Assets Recovery Agency v Jared Kiasa Otieno [2020] KEHC 4130 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI

ANTI-CORRUPTION & ECONOMIC CRIMES DIVISION

ACEC NO. 36 OF 2019

ASSETS RECOVERY AGENCY..............................................................APPLICANT

V E R S U S

JARED KIASA OTIENO......................................................................RESPONDENT

RULING

Introduction

1. Vide an Originating summons dated 22nd August 2019, the Asset Recovery Agency (hereinafter the applicant) sought preservation orders in respect of motor vehicles KCD 966L Porche Panamera 2015 and KCU 966C Bentley, Continental GT 2019 owned by the respondent on grounds that they were acquired and or obtained fraudulently out of proceeds of crime and through money laundering. The application was heard exparte and preservation order to last for a period of 90days granted on the same day.

2. Aggrieved by the said orders issued pursuant to section 82 of POCAMLA, the respondent moved to this court on 6th September 2019 vide a Notice of Motion of even date seeking to have the said order rescinded or varied in accordance with Section 89(3) of POCAMLA. Upon canvassing the respondent’s application, the court delivered its ruling on 20th November 2019 thereby rescinding and or varying part of the preservation order affecting  motor vehicle registration No. KCD 966L. Effectively, with this variation, KCD 966L was set to be released to the respondent.

3. Upon delivery of the said ruling, the applicant sought temporary stay for 14 days which was granted pending filing of a formal application which was allowed.  On 2nd December 2019, the applicant filed an application for stay of execution of this court’s orders / ruling dated 20th November 2019 pending appeal.  At the same time, they moved to the Court of Appeal vide their application dated 4th December 2019 seeking stay of same orders which was granted.

4. During the pendency of the Court of Appeal application, stay of execution orders before this court were extended. Subsequently, the applicant withdrew their application for stay pending before the Court of Appeal.  As a consequence, the respondent filed another application dated 28th April 2020 seeking to vacate interim stay orders in force against him and further sought release of motor vehicle Registration No.KCD 966L to him. On 6th May 2020, the said application was dismissed on grounds that the application dated 2nd December 2019 in respect of which stay orders were granted was still pending.

5. The court therefore directed parties to fix the application dated 2nd December 2020 for hearing.

(a)  Applicant’s Case

6.    The application dated 2nd December was filed pursuant to Sections 1A, 1B, 3 & 3A of the Civil Procedure Act, Orders 42 rule 6 and  51 rule 1 of the Civil Procedure rules seeking orders as follows;

(i) That this matter be certified urgent and be heard ex-parte in the first instance.

(ii) That pending the hearing of this application interpartes, the Hourable Court be pleased to stay execution of the ruling of the Honourable Justice J. N. Onyiego dated 20th November 2019 rescinding and setting aside the preservation orders issued on 26th August 2019 and rectified on 4th September 2019 in respect to motor vehicle Registration No. KCD 966L.

(iii) That pending the hearing and determination of this application, the Honourable Court be pleased to stay the execution of the ruling of the Hon. Justice J. N. Onyiego dated 20th November 2019 rescinding and setting aside the preservation orders issued on 26th August 2019 and rectified on 4th September 2019 in respect to motor vehicle registration number KCD 966L.

(iv) That pending the hearing and determination of the intended appeal, the Honourable Court be pleased to stay execution of the ruling of the Hon. Justice J. N. Onyiego delivered in Nairobi on 20th November 2019 rescinding and setting aside the preservation orders issued on 26th August 2019 and rectified on 4th September 2019 in respect to motor vehicle registration number KCD 966L.

(v) That the costs of this application be in the cause.

7. The application is premised upon grounds stated on the face of it and an affidavit sworn on 2nd December 2019 by Cpl. Sautet Jeremiah Matipei.

8. It is the applicant’s case that they have an arguable appeal with prospects of success as the court misapprehended the law and made final orders thus releasing the motor vehicle.

9. That unless execution of the ruling delivered on 20th November 2019 is stayed pending the outcome of the appeal, preservation orders issued on 26th August 2019 and rectified on 4th September 2019 will be rendered nugatory and therefore an academic exercise.

10. He further averred that, if the motor vehicle is released to the respondent, the same will depreciate due to increased millage, tear and wear from its use thus prejudicing the applicant’s case. He further stated that, release of the said motor will render the pending forfeiture proceedings in respect of the said motor vehicle nugatory.

