Bwanyange Limited v Alibhai & another [2023] KEHC 24982 (KLR)

Bwanyange Limited v Alibhai & another (Civil Suit 13 of 2023) [2023] KEHC 24982 (KLR) (6 November 2023) (Ruling)

Neutral citation: [2023] KEHC 24982 (KLR)

Republic of Kenya

In the High Court at Mombasa

Civil Suit 13 of 2023

DKN Magare, J

November 6, 2023

Between

Bwanyange Limited

Applicant

and

Yusuf Alibhai

1st Defendant

Family Bank (K) Limited

2nd Defendant

Ruling

1. The Applicant filed suit against the defendant claiming that he operated 2 accounts in the USD and Kshs. In account No. xxxx870USD, Account No. XXX872Ksh. They notified unauthorized withdrawals on 19/5/2020. The Applicant realized that a sum of USD 179,880 and Kshs. 31,732,776. 80 had been withdrawn. They claim the said amount in the main suit.

2. The Applicant did nothing till 1031 days later, when on 15/2/2023, when they saw urgency to file this suit. The suit is filed in conjunction with other matters involving four other banks. It is again not till two months later did they find it necessary to file an application dated 18/4/2023. This is the subject of this ruing.

3. The 1st defendant filed defence stating that there is another suit, being Nairobi HCCC E268 of 2021. The 1st Defendant filed an application dated 17/3/2023 consolidate the related suits being: -a.This suit, HCCC 13 of 2023 Bwanyange Limited =vs= Family bank Ltd & another.b.Mombasa HCCC No. E014 of 2013 – Bwanyange Limited =vs= Ecobank and 2 Others.c.Mombasa HCCC 15 of 2023 Bwanynage Ltd.= vs= Equity Bank (K) Ltd.d.Mombasa HCCC E016 of 2023 Bwanyange Limited =vs= NCBA Bank Plce.Mombasa No. 19 of 2023 –Bwanyange Ltd =vs= Absa Bank Plc.f.They prayed that No. 13 of 2013 be the lead file. They also pray that the Applicant accordingly and the plaint within 14 days of the grant of the order for consolidation.

4. I gave an orders on 24/10/2023 consolidating the matters except Mombasa No. 19 of 2023 –Bwanyange Ltd =vs= Absa Bank Plc. This is because Absa Bank and the Applicant have other issues in a matter filed in Nairobi prior to this case.

5. The current application dated 18/4/2023 remained. This application was not field simultaneous with the filing of these suits. This court has the task of making a decision on the application before the matter proceeds for full hearing or other processes proceed.

6. The application seeks the following orders: -1. Spent2. Spent3. THAT this Honourable Court be pleased to order the 2nd defendant/respondent to unconditionally lift the freezing order placed by itself without any valid court order on A/C No. 096000039870 and do immediately gran the plaintiff/ applicant whether by itself, its employees, servants, agents and /or otherwise access to the said account and that the 2nd defendant/respondent be restrained by way of an injunction form freezing the said account till further orders of this Honourable Court.4. THAT cost of this application be provided for.

7. There are only two issues in regard to the application herein, outside the question of costs. The issues are: -a.Whether an interlocutory injunction ought to issue in the circumstances of this case.b.Whether the Applicant has met the threshold for grant of a mandatory injunction.

8. A claim for interlocutory injunction always uses a well throttled path, set out in the locus classicus case, decided by the former court of Appeal for Eastern Africa sitting in Kampala, that Giella = vs = Cassman Brown & Co. Ltd (1973) EA, 358, 360. The decision elucidates the principles for grant of injunction. The court, stated as follows, though the wisdom of Spry VP, as then he was, as follows: -“The conditions for the grant of an interlocutory injunction are now, I think, well settled in east Africa. First, an applicant must show a prima facie case with a probability of success. Secondly, an interlocutory injunction will not normally be granted unless the applicant might otherwise suffer irreparable injury, which would not adequately be compensated by an award of damages. Thirdly, if the court is in doubt, it will decide an application on the balance of convenience.”

