Ethics And Anti-Corruption Commission v Promo Masters Ltd Kenya [2022] KEHC 13492 (KLR)

Ethics And Anti-Corruption Commission v Promo Masters Ltd Kenya (Anti-corruption and Economic Crimes Miscellaneous E020 of 2022) [2022] KEHC 13492 (KLR) (Anti-Corruption and Economic Crimes) (6 October 2022) (Ruling)

Neutral citation: [2022] KEHC 13492 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Anti-Corruption and Economic Crimes

Anti-corruption and Economic Crimes Miscellaneous E020 of 2022

EN Maina, J

October 6, 2022

Between

Ethics And Anti-Corruption Commission

Applicant

and

Promo Masters Ltd Kenya

Respondent

Ruling

1. The respondent/applicant has filed a notice of motion application under a certificate of urgency dated May 4, 2022 supported by an affidavit sworn on its behalf by Patrick Juma on an even date and a further affidavit sworn on May 27, 2022.

2. The application is brought under the provisions of sections 1, 1A, 3 and 3B of the Civil Procedure Act, section 10 of the Judicature Act cap 8 and order 46 of Civil Procedure Rules and seeks the following orders:1)Spent2)Spent3)That the honourable court be please to set aside the freezing and/or preservatory orders made.4)That the honourable court be pleased to make such further orders it deems fit and expedient in the circumstances5)That the costs of this application be provide for.

3. The application is made on the following grounds stated on the face of it and the supporting affidavit:1)The court orders granted on the ex-parte stage were based on withheld material facts2)The applicant now seeks to extend the orders for a further six months3)The respondent's finances are not proceeds of crime as they are engaged in lawful business and ought to have been accorded a hearing before such extreme orders can be granted.4)Any amounts received from Inter-Governmental Relations Technical Committee (IGRTC) or any other independent procuring entity can be properly accounted for by invoices, local purchase orders and the goods supplied.5)The preservation orders sought are extremely punitive to the respondent who requires to access their bank accounts to enable them meet their financial obligations to Kenya Revenue Authority and other third-party.6)The respondent is at risk of being bankrupted and close their operations unless their threat to existence is alleviated by the honourable court.7)Unless the application is heard on a priority and the orders sought therein are granted, the respondents shall continue to suffer great prejudice and shall be exposed to extreme hardship thus defeating the object of this application.

4The Ethics and Anti-Corruption Commission, the (applicant/respondent herein) opposed the application vide its grounds of opposition and replying affidavit sworn by Christine Mweu on May 23, 2022.

5The respondent contends that the application has been brought under sections of the law that don't provide for discharge/varying of preservation orders; that the respondent has not satisfied the court, on a balance of probabilities, that the funds in respect of which the order of discharge or varying is sought, were not acquired as a result of corrupt conduct; that the court in granting orders prohibiting the transfer or disposal of or other dealing with the respondent's funds, satisfied itself that there are reasonable grounds to suspect that the funds were acquired as a result of corrupt conduct.

6The respondent contends further that an order under section 56 of the Anti-Corruption and Economic Crimes Act is made ex-parte and may be made against a person who is reasonably suspected to have been involved in corrupt conduct or against a person who subsequently acquired the property; that investigations are still ongoing and the respondent and its directors shall have a chance to record their statements and furnish evidence to the commission.

7They aver that the orders were obtained by the commission in the course of discharging its mandate and the commission has good cause to continue with the investigations. Lastly, that the application is frivolous, vexatious, without merit and an abuse of the court process and therefore should be dismissed with costs to the commission.

Submissions by the Parties 8. The respondent/applicant relied filed written submissions dated June 14, 2022 while the applicant/respondent filed submissions dated June 23, 2022.

9. The respondent/applicant submits that the applicant filed an originating motion dated April 27, 2022 seeking inter alia preservation orders prohibiting the transfer, withdrawal and disposal of the funds in the respondent/applicant’s Bank Account No 10011202001972 held at Consolidated Bank of Kenya. That the preservation orders were granted ex parte by this court on May 4, 2022. They seek a variation of the said preservation orders.

10. The respondent/applicant submits on two issues: whether the respondent met the threshold for issuance of the preservation orders under section 56 of the ACECA; and whether the applicants have met the threshold for the variation and rescission of the preservation orders granted ex parte.

