Junghae Wainaina v African Agricultural Capital Fund LLC & Midlands Limited [2017] KEHC 4572 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

MILIMANI COMMERCIAL & TAX DIVISION

CIVIL CASE NO. 93 OF 2016

JUNGHAE WAINAINA ………..................................................APPLICANT

-VERSUS-

AFRICAN AGRICULTURAL CAPITAL FUND LLC…..1ST RESPONDENT

MIDLANDS LIMITED…………..…..…………........…2ND RESPONDENT

RULING

1. The Notice of Motion herein is dated 23rd March 2016, filed by the Plaintiff (herein “the Applicant”) and brought pursuant to the Provisions of Order 40 Rule 1(a) 2(1) 3(1) 4(1) (2) (3) and (5) of the Civil Procedure Rules, Section 30 (A) of the Capital Markets Authority, the Companies Act and Section 3A of the Civil Procedure Act.

2. The Applicant is seeking for an order of the Court to set aside the sale of the Plaintiff’s shares held by the 2nd Defendant (herein “2nd Respondent”) and quash any offers or acceptance for sale that might have been received by the 1st Defendant (herein “the 1st Respondent”) in respect to the Applicant’s shares. Further the Court be pleased to issue an order prohibiting the transfer of the Applicant’s shares pursuant to the advertisement placed in the Daily Nations Newspapers dated 10th March 2016 and/or any subsequent offer for sale. The costs of the Application be provided for.

3. The Application is based on the grounds on the face of it and the Affidavit sworn by the Applicant dated 23rd March 2016. The brief facts of the case, according to the Applicant are that, he pledged his shares in the 2nd Respondent Company to guarantee a loan facility advanced to the 2nd Respondent Company by the 1st Respondent. The arrangement was based on an Investment Agreement signed contemporaneously with a shareholders Agreement and a Memorandum of deposit dated 4th December 2012 (herein “the Agreements”). The guarantee was in addition to other guarantees offered by Gathima Limited and Juanco Group Limited. The Applicant deposed that, the terms of the Agreements provided that, the 1st Respondent was to be a Board member of the 2nd Respondent, together with other shareholders in an endevour to oversee the running of the 2nd Respondent’s affairs and monitor and ensure the loan advanced is repaid.

4. That, contrary to the terms of the Agreements, the 1st Respondent appointed one of it’s representatives as a Chief Executive Officer of the 2nd Respondent Board, while the 2nd Respondent retained a seat on its Board. Effectively the members of the Board consisted of the 1st Respondent’s nominee, the 2nd Respondent and M/s Githima Holdings. The Applicant averred that, he was locked out of the meetings of the Board and the day to day running and/or affairs of the 2nd Respondent. That, he then appointed a representative to represent his interests in the Board, but he was rejected without valid reasons. The Applicant argues that, the 2nd Respondents directors have embarked on adopting and executing unfavourable business decisions to the detriment of the 2nd Respondent. That despite his concerns over the same there has been no change.

5. The Applicant further deposes that, the 1st and 2nd Respondent did not update him on the loan repayment, the default in repayment thereof or the amount in arrears. He was therefore unable to come up with a method or a solution to remedy the default. He further avers that, the Respondents directors scuttled an offer preferred by one of the guarantors seeking to take up the share of the 2nd Respondent’s loan which would have mitigated the situation. Similarly, an offer made by one of the guarantors seeking an amicable solution to the matter was not responded to by the 1st Respondent.

6. The Applicant further states that, no notice of default was served on him and therefore the 1st Respondent’s actions of advertising the shares for sale is malicious and bordering on fraud, as it has actively participated in the non-performance of the 2nd Respondent default by pursuing policies that are not cost-effective. The Applicant gave an undertaking to pay damages in the event that this Application is “found wanting”.

