Evans Kidero v Andrew Omtatah Okoiti & Oyugi Neto Agostinho Suing As Registered Trustees Of Kenya For Justice Development (Kejude) Trust & 29 Others [2014] KECA 327 (KLR)

IN THE COURT OF APPEAL

AT ELDORET

(CORAM: NAMBUYE, MARAGA & GATEMBU, JJ.A)

CIVIL APPEAL NO. 140 OF 2012

BETWEEN

DR. EVANS KIDERO  ……………………………  APPELLANT

AND

ANDREW OMTATAH OKOITI & OYUGI NETO AGOSTINHO

SUING AS REGISTERED Trustees of KENYA FOR JUSTICE DEVELOPMENT (KEJUDE) TRUST & 29 OTHERS  ……… RESPONDENTS

(Being an appealfrom theRuling and Orderof the High Court of Kenya at Bungoma (A. O.

Muchelule, J) dated and delivered on 4thJune, 2012in

BUNGOMA H.C.C.P.NO. 1 OF 2012)

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JUDGMENT OF THE COURT

1. By a  constitutional  petition dated  26th January  2012 Andrew Omtatah Okoiti and Oyugi Neto Agostinho as registered  Trustees  of Kenyans For Justice and Development (Kejude)  Trust and 29 other persons petitioned the High  Court of  Kenya at Bungoma  for  numerous  reliefs  against the respondents  including declarations  that the Commissioner  of  Lands is required to safeguard  public land; the property known as  L.  R. No. Bukhayo/Nasewa/1500 is public land and that dealings in it by Busia Sugar Company Limited, Mumias Sugar Company Limited or Kaplong Limited are irregular, null and void; the respondents, including the appellant who was  named as   the 9th   respondent  in  the petition, have no legal or constitutional right  to  that  property; an  injunction  to  restrain   the respondents  from dealing with the property; and an order should  issue directed at the Director of Public Prosecutions to investigate some of the respondents and also the appellant to determine whether they are criminally liable.

2. The petitioners,  who are  the respondents  in this  appeal averred that the Government of Kenya compulsorily acquired several parcels of land from members of the Busia community who were not adequately compensated with the intention of establishing Busia Sugar Factory;  the parcels of land acquired from the community  were consolidated into the property known as L.  R. No. Bukhayo/Nasewa/1500  (the property); the property was wrongfully transferred to Busia Sugar Company  Limited; the community was deceived that that Company was a state corporation when in fact it was a private  company; that through  a host of dubious transactions  in which Mumias  Sugar Company Limited  is  implicated and over which the appellant presided, the property  was charged to Mumias Sugar Company Limited for non existent liabilities and ultimately sold in purported exercise of a chargee’s  statutory  power of sale  to Kaplong Limited. Specifically against the appellant, the petitioners averred that despite the fact that Busia Sugar Company  Limited was  not indebted  to Mumias  Sugar  Company Limited, the appellant falsely represented that it was indebted to the extent of over Kshs. 119 million.

3. The petitioners  contended  that the respondent’s  actions and omissions violated numerous constitutional provisions and breached the respondent’s fundamental rights.

