James Newton Karanja , Ayub Mugo Njoroge & Kago Nduati v David Muthigu,Peter Ndungu Kimani, Elijah Mungai Mutuambuki & Joseph Ngaca Nganga [2014] KEHC 69 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAKURU

CIVIL SUIT NO.16 OF 2013

JAMES NEWTON KARANJA ….........….… 1ST PLAINTIFF/ APPLICANT

AYUB MUGO NJOROGE……..…......….......2ND PLAINTIFF/ APPLICANT

KAGO NDUATI……………..…….....…….....3RD PLAINTIFF/ APPLICANT

VERSUS

DAVID MUTHIGU…………….....………1ST DEFENDANT/ RESPONDENT

PETER NDUNGU KIMANI......................2ND DEFENDANT /RESPONDENT

ELIJAH MUNGAI MUTUAMBUKI.........3RD DEFENDANT /RESPONDENT

JOSEPH NGACA NGANGA...................4TH DEFENDANT /RESPONDENT

RULING

The application dated 06/02/2013 seeks that:-

(a) The respondents by themselves, servants and/or agents be restrained from purporting to hold or holding a general meeting for the Mai Mahiu Kijabe Longonot Co.  Ltd. and/or holding elections on 07/02/2013 or on any other date pending hearing and determination of the suit.

(b) The respondents be restrained from purporting to act and or presenting themselves as directors and office bearers of the said company pending hearing and determination of the suit.

The background to this is  that the  named company had been deregistered on  13th October 1988 by  the  Registrar of  Companies,  but   it  was   reinstated  by  orders of  the court made in Nrb HCC  Misc. Appl. No.86 of  1989 and thereafter a gazette notice was  published to that effect.

Since its reinstatement, no elections have been held, and the shareholders have not appointed any office bearers. However  the  respondents filed  returns with  the  Registrar of Companies, indicating that  they  and others were  the validly   elected office  bearers of  the   company. On that pretext, the respondents begun harassing people in Mai Mahiu areas, with threats of having their titles cancelled.

The    respondents   introduced   a   different register   of members whom they alleged to   have “vetted" - the vetting involved payment of money.   The  Registrar of Companies declared  the offices  of  the   company vacant and declared an election but   the  respondents  prevented the  election being held   by  creating chaos after realizing that they   would not   be  able   to  manipulate the   results. The Registrar of Companies thus cancelled the meeting and advised the parties to go to court.

Thereafter the  respondents issued notices for an Annual General  Meeting (AGM)  although  the  notice was   only circulated to  a few  individuals and  not  announced  on radio.

The intended meeting is contested as illegal and irregular as:-

(a) The method of determining members who will participate and have voting rights has    not been agreed upon.

(b) The  respondents are  illegally  in office as they have never   been  elected, and in  any  case the  offices  of directors having  been  declared  vacant   by   the Registrar of Companies on  26/10/2012,  then the respondents have  no  mandate to call a meeting.

(c) The notice given was not proper.

The   applicants are   members of  the   company who   own various parcels of land situate in  Mai Mahiu area, having been shareholders  of  the   company whose venture  was land buying.  The company subdivided land amongst its shareholders   and   subsequently   issued   titles   to    its members who enjoyed quiet use and possession until the respondents begun interfering.  Apart from calling for the AGM, the respondents are accused of having used the company's name to file a suit HCCC No.1672 of 2001 (Milimani) seeking reversal of the sub-division and cancellation of titles.   The applicants desire that before the AGM is held,   an independent person conducts the vetting of the participants and supervise the convening of such meeting.  Further,  that  elections ought to  be  the main agenda of  the   meeting, and the  area security and administrative  personnel  be   ordered  to   ensure compliance of the  order.

In opposing the application, the respondents rely on the replying affidavit sworn by Peter   Ndungu Kimani who describes himself as a director of Mai Mahiu  Kijabe Longonot Co.  Ltd.  and contends that the 1st and 2nd applicants,  along with  others, fraudulently procured the Nakuru  Land   Registrar to  open a register in  respect of the  Company in  the  year  1985, yet  the  land owned by the Company had  its own  register at  Ardhi House in  Nairobi. Consequently the   Company’s property was sub-divided into 3777 plots which were illegally transferred to various persons including the applicants.    Since the company has never passed a resolution to cancel the title at Ardhi House, the suit HCC 1672 of 2001 was filed in Nairobi High Court seeking cancellation of the   titles issued and the subdivisions. That suit is on-going.

The respondents maintain that the company has had several Annual General Meetings, the  last one   having been  held  on 19th November  2011   where   retired directions were  replaced and other office  bearers elected - copies  of  minutes  of  the  AGM  are  annexed. The company also filed its annual returns, the last ones being for the year 20 11.

