[2023] KEHC 21134 (KLR)

Forty Thieves Beach Bar Limited v Staudte (Civil Suit 113 of 2018) [2023] KEHC 21134 (KLR) (18 July 2023) (Ruling)

Neutral citation: [2023] KEHC 21134 (KLR)

Republic of Kenya

In the High Court at Mombasa

Civil Suit 113 of 2018

OA Sewe, J

July 18, 2023

Between

Forty Thieves Beach Bar Limited

Plaintiff

and

Ann Muthoni Staudte

Defendant

Ruling

[1]The Notice of Motion dated March 27, 2019 was filed herein by the defendant, Ann Muthoni Staudte. It is expressed to have been filed under Sections 562 and 564(2) of the Companies Act, 2015, Sections 1A, 1B and 3A of the Civil Procedure Act, Chapter 21 of the Laws of Kenya, Order 28 Rule 7 and Order 51 Rule 1 of the Civil Procedure Rules, 2010, for orders that:(a)The Court be pleased to declare that the defendant has an interest in fifty percent (50%) of the shares of the plaintiff.(b)That the Court be pleased to declare that the defendant can exercise and is at liberty to exercise rights consistent with ownership of fifty percent (50%) of the shares of the plaintiff.(c)That such other orders as the Court considers just and appropriate be made.(d)that he costs of the application be provided for.

[2]The application was premised on the grounds that on the August 28, 2017, the defendant purchased three hundred (300) shares in the plaintiff company at a consideration of Kshs. 30,000/= which shares were transferred to her by a shareholder of the plaintiff, George Barbour who is now deceased, vide a Share Transfer Form of even date. Thereafter, on August 23, 2018, the defendant purchased additional two hundred (200) shares in the plaintiff company at a consideration of Kshs. 20,000/=; which shares were similarly transferred to her by George Barbour vide a Share Transfer Form of even date.

[3]The defendant further averred that, in an affidavit sworn on December 14, 2018 by one of the directors of the plaintiff, Anthony John Barbour, the plaintiff acknowledged that the defendant’s 500 shares in the plaintiff company had been transferred to her by George Barbour but were yet to be registered. She took issue with the fact that, in the aforementioned affidavit, Anthony John Barbour referred to her merely as “a girlfriend” of George Barbour. As such, she is unable to effectively exercise her rights as a shareholder of the plaintiff company unless this Court declares that she has a valid interest in the 500 shares in accordance with Section 562 of the Companies Act , 2015.

[4]The application was premised on the defendant’s own affidavit, sworn on March 27, 2019 to which she annexed copies of the Share Transfer Forms (Annexures “AMS 1” and “AMS 3”. She also attached copies of affidavits sworn by George Barbour by which he declared his intention to execute the Share Transfer Forms in favour of the defendant (marked Annexures “AMS 2” and “AMS 4”). The defendant further stated, at paragraph 9 of her Supporting Affidavit, that despite having lodged the Share Transfer documents with the Companies Registry, and despite the documents having been duly received for stamp duty, the Companies Registry is yet to update its records to reflect the plaintiff’s shareholding.

[5]The defendant exhibited a copy of the plaintiff’s CR 12 (Annexure “AMS 5”) to demonstrate that the company has 1,000 shares; and that 700 thereof are in the name of the deceased George Barbour; thereby confirming that 500 shares in the name of George Barbour were yet to be registered in her name. At paragraph 12 of her affidavit, the defendant explained that George Barbour was her spouse for purposes of Section 564(2) of the Companies Act; and that they cohabited with him as husband and wife on the property known as Title No. Kwale/diani Beach Block/1228 from the year 2015 until his demise on 3rd October 2018; and which is where she still resides to date. She added that she is also the legatee of George Barbour as per his Will, a copy of which was marked Annexure “AMS 6”.

[6]In response to the application, a Replying Affidavit sworn on 21st October 2021 was filed on 26th October 2021 by Anthony John Barbour, a director of the plaintiff company. He pointed out that neither party had filed any claim for alleged transfer of shares; and therefore that the defendant’s application was not anchored on any substantive claim in the suit. Mr. Barbour further deposed that at the time of his death on 3rd October 2018, George Barbour had 700 shares in the plaintiff company as confirmed by the Certificate of the Registrar of Companies dated 16th November 2018, annexed to the Replying Affidavit as Annexure “AJB 1”. He therefore posited that all 700 shares form part of the deceased’s estate and have to be dealt with as such.

