[2015] KEELC 562 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI MILIMANI LAW COURTS

ENVIRONMENT AND LAND DIVISION

ELC NO.1411 OF 2014

PHILOMENA NDANGA KARAJA……………1ST PLAINTIFF/RESPONDENT

NDANGA HOTEL LTD………..................……2ND PLAINTIFF/RESPONDENT

KARANGI COFTEA LTD……........................…3RD PLAINTIFF/RESPONDENT

VS

EDWARD KAMAU MAINA…………............................……………DEFENDANT

R U L I N G

The matter coming up for determination is the Notice of Motion dated 21st November 2014,brought by the 3rd Plaintiff herein,Karangi Coftea Ltd. The application is brought under Order 2 Rules 15 (b), Order 1 Rule 10 (2) Order 51 Rule1 and all other enabling provisions of law. The applicant has sought for the following orders:

The suit herein be struck out.

In the alternative the name of Karangi Coftea Ltd as 3rd Plaintiff be struck out.

The costs of the suit be borne by the 1st Plaintiff personally.

The court to issue such further or other orders as it may deem appropriate.

The application is premised on the grounds stated on the face of the application and also on the affidavit of Thomas Kiarie Karanja.

These grounds are:

The suit was instituted in the name of the 3rd Plaintiff without the authority and/or consent of the 3rd Plaintiff.

The 3rd Plaintiff did not authorize the proceedings nor did it appoint J. M. Njenga Advocates to represent it.

The proceedings are frivolous, vexatious and amount to abuse of process of court.

It is fair and just that orders do issue.

In his Affidavit, Thomas Kiarie Karanjaaverred that he is one of the Directors of Karangi Coftea Ltd, together withLawrence Kibe Karanja and Philomena Ndanga Karanja. He further averred that Edward Kamau Maina is the Chief Executive Officer of Karangi Coftea Ltd, duly retained and employed by the company. It was his contention that the suit herein was brought by Philomena Ndanga Karanja, without the knowledge, approval or consent of the company or its Board of Directors. Further, that the suit seeks to prevent the Defendant from carrying out its duties as an employee of the company and its institution in the name of the company which suit required the consent of the Company’s Board of Directors , before it was filed. Again, that the Defendant Edward Kamau Maina, is an employee of the Company whose services have not been terminated. Therefore, on 1st November 2014, the company resolved that the suit be terminated forthwith as per the attached resolution marked TKK2.

He also deposed that the suit is frivolous and vexatious as both the 1st and 2nd Plaintiffs have not in their own capacity made a justifiable claim against the Defendant to warrant sustenance of the suit herein. He further deposed that it is therefore in the interest of justice that this suit be struck out and costs be borne by the 1st Plaintiff personally.

The Notice of Motion is contested. Philomena Ndanga Karanja, filed her Replying Affidavit and averred that she is the 1st Plaintiff herein and the majority shareholder in the 2nd and 3rd Plaintiff company and biological mother of Thomas Kiarie Karanja, the deponent of the affidavit in support of the application at hand. She further averred that her sons who are among minority shareholders in the companies and under the influence of the Defendant have mismanaged and embezzled from the Estate. Further that it was her desire to arrest such state of affairs in the 3rd Plaintiff company and its affiliate companies and its assets which prompted her to file the instant suit in an attempt to revert the Estates to its past profitable and smooth running. Further, that even if the Defendant alleges that he was employed by the 3rd Plaintiff Company, he has not annexed a copy of his letter of appointment.

She further deposed that she was unaware of any Board of Directors minutes/meeting that deliberated on the Defendant’s appointment/ employment as an alleged Chief Executive Officer of the 3rd Plaintiff Company. Further, as a majority shareholder, she has the power to take any appropriate action as she deems fit for the benefit of the 3rd Plaintiff and such action includes filing of the instant suit to injunct the Defendant from acts complained of. She refuted the allegation that the 3rd Plaintiff has appointed Njuguna & Partners Advocates to act for it and the said Njuguna advocate is acting for the Defendant or her sons and not the 3rd Plaintiff herein. She therefore argued the Court to dismiss the instant application.

