[2020] KEHC 10412 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

COMMERCIAL AND TAX DIVISION

PETITION NO. E005 OF 2020

IN THE MATTER OF IVORY SECURITY SERVICES LIMITED

AND

IN THE MATTER OF THE COMPANIES ACT NO. 17 OF 2015

AND

IN THE MATTER OF AN APPLICATION UNDER INTER ALIA SECTIONS 780, 782, 786, AND 789 OF THE COMPANIES AT NO. 17 OF 2015

MARY KATHAMBI.................................................PETITIONER/APPLICANT

VERSUS

JULIUS K. ITHAI....................................................................1ST RESPONDENT

IVORY SECURITY SERVICE LIMITED...........................2ND RESPONDENT

RULING

1. What is before the court for determination is a Notice of Motion dated 28th July, 2020 filed by Mary Kathambi, the Applicant. It is brought under the provisions of Article 159 of the Constitution, Sections 780, 782, 786 and 789 of the Companies Act No. 17 of 2015, Sections 1A, 1B and 3A of the Civil Procedure Act, Order 40 Rule 2 and 4 and Order 51 Rule 1 of the Civil Procedure Rules, 2010.

2. In the application, the Applicant sets out ten prayers. The Applicant seeks for temporary orders of injunction against the Respondents restraining them from effecting changes on the 2nd Respondent’s register, disposing of un-allotted shares and assets of the 2nd Respondent. She also seeks to freeze four bank accounts that the 2nd Respondent holds in Equity Bank, Family Bank and Kenya Commercial Bank. She seeks to have a reputable audit firm be appointed by the court to conduct an independent business review of the 2nd Respondent from January 2014 to date and to prepare a report thereof and to also prepare a valuation of the 2nd Respondent’s shares.

3. She further seeks to compel the Respondents to release to her a schedule of documents including a schedule of all the 2nd Respondent’s assets alongside the relevant title of documents and schedule of all the 2nd Respondent’s liabilities. She also seeks a mandatory order of injunction to compel the 2nd Respondent to pay her director’s remuneration from January 2015 at the rate of Ksh.20,000/- per month at Ksh.1,340,000/- or any other monies owed to her. She also seeks to be indemnified against all claims attributed to the actions or omissions of the 2nd Respondent from 2014 to date. She finally seeks to be awarded costs of the application.

4. The Application is supported by grounds on the face of it as well as an affidavit sworn on 28th July, 2020 by the Applicant herself.

5. The Application is opposed by way of Replying Affidavit sworn by Julius K. Ithai which is undated.

Applicant’s case

6. The Applicant depones that her and the 1st Respondent are husband and wife but legally separated at the present moment. The 1st Respondent is a military officer and upon his retirement in the year 2010, they decided to incorporate the 2nd Respondent which is a security company based on the 1st Respondent’s experience and expertise in the security sector. The 1st Respondent held a total of 3,300 ordinary shares in the company while she held a total of 700 ordinary shares.

7. That they ran the Company harmoniously until about 2016 when their marriage irretrievably broke down leading to several disagreements including the day to day running of the Company. The 1st Respondent unilaterally took over the conduct of the Company and completely locked her out. The 1st Respondent made several attempts at removing her as director and shareholder without her knowledge or approval but the Registrar of Companies rejected these attempts as the same were unprocedural.

8. She depones that the 1st Respondent has been running the Company in a manner that is prejudicial to her rights as a shareholder and has locked her out of the day to day affairs. He has further withheld her remuneration and other allowances as director from January 2015 and which as at July 2020 has accumulated to Ksh.1,340,000/-. He has also withheld her dividends from the year 2010 despite making a net monthly average profit of Ksh.3 million. That through the 1st Respondent’s omissions and commissions she has been unable to take care of her children born out of the marriage with the 1st Respondent.

9. She deposes that in a bid to resolve their issues, on 24th January, 2010, she, through her lawyers offered to sell her shares to him on a preferential basis. On 17th February, 2020, the 1st Respondent responded and accepted the offer and requested to be furnished with more details to facilitate the sale. On 27th February, 2020 her advocates responded and advised that the proposed amount for each share was Ksh.30,000/- based on her knowledge of the net worth of the company having been a director from incorporation. The 1st Responded acknowledged receipt of the offer and stated they would respond at a later date. On 23rd March, 2020 the 1st Respondent wrote to the Applicant and requested to know the procedure used to value the shares.