7. The Application was opposed based on the Replying Affidavit dated 1st April 2016, sworn by Wanjohi Ndagu, who was duly authorized by the 1st Respondent, vide a Power of Attorney dated 1st April 2016. He deposed that, the Applicant is guilty of non-disclosure of material facts. That he has failed to disclose that, he and his Company Juanco Group Ltd (herein “Juanco”) are the majority shareholders in the 2nd Respondent Public Company. That, the 1st Respondent is entitled to two seats in the 2nd Respondent; one of which is by an independent person, and thus it has no control over the 2nd Respondent’s Board of Management.

8. The 1st Respondent further averred that, the Applicant has also concealed from the Court the fact that his Company, namely Juanco and Githima Ltd entered into an Investment Agreement whereby the 1st Respondent advanced the 2nd Respondent a loan in the sum of Kshs.100 Million. That the 1st Respondent took up shares in the 2nd Respondent for a consideration of that sum under the shareholder’s Agreement entered into by the Parties.  Thus, the loan of Kshs.100 Million was secured by shares held by the Plaintiff, Juanco Group Ltd and Githima Ltd, under a Memorandum of deposit dated 4th December 2012. The 1st Respondent further averred that, the Applicant concealed from the 1st Respondent that, the property allegedly belonging to the 2nd Respondent was a subject of criminal investigation, whereby the Applicant was charged for fraudulent acquisition of Public Property contrary to Section 45(1) (a) as read with Section 48(1) of the Anti-Corruption and Economic Crimes Act No. 3 of 2003. Facts which the 1st Respondent learnt of when it was published in the dailies in April 2014. That after the Publication, the Applicant resigned from the Board of the 2nd Respondent vide email dated 19th April 2014. The Respondent averred that, the “traits of concealment and non-disclosure has continued and manifests itself in this proceedings”.

9. The 1st Respondent refuted the Applicant’s allegations that, no notice of default was served upon him and told the Court that the it’s lawyers sent a notice of default to the 2nd Respondent on 17th June 2015. On 10th August 2015, the 1st Respondent sent a statutory notice under Section 220 of the “Companies Act Cap 486”. (Note: This Act has been repealed, and replaced with the Companies Act No. 17 of 2015).

10. That a “Put Option Notice” was sent to the Applicant on 17th September 2015 and was received on 25th September 2015 and acknowledged on 30th September 2015. That under Clause 62(a) of the Shareholder’s Agreement, it was agreed that, in the event of an insolvent event occurring, the 1st Respondent would be entitled to exercise its rights to sell all the shares held at a price of kshs.225 Million. On the 15th February 2016, the Applicant was served by the 1st Respondent with a notice of its intention to exercise that Power of sale. That, although the advertisement published on 10th March 2016, was held to be an invitation to the Public to prescribe for shares in the 2nd Respondent; it was pursuant to the 1st Respondent’s right of sale. That position was explained to the Capital Markets Authority and it gave authority for the advert that was published on 23rd March 2016.

11. Finally, the 1st Respondent averred that, the Applicant does not deserve any equitable relief from the Court and the Court should not aid the Applicant in breaching his contractual Agreements, and frustrating the 1st Respondent as an investor.

12. The 2nd Respondent opposed the Application based on the Replying Affidavit sworn by Mary Wangui Kiarie, a Director and Chair of the Board of Directors of the 2nd Respondent Company.  She averred that, she has been a Chair of the Board of Directors of the 2nd Respondent Company since April 2014. That, the 2nd Respondent is a public Company registered at the Companies Registry as Number G187. The Applicant and the 1st Respondent are anchor shareholders of the Company which has approximately 2,800 members. That, the Applicant holds a share of 14. 5 percent shares in the 2nd Respondent Company while the 1st Respondent holds 16 per cent. The Applicant is the founder shareholder and director of the 2nd Respondent from as far as 2005 until his resignation as a Director on 19th April 2014.