[7]Mr. Barbour further pointed out that a Petition has in fact been filed at the High Court, being Mombasa High Court Succession Cause No. 11 of 2019 for grant of probate in respect of the Will of the late George Barbour; and that the defendant is fully aware of those proceedings and has taken part in therein. He annexed a copy of the ruling delivered in the succession matter by Hon. Onyiego J. as Annexure “AJB 2”. Mr. Barbour further averred that the defendant also filed an application in the Commercial and Tax Division of the High Court at Nairobi, namely, Miscellaneous Cause No. 72 of 2019, seeking an order to compel the Registrar of Companies to rectify the Register of Companies to reflect her ownership of 500 of the plaintiff company’s shares. A copy of the application was likewise annexed to the Replying Affidavit.

[8]The application was canvassed by way of written submissions pursuant to the directions given herein on July 21, 2021. Thus, Mr Gakuo for the defendant filed his written submissions on February 18, 2022. He proposed the following issues for determination:(a)Whether the defendant’s shares comprise the estate of the deceased;(b)Whether the application herein is sub-judice

[9]Counsel submitted, on the basis of the Share Transfer Forms and Affidavits of the late George Barbour, that the defendant bought 500 shares from George Barbour before his demise; and therefore that those shares do not form part of the estate of the deceased. He relied on Section 3 of the Law of Succession Act for the definition of “estate” and “free property of a deceased person”. He also made reference to the cases of Benson Mutua Muriungi v CEO Kenya Police Sacco & Another [2016] eKLR in urging the Court to find that the 500 shares in question do in fact belong to the defendant.

[10]In response to the assertion by the plaintiff that the application is res judicata, counsel conceded that the defendant filed Nairobi Milimani High Court Commercial & Tax Miscellaneous Cause No. 72 of 2019 seeking an order to compel the Registrar of Companies to rectify the Register of Companies to reflect the defendant’s ownership of 500 shares. He however asserted that the orders sought in the instant application are fundamentally different from the orders sought in Miscellaneous Application No. 72 of 2019. He added that, in any event the onus of proof was on the plaintiff to demonstrate the applicability of the res judicata bar to the facts of this case; which in his view was not discharged. He accordingly relied on Sections 107 and 109 of the Evidence Act and theEstate of Sophia Watare Gachigua (Deceased)[2016] eKLR on burden of proof and urged that the application be allowed.

[11]On his part, counsel for the plaintiff, Mr. Omollo, relied on his written submissions filed on April 22, 2022. He was of the view that the defendant’s application dated March 27, 2019 is strange to the suit as there is no pleading or prayer concerning a claim by the defendant to the shares belong to George Barbour, the deceased; and therefore that the defendant seeks to obtain orders by application which she cannot get in the suit. Counsel relied on the Replying Affidavit sworn by Anthony John Barbour to confirm that as at the time of his demise, George Barbour, held 700 shares in the plaintiff company. He therefore submitted that those shares now form part of the estate of the deceased and are the subject of Succession Cause No. 11 of 2019 to which the defendant is a party.

[12]Mr. Omollo further submitted that it would be absurd for the Court to be asked to declare that the defendant has an interest in 50% of the shares in the plaintiff company when the records at the Registrar of Companies show otherwise; and when the defendant has not filed a suit claiming those shares. Counsel relied on the documents annexed to the plaintiff’s Replying Affidavit, particularly the Certificate of the Registrar of Companies (Annexure “AJB 1”) and a copy of the ruling delivered in Mombasa High Court Succession Case No. 11 of 2019 (Annexure “AJB 2”) to support his argument that the instant application is an abuse of the process of the Court. He consequently prayed for the dismissal of the application with costs.

[13]Counsel had an opportunity to highlight their submission and they essentially reiterated their respective positions. Ms. Nzisa for the defendant submitted that sufficient proof had been given by the defendant to demonstrate that she bought 500 of the deceased’s shares and therefore those shares cannot be part of the free property of the deceased for purposes of Section 3 of the Law of Succession Act. She also maintained the defendant’s posturing that the application is not res judicata. She relied on paragraph 13 of the defendant’s written statement.

[14]Mr. Omollo likewise reiterated his submissions and pointed out that the plaintiff has demonstrated that, as at November 16, 2016, there were only 2 shareholders of the plaintiff, namely, Anthony John Barbour and George Barbour, who died thereafter on October 3, 2018. He therefore asserted that the 700 shares in the name of the deceased belong to his estate; in respect of which there is a pending Succession Case No. 11 of 2019. He urged the Court to take into consideration all the documents annexed to the Replying Affidavit in making its decision.

