Mogusii Farmers Group Co. Ltd & another v Mose & 27 others; Momanyi & 2 others (Interested Parties) [2022] KEHC 10128 (KLR)

Mogusii Farmers Group Co. Ltd & another v Mose & 27 others; Momanyi & 2 others (Interested Parties) (Civil Case 5 & 4 of 2021 (Consolidated)) [2022] KEHC 10128 (KLR) (6 July 2022) (Ruling)

Neutral citation: [2022] KEHC 10128 (KLR)

Republic of Kenya

In the High Court at Nyamira

Civil Case 5 & 4 of 2021 (Consolidated)

FA Ochieng, J

July 6, 2022

Consolidated with No. 4 of 2021

Between

Mogusii Farmers Group Co. Ltd

1st Plaintiff

Mogusii Tea Co. Ltd

2nd Plaintiff

and

Hudson Mose

1st Defendant

Charles Ondari Achoki

2nd Defendant

Samwel Mogeni Maroko

3rd Defendant

Isaac Manono Achoki

4th Defendant

Milka Motito

5th Defendant

Billiah Ongera

6th Defendant

Isaiah Agwata Okemwa

7th Defendant

Willian Birai

8th Defendant

Yobesh Openda Mokaya

9th Defendant

Steve Kaka Kimori

10th Defendant

Dancan Omenge Ondari

11th Defendant

Peter Okerio

12th Defendant

Justus Obino

13th Defendant

Elizaphan Nyakundi Nyatuka

14th Defendant

Charles Barongo

15th Defendant

Stephen Mboga

16th Defendant

Meshack Ochengo Mokua

17th Defendant

Atomic Nyasinga Nyakundi

18th Defendant

Richard Ayiera Ogeto

19th Defendant

Daniel Mokaya

20th Defendant

Johnstone Sagwe

21st Defendant

Fredrick Gochi

22nd Defendant

Alfred Onsomu

23rd Defendant

James Mokua

24th Defendant

Stanley Misati

25th Defendant

Irene Nyakundi

26th Defendant

Dancan Abuga

27th Defendant

Steve Orina

28th Defendant

and

Ben Orora Momanyi

Interested Party

County Commissioner Nyamira County

Interested Party

Deputy County Commissioner Borabu Sub-County

Interested Party

Ruling

The application dated 22nd February 2022 was filed by the Plaintiffs. It was an application for a Mandatory Injunction to compel the Defendants and the Interested Parties, to move out of the Plaintiffs’ office premises, tea plantation and factory premises. 1. The Plaintiffs told this Court that the 2 companies have approximately 200 shareholders.

2. It was noted that there was a General Meeting of the Applicants, which was held on 21st February 2022. According to the Plaintiffs, the meeting in issue was called for by the Respondents.

3. At paragraph 16 of the supporting affidavit, which was sworn by Erastus Nyamwaya, the Plaintiffs said that the following persons were elected as members of the Board of Directors: -a.Hudson Mose.b.Charles Ondari Achoki.c.Isaac Manono Achoki.d.Bilia Ongera.e.Milka Nyiroria.f.Samuel Mogeni Maroko.g.Pastor Isaac Agwata Okemwa.

4. However, the Plaintiffs took issue with those directors, because they were allegedly not shareholders.

5. Even though the directors were not shareholders, they apparently took over the offices of the Plaintiffs.

6. The Plaintiffs expressed fear that the company assets would be wasted by the directors.

7. According to the Plaintiffs;“The Respondents cannot account for the company property. They are criminals and at best robbery with violence criminals, were the police carrying out their mandate according to the law.”

8. In answer to the application, the Respondents stated that the persons who were elected as directors in the year 2019, ceased to be directors in the year 2020. Pursuant to the Memorandum and Articles of Association, of the 2nd Plaintiff, directors serve for a period of one year, from the date when they are elected.

9. Secondly, the Respondents challenged the legality of these proceedings on the grounds that there had not been any resolutions passed by the directors of the Plaintiffs, to institute the proceedings.

10. The Respondents also challenged the efficacy of the Verifying Affidavit and of the affidavits supporting the application herein, as the deponents did not have the requisite authority to swear the same.

11. Thirdly, the Respondents have pointed out that the Plaintiffs failed to exhibit a resolution of the Board of Directors, which gave instructions to the firm of Nyagaka, Mosota, Isaboka, Kerosi Ondieki & Associates Advocates, to institute these proceedings.

12. The issues raised by the Respondents are fundamental.

13. At the very least, if the Plaintiffs do not provide proof that: -i.There was a resolution to institute these proceedings; andii.a resolution authorizing the deponent of the verifying affidavit,to swear the affidavit; andiii.a resolution to have the law firm of Nyagaka, Mosota, Isaboke, Kerosi Ondieki & Associates Advocates, to institute the proceedings on behalf of the plaintiffs;the Court would be unable to allow the matter to move forward. In other words, unless the Court is satisfied that the suit was filed with appropriate legal authority; and the advocates who filed it were duly authorized by the companies; and also that the persons who swore affidavits were authorized to do so, the court may well strike out the suit.