10. She notes that the request for valuation procedure was made despite the 1st Respondent’s actions of locking her out of the conduct of the affairs of the Company including the bank accounts and assets of the Company. She is thus apprehensive that given the state of affairs between her and the 1st Respondent, the 1st Respondent may dispose of the assets of the Company in a bid to keep her from benefitting from the same. She is also apprehensive that he might tamper with the Company’s assets in a bid to interfere with the inspection necessary for valuation. That, it therefore imperative for the Court to grant the orders she seeks.

11. The Applicant adds that she is willing to relinquish her shareholding and directorship upon purchase of her share in the Company by the 1st Respondent and he has intimated such sale must be based on valuation of the Company. She deposes that without the orders sought herein, she continues to suffer irreparable harm as the 1st Respondent continues to conduct the affairs of the Company in an oppressive manner which may lead to devaluation of the Company.

12. It is her case that she and her children continue to suffer as the allowances and dividends payable to her as a director were their only source of livelihood.

13. The Application is predicated on a Petition wherein the Applicant accuses the 1st Respondent of unfair and oppressive conduct in conducting the affairs of the Company on the same facts as afore stated. She seeks, inter alia,full disclosure of the Company’s transactions, audited statement of accounts, inspection and valuation of the Company’s assets and shares and compensation for dividends and her remuneration as the Company’s director.

1st Respondent’s Case

14. The 1st Respondent begins by denying that he was married to the Applicant, stating that they cohabited and had children together and that she has two other children from a previous union. He deposes that he is the founding director and majority shareholder of the Company.

15. He adds that the Company was incorporated on 20th August, 2003 and not 2010 as alleged. At the time, he held 3000 shares and his daughter, Nelly Caster Ithai held 700 shares. To ensure smooth running of the Company, he decided to co-opt the Applicant and transferred the 700 shares from his daughter to her while he transferred to himself 300 shares held by Aston Maungu Odieri, thus he held 3300 shares and the Applicant 700 shares. The transfer of shares from his daughter to the Applicant did not involve any pecuniary or other compensation to his daughter.

16. That as the founding Managing Director of the Company he has always been in charge of the day to day running of the Company’s affairs and this remained even after transferring shares from his daughter to the Applicant.

17. That due to the fact that he was cohabiting with the Applicant, he subsequently set up a separate business for the Petitioner named Kids wear Shop. The same is located at Jacaranda Business Center along Kamiti Road, in order for her to generate her own income as she was not involved in the day to day running of the Company. The Applicant, however, participated in principal Company meetings and endorsed the resolutions passed in the said meetings.

18. The 1st Defendant alludes that he has been wrongly advised that he could allot the remaining shares of the Company to his daughter, Nelly Caster Ithai, who was a founding shareholder. That he had done so hoping to ensure the smooth running of the Company and the same was not meant to defraud or prejudice the Applicant as her shares in the Company remained unchanged.

19. He states that he is a stranger as to how the Applicant arrived a figure of Ksh.3 million as net monthly average profit of the Company. He states that she has failed to explain why her alleged remuneration and allowances were not paid and why she failed to make demand for the same. He adds that she is driving motor vehicle registration No. KCN699R which was purchased by the Company through asset finance facility with NCBA Bank Limited and which facility is still being serviced by the Company.

20. That he requested for a fair valuation to be conducted by an external valuer to determine the fair value of the shares. That the Applicant has resorted to underhand means to disrupt the operations of the Company by forcibly locking its premises and chasing away staff and confiscating vital company documents. That she had him arrested on false claims of assault and this was reported to Kasarani Police Station. That the same was driven by malice as at the time they were no longer cohabiting after she voluntarily left the home in January 2020 and this led to irreconcilable differences.

21. He accuses the Applicant of falsehoods and concealing material facts calculated to mislead the Court. That the same is gross abuse of court and clear demonstration that she has come to court with unclean hands.

22. Finally, that the orders sought are only aimed at crippling the operations of the Company and would also prejudice the Applicant as the same would erode the value of the shareholding.