13. That due to financial difficulties the Company experienced in the year 2012, it negotiated a Kshs.200 Million deal with the 1st Respondent. The 1st Respondent was to acquire 9,523,809 ordinary shares (16%) at a price of Kshs.100 Million and additionally lend the Company a sum of Kshs.100 Million. As the Company’s assets had been charged in favour of Equity Bank Ltd, for a pre-existing facility, the indebtedness towards the 1st Respondent was secured by the pledges of shares by the anchor shareholders, including the Applicant, through the execution of a Memorandum of Association Agreement dated 4th December 2012. The 2nd Respondent argued that since the 1st Respondent and the Applicant are both shareholders in the 2nd Respondent Company, the 2nd Respondent is reluctant to get embroiled in the dispute between the two parties, and wish to remain neutral, more so, as the company is sued only as a nominal Respondent. The 2nd Respondent replied to the matters raised by the Applicant in relation to the running and management of the Company. She denied the allegation that the 1st and 2nd Respondents locked the Applicant out of the company’s Board. She further deposed that, Esther Mwikali was recruited as a Chief Executive Officer of the Company to assist in its turn-around due to its financial challenges. Therefore it is not true that the 1st Respondent appointed one of its representative to the Board as a Chief Executive Officer. She further detailed out the reasons why the Applicant’s offer to lease the Plastic and Peal Management Unit, was not accepted, and the reasons why the Company’s Annual General Meeting has been delayed.

14. Finally, she gave a detailed account of the activities undertaken by the Board to turn around the company; and denied allegation of mismanagement of the company; arguing that, the Board has instituted proper corporate governance structures in the company. She acknowledged that requisite notices of default were served by the 1st Respondent and that while the Company acknowledges it is the principal debtor, it has not been able to service the loan by the 1st Respondent due to the financial difficulties as aforesaid. That the company is willing to abide by such orders as the Court may make in respect of the Application herein.

15. The Applicant swore a further Affidavit dated 11th April 2016, rebutting all the averments by Mr. Wanjohi Ndagu on behalf of the 1st Respondent. He specifically denied the allegation of concealment and non-disclosure of the material facts to the Court as alleged. He vehemently denied non-disclosure relating to the Criminal investigations as alleged. He argued that he did not resign due to the serious misrepresentation but that he resigned to pay attention to on-going Court cases. He insisted that he was kept in the dark over the management of the affairs of the Company.

16. After the arguments by the Parties in support and/or in opposition to the Application, I find the following issue requires consideration; whether the Applicant has met the threshold for grant of an order of injunction.

17. The celebrated case of Geila Vs Cassman Brown & Co. Ltd (1973) EA 35, sets down the guiding principles for grant of the injunction. That the Applicant:

i. Must show that it has a prima facie case with high chances of success.

ii. That he will suffer irreparable loss.

iii. If the Court is in doubt about the above, the Applicant must show on a balance of convenience that the order ought to issue on his/her favour.

18. A prima facie case has been explained by the Court of Appeal in the case of Vivo Energy Kenya Limited Vs Maloba Petrol Station Limited & 3 others Civil Appeal No.21 Of 2014. Citing Mrao Ltd v First American Bank of Kenya Ltd and 2 others (2003) KLR 125. The Court defined a prima facie case as:

“…a prima facie case is more than an arguable case. It is not sufficient to raise issues. The evidence must show an infringement of a right, and the probability of success of the applicant’s case upon trial. That is clearly a standard which is higher than an arguable case.”

19. I shall deal with the 1st issue as to whether the Applicant has established that he has a prima facie case with high probability of success. In a nutshell, the Applicant argues that, he was thrown out of the control and/or management of the 2nd Respondent’s Company. That due to the 1st and 2nd Respondent scheme of taking control of the 2nd Respondent’s operation, he could not make any contributions to the Company’s financial affairs. Further his proposal to prop the Company and raise revenue through lease of plastic and peel management was flatly rejected. Equally rejected is a loan of Kshs.12 Million offered by Juanco Group Ltd. As such the attempt to crystallize the guarantee is not in good faith but an attempt by the 1st Respondent to reap from “its own misadventures”. That as a nominal shareholder in Juanco Group Ltd and a majority shareholder in the 2nd Defendant Company, he has established a prima facie case.

