Peter Kasimba & 219 others v Kwetu Savings & Credit Co-operative Society Limited (Formerly Masaku Teachers Savings Co-operative Society Ltd), Masaku Teachers Investment Limited, Registrar Of Companies, Registrar of Land, Machakos County, National Land Commission, Hon. Attorney General, Julius Nzioka, James Nduta, Francis Kioko, David Kikumu, Machakos County & Gedion Soo Kavuu [2022] KEHC 2515 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT MACHAKOS

(Coram: Odunga, J)

CIVIL SUIT NO. 29 OF 2018

PETER KASIMBA & 219 0THERS................................................................PLAINTIFFS

-VERSUS-

KWETU SAVINGS & CREDIT CO-OPERATIVE SOCIETY LIMITED

(Formerly Masaku Teachers Savings Co-operative Society Ltd)..........1ST DEFENDANT

MASAKU TEACHERS INVESTMENT LIMITED................................2ND DEFENDNT

REGISTRAR OF COMPANIES.............................................................3RD DEFENDANT

REGISTRAR OF LAND, MACHAKOS COUNTY.............................4TH DEFENDANT

NATIONAL LAND COMMISSION......................................................5TH DEFENDANT

HON. ATTORNEY GENERAL..............................................................6TH DEFENDANT

JULIUS NZIOKA.....................................................................................7TH DEFENDANT

JAMES NDUTA........................................................................................8TH DEFENDANT

FRANCIS KIOKO....................................................................................9TH DEFENDANT

DAVID KIKUMU....................................................................................10TH DEFENDANT

MACHAKOS COUNTY.........................................................................11TH DEFENDANT

GEDION SOO KAVUU..........................................................................12TH DEFENDANT

RULING

1. By a Motion on Notice dated 24th September, 2021, the Plaintiff herein seeks an order that the Amended Statement of Defence, Witness Statement and List of Documents filed by M/s Amolo & Kibanya Advocates be struck out in so far as they relate to the 2nd Defendant, Masaku Teachers Investments Limited and further that the said Amolo & Kibanya Advocates be restrained from filing any documents and/or representing the 2nd Defendant.

2. According to the Applicant notwithstanding the fact that the firm of Andrew Makundi & Company Advocates is on record for the 2nd Defendant and did enter appearance and filed the defence and bundle of documents , the law firm of M/s Amolo & Kibanya Advocates (the law firm) have purported to irregularly and unprocedurally file documents on behalf of the 2nd Defendant (the Company) contrary to the court orders of 8th February, 2021 and 8th April, 2021 which barred the said firm from acting for the 2nd Defendant. It is averred that the Plaintiffs herein are some of the shareholders of the 2nd Defendant and are not aware of any resolution appointing the said firm to act for the 2nd Defendant Company. Similarly, they are not aware that the person who has issued the witness statement has been duly authorised by the company to do so.

3. It is further averred that the firm of Amollo & Company Advocates having sued the Company in High Court Miscellaneous Case No. 35 of 2015 and having acted against the Company in ongoing ELC Case No. 35 of 2014, cannot act for the same company due to conflict of interest.

4. The said application was supported by an affidavit sworn by Peter Kasimba, the 1st Plaintiff herein on 24th September, 2021, in which the foregoing averments were reiterated.

5. The said Application was supported by the 2nd Defendant vide an affidavit sworn on 5th October, 2021 by James Muiya, a director of the 2nd Defendant who deposed that he was authorised by his co-directors to do so. According to him, they have never instructed the firm of Amollo Kibanya and Co. Advocates to act for the Company. In this case, he contended, in January, 2019, they instructed the firm of Andrew Makundi & Co. Advocates to represent them in the matter following a resolution to that effect and this was communicated to the firm of Andrew Makundi & Co. Advocates. However, the firm of Amollo Kibanya and Co. Advocates purported to come on record for the 2nd Defendant on 18th December, 2019.