4. In answer to the petition, Mumias Sugar Company Limited filed a replying affidavit on 13th February 2012 that was sworn on 10th February 2012 by the appellant as its managing director. In that affidavit, the appellant explained the genesis and nature of the relationship between Mumias Sugar Company Limited and Busia Sugar Company Limited. The appellant deposed that on account of acute  liquidity problems Busia  Sugar Company  Limited was experiencing, it sought the assistance of Mumias Sugar Company Limited, which agreed  to fund and manage  cane development  in  Busia  Sugar Company Limited; that at the request of Kenya Sugar Board, Mumias Sugar Company Limited incurred liabilities on behalf of Busia Sugar Company Limited which were secured by a charge  over the property; Busia  Sugar Company Limited was placed under receivership  by Kenya Sugar Board pursuant to a debenture  over the former’s  indebtedness  relating to sugar development fund/loans  extended by Kenya Sugar Board to Busia  Sugar Company Limited; the receivership was later nullified by the court; when it became  apparent  that the recoverability of debt due to Mumias  Sugar Company  Limited from Busia  Sugar Company  Limited was  in doubt, Mumias Sugar Company Limited resolved to sell the property in exercise of its power of sale under the charge; having  obtained  a valuation report  as regards the current value of the property, Mumias Sugar Company Limited entered into an agreement for sale to sell the property to Kaplong Limited on 7th  July  2011; the sale  of the property by private  treaty to Kaplong Limited was sanctioned by the court; that the court order sanctioning the sale  is  the subject of a  civil suit in Bungoma High Court;  and that all dealings between  Busia  Sugar Company Limited  and Mumias  Sugar Company Limited were open and above board. With the appellant on behalf of Mumias Sugar Company Limited prayed for the dismissal of the petition.

5. The appellant took the view that he was wrongly  joined in the petition as no cause of action was disclosed in the petition against him. On 6th February 2012 the appellant  presented  a notice of motion to the High Court and sought an order for his name to be expunged from the proceedings and for the petitioners to be condemned to pay his costs for wrongly dragging him to court. In the grounds set out on the face of that application and supportedby his affidavit, the appellant contended that the petitioners have not in the petition demonstrated any wrongs committed by the appellant in his private capacity; in his capacity as managing director  of Mumias Sugar Company Limited, he cannot be liable  for  wrongs allegedly committed by the company which is a separate and distinct legal entity; there is no basis for his inclusion as a respondent   in the matter; and that his inclusion in the matter was actuated by extreme malice on the part of the petitioners.

6. To further support and demonstrate that his inclusion in the petition as a respondent was actuated by malice, the appellant filed a further affidavit on13th February 2012 in which he deposed that one of the petitioners, Andrew Omtatah Okoiti, had prior to filing the petition threatened“to bring out the Nasewa land  issue   personally   against”him  unless  his   request  for intervention in the settlement of his claim that was pending in court arising from an accident involving his tractor and a vehicle belonging  to Mumias Sugar Company Limited was settled on his terms.

7. In response, Andrew  Omtatah Okoiti swore two replying affidavits on 16th March 2012 and 31st March 2012 respectively in which  he deposed that the appellant is a necessary  party in the petition; that some of the allegations and prayers in the petition are against the appellant personally; apart from the appellant  being the managing  director of Mumias  Sugar Company Limited, the petitioners  “reasonably  suspected  that he abused his office and engaged in criminal activities which were meant for personal gain”and that the court ought to hear the petition for its “ full, effective and final determination.”

8. Regarding  the claim that the petition was  actuated  by malice, Andrew Omtatah Okoiti set out in detail his dealings with the appellant after which he denied any malice in joining appellant in the petition.

9. After hearing the parties, the learned judge of the High Court dismissed the appellant's motion. It is against the background that the appellant complains that the learned judge of the High Court erred in dismissing his application and hence the appeal to this Court.

The appeal and submissions by counsel

10. The grounds on which the appellant has challenged the decision of the High Court  as set out in the memorandum of appeal are that the judge based his decision on his own construction of the case instead of basing his decision on the evidence and the material placed before him through the appellant’s responses  to the petition; the judge did not appreciate the nature of the petition and the reliefs that were sought by the petitioners; the judge failed to distinguish between Mumias Sugar Company Limited and the appellant and erred in holding that the appellant was a necessary party to the petition; and that the learned judge erred in refusing to strike out the name of the appellant from the proceedings.

