Bethany Vineyards Limited & Joseph Muturi Kamau v Equity Bank Limited, Equity Nominees Limited & Peter K. Munga [2017] KEHC 10047 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

COMMERCIAL AND TAX DIVISION

CIVIL SUIT NO. 518 OF 2011

BETHANY VINEYARDS LIMITED…....................................1ST PLAINTIFF

JOSEPH MUTURI KAMAU…………….........................…2ND PLAINTIFF

VERSUS

EQUITY BANK LIMITED…………..................................1ST DEFENDANT

EQUITY NOMINEES LIMITED……………………....…2ND DEFENDANT

PETER K. MUNGA………………………………...........3RD DEFENDANT

RULING NO. 2

1. The Ruling is in relation to the application dated 24th February 2017, which was brought by the 3rd Defendant, PETER K MUNGA.

2. The application seeks the striking out of the suit brought by the 1st plaintiff, BETHANY VINEYARDS LIMITED, on the grounds that the Company never passed any valid Resolution for the institution of the suit.

3. The Company is also said to have failed to pass any Resolution to appoint the Law Firm of AMING’A OPIYO MASESE & COMPANY ADVOCATESto institute the suit.

4. In relation to the suit by the 2nd plaintiff, JOSEPH MUTURI KAMAU, the applicant says that it should be struck out for want of authority to verify the contents of the plaint.

5. The applicant also asserted that the Company did not authorize either GEORGE CHARLES MBURU KARIITHI or JOSEPH MUTURI KAMAU to swear the Verifying Affidavits in respect of the plaint and of the Amended Plaint.

6. The other issue which the applicant raised is that the 2nd Defendant did not authorize GEORGE CHARLES MBURU KARIITHI to swear the Verifying Affidavit.

7. In his supporting affidavit, Peter K. Munga deponed that his advocates had informed him that there were no resolutions which the Company had passed to authorize either the filing of the suit, the appointment of advocates to represent it, or the specified officer who would swear the Verifying Affidavit.

8. The deponent also said that the suit was invalid because of the lack of the resolutions set out above.

9. It is notable that this application was filed in court on 9th March 2017, whilst the substantive trial of the suit had been scheduled for 27th March 2017.

10. That fact is notable because by the time when the application was filed, both sides to the case had already filed and exchanged such documents as they were going to rely upon to prove their respective cases.

11. It is within that context that the applicant said that;

“…there is no evidence that the plaintiff company did authorize one GEORGE CHARLES MBURU KARIITHI to swear the verifying affidavit in verification of the initial plaint on its behalf”.

12. The applicant exhibited the Verifying Affidavit in issue.  The deponent had, in the verifying affidavit, deponed that;

“1.   THAT I a am an adult male of sound mind sufficiently familiar with the facts herein and also a director of the 1st plaintiff company duly authorized by my co-directors to swear this affidavit on their behalf, hence competent to swear this affidavit”.

13. In an affidavit which was filed to answer to this application, the 2nd plaintiff confirmed that all the directors of the Company, had given authority to George Charles Mburu Kariithi to swear the verifying affidavit.

14. On the strength of the depositions by George Charles Mburu Kariithi and Joseph Muturi Kamau, I am satisfied that the Company had given requisite authority to George Charles Mburu Kariithi to swear the Verifying Affidavit.

15. The Company has also made available to the Court and to the applicant a copy of the Company Resolution pursuant to which the decision to institute proceedings was made.

16. Although the copy which was first produced did not have the company seal, the plaintiff thereafter provided the Resolution which bore the company seal.

17. Ordinarily, the production of that Resolution should have been sufficient to discharge the onus of proving that it was indeed passed, but the applicant has now raised doubts about the authenticity of the Resolution.

18. The doubts are said to arise from the fact that whilst the Resolution was signed by two persons, who are described as Directors of Bethany Vineyards Limited, the Memorandum and Articles of Association of that company had not cited either of those two persons as Directors.

19. The plaintiffs’ answer was that a close look at the signatures on both the Board Resolution as well as on the company’s Memorandum and Articles of Association, will reveal that they were appended by the same persons.

20. In my considered view, the applicant is now asking the court to conduct a trial-within-a-trial, to establish whether or not the Resolution was signed by legitimate directors of the company.

21. Whilst that may appear to be a step calculated to scuttle the suit summarily, a deeper reflection upon the issues raised shows that the applicant had, from the start of the application, asserted that there had been no Valid Resolution.

22. If the persons who had signed the Board Resolution were duly authorized by the juristic persons who are listed as Directors of the Company, then their signatures would render the Resolution valid.  I so find, because neither of the two Directors who signed the Resolution, are listed as Directors in the company’s Memorandum & Articles of Association. The court is therefore unable to make an assumption that the said two persons are legitimate directors.

23. The applicant appreciates, correctly in my considered view, that when there has not been compliance from the outset, there is a window of opportunity for belated ratification.

24. Of course, the plaintiffs have not yet asked the court to permit such belated ratification.  For that reason, the applicant insists that the Plaint and the Amended plaint must be struck out.

25. In the interests of justice, I decline the invitation to immediately strike out the plaint filed by the company.  Instead, I will, reluctantly allow the company to demonstrate, within the next 7 days that the persons who signed the Board Resolution were legitimate Directors of the company.

26. The demonstration shall be done through Affidavits and documents which show how and when the signatories became signatories of the company.

27. It is expected that the documents, if any, should not be limited to internal documents, which are derived only from the company’s own records.  I so direct because the fact of being an appropriately appointed Director, who is duly recognized as such, cannot be a private matter which was only known within the company.

28. By giving these directions, I have not overlooked the letters dated 30th March 2017, from the Registrar of Companies.  Those letters provide the particulars of the Bethany Vineyards Limited, and Nimex Limited.

29. Neither of the signatories to the Resolution are listed as Directors to those 2 companies.

30. But I note that there is no information about the Directors of Consolidated Securities Limited, and of Fatima Holdings Limited, which are listed as the other 2 directors of Bethany Vineyards Limited.

31. I do emphasize that the applicant does not have any obligation, at this stage, to provide any proof about anything.  So it is their choice about whether or not to file any further documents.

32. The onusis upon the 1st plaintiff to satisfy the court that it complied with the terms of its Memorandum and Articles of Association when it appointed the signatories of the Board Resolution as Directors.

33. Finally, I find no reason to warrant the striking out of the 2nd plaintiff’s suit.  To that extent, the application fails.

34. But in relation to the suit by the 1st plaintiff, the Court will make its final orders after taking into account such further material and submissions as those 2 parties will make.

DATED, SIGNED and DELIVERED at NAIROBI this13th day of November2017.

FRED A. OCHIENG

JUDGE

Ruling read in open court in the presence of

Opiyo for the 1st Plaintiff

Opiyo for the 2nd Plaintiff

No appearance for the 1st Defendant

No appearance for the 2nd Defendant

No appearance for the 3rd Defendant

Collins Odhiambo – Court clerk.