[2024] KEHC 16280 (KLR)

Endao Company Limited & 7 others v Yatich & 9 others (Civil Case E011 of 2023) [2024] KEHC 16280 (KLR) (18 December 2024) (Ruling)

Neutral citation: [2024] KEHC 16280 (KLR)

Republic of Kenya

In the High Court at Nakuru

Civil Case E011 of 2023

PN Gichohi, J

December 18, 2024

Between

Endao Company Limited

1st Plaintiff

John Wendot A Kibowen

2nd Plaintiff

Samuel Kandagor Chepkonga

3rd Plaintiff

Francis Kiptai Kiptenten

4th Plaintiff

Francis Kiptai Kiptenten

5th Plaintiff

Richard Kabalawat Chemjor

6th Plaintiff

David Cherono Ngosos

7th Plaintiff

Lilian Kabon Chebet

8th Plaintiff

and

Dickson Kangogo Yatich

1st Defendant

Shadrack Kipruto Cherogony

2nd Defendant

William Kipsang

3rd Defendant

Kipsetim Kimosop

4th Defendant

Charles Kimechwa Kumbelel

5th Defendant

Boigor Benjamin

6th Defendant

Yatich Hillary Chepkonga

7th Defendant

Elisha Kipkoech Cherop

8th Defendant

Bernard Kipruto Chesire

9th Defendant

The Registrar Of Companies

10th Defendant

Ruling

1. The 1st to 9th Defendants/Applicants herein moved this Court by an Application dated 20th June, 2024 and brought pursuant to Sections 1A, 1B, and 3A of the Civil Procedure Act, Section 128 and 129 of Part IX of the Companies Act seeking for the following Orders: - 1. That this Honourable court be pleased to certify this application to be of utmost urgency and hear it on a priority basis.

2. That this Honourable Court be pleased to issue orders granting the 1st Plaintiff’s directors, the 1st to 9th Defendants herein, a period of three months to prepare and call for an Annual General Meeting of the 1st Plaintiff.

3. That this Honourable Court be pleased to direct that an Annual General Meeting of the 1st plaintiff be held at Kabarnet ASK Grounds.

4. That this Honourable Court be pleased to direct the Deputy County Commissioner, Baringo Central and the Registrar of Companies, the 10th Defendant herein, to supervise the Annual General Meeting of the 1st Plaintiff herein.

5. That costs of this application be provided for.

2. The Application is based on the grounds on the face of it supported by the Affidavit sworn on 20th June 2024 by Dickson Kangogo Yatich.

3. It is pleaded that the Applicants herein were elected as directors of the 1st Plaintiff in an Annual General Meeting held on 4th April, 2023 at Kabarnet ASK Grounds. They filed this suit vide a Plaint dated 27th June 2023 together with a Notice of Motion on even date. The court issued interim orders on 3rd July 2023 barring the Applicants herein from acting as directors. However, those orders have since lapsed and have not been extended.

4. It is further stated that the suit herein and the application dated 27th June 2023 have been overtaken by events, given that the term of directors came to an end and new directors can only be elected in an Annual General Meeting.

5. Further, it is deponed that the 1st to 9th Defendants are the directors of the 1st Plaintiff as per the returns filed with the 10th Defendant appearing in the CR 12 of the 1st Plaintiff.

6. It is stated that interim order sought is necessary to allow for a general meeting of the shareholders/members of the company and subsequent elections of legally-backed directors. In addition, that the Annual General Meeting ought to be conducted at Kabarnet ASK Grounds which is a central point and has been the grounds where the Annual General Meetings of the 1st Plaintiff have been held.

7. Besides, a large number of the members, at least 80%, reside in Kabarnet and therefore the Annual General Meeting ought to be conducted in a logistically conducive venue.

8. It is deponed that by a ruling dated 16th July 2012, the Registrar of Companies had found that Kabarnet is the central place for calling of an AGM of the 1st Plaintiff.

9. He avers that the current directors who are the Applicants herein are the rightful directors and have the capacity to call for Annual General Meeting, moreover, the affairs of a company can only be solved by the members in an Annual General Meeting. It is further deponed that the Deputy Commissioner and the Registrar of Companies will ensure that the intended meeting is conducted smoothly and report to the court the conduct of the new directors.

10. The Application herein is opposed by the Plaintiffs/Respondents who filed a Replying Affidavit sworn by John Wendot. A Kibowen, the 2nd Plaintiff’s herein, sworn on 22nd July, 2024 where he states that the Application herein has exposed a myriad of challenges faced by the company in terms of legitimacy of stewardship.