[15]In the light of the foregoing, the issues for consideration in the instant application can be summarized as follows:(a)Whether the application is competently before the Court;(b)Whether the 500 shares that the defendant bought from the deceased, George Barbour, form part of the estate of the deceased.

[16]There is no dispute that the deceased, George Barbour was one of the shareholders of the plaintiff company. He was the father of Anthony John Barbour, his co-shareholder and others. The parties are also in agreement that the deceased was in a relationship with the defendant as at the time of his demise. The defendant referred to it as a husband-wife relationship while according to Anthony, she was merely the girlfriend of the deceased. Be that as it may, the parties were in agreement that during his lifetime, the deceased sold 500 of his 700 shares to the defendant; but that to date, the transfer is yet to be effected.

[17]The defendant produced a copy of Form CR12 as Annexure “AMS-5 to her Supporting Affidavit. It shows that the plaintiff’s nominal share capital, as at November 16, 2016 was 100,000. 00 valued at Kshs. 1000 per share; and that the two shareholders at the time were George Barbour, with 700 ordinary shares, and Anthony John Barbour, with 300 ordinary shares. The defendant also exhibited copies of Share Transfer Forms and affidavits sworn by George Barbour evincing his intention to transfer 500 of his shares to the defendant. (see Annexures “AMS-1”, to “AMS-4”). Unfortunately, by the time of his demise, on October 3, 2018, the transfer was yet to be effected. Thus, before engaging in a merit discussion as to whether the defendant has made out a good case to warrant the issuance of the orders sought, the Court must first determine the issues raised by counsel for the plaintiff touching on the competency of the application.

[18]The application has been brought in a suit in which the company sued the defendant seeking orders of injunction to restrain her from withdrawing funds from the plaintiff’s accounts. The defendant has filed a counterclaim alleging certain wrongful acts that led to the closure of the plaintiff’s business. She accordingly prayed for compensation for the losses suffered by the plaintiff due to the closure of the plaintiff’s business and general damages for the damage caused to the plaintiff’s business goodwill, among other reliefs. Thus, although the defendant mentioned the issue of shares at paragraph 6 of her Counterclaim, there was no substantive prayer in respect of the alleged 50% stake pitched by the defendant. Accordingly, it is my considered finding that, being a complete departure from the parties’ pleadings, the application is untenable as an interlocutory intervention.

[19]It is a cardinal principle that a court of law can only give relief that accords with the prayers sought by the parties in their pleadings. Hence, in Kenya Airports Authority vs. Mitu-Bell Welfare Society & 2 Others [2016] eKLR, the Court of Appeal, while discussing this point, cited with approval, the following excerpt from an article by Sir Jack Jacob entitled “The Present Importance of Pleadings” published in [1960] Current Legal Problems, at page174:As the parties are adversaries, it is left to each one of them to formulate his case in his own way, subject to the basic rules of pleadings…for the sake of certainty and finality, each party is bound by his own pleadings and cannot be allowed to raise a different or fresh case without due amendment properly made. Each party thus knows the case he has to meet and cannot be taken by surprise at the trial. The court itself is as bound by the pleadings of the parties as they are themselves. It is no part of the duty of the court to enter upon any inquiry into the case before it other than to adjudicate upon the specific matters in dispute which the parties themselves have raised by the pleadings. Indeed, the court would be acting contrary to its own character and nature if it were to pronounce any claim or defence not made by the parties. To do so would be to enter upon the realm of speculation. Moreover, in such event, the parties themselves, or at any rate one of them might well feel aggrieved; for a decision given on a claim or defence not made or raised by or against a party is equivalent to not hearing him at all and thus be a denial of justice…In the adversarial system of litigation therefore, it is the parties themselves who set the agenda for the trial by their pleadings and neither party can complain if the agenda is strictly adhered to. In such an agenda, there is no room for an item called “Any Other Business” in the sense that points other than those specific may be raised without notice.”

[20]It is also noteworthy that a similar application has already been filed by the defendant in Milimani High Court, Nairobi, being Miscellaneous Civil Case No. 72 of 2019 in which the defendant sought orders for the rectification of the Register of Companies to reflect her ownership of 500 shares of the plaintiff company. Although the defendant’s counsel was of the view that the prayers sought in the two matters are totally different, the effect is same, the vesting of the 500 shares in the defendant; such that a successful outcome in Miscellaneous Civil Case No. 72 of 2019 would in effect be the answer to prayers 1 and 2 of the plaintiff’s application dated March 27, 2019.

