[2010] KEHC 3902 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI (MILIMANI COMMERCIAL COURTS)

Winding Up Cause 19 of 2009

ANTHONY CHINEDU IFEDIGBO ……………………......……………PETITIONER

VERSUS

ELEGANCE INVESTMENT LIMITED ……….………..……..……1ST RESPONDENT

JOYCE AKINYI OCHIENG ……………………....…………...……2ND RESPONDENT

RULING

1. The petitioner filed this petition seeking to wind up the company and also for the appointment of an independent interim liquidator to manage the property of the company known as Deep West Resort situated on LR NO. 209/9339 without the interference of the 2nd respondent. Simultaneously with the filing of the petition, the petitioner filed a notice of motion seeking for interim orders restraining the 2nd respondent from interfering with Joseph Kamau Muchina access and quiet possession, and management of the business in the suit premises. He also sought for an order that an interim liquidator be appointed to manage the business on the suit premises.

2. This application is premised on the grounds that the company was incorporated for purposes of running the Resort on the suit premises as a family business. The petitioner and the 2nd respondent are the sole shareholders and directors each holding one share. The relationship between the petitioner and the 2nd respondent deteriorated from the year 2008 and the two shareholders have been involved in several court cases both civil and criminal. It has therefore been impossible for the two directors to agree on the running of the company. Sometimes in January 2009, the petitioner sublet the resort to one Joseph Kamau Muchina but the 2nd respondent has interfered with the quite possession and vandalized the assets of the company hence the petitioner has sought for the winding up of the company.

3. The application is also supported by the affidavit of the petitioner which has given further details of the relationship between the petitioner and the 2nd respondent and the various suits pending determination which range from a suit HCCC NO.10 OF 2008 ANTONY CHINEDU IFEDIGBO vs. JOYCE AKINYI OCHIENG, HCCC DIVORCE CAUSE NO. 65 OF 2008 ANTONY CHINEDU IFEDIGBO VS. JOYCE AKINYI OCHIENG AND RAFAEL WANJALA, HCCC NO 291 OF 2009 SUSAN AKOTH OCHIENG (ATTORNEY OF JOYCE AKINYI OCHIENG and ELEGANCE INVESTIMENT LIMITED) VS ANTONY CHINEDU IFEDIGBO AND JOSEPH KAMAU MUCHINA, HCCC NO. 172 OF 2009 JOSEPH KAMAU MUCHINA VS JOYCE AKINYI OCHIENG. To criminal cases as in CRIMINAL CASE NO. 1473 OF 2009, REPUBLIC VS JOYCE AKINYI OCHIENG.

4. This application was opposed; the 2nd respondent took out a notice of preliminary objection which was argued along side the response to this application. The 2nd respondent also relied on a supplementary affidavit sworn on 23rd October 2009. According to the respondent, the petition is totally defective as the court has no jurisdiction to wind up a company other than as provided for under section 211, 212 and 219 of the Companies Act which provisions have not been invoked. Winding up of a company should be the last option. Moreover it was strongly argued that the petitioner did not come to court with clean hands. The petition has been brought on behalf of and for another party who is a stranger to the petition. The grounds cited as reasons for winding up are without basis, because the 1st respondent has not given any instructions to the petitioner’s advocate to present the petition.

5. Further it was submitted that the petitioner’s advocate lack the capacity to represent the 1st respondent, to the extent that the petition was not filled as provided for under section 211 of the company’s Act, the same is defective and bad in law. More fundamentally the petition is actuated by malice and was filled to circumvent the hearing and determination of the two pending suits between the petitioner and the 2nd respondent. The orders sought in the notice of motion are the same ones sought in the suits that are pending; that is an order restraining the 2nd respondent from interfering with the suit premises.

6. Counsel for the 2nd respondent submitted that the petitioner has not established a prima facie case to warrant the granting of interim orders. The company sought to be wind up, is carrying on business and winding up is the last option as there are alternative remedies. Moreover the petitioner did not come to this court with clean hands and his sole objective is to circumvent the other suits that are pending in other courts.

7. The matter to consider at this interlocutory stage is whether to uphold the preliminary objection and dismiss the petition for reasons stated in support thereof or to grant the interim orders sought in the notice of motion dated 7th July 2009. Under the provisions of section 222 (b) of the Companies Act it is provided as follows:

“that in the absence of any other remedy it would be just and equitable that the company should be wound up shall make a winding-up order, unless it is also of the opinion both the some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.”

8. There is ample jurisprudence from decided cases which emphasize that, if a petitioner has alternative remedies against a company, the provisions of the Companies Act, of winding up a company should not be invoked to black mail a company through threats of winding up. See the case of Leisure Lodge Ltd WC No.28 of 1996. The same principle was articulated in the case of Vadag Establishment vs. Yashvin Shretta & Others Civil Appeal No. 83 of 2000 (The East Africa Law Reports [2002] Vol.2, 588.

9. The business of the shareholders is distinct from the business of the company and if a shareholder is aggrieved by the way the company is managed, there is the alternative remedy which the petitioner can invoke by offering to sell his shares in the company. The petitioner complains that the company was established as a family venture to run the business in the suit premises. His relationship with the 2nd respondent deteriorated and the two share holders are unable to run the business of the company together. Sometimes in January 2009 the petitioner contends that the company sublet the suit premises to one Joseph Kamau Muchina. It is alleged the 2nd respondent has been interfering with the quite possession and also the assets of the company.

10. The 2nd respondent’s response to these allegations is that the petitioner had no authority to enter into a sublease of the suit premises. Indeed that sublease is the subject of several suits pending before court. The Memorandum and Articles of Association of the company clearly provides for a resolution by the two directors before the seal of the company is affixed on a sublease. These are the issues which are pending for trial before other courts.

11. Prima facie the petitioner has not established a clear case to warrant the granting of the interim order of injunction against the 2nd respondent. Should an interim liquidator be appointed to run the business of the company? Under the Companies Act, there are provisions on when the Court may be petitioned to wind up a company. See section 211, 212, 219 and 221 come to mind. The petitioner’s case would fall within the provisions of section 211 since he is complaining that the company’s affairs are being conducted in a manner oppressive to his interest as a 50% share holder. However, is the appointment of an interim liquidator the appropriate order under the circumstances? Under section 222 (b) (supra) the petitioner should have sought alternative remedies such as the option to relinquish his shares at a valuable consideration as winding up is final and drastic so is the appointment of an interim liquidator especially when the business is a going concern.

12. This court was also urged to dismiss the petition on the grounds that it was not brought in good faith. It was also argued that the petition is bad in law as the petitioner lacks locus standi to act on behalf of the company I will not wish to dwell on that at this interlocutory stage and dismiss the petition while being guided by the broad principles in the administration of justice as stated by the Court of Appeal in the case of Trust Bank Limited vs. Amalo Company Limited [2003] I EA 350 at page 352.

“The principle which guides the court in the administration of justice when adjudicating on any dispute is that where possible disputes should be heard on their own merit.”

13. For the aforesaid reasons I dismiss the notice of motion dated 7th July 2009 with costs to the 2nd respondent. The petitioner will be at liberty to bring this petition within the provisions of the Companies Act and if I were to offer advice he should seek alternative remedies by offering to sell his shares in the company rather than pushing for the winding up which should be the last option.

RULING READ AND SIGNED ON 29TH JANUARY 2010 AT NAIROBI.

M.K. KOOME

JUDGE