6. It was averred that the memorandum of appearance filed by the firm of Amollo and Kibanya & Co. Advocates ought to be struck out since it was filed out of time and there is no resolution by the Company or any other document showing that the said firm was appointed to act for the Company.

7. On behalf of the applicant, it was submitted that the law firm of Amolo Kibanya has no basis to purport to act for the company as there is no resolution appointing it nor is there any authorization for the said Stanley Kyelenzi to represent the company. According to the Applicant, the actions by the law firm whereas the law firm of Makundi & Company are merely aimed to delay setting down of the case for hearing and frustrate the hearing as right from the onset when the case started the law firm of Makundi & Company entered appearance and filed pleadings and affidavits without any objection by the Sacco or the law firm.

8. It was pointed out that it was only upon seeking leave to amend defence that the Law firm sought to introduce pleadings and witnesses’ statements for the company without filing any notice of change of advocates or notice of appointment and no resolution appointing the law firm in breach of Order of the Civil Procedure Rules.

9. Regarding the judgment by Kemei, J it was submitted that it dealt only with 20,000 shares, not the then and still current 2,500,000 shares and the subscribers James Muiya, Daniel Mathungwa, Israel Nzalu, Richard Masila Kaveke, Partick Sove, David Mwanthi, David Kioko, Cosmos Mwololo, Wilson Mutunga and Josphat Kalanzo and not the numerous plaintiffs shareholders herein and the many parties in this case. It was contended that the Sacco is aware how the current directors were elected and their election and shareholding has never been challenged in any court of law.

10. Accordingly, the Sacco being just one of the shareholders is aware of the many financial statements and balance sheets which had been filed to outline the status of the shareholding and capital of the company and it never challenged the status of the company incorporation as a public limited liability company or shareholding of many shareholders. In fact, the company sought to buy shares which is perfectly legal as the company is public company with right of shareholders to freely transfer their shares; however, the illegality was that the Sacco sought to buy the shares so it could lay claim that the subscribers were the only shareholders. In support of their case the Applicant relied on Salmon vs. Salmon & co. Limited (1897) A. C.  and Litein Tea Facory Company  & Another –vs- Davis Kiplagat Mutai & 5 others to the effect that a Company is, at law, a different person  altogether and  different from the subscribers to the Memorandum and though it may be that after incorporation the business is precisely the same as it was before, and the same person are managers and the same hands receive the profits, the company is not in law the agent of the subscribers or trustees for them nor are the subscribers liable in any shape or form, expect to the extent and in the manner provided in the Act.

11. It was therefore submitted that by extension proceedings relating to shareholders thereof should be in the name of shareholders and proceedings in relation to directors should be in be in the name of directors in much the same was the proceedings against subscribers are against subscribers but there can be no proceeding by inference or, implication it must be directly against the parties intended.

12. It was submitted that the decision of Kemei, J cannot be used as basis for the law firm to act for the company. Based on the decision in Mary Kathambi vs. Julius K. Ithai & Another [2020] eKLR,it was submitted that to allow the witness and law firm to act for the company will result in running of the affairs of the company more oppressively and prejudicially to the Plaintiffs as the board of directors were duly elected by shareholders and the election and directorship and their membership/shareholding has not been challenged.

13. It was further submitted that any action by the law firm and the amended Defence filed therein together with the witness statements are contrary to the court orders of on 8th February 2021 and 8th April 2021 which were specific to what extent the leave to amend was granted and therefore the pleadings filed in contempt and contrary of the court orders ought to be struck out by the court on its own motion as there has been no appeal nor review of the Orders by the court.

14. In response to the Application, Stanley Kyelenzi, the Chief Executive Officer of the 1st Defendant deposed that this court never issued any order on the 8th February, 2021 and indeed no proceedings were conducted on that date. It was further deposed that similarly, no order was issued on 8th April, 2021 to the effect deposed to in the supporting affidavit.