Respondent’s response

11. In response to the said application, the respondent filed a replying affidavit sworn on 9th December 2019 by the applicant himself.  Contemporaneously filed with the application is a Notice of Preliminary Objection urging that, the Honourable Court lacks jurisdiction to determine the application on grounds that it had been rendered functus officio by the filing of a notice of appeal dated 20th November 2019 before the Court of Appeal.

12. He further contended that, the application does not meet the threshold laid in law for the grant of a stay of execution pending appeal.  He further expressed the view that the intended appeal is premised on a misapprehension of the proceeds of crime and Anti Money Laundering Act (POCAMLA).

13. He contended that the appropriate forum to determine the application is the Court of Appeal for the reason that the filing of the Notice of Appeal dated 20th November 2019 renders this  court functus officio; that the applicant is acting in bad faith with a determined mindset of frustrating the respondent’s right to property as there was no causal link established between the motor vehicle and any criminal activity; that despite the temporary stay in force, the applicant has not filed its record of appeal before the Court of Appeal and, that the order of 20th November 2019 rendered the intended forfeiture proceedings superfluous.

Applicant’s Submissions

14. The applicant filed their submissions dated 8th June 2020 reiterating the averments contained in the affidavit in support of their application.  Mr. Githinji for the applicant urged that stay of execution pending appeal is a discretionary power bestowed upon the court which must be exercised in such a manner that it does not negate the appeal.  In support of this position, counsel made reference to the decision in the case of Butt v Rent Restriction Tribunal, Civil Application NAI 6 of 1979 (1979)eKLR.

15. Counsel further contended that the applicant will suffer substantial loss if stay pending appeal is not granted. That the respondent lacks locus standi to claim the motor vehicle as the same is registered in the name of Cleaners Ltd and not him.

16. That the motor vehicle in question is the subject matter in forfeiture proceedings in Civil Application No. 51/2019, where the issue as to whether it is a product of proceeds of crime will be determined on merit.  As to whether the application was filed within reasonable time, counsel contended that it was filed within 12 days after the impugned ruling.

17. Regarding the current status of the appeal, counsel contended that they have filed a Notice of Appeal which has been allocated Civil Appeal No. 604/19.  He asserted that the respondent will not suffer any prejudice if stay is granted.

18. Concerning the question that the court lacks jurisdiction and therefore functus officio, Mr. Githinji submitted that Order 42 rule 6 allows this court to grant stay orders pending filing of an appeal.  In support of this proposition, counsel relied on the decision in the case of Assets Recovery Agency v Charity Wangui Gethi (2019)eKLR.

Submissions by the Respondent

19. Through the firm of Allamano and Associates, the respondent filed his submissions on 9th June 2020 opposing the application.  Counsel literally reiterated the averments contained in their replying affidavit.

20. Learned counsel submitted that the respondent is entitled to the fruits of his ruling 7 months down the line since the orders rescinding the preservation orders were issued. To support this position, counsel referred the court to the holding in the case of Koki Muia v Samsung Electronics East Africa Limited (2015)eKLR where the court held that, the purpose of stay of execution pending appeal is to preserve the subject matter and not to prevent a successful litigant from accessing the fruits of litigation.

21. Further, that the applicant has failed to demonstrate substantial loss in the event stay of execution is denied.  To fortify this argument, counsel placed reliance in the case of James Wangalwa and Another v Agnes Naliaka Cheseto H.C Misc. No. 42 of 2012 (2012)eKLR.

22. He contended that, in its immobile state, the motor vehicle is at a greater risk of loss of utility and it should be auctioned in the event the forfeiture application is successful.  That in the alternative, the motor vehicle log book should be deposited in court and a monthly inspection report be availed.  Lastly, counsel contended that, this application is purely an abuse of the court process as a similar application had been filed before the Court of Appeal but withdrawn.

23. Highlighting on the submissions, S.C. Paul Muite adopted the content in the written submissions entirely urging that the application has no arms nor legs to stand on.  He opined that asset recovery was not created to punish a party.

Analysis and determination

24. I have considered the application herein, affidavit in support, response thereto and submissions by both counsel.  Issues that arise for determination are;

(a)  Whether the applicant has met the threshold for grant of stay of execution orders.

(b) Whether this court has been rendered functus officio.

(c) Whether the respondent has locus to claim a motor vehicle which he does not own.

25. A prayer for grant of stay of execution orders is governed by Order 42 Rule 6(2) of the Civil Procedure Rules which provides that; no order for stay of execution shall be made under sub-rule (1) unless;

“(a)  the court is satisfied that substantial loss may result to the applicant unless the order is made and that the application has been made without unreasonable delay; and

(b) such security as the court orders for the due performance of such decree or order as may ultimately be binding on him has been given by the applicant.

