GILBERT CHEGE v KENYA INSTITUTE OF APPLIED SCIENCE,JACKSON ADEDE IRAVUNAH & EVELYN IRAVUNAH [2011] KEHC 821 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT ELDORET

CIVIL SUIT NO. 206 OF 2011

GILBERT CHEGE

T/A ELDORET CONFERENCE CENTER:::::::::::::::::::::::::::::::::::::::::::PLAINTIFF

VERSUS

KENYA INSTITUTE OF APPLIED SCIENCE:::::::::::::::::::::::::::1ST DEFENDANT

JACKSON ADEDE IRAVUNAH::::::::::::::::::::::::::::::::::::::::::::::::::2ND DEFENDANT

EVELYN IRAVUNAH:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::3RD DEFENDANT

RULING

The 2nd defendant, Jackson Adede Iravunah and the 3rd defendant, Evelyn Iravunah,have applied, by Chamber Summons dated 16th September, 2010 for one order namely that their names be struck out for being improperly enjoined in this suit. They contend that as directors of the 1st defendant they cannot be sued in their own names for claims against the 1st defendant.

The plaintiff, on his part, contends that at the time he dealt with the 2nd and 3rd defendants, they did not disclose that they were acting as directors of the 1st defendant and it would now be unfair to accede to the order they seek, since they are necessary parties.

The plaintiff, in his plaint, describes the 1st defendant as a private institute having a common seal with registered offices in Nairobi and Eldoret.  In paragraph 5 of the same plaint, he avers that he entered into a contract with the defendant to buy hostel business from the 1st defendant. In the agreement exhibited by the plaintiff, the only parties thereto are the plaintiff and the 1st defendant. The 2nd and 3rd defendants are mentioned nowhere.

It is plain that the plaintiff does not appreciate the separate corporate identity of the 1st defendant hence his contention that he did not know that he was dealing with the 2nd and 3rd defendants as the directors of the 1st defendant yet the agreement of sale which is the foundation of his claim is in the name of the 1st defendant as the only seller of the hostel business. It is a basic principle of Company Law that a company has a distinction and separate personality from its shareholders and directors even where the directors are also the shareholders. (See the precedent setting case of Salomon -Vs- Salomon and Company Limited [1957] AC 22. )  As a separate legal entity, its property is distinct from that of its shareholders and directors. It follows therefore that if the company herein sold its property or business to the plaintiff, it is only proper that it bears the consequences. In the premises, I find and hold that the 2nd and 3rd defendants, as directors of the 1st defendant have no capacity to be sued for wrongs committed by the 1st defendant and have therefore improperly been joined in this suit.

I accordingly allow the 2nd and 3rd defendants’ application dated 10th September, 2010 and order that the two be and are hereby struck out of this suit.

As the plaintiff appears to have dealt with the two, the proper order on costs is that each party bears its own costs.

It is so ordered.

DATED AND DELIVERED AT ELDORET

THIS 7TH DAY OF DECEMBER, 2011

F. AZANGALALA

JUDGE

Read in the presence of:

Mr. Kitur H/B for Mr. Kathili for the plaintiff and

Mr. Chepkwony H/B for Mr. Andambi for 2nd & 3rd Defendants

F. AZANGALALA

JUDGE

7TH DECEMBER, 2011