https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7772

Sentro Healthcare Ltd v Njiraini (Civil Appeal E171 of 2022) [2026] KEHC 7772 (KLR) (Commercial and Tax) (4 June 2026) (Judgment) Neutral citation: [2026] KEHC 7772 (KLR) Republic of Kenya In the High Court at Nairobi (Milimani Commercial Courts) Commercial and Tax Civil Appeal E171 of 2022 BK Njoroge, J June 4, 2026 Between Sentro Healthcare Limited Appellant and Margaret Wangechi Njiraini Respondent (Being an appeal from the judgment of the Hon. E.M. Kagoni (Mr.) at Milimani Chief Magistrate Court delivered on 15th July 2022 in Milimani CMCC 627 of 2019) Judgment 1.This is a judgement arising out of this Appeal. It is against the judgement rendered by Hon. E.M. Kagoni at Milimani Chief Magistrate Court in CMCC No. 627 of 2019. Background Facts 2.The Appellant was the unsuccessful Plaintiff before the Trial Court. It sued the Defendant now the Respondent. This was on account of allegations that the Respondent continuing to sell distribute and advertise a drug named ORTHOFLEX. She was also said to withhold some company equipment and properties worth Ksh.295,125/=. It was further alleged that the Respondent had resigned from the company as a director. Yet she continued to hold herself out as such a director. 3.For these reasons, the Plaintiff sought the following reliefs against the Defendant;a.A permanent order restraining the defendant from selling distributing and advertising the product named ORTHOFLEX.b.An order that the defendant provide detailed report of all monies collected from the sale of Orthoflex since 18th December 2018 when the products cleared form the port.c.An order to compel the defendant to pay the said money and return all the companies property.d.Cost of the suit.e.Interest on (d) above at court rate. 4.The Defendant mounted a Defence and Counter-claim dated 18th December, 2018. She denied withholding any drug on account of the Appellant. She maintained she was a Director of Fournet Pharma Africa Limited which had imported the drug known as ORTHOFLEX. That she was therefore marketing, promoting and distributing it on behalf ofFournet Pharma Africa Limited. This was with the express permission and agreement of Pharmastra Lifecare PVT Ltd) PLC. 5.She Counter-claimed for her wrongful removal as a director and shareholder of the Plaintiff. She prayed for the following reliefs;i.One (1) year salary for the loss of employment caused by the Plaintiff.ii.An order that accounts of the Plaintiff’s company be taken and profits paid to the Defendant consequent upon the said accounts.iii.Defendant to be paid the value of her 2000 shares consequent upon the said accounts being taken.iv.Costs of this suit.v.Any other relief as this Honourable court may deem fit. 6.The Trial Court rendered a judgment after hearing the case. It struck out the Appellant’s claim. This was on the ground that it was filed without the express authority of the company. 7.On the other hand, the Trial Court allowed the Counter-claim as prayed for by the Respondents. 8.It is this decision that has triggered this Appeal. The Appellant has filed a Memorandum of Appeal that raises the following grounds;1.That the learned Magistrate erred in law and in fact by dismissing the suit dated 18th September 2019 on the ground that the application lacked merit.2.That the learned Magistrate erred in law and in fact by dismissing the suit by holding that the deponent of the verifying affidavit did not have express authority from the Appellant’s company when in fact he is the director of the said company.3.That the learned Magistrate erred in law and in fact by holding that the Respondent was unlawfully removed from office when in fact it is the Respondent herself who resigned from the company through a resignation letter and an affidavit.4.That the learned Magistrate erred in law and in fact by allowing the Counter-claim filed by the Defendant by holding that it was the Plaintiff who pushed the Respondent out of the company.5.That the learned Magistrate erred in law and fact by totally failing to take into accounts the evidence brought before the Honourable court by the Appellant.6.That the learned Magistrate erred in fact law and law by failing to consider the submissions of the Appellant Counsel together with the case law in the support by indicating that the same was not filed yet the written submission are on record. 