1. In the application dated 17.03.2023, the Plaintiff seeks an interim measure of protection under section 7 of the Arbitration Act pending reference to arbitration of the dispute between the parties under a Royalty Collection and Distribution (CMO) System Agreement between the Plaintiff and the Defendant dated 15th April 2020 (“the Agreement”). The parties are agreed that there is a dispute regarding outstanding payments to the Plaintiff and whether the Plaintiff performed the services it was contracted to do. Clause 20 of the Agreement is the arbitration clause.
2. The issue for resolution is whether I should grant the order directing the Defendants to preserve the sum of Kshs. 20,749,251.76 held by them in a joint account which the Plaintiff claims is the money owed to it under the Agreement. I have heard brief arguments by the parties and I take the following view of the matters.
3. First, this court has jurisdiction under section 7 of the Arbitration Act to issue interim measures of protection before or during arbitral proceedings. It is not necessary for the arbitral proceedings to have commenced. Further, the fact that the Plaintiff has filed suit does not preclude it from filing the application as Rule 2 of the Arbitration Rules, 1997 provides that an application under section 7 of the Act shall be filed by summons in the suit hence it is contemplated that the Plaintiff seeking an interim measure of protection must file a suit.
4. On the substance, the Defendants oppose the application on the grounds that they are going concerns and that they collect royalties on behalf of third parties which they distribute to them. They urge that if the collection account is frozen to the extent sought by the Plaintiff, it may interfere with their core business.
5. In order to succeed in the application, the Plaintiff must show that the money it seeks to be preserved may be dissipated either by a deliberate scheme by the Defendants to evade a decree that may be ordered against them, or they may be insolvent or that they may be winding up business or leaving jurisdiction.
6. I accept that the Defendants are duly licenced to collect royalties. These royalties are collected and deposited into the subject collection account. There is evidence that they collect a substantial sum of money which in excess of Kshs. 100 million and will continue to do so hence I cannot say they are insolvent. The sum claimed by the Plaintiff is miniscule in the scheme of things and there is no evidence that the Defendants will not be in a position to pay it if its claim succeeds. There is also not evidence that the Defendants are taking any steps to evade any judgment that may be rendered against them. I therefore decline to grant an interim measure of protection.
7. I dismiss the application dated 17.03.2023 with costs. The Plaintiff shall pay each Defendant Kshs. 50,000.00 as costs of the application and suit since the suit has now been determined by this application.
DATED and DELIVERED at NAIROBI this 11th day of APRIL 2023
D. S. MAJANJA
JUDGE