Applicant’s response

23. The Applicant filed a Further Affidavit sworn on 25th August, 2020 in response. She reiterated the contents of her Supporting Affidavit. She further deponed that although the Company had been initially incorporated in 2003, the shareholders lacked the financial muscle needed in the business and thus they agreed that she could acquire the 700 shares while he acquired the other 300 shares. That the financial injection/bail out was based on trust between the two of them.

24. She argued that, as co-director, she is entitled to participate in the day to day running of the Company but the 1st Respondent has made it difficult by locking her out of her office and unilaterally taking over the Company without her consensus. The 1st Respondent made this more difficult by instructing the security guards at the Company’s headquarters not to allow her in so she may not know what is going on in the Company.

25. That some of the resolutions annexed to the 1st Respondent’s affidavit are not genuine as she did not attend the meetings specifically on 6th April, 2018, 17th October, 2017, 14th July, 2017 and that her signatures appended there are forgeries. In any event, it is evident that the Company has not passed any resolutions in the last two years. That she reported the forgery of the signature to the Directorate of Criminal Investigations headquarters for investigation on 25th August, 2020.

26. That to demonstrate that the Company was making profits in the millions, on 30th March, 2020, the Applicant states that she and the 1st Respondent signed an agreement that she would be getting a salary of Ksh.100,000/- which amounts have not been paid to date. She deposes that the Company has enjoyed steady growth due to her hard work, diligence and aggressive marketing strategies, something the Respondents have failed to appreciate.

27. She finally adds that she is using motor vehicle registration number KCN699R by virtue of her status as director of the Company and to ease her movement and that of her children with the 1st Respondent.

Analysis and determination

28. The application was canvassed by way of written submissions. The Applicant’s submissions are dated 4th September, 2020 whilst those of the 1st Respondent are dated 30th September, 2020.

29. The prayers sought herein are for grant of an injunction. The locus classicus case on conditions to be satisfied before an interlocutory injunction can be granted is Giella v Cassman Brown Co. Ltd (1973) E.A. 358 where Spry VP held that;

“First, an applicant must show a prima facie case with a probability of success. Secondly, an interlocutory injunction will not normally be granted unless the applicant might otherwise suffer irreparable harm which would not adequately be compensated by an award of damages. Thirdly, if the court is in doubt, it will decide an application on a balance of convenience.”

Has the Applicant demonstrated a prima facie case with probability of success?

30. In the case of Mrao Ltd –v- First American Bank of Kenya Ltd (2003) eKLR, the Court of Appeal held that:

“…..A prima facie case is more than an arguable case. It is not sufficient to raise issues. The evidence must show an infringement of a right and the probability of the Applicant’s case upon trial….it is a case which, on the material presented to the court, a tribunal properly directing itself will conclude that there exists a right which has apparently been infringed by the opposite party as to call for an explanation from the latter….”

31. The Applicant submits that she has fulfilled this requirement, by demonstrating that the affairs of the Company are being conducted in an unfair and exploitative manner prejudicial to her position as director and shareholder. She points out that the 1st Respondent has not controverted her assertions of unfairness, prejudicial conduct and infringement of her personal rights as director and shareholder. She further points out that the 1st Respondent admitted to undertaking changes in the Company’s shareholding and directorship without involving the Applicant. That the 1st Respondent instructed guards not to allow her into the Company’s premises. That this demonstrates the lengths the 1st Respondent will go to kick her out.

32. She also points out that the 1st Respondent has admitted that she has not been paid her directorship salary due to the fact that she had not demanded the same.

33. The 1st Respondent on the other hand reiterates the contents of his Replying Affidavit and further submits that the Applicant is using this forum to settle a family dispute which ought not to be the case as there is a separate forum to adjudicate over such issues.

34. He further submits that the Applicant has come to court with unclean hands as her application is tainted with falsehoods, calculated at misleading the Court. That in any case, the application is intended to cripple the operations of the Company. That she therefore does not deserve the prayers sought.

35. The Applicant seeks a temporary injunction order to restrain the Respondents from effecting changes on the 2nd Respondent’s register and from disposing of the un-allotted 1000 shares of the Company. Section 780 of the Companies Act provides as follow;

“(1) A member of a company may apply to the Court by application for an order under section 782 on the ground—

(a) that the company's affairs are being or have been conducted in a manner that is oppressive or is unfairly prejudicial to the interests of members generally or of some part of its members (including the applicant); or

(b) that an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be oppressive or so prejudicial.”

