Simon Kandie,Kibichi Kigen Cheplego,Kipkoech Chebet Cherutich,John Kibiiegon Cherutich,Samuel Kipklei Chelelgo,Jackson Chepkieng Tuitoek,Simon Kipchomba Kandie (Suing as Members of Solai Ruyobei Farm Limited) v Richardson Kipkoech Bundotich,Charles Olari Chebet,Joseph Kipyegon Lenginch,Koilel Laramatak Self Help Group, Lari Nyakinyua (Solai Farm) Ltd & Jata Housing Company & 5 others [2014] KEELC 676 (KLR)

REPUBLIC OF  KENYA

IN THE  HIGH  COURT OF  KENYA AT  NAKURU

LAND AND ENVIRONMENT DIVISION AT NAKURU

CIVIL  SUIT NO. 532 OF  2013

SIMON KANDIE………………………….…...……....1ST   PLAINTIFF

KIBICHI KIGEN CHEPLEGO…….…….………....……2ND PLAINTIFF

KIPKOECH CHEBET CHERUTICH….…..………...….3RD PLAINTIFF

JOHN KIBIIEGON CHERUTICH…………………...…..4TH PLAINTIFF

SAMUEL KIPKLEI CHELELGO………..…………........5TH PLAINTIFF

JACKSON CHEPKIENG TUITOEK………..…….....….6TH PLAINTIFF

SIMON KIPCHOMBA KANDIE…………..………...….7TH PLAINTIFF

(SUING AS MEMBERS OF SOLAI RUYOBEIFARM LIMITED)

VERSUS

RICHARDSON KIPKOECH BUNDOTICH…...……..1ST DEFENDANT

CHARLES OLARI CHEBET…………..………..…...2ND DEFENDANT

JOSEPH KIPYEGON LENGINCH……………….….3RD DEFENDANT

KOILEL LARAMATAK SELF HELP GROUP….……4TH DEFENDANT

LARI NYAKINYUA (SOLAI FARM) LTD…….……....5TH DEFENDANT

JATA HOUSING COMPANY……………………..….6TH DEFENDANT

RULING

1.  The Plaintiffs instituted this suit against the defendants by way of plaint on 12th September, 2013 seeking two substantive orders;

a) that the court makes a declaration that any agreements entered  into  by the  defendants with any third parties are illegal, irregular and null and void

b) a permanent injunction restraining the defendants themselves, their agents, servants and or employees from further  selling, alienating, transferring, registering any transfer, executing a transfer, charging, mortgaging to any third parties, entering,. Occupying or in any way interfering with L.R No. 67258/1 ("suit land") until this suit is heard and determined.

2.  Contemporaneously with the plaint, the plaintiff filed a notice of motion on even date seeking temporary orders of injunction to restrain the   defendant in the   manner stated above. They   also sought an  order to  have the  Company's documents   including  the   title deed,   Company   seal, Company cheque books, Company registration documents deposited  in    court  for  safe  custody  to  avoid  further alienation.

3.  On 19th September, 2013 in the presence of counsel for 1st, 2nd and 3rd defendants, a temporary injunction was issued restraining the defendants from interfering with the suit land pending the hearing and determination of this application.

4.  On  2nd October, 2013  counsel for  the  plaintiff brought to  the  attention of the  court that  the District officer Gilgil, had started resettling people on  the suit land and  that the instruments of  the   Company  if left  in   the   hands of  the defendants were likely  to  be  misused. He urged the court to extend the order granted on 19th September, 2013  to  be served upon the District Officer  and the instruments of the company  to  be  deposited  in  court.  To safeguard the company's instruments, the court ordered that the same be deposited in court pending inter parties hearing of the application.

5.  Before this  application could be  set  down for  hearing, the  1st, 2nd and 3rd respondents filed  a notice of preliminary objection dated 1st October, 2013 on  the grounds that the plaintiffs application was bad in  law,   incurably  defective and an abuse of  the  court process; that this court lacked jurisdiction and could not impose a resolution on  the 1st, 2nd and 3rd respondent's company and  its shareholders; that  the supporting   affidavit was  undated   and  the deponent's signature was forged; that  the plaintiffs lacked capacity to  institute the suit as they did  not have proper mandate  and/  or   authority  and   that   the  plaintiffs instituted this  suit  using a  list  of   non  members and deceased persons of Solai Ruiyobei farm.

6. On   3rd February, 2014  parties  agreed  that  the preliminary  objection  would  be   disposed  of   by  way  of written submissions. The   1st, 2nd and 3rd defendants filed their written submissions on   10th February, 2014 while the plaintiffs filed theirs on 11th   February, 2014.  The   4th, 5th and 6th defendants did not file any despite being given ample time to do so.

