Labh Singh Harman Singh Limited v Alfa Motors Limited & Intercity Shuttles Limited [2013] KEHC 7051 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

COMMERCIAL AND ADMIRALTY DIVISION

CIVIL SUIT NO. 351 OF 2007

LABH SINGH HARMAN SINGH LIMITED……….………..….PLAINTIFFVERSUS

ALFA MOTORS LIMITED………………………………...1ST DEFENDANT

INTERCITY SHUTTLES LIMITED………………….…...2ND DEFENDANT

RULING

The plaintiff beseeches the court to order the 1st defendant to furnish security for satisfaction of the decree and costs.  The amount sought is Kshs 7,000,000 to be paid within 15 days of the order.  The plaintiff’s notice of motion dated 27th February 2013 is predicated upon averments in a deposition sworn by Harjeet Sokhi on even date.

The plaintiff’s suit is for recovery of Kshs 3,820,000.  It avers that the 1st defendant is disposing of its plant and equipment.  An advertisement for sale is annexed and marked ‘HSS 1’.  The deponent states that the directors of the 1st defendant were also the directors of another company known as Ply and Panels Limited which was wound up in similar circumstances.  The plaintiff, after computing interest, avers that its claim has now rosen to Kshs 7,000,000.  That is the amount that the 1st defendant should thus furnish as security.  There are two other grounds raised in the motion but not pleaded in the deposition: that the 1st defendant has employed delaying tactics in the suit; and that its 2 directors intend to relocate to the United Kingdom.

The motion is contested.  The 1st defendant concedes that it has disposed off some plant and equipment with a book value of Kshs 2,066,459 representing 6% of its asset base. The 1st defendant contends that it is still in business of sale of motor vehicles and parts.  There is thus no intention to defeat the decree.  The apprehensions by the plaintiff are attacked as baseless.  The 1st defendant denies delaying the hearing of the suit.  Harbider Bhogal, a director of the 1st defendant denies knowledge of the company known as Ply and Panels Limited.  In particular, he avers that neither him nor Amrik Bhogal are directors of that company.  He avers that he is a resident in Kenya, has been a resident since birth and has no intention of absconding.  In the end, the 1st respondent’s case is that the plaintiff’s motion has not reached the threshold for grant of the reliefs sought.

I have heard the rival submissions.  Whether or not to grant a prayer to furnish security is entirely within the discretion of the court.  See Procon Limited Vs Provincial Building Company [1984] 2 ALL ER 368.  See also Parmex Limited Vs Austin and Partners Nairobi, High Court case 450 of 2003 [2006] e KLR, Mama Ngina Kenyatta and another VsMahira Housing Company [2005] e KLR.  See also Nancy Wanjiru Mwaura Vs John Njoroge and another Nairobi, High Court case 1086 of 1998 [2005] e KLR, Abel Moranga Ongwacho Vs James Maina Ndegwa and others Nairobi, High Court case ELC 39 of 2012 [2012] e KLR, Ndirangu Vs Abdalla [1984] KLR 746.  Again, the mere fact that the respondent is a foreign company is not sufficient in all cases to ground the motion.  See Jismaji Vs Saheb and another [1990] e KLR, Kenya Education Trust Limited Vs Katherine S.M. Whittan Civil Appeal (application) 301 of 2009 (unreported).

In Shah VsShah [1982] KLR 95,  at page 98, Law, J.A delivered himself thus;

“The general rule is that security is normally required from plaintiffs resident outside the jurisdiction, but as was agreed in the court below, a court has a discretion, to be exercised reasonably and judicially, to refuse to order that security be given; see Korecha Vs Bank of Baroda (CA Civil Application No 43 of 1978, unreported)”.

When I apply those principles to the facts here, I find further as follows.  Although the plaintiff claims that Harbinder Singh and Amrik Bhogal, the directors of the 1st defendant intend to leave jurisdiction, no such evidence is forthcoming.  I have stated that no corresponding facts are deponed to in the supporting affidavit.  In the replying affidavit, Harbinder Singh depones that he is a resident and carrying on the remainder of the 1st defendant’s business.  The apprehensions by the plaintiff thus remain just that:  unfounded fears not borne out of credible evidence.