15. According to the deponent, Kwetu Sacco was sometime in December, 2018 served with Certificate of Urgency and Notice of Motion both dated 3rd December, 2018 and the Supporting Affidavit sworn by Peter Kasimba on the 3rd December, 2018 and these documents were filed in court on an unknown date in December, 2018. On 15th January, 2019 a Notice of Appointment of Advocates was filed by the firm of Amolo & Kibanya Advocates and the said firm filed a Memorandum of Appearance dated 6th December, 2019.

16. The deponent while identifying various documents filed on behalf of the parties herein by various advocates averred that he was informed by Mr. N. W. Amolo Advocate that his office has never been served with a copy of the Notice of Appointment dated 22nd January, 2019 which is exhibited to Muiya’s affidavit nor the Memorandum of Appearance filed by M/s Andrew Makundi & Co. Advocates. He noted that the Notice of Appointment and the Memorandum of Appearance filed by M/s Amolo & Kibanya Advocates make it clear that the said firm acts for several defendants including the 2nd Defendant. Based on the information received from his advocates, he averred that M/s Amolo & Kibanya Advocates acts for the 2nd Defendant given that it is the property of the 1st Defendant by reason of the ruling delivered on the 26th February, 2018 in Machakos Misc. Application No. 35 of 2015 (Formerly Nairobi Misc. Application No. 78 of 2015) Kwetu Savings and Credit Co-operative Society Ltd (Formerly Masaku Teachers Savings and Credit Co-operative Ltd.) (vs) James Muiya and 12 Others.

17. It was alleged that the findings above having been made well after the Court was functus officio by reason of delivering its final decision on 26th February, 2018, an application was made by a number of persons seeking to be joined as Third Parties, which application was dismissed after it was heard on its merits.

18. In the deponent’s view, the decision of 26th February, 2018 was by a court of concurrent and coordinate jurisdiction with this Court and the Respondents in Machakos Misc. Application No. 35 of 2015 who included James Muiya ceased to be shareholders and directors of Masaku Teachers Investments Limited as pronounced by the High Court and the said Masaku Teachers Investments Ltd now belongs to Kwetu Sacco unless the decision of 26th February, 2018 is overturned by the Court of Appeal and James Muiya hence the other Respondents cannot therefore purport to instruct M/s Andrew Makundi & Co. Advocates or indeed  any other  advocate to act for the 2nd Defendant.

19. It was averred that the pleadings filed in this cause are without doubt a cavalier effort by the Plaintiffs in this cause to go around the decision of this court and re-agitate issues already disposed and as a matter of fact the present Notice of Motion ideally ought to have been filed by James Muiya (who has sworn an affidavit) who purports to be a director who instructed Andrew Makundi & Company Advocates. He added that Kwetu Sacco passed a resolution to instruct Mr. N. W. Amolo of Amolo & Kibanya Advocates to act for it and the 2nd Defendant in these proceedings.

20. It was submitted on behalf of the Respondent that the Notice of Motion seeks the grant of orders that shall in all probability infract upon Articles 40 and 50(1) of the Constitution of Kenya 2010 since the Court is being urged to descend into the arena that belongs solely to parties that is to say the right of a party to instruct an advocate of own choice. It was submitted that the common law position is that it is the sole prerogative of a party to decide which advocate shall represent him/her/it and this applies to Kenya by virtue of Section 3 of the Judicature Act Chapter 8 Laws of Kenya. According to the Respondent, a fair hearing contemplated by Article 50(1) cannot be guaranteed unless a party is free to decide who should act for him/her/it.

21. It was submitted that the right to protection of property will be infringed and infracted upon where the court does not protect the right of a party to choose who should act for him/her/it.  The answer to these concerns lie in whether the law firm to act should be determined by James Muiya or Kwetu Savings and Credit Co-operative Society Limited and has already been addressed in the decision in Machakos High Court Misc. Application No. 35 of 2015 Kwetu Savings and Credit Co-op Society Limited V. Muiya and Others.