9. The dispute herein oscillates around the operation of the account and the origin of the money in the account. The family bank closed the accounts stated to be having a balance of Ksh. 3,532,958. 95 as at 18/7/2022. The Applicant company relies on the old English authority of Salomon v A Salomon & Co Ltd [1896] UKHL 1, [1897] AC 22, which is a groundbreaking decision where the house of Lords (the predecessor of the UK Supreme court), in our former colonizer’s court conceptualized, contextualized and problematized the principle of separate legal personality.

10. The Applicant exhibited form CR 12 and a letter from the newly appointed director of public prosecution as cogent evidence in support of their case. The Applicant jump from that submission to the statement by Lord denning, MR in a case, which I cannot quote as it is not properly cited.

11. Further, the Applicant relied on the case of Viable Deco Solutions Limited v Co-operative Bank of Kenya Limited [2014] eKLR, where justice F. GIKONYO stated as doth: -“(25)Now that I have found that the account herein and the funds thereto belong to the Company; and it must be run in accordance with the instructions which are given to the Bank by the Company in accordance with resolutions of the Company, did the bank act in accordance with the law in freezing the account? The great legal innovation is that, a company is a separate legal entity from the people who compose it although it operates through human agents.Therefore, instructions by an individual director to the Bank to freeze the Company account, should only be acted upon by the Bank if they are backed by a court order or a resolution of the Company under seal, or are in the nature of a report of commission of an offence such as fraud, money-laundering, terrorism-financing, and others on the Company account, and on which the bank has reasonable suspicion that a crime may have or has been committed.I have held that, where there is a dispute or suspicion of fraud on the Company account held in the Bank; and the Bank decides to freeze the account, it beholden the Bank to bring the decision to the attention of the company immediately unless it is prohibited by law to do so. The bank did not do that; it has not even show that there was any prohibition on its part to notify the Company of the freeze of its account; it has placed absolutely nothing before the court to support its action to freeze the account and I therefore, hold that there was no reason to freeze the account on grounds that were unsubstantiated and quite untenable in law...”

12. On interlocutory mandatory injunction they rely on Showind Industries Ltd v Guardian Bank Ltd & another [2002] eKLR, justice A Ringera, as he was then, stated as doth: -“As I understand the law, an interlocutory mandatory injunction is granted very sparingly and only in exceptional circumstances such as where the applicant’s case is very strong and straight forward. Moreover, as the remedy is an equitable one, it may be denied where it would be inequitable to grant the relief for the reason, for example, that the applicant’s conduct does not meet the approval of a court of equity or his equity has been defeated by laches. I will determine this application on the basis of the above broad principles.”

13. They state that they have a prima facie case. The rely on Mrao Ltd v First American Bank of Kenya Ltd& 2 others [2003] eKLR, where the court of Appeal, Bosire & O’Kubasu JJ A, as then they were, stated as doth: -“So what is a prima facie case? I would say that in civil cases it is a case in which on the material presented to the Court a tribunal properly directing itself will conclude that there exists a right which has apparently been infringed by the opposite party as to call for an explanation or rebuttal from the latter.”

14. Respondent relied on the case of Rafique Ebrahim v William Ochanda Onguru t/a Ochanda Onguru & Co. Advocates [2020] Eklr. I do not know what the case was supposed to state as there is nothing in the submissions about it. I have also read the decision but cannot get the point the point the Applicant was making. The idea of throwing multiple authorities to the court in a vain hope that the courts will have no time to read them, is neither advisable nor encouraged. This is our day and night job. We have no other work other than read. We will read. The court is not supposed to use conjecture surmises and hyperbole to know the intention of the parties.

15. It was my sincere wish that the applicant could be more succinct in his submissions. The submissions make one to move back and forth trying to understand the thought flow.

16. The respondent filed a replying affidavit of Joan Gachomba.sge stated that the account was opened in the names of the applicant with Robert Wangila Wandera’s telephone number as contact. Underson Kombe and Robert Wangila Wandera were are signatories. A letter was sent complaining of fraud on part of the signatories. It stated that Robert Wangila Wandera and Alex Mutemi be topped form operating the accounts. A second letter dated 3/6/202 was also received.

