[2022] KEHC 14604 (KLR)

Gakwamba Farmers Co-op Society Ltd v Rao & 6 others (Civil Case E697 of 2021) [2022] KEHC 14604 (KLR) (Commercial and Tax) (13 October 2022) (Ruling)

Neutral citation: [2022] KEHC 14604 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Civil Case E697 of 2021

WA Okwany, J

October 13, 2022

Between

Gakwamba Farmers Co-op Society Ltd

Plaintiff

and

Ponangipalli Venkata Ramana Rao

1st Defendant

KCB Bank Ltd

2nd Defendant

Attorney General

3rd Defendant

County Government Kakamega

4th Defendant

Cabinet Secretary, Ministry of Agriculture, Livestock and Fisheries

5th Defendant

Agriculture Food Authority

6th Defendant

Devki Steel Mills Ltd

7th Defendant

Ruling

1. Before this court for determination are two applications dated October 21, 2021 and January 28, 2022 relating to the subject of the plaintiff’s legal representation.

Application dated October 21, 2021 2. The applicant in the application dated October 21, 2021 seeks the following orders: -a)Spentb)That this Honourable Court be pleased to issue an order to annul the Notice of Change of Advocates October 4, 2021 purporting that the Plaintiff has appointed Ms. MMA Advocates LLP to act for it in this matter in place of Ms. Kinoti & Kibe Co. Advocates.c)That the Honourable Court be pleased to issue an order to set aside and/or annul the Notice of Withdrawal dated October 4, 2021 and expunge it from the Record.d)That the costs of this application be borne by Ms. MMA Advocates LLP.

3. The application is supported by the affidavit of Charles Ochieng Atiang Atyang the plaintiff’s General Secretary and is based on the grounds that:-a.The Board of the Plaintiff has duly appointed Ms. Kinoti & Kibe Co. Advocates to act for it in this matter and the said instructions have not been withdrawn or otherwise varied.b.The Plaintiffs Board is surprised, intrigued and offended by the audacity of Ms. MMA Advocates, LLP to purport that it has been appointed to take over conduct of this matter from Ms. Kinoti & Kibe Co. Advocates and simultaneously file a Notice of Withdrawal of this suit.c.The Plaintiff's Board is aware that having instructed Ms. Kinoti & Kibe to file this suit, it retains the authority and power to instruct the same advocates to withdraw the suit if and when that becomes prudent or necessary; it would therefore, be completely irrational for the Plaintiff's Board to appoint Ms. MMA Advocates, LLP to take over conduct of this suit only for the limited and simple purpose of filing a Notice of Withdrawal of this suit.d.By all indications, the impugned Notices filed by Ms. MMA Advocates LLP was to withdraw this suit in order to frustrate and/or obstruct the legitimate public interest to ensure that privatization of Mumias Sugar Company Ltd either through sale or leasing of its assets is conducted transparently, with requisite public participation and in accordance with the due process of law.e.Under Order 25 Rule 1 of the Civil Procedure Rules, Ms. MMA Advocates LLP have no mandate/authority to withdraw a suit that they did not file.f.In the circumstances of this case it would be just, prudent and necessary that the impugned notices be annulled forthwith.g.It should offend the. conscience of this Honourable Court that MMA Advocates, LLPas officers of this Court —have engaged in conduct whose objective is clearly to defeat and obstruct the cause of justice.h.Other grounds to be adduced during the hearing of this application.

4. The applicant further filed the application dated January 28, 2022 for orders that;-1. Spent2. Spent3. That this Honourable court be pleased to issue an order to annul the Notice of change of advocates dated October 25, 2021 purporting that the plaintiff has appointed Ms. Musyoka Mogaka & Co advocates to act for it in this matter in place of Ms MMA Advocates LLP4. That the Honourable court be pleased to issue an order to annul the Notice of change of advocates dated October 25, 2021 purporting that the plaintiff has appointed Ms Musyoka Mogaka & Co advocates to Act for it in this matter in place of MS Kinoti and Kibe Advocates5. That the Honourable court be pleased to issue an order to annul the Notice of change of advocates dated October 25, 2021 purporting that the plaintiff has appointed Ms Musyoka Mogaka & Co advocates to Act for it in this matter in place of MS Kinoti and Kibe Advocates

5. The 1st and 2nd defendants opposed the application through the Grounds of Opposition dated December 8, 2021 wherein they state that the plaintiff has no locus standi to institute the suit. They further state that there is no provision for setting aside the withdrawal notice and that the said notice takes effect as soon as it is filed. According to the defendants, the suit stands withdrawn. It is the defendants’ case that the application is not sustainable as it is directed to former advocates yet there has been subsequent change of advocates.

6. The plaintiff’s chairperson Mr. Elisha Onyango Huma opposed the application while stating that the plaintiff did not appoint the firm of MMA Advocates to act for it in this matter and that their purported annulment of the notice of change is therefore inconsequential. He further states that in a resolution dated October 22, 2021 the board unanimously appointed the firm of Musyoki Mogaka & Co. Advocates and duly authorized them to act for the plaintiff/applicant. He states that the present application has been overtaken by events and serves no useful purpose.

7. Charles Ochieng the General Secretary of Gakwamba Farmers Cooperative Society filed a further affidavit dated July 15, 2022 wherein he states that the Special General Meeting held on October 6, 2021 did not authorize the appointment of the firm of Musyoki Mugaka & Co advocates to Act for the plaintiff.