22. According to the Respondent, the Plaintiffs cannot have a prima facie case when it is obvious that it is not their business who should act for the 2nd Defendant.  It is further submitted that the Plaintiffs cannot be entitled to damages and only the 2nd Defendant can claim and be awarded such.  It is finally submitted that the balance of convenience cannot repose in favour of the Plaintiffs.  The second limb of the application, it was submitted, therefore commends itself to dismissal.

23. According to the Respondent, for one to get a proper and full grasp of what is afoot, one needs to appreciate the decision of 26th February, 2018 by Kemei, J in Machakos High Court Misc. Application No. 35 of 2015 Kwetu Savings & Credit Co-op. Society Limited vs. James Muiya and 12 Others bywhich James Muiya and his Partner Respondents were removed as shareholders and Directors of the 2nd Defendant.  Whereas an appeal has been filed in the Court of Appeal, it was noted that no stay has been issued.  The appeal is by persons who were respondents in the Superior Court and were ably represented by M/s Andrew Makundi & Company Advocates.  M/s Moses Odawa & Company Advocates have not filed an appeal against the decision of 26th February, 2018 as permitted by Rule 75 Court Appeal Rules. In the Respondent’s view, the none-issue of shareholding of Masaku Teachers Investments Ltd being pushed in the present Notice of Motion is irrefutable and conclusive proof that the Plaintiffs are nothing more that confederates of the Respondent’s in the aforesaid proceedings and whose only bidding is to advance the interests of James Muiya and his partner Respondents.

24. The Respondent noted that it is curious that a plaintiff can arrogate upon self the role of filing an application which does not concern it at all but concerns an adversary.  The only person who can bring forward such an application is one who adduces evidence that he/she/it is a director of the 2nd Defendant and that there is no such evidence.  Nowhere in Peter Kasimba’s Supporting Affidavit has it been stated that he is a director or indeed shareholder.  The affidavit sworn by James Muiya in support the Notice of Motion in question depones that he (the said James Muiya) is a director of the 2nd Defendant.  If that were so, then the prayers sought in the Notice of Motion ought to have been sought by him.  Even presuming that had been done, it still could not have had any merit for the simple reason provided by the depositions in Paragraph 9 of Mr. Stanley Kyelenzi’s Replying Affidavit.  Mr. Kyelenzi is the Chief Executive Officer of Kwetu Savings and Credit Co-op. Society Limited. The decision of 26th February, 2018 handed down by Kemei, J speaks for itself.

25. The Court was therefore urged to dismiss the application.

Determination

26. I have considered the foregoing as well as the submissions filed by the parties. The gravamen of the instant application is who between the firm of Andrew Makundi & Co. Advovates and Amollo Kibanya & Co. Advocates ought to represent the 2nd Defendant in these proceedings. The other issue whether the documents filed by the later firm ought to be expunged from the record are only collateral issues.

27. The general rule is that it is not the business of the courts to tell litigants which advocates should or should not act for them in a particular matter as each party to a litigation has the right to choose his or her own advocate and unless it is shown to a Court of law that the interests of justice would not be served if a particular advocate were allowed to act in the matter, the parties must be allowed to choose their own counsel. See William Audi Ododa & Another vs. John Yier & Another Civil Application No. Nai. 360 of 2004; Delphis Bank Ltd vs. Channan Singh Chatthe & 6 Others Civil Application No. Nai. 136 of 2005; Geveran Trading Co. Ltd vs. Skjevesland [2003] 1 ALL ER 1.