7. In  their  submissions,  the  1st, 2nd and 3rd defendants submitted that Solai Ruiyobei farm Ltd  is a body corporate, a legal  entity having a right to  sue and be  sued; that the plaintiffs did   not   have locus standi to file suit against the 1st, 2nd and 3rd defendants being directors of the  Company; that the alleged acts and / or violations were wrongs against the  company  therefore  only  the company  could  seek redress and not   its members as laid  down in  the   case  of Foss v  Harbottle (1843)  Hare  461; that the instant case did  not  fit  within   the  exceptions laid   down in  the case of Edwards   v  Halliwell  (1950) All  E.R.-1064, therefore the orders sought should not  be granted.

8.  They  further  submitted  that  no   evidence  had  been adduced  that  a  resolution  had  been  passed  by  the shareholders of  the company to  institute this suit or  that the shareholders  if   aggrieved had  first  exhausted  the available mechanism  laid   down in  the Companies Act  by calling for  a meeting under Sections 131 and 134 of the Companies' Act instead  of  filing   suit. It   was  also  their contention that  the plaintiffs had filed  this suit with only one verifying  affidavit  which  was  undated  as  was  the supporting affidavit, which bore  forged  signatures sworn by the   1st plaintiff contrary  to  Order  4 Rule   1(2)  (3)  of  the Civil   procedure  Rules and  there  was  no   authority   filed expressly authorising the  1st  plaintiff to  swear the affidavit on  behalf of the  other plaintiffs.

9.  They relied on the cases of David Langat vs St Lukes Orthopaedic & Trauma Hosipital ltd and 2 others Eld. ELC NO 56 of 2013 and Julius Gichuhi Kamau & Others v Joseph N. Maina & Others Nairobi HCC No 415 of 2007.

10.  In reply, the plaintiffs submitted that the 1st, 2nd and 3rd defendants had not demonstrated how the suit and the application were incurably defective or an abuse of the court process. Further, the defendants having being sued as individuals, the issue of filing a resolution do not arise as this suit was neither a derivative or a representative suit.

11.   On the issue of  the forged documents and  defects in the plaint, the plaintiffs submitted that these were issues of the  fact    which  needed   to   be   proved   by   documentary evidence being adduced  and expert witnesses  being called during trial.

12.   The locus classicus on preliminary objections is the case of Mukisa Biscuit  Manufacturing Co. Ltd vs West End  Distributors ltd  (1969)   EA 696, where  Newbold, V.Pheld,

"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 the facts pleaded by the other side are correct.  It cannot be raised if any fact had to be ascertained   or if what is sought is the exercise of judicial discretion. The improper raising of points by way of Preliminary Objection does nothing but unnecessarily increase costs and, on occasion,  confuse  the  issue.  The improper practice should stop"

13.    Applying   the    principles  laid    down   in   the Mukisa Biscuits case, I am   of  the view  that the grounds  raised  in   the  objection do   not    fit   the criteria set out in  the aforementioned case as I will demonstrate shortly.

( 1)   Whether this  court  has  jurisdiction to entertain this matter

14.   The   Environment and  Land Court is a  special court established under Article 162 (2)  (b)  and Section 4 (1)  of The Environment and Land Court Act  (No.9 of  2011) to deal  with  matters  concerning  the  Environment, use  and occupation  of   and  title  to   land.  Section   13(1) of   the Environment and Land Court Act sets out the mandate of the court as follows:-

"the Environment and Land Court shall have original and  appellate jurisdiction to  hear  and  determine all disputes in accordance with  Article 162(2)(b) of the Constitution and  with the provisions of the Act or any other written law relating to  environment and  land."

15.  It is clear from the Constitution and the Environment and Land court Act what the jurisdiction of this court is. According to counsel for  the  applicant, Solai Ruyobei Farm was incorporated,"  to  purchase and   sale  land for  the benefit  of   its   members  and   to   buy   and   allocate to shareholders land  according to the paid  up  shares held by  members". The   plaintiffs filed   this suit opposing the sale, or   planned sale of parcel No.  67258/1, one   of the properties owned by the company. This court was set up to deal with matters concerning the environment, use and occupation of and title to  land. The matter at hand relates to a decision made by the directors of the company on how to deal with a parcel of land owned by the company. It is my view  that this court being mandated to deal with issues affecting that parcel of land owned by  the  company cannot close   its eyes   and or   refuse/  fail  to  deal with  decisions made  by   the   directors of  that  company or   its  members affecting that parcel of land.