20. However, the 1st Respondent submitted that, the Applicant has not established a prima facie case with a probability of success, as he is guilty of non-disclosure of material facts as aforesaid. That, he has not come to Court with clean hands; and has misled the Court by inter alia, averring;

i. That he was locked out of the Board, when he voluntarily resigned on 19th April 2014.

ii. That he was not given a notice of sale before the advert for the same. Yet, he was served with a “Put Option Notice” dated 17th September 2015; and further a Notice of Intention to exercise Power of sale dated 8th February 2016.

iii. That the Applicant is in breach of the Investment Agreement Schedule 2 Part 2 Note 8 thereof, due to non-disclosure of the pending litigation against him and the 2nd Respondent concerning the land.

iv. That he failed to disclose to the Court that, he was charged in Court on 17th March 2014, for fraudulently acquiring a Public Property.

21. The 1st Respondent relied on the case of: Bahadurali Ebrahim Shamji v. Al Noor Jamal & 2 OthersCivil Appeal No. 210 of 1997, where the Court stated as follows:-

“It is perfectly well-settled that a person who makes an ex-parte application to the court – that is to say, in the absence of the person who will be affected by that which the court is asked to do – is under an obligation to the court to make the fullest possible disclosure of all material facts within his knowledge, and if he does not make the fullest possible disclosure then he cannot obtain any advantage from the proceedings, and he will be deprived of any advantage he may have already obtained.”

22. The 1st Respondent further submitted, that the Applicant’s argument that he has been locked out of the Board of Directors of the 2nd Respondent have no basis, since as a shareholder he has no right to direct the affairs of the Company. The case of The Gramophone and Typewriter Limited v Stanley [1908] 2 K.B., was cited. Buckley L.J. at page 106, expressed himself as follows:

“The directors are not servants to obey directions given by the shareholders as individuals; they are not agents appointed by and bound to serve the shareholders as their principals. They are persons who may by the regulations be entrusted with the control of the business, and if so entrusted they can be dispossessed from that control only by the statutory majority which can alter the articles.”

23. That similarly, there is no clause in the shareholders Agreement that gave the Applicant a right to appoint a director; and therefore his argument that he was entitled to representation on the Board is unfounded. Finally, the 1st Respondent submitted that, the Applicant has not identified the particulars of fraud attributed it.

24. The 2nd Respondents submitted that, the allegation by the Applicant that he was pushed out of the Board of Directors, are not supported by the pleading. The allegation was only raised through the further Affidavit the Applicant swore, to which the 2nd Respondent had no audience to reply. That, the Applicant cannot leave a Company when it is on it’s knees and then turn around and accuse the present Board of Directors of running it down. The 2nd Respondent further submitted that, the Applicant as a shareholder cannot “second guess the Board” or indeed be allowed as an individual shareholder, however large, to instruct the Board of Directors on the ruling of it’s day to day affairs. The case of Affordable Homes Africa Limited Vs Henderson & Others Nbi HCC 524 of 2004 (unreported) was cited. Njagi J. relying on the principle that a Company is a distinct entity from its shareholders, stated as follows:

“Even a majority shareholder therefore is not and cannot purport to be the Company. His votes alone may ensure the passing of an ordinary resolution, or even a special resolution, which would constitute an act of the company. But until then, the Company cannot be said to have acted in a particular manner merely because that is the intention of the majority shareholder. His wishes remain wishes unless and until they are translated into an act of the company by an appropriate resolution at an appropriate forum.”

25. The 2nd Respondent argued that the Applicant’s displeasure with the Board’s decision cannot be the basis for the grant of the orders sought for herein. That having also failed to prove the allegations of fraud, the Applicant cannot have established a prima facie case. The loan facility herein was advanced when the Applicant was Chair of the Board of the 2nd Respondent Company. He cannot allege mismanagement only after he resigned.