17. The letter stated that Alex Mutemi was no longer in employment and Robert Wangila Wandera should be removed with the 1st Defendant as a signatory. There was a board resolution to that effect.

18. In light of the aforesaid the 2nd respondent made changes after certifying the id numbers and other documents. There was a letter that fraud had been perpetuated against third parties.

19. Given the dispute on the signatories, the bank invoked clause 13, of the bank’s general terms and conditions to freeze the accounts to the extent that no withdrawals until the dispute over the signatories is resolved. The said dispute has not been resolved. The contract, clause 13 does not require a court order

Analysis 20. The first issue is whether the Applicant is entitled to an order of mandatory injunction at the interlocutory stage. The order of that nature is given sparingly. Even where a party satisfies the criteria for grant the court can still exercise its discretion and decline. In the case of Joseph Kaloki t/a Royal Family Assembly v Nancy Atieno Ouma [2020] eKLR, the court of Appeal, was of the considered view that; -“As this Court stated in Kenya Breweries Limited & another vs. Washington O. Okeyo [2002] eKLR a mandatory injunction can be granted on an interlocutory applications as well as at the hearing but should not normally be granted in the absence of special circumstances but that if a case is clear and which the court thinks it ought to be decided at once, a mandatory injunction will be granted at an interlocutory application.

21. In the case of referred above, Kenya Breweries Ltd & Another vs Washington O. Okeya [2002] eKLR, the Court of Appeal stated as doth: -“A mandatory injunction ought not to be granted on an interlocutory application in the absence or special circumstances, and then only in clear cases either where the court thought that the matter ought to be decided at once or where the injunction was directed at a simple and summary act which could be easily remedied or where the defendant had attempted to steal a march on the Applicant. Moreover, before granting a mandatory interlocutory injunction, the court had to feel a higher degree of assurance that at the trial it would appear that the injunction had rightly been granted, that being a different and higher standard than was required for a prohibitory injunction.”

22. There is reluctance on part of the court to issue a mandatory injunction on part of the courts. This is because, it has neither seen nor heard witnesses. A case that appears prima facie strong can crumble on the table of cross examination. In other words, unless the sky is falling, the court should have circumspection when issuing interlocutory injunction.

23. The Court of appeal in the case of stated in Shariff Abdi Hassan v Nadhif Jama Adan [2006] eKLR restated the position on mandatory injunction as follows: -“The courts have been reluctant to grant mandatory injunction at the interlocutory stage. However, where it is prima facie established as per the standards spelt out in law as stated above that the party against whom the mandatory injunction is sought is on the wrong, the courts have taken action to ensure that justice is meted out without the need to wait for full hearing of the entire case.”

24. The difference between the prohibitory injunction and mandatory injunction is that mandatory injunction places a positive duty, which ends up changing the status quo ante. This is done before hearing of witnesses. In the case of Kenya Power & Lighting Co. Ltd v Samwel Mandere Ogeto [2017] eKLR, the high court sitting at Kisii, stated as doth:“20. A mandatory injunction is different from a prohibitory injunction in the sense that while an in prohibitory injunction the applicant must, as was stated in the celebrated case of Giella vs Cassman Brown & Co. Ltd (1973) EA 358, establish the existence of a prima facie case with high chances of success, and that he will suffer irreparable loss/damage which cannot be adequately compensated by an award of damages if the injunction is not granted, and further that the balance of convenience tilts in his favor, an applicant in a mandatory injunction must, in addition, establish the existence of special circumstances. Furthermore, an applicant for mandatory injunction must prove his case on a standard higher than the standard in prohibitory injunctions.”

25. In the case of Nation Media Group & 2 Others vs John Harun Mwau [2014] eKLR, the court of appeal said: -“It is trite law that for an interlocutory mandatory injunction to issue, an applicant must demonstrate existence of special circumstances… A different standard higher than that in prohibitory injunction is required before an interlocutory mandatory injunction is granted. Besides existence of exceptional and special circumstances must be demonstrate as we have stated a temporary injunction can only be granted in exceptional and in the clearest of cases.”

