Anez Catering Company Limited v Gems National Academy Academy Ltd Regis School Runda; Gems National Academy Ltd t/a Regis School Runda & another (Objector) [2023] KEHC 25520 (KLR)

Anez Catering Company Limited v Gems National Academy Academy Ltd Regis School Runda; Gems National Academy Ltd t/a Regis School Runda & another (Objector) (Civil Appeal E266 of 2021) [2023] KEHC 25520 (KLR) (Civ) (21 November 2023) (Ruling)

Neutral citation: [2023] KEHC 25520 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Civil

Civil Appeal E266 of 2021

JN Mulwa, J

November 21, 2023

Between

Anez Catering Company Limited

Plaintiff

and

Gems National Academy Academy Ltd Regis School Runda

Defendant

and

Gems National Academy Ltd T/A Regis School Runda

Objector

Runda Garden Development Ltd

Objector

Ruling

1. By a Ruling dated 19/05/2023 a partial judgment on admission was entered for the Plaintiff against the Defendant Gems National Academy Limited T/A Regis School Runda in the sum of Kshs. 8,934,980/- plus interest at court rates and costs.At the same time, a stay of execution of the partial decree was granted for 40 days to allow the parties engage in amicable settlement proposals. The balance of the claim was to be set down for hearing.

2. A decree was thereafter drawn bringing the partial decretal sum to Kshs. 10,744,559. 52 as at 5/07/2023 the Judgment Debtors (J/D) had not paid prompting the Decree Holder (D/H) to obtain warrants of attachment, instructing Betabase Auctioneers to execute the warrants by attachment and sale of the movable properties of the JD, the defendant in this suit. With the warrants in their hands, the Auctioneers attempted to enter and proclaim the movable properties of the JD on the 6/07/2023 at Regis School Runda.

3. By a Notice of Motion Application dated 18/07/2023 brought under a certificate of urgency, two Objectors, Regis Runda Academy Limited; and Runda Garden Development Limited (1st and 2nd Objectors respectfully) moved the court for orders: -1. Spent2. This Hon. Court be pleased to grant an interim order staying the execution of the decree dated 19/05/2023 pending the hearing and final determination of this Application.3. This Honourable court be pleased to grant an order staying the attachment and sale of each and all movable goods situated at Regis School – Runda based on the false proclamations of attachment made by Betabase Auctioneers on or around 6/07/2023 or any other warrant of attachment in execution of the decree issued on 19/05/2023 pending the hearing and final determination of this Application.4. This Honourable Court be pleased to permanently lift the proclamations of attachment made by Betabase auctioneers on or around 6/07/2023 against the Objector’s movable goods and to permanently restrain the decree-holder herein from execution against the Objector’s movable goods situated at Regis School – Runda.5. The decree-holder be condemned to pay the costs of this Application.

4. On 31/07/2023, this court upon hearing the parties arguments issued the following orders: -a.As a conditional stay of execution, the Applicants/Objectors shall deposit a sum of Kshs. 4 million into court as security within 10 days of this order, and in default, the stay order shall lapse automatically.b.Upon order (a) above being complied with, prayer No. 3 of the Application shall be deemed to have been granted pending determination of the Application.

5. I have noted that the conditional stay of execution orders were duly complied with as Kshs. 4 million was deposited into court on 9/08/2023. Pending for determination is therefore prayer No. 3, 4 and 5.

Objectors Case 6. The Applicants/Objectors in their grounds for the Application stated at its face state that: -a.They have legal and beneficial interest in all movable properties situated at Regis School – Runda, including all the proclaimed movable properties on the 6/07/2023 by Betabase Auctioneersb.That they are neither defendants or judgment debtors in the proceedings and therefore have no legal obligation to settle the decretal sum.c.That the Defendant transferred by a licence all its assets and school business excluding all liabilities to the objectors prior to 1/01/2023, and complied with Provisions of Transfer of Business Act, notified the public of the transfer and therefore they are shielded from any liabilities of the Defendant T/A as Regis School; Andd.That the proclaimed properties are used for the education of the students of the school, and if allowed to continue, would disenfranchise the children of their rights to education.