36. Section 782 of the Companies Act provides as follows;

“(1) If, on the hearing of an application made in relation to a company under section 780 or 781, the Court finds the grounds on which the application is made to be substantiated, it may make such orders in respect of the company as it considers appropriate for giving relief in respect of the matters complained of.

(2) In making such an order, the Court may do all or any of the following:

(a) regulate the conduct of the affairs of the company in the future;

(b) require the company—

(i) to refrain from doing or continuing an act complained of; or

(ii) to do an act that the applicant has complained it has omitted to do;

(c) authorise civil proceedings to be brought in the name and on behalf of the company by such person or persons and on such terms as the Court directs;

(d) require the company not to make any, or any specified, alterations in its articles without the leave of the Court;

(e) provide for the purchase of the shares of any members of the company by other members or by the company itself and, in the case of a purchase by the company itself, the reduction of the company's capital accordingly.

(3) Subsection (2) does not limit the general effect of subsection (1).

(4) The company is entitled to be served with a copy of the application and to appear and be heard as respondent at the hearing of the application.”

37. The 1st Respondent’s actions of sidelining the Applicant despite being a director and shareholder of a company have not been denied. They can certainly be termed as oppressive and unfair. The Applicant’s apprehension that the 1st Respondent may change the Company’s register and remove her is well founded. The 1st Respondent has admitted to having attempted to do so, without success. He however deposes that the same was on wrong advice.

38. The Applicant has not made out a case for her apprehension that the 1st Respondent may dispose of the un-allotted shares of the Company without her knowledge or consent.

39. Specifically, on the order to freeze the company accounts she submits that this court has the power to do so where there is good cause and relies on the decision by Makau J. in Gitahi Gethenji & 3 Others Vs. James Ndungu Gethenji & 3 Others (2018) e KLR. She submits that the 1st Respondent has opened multiple bank accounts in the Company’s names and which he operates in concealment, a fact he has not denied. She submits that the same were opened unprocedurally and through concealment and she is apprehensive that the same may expose her to future claims or actions.

40. The 1st Respondent has submitted that this would cripple the operations of the Company and would be the detriment to both the Applicant and himself as well as the employees of the Company. However, since the Applicant is a shareholder and director of the company, she is entitled not only to disclosure as well as her inclusion in key decisions of the company. The disclosure should entail the bank accounts, how much is held therein and how the same were opened, in the interim.

41. On the prayer for inspection and audit of the Company, she relies on Section 760 of the Companies Act which give the Court the power to order for the same on application by the Company members. She submits that she owns 700 of the 5000 ordinary shares owning a tenth of the nominal value of the company’s share capital. That as afore stated she has good reason to seek for the inspection as she has been locked out of the Company’s affairs by the 1st Respondent. The 1st Respondent has not opposed the order for inspection or disputed the fact that they have failed to prepare financial and account statements and reports for consideration and ratification by the board of directors, which includes the Applicant.

42. On this, the 1st Respondent relies on Section 786 of the Companies Act. The same provides as follows;

“786. (1) The Court may appoint one or more competent inspectors to investigate the affairs of a company and to report on those affairs in such manner as the Court directs—

(a) in the case of a company having a share capital — on the application either of—

(i) not fewer than two hundred members; or

(ii) members holding not less than one-tenth of the nominal value of the company's share capital; or

(b) in the case of a company not having a share capital—on the application of not less than one-fifth in number of the members of the company.

(2) The Court may decline to proceed with the application unless the applicants produce such evidence as the Court may require for the purpose of showing that the applicants have good reason for requiring the investigation.

(3) Before appointing an inspector, the Court may require the applicants to give security of an amount not exceeding five hundred thousand shillings as contribution towards meeting the costs of the investigation.”

43. That the Applicant has not provided the sum of Ksh.500,000/- as stipulated under Section 786 (3) of the Act as security to meet the costs of prayers (v) and (vi).

44. Section 786 (3) uses the word ‘may’ which is permissive as opposed to ‘shall’ which is authoritative. It is left to the court’s discretion to determine whether or not to order for security.

45. In this case, the present suit is brought as a result of the 1st Respondent’s actions. And an inspection and subsequent valuation of the Companies shares, assets and liabilities would benefit both the Applicant and 1st Respondent as well as the Company itself. It is therefore in the interest of justice that the cost of such inspection and valuation be shared by both the Applicant and 1st Respondent in accordance with their shareholding in the Company.