11. At the hearing  of the application  before us Professor  T. Ojienda  senior counsel appearing for the appellant submitted that the learned judge did not address  the complaints  raised in the application  and submissions  and in particular the consideration  that Mumias  Sugar Company  Limited is  a separate and distinct legal person from the appellant; complaints relating on the appellant touch on him qua managing director of the company and that he was joined in the petition without any basis; no basis was also laid in the petition for the reliefs or prayers directed at the appellant; the learned judge avoided dealing with the issues taken up by the appellant including the fact that the appellant,  as a director,   is in law separate from the company   as stressed  in Bachoo Patel vs. Stanley George Wamutura [2010] eKLRthat  followed the age old principle  articulated  in Salomon vs. Salomon [1897] AC 78where  the House  of Lords categorically  stated  that the company is in law a different person from its members.

12. Counsel for the appellant also reffered us to the decision of this Court in Victor Mabachi & Anor vs. Nurturn Bates Ltd [2013] eKLRwhere this Court held that it is a breach of the principle of common law that where the principal is disclosed, the agent is not to be sued; in the present case, the principal Mumias Sugar Company Limited was disclosed and that its agent the appellant, its managing director could not therefore be sued; the prayer in the petition for the appellant to be investigated, being the only prayer that touches on the appellant, cannot  be a basis for joining the appellant in the petition as  nothing is  shown to have been done by the appellant  in any capacity other than that of  the managing director of  Mumias  Sugar Company Limited.

Counsel concluded his arguments by referring us to numerous decisions of this Court that stand for the proposition that the allegations in the petition pertaining to alleged infringement of constitutional rights and breaches of human rights must not be generalized and must express with precision, the nature, manner and extent of the alleged violations.

13. Learned counsel Mr. Simiyu Makhoha  stated that the 10th respondent is not affected.

14. Mr. C.  Kanjama  for  the 1st    to  30th   respondents  (excluding the 10th respondent) submitted that a person who commits a crime cannot purport to have done so on behalf of another person; the petitioners in this case are alleging that the appellant is involved in perjury and fraud in relation to the property; the appellant cannot in those circumstances  claim agency  as he acted in excess of his authority; specific complaints  are made in the petition against the appellant in paragraphs 35,38,39,48 thereof and that prayers E, F and I touch on the appellant directly; the petitioners allege that perjury and other offences were committed by the appellant; this being a constitutional matter coming on appeal, this Court should adopt a liberal approach in light of Articles 22 and 23 of the Constitution; if the appellant's name is struck out from proceedings, some of the prayers sought by the petitioners will  no longer be sustainable. It is therefore necessary that the appellant should remain a party in the petition.

15. According to Mr. Kanjama, the authorities  cited are  distinguishable;  the authorities on the question of separate entity in particular do not apply to proceedings  of a  constitutional  nature  where  each person  is  personally liable; the petition is  specific  on the complaints  made and the prayers sought; and that the appellant  should not be allowed to use  a  collateral attack to avoid ventilation of grave matters affecting many farmers. With that Mr. Kanjama asked us to dismiss the appeal.

Determination

16. We have considered this appeal and the submissions by learned counsel for the parties.  The order of the High Court appealed  from was  made  in exercise  of the court’s  discretion.  For this  Court to interfere  with the exercise of that discretion, the appellant must satisfy us that the learned judge misdirected himself in some matter and as a result arrived at a wrong decision  or it is  manifest  from the case as a whole   that the judge was clearly wrong in the exercise of his discretion and that as a result there has been injustice. In Mbogo and Another v Shah [1968] EA 93,Sir Clement De Lestang, V. -P of the predecessor of this Court had this to say on any challenge of the court’s exercise of discretion:

“Ithink  itiswell settled  that  this  Court  will not interfere  with the exercise of…discretion by an inferior court unless it is satisfied that its decision is clearly wrong, because it has misdirected itself or because it has acted on matters on which is should not have acted or because it failed  to take into consideration matters which it should have taken into consideration   and in  doing so  arrived    at  a  wrong conclusion.”