9.It prays for the following reliefs in the Appeal;a.The appeal be allowed.b.The Honourable Magistrate’s ruling be set aside and he same substituted for the ruling of this Honourable court.c.The costs of the appeal and the proceedings be accorded to the Appellant. Issues for Determination 10.The Court has considered the pleadings filed, the evidence tendered, the Record of Appeal, and the respective submissions filed. The Court has also considered the oral highlights made by Counsel for the Respondent. Counsel for Appellant did not appear to highlight the submissions. The Court frames three (3) issues for determination.a.Whether the Trial Court erred in striking out the Plaint for want of company resolution to file suit.b.Whether the Counter-claim was merited.c.What reliefs follow from this Appeal? Analysis 11.This is a first Appeal. This Court is under a duty to re-evaluate and re-analyze afresh the evidence adduced before the Trial Court and draw its own independent conclusions. In doing so, the Court must bear in mind that the Trial Court had the advantage of seeing and hearing the witnesses firsthand — see Selle & Another v Associated Motor Boat Co. Ltd & Others (1968) EA 123.a.Whether the Trial Court erred in striking out the Plaint for want of company resolution to file suit. 12.The Court has perused the Statement of Defence filed. It does not see any allegation or averment that the suit had been filed without the permission or the authority of the company. 13.Even the Counter-claim does not raise the issue of the authority of the company to institute the claim. 14.A further perusal of the final submissions by the Respondent before the Trial Court also show that the issue was not raised. It was not among the six (6) issues raised by the Respondent for determination. 15.The issues did not arise during the trial by way of cross-examination or as a direct question posed to the Appellant’s witness in cross-examination. 16.It is the Court that framed the issues for determination as follows;a)Whether the Plaintiff has brought this suit with the authority of the company.b)Whether the Plaintiff is deserving of the orders sought in the Plaint.c)Whether the Defendant resigned voluntarily.d)Whether the Defendant is deserving of the orders sought, in the Counter-claim.e)Who bears the costs of this suit? 17.The Court reminds itself that a Trial Court can proceed to frame and return a verdict on an unpleaded issue. This is when parties have presented evidence and conducted the trial in such manner as to leave no doubt that this is an issue, they want to be determined. The issue can also be said to have sprung and flowed naturally from the trial. That the parties fully submitted or canvassed this unpleaded issue. This is the holding in Odd Jobs v. Mubia (1970) EA 476. 18.The Court has addressed itself and spoken enough to show that this issue was not neither pleaded nor the subject of the trial. The Trial Court ought not to have sprung it upon the parties. That would account for the submissions by the Appellant that this issue of the company resolution or authority was not a fatal defect. That if it was a defect, the same was curable pursuant to the decision of Hewett J. in Assia Pharmaceuticals V Nairobi Veterinary Centre Ltd [2000] KEHC 159 (KLR). Where the learned judge held as follows;“This was a short case between opposing shareholders & directors of the same Company, some of whom apparently instituted a suit in the name of the Company. In that context, I can understand Mwera J. stating “……..it is a 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”. Also cited was Simba Wood Industries Ltd. vs. IDB & 2 Others. This again was an internal company dispute where the shareholders and some of the directors of the plaintiff disagreed with IDB and the Receivers appointed by it and sought to challenge their actions. The actual point at issue was whether a resolution had been passed to institute proceedings in the Company’s name or not and there was a contest as to what the wording of the resolution was.The latter case cited the commentary in 4th Halsbury Vol. 7 paragraph 767 which reads as follows:“Control of Company’s litigation. As regards litigation by an incorporated company, the directors are, as a rule, the persons who have 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 a 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.Danish Mercantile vs. Dearmont 1951 1 All E.R. page 925 is cited as authority for that last proposition. It is an English Court of Appeal decision which fully supports the statement in Halsbury. It is urged on me that whether the suit has been properly instituted is a triable issue. As it seems that even if that is so, the matter can be rectified in short order. I do not consider that it is such an issue.” 