Majestic Security Systems Limited v Magnate Ventures Limited, Rahab Karei Mukiama, Titus Karauka Mukiama, Rregistrar of Tittles, Nairobi & Registrar of Companies [2020] KEELC 345 (KLR)

REPUBLIC OF KENYA

IN THE ENVIRONMENT AND LAND COURT

AT MILIMANI

ELC CASE NUMBER 212 OF 2018

MAJESTIC SECURITY SYSTEMS LIMITED.........................................PLAINTIFF

VERSUS

MAGNATE VENTURES  LIMITED........................................................1ST DEFENDANT

RAHAB KAREI MUKIAMA....................................................................2ND DEFENDANT

TITUS KARAUKA MUKIAMA..............................................................3RD DEFENDANT

RREGISTRAR OF TITTLES, NAIROBI..............................................4TH DEFENDANT

REGISTRAR OF COMPANIES.............................................................5TH DEFENDANT

R U L I N G

Introduction

1. This is a ruling in respect of three applications and a preliminary objection. The first application is dated 3rd May, 2018. It is brought by the plaintiff and it seeks the following orders: -

a) Spent

b) Spent

c) That there be at temporary injunction restraining the 1st,  2nd and 3rd Defendants by themselves their servants or agents or any of them howsoever from dealing, entering into the suit premises ,fencing,alienating,damaging or demolishing structures belonging to the Plaintiff, building, selling, transferring and/or in any way interfering with the Plaintiff’s lawful use of L.R. No. 21069 (Grant No. 78042 until hearing and determination of the suit.

d) That costs of this application be provided for.

2. The second application is dated 22nd October, 2018. It is brought by the plaintiff and it seeks the following orders: -

i) That the counterclaim and the 1st Defendant’s Statement of defence be struck out in its entirety.

ii) That the counterclaim and the 2nd and 3rd Defendant’s Statement of defence and counterclaim be struck out in entirety.

iii) That the 2nd and 3rd Defendant’s Statement of Defence and Counterclaim be struck out in its entirety.

iv) That the costs of this application be provided for.

3. The third application is dated 13th March, 2019. It is brought by the     1st Defendant and it seeks the following orders: -

i) The plaint dated 3rd May, 2018 be and is hereby struck out and the suit dismissed in its entirety.

ii) Costs of this application and of the dismissed suit be borne personally by Esther Jeanet Ngenyi and Isaiah Kandie, Advocate.

4. The Preliminary Objection is brought by the 2nd and 3rd Defendants and it raises the following grounds: -

a) That the same is incompetent as this suit is incompetent and void ab initio because the Plaintiff as pleaded has no shareholdings and has one director appointed posthumously;

b) That the same is frivolous, vexatious and otherwise an abuse of the process of the court as the legal instruments were admittedly handed over to the 2nd and 3rd Defendants as well as possession of the suit land whose title was transferred to the 1st Defendant who was similarly placed in possession and the injunction would be late by 15 years.

c) The suit is res judicata as the issue of ownership of majestic Security Systems Limited was raised in HC.J.R No. 424 OF 2016 and the purported plaintiff through its advocates on record refused failed and or neglected to file any submissions on the matter after submitting to the Honourable Court’s jurisdiction;

d) That the alleged Plaintiff director has no legal capacity to institute court proceedings as her capacity is not demonstrated and indeed being a posthumous director is perpetrating an illegality and it would be unlawful for this Honourable Court to aid in this illegality and Esther Jeanet Ngenyi should either withdraw this suit with costs or establish and how and when she became a non-shareholding director and her relationship to the deceased directors.