Sub/rule-3 - Notwithstanding anything contained in Sub-rule (2), the court shall have power, without formal application made, to order upon such terms as it may deem fit a stay of execution pending the hearing of a formal application.

Sub-rule- 4 - For the purposes of this rule an appeal to the Court of Appeal shall be deemed to have been filed when under the Rules of that Court notice of appeal has been given.”

26. It is trite law that an application for stay of execution is purely a discretionary matter exercisable reasonably within the permissible legal parameters.  It is not issued as a matter of course.  There must be a just cause to warrant such action bearing in mind the overriding objective principle stipulated under Sections 1A and 1B of the Civil Procedure Act underscoring the just determination of proceedings in a timely manner. Therefore, it is incumbent upon the applicant to prove the basic ingredients of Order 42 rule 6(2) of the CPRs to the effect that;

(a) substantial loss may occur if the stay is not granted;

(b) that the application has been filed within reasonable time.

(c) that necessary security has been furnished; and

(d) whether there is any other reasonable cause established for the ends of justice to be met.

27. The above guiding principles have been upheld by various Superior Courts in various judicial precedents.  In the case of Vishram Ravji Halai & Another vs. Thornton & Turpin Civil Application No. Nai. 15/1990 (1990)KLR 365 the Court of Appeal held that, whereas the Court of Appeal’s power to grant a stay pending appeal is unfettered, the High Court’s jurisdiction to do so under Order 41 rule 6 of the Civil Procedure Rules is fettered by three conditions namely, establishment of a sufficient cause, satisfaction of substantial loss and the furnishing of security. Further the application must be made without unreasonable delay.

28. In Red Cross Society v. Mbondo Katheke Mwania Misc. Civil Application No. 393/2018 (2019)eKLR,  the court held that:-

“It is therefore important that the Court takes into consideration the likely effect of granting the stay on the proceedings in question. In other words, the Court ought to weigh the likely consequences of granting the stay or not doing so and lean towards a determination which is unlikely to lead to an undesirable or absurd outcome. What the Court ought to do when confronted with such circumstances is to consider the twin overriding principles of proportionality and equality of arms which are aimed at placing the parties before the Court on equal footing and see where the scales of justice lie considering the fact that it is the business of the court, so far as possible, to ensure that any transitional motions before the Court do not render nugatory the ultimate end of justice. The Court, in exercising its discretion, should therefore always opt for the lower rather than the higher risk of injustice.”

Similar position was held in the case of Butt v. Rent Restriction Tribunal (supra).

29. Before I proceed to determine the key issues on whether the applicant is likely to suffer substantial loss and lack of jurisdiction by the court, I would like to address the issue of filing the application without unreasonable delay. The impugned ruling (order) was delivered on 20th November 2019.  The applicant filed the application for stay on 2nd December 2019 twelve days after. Therefore, the application was filed within reasonable time.

30. Is the applicant likely to suffer substantial loss and the appeal rendered nugatory unless stay orders are granted? Indeed, the ruling subject of this application was delivered on 20th November 2019.  Immediately, the applicant sought temporary stay of execution of the ruling pending filing a formal application.  The application was allowed and temporary stay granted.

31. On 2nd December 2019, the instant application was filed and stay of execution orders pending appeal granted exparte pending interpartes hearing. Meanwhile, on 4th December 2019 the applicant filed a notice of appeal and moved to file an application for stay of execution before the Court of Appeal but withdrew the same on 10th march 2020 for unknown reasons.  Pursuant to Order 42 rule 6(4) of the Civil Procedure rules, an appeal is deemed to have been filed before the Court of Appeal upon lodgment of the notice of appeal.  It is admitted that the appeal was filed and given Civil Appeal No. 604/19.

32. Practically, with this appeal on record, the Court of Appeal was seized of the matter and the High Court technically relinquished its authority or jurisdiction over the matter.  In other words, there cannot be parallel proceedings both before the High Court and the Court of Appeal over the same subject.  To that extent, I am in agreement with the submissions of senior counsel Mr. Muite that this court has been rendered functus officio and cannot purport to continue with any other proceedings. This court’s order of stay granted temporarily was intended to facilitate filing of an appeal before the Court of Appeal which was achieved by filing Appeal No. 604/19.

33. By retreating again back to the High Court to start prosecuting an application for stay of execution similar to the one filed before the Court of Appeal is to say the least an abuse of the court process. The applicant should concentrate with the appeal and if necessary obtain further stay of execution orders there.