On 1st September  2012,  the   directors of  the   company were summoned  to  Sheria  House  by   the  Assistant Registrar of Companies because the  applicants had complained that the  directors had   refused to  hold  AGM and to involve  members in  meetings.  The Registrar after hearing them held   that the applicants recognised the respondents as the directors.It is contended that the issue of membership is  easily verified from  the  members list    filed   with    the  Registrar  of Companies  and the Company's clerks cross checked by  screening names of members  against  their  national  identity  cards,   the company register and individual share  certificates.  It  is further explained that  persons who   had  received share certificates from  their parents or  those who  had bought shares  from    a  member  and  transferred   them  were allowed to attend the  meeting.

It  was  then that the  applicants demanded that  persons without share certificates be  allowed to  attend  and vote, even  though they  were  not  registered members.

The respondents point out that the Company’s Articles of Association are   clear that only   members issued with share   certificates   are   allowed   to  attend   company meetings and vote. However the Registrar of Companies overruled that   and allowed anyone who    had a title document to   vote.   The    members   pleaded   with  the Registrar that the   company had a rotational retiring signature of three directors every   year from   1997, but this  was    ignored.   As    a result,   no    elections   were conducted and no annual returns were filed.

Further, that under Clause 100 of the  Articles of Association, the  directors are  to hold  office  until the conclusion of the   next AGM, and under Article 116, in the event  that  the    directors  are    not    chosen  at  the subsequent AGM,  the   retiring directors are   declared  to still   be   in   office   and  Article 117  gives   the   company power  to  determine in  what rotation the  directors would hold  office.

The respondents therefore argue that they are validly in office as directors and have the authority to call for the AGM. They fault the Registrar for ignoring the provisions of the   company’s Articles.  They   however acknowledge that  whereas the  members  are   only   2,576,  the    title holders are  15,000 and that it  is  necessary to  hold   the AGM  because as a going concern, the   company cannot function without holding meetings so as to run its affairs, otherwise the  company would have  to be dissolved.

The court directed that the application be disposed of by way of written submissions but as of 27/05/2014, only the respondent's counsel had filed written submissions. The issue here is very simple - should the respondents be  allowed to hold the AGM in their capacity as directors? Who should determine the agenda? I think with  regard to the  issue of surrender of title, the resulting subdivisions and the transfers in   respect of the   3777 portions, my view is that it would  be premature   to determine or even  comment on  this as there is already a suit No.1672 of 2001 (Milimani) pending, relating  to  this issue.

Although the applicants claim that no elections had been held since 1989, the respondents annexed minutes and resolutions of   the latest AGM   held on 19/11/2011, which show that the   respondents were   elected to   the office.   The applicants do not claim to have been unaware of the   meeting nor did they file suit in court contesting the said elections.

Apart from  that,  following complaints  by  the  applicants, the   Registrar  of  Companies  presided  over   this dispute and in  her   ruling dated 18th September 2012, she made orders that:-

"The Directors (the respondents herein) shall call for an Annual General Meeting of the Company by issuing a 21 days’ notice to be held on 26th October 2012. "

The   meeting was to address the   issues and elect the directors of the company in which the   Registrar would attend to vet the members.

I have no  hesitation in  concurring with  the  respondent's counsel that the meeting held  on  26/ 10/2012  essentially recognised that the  respondents were  the  directors of the company stated  as much in her   ruling. The   last AGM held   by the   company was   on   19th November 2011 and the officer bearers are the respondents.

Furthermore, by virtue Articles of  Association of the Company, Article 100,  gives  the  respondents authority to hold  office until the  elections are  held  as it provides:-

Clause 100 "......Any appointed Director shall hold office only until the conclusion of the next following Annual General Meeting of the Company........"

Clause 116 provides that in event of a vacancy falling by virtue of a director's retirement, if the same is not filled up by electing a person, then the retiring director shall be deemed to have been re-elected.

I am  therefore clear in  my  mind that  the  last AGM held on 19th November 2011  saw  the   respondents assume office  as Directors.  The   next   AGM  which should  have been  held   in  2012 was   derailed due  to  the   complaints raised by applicants, so since no  AGM was  held, the respondents  remained  in   office. However  recognising that the company needed to  hold   elections,  they called for  a meeting in  2013 and that is  when the   applicants moved  to  court  to  stop  the   meeting.    I find   no   basis whatsoever to bar the respondents from calling for the company's AGM and I decline to issue the orders sought. The application is dismissed with   costs to  be  borne  by the  applicants.

The  respondents are  at liberty to give  notices for  the  next AGM- within a reasonable period, and publish the notice by sending flyers and putting them in  open public places, as well   as  making an  announcement  over   the  radio. Since they have the Articles of Association that ought to guide them on who will be allowed to attend and vote. The Registrar of Companies is directed to send a representative to attend the meeting and help in vetting the   members and supervise the   elections.   The   County Commissioner Nakuru and the OCS Mai Mahiu police station shall provide security.

Delivered and dated this 11th day of July, 2014 at Nakuru.

H.A. OMONDI

JUDGE