26. In the case of Nguruman Limited v Jan Bonde Nielsen & 2 Others [2014] eKLR the Court of Appeal was of the view that these tests are sequential. The Court stated: -a.“In an interlocutory injunction application, the applicant has to satisfy the triple requirements to;a.establish his case only at a prima facie level,b.demonstrate irreparable injury if a temporary injunction is not granted, andc.allay any doubts as to (b) by showing that the balance of convenience is in his favour.b.These are the three pillars on which rests the foundation of any order of injunction, interlocutory or permanent. It is established that all the above three conditions and stages are to be applied as separate, distinct and logical hurdles which the applicant is expected to surmount sequentially. See Kenya Commercial Finance Co. Ltd V. Afraha Education Society [2001] Vol. 1 EA 86. If the applicant establishes a prima facie case that alone is not sufficient basis to grant an interlocutory injunction, the court must further be satisfied that the injury the respondent will suffer, in the event the injunction is not granted, will be irreparable.c.In other words, if damages recoverable in law is an adequate remedy and the respondent is capable of paying, no interlocutory order of injunction should normally be granted, however strong the applicant’s claim may appear at that stage. If prima facie case is not established, then irreparable injury and balance of convenience need no consideration. The existence of a prima facie case does not permit “leap-frogging” by the applicant to injunction directly without crossing the other hurdles in between.”

27. In this case two issues stand out. The money withdrawn by the 1st Respondent is humongous. Nothing is said of any criminality on his part. The issues complained of took place in 2020. This suit was filed 3 years later, under some kind of urgency. There is more than meets the eye. I do not think that a stranger will walk into your account, withdraw 10/= leave alone 114million, and the only interest you have is 3 million remaining. I have a nice feeling that the full drama is yet to unfold. I recall the lamentations by justice Madan about lies. He stated as doth: -

28. I do not find that there are special circumstances for grant of a mandatory interlocutory injunction.

29. I agree with the applicant that they may have a prima facie case. However, the response is equally compelling. Under section 60(1) (m), (o) and (p) of the Evidence Act, I am entitled to presume certain things. One of them being that human being will always act in their best interest. The applicant does not appear to have acted in their best interest in 3 years. There is no harm waiting for a few more months to determine the owner of the money in the account. Further, there is a need to settle signatories in the Accounts.

30. A party who disregards their own interest, does not deserve an equitable remedy of injunction. One other thing that a party, who comes to equity must come with clean hands. In Alice Njoki Mugo v KCB Bank Kenya Limited & another [2020] eKLR, the court stated as follows: -“Having made a determination that the Plaintiff contradicted herself in her pleadings before the Thika Chief Magistrate’s Court matter with what she pleaded in this matter it becomes clear that the Plaintiff approached this court seeking equitable relief with unclean hands. He who comes to equity must come with clean hand. in Kyangaro v. Kenya Commercial Bank Ltd & Another (2004) 1 KLR 126 as cited in Patrick Waweru Mwangi & Another v. Housing Finance Co. of Kenya Ltd (2013) eKLR at page 145 stated:“Secondly, the injunction sought is an equitable remedy. He that comes to equity must come with clean hands and must also do equity. The conduct of the Plaintiff in this case betrays him. It does not endear him to equitable remedies. ... He who comes to equity must fulfill all or substantially all his outstanding obligations before insisting on his rights. The Plaintiff has not done that. Consequently, he has not done equity.”

31. The parties appear to have had earlier proceedings. There has not been full disclosure as regards the circumstances the matters could not proceed wherever, it was.