26. I have considered the rival submissions on the issue of prima facie case. The law as cited herein (Mrao’s Case) guides as to what is a prima facie case.In this Application, the Applicant is seeking for prohibition of the “advertisement, offering for sale and/or dealing with his shares” in a manner that would deprive him of his ownership. He further seeks that, the Court do issue an order to set aside the sale of the said shares, advertisement thereof, and quash any offers, or acceptance for sale that might have been received by the 1st Respondent over his shares. That the Court then issues an order prohibiting the transfer of his shares placed in the Daily Nation Newspaper dated 10th March 2016 and/or any subsequent offer for sale. The question is, is there a prima facie case established.

27. First and foremost, from the prayers in the Application, I note that “Prayer (b)” of the Application is the same as “prayer (a)” in the Plaint filed in Court on 23rd March 2016. The Plaintiff/Applicant under prayer (a) of the Plaint states that the Plaintiff prays for:

“An injunction restraining the 1st and 2nd Defendants by themselves or their agents or any one acting under them or through them from disposing, alienating and/or placing the Plaintiff’s shares for sale or dealing with the said shares in any manner that would deprive the Plaintiff of it’s ownership in the said shares”.

28. Therefore the grant of prayer (b) of the Application on 4th April 2016 literally determined prayer (a) of the Plaint at an interlocutory stage, the saving grace is that prayer (b) of the Application was sought pending the hearing of this Application. It is spent.

29. Be that as it may, I also observed that, the Parties herein have sworn length Affidavits and filed extremely length submissions, deposing on the same matters or facts submitted on. I believe that shorter or a skeleton submissions would have been sufficient taking into account the lengthy averments in the respective Affidavits filed. Even though, the submissions are fully considered in this ruling.

30. I also note that prayer (d) of the Application (as framed) is seeking for final orders. The orders therefore are not sought either pending the hearing and determination of this “Application” and/or the hearing the “suit”. The question that arises is that; can final orders be granted in a suit at an interlocutory stage. In the same vein, prayers (b) (c) and (e) in the Plaint are not based on any prayer in the Application. They are treated as grounds on which the Application is based.

31. To revert back to the subject issue, I find that, the Parties have dwelt at length of the issue of management and/or control of the affairs of the 2nd Respondent Company. As much as this is important to the issues herein, I am of the view that it took centre stage, and laid aside the very issues which I summarise as follows:

i. Did the 1st Respondent advance a loan facility to the 2nd Respondents Company.

ii. Did the Applicant jointly and/or severally, with others guarantee the repayment of that loan.

iii. Has that loan facility been repaid; if not

iv. Is the 1st Respondent as a lender entitled to recover the loan facility, in accordance with the Terms of the Agreements entered into by the Parties.

v. Does the Applicant have any lawful reason why the Court should injunct the 1st Respondent from realizing the security offered to secure the loan facility.

32.  Since the Parties did not address these issues, I shall dwell on the orders sought for in the Application. I shall consider prayer (b) of the Application. The order granted herein on 4th April 2016 disposed of that prayer. Therefore the issue is whether this Court should sustain that injunction order or vacate the same. Having fully considered the matter herein, I find that, in view of the fact that, it is acknowledged that, the 2nd Respondent is in arrears of payment of the loan advanced, and in view of the fact that, the Applicant has admitted, that jointly with others guaranteed the said debt, the Court cannot issue an order of injunction to restrain the 1st Respondent from recovering the loan. Especially without an indication as to how long this matter may take in the Court. Justice is weighed on a scale, and indeed that scale must balance. It cannot tilt in favour of one Party alone.

33. I am inclined to order that, in the interest of justice, since the Application has been pending and the Applicant has had injunctive orders since 4th April 2016, and the 1st Respondent has a right to recover the loan facility advanced to the 2nd Respondent. I shall not deal with prayer (c) and (d) which in my considered opinion can only be granted once the main suit is heard and cannot be decided on Affidavit evidence.

