Artcaffe Coffee and Bakery Limited v Virani (Sued as Trustee of Virani Settlement Trust) & another; Diamond Trust Bank Kenya Limited (Interested Party) [2022] KEHC 14377 (KLR)

Artcaffe Coffee and Bakery Limited v Virani (Sued as Trustee of Virani Settlement Trust) & another; Diamond Trust Bank Kenya Limited (Interested Party) (Civil Case E354 of 2020) [2022] KEHC 14377 (KLR) (Commercial and Tax) (14 October 2022) (Ruling)

Neutral citation: [2022] KEHC 14377 (KLR)

Republic of Kenya

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

Commercial and Tax

Civil Case E354 of 2020

DO Chepkwony, J

October 14, 2022

Between

Artcaffe Coffee and Bakery Limited

Applicant

and

Praphulbala Nizarali Virani (Sued as Trustee of Virani Settlement Trust)

1st Respondent

Alwina Nizarali Virani (Sued as Trustee of Virani Settlement Trust)

2nd Respondent

and

Diamond Trust Bank Kenya Limited

Interested Party

Ruling

1. The applicant herein, Artcaffee Coffee and Bakery Ltd is a tenant to premises owned by Virani Settlement Trust having executed a lease agreement to that effect on January 1, 2019. The said agreement is to lapse on November 30, 2025 and was executed by the two respondents in their capacity of co-trustees of the trust. to secure the payment of rent, the applicant caused the interested party, Diamond Trust Bank Kenya Ltd to issue a bank guarantee in favour of Virani Settlement Trust.

2. All was well and the applicant duly paid rent until sometimes in 2020 when dispute arose between the respondents and created confusion on whom among them was legally entitled to receive rent from the applicant. At some point, the 2nd respondent communicated to the applicant that the 1st respondent had unanimously been stripped off the privilege and mandate of being a trustee of Virani Settlement Trust. Consequently, the 2nd respondent directed the applicant to surrender its rent to PAM Goldings Properties as the duly appointed property managers to collect rental income on behalf of the trust. On the same wavelength, the 1st respondent vide a letter dated November 22, 2019 instructed the applicant to make all payments of rent by cheque with respect to the same premises to Tristem Estates Ltd, which had been appointed by the trust, as managing agents.

3. As such the applicant found itself between rock and hard place, which situation was exacerbated by 1st respondent’s letter addressed to the interested party calling off the guarantee it had issued in favour of the applicant.

4. The circumstances prompted the applicant to institute the interpleader proceedings through the originating summons dated September 9, 2020, and sought, among other prayers that the interested party be restrained from releasing any sum of money as rent payment to respondents or their agents, by virtue of a bank guarantee dated August 28, 2019. The applicant also sought the court to determine who among the two respondents was the rightful beneficiary of the rent payable by the applicant and as a consequence thereof, the applicant be indemnified against any liability thereof.

5. Contemporaneous with the originating summons, the applicant filed a notice of motion application of even date seeking to restrain the interested party from releasing any sum of money to the respondents by virtue of the bank guarantee pending the determination of the interpleader proceedings.

6. On May 5, 2022, the Honourable justice Mabeya directed the parties to canvass the notice of motion by way of written submissions upon the respondents filing a response. Counsel for the parties appeared before me on June 9, 2022 to confirm compliance with the directions of the Hon justice Mabeya.

7. On that date, although the applicant had filed and served submissions on the application, Mr Khan, counsel for the 1st respondent and M/S Jan-Mohamed, counsel for the 2nd respondent informed the court they were not opposed to the interpleader application and were seemingly agreeable that this court would not be the proper forum to determine the dispute between the two respondents.

8. The two respondents indicated that they would not be filing any response and commonly gave two proposals as to the way forward pending resolution of the dispute between the respondents before the proper, just as the applicant had done in its submissions.

9. The first proposal is for the applicant to deposit the rent in court and the second one as proposed by the learned senior counsel, M/S Jan-Mohamed is that the rent be deposited in a joint interest earning account in the name of the advocates of the respondents pending the determination of the dispute between their respective clients. The applicant was however concerned that in the event that the court adopts the 2nd option, then the applicant should be issued with an invoice for tax compliance.

10. Having listened to respective counsel for the parties and given that the respondents are not opposed to the interpleader proceedings, I do not wish to delve in depth discussion as to whom among the respondents is the rightful beneficiary of the rent payable by the applicant.

11. Both respondents through their respective advocate are seemingly agreeable to jurisdiction of an alternative forum other than this court to resolve their dispute. This court does not wish to disturb such an agreement as it is within the mandate of the court under article 159 of theConstitution of Kenya to promote alternative dispute resolution mechanisms.

12. Consequently, to safeguard the applicant’s interest as expressed in the notice of motion and originating summons both dated September 9, 2020 this court directs as follows:-a.The 1st and 2nd respondents’ advocates on record to open a joint-escrow account for purposes of receiving rent due from the applicant on behalf of the Virani Settlement Trust and communicate the details to the applicant through the applicants’ advocate.b.The said escrow account to be opened within 14 days of this ruling.c.The applicant to deposit in the escrow account to be opened as directed above, all accrued rent and future rent payable to Virani Settlement Trust by virtue of lease agreement dated January 1, 2019, pending the determination of dispute between the two respondents in their preferred forum.d.Upon deposit of the monthly rent by the 1st applicant, the 1st and 2nd respondents’ advocates on record shall cause a tax invoice to be issued to the applicant.e.That the applicant shall be indemnified from any liability for payment of rent under the lease agreement between itself and Virani Settlement Trust.f.That parties are ordered to bear their own costs.It is hereby so ordered.

RULING DELIVERED VIRTUALLY, DATED AND SIGNED AT NAIROBI THIS _14thDAY OF OCTOBER, 2022. D. O. CHEPKWONYJUDGEIn the presence of:Mr. Ikoha Muhindi for the ApplicantM/S Athrean counsel holding brief for Mr. Khan for 1st RespondentM/S Jan Mohamed (S.C) counsel for 2nd RespondentCourt Assistant - Sakina