Ndungu v Serem [2022] KEHC 13599 (KLR)

Ndungu v Serem (Civil Appeal 110 of 2019) [2022] KEHC 13599 (KLR) (12 October 2022) (Judgment)

Neutral citation: [2022] KEHC 13599 (KLR)

Republic of Kenya

In the High Court at Eldoret

Civil Appeal 110 of 2019

RN Nyakundi, J

October 12, 2022

Between

Anthony Kamunya Ndungu

Appellant

and

Philomena Serem

Respondent

Judgment

1. What is before this court is an appeal from the decision of honourable E Kigen in respect to an application dated July 27, 2018. The respondent herein had made an application seeking orders of injunction restraining the defendant from selling, disposing, transferring, removing agrochemical goods, entering or re-entering or destroying fixtures or in any manner interfering with the business of Topline Agrovet situated at Gilmas Building within Eldoret pending hearing and determinant this the application inter parties.

2. The parties were directed to file written submissions in respect of the said application and upon considering the pleadings, responses and submissions therein, the trial court allowed the application.

3. Being dissatisfied with the ruling of the trial court, the defendant/appellant proffered this appeal on the following grounds:1. That the learned trial magistrate erred in law and fact in failing to properly evaluate the application dated July 27, 2018 and the replies thereto in making the determination on the application for injunction.2. That the learned trial magistrate erred in law and fact in failing to give a proper analysis of the issues raised by the parties in determining the application for injunction and the subsequent decision arrived at by the trial magistrate had no basis.3. That the learned trial magistrate erred in law and fact in granting an injunction without taking into consideration that the business in issue had been sold and there was therefore nothing to injunct.4. That the learned trial magistrate erred in law and fact in granting an injunction contrary to the provisions of Order 40 of the Civil Procedure Rules and the well laid down principles in law.

4. The appellant sought to have the orders set aside and the application disallowed. He further sought costs for the appeal.

Appellant’s Case 5. The appellant field his submissions on December 7, 2021. The appellant submitted that in granting an order for interlocutory injunction, the law is laid down under Order 40 (1) (a) and (b) of the Civil Procedure Rules2010. The plaintiff did not satisfy the laid down principles as the trial court did not consider the evidence tendered by the defendant/appellant in its replying affidavit. It was his case that injunction is mainly a preservative order and preservation can only occur where the subject matter exists and is in danger of being tampered with. Here, the appellant had already sold out the goods and stock which forms the subject matter of the case. In essence therefore, there was nothing to be preserved.

6. He cited Giella vs Cassman Brown & Co Limited(1973) EA 358 on the conditions for granting an injunction and on the issue of a prima facie case. He submitted that the respondent failed to fulfil the requirements for an order of an injunction to be issued.

7. On the question of there being a serious/fair issue to be tried, the appellant submitted that the current case does not show how a subject matter that has already been disposed of can be preserved. This is because vide a sale agreement dated January 20, 2018, between the appellant and Stephen Wanjau, the subject matter of this appeal was disposed of. The said sale agreement was annexed in the replying affidavit of the appellant marked as AKN8a. The respondent filed her application on July 27, 2018, after the subject matter had been disposed of and courts do not grant orders in vain. It was important for the respondent to make full closure of material facts about the case.

8. On the requirement that damages would not be an adequate remedy, the appellant submitted that the provision was not satisfied as it was clear that the respondents’ contribution to the business are clearly known to be to the tune of Kshs 300,000/-.

9. On balance of convenience, the appellant cited Peter Kairu Gitu-KCB Bank Kenya Limited & Another (2021) eKLR and submitted that the trial court made orders for injunction in vain for firstly, the subject matter had already been disposed of meaning there was nothing to injunct. Further, in the aforementioned decision the court held that it is mandatory for all the 3 requirements to be satisfied before an order of injunction can hold. He asked that the court set aside the trial courts’ orders issued.

Respondent’s Case 10. The respondent filed submissions on December 17, 2021. It was her case that the partnership deed between the two parties lays the basis in which the parties carry out their business. It is signed by both parties. The partners were supposed to make major decisions after consultations. The appellant claims he consulted her but she disputes that, which prompted to instituting the suit before the trial court. It is, thus, clear that she has established genuine, strong and arguable case but also one that warrants rebuttal from the defence. She relied on Panari Enterprises Limited v Lijoodi & 2 others[2014] eKLR and submitted that the documents before the lower court show that consultation was necessary before the appellant disposes of the suit property. However, the appellant's argument that his decision to dispose of the suit property was informed by exercise of executive powers can only be interrogated at trial of the suit. It is during trial that the lower court would at that point examine whether under the spirit of partnership deed, the executive powers bestowed upon the defendant would override the requirement for consultation as enshrined in the deed. It will further determine what amounts to a major decision.