32. The account was not frozen because of any capricious act of the Applicant but due to a dispute regarding signatories. The contract in place between the parties allows the bank to freeze the account till the parties agree on the signatories. The contract between parties is sacrosanct. In the case of National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & another [2001] eKLR, the court of Appeal, Tunoi, Shah & Keiwua JJA, as then they were, stated as doth: -“Court of law cannot re-write a contract between the parties. The parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved. There was not the remotest suggestion of coercion, fraud or undue influence in regard to the terms of the charge.As was stated by Shah JA in the case of Fina Bank Limited vs Spares & Industries Limited (Civil Appeal No 51 of 2000) (unreported):“It is clear beyond peradventure that save for those special cases where equity might be prepared to relieve a party from a bad bargain, it is ordinarily no part of equity’s function to allow a party to escape from a bad bargain”.

33. I do not find on prima facie basis that the bank went overboard in freezing the account till signatories are agreed upon. Indeed, the two parties are accusing each other of fraud. The bank is found in the middle. I find and hold that there is no prima facie case for issuing an interlocutory injunction. Even if I unfreeze the account, I will have to direct who is to withdraw.

34. Regarding the directors, I have lived long enough to know that you can be a director in a company you know nothing of or you can be removed as a director in a company you wholly own and have all documents. This can be resolved though hearing evidence. The court of appeal, WAKI, NAMBUYE & G.B.M. KARIUKI, JJ.A, in Arthi Highway Developers Limited v West End Butchery Limited & 6 others [2015] eKLR, stated as doth: -“48. The case was akin to Ruben & Another vs. Great FingallConsolidated (1906) A.C 439 where Ruben and another person advanced money to the company secretary for his own purposes on the security of a share certificate issued by the secretary certifying that they were registered in the companies register of shareholders as transferees of shares. The secretary forged the signatures of the company Directors and affixed the company seal on the certificate without authority, but otherwise the certificate was in accord with the Memorandum and Articles of Association of the company. The company refused to register Ruben and his friend as owners of the shares and they sued the company. The dispute went all the way to the House of Lords which decided, affirming the Court of Appeal, that the company was not estopped by the forged certificate from disputing the claim of the appellants and it was not responsible for the wrongful actions of the secretary.

49. Lord MacNaghtenwas forthright in his exposition of the matter:-

“The thing put forward as the foundation of their claim is a piece of paper which purports to be a certificate of shares in the company. This paper is false and fraudulent from beginning to end. The representation of the company’s seal which appears upon it, though made by the impression of the real seal of the company, is counterfeit and no better than a forgery. The signatures of the two directors which purport to authenticate the sealing are forgeries pure and simple. Every statement in the document is a lie. The only thing real about it is the signature of the secretary of the company, who was the sole author and perpetrator of the fraud. No one would suggest that this fraudulent certificate could of itself give rise to any right or find or affect the company in any way. It is not the company’s deed, and there is nothing to prevent the company from saying so.Then how can the company be bound or affected by it. The directors have never said or done anything to represent to lead to the belief that this thing was the company’s deed. Without such a representation there can be no estoppel.The fact that this fraudulent certificate was concocted in the company’s office and was uttered and sent forth by its author from the place of its origin cannot give it any efficacy which it does not intrinsically possess. The secretary of the company, who is a mere servant, may be the proper hand to deliver out certificates which the company issues in due course but he can have no authority to guarantee the genuineness or validity of a document which is not the deed of the company.”So was Lord Loreburn L.C, who stated:-“I cannot see upon what principle your Lordships can hold that the defendants are liable in this action. The forged certificate is a pure nullity. It is quite true that persons dealing with limited liability companies are not bound to inquire into their indoor management, and will not be affected by irregularities of which they had no notice. But this doctrine, which is well established, applies only to irregularities that otherwise might affect a genuine transaction. It cannot apply to a forgery.”Lord Daveytoo, stating thus;“The appellants have no doubt been grossly defrauded, but the question is whether they can shift the loss on to the shoulders of the innocent. The company has done literally nothing in the transaction, and could do nothing, because in no stage of the transaction did it come before the board of directors, which alone was entitled to speak and act for it.” 50. And so it is in the matter before us. The documents which perpetrated the fraud of share transfer were not even presented to the Company Registry by the real company secretary of West End.”

35. I have said enough already. The Court will have to establish the true signatories before the account is unfrozen. I have seen the letter from the director of public prosecution. It does not clear the parties of fraud. It only states that the rightful person must complain. In the meantime, the civil side of the claim is not bound by such proceedings where that court must reach its own conclusions on a balance of probabilities.