7. One Peter Mburu Burugu, swore the Supporting Affidavit on the 18/07/2023; stating that he is a shareholder of the 1st Objector, and annexed certificates of Incorporation of the companies to the affidavit;a.Regis Runda Academy Limited Incorporated on 28/01/2021b.Runda Gardens Development Limited – incorporated on 19/09/2006. c.Gems National Academy Limited – T/A Regis Schools on 21/01/2019.

8. By the above annexures and certificates of official searches (CR12) of the companies; it is stated there are no connections between the three companies, and therefore that the objectors have a legal sustainable and protectable beneficial interest in all the movable assets within or at Regis School- Runda including those listed in the allegedly false proclamation, and further that the Decree is only enforceable against Gems National Academy T/A Regis Schools, and not the objectors. He vehemently attempted to show the differences and connections if any of the two objectors and the defendant, at paragraph 5-10. The Court will refer to the averments therein later in this ruling.

Decree Holders Case(plaintiff) 9. In response to the Objection Proceedings, the Plaintiff - Decree Holder (DH) filed a Replying Affidavit sworn by Zena Hassan on 24/07/2023 describing herself as the director of the plaintiff company as well as a list of authorities in support of her averments. It is the plaintiff’s averment that the objections are brazen attempts by the J/D to erode and avoid satisfaction of the partial decree.Further, the Plaintiff avers that the legal or beneficial interests put forth by the objectors are not liens that have been perfected to take priority over other claims of the JD’s assets, nor do the alleged transfers by licence create any liens over the assets.It is a further disposition by the DH that there exists a legal binding contract between the JD and the DH for the provision of services which were duly provided to the students at the school and that the proclamation was legally undertaken at the same school where the services were provided and the Decree of the court has crystallized.

10. Additionally, the Plaintiff has provided a Gazette Notice and in its view, the Defendant (JD) granted a short term licence Agreement to the 1st Objector from 1/01/2023 and did not transfer its properties to the objectors; and by that, has urged the court to dismiss the objection proceeds. The Defendant (J/D) has not filed any response to the objection proceedings.

11. Issues for Determinationa.Whether the objection proceedings lodged by the two objectors are merited

12. Analysis and DeterminationThere is on record a judgment on admission dated 15/09/2023 upon which the decree was issued against the defendant. Further, by the same ruling, the Decree Holder and Judgment Debtor were granted 40 days to negotiate a mode of payment by the court, upon a condition stay order for deposit of Kshs. 4 million into court.The conditional stay order was complied with, not by the Defendant, but by the Objectors, upon a Proclamation on the Defendant’s School, Regis School Runda, where the DH supplied the catering services that were not paid for –atleast to the extent of Kshs. 8,934,980/- the admitted amount, and the balance to be determined at a hearing later.

13. In the first instance, the court cannot understand why the Objectors would wish to bail out the Defendant and its school, if they were not very knitly and closely connected to the same school.The Objectors have attempted to explain this by a quite intricate maneuvers between the Defendant itself and the two objectors, by agreements, leases, licenses or deeds, that on various dates the JD granted to the 2nd Objector a legal lien over all movable assets at the subject school, to secure loans granted to it.

14. Further it is averred that on 9/01/2023, just a year after, the Defendant transferred to the 2nd Objector all its movable assets at the subject school, by a licence and/or agreement.By the above, it would appear that the defendant transferred to the 2nd Defendant its legal and beneficial ownership of the school’s movable assets, situated at the school. This is subject to prove at a later stage.There is also an alleged valid agreement dated 19/01/2023 between the Defendant and the 1st Objector, a one year licence Agreement to manage the school operations in order to salvage it from collapse.