11. On irreparable damage, she submitted that the partnership deed showed that the suit property is a business belonging to the two parties as a team. The deed spells out the manner of contribution of capital to start-up of the business, the shares both parties will have in the business, the manner in which business is carried out - including that consultation is required in major decisions - and how proceeds will be shared. The same demonstrates that the respondent has a significant stake in the business which would then subject cause him irreparable damage if the court would not stop the interference or disposal of the suit property pending the hearing and determination of the suit. The business in question entails fittings, agrochemical goods and animal feeds that if tampered with would be damaged irreparably. Based on the economic and market trends, these products' pecuniary value cannot be adequately quantifiable. But most importantly, the disposal of the suit property would include the business name and good will, which if allowed, the damage cannot be measured in monetary terms. He cited Paul Gitonga Wanjau v Gathuthi Tea Factory Company Ltd &c 2 others [2016] eKLR in support of this submission.

12. The respondent, having demonstrated ‘a genuine and strong case' that she was not consulted, and that she would suffer irreparable damage that cannot be quantified in monetary terms, it follows that balance of convenience tilted towards preservation of the suit property.

13. The respondent submitted that in paragraphs 10(vi), 14, 15, 16 & 17(ii) & (iii) of the replying affidavit, the appellant alleged that the suit property had been disposed to Mr Stephen Wanjau. A purported sale agreement and bank slips was annexed and the respondent submitted that the same were not credible. She gave the example of the mode of payment not being indicated in the agreement whereas there were two uncertified bank slips annexed thereto. Neither are there invoices to indicate payment was made in respect to the purchase of the business and stock. Further, the respondent submitted that the available cash deposit receipts do not have significant information as to what the deposit was for. The annexed documents that suggest that the suit property has been sold have serious gaps and glaring contradictions, and cannot verifiably relied on.

14. She asked that the court dismiss the appeal with costs.

Issues for Determination Whether the ruling delivered on May 5, 2019 should be set aside 15. The orders the appellant seeks to set aside pertain to the injunction that restrained him from disposing or interfering with the business of Topline Agrovet pending the determination of the suit. The main argument is that the property that the respondent sought to protect, which formed the subject matter of the suit, was disposed of and therefore there was nothing to be preserved.

16. This being a first appeal, it is the duty of the court to review the evidence adduced before the lower court and satisfy itself that the decision was well-founded. In Selle & Another vs Associated Motor Boat Co Ltd & Others [1968] EA 123, this principle was enunciated thus:"...this court is not bound necessarily to accept the findings of fact by the court below. An appeal to this court ... is by way of retrial and the principles upon which this court acts in such an appeal are well settled. Briefly put they are that this court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect..."

17. The principles regarding injunctions inGiella vs Cassman Brown & Co Limited (1973) EA 358 were set out as follows;"First, an applicant must show a prima facie case with a probability of success. Secondly, an interlocutory injunction will not normally be granted unless the applicant might otherwise suffer irreparable harm which would not adequately be compensated by an award of damages. Thirdly, if the court is in doubt, it will decide an application on a balance of convenience.”

Whether there exists a prima facie case 18. I have perused the record of appeal and indeed there is evidence that the appellant sold off the business to one Stephen Wanjau as at July 20, 2018. However, the court cannot turn a blind eye to the fact that the parties herein were partners in the business and the respondents’ case rests on the claim of the properties and stock that form part of the business. The legality of the sale agreement is part of the cause of action therefore the appellant, by asking this court to find that the property to be preserved had already been sold is asking for the sanitisation of a probable illegality. It is in this regard that I find that the property that forms the subject matter of the suit should be preserved until the decision on the legality of the disposal of the business is determined. In the premises, there exists a prima facie case with a probability of success.

Irreparable Harm 19. Whereas the appellant contends that the contributions of the respondent are measurable and can therefore be compensated by way of damages, it is worth noting that there is the issue of the business name and goodwill whose value cannot be ascertained unilaterally. The goods and fittings are also subject to market forces and in determining what prices they will be sold at, it is my view that the parties must both agree on these issues. If the value of the business as estimated by the appellant is allowed, the respondent runs the risk of suffering irreparable loss for which the appellant will not cater for. It is for this reason that I find that the respondent stands to suffer irreparable harm.

Balance of Convenience 20. This court is well aware of the concerns of the appellant as he claims to have taken out loans to sustain the business and runs a greater risk than the respondent. However, this did not give him the executive powers to decide what to do with the business on his own. The balance of convenience lies in preserving the subject matter of the suit. If the subject matter is disposed of and the appellants’ case fails, it would be more difficult for the respondent to be compensated for her shares and the loss of the business name is one that is not clearly quantifiable.

21. In determining this appeal I am guided by the principles in Price and Another –v- Hilder(1986) KLR 95“In considering the exercise of judicial discretion as to whether or not to set aside a judgment the court considers whether in the light of all the facts and circumstances both prior and subsequent and of the respective merits of the parties, it would be just and reasonable to set aside or vary the judgment, if necessary upon terms to be imposed. The court will not interfere with the exercise of its discretion by an inferior unless it is satisfied that its decision is clearly wrong, because it has misdirected itself or because it has acted on matters on which it should not have acted or because it has failed to take into consideration matters it should have taken into consideration and in doing so arrived at a wrong decision.”

22. In the premises, the appeal fails on all limbs.

DATED, SIGNED AND DELIVERED VIA EMAIL AT ELDORET THIS 12TH DAY OF OCTOBER, 2022. ............................R. NYAKUNDIJUDGE