46. On the prayer for production of documents, the Applicant argues that this is in line with Section 782 (2) of the Companies Act. That having been locked out of the Company’s affairs, it is imperative that the Respondents provide the documents prayed for in order to be appraised of the current affairs of the Company in her capacity as shareholder and director.

47. This prayer is also merited on the afore stated on the ground that she is a director and shareholder of the company. This prayer is also in line with the inspection and valuation of the Company’s shares, assets and liabilities as spelt out under Section 786 of the Act.

48. On the prayer for the mandatory injunction compelling the Respondents to pay her salary, from January 2015 to date, she submits that she is entitled to such under the Articles of Association, specifically Article 26 which provides as follows;

“The directors shall be entitled to such remuneration as shall from time to time be determined by the Company in General Meeting and such remuneration shall be divided among the directors as they may, by resolution determine, or failing such determination, equally, except that in such event any director holding office for less than a year shall only rank in such division in proportion to the period during which he has held office during such year.”

49. She relies on the case of Kenya Breweries Ltd Vs. Washington Okeyo (2002) EA 109 where the court cited with approval the decision in Mutethia Munene Thuranira Vs. Makueni County Sand Conservation and Utilization Authority (2018)eKLR where the court held that mandatory injunctions are granted in clear cases with special circumstances and which if the act done is simple and summary and can easily be remedied if the Defendant attempts to steal a march. She submits that the issue of non-payment of her salary is clear, simple and summary and can easily be remedied by the court compelling the Respondent to pay her salary arrears that are due. She submits that no evidence has been submitted to demonstrate that she has been paid her director’s salary from January 2015.

50. The 1st Respondent submits that the prayers sought for in the Application are similar to those sought for in the Petition. That the granting of the mandatory orders of injunction would amount to making a determination of the issues in dispute in a summary manner and without the benefit of a full hearing. He submits that the Applicant has not established a strong case for the issuance of mandatory orders at an interlocutory stage.

51. The Court of Appeal quoted with approval an English decision in the case of Locabail International Finance Ltd vs Agroexport and others(1986) 1 ALLER 901where it was stated:-

“A mandatory injunction ought not to be granted on an interlocutory application in the absence of special circumstances, and then only in clear cases either where the court thought that the matter ought to be decided at once or where the injunction was directed at a simple and summary act which could be easily remedied or where the defendant had attempted to steal a march on the plaintiff. Moreover, before granting a mandatory interlocutory injunction, the court had to feel a higher degree of assurance that at the trial it would appear that the injunction had rightly be granted, that being a different and higher standard than was required for a prohibitory injunction.”

52. In the recent case of Nation Media Group & 2 others vs John Harun Mwau [2014] eKLR the Court of Appeal said:-

“It is trite law that for an interlocutory mandatory injunction to issue, an applicant must demonstrate existence of special circumstances ... A different standard higher than that in prohibitory injunction is required before an interlocutory mandatory injunction is granted. Besides existence of exceptional and special circumstances must be demonstrated as we have stated a temporary injunction can only be granted in exceptional and in the clearest of cases.”

53. Thus, in cases where a party seeks a mandatory interlocutory injunction, the court will act sparingly and only accede to the request and grant such an order in the clearest of cases (see Kenya Airports Authority vs Paul Njogu Mungai & 2 others) [1997] eKLR. Megarry, J sounded this caution in the case of Shepherd Homes Ltd vs Shadahu(1971) I Ch 34 as follows:-

“It is plain that in most circumstances a mandatory injunction is likely, other things being equal, to be more drastic in its effect than a prohibitory injunction. At the trial of the action the court will of course grant such injunction as the justice of the case require; but at the interlocutory stage, when the final result of the case cannot be known and the court has to do the best it can, I think the case has to be unusually strong and clear before a mandatory injunction can be granted even if it is sought to enforce a contractual obligation.”

54. In the present case there is need for the Applicant to prove how much she was earning from January 2015 to present. There will be a corresponding duty on the 1st Respondent, as the party in control of the Company to show if and how much the Company paid the Applicant. This cannot be determined at an interlocutory stage but only at the full hearing. The same shall also be revealed through an audit and valuation in order to determine what dividends, if any, the Applicant is owed.