15. The court has considered the “licences” and “agreements” alluded to above, and in the affidavits by the objectors; as well as the current CR12 for each of the three limited liability companies.The 1st objector however at its paragraph 8 of the supporting affidavit to the objection proceedings clearly states that, it agreed, by the deed dated 9/01/2023, to operate the school, excluding all liabilities accrued upto 31/01/2023. By the above disposition, Gem National Academy Limited (the defendant) was to bear its own liabilities accrued upto 31/01/2023.

16. The Liability that is at issue in this case was incurred through the supply contract between the Defendant and the Plaintiff – as clearly stated at the Amended Plaint dated 2/11/2021, being unpaid services rendered by the Plaintiff to the Defendant for the Period 4/01/2021 upto 18/10/2021 when it is alleged that the defendant unilaterally terminated the Agreement leaving unpaid Kshs. 24,072,145/=. In the circumstances, the liability subject of this case and more precisely the partial judgment and decree were incurred during the pendency on the agreement and the partial judgment.That in my view brings the liability squarely on the shoulders of the defendant, Gems National Academy Limited T/A Regis School – Runda.

17. The Objectors have vehemently submitted that the “licences, leases, agreements” alluded to by the Defendant are not registered and therefore lack legal basis; and urge the court to set aside the exparte orders, further submitting that by the licences and leases, there is a conspiracy between the JD and the Objectors to deny the plaintiff its fruits of judgment.Black’s Law Dictionary 8th Edition defines a licence asPermission, usually revocable, to commit some act that would otherwise be unlawful especially an agreement (not amounting to a lease or profit) …….Further, a licensee is one to whom a licence is granted to one who has permission to enter or use another’s premises but only for one’s own purposes and not the occupiers benefit.18. At Section 44 of the Civil Procedure Act: -a.All property belonging to a judgment debtor, including property over which or over the profits of which he has a disposing power which he may exercise for his own benefit, whether that property is held in his name or in the name of another but on his behalf, shall be liable for attachment and sale in execution of a decree provided that the following shall not be liable to attachment or sale: -i.………………ii.The tools and implements of a person necessary for the performance by him of his trade or profession.iii.……………………

19. Juxtaposed against the parties submissions, the licences alluded to by the Defendant as to transferring its legal and beneficial interests to the Objectors, nothings turns on such, as it appears that all these alleged transfers, licences and leases within the existence of the debt were but a scheme by both the Defendant and the Objectors to deny the plaintiff from recovering the debt, which for all purposes and intent the Objectors knew as they clearly stated that they did so to avoid the school subject of these proceedings from total collapse due to financial difficulties.

20. I have considered what the defendant allegedly transferred to the Objectors by the licences, agreement and leases.Under Section 2 of the Chattels Transfer Act, Cap 28 Laws of Kenya, “Chartels” is described as to mean; Any movable property that can be completely transferred by delivery and includes machinery, stock and the natural increase of stock as hereinafter mentioned, crops and wool, but does not include: -a.…………………….b.……………………c.Shares and interests in the capital or property of any company or other corporate body; or—Going back to the Objector’s averments, at paragraph 8 of their supporting affidavit, it is crystal clear that the licence if any was for a limited period of one year to operate the school from 1/01/2023, and that it had transferred all its assets and school business, excluding all liabilities accrued up to 31/12/2022. Without a doubt, all these actions took place when the defendant was already unable to pay the debt it owed to the defendant. By the above, the debt to the Plaintiff was already owing, at least the admitted sum, and the partial judgment. To that extent then, the court finds that the services rendered by the Plaintiff to the Defendant, to the extent of the admitted amount, were not taken over by the Objectors. They remained as liabilities to the Defendant.