11. Giving a chronology of events leading to the filling of this suit, he states that on 10th April, 2023, the Company received a letter dated 10th March, 2023, directing the members to conduct an Annual General Meeting in accordance with the Companies Act as the Company had not conducted any meeting in accordance with the law.

12. That following the communication of the Registrar of Companies, they issued notices for the meeting to the shareholders which attracted a good percentage of its membership and the meeting was conducted on 4th April, 2024, at Endao Farm in Solai, Nakuru.

13. He depones that unknown to them, the Applicants herein carried out a parallel meeting held in Kabarnet ASK Grounds which resulted to the appointment of the 1st to 9th Defendants as directors of the company without due regard to process. Nonetheless, and that on 5th April, 2023, their appointed Company secretary lodged with the Registrar of Companies’ compliance documents pursuant to directions issued on 10th March, 2023.

14. It is further deponed that they later learnt that the Applicants herein also forwarded their documentation including their appointed Company Secretary to the Registrar of Companies for action. That on 15th April, 2023, the Plaintiffs received an email acknowledging receipt of the documents from the two factions and inviting the separate Companies’ Secretaries to a meeting to be held on 19th April, 2023 at the Registrar of Companies offices. However, their appointed Company Secretary was not available for the meeting.

15. He stated that they learnt with utter shock, that as per the search record of 19th April 2023, the 1st to 9th Defendants were indicated as the 1st Plaintiff’s Directors. He maintained that the registration and recognition of the Applicants as directors of the Company is without proper justification and an affront to their dignity as the rightful directors of the Company.

16. He depones that the 1st to 9th Defendants are unqualified to be elected directors of the company for the reason that the 1st and 2nd Defendants are of 96 and 79 years respectively as per the CR-6 dated 19th April, 2023 and the 3rd to 9th Defendants are not shareholders of the Company.

17. On the venue of the Company’s meetings, he stated that the 1st Plaintiff Company’s physical address is in Nakuru and majority of its members are drawn from the locality, thus any meeting should be held in Nakuru County.

18. He also reiterated that the 2nd to 8th Plaintiffs’ names herein had been registered as Directors of the Company and later deregistered, throwing the Company into leadership wrangles, which issue should be determined first before the Application before court is determined. He added that calling for another Annual General Meeting will not resolve any of the issues raised in the suit.

Applicants’ Submissions 19. Their submissions were one issue only, that is, whether the application dated 20th June 2024 is justified. Arguing that the Order issued by this Court on 3rd July 2023 lapsed and the same were not extended, the Applicants who were previously barred from acting as Directors can carry out their duty as the duly elected Directors as reflected in the CR 12 and to carry out their mandate of calling for an Annual General Meeting to sort out the affairs of their Company.

20. The Applicants maintained that only shareholders have the powers to elect the Directors of a Company in an Annual General Meeting. Further, they submitted that since they are the duly registered Directors of the Company, they should be granted leave to call for an Annual General Meeting of the 1st Plaintiff for purposes of electing new Directors to office and therefore, they will be acting in transition, for purposes of facilitating election of the new Directors of the Company considering that the current term of Directors lapsed on the 4th April 2024.

21. With regard to the location where the Annual General Meeting is to be held, the Applicants submitted that the Registrar of Companies in its communication of 16th July 2012 held that Kabarnet is the central place for AGM meetings of the 1st Plaintiff for reasons of the centrality of the grounds and the inclusion it will afford all the members of the 1st Plaintiff. That this location has traditionally been used as the meeting points for all deliberations of the Company and therefore, there is no need of deviation from the same.

22. The Applicants therefore urged this Court to allow the Application as prayed as that will involve all shareholders who will exercise their voting rights and air their issues therein and therefore, no prejudice will be caused on the Respondents herein. Further, it is the only reasonable way to forward in order to lift the paralysis that has marred the 1st Plaintiff and its working due to extended litigation.

23. In addition, it was submitted that the Deputy County Commissioner and the 10th Defendant’s attendance is imperative to offer security and also for proper conduct of the meeting.

24. Lastly, they submitted that the 1st Plaintiff should be awarded costs of this application.

Respondents’ Submissions 25. The Respondents submitted on a similar issue and argued that there is an underlying issue of the legitimacy of the directorship herein and the place to conduct the subject company’s annual general meeting, therefore, the application should not be considered before the said issues are addressed.

26. The Respondents maintained that the 10th Defendant dubiously deregistered the 2nd to 8th Respondents in favour of the 1st to 9th Applicants without any justifiable cause.