5. At the centre of the suit filed by the  Plaintiff and the counterclaims by the 1st Defendant on the one part and the counterclaim by the 2nd and 3rd Defendant on the other part is L.R. 21069 (suit property) which is currently registered in the name of the 1st Defendant. Prior to the transfer of the suit property to the 1st Defendant, the same was registered in the name of the Plaintiff. It is alleged that the directors of the plaintiff company signed a power of attorney which granted authority to Metra Investments Limited to sell the suit property. The 2nd and 3rd Defendants who are associated with Metra Investments Limited then sold the suit property to the 1st Defendant. At the same time, it is alleged that the 2nd and 3rd Defendants fraudulently presented themselves as directors of the Plaintiff company and thus sold the suit property to the 1st Defendant.

6. One of the directors of the plaintiff company made a complaint to the National Land Commission which led to the National Land Commission directing the Chief Land Registrar to register a caveat against the title to the suit property. It is this caveat which is the basis of the counter-claim  by the 1st Defendant against the Land Registrar.

7. The 2nd and 3rd Defendants allege that they were improperly removed as directors of the plaintiff company. This is the basis upon which they have filed a counter-claim in which they seek among other orders  restoration of their names into the records of the company registry.

8. There was no response to the third application by the plaintiff. The court record shows that there were no directions given regarding the same and this explains why the plaintiff did not respond to it. The 1st defendant has however submitted on the same in its submissions.

The Preliminary Objection

9. The 2nd and 3rd Defendants contend that the issue of directorship of the Plaintiff Company was dealt with in High Court Judicial Review Application No. 424 of 2016 and that the matter was settled and that litigation has to come to an end.

10. The Plaintiff submitted that what the 2nd and 3rd Defendants have raised as a preliminary objection does not amount to one and ought to be dismissed. The Plaintiff also argues that the issue of res judicata does not arise as the issues being raised in this suit were not decided upon in the Judicial Review Application.

11. I have considered the submissions by the 2nd and 3rd defendants and the submissions by the plaintiff on the Preliminary Objections raised. In the case of Mukisa Biscuit Manufacturing Company limited Vs West End Distributors Limited (1969) EA 696 a Preliminary Objection was defined in the following terms:

“a preliminary objection is in the nature of what used to be a demurrer. It raises a pure point of law which is argued on the assumption that all facts pleaded by the other side are correct. If cannot be raised if any fact has to be ascertained or if what is sought is the exercise of Judicial discretion.”

12. It is clear from the grounds raised particularly grounds numbers 1, 2 and 4 do not raise any pure point of law which can pass a test of a Preliminary Objection. This is because what is being raised requires ascertainment of facts and, therefore, they cannot form a basis of a preliminary objection.

13. On the issue of res judicata. It is clear that the High Court in the Judicial Review Application did not deal with the issue of ownership of the suit property as that was left for the Environment and Land Court and that is why this suit was filed before this court. In the application filed before the High Court, the issue before the court was whether the National Land Commission had jurisdiction to entertain an issue of ownership between two private entities where there was no issue of whether the suit property had been unlawfully or illegally converted to private land.

14. It is, therefore clear that the Preliminary Objection by the 2nd and 3rd Defendants lacks merit. The same is hereby dismissed with costs of the Plaintiff.

It is so ordered.

The First Application.

15. The Plaintiff contends that the 2nd and 3rd Defendants used a fraudulent power of Attorney to transfer the suit property to the 1st Defendant. The plaintiff contends that the alleged Power of Attorney was not executed as required and that it was never registered and that the advocate who is purported to have singed the Sale Agreement which led to transfer of the suit property to the 1st Defendant denounced the said agreement and that the signature on the power of Attorney was found to be a forgery.

16. The purported change of directors in the company registry in respect of the Plaintiff Company was also found to have been fraudulent as the Plaintiff company’s directors were never replaced by the 2nd and 3rd Defendants. The Plaintiff, therefore, prays for an injunction to stop the 1st, 2nd and 3rd Defendants from employing the same fraudulent means to dispose of the suit property.

