filed on April 29, 2019 and supplementary affidavit filed on September 13, 2019. (See annexures Sur 5 and Sur 2 of the said affidavits). Hans Juergen Langer fraudulently obtained a court order, temporarily making him a director by misrepresenting to Hon Justice Mohammed Ibrahim in HCCC 118 of 2009 at Malindi that there was a foreign judgment.

13. However, the said status was reviewed and his directorship over the said hotel subsequently nullified by the High Court of Kenya Malindi in civil case number of 2009 through a ruling of Justice Said J Chitembwe delivered on April 30, 2015. Hans Juergen Langer then appealed in the Court Appeal in civil appeal 36 of 2015 but his appeal was dismissed and the Court of Appeal upheld the decision of the High Court as evidenced by the judgment of the Court Appeal attached to as (annexure marked 'Sur 5’).

14. Subsequently, Hans Juergen Langer later filed a notice of motion application dated January 8, 2018 in the High Court of Kenya at Malindi seeking interim orders on the shareholding status of the Salama Beach Hotel Limited but the application was also dismissed by the court ruling there is nothing more to litigate over the directors and/or ownership of the said hotel. This was delivered by Hon Justice Weldon Korir on March 20, 2019 (annexure 'US 2' attached to the supplementary affidavit).

15. Despite the aforesaid ruling by honourable Justice Weldon Korir, Hans Juergen Langer being dissatisfied by the Ruling, appealed to the Court of Appeal in civil appeal No 43 of 2018 which was also dismissed by Justice Alnashir Visram, M.K Koome and A.K Murgor on August 21, 2019. The applicant submitted that this court lacks jurisdiction to determine the issue of directorship of Salama Beach Hotel as it isres judicata.

16. It was the applicant’s position that the above highlighted facts and judicial decisions of courts of competent jurisdiction that include the Court of Appeal whose pronouncement is binding to the court, it is clear that Hans Juergen Langer is not a director of Salama Beach Hotel wherefore, he cannot lawfully and legally sanction or instruct the firm of Kerandi Manduku & Company Advocates to act and /or represent the said hotel.

17. From the foregoing the applicant submitted that all documents filed by the said law firm on behalf of Salama Beach Hotel in the main suit that culminated in the judgment on admission dated September 24, 2018 and the replying affidavits herein are incurably defective for want of authority by the bonafide and lawful directors of the hotel that is Steffano Uccelli and Isaac Rodrot.

18. Further, Hans Juergen Langer did not attach any prima facie evidence showing and/or proving that he is a director recognised by the Law of Kenya combined with the fact none of his replying affidavits and further affidavits has attached a company resolution and/or any authority whatsoever appointing the firm of Kerandi Manduku & Company Advocates to act on behalf of the Salama Beach Hotel Limited.

19. The applicant placed reliance on the case of Kabundu Holdings Ltd v Ali Ahmed T/A Sky Club Restaurant [2005] eKLR where the court was determining a notice of preliminary objection which was basically two-pronged in that the said Patrick Kabundu who claimed to be a director and shareholder in the plaintiff company had not at any time since the proceedings started presented a resolution passed by the company shareholders or directors authorizing him to represent and act for it these proceedings. That he only claimed to hold a power of attorney allegedly from the company, which power could not be a substitute for a resolution at all.

20. It was the applicant’s submission that, the register of members as found in Form CR 12 as attached to the applicant's supplementary affidavit marked as annexure "USR 1" is the prima facie evidence of who the directors and shareholders are unless the contrary is proven.

21. This is a statutory position that is clearly stipulated in section 105 of the Companies Act (chapter 493 Laws of Kenya) that stipulates as follows: -“Until the contrary is proved, the register of register to be evidence of members of a company is evidence of the matters required or authorized to be included in it”.

22. Hans Juergen Langer did not provide any contrary demonstration as required by the aforesaid provision of the law other than stating in paragraph 2 of his further replying affidavit that filed in this court on October 25, 2019 that the applicant’s Form CR12 was obtained through a gross misrepresentation of facts by the applicants to the registrar of companies.

Respondent’s Case 23. The respondent submitted that by judgment of the Court of Appeal of Milan dated September 16, 2013 judgment No 4510/10 register No 4413/13 in the Court of Appeal of Milan between Viaggi Del Ventaglio SPA against Listos AG and Accredo Aktiengesellschaft, it was ordered that VIaggi Del Ventaglio S.P.A do pay Accredo AG a sum of 550,000. 00 Euros plus interest from 2001 and costs totalling to 36,150. 00 Euros, thereafter a cessation agreement dated June 8, 2005 between Accredo AG herein and Adinos AG, Accredo AG was assigned by Adinos AG all its rights and liabilities to the said judgement and decree.

24. Pursuant to the authority by Bruno Colombo, Hans Juergen Langer being the majority shareholder of Accredo AG, took over control, management of Salama Beach Hotel Limited, these facts have never been controverted by the applicants and no evidence to the contrary has been provided to disprove this assertion.

