China Gansu International Corporation for Economic & Technical Cooperation Kenya Company Limited v Golden Gulf International Limited & another [2022] KEHC 15068 (KLR)

China Gansu International Corporation for Economic & Technical Cooperation Kenya Company Limited v Golden Gulf International Limited & another (Commercial Case E679 of 2021) [2022] KEHC 15068 (KLR) (Commercial and Tax) (7 November 2022) (Ruling)

Neutral citation: [2022] KEHC 15068 (KLR)

Republic of Kenya

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

Commercial and Tax

Commercial Case E679 of 2021

DAS Majanja, J

November 7, 2022

Between

China Gansu International Corporation for Economic & Technical Cooperation Kenya Company Limited

Plaintiff

and

Golden Gulf International Limited

1st Defendant

Equity Bank (Kenya) Limited

2nd Defendant

Ruling

1. By a ruling of the court dated August 30, 2022, the court dismissed the Plaintiff’s application dated July 6, 2022 seeking mareva injunction freezing the 1st Defendant's accounts held at First Community Bank Limited and any other bank in Kenya and an interim injunction restraining the 1st defendant from transferring or disposing in any way any sums demanded from and released by the 2nd defendant (“the Bank”) relating to the Bid Bond Tender Security dated May 21, 2021 (“the Bid Bond”) amounting to Kshs. 77,257,005. 02, pending the hearing and determination of the suit.

2. This decision was preceded by two rulings dismissing the Plaintiff’s applications seeking to restrain the Bank from paying or otherwise complying with 1st Defendant's demand dated July 9, 2021 or any demands by the 1st Defendant for the payment of any sums under the Bid Bond. In effect, the court held that the Bank is obliged to honour the 1st Defendant’s demand.

3. In the ruling of August 30, 2022, the court opined that the Plaintiff’s Amended Plaint did not set out any other cause of action against the 1st Defendant other than that in respect of the bid bond. In essence and having regard to the findings the court had made in the previous rulings, the court held that there was nothing further to determine in the suit unless it is amended to include a cause of action against the 1st Defendant in respect of their primary business relationship.

4. The 1st Defendant has since filed a counterclaim dated September 29, 2022 against the Bank accusing the Bank of delay in paying the amount under the Bid Bond which it claims has caused it loss and damage. The 1st Defendant seeks judgment for the amount under the Bid Bond being Kshs. 77,257,005. 03, interest and costs from the Bank. In tow with the counterclaim, the 1st Defendant filed the Notice of Motion dated September 29, 2022 made, inter alia, under Order 40 of the Civil Procedure Rules principally seeking a mandatory injunction to issue compelling the Bank to deposit the sum of Kshs. 77,257,005. 02 into its account pending the hearing and determination of this suit.

5. The application is supported by the grounds set out on its face and the supporting and further affidavit of David A. Obare, the 1st defendant’s Managing Director sworn on September 29, 2021 and October 21, 2022 respectively. It is opposed by the Bank through the Grounds of Opposition dated October 12, 2022 and the replying affidavit of its Legal Manager, John Njenga, sworn on October 24, 2022. The plaintiff has also opposed the application through the replying affidavit of its General Manager, Wang Qian, sworn on October 17, 2022. The parties have also filed written submissions in support of their respective positions.

6. I have considered the application, depositions and submissions and the main issue for determination is whether the court should issue a mandatory injunction compelling the Bank to deposit the sum of Kshs. 77,257,005. 02 into the 1st defendant’s bank account pending the hearing and determination of this suit. The Court of Appeal, in Kenya Breweries Limited and Another v Washington O. Okeyo NRB CA Civil Appeal No. 332 of 2000 [2002] eKLR accepted that the court may grant a mandatory injunction at the interlocutory stage but it should not normally be granted in the absence of special circumstances. In addition, the court may grant such an injunction if the case is clear and the court thinks that it ought to be decided at once. In Shariff Abdi Hassan v Nadhif Jama Adan NRB CA Civil Appeal No. 121 of 2005 [2006] eKLR the Court of Appeal stated that: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.

7. The 1st defendant is right to state that this court has already pronounced itself on the Bid Bond by stating that the same is now due and payable by the Bank to the 1st Defendant and that the Plaintiff cannot stop the Bank from paying up the demanded sum under the Bid Bond because its dispute is with the 1st defendant and not the Bank, which is not even privy to the agreement between the Plaintiff and the 1st Defendant.

8. However, the Bank in its Statement of Defence to the 1st defendant’s Counterclaim has challenged the validity of the Bid Bond by claiming that it is tainted with fraud and illegality and opposes paying up the Bid Bond on this ground. The Bank claims the 1st Defendant used deceit and undue influence in pretending to award a tender, when it knew it had no capacity to complete a contract of a construction nature, that it abused the confidence held by the Plaintiff and took unfair advantage, that the transaction is unconscionable or unreasonable and only favoured the 1st Defendant. Further, that the Plaintiff has tacitly pleaded fraud on the main transaction and enforcement of the Bid Bond will go to perpetuate an illegality, that the sole object of calling for Bid Bond was designed to aid in defrauding the Plaintiff, which is illegal and that enforcement of the Bid Bond will involve injury to the Plaintiff's property offered as security, which will be sold to answer the guarantee and which is an act opposed to public policy. The Bank further claims the Bid Bond as it stands restricts the Bank wholly, in the enforcement of rights under the contract and is therefore void.

9. The allegations of fraud by the Bank are weighty and cannot be resolved at an interlocutory stage. While it is true that the court has already pronounced itself on the Bid Bond, the said pronouncement was made and based on the fact that the Plaintiff could not challenge the Bid Bond as it lacked privity. This time round, it is one of the parties privy to the Bid Bond, that is the Bank, that has challenged it and this court is bound to hear its side of the case. In my view, this is one of those instances where the court is reluctant to issue a mandatory injunction at an interlocutory stage.

10. I do not find any exceptional grounds in the circumstances of this case to warrant issuing a mandatory injunction compelling the Bank to deposit money into the 1st Defendant’s account pending hearing and determination of this suit. If the 1st Defendant turns out to be successful in its suit against the Bank, the Bank can always compensate the 1st Defendant by way of damages which compensation the Bank is capable and is indeed willing to pay if the court orders.

11. For the above reasons, I dismiss the 1st Defendant’s application dated September 29, 2022 with costs to the 2nd Defendant.

DATED ANDDELIVERED ATNAIROBI THIS 7THDAY OF NOVEMBER 2022. D. S. MAJANJAJUDGECourt of Assistant: Mr M. OnyangoMs Mburu with her Mr Kibaara instructed by Kimondo, Gachoka and Company Advocates for the PlaintiffMr Gikandi instructed by Gikandi and Company Advocates for the 1st Defendant.Mr Mahinda instructed by Gathara Mahinda and Company Advocates for the 2nd Defendant.