[21]Section 6 of the Civil Procedure Act, Chapter 21 of the Laws of Kenya, is explicit that:No court shall proceed with the trial of any suit or proceeding in which the matter in issue is also directly and substantially in issue in a previously instituted suit or proceeding between the same parties, or between parties under whom they or any of them claim, litigating under the same title, where such suit or proceeding is pending in the same or any other court having jurisdiction in Kenya to grant the relief claimed."

[22]The mischief intended to be cured by this provision was well articulated by the Court of Appeal in Kenya Airports Authority v Anthony Mutumbi Wachira [2015] eKLR, thus:We think, as a matter of policy of the law that finds expression in Section 6 of the Civil Procedure Act for instance that no court should proceed with the trial of any suit or proceeding in which the matter in issue is also directly and substantially in issue in a previously instituted suit or proceeding between the same parties where such suit or proceeding is pending in the same or any other court having jurisdiction to grant the relief claimed. The sound object behind that policy is to prevent courts of concurrent jurisdiction from simultaneously trying two parallel suits or proceedings in respect of the same subject matter in issue."

[23]Hence, the plaintiff having raised the issue of sub-judice, the evidential burden shifted to the defendant to demonstrate that the other matter has since been withdrawn or otherwise terminated without a merit consideration. The defendant did not respond to this need and instead submitted that the burden of proof was on the plaintiff; yet Section 109 of the Evidence Act is clear that:112. In civil proceedings, when any fact is especially within the knowledge of any party to those proceedings, the burden of proving or disproving that fact is upon him.”

[24]It is instructive therefore that, inAnne Wambui Ndiritu vs. Joseph Kiprono Ropkoi & Another [2005] 1 EA 334, the Court of Appeal held that:As a general proposition under section 107(1) of the Evidence Act, Cap 80, the legal burden of proof lies upon the party who invokes the aid of the law and substantially asserts the affirmative of the issue. There is however the evidential burden that is cast upon any party the burden of proving any particular fact which he desires the Court to believe in its existence which is captured in sections 109 and 112 of the Act.”

[25]That evidential burden was on the defendant and having failed to discharge it and demonstrate that there is no other suit pending touching on the issue of the plaintiff’s shares, it follows that the instant application must fail for being sub judice.

[26]But even assuming that the application dated July 27, 2019 was competently before the Court, the key issue for determination in that regard would be whether or not the 500 shares that were allegedly bought by the defendant, and which are still in the name of the deceased, form part of the estate of George Barbour. My considered view is that, in so far as the transfer was not perfected by the time of the deceased’s death, the shares remained part of the estate of the deceased. An analogy can be drawn in this regard with inter vivos gifts that are not perfected in the donor’s lifetime; in respect of which it is opined in Halsbury's Laws of England 4thEdition Volume 20(1) at Paragraph 67 that:Where a gift rests merely in promise, whether written or oral, or in unfulfilled intention, it is incomplete and imperfect, and the court will not compel the intending donor, or those claiming under him, to complete and perfect it, except in circumstances where the donor's subsequent conduct gives the donee a right to enforce the promise... If a gift is to be valid the donor must have done everything which according to the nature of the property comprised in the gift, was necessary to be done by him in order to transfer the property and which it was in his power to do."

[27]Indeed, free property is defined in Section 3 of the Law of Succession Act to be:the property of which that person was legally competent freely to dispose during his lifetime, and in respect of which his interest has not been terminated by his death.”

[28]As the Companies Register still recognizes the deceased as the owner of the 700 shares, the shares form part of the estate of the deceased and therefore the defendant’s interest can only be pursued in the already existing Succession Cause No. 11 of 2019 to which the defendant is a party. Indeed, in a ruling delivered in Milimani Miscellaneous Case No. 72 of 2019 Hon. Kasango, J. expressed concern that the application had been made in respect of shares held by a deceased person. I would have dismissed the application on that account.

[29]In the result, having found that the application dated March 27, 2019 is sub judice, the same is hereby struck out with costs.

It is so ordered.

DATED, SIGNED AND DELIVERED VIRTUALLY AT MOMBASA THIS 18THDAY OF JULY 2023OLGA SEWEJUDGECIVIL SUIT NO. 113 OF 2018 RULING 3