8. The application was canvassed by written submissions which I have considered. The dispute before me, as I have already noted, concerns the plaintiff’s legal representation.

9. The applicant in the first application seeks the annulment of the Notice of change of advocates filed by Ms. MMA Advocates LLP to act for the plaintiff in place of Ms. Kinoti & Kibe Co. Advocates while the 2nd application seeks the annulment of the notice of change of advocates appointing Ms Musyoki Mogaka &Co advocates to act for the plaintiff in the matter in place of Ms. MMA Advocates LLP.

10. The court record shows that there are 3 law firms purporting to represent the plaintiff, namely; the firm of Kinoti Kibe & Co. Advocates, Ms. MMA Advocates LLP and Ms. Musyoka Mugaka & Co advocates. The plaintiff herein is a Company whose legal representation ought to be backed by a resolution of its Board of Directors authorizing the advocate to represent it. In Leo Investments Limited v Trident Insurance Company Limited [2014] eKLR the court observed that:-“it is trite that advocates can only act in a matter where they have been instructed either expressly or by implication. It is also trite that an incorporated person is but just a legal person in the eyes of the law. It is therefore axiomatic that an incorporated body has of necessity to act through agents who are usually its Board of Directors by way of resolutions passed thereby. Where for example it is proved to the satisfaction of the Court that legal proceedings were commenced by or on behalf of an incorporation by an advocate contrary to or in the absence of the instructions of an incorporation it is trite in this jurisdiction that such proceedings are liable to be struck out with costs being borne by the advocate concerned. “

11. Hewett, J in Assia Pharmaceuticals vs. Nairobi Veterinary Centre Ltd. Nairobi (Milimani)HCCC No. 391 of 2000 stated:-“It is settled law that where a suit is to be instituted for and on behalf of a company there should be a company resolution to that effect……As regards litigation by an incorporated company, the directors are as a rule, the persons who have the authority to act for the company; but in the absence of any contract to the contrary in the articles of association, the majority of the members of the company are entitled to decide even to the extent of overruling the directors, whether an action in the name of the company should be commenced or allowed to proceed. The secretary of the company cannot institute proceedings in the name of the company in the absence of express authority to do so; but proceedings started without proper authority may subsequently be ratified.”

12. From the above cited cases, it is clear that a notice of change of advocates should be accompanied by a resolution of the company signifying the change in representation. In the present case, the court has been furnished with two resolutions purporting to appoint the firm of Ms. Kinoti & Kibe Co. Advocates and Ms. Musyoka Mugaka & Co advocates.

13. It is trite that companies can only authorize the commencement of legal proceedings through resolutions made by their Board of Directors (See Bugerere Coffee Growers Ltd vs SSebaduka & Another (1970)EA 147).

14. Courts have also taken the position that they will not interfere with the internal affairs concerning the management of a Company. This is the position that was adopted in Salina Properties Ltd. vs Migui Macharia Mungai & Another [2010] eKLR where it was held that:-“It is unfortunate that matters between Advocates and their appointing clients should be coming to Court, since the decision as to who should or should not represent a company in Court should be taken by the company itself; and not by the Court. To borrow a leaf from the words of Scrutton L.J. in the case of Shuttleworth vs Cox Brothers & co. LTD. [1927] 2 K.B. 9 at page 22 -. . . to adopt that view would be to make the Court the manager of the affairs of innumerable companies instead of the shareholders themselves . . .”The court went ahead to state and I quote;I find that the disputed resolution appointing Okongo Omogeni & Co., Advocates, is the only prima facie evidence on record to show who the company's Advocates are. The Plaintiff Company should therefore take the cue and organize early elections in order to appoint those that will keep its heart beating. Should they fail to do so, it is the company itself which will be at the receiving end. The application before the Court partly succeeds to the extent that there is a resolution on the record appointing Okongo Omogeni & Co., Advocates, while there is no similar evidence for the appointment of Mungai Kalande & Co., Advocates. At the same time, however, there is no evidence that the firm of Okongo Omogeni & Co., Advocates, were specifically instructed by similar resolution to commence this action. That was improper. On that note each party will bear its own costs of this application with a caveat that the ball is in the company's court... "

15. Taking a cue from the dictum in the above cited case, I find that the issue of legal representation in this matter is one that only the company can resolve by staying true to the provisions of the Companies Act, the Memorandum and Articles of Association and by holding its Annual General Meeting. It is only in such meetings that critical decisions/resolutions involving the running of the affairs of the Company including the appointment of advocates to represent the company in court proceedings can be made.

16. My considered view is that the proper remedy in this matter would be to direct the plaintiffs to clear the air on the appointment of advocate by passing a new resolution after a special general meeting. I reiterate that this court will not be involved in the internal running of the plaintiff company.

17. In the upshot I give the following orders,a.That the plaintiff do convene a special general meeting and pass a resolution to appoint an advocate to represent the plaintiff in the suit.b.No orders of costs.c.Mention on November 23, 2022.

DATED, SIGNED AND DELIVERED VIRTUALLY AT NAIROBI THIS 13TH DAY OF OCTOBER 2022. W. A. OKWANYJUDGEIn the presence of: -Ms Wairimu for Kibe Mungai for the plaintiff.Mr. Bett for 3rd and 6th defendants.Mr. Ondieki for Tugee for 1st and 2nd defendants.Mr. Muchiri for Omari for plaintiff.Court Assistant- Sylvia