Eric Agbeko, Phillip Nyambok & Ravasam Development Company Limited v Farouk Ravate, Justin Samourgompoulle & Spire Bank (Formerly Known as Equatorial Commercial Bank Limited) [2020] KECA 562 (KLR)

IN THE COURT OF APPEAL

AT NAIROBI

(CORAM: OUKO (P), KOOME & MURGOR, JJA.)

CIVIL APPLICATION NO. 29 OF 2020

BETWEEN

ERIC AGBEKO..........................................................................................1STAPPLICANT

PHILLIP NYAMBOK................................................................................2NDAPPLICANT

RAVASAM DEVELOPMENT

COMPANY LIMITED...............................................................................3RDAPPLICANT

AND

FAROUK RAVATE..................................................................................1STRESPONDENT

JUSTIN SAMOURGOMPOULLE........................................................2NDRESPONDENT

SPIRE BANK (FORMERLY KNOWN AS

EQUATORIAL COMMERCIAL BANK LIMITED).........................3RDRESPONDENT

(Being an application for stay of execution pending the filing, hearing and determination of an intended appeal from the judgment and decree of the High Court of Kenya at Nairobi (Tuiyot, J.) dated 20thJanuary, 2020)

in

HCCC No. 450 of 2011

consolidated with

HCCC No. 476 of 2015 and 637 of 2015)

*******

RULING OF THE COURT

At the heart of this dispute is a development on parcel of land known as LR No. 2/186 situated off Elgeyo Marakwet Road within Nairobi, purchased atKshs.71,500,000. 00 and developed at Kshs. 535,000,000. 00. On it now stands an office block named “Elysee Plaza”. The property was registered in the name of Ravasam Development Company Limited (the 3rd applicant). While the 1st and 2nd respondents insist that they were to be the sole directors and shareholders of 3rd applicant, they contend that through fraudulent schemes, the 1st and 2nd applicants caused changes in the company that saw them become the sole directors and shareholders of the 3rd applicant.

Apart from this occurrence, the 1st and 2nd respondents were concerned that a loan advanced to the 3rd applicant by Equatorial Commercial Bank Limited (ECB) now known as Spire Bank Limited (the 3rd respondent) in the sum of Kshs. 336,000,000. 00 after the aforesaid charges in the company remained unpaid; that out of the amount loaned, only Ksh. 190,000,000. 00 was disbursed; and that even in respect of the Kshs.190,000,000. 00 that was allegedly advanced to 3rd applicant, only a small fraction went towards the construction of Elysee Plaza. From the loan transaction and the conduct of the applicants, the 1st and 2nd respondents were convinced that there was fraudulent collusion between the 1st and 2nd applicants on the one hand and the Bank on the other. Despite letters from the respondent’s advocates warning the Bank against having any transactions involving the suit property, it went ahead and advanced the sums in question.

The applicants obviously denied all these allegations of wrongdoing on their part and insisted that the 1st and 2nd respondents have never been shareholders or directors of the 3rd respondent; that the 3rd applicant was incorporated for the purpose of holding and developing L.R. No. 2/186; that at the time, it was understood by all the parties that the role of 1st and 2nd respondents was to be part financiers of the project; that their names were not to appear as shareholders or directors of 3rd applicant for the reason that they did not want to attract taxation on their investment in Kenya.

On 20th day of January, 2020, the High Court, (F. Tuiyott), declared that the 1st and 2nd respondents were the true and rightful directors of the 3rd applicant and directed, inter alia, that the names of the 1st and the 2nd applicants be struck out as directors and shareholders of the 3rd applicant and that they be replaced with the 1st and 2nd respondents. By an order of mandatory injunction, the first two respondents were compelled to transfer all the shares they were holding in the 3rd applicant to the first two respondents. They were further restrained from selling, disposing of, charging, dealing or interfering with the suit property, and from interfering with the shares and shareholding in and of the 3rd applicant.

These orders and a host of others aggrieved the applicants, who, by a motion filed on 7th February, 2020, moved the Court to stay execution of those orders pending the filing and determination of the intended appeal. They have argued that the grounds upon which the learned Judge gave judgment in favour of the respondents were res judicata, the issue of directorship, joint venture and fraud having been determined with finality by Mutava, J.; that 10 days after the delivery of the impugned judgment, the applicants found important documents which they had misplaced in 2014, namely, a letter of indemnity dated 28th April, 2009 and a letter dated 18th December, 2012 from Farouk Ravate (the 1st respondent) confirming the 1st and 2nd applicants’ interest in the 3rd applicant; and that had these documents been presented, the Judge would have arrived at a different decision.

The applicants have also claimed that by directing them to surrender to the respondents all company documents and assets, the Judge exposed them to irreparable loss in the company, just as the order directing their names to be replaced in the company’s register with those of the respondents would divest them of their interest in the company and present to the respondents an opportunity to dispose of and alienating, charge, mortgage, or gift the assets of the company.

In Stanley Kangethe Kinyanjui vs. Tony Ketter & 5 others [2013] eKLR, the Court summarized the application of the two principles that must both be satisfied in order to obtain any of the reliefs under Rule 5(2) (b) of the Court of Appeal Rules. Key among these are that a motion seeking stay of execution, injunction or stay of proceedings does not constitute an appeal from the trial judge's decision, but involves the exercise of judicial discretion. The Court will grant the application if it is shown that the appeal is arguable, even on a single bonafidepoint; that an arguable appeal is not one which must necessarily succeed, but one which is not frivolous, requiring full arguments before the court; and that the Court hearing a 5(2)(b) application must not make any definitive or final findings of either fact or law as doing so may embarrass the ultimate hearing of the main appeal. In addition to satisfying the Court that the appeal or intended appeal is not frivolous, the applicant must demonstrate that the appeal or intendedappeal will be rendered nugatory if an order of stay or injunction is not granted and in the event the appeal were to succeed.