21. That position then confirms the court’s view that these alleged transfers licences and agreements were all but a scheme of unlawful actions so as to safe the school assets from being attached should judgment be entered against the defendant.It is well captured in Black’s Law Dictionary (Supra) that the permission or authority donated by the licence is only made to benefit the donor (licencee) and not the licensor (receiver).In the case Mt Kenya Safari Club Ltd vs. Mukawa (Hotels) Holdings Ltd (1989) eKLR the court while citing Winter Garden Theatre v. Millenium (1947) 2 ALL ER 331 rendered that: -“---A Licence Property passeth no interest, nor alters or transfers property in anything by only makes an action lawful which without it had been unlawful-“

22. Towards that, and for a party to be successful, the objector must adduce evidence to show that at the date of the attachment, he had a legal or equitable interest in the property as held in Precast Portal Structures vs. Kenya Pencil Company Ltd & 2 others (1993) eKLR.Further, the burden of proof is on the Objector to prove and establish his right to have the attached property released from the attachment.Additionally, the court in Precast Portal Structures case (Supra) the Objector must prove that the property attached was not held by the judgment debtor for himself, or by some other person in trust for the Judgment Debtor, but that the Objector holds the property on his account.

23. Considering the Defendants and Objectors actions from the date of the agreement for supply and provision of catering services by the Plaintiff to the Defendant, being 4/01/2021, and that within 10 months the contract was terminated, the inability of the defendant to pay for the debt was evident and known to the objectors, hence their attempts to save Defendant’s school from collapse by the alleged transfers of assets by licensees and agreements, whose validity and legality are yet to be determined.

24. If the scenario presented to this court by the Objectors through these Objection Proceedings, were truly legal and lawful, and in the JD’s knowledge, upon entry of judgment on its own admission, why would it not have appealed against the judgment?In other words, at the institution of the suit, why did the Defendant not take out third party proceedings against the Objectors as it did expect that in default of settlement of the decree, execution against its movable assets, including the Regis School Runda would ensue?The court agrees with the plaintiff’s submissions that despite the three companies – the Defendant and the two objectors, by their CR12- showing different directorships and periods of incorporation, their actions speak of a joint scheme to aid the Defendant from satisfying the decree, at least for a short while, as these are interlocutory proceedings.

25. The court agrees that the movable and attachable assets of the Defendant, at the school are used for the education of the students; but this alone in my view is not sufficient ground to persuade the court to halt all execution proceedings, there is no doubt that the school building too is an asset capable of sale to satisfy the decree; among other assets not disclosed in these proceedings.Having sufficiently rendered itself on the issues raised by the parties, and the prayers sought by the Objectors, the court finds that the matter of whether the proclamations or attachment made by Betabase Auctioneers were false or real, is at the moment immaterial; and will not go into its merits or lack of it;

26. On 31/07/2023, this court granted the Objectors conditional stay of execution orders upon them depositing into court Kshs. 4 million as security which was done. That having been done, the stay order are in place. The court is further aware that the balance of the claim by the Plaintiff against the defendant is yet to be heard and determined.Many of the issues raised as to the relationship between the defendant and the objectors, in my view, can only be properly and ultimately resolved by evidence, which shall be during the hearing of the suit for the remainder of the plaintiffs claim against the defendant.In these objection proceedings, this court can only do as much the trial court will at the end determined which of the parties ought to settle the Decretal sum.

27. Guided by provisions of Section 1A, 1B and 3A of the Civil Procedure Act, the court finds it just, fair and reasonable in the circumstances that the sum of Kshs. 4 million deposited into court as security do remain so deposited, or in the alternative be withdrawn from the court, by the Depositor-Objectors and instead be deposited in a joint interest earning account in the names of the Plaintiffs advocates, and the objectors advocates within 45 days of this ruling pending hearing and determination of the suit which hearing will no doubt resolve issues as stated above.

28. Consequently, the Court orders and issues stay orders of execution by the Plaintiff against the property or movable assets situated or to be found in the Regis School Runda compound pending the hearing and determination of this suit.

29. Circumstances of these objection proceedings demand that costs of the Application dated 18/07/2023 be borne by the Defendant to the Plaintiff only.Order accordingly.

DELIVERED DATED AND SIGNED THIS 21ST DAY OF NOVEMBER, 2023JANET MULWAJUDGE