16.  It is for the  above  reason that I find  and  hold  that this court  has  jurisdiction to  deal with this matter which jurisdiction is derived from  Article 162 of the Constitution and Section 13(1)  of the  Environment and Land  Court  Act as stated in the   case of Samuel Kamau Macharia  & Another V Kenya  Commercial Bank  Limited & 2 Others [2012] eKLR where the  supreme court  held;

"A Court's jurisdiction flows from either the Constitution or legislation or both. Thus, a Court of law can only exercise jurisdiction as conferred by the constitution or other written law. It cannot arrogate to itself jurisdiction exceeding that which is conferred upon it by law........."

(2). Whether the  Plaintiffs have locus standi to institute this suit

17.  It is the  applicant's contention, that the  Plaintiffs have no  locus standi to institute a claim  as against the  company and  they are  in  breach of the  principles laid  out in  the  case of Foss v  Harbottle (supra). In  one  of the  cases relied  on by the  applicants, David  Langat v St  Luke's Orthopaedic &  Trauma  Hospital  Ltd  Eld.   E & L Case  No  56   of  2013 Munyao J. restated the  two  principles in  Foss v Harbottle (supra).  He  laid   down  the   principles  to   be   that  only   a company could file  suit on  a wrong done to  it  not its shareholders and secondly if  the   wrong was confirmed or ratified by a simple majority then the  minority shareholders could not   bring an action unless the company had acted ultravires  or    those   in   control  of   the    Company   were perpetrating a fraud.

18.  Exceptions to the Foss Vs  Harbottle  case   were laid down in   the   case of    Edwards v  Halliwell (supra) from which Munyao J.   quoted   with   approval   as   follows;

((••••••••••situations will  inevitably arise  where the appropriate organ of  the company is unwilling to sue even where it will  be in the interests of the company to do  so. This is likely to be the case when the wrong complained of, against the company has been done by the very persons who are in control of the company.

The power to sue is therefore capable of being misused to serve personal   ends   to the   detriment of  the company. It   is through a recognition of   these circumstances that the common law allowed certain exceptions to   the   Rule in   Foss    v   Harbottle and permitted a shareholder to institute suit, known as the derivative suit, on behalf of  the company. The case of Edwards v Halliwell is taken to be the locus classicus that laid out these exceptions. Jenkins L.J stated as follows :-"The  cases falling within the general ambit of the rule are  subject to certain exceptions. It  has been noted in the course of  argument that in cases where the  act  complained of    is  wholly ultra  vires the company or  association the  rule has no application because there is no  question of  the transaction being confirmed by  any majority. It  has been further pointed out  that  where what has been done amounts to what is generally called in these cases a fraud on the minority and the wrongdoers are themselves in control of  the company, the rule is relaxed in favour of  the aggrieved minority who are allowed to bring what is known as a minority share holders' action on  behalf of themselves and all  others. The reason for  this is that, if they  were denied that  right, their grievance could never reach the  court because the  wrongdoers themselves,  being  in  control,  would  not allow the company to sue. Those exceptions are   not   directly in point in  this case, but  they show, especially the last one,  that the  rule  is not  an  inflexible rule  and   it will be relaxed   where   necessary   in    the   interests  of justice ............... "

19.  This is such a matter as the one contemplated by  the authority  cited  above. The   plaintiffs as  shareholders  of Solai Ruiyobei farm, brought this suit against the 1st, 2nd and 3rd defendants and others, because they believed that the   1st, 2nd and 3rd defendants  being directors of  Solai Ruiyobei farm had without the  consent and/or  approval of the shareholders started disposing off  portions of  the suit property. The 1st, 2nd and 3rd defendants are the ones bestowed with the   power   to manage the affairs of Solai Ruiyobei farm. They can not be expected to bring this suit in the name of the   company being the ones undertaking the   alleged actions.  In  this case, I  am   satisfied that  the plaintiffs have earned the  right to bring a claim on  behalf of the   company and I find   and hold   that  the Plaintiffs have locus to institute the  suit.

(3) Whether the  issues raised about the  verifying, supporting affidavits and  forgeries are  points of law

20. Finally the applicants have raised issue with the verification of the contents of the   plaint.  They allege that the plaintiffs have forged signatures in the verifying affidavit and other accompanying documents. To my mind, these are issues of fact which should be proved by evidence and should not be raised in a preliminary objection.

21. I think I have said enough to show why  the Notice  of Preliminary Objection dated 1st October, 2013must  fail and  the  same  is   hereby  dismissed  with  costs  to   the plaintiffs.

22. Interim orders  are  extended for  90  days  within which period the  Notice  of   Motion dated  10th  September, 2014 should be set  down for hearing.

Dated, signed and delivered in open Court at Nakuru this 17th day of October, 2014.

L N WAITHAKA

JUDGE

PRESENT

Ms Njoroge holding brief for Mr Olonyi for the defendant/ Respondent

Ms Gachanja holding brief for Mrs Ndeda for 4th respondent

N/A for the plaintiff

L N WAITHAK.A

JUDGE