34. That leads me to the issue of irreparable loss. The Applicant submitted that, he will suffer irreparable loss “as the shares sought to be sold are not only valuable, unavailable in the market but also shares from Company he founded and whose economic importance to the development of the County Government where it is located is strategic”. That the County Government of Nyandarua seeks to buy it from the current shareholders and the value of the Company has been estimated at over 20 Billion shillings. That the timing of the sell of the shares is suspect and no amount of compensation can adequately recompense him. The argument that the 1st Respondent is able to pay damages does not qualify the denial of the equitable relief to the Applicant. Reference was made to the case of Geoffrey Asanyo & Another Vs John Kiragu Ngunyi & 4 Others (2015) eKLR, where the Court observed that the doctrine in the case of Geilla Vs Cassman Brown (supra) and stated:

“As regards the second limb of Geilla Vs Cassman Brown decision of whether the applicants shall suffer irreparable harm that cannot be compensated by an award of damages if the injunction sought is not granted, which limb also emphasises that once a party establishes that a Defendant has breached an Applicant’s right, an injunction should issue, the above principle was expounded in the case of Loldiaga Hills Ltd & 2 others Vs James Wells & 3 others (UR), it was held that:

“Be that as it may, I hold the view that it is not always mandatory that where damages are an adequate remedy an injunction should not issue. In HCCC No. 33 of 2011, Payless Car Hire and Tours Ltd Vs Imperial Bank Ltd (UR),I held that:

35. However, the 1st Respondent submitted that the Applicant can be compensated in monetary terms as the Applicant has acknowledged that, his shares have a monetary value, which he indicates under paragraph 5 of the Plaint as Kshs.9. 1Million and paragraph 2 of the supporting Affidavit as Kshs.5. 8Million. The 1st Respondent submitted that, it has invested in Kenya USD 8. 3Million is therefore capable of satisfying any decree that may be made in future to the Applicant. The case of Geoffrey Asanyo (supra) was distinguished in that the Applicant has failed to show that the First Respondent’s actions are illegal or blantantly flout the law.

36. The 2nd Respondent submitted that, the Applicant has not demonstrated irreparable loss that he may suffer if the orders sought are not granted. That he has already quantified the value of the shares as kshs.9. 1Million. The 2nd Respondent relied on the case of Isaac Litali Vs Ambrose W. Subai & 2 OthersNBI HCCC 2092 OF 2000 (unreported), as quoted in Charles Alex Njoroge Vs National Bank of Kenya Limited & Another (2015) eKLR. That once a Party offers an asset as security for a loan, the Party converts that asset into a commodity for sale and the same is liable to be sold in the event of default and that there is no commodity for sale whose loss cannot be compensated by an award of damages.

37. I have considered the rival arguments and I find that, there is no doubt the value of “shares” can easily be ascertained. This is more so when the issuing company is a public company shares are usually quoted at the stock exchange. Even without belabouring the point, I am guided by the Applicant’s own pleadings that the shares are valued at Kshs.9. 1million. It is therefore clear that if the same are sold legal or otherwise, the known value, can be used as a guide to assess damages payable. It cannot therefore be said that, the value is unknown. The reasons advanced by the Applicant that, the County Government has an interest in acquiring the 2nd Respondent are neither here nor there. That is not enough to stop a creditor from recovering a right due, and accruing to it. If the County Government is desirous of acquiring the 2nd Respondent Company, they should first pay off the 1st Respondent’s debt.

38. Finally, in whose favour does the balance of convenient. The Applicant submitted that, if the shares are sold, the Applicant will not recover them and the suit will be an academic exercise, however, if they are preserved, the 1st Respondent will still have an opportunity to exercise it’s rights, if any. That the Applicant has filed an undertaking as to damages as a demonstration of bonafides of the prayer for a temporary injunction.

39. The 1st Respondent submitted that, the balance of convenience tilts in it’s favour, as the 1st Respondent has fulfilled it’s part of the bargain and disbursed the whole amount being Kshs.100Million. The Applicant has not made any offer to discharge the pledge by paying the amount secured.