25. Upon taking over management of Salama Beach Hotel Limited, Hans Juergen Langer found the Hotel in a dilapidated state and requiring a lot of investment in order to revive it, Hans Juergen Langer borrowed Kshs 6,690,807. 89 Euro from the plaintiff company Salama Beach Hotel Limited failed to pay off its debts owed to Temple Point Resort Limited hence the filling of this instant suit.

26. The applicants in their allegations relied on the order of Chitembwe J. in Malindi HCC 118 of 2009 and the ruling of the Court of Appeal in Malindi civil appeal No 36 of 2015, it should be noted that none of the said rulings gave directorship and or shareholding to Isaac Rodrot or Steffano Ucelli, he can therefore not purport to act as a director and or shareholder of Salama Beach Hotel Limited.

27. Further, the order of Chitembwe J in the Malindi HCC 118 of 2009 suit reverted shareholding of Salama Beach Hotel Ltd to the position it was as at December 14, 2009, these orders have not been set aside, the position of Shareholding of Salama Beach Hotel Limited as at December 14, 2009 has been clearly captured in the applicants own supporting affidavit sworn on April 29, 2019 under the annexures marked “Sur1” by Steffano Ucelli, in the letter dated June 25, 2015 from the Registrar of Companies.

28. Going by the above, the Steffano Ucelli and Isaac Rodrot are not shareholders or directors of Salama Beach Hotel Ltd as they were not so in December 14, 2009 and therefore they cannot purport to have capacity to represent Salama Beach Hotel Limited in any capacity whatsoever, the ruling by Chitembwe J. further emphasized this position in page 41 of the ruling.

29. Further, as at the time the ruling by Chitembwe J. was being delivered, Ventaglio International SA had already been put under receivership, a company under receivership is not capable of owning anything, and therefore by operation of the law of insolvency it was not possible for Hans Langer and Zahra Langer to comply with the orders of Chitembwe J. as the shares could not be transferred back to the directors of Ventaglio International SA as they had no power and or authority to own the shares or be directors of Salama Beach Hotel Limited.

30. The respondent relied on the case of Odera Obar & Co Advocates v Charter House Bank Limited[2018] eKLR where the court held that:“There is no difference in principle between the appointment of a receiver or manager of a company and the placement of a company under statutory management insofar as the general powers of the directors of a company are concerned. Although in case of receivership the receiver or manager protects the interest of the debenture holders, while statutory manager protects the interests of the company, its deposits and other creditors, in both cases, the powers of the directors of the company are paralyzed and vested in the receiver or statutory manager.”

31. The claim for res judicata in this matter does not lie as the applicants have failed to meet the threshold to uphold the doctrine of res judicata. There is no final judgement or decision that has been rendered in Malindi HCC 118 of 2009. Malindi civil appeal No 36 of 2015 was an appeal on the ruling of Chitembwe J. in Malindi HCC 118 of 2009 and therefore cannot be in anyway a final judgment or decision in the matter.

32. Moreover, the causes of action and the reliefs sought in this suit and in Malindi HCC 118 of 2009 are different. Malindi HCC No 118 of 2009 is a suit challenging the validity of a consent order, whereas this instant suit is a claim for a debt by Temple Point Resort Limited as against Salama Beach Hotel Limited. The matters being totally different with regards to the cause of action and reliefs sought, the issue of res judicata does not arise in whatsoever manner.

33. It was the respondent’s argument that the applicants misled the Registrar of Companies by giving the wrong position of the ruling of Chitembwe J. on April 30, 2015 in Malindi HCCC No 118 of 2009 and the Court of Appeal judgment issued on December 15, 2017 in civil appeal No 36 of 2015 Malindi, the court should not allow itself to be part and parcel of the fraudulent dealings and activities of the applicants but should instead uphold fairness and justice by declaring the CR12 dated August 26, 2019 invalid. A CR12 that has been obtained by misrepresentation of facts and fraud is null and void and therefore invalid.

34. The respondent submitted that the applicants claim that through a purported board meeting held on January 24, 2020 it was resolved that the firm of M/S Gichuki Karuga & Co do represent Salama Beach Hotel Limited in this case, this purported meeting and all the resolutions derived from it are null and void and have no effect whatsoever in law as the people who participated in the said meeting had no capacity to transact such business on behalf of Salama Beach Hotel Limited, by virtue of the fact that Isaac Rodrot and Steffano Ucelli are not and were not Directors or Shareholders of Salama Beach Hotel Limited and Ventaglio international SA had already been put under receivership at the time the purported meeting was being held, all the directors of Ventaglio International SA have already ceased being directors as the company was under the management of the receivers. The “directors” could therefore not transact any business with regard to Salama Beach Hotel Limited.