17. In its opposition to the application by the plaintiff, the 1st defendant contends that the directors of the plaintiff company died in 1998 and 2016 and therefore they could not be directors as per the CR. 12 dated 9th November, 2016. The 1st Defendant further argues that Esther Jeanet Ngenyi has not demonstrated that she is a legal representative of any of the estates of the deceased directors and cannot, therefore purport to bring a suit let alone a notice of motion.

18. The 1st defendant further argues that it is the registered owner of the suit property which it purchased for Ksh.48,000,000/- after carrying out due diligence which established that the 2nd and 3rd Defendants were directors of the plaintiff company.

19. The investigations by the Directorate of Criminal Investigations later revealed that the 1st, 2nd and 3rd Defendants were not criminally liable for the accusation made against them. The director of the 1st Defendant stated that one of the directors of the Plaintiff Company tried to extort money from him so that he could stop pursuing the land issue but that he refused. It is after this refusal that the same director went to complain before the National Land Commission which cancelled the title held by the 1st Defendant, a decision which was later quashed by the High Court.

20. In their opposition to the Plaintiff’s application, the 2nd and 3rd Defendants question the capacity of the deponent of the Supporting affidavit to the application for injunction arguing that she has failed to disclose how she was appointed a director of the Plaintiff Company and who the other directors are. They also argue that the deponent is feigning ignorance of the fact that the suit property was given to them as a replacement of L.R. No. 209/12744 which her husband had intended to sell to them but which he sold to someone else before deciding to give them the suit property which was bigger than the one he had sold to a third party and that he asked to be added ksh.1. 5 Million which was paid to him.

21. The 2nd and 3rd Defendants accuse the deponent of the supporting affidavit of using the company registry to frustrate them as well as the Directorate of Criminal Investigations and the National Land Commission which tried to nullify the title held by 1st Defendant but which action was reversed by the High Court.

22. I have considered the application of the Plaintiff as well as the opposition thereto by the 1st, 2nd and 3rd Defendants. The only issue for determination is whether an injunction should issue as prayed for by the Plaintiff. There is no contention that the suit property is currently registered in the name of the 1st Defendant. There is also no contention that it is the 1st Defendant which is in possession but there are no developments on the same.

23. There is also no contention that the plaintiff was the original allottee of the suit property and was the first registered owner. There are allegations that the ownership of the plaintiff changed hands to 2nd and 3rd Defendants who then sold the suit property based on their alleged directorship in the plaintiff company. The 1st Defendant claims to have purchased the suit property after carrying out due diligence and establishing that the 2nd and 3rd Defendants were directors of the plaintiff company.

24. It is clear from a perusal of the documents presented before the court as well as the averments made in the affidavits filed herein that there are serious contested facts as to how ownership changed from the Plaintiff to the 2nd and 3rd Defendants who then sold the  suit property to the 1st Defendant. This being the case, the best the court can do is to order that the obtaining status quo be maintained. The suit property has not been developed. There should be no development of the suit property and there shall be no sale, charging or any other action as would change the character of the suit property until this case is heard and determined. The costs of this application shall be in the cause.

It is so ordered.

The Second Application

25. In this application, the Plaintiff contends that the 1st Defendant’s defence and counterclaim ought to be dismissed as the 1st Defendant has counter-claimed against the 4th Defendant only and that the Plaintiff has no opportunity to respond to the Counterclaim.

26. In response to the Plaintiff’s application, the 1st Defendant contends that it has filed a counterclaim against the 4th defendant and did not have to direct its claim to the Plaintiff from which it does not have a relief to claim against. The 1st Defendant cannot be expected to file a notice of claim against a co-defendant as it is not claiming any indemnity against the 4th Defendant.

27. In their response to the application by the Plaintiff, the 2nd and 3rd Defendants state that, it is the husband of Ngenyi who surrendered the original title to the suit property to them and that he signed a power of Attorney and M/s Ngenyi cannot, therefore, claim that the title was given to them to enable them subdivide the suit property for purposes of hiving off one acre which they intended to purchase.