17. Has the appellant satisfied us that the learned judge was wrong in his approach?  Although the appellant  set  out ten grounds  of  appeal,  the substance  of the complaints is that the learned  judge failed to take into account that Mumias Sugar Company Limited that was named  as the 6th respondent in the petition and the appellant who was the managing director of that company who was named as the 9th respondent in the petition are separate  legal personalities.  Related  to that is  the complaint hinged on decisions of this Court inAnarita Karimi Njeru vs. R [1976-80] 1 KLR

1272 as  followed in Mumo Matemu vs. Trusted Society of Human Rights Alliance & 5 others [2013] eKLRthat the no specific allegations have been  made  against the appellant in  the petition and that the requirement that constitutional petitions are to be pleaded with reasonable precision was breached.

18. The proposition put forward by counsel for the appellant that a company is a separate  legal entity from its directors  and shareholders is undoubtedly correct. There are many judicial pronouncements to that effect going back to Salomon vs. Salomon & Co Ltd(supra). In a recent  decision of this Court in the case  of Victor Mabachi & Another vs. Nurturn Bates Limited(supra) this  Court re-affirmed  that principle  when allowing an appeal from a decision of the High Court refusing to strike out the name of the appellant therein who was an agent of a disclosed  principal.

19. We are not satisfied that the decision of the High Court goes against that established legal principle. In our view, the learned judge did not in his ruling say that the appellant  is  personally  responsible  for the actions  or omissions of the Mumias Sugar Company Limited. What we understand the judge to have said when he ruled that “the 9thRespondentis in my view a necessary  party to the petition who has to account  for the alleged violations, if at all...."is that on the face of the petition a cause of actionagainst the appellant was disclosed and that whether the allegations made against each of the respondents in the petition are sustainable  is a matter for determination during the hearing of the petition. In that regard, this is what the learned judge said:

“Regarding the9thRespondent,Iget thepetitioners tobesayingthat he was  the  main mover  of  the  events that eventually  led to the sale of the suit premises to the 8thRespondent,  thathe did  this  when he was  privy  to  the information that the 6thRespondent was not owed anymoneyby the7thRespondent.Petitioners regard him to be themoverof the illegal  consent that led to the sale of thesuit premises.

All these allegations  by the  Petitioners  against  each Respondent, or all of them, will be subjected  to inquiry during trial and will have to be proved.  The 9thRespondentisarguing  that  whatever he did  was  on behalf  of  the 6thRespondentfor whom  he was  working   as  the  managing director,  and he did  nothing  in his  personal  capacity.  I consider this to be his defence which he will pursue during the  main hearing. It  is  during  that  hearing  that  he will argue that whatever violations that may be proved against the

6thRespondent cannot attach to him as the two areseparateand distinct legalentities.”

20. We therefore reject the complaints that the learned judge of the High Court failed to make a distinction between the appellant and the 6th Respondent in the petition or that no specific  allegations  have been made  against  the appellant in the petition.

21. The complaint that the remedies sought against the appellant in the petition are untenable is founded on the premise that there is no demonstration that the violations or wrongs allegedly done by the appellant were done in his private capacity. Having regard to the conclusion that we have reached that the appellant has not satisfied us that the learned judge of the High Court

wrongly exercised his discretion in refusing to strike out the name of the appellant, the question of whether the remedies sought are tenable or not will  be a matter  for determination  by the High Court after hearing  the petition.

22. The upshot is that the appellant has not demonstrated to us that the learned judge of the High Court misdirected himself with the result that he arrived at a wrong  decision. It is also not manifest from the case as a whole  that the judge was clearly wrong in the exercise of his discretion.

23. The result is that we dismiss this appeal with cost.

Dated and deliveredat Eldoret this 10thdayof October, 2014.

R. N. NAMBUYE

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JUDGE OF APPEAL

D. K. MARAGA

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JUDGE OF APPEAL

S.GATEMBU KAIRU

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JUDGE OF APPEAL

I certify that this is a

true copy of the original.

DEPUTY REGISTRAR