36. The Court of Appeal in the case of Arthi Highway Developers Limited v West End Butchery Limited & 6 others (supra), accepted the holding of the high court, (Nyamweya, J, as then she was, as doth:“17. As to whether there was complicity by or collusion with the Registrar of Companies, the court was affirmative. It considered and accepted the evidence of missing annual returns filed by the original Directors of West End, missing copies of receipts issued to West End upon filing of the annual returns, and the failure or refusal by the Registrar to produce the registry file as demanded by West End. The court cited several provisions of the Companies Act including Sections 108(1), 112(3), 201(4), 382, 384, and 399, and found that the Registrar has a duty and responsibility to the public to ensure that it is a depository of credible information of companies registered in Kenya. It held as follows: -

“There is no legal basis for the approach adopted by the 4th Defendant (Registrar General) in this case of “see no evil, hear no evil and say no evil” in terms of verification of documents presented to it for public consumption. The very least that the Companies Registry should do is to insist on evidence that the law has been followed when accepting documents presented to it. If the companies Registry does not doso it risks being an unwitting player and facilitator of company identity theft and fraud, as happened in the case herein. It is therefore my finding that there was laxity on the part of the Companies Registry to this extent, and that either by way of omission or commission it did contribute to the fraud perpetrated by the 2ndand 3rdDefendants.”

37. The presence of the CR 12 is not enough at interlocutory level. It is imperative that the court hears evidence to determine the level rights for the parties. This is the standard of proof available in civil cases. The standard of proof in criminal cases is not applicable herein. The question as to what amounts to proof on a balance of probabilities was discussed by Kimaru, J in William Kabogo Gitau vs. George Thuo & 2 Others [2010] 1 KLR 526 as follows:“In ordinary civil cases, a case may be determined in favour of a party who persuades the court that the allegations he has pleaded in his case are more likely than not to be what took place. In percentage terms, a party who is able to establish his case to a percentage of 51% as opposed to 49% of the opposing party is said to have established his case on a balance of probabilities. He has established that it is probable than not that the allegations that he made occurred.”

38. In Palace Investment Ltd vs. Geoffrey Kariuki Mwenda & Another (2015) eKLR, the judges of Appeal held that:“Denning J. in Miller Vs Minister of Pensions (1947) 2 ALL ER 372 discussing the burden of proof had this to say; -“That degree is well settled. It must carry a reasonable degree of probability, but not so high as is required in a criminal case. If the evidence is such that the tribunal can say; we think it more probable than not; the burden is discharged, but if the probability are equal it is not. This burden on a balance of preponderance of probabilities means a win, however narrow. A draw is not enough. So in any case in which a tribunal cannot decide one way or the other which evidence to accept, where both parties…are equally (un)convincing, the party bearing the burden of proof will lose, because the requisite standard will not have been attained.”

39. This means that to be able to settle the factual conundrum and legal imbroglio between the parties, it is necessary to hear evidence. There are no special circumstances to order funds to be released to parties by way of withdrawal without settling the bona fide signatories. The termination of Shitemi was not addressed at all. I am of the opinion that the sky will not fall if the orders are not granted.

40. In the circumstances, I find no merit in the application dated 18/4/2023. It is accordingly dismissed. It was however not an idle application. There is a real dispute. Therefore, the costs shall be in the cause.

Determination 41. The upshot of the foregoing, I make the following orders: -

a. The Application by way of notice of motion dated 18/4/2023 is dismissed.b. Costs be in the cause.

DELIVERED, DATED AND SIGNED AT MOMBASA ON THIS 6TH DAY OF NOVEMBER 2023. RULING DELIVERED THROUGH MICROSOFT TEAMS ONLINE PLATFORM.KIZITO MAGAREJUDGEIn the presence of: -J.M. Makau for the PlaintiffMiss Kaunda for the 2nd DefendantCourt Assistant - BrianPage 8 of 8 M.D. KIZITO, J.