We bear in mind these strictures as we turn to consider the arguments in this application. At trial, just like in the intended appeal, the main issue remains, who are the legitimate directors of the 3rd applicant. It is that question that the learned Judge answered in favour of the 1st and 2nd respondents; that they were the legitimate directors and shareholders; and that the 1st and 2nd applicants were only trustees for the purposes of incorporating the 3rd applicant.

“Arguable” appeal as a standard of proof is not defined in the rules or in any of the authorities we have seen. It is, however, agreed that is can be discharged by presenting even a single bonafide arguable ground; and that an arguable appeal is not one which must necessarily succeed. To determine the question, the Court must be satisfied that factors exist which prima facie support the applicant’s case as against the respondent’s, having regard to the limitations which come with determining issues at an interlocutory stage.

The decision, the subject of the intended appeal was based on two documents that the learned Judge believed contained the intention of the parties in so far as the incorporation of the 3rd applicant and acquisition of main asset, Elysee Plaza was concerned. In the first document dated 18th July, 2008, the 1st and 2nd respondents are said to have declared that;

“(1) AUTHORITY TO REGISTER RAVASAM DEVELOPMENT COMPANY LIMITED USING NOMINEES

We, Ravate Farouk and Samourgompoulle Justin hereby authorize Mr. Philemon Koech, Advocate of KIPKENDA, LILAN & KOECK ADVOCATES to register Ravasam Development Company Limited using such two nominees as the said firm shall appoint. That the said Nominee will hold 1 share each for purposes of registration only and that they shall sign Transfer forms for the said shares in our names RAVATE FAROUK and SAMOURGOMPOULLE JUSTIN.”

The second document, which was signed by the 1st and 2nd applicants, came only four days after the first one confirming its contents and was dated 22nd day of July 2008. It stipulated that;

“ACKNOWLEDGMENT AS TO SHAREHOLDING

We, ERIC AGBEKO GHANIAN PASSPORT NUMBER H097885 of Post Box Office Number 46937 Nairobi and PHILIP NYAMBOK ID No. 0300788 of Post Box Office Number 46937 Nairobi do hereby confirm that we are holding one share each in RAVASAM DEVELOPMENT COMPANY limited in trust for MR. FAROUK RAVATE and MR. JUSTIN SAMOURGOMPOULLE of Reunion Islands, Republic of France or any entity that they will incorporate.

We further affirm that we have no other claim to any shares in RAVASAM DEVELOPMENT COMPANY LIMITED other than as such trustees or unless otherwise directed by the said MR. FAROUK RAVATE and MR. JUSTIN SAMOURGOMPOULLE”.

In light of these two documents the Judge found that the 1st and 2nd applicants did not satisfy him that they made any financial contribution toward incorporation of the 3rd applicant and also in the acquisition of the land and development of Elysee Plaza.

Without expressing ourselves fully on these points, but having ourselves considered the pleadings and arguments, we do not think, prima facie, that the intended appeal will be arguable.

With that conclusion, we do not have to address the second limb on the nugatory aspect of the intended appeal. We, however think it is necessary to point out what appears to us to be a flagrant and gross abuse of the court process in this dispute. Almost concurrently with this application which was filed on 7th February, 2020 the applicants filed, three days later, in the High Court on 10th February, 2020, another application for the very same orders they have come for in this Court. They obtained in the High Court orders for 21 days staying the decision intended to be stayed by the present application pending hearing and determination of that application inter-parte in the High Court. As they approached the High Court, they did not disclose that they were also before the Court of Appeal for the same reliefs. Before us, until we pressed counsel, the applicants were not prepared to disclose to us that they were before the High Court. Further pressed to explain the reason why two levels of courts have to be engaged in that manner, counsel undertook to withdraw the application in the High Court. In a subsequent application taken out by the applicants and placed before us during the pendency of this ruling, we learnt from counsel that the learned Judge of the High Court on his own motion vacated the temporary orders, we believe, for the very reason of abuse of the process.

It is not contested that the 1st and 2nd applicants have also used the judicial process to make far reaching changes in the company’s shareholding and directorship by transferring to Nicholas Sankok Teeka all the shares in the company. After the transfer of all their shares, one may ask, what is left of their interest in the company capable of being protected by the Court?

It is equally conceded that the applicants have borrowed heavily from the 3rd respondent, and there is no evidence of any efforts to repay the debts whose interests continue to accrue.

An order of stay is essentially discretionary and equitable. It is no exaggeration to state that there is no maxim of equity that the applicants have spared in breach.

It is for these reasons that we find no merit in this application. It is accordingly dismissed with costs.

Dated and delivered at Nairobi this 19thday of June, 2020.

W. OUKO, (P)

………………………….

JUDGE OF APPEAL

M.K. KOOME

………………………….

JUDGE OF APPEAL

A.K. MURGOR

………………………….

JUDGE OF APPEAL

I certify that this is a true

copy of the original.

Signed

DEPUTY REGISTRAR