11. They contend that the applicant did not meet the threshold for grant of preservation orders and the extension of the orders under section 56 of the Anti-Corruption and Economic Crimes Act. That they did not prove reasonable suspicion that the money was obtained through corrupt means. They submit that reasonable suspicion must be based on existing facts and not mere allegations or malice and cite Ethics and Anti-Corruption Commission v Moses Kasaine Lenolkulal and another[2019] eKLR and Emmanuel Suipenu Siyanga v Republic Cr Appeal 209 [2014] eKLR.

12. They submit further that the funds were not obtained from corrupt conduct as defined under section 56(7) of the ACECA and refer to HC ACEC Petition No E001 of 2022 which they argue to be based on the similar facts and that this court declined to preserve the funds in Monica Mbuve’s Stanbic Bank Account. That Monica Mbuve, although associated with the respondent/applicant, can be accounted for the funds she received.

13. On the second issue, they submit that the respondent/applicant and its directors need to access Kshs 800,000/- per month to meet their reasonable living expenses and other financial obligations. That they have shown in their further affidavit that funds were acquired legitimately during the period of interest, that is May 12, 2017 to June 18, 2021. that there is no law barring a public officer from transacting business with the government. That, Monica Mbuve was a casual worker on short-term contracts and she did not have as much influence as to award herself the alleged tenders. That the tenders were awarded procedurally and the contracts performed, with the company rendering the goods and services.

14. Lastly, they submit that the respondent/applicant have no other means to cater for living expenses and to pay their creditors and suppliers. That the businesses are facing hardship as a result of the preservation orders and urge the court to vary the orders to allow them meet their tax obligations, legal fees, pay salaries and rent amongst others. They cite the authorities in Ethics and Anti-Corruption Commission v Jimmy Mutuku Kiamba & 4 others [2018] eKLR and Assets Recovery Agency v Lillian Wanja Muthoni t/a Sahara Consultants & 5 others [2019] eKLR in support.

15. The applicant/respondent in opposing the application on its part relied on its written submissions dated June 27, 2022.

16. They submitted on seven issues for determination:Whether the preservation orders were granted erroneously/ contrary to the provisions of section 56 (1) of the ACECA; what are the laws and principles applicable to discharge of preservation orders; whether the respondent has satisfied the court that the property was not acquired as a result of corrupt conduct; whether orders to vary on grounds of hardship are available under section 56 of theACECA; whether orders to vary on grounds of hardship are available under section 56 of the ACECA; whether public interests will suffer if the preservation orders are discharged; whether any prejudice will be caused to the investigations if the preservation orders are discharged; and which party should bear the costs of this application.

17. The applicant/respondent submits that section 56 of the ACECA under which the orders were granted was amended by section 24 of the Bribery Act to delete the words “on evidence” and replace the same with “if satisfied that there are reasonable grounds to suspect”. That accordingly, the threshold for granting for preservation orders is reasonable grounds to suspect and was expounded further by the court in Ethics and Anti-Corruption Commission v National Bank of Kenya &another [2017] eKLR. They also make reference to a text “Freezing and Search Orders” by Mark SW Hoyle Fourth Edition at page 31.

18. They submit that there were reasonable grounds to suspect that the respondent’s director Monica Mbuve is a public officer and an employee of Intergovernmental Relations Technical Committee and that the respondent company received large sums of money in its account no 10011202001972 held at Consolidated Bank, which funds were acquired as a result of corrupt conduct. That an analysis of the flow of funds in the said bank account held by the respondent revealed a trend whereby the amounts credited from the aforesaid cheques and entities were larger than the usual credits. The respondent received credits as follows:i.Kshs 1,550,500 on May 12, 2017 via cheque.ii.Kshs 1,706,897 on September 6, 2017 via cheque.iii.Kshs 1,900,000 on September 6, 2017 via cheque.iv.Kshs 2,640,000 on November 14, 2017 from State Department for Devolution.v.Kshs 1,438,534 on February 14, 2018 via cheque.vi.Kshs 1,820,690 on February 14, 2018 via cheque.vii.Kshs 3,499,137,690 on May 18, 2018 via cheque.viii.Kshs 1,280,056 on May 21, 2018 via cheque.ix.Kshs 12,356,349 on June 29, 2018 via cheque.x.Kshs 1,646,965 on September 5, 2018 via cheque.xi.Kshs 1,908,000 on January 25, 2019 from State Department for Devolution.xii.Kshs 1,412,224 on March 5, 2020 from Commission on Revenue Allocation.xiii.Kshs 114,000 on April 24, 2020 from Commission on Revenue Allocation.xiv.Kshs 373,448 on June 18, 2021 from Commission on Revenue Allocation.