27. They submitted that the registration of the Applicants is illegal for the reasons that the 1st and 2nd Applicants are of advanced ages and thus barred from holding position of directors, while the 3rd to Applicants are not shareholders of the Company.

28. It is their argument that the Application dated 27th June 2023 by the Respondents herein and the ensuing orders dated 3rd July 2023 which have been deemed overtaken by events and said orders lapsed, is an affront to natural justice for the reason that the subject application was never heard nor determined to its conclusion by this court. They reiterated that the determination of that application would have finally solved the leadership wrangles.

29. On location where the AGM can be held, it was submitted that the Company is situated in Nakuru County. Further, most of its members hail from this County and that the Company’s physical address is Nakuru and therefore, the Annual General Meeting should ideally be held in Nakuru. To support that argument, the Respondents cited the Court of Appeal case of Ougo & Another v Otieno [1987] KLR 364, where it was held that, the general principle is that where there are serious conflicts of facts the trial court should maintain the status quo until the dispute has been decided at trial.

30. They therefore submitted that since there is a pending issue of the legitimacy of the directorship herein and the place to conduct the subject Company’s annual general meeting, justice would be better served if the status quo is maintained.

31. They therefore urged that the application be dismissed with costs to the Respondents.

Determination 32. Having heard the parties herein, the broad issue for determination is whether the application herein is merited.

33. The Applicants argue that they are the duly elected directors as appearing in the CR-12. On the other hand, the Respondents claim that they are the duly elected Directors of the Company only that the Registrar of Companies expunged their names from records held in the Registrar of Companies offices.

34. The Applicants have tendered in evidence vide annexure DKY-9, a letter dated 28th January, 2013 from the Registrar of Companies, showing that the Directors of the Company as at 23rd January, 2013 are 14 in number and among the Directors are the 1st Defendant, 3rd Defendants and 9th Defendant herein. The Respondents have also attached a CR-12 obtained by a search carried out on 19th April, 2023 that shows that the Directors of the Company as at 19th April, 2023, are the 1st to 9th Defendants.

35. Though the Respondents object to the appointment of the said Directors, it is not in dispute that term of the directors lapsed on 4th April, 2024 and that their application dated 27thJune, 2023 was overtaken by events as interim orders of 3rd July, 2023 were not extended. Naturally, the requirement to look at the legitimacy of the Directors for the last one year is mute.

36. In the circumstances, this Court finds that with the Applicants were the directors of the Company for the last one year as appearing in the evidence before Court

37. Looking at the pleadings and considering the endless leadership wrangles between the parties herein, the status quo as sought by the Respondents is not tenable. It is in the interest of justice that an Annual General meeting be held to ensure smooth operations and service delivery and that would be done with the 1st to 9 Defendant/Applicants doing it in the interim to facilitate the elections of new Directors of the Company.

38. On the place where Annual General Meeting should be held, the Plaintiffs/Respondent maintained that since the farm is situated in Solai, Nakuru County, the meeting should be held in Nakuru while on the other hand, the Applicants maintained that majority of the member are drawn from Kabarnet Baringo County and therefore the Elections should be done at Kabarnet.

39. It is clear from the material before Court that the issue of venue of the Annual General Meeting was raised in year 2012 before the Registrar of Companies. In his Ruling of issued on 16th July, 2012, F. S. M. Nganga considered that Endao Company farm has several parcels of land in; Endao farm, Ampire farm, Nakuru Plots and Moiben farm, all from various counties including Kabarnet, Uasin Gishu and Nakuru.

40. He held that since the company drawn its member from the various counties listed, the central place for all the members will be Kabarnet and therefor directed that the AGM should be held in Kabarnet. This Court finds no reason to depart from that reasoning so as to change venue to Nakuru as proposed by the Respondents.

41. In light of the foregoing, the application herein allowed in the following terms: -a.The 1st to 9th Defendants herein are granted a period of three months to prepare and call for an Annual General Meeting of the 1st Plaintiff.b.The Annual General Meeting of the 1st Plaintiff will be held at Kabarnet ASK Grounds.c.The Deputy County Commissioner, Baringo Central and the Registrar of Companies to supervise the Annual General Meeting of the 1st Plaintiff herein.d.Due to the circumstances of this matter, to pay his own costs.

DATED, SIGNED AND DELIVERED AT NAKURU THIS 18TH DAY OF DECEMBER, 2024. PATRICIA GICHOHIJUDGEIn the presence of:Mr. Gatitu for the Plaintiffs/RespondentsMr. Langat for Defendants /ApplicantsRuto Court Assistant