28. The 2nd and 3rd Defendants argue that they would not have been given a PIN by Kenya Revenue Authority if they did not have evidence that they were Directors of the Plaintiff Company. They argue that the plaintiff company only had the suit property as its asset and that it became convenient to file change of Directors to avoid incurring stamp duty.

29. I have considered the plaintiff’s application as well as the opposition to the same by the 1st, 2nd and 3rd Defendants. The only issue for determination is whether the defences and counterclaims by the 1st, 2nd and 3rd Defendants should be struck out. It is trite law that striking out of a pleading should be done sparingly considering the peculiar circumstances of each case. This a contested litigation involving how a property changed ownership. There are allegations that the directorship of the plaintiff company was achieved through fraudulent means.

30. The 1st Defendant alleges to have purchased the suit property after it was convinced that the 2nd and 3rd Defendants were directors in the plaintiff company. There is no contention that there is a caveat which was registered against the title at the behest of the National Land Commission. The defence of the 1st Defendant is not so hopeless as to be struck out. Its counter-claim is also not without merit. It should not be stuck out.

31. The 2nd and 3rd Defendants claim that they lawfully became directors of the Plaintiff Company. Their counterclaim is not so hopeless as to be struck out. In matters to do with land, it is in very rare cases that a defence or claim can be struck out. The fact that the plaintiff has no opportunity to answer to a counter-claim which is not directed at it is no ground for seeking to strike out the counter-claim by the 1st Defendant. A party cannot compel another to seek a relief against it if such relief cannot be directed at it. I find that the application by the plaintiff lacks merit. The same is dismissed with costs to the 1st, 2nd and 3rd Defendants.

It is so ordered.

The Third Application

32. This application seeks to have the plaintiff’s suit struck out with costs being borne by Esther Jeanet Ngenyi and Isaiah Kandie personally.  As I said hereinabove, the court did to give directions on this application but because the 1st defendant decided to address the same. I will proceed to deal with it so that we do not have to come back to it.

33. There was no response filed by the Plaintiff and the reason is clear. There are weighty issues to be determined in this suit. The plaintiff’s suit is not so hopeless as to be struck out. The 1st Defendant was contending that there was no board resolution made authorizing the filing of this suit. The Plaintiff Company has demonstrated that there was such a resolution and the 1st Defendant cannot claim that the resolution was made after the suit had been filed and was backdated.

34. The 1st Respondent also took issue with the advocate failing to demonstrate that he had instructions to act for the plaintiff. The plaintiff demonstrated through affidavit that the advocate had instructions to act for the plaintiff. There is therefore, no basis upon which the 1st Defendant can claim that the instructions were backdated. I find no merit in this application which is dismissed with no order as to costs as there was no response to the same or even mention about the application in the plaintiff’s submissions.

It is so ordered.

Disposition

35. In summary thereof, I make the following final orders: -

1) The Preliminary objection by the 2nd and 3rd Defendants is dismissed with costs to the Plaintiff.

2) An order of maintenance of status quo is granted in respect of Notice of Motion dated 3rd May, 2018. For avoidance of doubt, it is the 1st Defendant which is in possession of L.R. No. 21069. There shall be no development on the suit property, no sale, no charging or carrying out any act which will alter the status of the suit property by any party until the hearing and determination of this suit.

3) The costs of the Notice of Motion dated 3rd May, 2018 shall be costs in the cause.

4) The Notice of Motion dated 22nd October 2018 is dismissed with costs to the 1st, 2nd and 3rd defendants.

5) The Notice of Motion dated 13th March, 2019 is dismissed with no order as to costs.

Dated, signed and delivered in Nairobi on this 11th day of November, 2020.

E .OBAGA

JUDGE

In the Virtual Presence of:-

Mr. Njeru for 2nd and 3rd Defendants.

Mr. Kamau for 4th and 5th Defendants.

M/s Ang’awa for Mr. Havi for 1st Defendant

Court Assistant : Hilda

E .OBAGA

JUDGE