It is common ground that the 1st defendant is selling its assets.  Doubt is completely removed by the advertisement of 12th February 2013 for sale of its automobile and general engineering business.  The 1st defendant contends that the sale comprises 6% of its assets and that it continues to trade in motor vehicles and parts.  The plaintiff did not file a further affidavit to controvert that.  The basis for the plaintiff’s claim is thus in its averment at paragraph 2 of the affidavit where it is deponed as follows;

“THAT it has been brought to my attention that (Sic) by my friends in the business circles that the 1st defendant herein is disposing of its plant, machinery and equipment.  Annexed hereto is a copy of the Daily Nation advert dated 12/2/2013 marked as ‘HSS 1’ ”.

The plaintiff then states that it is “convinced that once the 1st defendant disposes off its property it will close its business” and hence defeat the decree.   There is hence no direct or cogent evidence that the 1st defendant is disposing of all or asubstantial component of its business with intention to defeat the decree or that it about to close its business.  There is equally no reliable evidence that its directors are about to abscond.  Fundamentally, the directors remain distinct from the company.  Salomon Vs Salomon [1897] AC 22.

The plaintiff has not shown a clear nexus between the 1st defendant, its directors and the other company known as Ply and Panels Limited.  The 1st defendant denies any such relationship.  The substratum for an order to furnish security has thus collapsed.  See Ndirangu Vs Abdalla [1984] KLR 746.  To require the 1st defendant to furnish security on information believed from undisclosed sources would be to lower the threshold set by the courts.  Furthermore, and as a general rule, the court must be “extremely slow” in ordering security before judgment except in the clearest of cases.  In Kanyoko t/a Amigos Bar Vs Nderu [1988] 2 KAR 126 at 133 the Court of Appeal held:

“If the result of this case teaches anything, it is that courts should be extremely slow in ordering attachment of a defendant’s property before judgment, not only because it is hardly consistent with justice to exact ‘punishment’ before the defendant’s liability to execution is established but also because in view of the tardy and time consuming process of the courts, the rights and liabilities of the parties may not be determined for a long time, possibly years”.

This suit was presented in court on 6th July 2007.  So over 5 years have passed.  Although the plaintiff states in its grounds that the “1st defendant’s directors have employed [delaying] tactics in a previous suit and finally allowed their company to be wound up” it is not predicated on a clear deposition.  Paragraph 6 of the supporting affidavit deals with a different suit brought by ICEA Limited against Ply and Panels Limited.  The 1st defendant, like I stated, has distanced itself from the latter company.  At paragraph 11 of the replying affidavit, the 1st defendant states that it is not to blame for the delays in this suit.  It remains the primary business of the plaintiff to progress the suit.  See Lord Dennings sentiments in Fitzpatrick Vs Batger & Company Ltd [1967] 2 ALL E.R 657.

In the record of the court, I can see an application by the 1st defendant to dismiss the suit for want of prosecution.  The court was magnanimous and offered the plaintiff a last chance.  That was on 11th November 2009.  The matter came up for hearing on 7th November 2011.  The plaintiff had not served the 2nd defendant.  It was taken out.  On 31st January, 2012 and 25th July 2012, it was the 1st defendant who applied for adjournment.  There is then a sense in which both parties are guilty of laches.  The plaintiff is not on a higher pedestal. Clearly, the plaintiff cannot stand on the platform of delay as the foundation for the motion to furnish security.

Lastly, the claim in the suit is for Kshs 3,820,000.  There is another defendant in the suit.  The plaintiff states that the sum “has now risen to approximately Kshs 7,000,000 when interest of 12% is applied”.  The sum sought in security is thus based on the plaintiff’s own measure of the value of the claim.  The order is sought, quite unfairly in my view, against only one defendant.  I have already stated that no sufficient foundation has been laid to meet the threshold of grant of an order to furnish security.

For all the above reasons, the plaintiff’s notice of motion dated 27th February 2013 is dismissed with costs to the 1st defendant.

It is so ordered.

DATED and DELIVERED at NAIROBI this 26th day of April 2013.

G.K. KIMONDO

JUDGE

Ruling read in open court in the presence of

Ms. A. O. Ameyo for the Plaintiff.

No appearance for the 1st Defendant.

No appearance for the 2nd Defendant.

Mr. Collins Odhiambo Court Clerk.