55. On the prayer for indemnity she submits that having been excluded from the conduct of the day to day affairs and having proved that the 1st Respondent has been conducting the affairs of the Company in an oppressive and unfair manner and in a manner that is prejudicial to her interests, she should be indemnified against any loss, claims, suits, breach of law or actions attributable to the actions or omissions by the Respondents.

56. On this prayer, the 1st Respondent submits that the general principle in Company law is that the Company has a separate legal personality from its shareholders and directors. That they are protected from being personally liable for the Company’s debts and other obligations, though the protection is not carte blanche. He submits that should there be a lifting of the corporate veil of the Company, she will be personally liable for the actions and omissions of the Company for the durations she was a shareholder and director.

57. In Karachiwalla (Nairobi) Limited v Burrell International Limited [2019] eKLR the court stated:

“12. It is a long-standing legal principle that a company is in law a separate legal entity distinct from its members. The judicial precedents cited since the decision in Salmon and Salmon and Co. Ltd (1897) A.C. 22HL, courts have upheld the doctrine of the corporate veil and limited liability of a company. However, courts have in certain instances pierced the corporate veil to see what is happening behind it if there is evidence that the corporate veil is being used to shield fraud and improper conduct on the part of the directors or shareholders of the company. In other words, where it is established that there is fraud or improper conduct, the corporate veil may be lifted.

13. In Victor Mabachi & Another v Nurturn Bates Ltd, Civil Appeal No. 247 of 2005 [2013] eKLR, the Court held that:

“ra company as a body corporate, is a persona jurisdica, with separate independent identity in law, distinct from its shareholders, directors and agents unless there are factors warranting a lifting of the veil.”

58. In the case of Tatu City Limited & 3 others v Stephen Jennings & 6 others [2015] eKLR it was stated as under as regards determining an application for a derivative action;

“The 3rd Plaintiff has alleged in his claim that he has been unprocedurally sacked from the chairmanship of the Plaintiff Companies. If this allegation is correct, the 3rd Plaintiff will suffer injuries which are very individual and personal. Such a wrong against the 3rd Plaintiff would be an individual wrong, or a wrong that has been done to an individual. In a strikingly similar case in Uganda, beingMusa Misanga - Vs- Erai Musigire & others [1966] 1EA 390 (HCU)the court, faced with almost similar circumstances had this to say:-

“This is a motion which raises some point of great importance. The first question is whether a director who is improperly and without cause excluded by his brothers from the board from which they claim the right to exclude him, is entitled to an order restraining his brothers from so excluding him. In this case a man is necessarily a shareholder in order to be a director and as a director he is entitled to fees and remuneration for his services and it might be a question whether he would be entitled to the fees if he has been excluded. Now, it appears to me that this is an individual wrong, or a wrong that has been done to an individual. It is a deprivation of the legal rights for which the directors are personally and individually liable. He has a right by the constitution of the company to take a part in its management, to be present, and to vote at the meeting of the board of directors. He has a perfect right to know what is going on at these meetings. It may affect him individually, as a shareholder, as well as his liability as a director and it has been sometimes held that even a director who does not attend board meeting is bound to know what is done in his absence. It appears to me that the injury or wrong done to him by preventing him from attending board meetings by force, he has a right to sue. He has what is commonly called a right of action, and these decisions which say that, where a wrong is done to the company by the exclusion of a director from the board meetings, the company may sue, and must sue for that wrong, do not apply to the case of wrong done to an individual.”

59. In view of the foregoing, there is no doubt that there is need for the inspection, audit and valuation of shares to determine the Company’s bank accounts, assets and liabilities. This will determine the extent of the Applicant’s liability. An indemnity cannot be ordered before these issues have been ascertained. It is a matter that requires adduction of evidence and hence a relief cannot issue at this interlocutory stage. Accordingly, the prayer for indemnity at this stage is premature.

Will the Applicant suffer irreparable harm?

