[2022] KEHC 16470 (KLR)

Sifatronix Ltd v Tumaz and Tumaz Enterprises Ltd & another (Commercial Civil Case E216 of 2019) [2022] KEHC 16470 (KLR) (Commercial and Tax) (8 December 2022) (Ruling)

Neutral citation: [2022] KEHC 16470 (KLR)

Republic of Kenya

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

Commercial and Tax

Commercial Civil Case E216 of 2019

WA Okwany, J

December 8, 2022

Between

Sifatronix Limited

Plaintiff

and

Tumaz And Tumaz Enterprises Limited

1st Defendant

Julius Mwale

2nd Defendant

Ruling

1. This ruling is in respect to the application dated December 14, 2021 wherein the applicant seeks the following orders:-1. Spent2. The plaint dated July 8, 2019 be struck out in its entirety.3. The costs to be borne by the plaintiff.4. The honourable court be pleased to issue such further or other orders as may appear to it just and convenient.

2. The application is supported by the affidavit sworn by the 2nd defendant Julius Mwale and is based on the following grounds:-1. The plaintiff has instituted a suit before this honourable court absent of any locus standi, legal capacity and/ or cause of action against the defendants in this matter; by law the plaintiff is incapable of commencing this piece of litigation and the suit is a fraud and a sham.2. The plaintiffs supposed cause of action arises from a purchase order which contains clause 9. 1 which clause clearly stipulates that the plaintiff cannot sub-contract the works without prior written consent with the defendants.3. The plaintiff has admitted in its demand letter dated March 20, 2019 emanating from the firm of Eliakim Owala & Company Advocates that it sub-contracted the construction works, contrary to the clear stipulations of the purchase order.4. In the plaint, the plaintiff makes no averment to the effect that the plaintiff company personally carried out the works and/or rendered services to the defendants. It is patently obvious that the plaintiff breached the contract between the parties herein and is therefore undeserving of the prayers sought in the plaint.5. The plaintiff failed to obtain prior written consent from the defendants before subcontracting the works claimed herein. The sub-contractor was never a party to the purchase order and therefore any monetary claim for works purported to have been done by the plaintiff and/ or subcontractor cannot and should not be recovered from the defendants and therefore the plaintiffs suit is dead on arrival.6. The plaintiff has not demonstrated that it carried out the works claimed herein and is thus incapable of instituting and/ or maintaining the suit in its name.7. The dispute comprised in the plaint and/ or the remedies sought are not justifiable or available to the plaintiff and this court cannot entertain or give any effectual relief to the plaintiff in the circumstances.8. The plaintiff has not established a prima facie cause of action against the defendants since it has no locus standi to institute this suit in the first place. This honourable court is therefore being called to act in vain.9. Further to the foregoing, the plaintiffs suit has been filed in breach of mandatory requirements of order 4 rule 1 (4) of the Civil Procedure Rules, 2010. The plaint in this matter is scandalous, frivolous, vexatious, a nonstarter and a total abuse of the court process for the reasons that: -a.The suit does not meet the mandatory requirements of the law, having been filed without due authority from the plaintiff company as there is no resolution or valid resolution of the plaintiff company approving the institution of this suit.b.There is no resolution or valid resolution of the plaintiff company appointing the firm of Eliakim Owala & Co Advocates to institute the suit for and on behalf of the plaintiff company.c.The filing of the suit by the said firm of advocates is invalid for want of authority from the plaintiff companyd.The suit has been filed in contravention with order 4 rule 1 (4) as Amon Robert Okumu does not have the requisite authority to sign and swear the verifying affidavit on behalf of the plaintiff company.10. The suit as drawn is bad in law and an abuse of the court process as the plaintiff has not exhibited the required legal authority.11. The plaintiff company can only sue in its own name with the sanction and backing of its board of directors or under a resolution in general or special meeting; which is not the case herein.12. The said Amon Robert Okumu has boldly stated at paragraph 2 of the verifying affidavit that he was duly instructed by the firm of Eliakim Owala & Co Advocates to institute these proceedings and not the plaintiff's board of directors.13. The authority to institute this suit in the name of the company is vested in the board of directors, or should be effected through a resolution of the shareholders in a general meeting.14. No action may be brought by a company without calling a meeting first. In the instant case, however, no meeting was called and therefore even a simple majority could avail themselves of that option to institute the suit.15. No resolution of the board of directors or shareholders at a general meeting had been exhibited by the plaintiff company depicting authority to institute the suit in the first place16. It was therefore improper for the said Amon Robert Okumu to file a suit in the company' s name without such authority. As there was no such authority in the instant case, the suit is improperly filed and therefore incompetent.17. Clearly, it was the firm of Eliakim Owala & Co Advocates who gave instructions to Amon Robert Okumu for commencement of this suit in the company's name rather than the company itself. In so doing, the firm usurped the powers of the board, and that is irregular and unconscionable.18. The authority and capacity to sue goes to the jurisdiction of this honourable court and the plaintiff company can only sue in its own name with the sanction of its board of directors or under the resolution of the company; which is not the case herein.19. The suit as drawn is bad in law and an abuse of the court process as the plaintiff company has not exhibited the required authority to bring this suit.20. The entire suit is dead on arrival as there is no surviving dispute to be resolved by this court and continuing hearing it would be an academic exercise.21. The prayers sought in the plaint are incapable of being granted. The continued maintenance of the plaint will be a gross abuse of the court process and is prejudicial to the defendants; this honourable court should be guided by the principles of fairness, justice and equal protection of the law for all parties.22. This application will aid to achieve the overriding objectives of the administration of justice by out the suit and terminating any proceedings founded upon the plaint dated July 8, 2019 for the reasons stated above.23. This suit is scandalous, frivolous and vexatious and an absolute abuse of the court process; the suit is a sham, a fraud and a veiled attempt at unjust enrichment.24. The rules of procedure vest this honourable court with the jurisdiction and discretion to strike out a suit at any stage where sufficient grounds and good cause is demonstrated such as in the instant case.25. This application is geared toward untangling the court from unnecessary litigation and the preservation of scarce judicial resources.26. There is urgent need to protect the integrity of this honourable court from misuse of and abuse of process by fraudsters, such as the plaintiff, out to scuttle the ends of justice for their own personal gain.27. Bearing in mind effects of Covid-19 on doing business in Kenya, the application has been brought at the earliest possible opportunity and before the suit is set down for hearing.