34. The above notwithstanding, and assuming for a moment that this court has locus which is not, has the applicant proved that; they will suffer substantial loss if the orders sought are not granted; the appeal is arguable and it will be rendered nugatory if it succeeds.

35. The applicant argued that they have an arguable appeal and that it will be rendered nugatory if it succeeds.  Whether the applicant has an arguable appeal is for the court before which the appeal is preferred to determine.  In this case and as correctly submitted by S.C. Muite, the right forum is the Court of Appeal. The High Court has already pronounced itself and made it clear that the applicant did not and does not deserve the preservation orders the subject of this application.  It has nothing remaining to consider to make a finding that the appeal is arguable.  The court seized of this mandate is the appellate court and not the trial court.

36. Concerning the issue of substantial loss, the applicant must demonstrate that he will suffer consequences that will not be redeemed by monetary compensation or any other remedy should the appeal succeed and the subject matter of the appeal would have ceased to exist in its original form or completely.  See H.C Misc. Application No. 42 of 2011 James Wangalwa and Another v. Agnes Naliaka Cheseto where the court held;

“The applicant must establish other factors which show that the execution will create a state of affairs that will irreparably affect or negate the very essential core of the Applicant as the successful party in the appeal. This is what substantial loss would entail ...”

37. Similar position was held in Mukuma v Abuogo (1988)KLR 645 where the court considered what constitutes substantial loss as:-

“…. the issue of substantial loss is the cornerstone of both jurisdictions.  Substantial loss is what has to be prevented by preserving the status quo because such loss would render the appeal nugatory.”

38. In this case the subject of preservation orders in question is a motor vehicle which the court found was not connected at all with any suspected proceeds of crime nor money laundering.  The motor vehicle has been lying at the CID headquarters thus wasting away due to vagaries of harsh weather conditions as a result of exposure to sunshine.

39. What substantial loss will the applicant suffer if the motor vehicle is released to the applicant with its log book retained by the applicant as security? I do not find any substantial loss that will be suffered should the appeal succeed.  There is a remedy which involves recovery of the motor vehicle as it will not change hands to a 3rd party or sold.  To ensure the motor vehicle is properly kept in good condition without exposing it to waste, a regular inspection can be undertaken to confirm that it is maintained in good condition.

40. In my view, I do not see any substantial loss likely to be suffered.  Will the appeal be rendered nugatory? One of the key consideration in granting stay of execution is that the appeal will be rendered useless and become an academic exercise should the appeal succeed and the subject ceases to exist.  Where a court finds that there is no substantial loss likely to be suffered, it is unlikely that the appeal will be rendered nugatory.

41. See Kenya Shell Ltd vs. Kibiru (1986)eKLR where the court held at page 416 that:-

“It is usually a good rule to see if order XLI rule 4 of the Civil Procedure Rules can be substantiated. If there is no evidence of substantial loss to the applicant, it would be a rare case when an appeal would be rendered nugatory by some other event. Substantial loss in its various forms, is the corner stone of both jurisdictions for granting a stay. That is what has to be prevented. Therefore, without this evidence it is difficult to see why the respondents should be kept out of their money.”

42. It is my finding that, if the appeal succeeds, the motor vehicle shall be repossessed as it will be available.  Concerning depreciation, this is not a commercial motor vehicle that will be exposed to increased use hence faster depreciation. That ground is therefore not available.

43. Regarding inclusion of the motor vehicle in the forfeiture proceedings in Civil Application No. 51/2019, the same is not of any consequence as the inclusion was contrary to the impugned court order.

44. Concerning the issue whether the respondent has a right to claim a motor vehicle not registered in his name, the same is not tenable.  It is the applicant who brought the respondent to court claiming that he had acquired the motor through proceeds of crime and money laundering.  They did not sue the company they are now claiming to be the registered owner. They know why they left out the purported registered owner and sued the respondent as the beneficial owner.  A registered owner or beneficial owner can be held liable.  Therefore, if there was a misjoinder of parties, it is upon the applicant to decide on who to sue.

45. In the instant case, it is too late to raise the issue of misjoinder of party or parties the applicant having erected to sue the beneficial owner.  Accordingly, that ground is not available.

46. Having held as above, it is my finding that the application herein is not merited and the same is dismissed with costs to the respondent.  The applicants are bound to release the motor vehicle to the respondent unless otherwise lawfully held or upon further orders from the Court of Appeal.  Order accordingly.

DATED, SIGNED AND DELIVERED VIRTUALLY AT NAIROBI THIS 15TH DAY OF JULY 2020.

J. N. ONYIEGO

JUDGE