28. It is however clear that advocates can only act in a matter where they have been instructed either expressly or by implication. Where there is a general retainer given to an advocate by a client, it does not fall in the mouth of the client to argue that there were no instructions given to the advocate in respect of a particular matter falling within the series in which there was a general retainer unless it is shown that there were express instructions given to the advocate not to act in that particular matter. In that event the onus of proving lack of instruction would be on the person alleging the same. It is also trite that an incorporated person is but just a legal person in the eyes of the law.  It is therefore axiomatic that an incorporated body has of necessity to act through agents who are usually its Board of Directors by way of resolutions passed thereby. Where for example it is proved to the satisfaction of the Court that legal proceedings were commenced by or on behalf of an incorporation by an advocate contrary to or in the absence of the instructions of an incorporation it is trite in this jurisdiction that such proceedings are liable to be struck out with costs being borne by the advocate concerned. This was the position in Tavuli Clearing & Forwarding Limited vs. Charles Kalujjee Lwanga Nairobi (Milimani) HCCC No. 585 of 2004.

29. It follows that if the firm of advocates purporting to act in a matter had no instructions to do so, the said firm would not be entitled to seek costs and might be liable to pay the costs of such proceedings. It is however to be noted that an action commenced without authority is capable of being ratified. As was held by Hewett, J in Assia Pharmaceuticals vs. Nairobi Veterinary Centre Ltd. Nairobi (Milimani) HCCC No. 391 of 2000:

“It is settled law that where a suit is to be instituted for and on behalf of a company there should be a company resolution to that effect…As regards litigation by an incorporated company, the directors are as a rule, the persons who have the authority to act for the company; but in the absence of any contract to the contrary in the articles of association, the majority of the members of the company are entitled to decide even to the extent of overruling the directors, whether an action in the name of the company should be commenced or allowed to proceed. The secretary of the company cannot institute proceedings in the name of the company in the absence of express authority to do so; but proceedings started without proper authority may subsequently be ratified.”

30. I agree with the Respondent that this application arouses curiosity. The party who is challenging the representation of the 2nd Defendant by the firm of Amollo Kibanya & Company Advocates is not the 2nd Defendant or any of the Defendants but the Plaintiff, an adversary of the 2nd Defendant. A party, in my respectful view, has no business choosing for his adversary which advocate ought to appear for him. While he is free to challenge the competency of the said advocates as regards his qualification or where there is a conflict of interest, he certainly cannot determine for the other parties who ought to represent them.

31. It is trite that an incorporated person being an artificial person can only act through its board of directors hence the necessity of a resolution by the said board whenever it carries out important decisions such as the decision to commence legal proceedings or to instruct counsel to represent it.

32. In order to bring the issue of representation to an end, at least for now, it is my view that it is necessary that a resolution be passed by the Board of Directors of the 2nd Defendant as to which firm of advocates ought to represent it in these proceedings. I am alive to the fact that the decision of Kemei, J is the subject of an appeal. However, in the absence of any order staying that decision, until that decision is reversed, that decision must remain valid. Legal proceedings cannot stall simply by virtue of a pending appeal since the existence of an appeal by itself does not amount to a stay of the decision being appealed against.

33. Therefore, the order that commends itself to me and which I hereby make is that the Registrar of Companies convenes a meeting of the 2nd Defendant’s Board of Directors, based on the current records held by the said Registrar and in compliance with the decision of Kemei, J in Machakos High Court Misc. Application No. 35 of 2015 Kwetu Savings & Credit Co-op. Society Limited vs. James Muiya and 12 Others in order for the 2nd Defendant to resolve which firm of advocates will represent it in these proceedings.

34. The said meeting is to be convened within 30 days from the date of service of this order on the said Registrar and the resolution to be filed in this Court. The costs of the said meeting to be met by the 2nd Defendant.

35. There will be no order as to the costs of this application, and it is so ordered.

Read, signed and delivered in open Court at Machakos this 7th day of February, 2022.

G V ODUNGA

JUDGE

Delivered in the presence of:

Mr Odawa for the Plaintiffs

Mr Muli for the 2nd Defendant

Mr Amollo for the 1st, 2nd, 7th, 8th 9th and 10th Defendants

CA Susan