14. In the case of Steel Formers Limited v SGS (Kenya) Limited & Another, Constitutional Petition No. 379 of 2018 J.A. Makau J. held that it was a mandatory requirement that when a company was instituting a suit, it should pass a resolution authorizing it to do so. The learned Judge said: -“The Petitioner’s failure to file the Company Resolution sanctioning the commencement of the action by the company, leads this Court to no other conclusion but to find that this Petition is fatally defective and it is for striking.”

15. I hold the considered view, that a suit which may end up being struck out for failure to comply with a mandatory requirement, cannot be said to be a prima facie case with a probability of success.

16. Secondly, the Respondents asserted that they were all shareholders in the 1st Plaintiff.

17. If indeed, it is true that the parcel of land which was acquired by the 1st Plaintiff was divided into 2 parts; one for the tea plantation and the other for the residence of the shareholders, I find that an order seeking to compel the Respondents to move out from, (inter alia) their residences would constitute a violation of their rights to their respective portions of land.

18. Thirdly, pursuant to the provisions of Section 257A (1) of the Companies Act, every company is obliged to convene an annual meeting, once every year.

19. The Applicants have conceded that they did not convene meetings in accordance with Section 257A. However, they have attributed the said failure to the fact that the country was ravaged by the unprecedented Corona Pandemic.

20. It is true that Kenya was not an exception to Covid 19, which struck literally the whole world. Almost every single person had no idea how to respond to the pandemic, when it first struck.

21. But it is equally true that man proved to be very adaptable. Within a short time span, we learnt how to adapt to “the new normal.”

22. Virtual Court; Virtual Holy Masses; Virtual Corporate Meetings, Virtual University Classes etc was the new way to get things done.

23. The Plaintiffs have not told this Court why they did not hold a virtual Annual General Meeting.

24. Pursuant to Section 277 of the Companies Act, members have the right to require directors to convene a general meeting.

25. If members call upon the directors to convene a meeting, Section 278 of the Companies Act stipulates that the directors would be required to convene the meeting within 21 days, from the date when the directors receive the requisition for the meeting.

26. On a prima facie basis, therefore, it appears that the meeting which was called for by the Respondents, was in accordance with the law. I so hold because by virtue of the provisions of Section 279 (1) of the Companies Act, the members who had requisitioned for a meeting are entitled to convene a meeting if the directors failed to convene the requisitioned meeting.

27. I also find that the term for the directors who were elected in 2019 had elapsed by operation of the law. In the said circumstances, if those who were elected on 21st February 2022, were compelled to vacate the positions they occupy, there would be a vacuum in the leadership of the 2 companies. I find that such a scenario would be seriously prejudicial to the companies.

28. On a prima facie basis, I find that the removal of the new directors would not, automatically, restore the former directors to their positions, as their terms had expired by effluxion of time.

29. As regards the contention that the Respondents cannot account for the property of the company, I hold the considered view that provided that they hold the positions of directors, they are accountable for the acts of commission or omission, in relation to the assets of the companies. It is not a matter in which they have a choice. The law imposes obligations on directors, and therefore the shareholders can call the Respondents to account.

30. The Plaintiffs have made some blanket statements such as: -a.“….. the 1st interested party has been holding meetings at his office with the Respondents, purporting them to be ‘professionals’ meeting, where they have been hatching plans to destabilise the Applicants/Plaintiffs ..............”b.“……. the Respondents have organized terror gangs which have been terrorising the management, to the extent of threatening their lives ……..c.……. They have appropriated the company property and now the same is in illegal hands and in danger of wastage. The Respondents cannot account for the company property. They are criminals and at best robbery with violence criminals, were the police carrying out their mandate according to the law.”

31. At the moment, there is no evidence which has been provided to the Court, to support those very serious allegations.

32. The Applicants appear to believe that there exists one big conspiracy, to which the Respondents are working with the interested parties and also with the police, to carry out illegal actions.

33. In order for one to be held culpable for a criminal offence, evidence must be made available before the Court before which the said person was facing trial. Until and unless a suspect goes through a trial, before a court of competent jurisdiction, and is convicted, he cannot be called a criminal or a robber.

34. I therefore deem to be most unfortunate, the words which the Plaintiffs have chosen to use in describing the Respondents and the interested parties.

35. If, as the Plaintiffs have asserted, the shareholders have no trust in the directors who were recently elected, they should make use of the law to call for the desired changes. By telling the Plaintiffs to use the law, the Court is suggesting that the members of the 2 companies can use their numerical strength to requisition for appropriate meetings, where appropriate resolutions can be passed.

36. It is not the function of the Court to impose upon or to remove directors from a company.

37. In conclusion, I find that the application dated 22nd February 2022 is without merit: It is therefore dismissed. The costs are awarded to the Respondent; and shall be paid by Erastus Nyamwaya. I so order because, so far, there is no evidence before the Court that his actions were taken with the requisite authority emanating from the Boards of Directors of the 2 companies which have been cited as the Plaintiffs herein.

38. In the event that the Boards of Directors shall ratify the actions taken in these proceedings, they may well indemnify Erastus Nyamwaya.

DATED, SIGNED AT DELIVERED AT NYAMIRATHIS 6TH DAY OF JULY 2022. FRED A. OCHIENGJUDGE