3. The respondent opposed the application through the replying affidavit sworn by Mr Amon Robert Okumu who states that the company instructed the law firm of Eliakim Owalla & Company Advocates to act for it and that the plaintiff was not subcontracted for any work or supplies to the defendant.

4. The application was canvassed by way of written submissions which I have considered. The main issue for determination is whether the applicant has made out a case for the granting of the orders to strike out the plaint for want of locus standi. According to the defendant, the plaintiff did not comply with the provisions of order 4 1(4) of the Civil Procedure Rulesin that the company did not pass a resolution to appoint the law firm of Eliakim Owalla & Co Advocates to file the instant suit.

5. Order 4 rule 1(4) provides as follows:-“‘Where the plaintiff is a corporation, the verifying affidavit shall be sworn by an officer of the company duly authorized under the seal of the company to do so.’

6. In the case of Spire Bank Limited vs Land Registrar & 2 others [2019] eKLR the Court of Appeal stated as follows: -“…It is essential to appreciate that the intention behind order 4 rule 1 (4) was to safeguard the corporate entity by ensuring that only an authorized officer could institute proceedings on its behalf. This was to address the mischief of unauthorized persons instituting proceedings on behalf of corporations, and obtaining fraudulent or unwarranted orders from the court. The company’s seal that is affixed under the hand of the directors ensured that they were aware of, and had authorized such proceedings together with the persons enlisted to conduct them. And where evidence was produced to demonstrate that a person was unauthorized, the burden shifted to such officer to demonstrate that they were authorized under the company seal. With this in mind, we dare say that the provision was not intended to be utilized as a procedural technicality to strike out suits, particularly where no evidence was produced to demonstrate that the officer was unauthorized.”

7. Further inAssia Pharmaceuticals vs Nairobi Veterinary Centre Ltd Nairobi (Milimani) HCCC No 391 of 2000 the court held as follows: -“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.”

8. In the present suit, the plaintiff contended that the other directors had knowledge of the institution of the suit and passed the special resolution to grant the law firm of Eliakim Owalla & Company Advocates permission to institute the suit.

9. A perusal of the court record reveals that the resolution dated January 24, 2022 was filed after the filing of suit. It is trite that where the plaintiff is a company a special resolution should be passed to allow an advocate to act on its behalf. The law does not however set out the timelines for the filing of the resolution. This means that failure to file the resolution together with the plaint is not fatal to the suit as the same can still be ratified by the company after the filing of the suit. The plaintiff herein has ratified the position and, in my view, the suit is properly before court. I find no reason to invalidate the suit.

10. In a nutshell, I find no merit in the instant application and I therefore dismiss it with costs.

DATED, SIGNED AND DELIVERED VIRTUALLY AT NAIROBI THIS 8TH DAY OF DECEMBER, 2022. W. A. OKWANYJUDGEIn the presence of: -Ms Nasimiyu for defendant.Mr. Owala for plaintiff/respondent.Court Assistant- Sylvia