Afvest Limited v Micro Mobile Limited [2018] KEHC 10116 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

COMMERCIAL AND ADMIRALTY DIVISION

CIVIL SUIT NO. 353 OF 2017

AFVEST LIMITED..........................................................................PLAINTIFF

- VERSUS -

MICRO MOBILE LIMITED.......................................................DEFENDANT

RULING

1. The plaintiff filed this suit by a plaint dated 23rd August 2017.  By that plaint, the plaintiff pleaded that it had provided the defendant, at the defendant’s request, a term loan of aggregate ksh 17 million amongst other terms.  That, that loan, under the terms of that agreement could be converted into a term loan, and interest would accrue at compound annual interest of 19% per annum, and in the event the loan was not fully converted into shares of common stock of the defendant, the outstanding loan would accrue interest of 25% computed in arrears from the date of disbursement.  That the loan accrued interest would be convertible into shares of common stock of the defendant company which would be capped at the amount less than or equal to 8% of fully dilluted shares of the defendant upon convertion.

2. On 28th November, 2016, the plaintiff sent the defendant a formal notice of convertion which by letter dated 11th April, 2017, the defendant agreed to conditions amongst which was the sum of Ksh. 6,039,679 of the loan would be converted into 8% share holding of the defendant.

3. The plaintiff pleaded that the defendant unlawfully with the intention to renege from the terms of the agreement refused to effect convertion of the overpaid debt.

4. On the basis of the above amongst others, the plaintiff prayed in its plaint for amongst other prayers, permanent injunction to restrain the defendant from affecting changes to its share holding structure and composition, by issuing shares, allotting shares, processing any debt to equity conversion.

5. By notice of motion application dated 23rd August, 2017, the plaintiff sought interim interlocutory injunction to restrain the defendant from affecting any changes in the defendant’s shareholding structure and composition.

6. The defendant filed a notice of motion dated 28th August, 2017 seeking to stay this suit and that the dispute be referred to arbitration.

7. This court (Justice Ochieng J,) by its ruling of 5th February, 2018, stayed this suit.  By that ruling the court also orderd parties to agree on appointment of a sole arbitrator and if within 30 days there was no agreement, the chairman of the Chartered Institute of Arbitrators was to appoint such an arbitrator.

8. It is not disputed that the dispute has not been referred to arbitration as ordered by the court.  The defendant stated, and it was acknowledged by the plaintiff, that the plaintiff has filed an appeal against the ruling of Ochieng J.

9. The application before court is the one filed by the plaintiff.  It is a notice of motion dated 13th February, 2018.  The plaintiff by that application seeks an injunction, pending hearing of the contemplated arbitration, to restrain the defendant from effecting any changes whatsoever to its share holding structure and composition.

10. The application was opposed by the defendant.  In oppositng the application, the defendant, quite rightly, submitted that the plaintiff could not move the court, as it had done, in light of the stay of this suit by the ruling of 5th February, 2018.

11. The defendant relied on the case Ferdinand Ndungu Waititu vs Independent Electoral & Boundaries Commission & 8 Others (2013) eKLR, it was stated that:

“A stay of proceedings involves arresting or stopping proceedings.  It is a tool used to suspend proceedings to await the action of one of the parties in regard to some step or some act (see Black’s Law Dictionary).  This implies that the rationale for stay is the pendency of an act or step either required by the Court or sought by a party.  It may be grounded on a statutory provision or on the need of a party and based on a plea for the plenary exercise of the court’s discretion.”

12. In this court’s view, that opposition raised by the defendant is decisive in determining the application.  The court having, by the ruling of 5th February, 2018, stayed this suit, the plaintiff was not entitled to move the court, even under section 7 of the Arbitration Act Cap 49, without first seeking the vacation of the order of stay.  On that ground alone the plaintiff’s application fails.

13. In addition, on my perusal of the court file, I could not find the summons to enter an appearance.  If there is no summons to enter appearance that were filed with the plaint, as required under Order 5 Rule 1 (3) of the Civil Procedure Rules (the Rules), then the suit before court is irregularly on record.  Indeed going by the provisions of Order 5 of the Rules the suit does not exist.  However, since I did not ask the parties to address me on that issue, I will say no more on the matter.

14. In the end, the plaintiff’s notice of motion dated 13th February, 2018is dismissed with costs to the defendant for having been filed when the suit is stayed.

DATED, SIGNED and DELIVERED at NAIROBI this30thday of July2018.

MARY KASANGO

JUDGE

Ruling read and delivered in open court in the presence of:

Court Assistant....................Sophie

........................................... for the Plaintiff

........................................... for the Defendant