Parties herein consented to canvass the application by way of written submissions which I have carefully gone though. The Court has also carefully considered the pleadings in general, the annextures thereto, the written submissions and the relevant laws and makes the following findings;-

There is no doubt that the 1st Plaintiff herein Philomena Ndanga Karanja is a shareholder of 1st and 2nd Plaintiffs herein. The other Directors are her children Thomas Kiarie Karanja , the deponent to the Affidavit in support of this application and Lawrence Kibe Karanja.

There is also no doubt that the Defendant herein is an employee of Karangi Coftea Ltd. At one point, the 1st Plaintiff had allegedly terminated his service as evidenced by annexture PK2.

There is also no doubt that the 1st Plaintiff herein has filed the instant suit against the Defendant herein for alleged gross misconduct on the 2nd and 3rd Plaintiffs by the Defendant.

The other Directors have come to Court and alleged that the instant suit was filed without the resolution of the Board. The two other Directors have attached a Resolution of the Board of Karangi Coftea Ltd appointing Njuguna & Ltd Partners Advocatesto represent the 3rdPlaintiff herein. Due to that regard, the 3rd Plaintiff has filed this instant application.

The 1st Plaintiff has contested the application and argued that as a majority shareholder, she could take any action to safeguard the interest of the company. However, the other Directors have argued that the 1st plaintiff is not a majority shareholder and even if she was, the resolution of the Board was necessary before the suit could be filed. They thus sought to have the suit struck out for having been fled without the authority of 3rd Plaintiffs.

I have considered the rival submissions, and it is obvious that the suit herein was filed without the resolution of the Board. The 1st Plaintiff has tried to justify that position. However, it is trite 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. See the case of Assia pharmaceuticals Vs Nairobi Veterinary Centre ltd , Nairobi ( Milimani) High Court , Civil case No. 391 of 2000.

The suit herein was filed without the resolution of the Board. That is contrary to the well settled law. Though the 1st Plaintiff stated that she was justified to bring the suit as a majority shareholder. I find that being a majority shareholder could not justify her to flout the well laid law. That position had been enunciated in the case of Bugere Coffee Vs Sebaduke & Another (1970) EA 147, where the Court held that:-

“Authority to undertake proceedings of a company must be given by resolution of the members of Directors”

In essence, the Directors of a company have authority to act for the company, however the majority of the members of the company are also entitled to decide even to the extend of overruling the Directors. The above position means that it is the majority members but not the member with the majority shareholding. See R M Muthamaand others Vs G P Waithaka and another, Nairobi High Court Civil case No. 576 of 1991where the Court held that;

“ As regard litigation by an incorporated company , the Directors are as well the persons who have the authority to act for the company but in the absence of any contract to the contrary, the majority of the members of the company are entitles 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”.

I will therefore concur with the applicant’s submissions that the 1st Plaintiff as a Director of 3rd plaintiff was not competent to file the suit on behalf of the company unless specific power is conferred on her as a suit on behalf of the Plaintiff company can only be filed by a person specifically empowered by the Board of Directors to file the suit.

It is evident that no resolution was passed by the Board of Directors herein authorizing the filing of the instant suit. Therefore the Company is not before the Court and this court will not hesitate to strike out the suit with costs to be borne by the 1st plaintiff personally.

From the annexture TK1 , the 3rd Plaintiff has three Directors two of them passed a resolution that the firm of Njuguna & Partners Advocates be appointed to represent the company . I find that the firm of Njuguna & Partners Advocates was properly appointed by the resolution of the Board. Having now carefully considered the instant Notice of Motion, the Court finds that the Applicant’s Notice of Motion dated 21st November 2014, is merited. The same is allowed entirely in terms of prayers No.1 and 3 herein.

The Court proceeds to strike out the entire suit and the interlocutory application filed on 6th November, 2014 with costs to be borne by the 1st Plaintiff personally.

It is so ordered.

Dated, Signed and delivered this 9th March dayof 2015

L. GACHERU

JUDGE

In the Presence of:-

Ms Randori for the 1st & 2nd Plaintiffs/Respondents

Mr Njuguna for the 3rd Plaintiff/Applicant

Defendant in person

Kamau: Court Clerk

L. GACHERU

JUDGE

Court:

Ruling Read in open Court in the presence above counsels and the Defendant.

L GACHERU

JUDGE