40. The 2nd Respondent submitted that once the Court finds the prima facie has not been established, the issue of balance of convenience does not arise. If the Court were to consider it, the balance of convenience lies in the Court allowing the financial transaction between the Parties to run their course.

41. Before I deal with the issue of the balance of convenience, I wish to revert to an issue raised by the Applicant regarding the Power of Attorney which was granted to one Wanjohi Ndagu, to swear a Replying Affidavit on behalf of the 1st Respondent. The Applicant submitted that, the same is not notarized, registered, and the stamp duty is not paid thereon. That it is made in favour of two (2) persons and not one. The Applicant sought that the Replying Affidavit be struck out and the Application be allowed as drawn. In respond the 1st Respondent, submitted that the arguments in relation to the same have no merit and should have been raised earlier. That the objections are of technical nature which are no longer tenable under the Constitution of Kenya and the Overriding objectives under the Civil Procedure Act. However, the Applicant maintained that, the omissions are not technical but statutory requirements.

42. I have had an advantage of considering the substantive submissions made by the Parties on the subject issue. The Applicant’s arguments are not in vain. If the Power of Attorney requires payment of stamped duty in accordance with the Stamp Duty Act, that ought to have been done. It is not good enough to simply argue that, duty can be paid. It should be paid at the right time. However, failure to pay cannot be a ground for striking out of the Replying Affidavit. My main concern though is that, the Applicant were served with the Replying Affidavit founded on the said Power of Attorney, they did not object to it. Thus “by conduct” they have led the 1st Respondent to believe the same is admissible. They cannot just come and attack it through length submissions. They should have raised it at the earliest to allow the 1st Respondent an opportunity to consider how to proceed. I shall not strike out the Replying Affidavit but if duty is payable, the 1st Respondent should comply forthwith.

43. All in all I find that, on the issue of prima facie case, and the balance of convenience, if the Applicant wants the Court to extent the interim orders herein and or set aside any advertisement of sale of his shares or the sale thereof, and/or transfer to a third Party, first, such an order can only be made “pending the hearing of the main suit” not as framed by the Applicant. Secondly, if the Court were to make the orders to extend the injunctive order or restrain the sale of the shares then, the interest of the 1st Respondent must be taken into consideration. In that case, the issue of payment of the Kshs.100 million advanced and not paid must be addressed.

44. As the Applicant has raised other issues of financial management of the Company by the 1st and 2nd Respondent, the issue of the 1st Respondent having it’s representative(s) on the Board of Directors, appointed to protect the interest of 1st Respondent in recovery of the sum sought and failed to do so or having run down the Company. It is only fair and just that, he be given an opportunity to be heard on these issues of control/ management of the company which may have a bearing on the failure of the 2nd Respondent company to repay the loan advanced, rendering the Applicant as a guarantor to be called upon to discharge the Guarantor’s liability.

45. I therefore order that, there shall be a stay of sale of the shares of the Applicant pending the hearing of this suit on condition that:

i. The Applicant pays 50% of the sum claimed to the 1st Respondent within 30 days of this order.

ii. The balance of the sum sought to be deposited in an interest earning Account in the joint names of the Applicant and 1st Respondent Counsel with 60 days of this order.

iii. In default of payments ordered herein, the 1st Respondent be at liberty to exercise its right of sale.

iv. The parties to set down the matter for Case Management Conference within 30 days of this order.

v. A hearing date be taken on priority basis within 90 days of this orders.

vi. The Costs of this Application shall abide the outcome of the main suit.

46. Ordered accordingly.

Dated, delivered and signed on this 11th day of July 2017 at Nairobi.

G. L. NZIOKA

JUDGE

In open court in the presence of:

Ms. Nyaga for Maina for the Applicant

Mrs Kahora for Gachuhi for the 1st Respondent

Ms. Njenga for Githera for the 2nd Respondent

Teresia – Court Assistant