Likoko & 5 others v Makchina1St & another [2022] KEHC 13569 (KLR)

Likoko & 5 others v Makchina1St & another (Civil Case E024 of 2021) [2022] KEHC 13569 (KLR) (6 October 2022) (Ruling)

Neutral citation: [2022] KEHC 13569 (KLR)

Republic of Kenya

In the High Court at Nakuru

Civil Case E024 of 2021

HK Chemitei, J

October 6, 2022

Between

Stanislaus Wekesa Likoko

1st Applicant

Noel Vuyanzi Vwamu

2nd Applicant

Maureen Wangui

3rd Applicant

Ruth Wacuka Karitu

4th Applicant

Jane Lucy Manyasisli

5th Applicant

Benard Kiptum

6th Applicant

and

Magister Lioubov Makchina1St

1st Respondent

Savanna International Ltd

2nd Respondent

Ruling

1. The notice of motion dated January 28, 2022 by the plaintiffs/applicants seeks to have this court order the production of copies of bank statements of the 2nd defendant/respondent’s account number 1485. 60. 423 held at Rabo Bank, Netherlands for the period between 2008 and 2021.

2. The plaintiffs/applicants prayed for the costs of the application.

3. The application is premised on the grounds on the face of the application as well as the supporting affidavit sworn on the even date by the 1st applicant.

4. In the said affidavits the 1st applicant deposed that the plaintiffs are shareholders in the 2nd defendant company, each owning one (1) ordinary share. That since its incorporation, the 2nd respondent made profits which were paid into its account held with Prime Bank Limited in Kenya and Rabo Bank in Holland. Further, that despite being shareholders in the 2nd respondent’s company, the plaintiffs have never received dividends in respect of the company’s profits since 2008.

5. He deposed further that the respondents were in possession and in control of the said bank statements and that the documents sought were relevant and necessary for determination of the issues in dispute between the parties. That it was therefore in the interest of justice that the respondents are ordered to produce the said documents.

6. In response to the application, the respondents filed a replying affidavit sworn on April 30, 2022 by Magister Lioubov Makchina a director of the 2nd respondent. He averred that the application herein was an afterthought by the plaintiffs and no basis had been laid for seeking the financial statements of the 2nd defendant at all. That they had already submitted in evidence the document sought by the plaintiffs.

7. He averred further that what was sought by the applicant under paragraph 5 of the supporting affidavit was found at pages 20-31 of the defendants’ bundle of documents dated November 3, 2021 which was an extract of the auditor’s report which showed no dividends was paid during the period in question. He termed the plaintiffs application as an abuse of the court process and that the same should be dismissed with costs.

8. The applicants filed a further affidavit dated June 9, 2022 and sworn by the 1st applicant. He deposed that upon perusal of the auditor’s report produced by the defendants, they noted that the taxation computation 32-33 of 2017 was incomplete and that income interest from the 2nd defendant’s account at Rabo Bank was not declared. That the 1st respondent not declaring the 2nd defendant’s income led to losses thus denying them their earned dividends. He went on to depose that the applicants were the minority shareholders and would not get access to the information sought unless the respondents are ordered by the court to avail the same.

9. When the matter came up for directions the court ordered the parties to file written submissions which they have complied.

Plaintiffs/Applicants Submission 10. The applicants in their submissions raised one issue for determination namely; whether the documents sought were crucial for the determination of the issues in dispute between the parties and if so, whether the defendants should be ordered to produce the same.

11. While placing reliance on order 11 of the Civil Procedure Rules, the applicants submitted that this court had powers to order for discovery, production or inspection of documents at case management and conferences. The applicants submitted further that the bank statements sought were necessary and relevant for the determination of the issues between the parties.

12. They placed reliance on the cases of Kahumbu v National Bank of Kenya Ltd [2003] 2 EA 475 andOracle Productions Limited v Decapture Limited & 3others [2014] eKLR and urged the court to allow their application as prayed.

Defendants’/Respondents 13. In their submissions, the respondents also raised one issue for determination that is, whether the applicants had laid any basis for the orders sought in the application.

14. It is the respondents’ submission that the application herein was without merit and should be dismissed. That the same was not an attempt to level the litigation playing field by discovery but a veiled attempt to patch up a party’s weak case. While relying on theHalsbury’s Laws of England, 4th Edition, the respondents submitted that the court cannot make any orders for documents which had no significance or relevance to the matter.

15. The respondents also placed reliance in the case of Concord Insurance Co Ltd v NIC Bank Ltd[2013] eKLR where the court was of the considered view that discovery should be limited solely to matters in contention. They argued that the said documents were not in their possession and therefore they were not in the position to produce the same. They urged the court to dismiss the application with costs in their favour.

Analysis and Determination 16. The only issue arising for determination is whether the applicants herein are entitled to the orders sought in their application and whether any of the parties shall suffer any prejudice in any event.

17. Essentially the issue raised by the applicant is at the discovery stage. The matter is yet to be set down for hearing. The applicants have sought for production and inspection of the bank statements relating to the 2nd defendant’s account held at Rabo Bank in the Netherlands. The respondent on their part have argued that the application herein was not an attempt to level the litigation playing field by discovery but a veiled attempt to patch up a weak party’s case.