19.The Court takes note that a CR – 12 dated 18th September, 2019 shows Robinson Hinga Njoroge as a Director of the Appellant. 20.This Court is of the view that had the authority or a resolution of the company to file the suit been in doubt or the subject of the challenge, hence made an issue for determination, it may be that such authority would have been availed. 21.As it were, the Court faults the Trial Court for determining the suit on an unpleaded issue. The Appellant was not given a chance to rectify any error that the Respondent had not raised. As the resolution can be availed at any time, even after filing a suit, it goes to show that this is not a fundamental issue. The Court even in absence of a resolution could safely assume the Defendant was aware the Appellant had authorized the filing of the suit. That is why she did not mount such a challenge. Whether the Counter-claim was merited. 22.Section 2 of the Company Act defines the Court for the purposes of the Act as follows;“the Court" means (unless some other court is specified) the High Court” 23.The Court notes that the issue of removal of a director from a company or the issue of shareholding and sales of shares is an internal company matter. It is a matter now pitting directors of the company against each other. 24.The Court says so because the Respondent denies that she even resigned from the company. She claims that she was duped. 25.Looking at the issues framed by the Trial Court for determination, it framed them as follows;(a)Whether the Plaintiff has brought this suit with the authority of the company.(b)Whether the Plaintiff *is deserving of the orders sought in the Plaint.(c)Whether the Defendant resigned voluntarily.(d)Whether the Defendant is deserving of the orders sought in the Counter-claim.(e)Who should bear the costs of this suit. 26.The reliefs claimed by the respondent in the Counter-claim bear repeating and were as follows;i.One (1) year salary for the loss of employment caused by the Plaintiff.ii.An order that accounts of the Plaintiff’s company be taken and profits paid to the Defendant consequent upon the said accounts.iii.Defendant to be paid the value of her 2000 shares consequent upon the said accounts being taken.iv.Costs of this suit.v.Any other relief as this Honourable court may deem fit. 27.This Court is not convinced that the Trial Court had the jurisdiction to hear this nature of dispute or even grant such relief. 28.The jurisdiction of the Magistrate’s Court as set out in Section 7 of the Magistrate Court Act does not encompass hearing of disputes under the Companies Act. 29.The Court follows the decisions in Republic v Resident Magistrate's Court at Kiambu Ex parte Geoffrey Kariuki Njuguna, Esther Wanja Nganga, Peter Mwaura Kamau, Julius Mwangi Kuria George Nderitu Kaguora, Joyce Rukaria Gitau, Richard Njogu Ndungu & 13 others [2017] KEHC 7988 (KLR) and Madrine Njeri Githinji & 7 others v Mununga Tea Factory Co. Ltd [2020] KEHC 5239 (29 May 2020). Following the same well-trodden path, the Court in Bog Chebut Tea Factory Ltd v Johana Kipkorir Chulai [2018] KEHC 1115 (KLR), stated as follows;“From the above description, it is quite clear that Section 2 of the Companies Act Cap 486 Laws of Kenya grants to the High Court the exclusive jurisdiction to determine all disputes relating to the business and affairs of Companies. The subordinate courts have not been given jurisdiction to entertain any such matters by the Companies Act. Hence the filing of the matter before the lower court was improper in the circumstances due to the lack of jurisdiction of that court. The court of Appeal in the case of Owners Of Motor Vessel “lillians” =vs= Caltex Oil (K) LTD [1989] KLR 1 rendered itself thus: -“It is reasonably plain that a question of jurisdiction ought to be raised at the earliest opportunity and the court seized of the matter is then obliged to decide the issue right away on the material before it. Jurisdiction is everything. Without it, a court has no power to make one more step. Where a court has no jurisdiction, there would be no basis for a continuation of proceedings pending other evidence. A court of law downs its tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction.”The issue of jurisdiction was properly raised by the Appellant’s Counsel before the trial court. However it seems the learned trial magistrate did not address her mind correctly on the issue of jurisdiction and fell into error when she made the following finding: -“........ they were correctly brought to court if anything the Defendant Company is vicariously liable for the actions of its employees. There is no prejudice to be suffered by Defendant on bringing this suit against the BOG or if there is any prejudice to be suffered that has not been demonstrated or even said that notwithstanding the issue of joinder or misjoinder of parties cannot prevent substantive justice from being rendered. I find the application dated 7/1/2014 to have merit and I do allow the same as prayed.”With respect to the learned trial magistrate, she failed to appreciate the clear provisions of Section 2 of the Companies Act Cap 486 Laws of Kenya which grants to the High Court the exclusive jurisdiction to determine all disputes relating to the business and affairs of companies. The learned trial magistrate ought to have accepted the Appellant’s grounds of Objection and proceed to hold that the court lacked jurisdiction and to strike out the Respondents suit at that stage.” 30.The Court also notes that part of the reliefs sought touch on the issue of loss of employment. This brought the dispute into the purview of the jurisdiction of the Employment and Labour Relations Court. Whereas the Magistrate’s Court has that jurisdiction, this suit was not framed and filed in the Employment and Labour Relations Court, at the Magistrate’s Court. 31.The Court is of the considered opinion that the Counter-claim was filed before a Court that lacked jurisdiction. 32.Jurisdiction is everything. A Court cannot arrogate itself a jurisdiction that it lacks. Parties cannot grant or clothe the Court with jurisdiction. It is one of the primary duties the Court undertakes before hearing a matter. It first considers whether it has jurisdiction. Sadly, if a Court proceeds to act on a matter where it lacks jurisdiction, all it actions including any ensuing decision thereof amount to nothing. 33.The Court refers to the locus classicus decision in Owners of the Motor Vessel “Lillian S" v Caltex Oil (Kenya) Ltd [1989] KECA 48 (KLR). This has been cited earlier in this decision. What reliefs follow from this Appeal? 34.The Court having found that the Counter-claim was filed in a Court without jurisdiction, proceeds to strike it out. 35.As to the Appellant’s claim, the same is remitted back to the Trial Court to be heard and considered afresh by a Court other than the one that delivered the impugned judgement. The Court takes the view that to proceed and consider the evidence at this point and deliver a verdict would render the Court to making a determination as a Court of first instance. This is because save for striking out the suit on grounds of lack of a resolution, the Trial Court did not consider the evidence and make a determination in the alternative. For that reason, there is nothing for the Appellate Court to consider. Let the Trial Court carry out its duty of considering the evidence. 36.On costs, the same lie at the discretion of this Court. Costs ordinarily follow the event. In the circumstances of this case the Court awards the costs of the appeal to the Appellant. This is including the costs of the suit before the Trial Court on the issue of the Counterclaim. The Appellant’s claim having been remitted back, costs of the Plaintiff’s claim will have to await the outcome of the Trial Court. Determination 37.The Appeal succeeds and judgement is entered for the Appellant as against the Respondent as follows;a)The appeal is allowed.b)The judgment and decree of the Magistrate’s Court in Milimani CMCC No. 627 of 2019 by Honourable E.M Kagoni (MR) delivered on 5th July 2022 is HEREBY set aside and quashed.c)It is instead replaced by a Judgement, Order and Decree of this Court remitting the Plaintiff’s claim back to the Trial Court for hearing by any other Magistrate other than the one who heard the initial case.e)The Respondent’s Counter-claim dated 18th December, 2019 is HEREBY struck out with costs for lack of jurisdiction of the Magistrate’s Court to hear and determine the same.f)The costs of this Appeal are awarded to the Appellant.g)Interest on costs at Court rates from the date of the judgement until payment in full. 38.It is so ordered. DATED, SIGNED AND DELIVERED AT MILIMANI THIS 04TH DAY OF JUNE, 2026.NJOROGE BENJAMIN K.JUDGEIn the presence of:N/A for the Appellant.N/A for the Respondent.Mr. John Paul - Court Assistant.