35. It was the respondent’s final submissions that Isaac Rodrot and Steffano Ucelli have not demonstrated to the court or any other court how and when they became shareholders and directors of Salama Beach Hotel Limited, the applicants have also failed to demonstrate how the judgment and decree entered in favour of the plaintiff in this matter was fraudulently obtained by concealment or suppression of material facts from the court and making false representations to the court, the applicants have also failed to demonstrate how the judgment on admission against the defendant was illegally issued on account of some mistake and/or error apparent on the face of the record. It therefore shows that this application lacks merit and has no basis in law.

Issues For Determination 36. The court has considered the applicant’s case as well as the respondent’s case and it was agreed that the issue of representation shall be dealt with first;a.Whether the defendant's/ applicant's advocates, Gichuki Karuga & Co Advocates, should be granted leave to come on record after judgment?

Analysis Whether the defendant's/ applicant's advocates, Gichuki Karuga & Co Advocates, should be granted leave to come on record after judgment? 37. The gist of the applicant’s application is that the defendant's law firm on record herein Kerandi Manduku & Company Advocates purported to represent Salama Beach Hotel Limited in this matter and went on to file memorandum of appearance, statement of defence and a subsequent statement of admission without proper instructions and/or authority from the legal, bonafide and lawful directors cum shareholders of the company that is Isaac Rodrot, Mario Scotti Camuzi and Steffano Uccelli.

38. The applicant argued that the aforementioned defendant's law firm Kerandi Manduku & Company Advocates were instructed by Hans Juergen Langer a fraudster who was ordered out of the ownership and management of Salama Beach Hotel Limited by the High Court and Court of Appeal decisions in civil suit, No 118 of 2009 and Court of Appeal civil appeal No 36 of 2015 in Malindi.

39. Order 9 rule 9 of theCivil Procedure Rules provides as follows: -When there is a change of advocate, or when a party decides to act in person having previously engaged an advocate, after judgment has been passed, such change or intention to act in person shall not be effected without an order of the court—(a)upon an application with notice to all the parties; or(b)upon a consent filed between the outgoing advocate and the proposed incoming advocate or party intending to act in person as the case may be.

40. The above provision of order 9 rule 9 CPR is meant to protect advocates from mischievous clients who will wait until a judgment has been delivered and then proceed to replace their advocate with another advocate or act in person. The provision is therefore an important one and cannot be wished away. Further to the above order 9 rule 10 provides as follows:“An application under rule 9 may be combined with other prayers provided the question of change of advocate or party intending to act in person shall be determined first.”

41. The same issue was addressed by the court in the case of Johnson M.S Njoguri v Samuel Makindu Gachegu [2021] eKLR“What appears from the above is that the need for leave to change an advocate after judgment is only meant to cater for the interests of the advocate whom the applicant wants to change.Despite the respondent having brought the issue as to service of the instant application upon the firm of Munyasya & Company Advocates, the applicant did not refute these averments or prove that the same was served upon the said firm of advocates.Though the above is the correct legal position, in my view, the change of advocates by a party to proceeding without notifying the previous advocate cannot in any way prejudice the other party in the proceedings so as to warrant a court to deny the party leave to effect the said change. The respondent did not prove any prejudice which he stands to suffer if the change of the advocates is allowed. I say so bearing in mind that an advocate has a right to raise a client- advocate bill of costs for work done or services rendered if the same has not been paid for.”

42. This court is guided by the above decision in that there is no evidence presented by the firm of Kerandi Manduku & Company Advocates on the prejudice it stands to suffer if the change of advocates is allowed. In deed the previous advocate is at liberty to file its bill of costs.

43. This court is satisfie that there are no good reasons to deny the applicant leave to effect the change.

Findings And Determination 44. In light of the forgoing reasons this court makes the following findings and determinations;i.The application for the grant of leave to the defendant's/ applicant's advocates, Gichuki Karuga & Co Advocates, to come on record after judgment is found to have merit and it is hereby allowed.ii.Each party shall bear its own costs.

Orders Accordingly.

DATED SIGNED AND DELIVERED ELECTRONICALLY AT NANYUKI THIS 11THDAY OF NOVEMBER, 2022. HON. A. MSHILAJUDGEIn the presence of;Atieno h/b for Githongori for the Plaintiff.Karanja for the Defendant/Applicant.Ndegwa for the Defendant/Respondent.Court Assistant: LucyKaranja: Need 21 days to file written submissions on the main issue of setting aside the judgment on admission.Atieno: Pray for 21 days to file written submissions.Ndegwa: I wish to apply for stay of ruling pending filing of an application for review or setting aside.Atieno: Not opposed to oral Application for orders for stay.Karanja: Oppose application if allowed. I have no audience. Pray Ndegwa files a formal application for stay then I shall have audience to respond.Court: The firm of KERANDI MANDUKU & COMPANY ADVOCATES and Ndegwa to file a formal application for review and for stay of the order made today November 11, 2022 within 14 days. Further directions on both applications on February 27, 2023 for further directions.DATED SIGNED AND DELIVERED ELECTRONICALLY AT NANYUKI THIS 11THDAY OF NOVEMBER, 2022. HON. A. MSHILAJUDGE4