19. They contend that the application is brought under the wrong provisions of law. That a variation order can only be made under section 56(4) and (5) of the Anti-Corruption and Economic Crimes Act. Further, that the respondent must prove on a balance of probabilities that the property in respect of the order was not acquired as a result of corrupt conduct.

20. The applicant contends that variation of the orders would be detrimental to public interest as the investigations and recovery proceedings are still ongoing. That discharging the preservation orders would render the recovery proceedings nurgatory.

Analysis and Determination 21. Monica Mbuve, a director of the respondent/applicant, is alleged to have unlawfully and irregularly acquired public funds amounting to Kshs 180,000,000 from the Intergovernmental Relations Technical Committee (“IGRTC”) on various dates between January 2017 to April 2022 during the pendency of her employment with IGTRC. According to the applicant/respondent, the funds were allegedly transferred to the respondent/applicant’s bank accounts.

22. The EACC/respondent sought and was granted warrants to investigate the respondent’s bank account no 10011202001972 held at Consolidated Bank, the subject of this application. This court, vide an order made May 4, 2020 preserved the funds in the said account for a period of 6 months to facilitate investigations pending the institution of recovery proceedings.

23. The court’s jurisdiction to discharge preservation orders as sought by the respondent/applicant is provided for under section 56 of the Anti-Corruption and Economic Crimes Act. The relevant subsections are (4) and (5) which states:"4. A person served with an order under this section may, within fifteen days after being served, apply to the court to discharge or vary the order and the court may, after hearing the parties, discharge or vary the order or dismiss the application.5. The court may discharge or vary an order under subsection (4) only if the court is satisfied, on the balance of probabilities, that the property in respect of which the order is discharged or varied was not acquired as a result of corrupt conduct.” (underlining mine)

24. Subsection (5) sets out the threshold which an applicant should attain to be granted the discharge orders, which is that the applicant must satisfy this court on a balance of probabilities that the property sought to be discharged was not acquired as a result of corrupt conduct. From a review of the affidavits filed by the respondent/applicant, it is my finding that it has not presented evidence before this court to controvert the serious allegations of illegality in the manner in which it obtained the funds in the preserved bank account. It has not been denied that the director of the respondent/applicant was an employee of the Intergovernmental Relations Technical Committee during the period of interest and continues to be an employee to date and that the monies deposited in the applicant’s account came from the Intergovernmental Relations Technical Committee. No explanation or evidence of an alternative source as would be required to satisfy the requirements of section 56(4) of the Anti-Corruption and Economic Crimes Act has been provided in respect of the funds subject of the preservation order. Indeed, the argument that the directors and the company itself are facing hardship cannot be considered by the court at this instance as that does not form the subject of section 56(4) of the Anti-Corruption and Economic Crimes Act. (See the case of Ethics & Anti-Corruption Commission v Rebecca Chepngeno Sang & 2 others[2018] eKLR)

25. In the absence of evidence proving on a balance of probabilities that the funds are not proceeds of corrupt conduct it is imperative that the court refrains from interfering with the EACC’s investigations of the subject bank account intended to establish whether there was corrupt conduct on the part of the respondent and officials of the Intergovernmental Relations Technical Committee. The respondent/applicant shall be afforded an opportunity to explain its source of funds during the recovery proceedings should any be proffered. Discharging the preservation orders granted by this court on May 4, 2022 will render the investigations and subsequent intended asset recovery proceedings by applicant/respondent nugatory.

26. In the upshot, it is my finding that the application is not merited and the same is dismissed with costs to the applicant/respondent.It is so ordered.

SIGNED, DATED AND DELIVERED VIRTUALLY THIS 6TH DAY OF OCTOBER, 2022. E N MAINAJUDGE