Mwati v Muli & 3 others; Ukamba Agricultural Institute (Affected Party); Mwaina & 8 others (Interested Parties) [2022] KEHC 12702 (KLR)

Mwati v Muli & 3 others; Ukamba Agricultural Institute (Affected Party); Mwaina & 8 others (Interested Parties) (Civil Suit E878 of 2021) [2022] KEHC 12702 (KLR) (Commercial and Tax) (8 July 2022) (Ruling)

Neutral citation: [2022] KEHC 12702 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Civil Suit E878 of 2021

A Mabeya, J

July 8, 2022

IN THE MATTER OF: UKAMBA AGRICULTURAL INSTITUTE AND IN THE MATTER OF: COMPANIES ACT NO 17 OF 2015 AND IN THE MATTER OF: SECTIONS 7, 146, 147, 148, 149, 151, 152, 157, 158, 215, 217, 238, 239, 240, 241, 275A, 662, 679, 680, 721 OF THE COMPANIES ACT NO 17 OF 2015 -AND- IN THE MATTER OF AN APPLICATION FOR PROTECTION OF SHAREHOLDERS AGAINST OPPRESSIVE CONDUCT AND LEAVE TO COMMENCE A DERIVATIVE ACTION ON BEHALF OF UKAMBA AGRICULTURAL INSTITUTE.

Between

Onesmus Kauna Mwati

Applicant

and

Stephen Ndambuki Muli

1st Respondent

Mccullogh Enterprises Limited

2nd Respondent

Pietz Holdings Limited

3rd Respondent

Eric Kinyowe Muli

4th Respondent

and

Ukamba Agricultural Institute

Affected Party

and

James Munywoki Mwaina

Interested Party

Simon Kimote Mwalali

Interested Party

Francis Muthengi Nzeveka

Interested Party

Jonathan Kithusi Nzyoka

Interested Party

Mary Ndinda Kimwele

Interested Party

Jonathan Kavuvi Mutia

Interested Party

Kennedy Kianda Nyaa

Interested Party

Stephen Mutiso Muia

Interested Party

Eric Mutinda Mutisya.

Interested Party

Ruling

1. By a motion on notice dated October 25, 2021, the applicant sought, among other prayers, leave to institute a derivative claim against the respondents.

2. The 2nd, 3rd and 4th respondent lodged a preliminary objection dated November 12, 2021 contending that the suit was res judicata as the reliefs sought were the subject of the proceedings in HCCC No 218/2016 Onesmus Kauna Mwati and 19 others v Ukamba Agricultural Institute & 3 others.

3. The affected company filed a similar objection dated November 12, 2021 and the 1st defendant filed his on November 15, 2021 on the similar grounds among others.

4. The main objection is that the present suit is res judicata as the reliefs sought were the subject of HCCC No 218/2016 Onesmus Kauna Mwati and 19 others v Ukamba Agricultural Institute & 3 others where a determination was made.

5. Section 7 of the Civil Procedure Act provides: -“No court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a court competent to try such subsequent suit or the suit in which such issue has been subsequently raised, and has been heard and finally decided by such court.”

6. On record is a ruling delivered on August 16, 2018 by Sergon, J in High Court Civil Suit Number 218 of 2016. In that ruling, it is shown that the applicant had lodged the said suit vide a plaint seeking judgment in the following terms: -“i)That all rent proceeds from all the properties of Ukamba Agricultural Institute (UKAI) starting September, 2016 be deposited into court pending proper elections in compliance with the company constitution.ii)That 2nd, 3rd and 4th respondents should be compelled to account for all rent and or proceeds received from tenants in respect of all Ukamba Agricultural Institute (UKAI) property within fifteen (15) days from the date of the order.iii)That 2nd, 3rd and 4th respondents should be compelled to provide audited financial accounts for all assets and liabilities of all Ukamba Agricultural Institute (UKAI) property within fifteen (15) days from the date of the order.iv)that the 2nd, 3rd and 4th respondents and the rest of the management board be declared to be unlawfully in office.v)Elections of UKAI officials will be carried out within 45 days of this order.vi)General, exemplary and punitive damages upon 2nd to 4th defendants for breach of fiduciary obligations.vii)Any other relief the court deems fit.”

7. Contemporaneous with the plaint, the applicant had filed an application dated August 17, 2016 in that suit wherein he sought orders, inter alia, as follows: -“a)That leave be granted to continue this suit as a derivative action.b)….c)…d)That all proceeds from all the properties of Ukamba Agricultural Institute (UKAI) starting from September 2016 be deposited into court pending determination of this suit.e)That the 2nd, 3rd and 4th respondents should be compelled to account for all rent and or proceeds received from tenants in respect of all Ukamba Agricultural Institute (UKAI) property within fifteen (15) days from the date of the order.f)The 2nd, 3rd and 4th respondents and the rest of the management board be declared to be unlawfully in office.g)That all the necessary and consequential orders and directions be given.h)That costs of this application be provided for.”

8. In the present application, the applicant seeks leave to commence a derivative claim in respect of acts or omissions by the 1st respondent and an order to have rent deposited in court in respect of the affected company’s property pending the determination of the suit.

9. In his determination, Sergon J held that the plaintiffs had not met the conditions necessary to grant leave to proceed with that suit as a derivative action and dismissed the application. Further, it was held that the dispute between the parties ought to be solved through the affected company’s internal mechanisms via the office of the registrar of companies.

10. Civil Suit 218 of 2016 was instituted by the applicant and 19 others against the 1st respondent herein and 3 others. Two of those respondents have been included in the current application as the 5th and 9th interested parties.

11. The court notes the glaring similarities between the two applications. The applicant is the same in both matters, seeking the same relief, to wit, leave to institute a derivative claim on behalf of the same company, that is Ukamba Agricultural Institute. Further, the issue of rent proceeds from properties owned by the affected company is the subject matter in both suits.

12. In Independent Electoral & Boundaries Commission v Maina Kiai & 5 others [2017] eKLR, it was held: -“Thus, for the bar of res judicata to be effectively raised and upheld on account of a former suit, the following elements must all be satisfied, as they are rendered not in disjunctive, but conjunctive terms;(a)The suit or issue was directly and substantially in issue in the former suit.(b)That former suit was between the same parties or parties under whom they or any of them claim.(c)Those parties were litigating under the same title.(d)The issue was heard and finally determined in the former suit.(e)The court that formerly heard and determined the issue was competent to try the subsequent suit or the suit in which the issue is raised.…“The rule or doctrine of res judicata serves the salutary aim of bringing finality to litigation and affords parties closure and respite from the spectre of being vexed, haunted and hounded by issues and suits that have already been determined by a competent court.”

13. A close scrutiny of the present application reveals that all the foregoing elements are present and are satisfied. This court fully adopts the foregoing rendition of the law. The application dated October 25, 2021 is but a replica of the one that was determined in Civil Suit Number 218 of 2016. The wording may be different but it is essentially seeking the same thing.

14. A court cannot ignore a valid decision that has determined similar issues by the same parties as those before it. To determine a second proceeding might lead to an embarrassing situation where two courts might arrive at two conflicting results. Litigation must come to an end, there is no need to clog the courts with repetitive litigation.

15. Accordingly, I find the objections to be meritorious and I uphold them. The end result is that the application dated October 25, 2021 is without merit and is hereby struck out with costs to the respondents and the affected company.It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 8TH DAY OF JULY, 2022. A MABEYA, FCIArbJUDGE