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Court of AppealAllowedNot stated in the judgment· [2023] KECA 737 (KLR)

Smartshop Limited v Mutitu (Civil Appeal 76 of 2019) [2023] KECA 737 (KLR)

Court of Appeal
16 June 2023
2,036 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~8 min to read original · ~4 min brief

The bottom line

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Kenya's Court of Appeal confirmed that a company's lawsuit is not invalid just because a board resolution authorising it was not filed when the case started.

What this practically means

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Executive summary

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This was an appeal to the Court of Appeal at Nakuru against a ruling of the Environment and Land Court at Nyahururu (ELC No. 179 of 2018) striking out Smart Shop Limited's Originating Summons against Daniel Karanja Mutitu on a preliminary objection. The objection, raised just before hearing, contended that the suit was defective because no resolution by the appellant's board of directors authorising the institution of the suit, or authorising its advocates and the deponent of its affidavit, was on record. The learned Judge upheld the objection, holding that in the absence of such a resolution the proceedings were a nullity, struck out the suit, and awarded costs to the defendant. Allowing the appeal, the Court of Appeal (Sichale, Ochieng and Achode JJA, in a single unanimous judgment) held that the trial court's conclusion did not accord with the law as it currently stands. It relied on the respondent's own concession that resolutions need not be filed with the plaint, and on Leo Investment Ltd v Trident Insurance Co. Ltd, to the effect that a board resolution may be filed any time before the suit is fixed for hearing and its absence is not fatal. Following its own decision in Arthi Highway Developers Ltd v West End Butchery Ltd, the Court noted that the Uganda decision in Bugerere Coffee Growers Ltd v Sebaduka, on which the trial Judge had relied, was no longer good law, having been overturned in United Assurance Co. Ltd v Attorney General, which settled that an authorised director may act for the company without a formal board resolution. Susan Gathoni Maina's affidavit evidence that she was a duly authorised director had not been displaced. The Court set aside the striking-out orders, overruled the preliminary objection, reinstated the Originating Summons, and awarded the costs of the appeal and of the preliminary objection to the appellant.

Key legal issues

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01

Whether failure to file a resolution authorising institution of a company's suit is fatal

Holding

No. Even where proceedings are instituted without a directors' resolution, the institution can be ratified; absence of a resolution in the court file does not of itself render the suit fatally defective.

Reasoning

The Court noted that the respondent himself conceded that resolutions need not accompany the plaint and that proceedings commenced without authority can be ratified. Relying on Leo Investment Ltd v Trident Insurance Co. Ltd, the resolution may be filed any time before the suit is fixed for hearing. The trial Judge's contrary conclusion rested on Bugerere Coffee Growers Ltd v Sebaduka, a decision that has been overturned in United Assurance Co. Ltd v Attorney General and is no longer good law, as this Court had already held in Arthi Highway Developers Ltd v West End Butchery Ltd.

p. 3
02

Whether an authorised director may act for the company without a formal board resolution

Holding

Yes. Any director authorised to act on behalf of the company has the powers of the board to act on its behalf unless the contrary is shown.

Reasoning

The Court adopted the restatement of the law in United Assurance Co. Ltd v Attorney General as applied in Kenyan courts, including in Fubeco China Fushun v Naiposha Company Limited. In this case, Susan Gathoni Maina deponed that she was a director duly authorised to swear the supporting affidavit, and referred to the firm of Kinoti & Kibe Advocates as the company's advocates, implying by necessary implication that the firm had been instructed by the company. The respondent had not shown these depositions to be incorrect.

p. 4

Legal principles established

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  • The absence of a board of directors' resolution in the court file at the time of institution does not, of itself, render a company's suit fatally defective; such proceedings may be ratified and the resolution filed later.
  • It is not necessary for a board of directors or general meeting to resolve to instruct counsel; a director authorised to act for the company has the powers of the board unless the contrary is shown.

Court orders

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  1. 1.Appeal allowed
  2. 2.Orders striking out the Originating Summons set aside
  3. 3.Preliminary Objection dated 24th September 2018 overruled for lack of merit
  4. 4.Originating Summons reinstated
  5. 5.Costs of the appeal and of the preliminary objection awarded to the appellant

Authorities

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Legislation

  • Civil Procedure RulesOrder 4 Rule 1(4)

Cases cited (7)

  • Bugere Coffee Growers Ltd v Sebaduka & Another
    (1970) 1 EA 147
  • Arthi Highway Developers Ltd v West End Butchery Ltd & 6 Others
    (2015) eKLR; Civil Appeal No 76 of 2019
  • Leo Investment Ltd v Trident Insurance Co. Ltd
    [2014] eKLR
  • Joseph Kipng'etich v Litein Tea Factory Ltd & Another
    (2016) eKLR
  • Republic v Registrar General & 3 Others, Misc. Application No. 67 of 2005
    [2005] eKLR
  • United Assurance Co. Ltd v Attorney General
    SCCA No. 1 of 1998
  • Fubeco China Fushun v Naiposha Company Limited & 11 Others
    [2014] eKLR
On appeal from
Environment and Land Court
Nyahururu ELC No. 179 of 2018
Jurisdiction invoked
First appellate jurisdiction over appeals from the Environment and Land Court (not expressly stated in the judgment)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (1)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Smartshop Limited v Mutitu (Civil Appeal 76 of 2019) [2023] KECA 737 (KLR)", Case Analysis (2023). Not stated in the judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2023/737/eng@2023-06-16

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.