Tatu City Limited & 3 others v Stephen Jennings & 6 others [2017] eKLR

Key Facts

Issues

• The defendants claimed the court had no jurisdiction to issue the audit orders, citing a Shareholders Agreement that required disputes to be resolved in English courts or via arbitration. The court rejected this argument, stating the defendants waived their jurisdictional rights by participating in the proceedings and filing a Statement of Defence. The court emphasized that orders from a court of competent jurisdiction must be obeyed until legally set aside.
• The court acknowledged that PWC withdrew from the audit due to defendants' intimidation. While finding the defendants in contempt, the court directed counsel to identify a replacement audit firm to ensure the audit was completed. This highlighted the ongoing need for compliance with the audit order despite PWC's refusal to engage.
• The court assessed whether the 1st, 2nd, 3rd, 5th, and 7th defendants (and Robert Reid) were in contempt for failing to comply with audit orders issued on 6th March 2015 and 12th June 2015. These orders required PriceWaterHouse Coopers (PWC) to conduct an independent audit of offshore loan accounts. The court found overwhelming evidence that the defendants obstructed the audit process, including refusing to sign the engagement letter and expressing hostility toward PWC, leading to its withdrawal. The court concluded that their actions constituted contempt of court.
• The plaintiffs relied on the Civil Procedure (Amendment No.2) Rules 2012 of England to file the contempt application, as Kenya's Contempt of Court Act (No.46 of 2016) had not been enacted at the time. The court upheld this procedural approach, noting that the application for contempt related to a breach of a non-injunctive order and did not require leave under local rules.

Holdings

• The Court ordered the attachment and potential sale of the 1st, 2nd, 3rd, 4th, 5th, and 7th Defendants' and Mr. Reid's property within the Court's jurisdiction if their disobedience of audit orders continued beyond one year from the date of the ruling.
• The Court directed counsel to propose an alternative audit firm to replace PWC, which had recused itself, to ensure the audit ordered on 12th June 2015 could proceed. No further action was taken against Mr. Robert Reid due to insufficient evidence of service of the contempt application.
• The Court committed the 1st, 2nd, 3rd, 4th, 5th, and 7th Defendants, along with Mr. Robert James Reid, to civil jail for up to six months for disobeying and contemptuously disregarding Court Orders dated 6th March, 28th April, and 12th June 2015 related to the audit by PriceWaterHouse Coopers (PWC).
• The Court dismissed allegations of contempt related to other acts, including attempts to withdraw the suit and alter director quorum, as these issues were resolved through subsequent Court Rulings on 16th March 2016 and 1st November 2016.

Remedies

• Any property of the 1st, 2nd, 3rd, 4th, 5th and 7th Defendants and Mr. Robert Reid as may be found within the jurisdiction of this Court is hereby attached, to be sold and the proceeds paid to the Plaintiffs should the said Defendants' disobedience of the Court Orders continue for more than one year.
• The cost of this Application is awarded to the Plaintiffs, who will have the costs of the Notice of Motion of 21st September 2015.
• The 1st, 2nd, 3rd, 4th, 5th and 7th Defendants and Mr. Robert James Reid are committed to civil jail for a period not exceeding 6 months for their disobedience and contempt of the Court Orders made on 6th March, 28th April and 12th June 2015.

Legal Principles

• The Court emphasized that contempt of court orders requires a high standard of proof, almost but not exactly beyond reasonable doubt, as established in Mutitika vs. Baharini Farm.
• The Court applied the principle that parties must obey court orders unless they are formally reviewed or discharged, even if they believe the orders are irregular or void, citing Hadkinson Vs. Hadkinson.

Precedent Name

• Christine Wangari Gachege Vs. Elizabeth Wanjiru Evans & 11 others
• Hadkinson Vs. Hadkinson
• Mutitika vs. Baharini Farm

Cited Statute

• The Civil Procedure (Amendment No.2) Rules 2012 of England
• Contempt of Court Act, No.46 of 2016

Judge Name

• F. TUIYOTT
• Ogola J.

Passage Text

• In conclusion this Court reiterates the crucial importance of the proposed audit. The disputants herein are locked into a dispute which only the said audit may unravel. The crucial business of the 1st and 2nd Plaintiffs are at a standstill due to the dispute.
• The 1st, 2nd, 3rd, 4th, 5th and 7th Defendants and Mr. Robert James Reid be and are hereby committed to civil jail for a period not exceeding 6 months for their disobedience and contempt of the Orders made herein on 6th March, 28th April and 12th June, 2015 and for ridiculing and undermining the institution of the Court.
• The Orders they make, unless reviewed, raised or set aside, must be obeyed. And the rationale for making an order for an in-depth Audit was well explained by Ogola J. as follows:-