60. She submits that having been locked out of the running of the Company, the 1st Respondent will most likely engage in actions that will be prejudicial to her rights such as devaluing the Company’s shares and further expose her to future litigation and claims in her capacity as director. She relied on the decision in the case of Paul Gitonga Wanjau Vs. Gathuthi Tea Factory Company Ltd & 2 Others (2016) eKLR stated as follows;

“The second test for determination is whether the applicant will suffer irreparable loss. The following paragraph in Halsbury’s Laws of England[4] is instructive. It reads:-

“It is the very first principle of injunction law that prima facie the court will not grant an injunction to restrain an actionable wrong for which damages are the proper remedy. Where the court interferes by way of an injunction to prevent an injury in respect of which there is a legal remedy, it does so upon two distinct grounds first, that the injury is irreparable and second, that it is continuous. By the term irreparable injury is meant injury which is substantial and could never be adequately remedied or atoned for by damages, not injury which cannot possibly be repaired and the fact that the plaintiff may have a right to recover damages is no objection to the exercise of the jurisdiction by injunction, if his rights cannot be adequately protected or vindicated by damages. Even where the injury is capable of compensation in damages an injunction may be granted, if the act in respect of which relief is sought is likely to destroy the subject matter in question”

61. The Applicant argues that she has suffered public humiliation when the 1st Respondent directed security guards not to allow her into the Company premises yet she is a director and shareholder, a fact known to the Company employees. She further submits that she has not been paid her salary as director, making it difficult for her to raise her children whom she has with the 1st Respondent.

62. As was held in the Musa Misanga - Vs- Erai Musigire case (supra) as shareholder

“He has a perfect right to know what is going on at these meetings. It may affect him individually, as a shareholder, as well as his liability as a director and it has been sometimes held that even a director who does not attend board meeting is bound to know what is done in his absence.”.

63. As correctly submitted, the Applicant has a right to know the Company’s affairs as the same directly affect her and her liability as director and shareholder. For this reason, she has made out a good case for grant of necessary relief.

Who should bear the costs of the Application?

64. The 1st Respondent submits that the costs and incidentals to all suits shall be at the discretion of the Court and the Court in making its determination should have regard to the motivations and the conduct of the parties, prior to, during and subsequent to the actual process of litigation. He submits that the application has been tainted with falsehoods and has failed to meet the threshold for granting of the orders.

65. The Applicant on the other hand submits that it is an established principle that costs follow the event and are generally awarded to a successful party. She submits that her application is merited and thus she should be awarded the costs of the application.

66. As regards costs, the Applicant has partially succeeded but bearing in mind that the present application was instigated by the 1st Respondent’s actions, costs should be in the cause.

Disposition

67. I accordingly issue the following orders:

a) That a temporary injunction do issue against the Respondents restraining them from effecting changes on the 2nd Respondent’s register held by the Registrar of Companies pending the hearing and determination of the Petition herein.

b) That a temporary injunction do issue against the Respondents restraining them from disposing of un-allotted shares and assets of the 2nd Respondent pending the hearing and determination of the Petition herein.

c) That Parties do agree on a reputable audit firm to be appointed by themselves to conduct an independent business review of the 2nd Respondent from January 2014 to date and to prepare a report thereof and to also prepare a valuation of the 2nd Respondent’s shares. If parties do not consent on the audit firm within 14 days, the Court be at liberty to appoint one. Costs of such audit shall be met by both the Applicant and the 1st Respondent at the ratio of their shareholding in the Company. That is to say that the cost shall directly be drawn from the Company’s profits within this ratio.

d) That the Respondents are hereby ordered within 14 days to release to the Applicant a schedule of all the 2nd Respondent’s assets alongside the relevant title of documents for her inspection and both the Applicant and the 1st Respondent to agree on where and how to secure the said documents. As well, the 1st Respondent shall also produce to the Applicant a schedule of all the 2nd Respondent’s liabilities.

e) That the 1st Respondent do forthwith make disclosure of the number, account numbers, Bank statements for at least the last five years from date of this ruling, current cash balances as at date of the 2nd Respondent’s bank accounts held in Equity Bank, Family Bank, Kenya Commercial Bank and any foreign Bank. The disclosure shall include the name(s) of the signatories of each of the Bank account.

f) That other prayers sought are hereby dismissed.

g) Costs be in the cause.

DATED AND DELIVERED AT NAIROBI THIS 4TH DECEMBER, 2020.

G.W.NGENYE

JUDGE

In the presence of:

1. Miss Kihenju for the Petitioner/Applicant.

2. Miss Mutegi h/b Kibera Maina for the Respondent.