18. According toBlack’s Law Dictionary, 7th Edition, discovery is defined as;“The disclosure by the defendant of facts, titles, documents, or other things which are in his exclusive knowledge or possession, and which are necessary to the party seeking the discovery as a part of a cause or action pending or to be brought in another court, or as evidence of his rights or title in such proceeding”. (Emphasis added).

19. Both parties relied onHalsbury’s Laws of England Volume 13 para 1 where by the purpose of discovery is captured as follows:“The function of discovery of documents is to provide the parties with the relevant documentary material before the trial so as to assist them in appraising the strength or weakness of their relevant cases, and to provide the basis for the fair disposal of the proceedings before or at the trial. Each party is thereby enabled to see before the trial or to adduce in evidence at the trial relevant documentary material to support or rebut the case made by or against him, to eliminate surprise at or before the trial relating to the documentary evidence and to reduce the cost of litigation."

20. According to Halsbury’s (supra) at para 38 the learned authors state as follows:“Discovery will not be ordered in respect of an irrelevant allegation in the pleadings, which, even if substantiated, could not affect the result of the action nor in respect of an allegation not made in the pleadings or particulars nor will discovery be allowed to enable a party to “fish” for witnesses or for a new case, that is to enable him frame a new case. Each case must be considered according to the issues raised; but where there are numerous documents of slight relevance and it would be oppressive to produce them all, some limitation may be imposed.”

21. In view of the above, it is clear that a party seeking discovery has to ensure that the documents sought are necessary to the cause of action before or pending trial before the Court and the said disclosure has to be of relevant facts to the matters in issue.

22. In the case relied on by the respondents herein Concord Insurance Co Ltd V NIC Bank Ltd[2013] eKLR, Judge JB Havelock opined that the court, in exercise of its discretion to issue such orders as to discovery, will be guided by the relevance of the documents that the applicant seeks, in relation to the pleadings. The learned Judge went ahead to quote the author in Halsbury’s (supra) at para 38 who wrote as follows:“Relevance must be tested by the pleadings and particulars and when particulars have been served which limit a particular issue then discovery on that issue is limited to the matter raised in the particulars.”

22. Having looked at the plaint I note that one of the orders sought by the applicants under prayer (c) is a delivery of the 2nd respondent’s financial records for the period 2008-2021. It is the applicants’ argument in their submission that they are shareholders of the 2nd respondent each of them holding one (1) ordinary share. They argued further that the bank statements as sought in their application were relevant and necessary for proper determination of the issues at hand.

23. On their part, the respondents in their replying affidavit deponed that they had annexed the auditor’s report which showed that no dividends were paid during the period in question. They also stated that the same had been attached in the defendants’ bundle of documents dated November 3, 2021. The applicants however argue that the said auditor’s report produced by the respondents was incomplete.

24. In view of the foregoing, prima facie, one of the issues raised in the plaint touches on the financial records of the 2nd respondent which the applicants are entitled to its disclosure by virtue of them being shareholders as per the annual returns and the particulars of directors and shareholders attached in the plaintiffs’ bundle of documents dated August 30, 2021. The respondents claim that the applicants were only nominees but no evidence was produced to that effect. Further, the auditor’s report they relied on as proof that no dividends was paid for the period in question was not annexed in the replying affidavit and I also note that the defendants’ list of documents is not on records.

25. Nonetheless this court is of the opinion that if the above pieces of evidence are available then there is room for the respondents to avail them. For now, the court will go with what has been availed.

26. In the case ofKahumbu v National Bank of Kenya Ltd[2003] 2 E.A 475 which was relied on by the applicants, Mbaluto, J in making his determination, was guided by the relevance and necessity of the documents sought, in relation to the pleadings before the court. It was the Judge’s considered determination, in exercise of his discretionary jurisdiction, that the documents which the Plaintiff wanted and for which it sought the court’s intervention, went to the crux of the matter and were indeed relevant for the just and expeditious determination of the matter.

27. This court is in total agreement with the learned Judge’s position. There is evidence that, prima facie, the applicants are minority shareholders of the 2nd defendant respondent by virtue of holding a share each. Whether they are merely nominees as advanced by the respondent is an issue that shall go to trial. That admission lance credence to the fact that they ought as a matter of right to know what is going on in the company.

28. Secondly and more importantly there is no evidence of any prejudice the respondents stand to suffer should it avail the bank statements. At the same time, it has not been suggested that obtaining the same is onerous on the part of the respondent. In my view, the fact that the respondents willingly produced the accounts for some period is prove enough that they are able to produce the bank statements which in any case are usually relied on by the accountants or auditors as the case may be.

29. In the premises, I do find merit in the application. The requested statements of accounts are relevant for the determination of this suit. Contrary to the submissions by the respondent’s the applicants are not engaged in a fishing expedition.

30. The application is therefore allowed as prayed. The respondents granted 60 days to produce and avail the same to the applicants and or the court.

31. Costs shall await the outcome of this suit.

DATED SIGNED AND DELIVERED VIA VIDEO LINK THIS 6THDAY OF OCTOBER 2022. H. K. CHEMITEIJUDGE.