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ELCStruck OutOriginating Summons dated 11th July 2011 (as amended 19th December 2014)· [2019] KEELC 4846 (KLR)

Smart Shop Limited v Daniel Karanja Mutitu [2019] KEELC 4846 (KLR)

Environment and Land Court
17 January 2019
2,246 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan company's eight-year land dispute collapsed because its directors never passed a board resolution authorising the lawsuit before filing it in court.

What this practically means

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Executive summary

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Smart Shop Limited sued Daniel Karanja Mutitu by Originating Summons dated 11th July 2011, later amended in December 2014. Before the hearing, the defendant filed a preliminary objection dated 24th September 2018 contending that no board resolution authorised the institution of the suit, that neither the firm of Kinoti & Kibe Advocates nor Waichungo Martin & Co Advocates had authority to act for the company, that Ms. Susan Gathoni Maina had no authority to swear affidavits, and that the court consequently lacked jurisdiction. The plaintiff filed neither a response nor written submissions. The court framed three issues: whether the proceedings were authorised by company resolution, whether counsel had authority, and whether the objection was sustainable. Applying Mukisa Biscuits on the nature of preliminary objections, and following Bugerere Coffee Growers, Omondi v National Bank of Kenya, Affordable Homes Africa and Philomena Ndanga Karanja, the court held that a company, being an artificial person with a personality distinct from its directors, cannot institute suit without a board resolution. No resolution or letter of authority was produced, so the proceedings were a nullity. Relying on Raila Odinga v IEBC and A.J. Limited v Catering Levy Trustees, the court held that Article 159(2)(d) does not excuse non-compliance with procedural imperatives. The preliminary objection was sustained, the suit was struck out with costs to the defendant.

Key legal issues

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01

Whether the proceedings were authorised by a resolution of the company

Holding

No resolution authorising the institution of the suit or the swearing of affidavits was ever lodged in court; the proceedings were a nullity.

Reasoning

The court reviewed Bugerere Coffee Growers, Omondi v National Bank of Kenya, Affordable Homes Africa and Philomena Ndanga Karanja, all holding that a company must pass a board resolution to institute proceedings. The plaintiff, though a duly registered limited liability company, had produced no resolution and no letter of authority for the supporting affidavit sworn by its director. Following those authorities, the proceedings lacked sanction and were a nullity.

p. 3
02

Whether the law firms on record had authority to act for the plaintiff

Holding

Neither firm produced evidence of authority from the company; the defect could not be cured by relying on Article 159(2)(d).

Reasoning

The plaintiff filed no response or submissions to the preliminary objection. Relying on Raila Odinga v IEBC and A.J. Limited v Catering Levy Trustees, the court held that substantive justice does not excuse non-compliance with procedural requirements such as locus standi and authority. The absence of any resolution or letter of authority meant the advocates acted without instructions and the company was not properly before the court.

p. 3
03

Whether the preliminary objection is sustainable

Holding

The preliminary objection raised a pure point of law and was sustained; the suit was struck out with costs to the defendant.

Reasoning

Applying the Mukisa Biscuits definition, the objection went to the legal capacity of the plaintiff to institute the suit, assuming the pleaded facts. Since no resolution existed, the company was not before the court, the suit was a nullity, and the objection succeeded without any need to ascertain facts or exercise discretion.

p. 3

Legal principles established

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  • In the absence of a board of directors' resolution to commence a suit, a company, being an artificial person, cannot institute a suit in court, and such a suit is a nullity and should be struck out.
  • Article 159(2)(d) of the Constitution does not excuse litigants from complying with procedural imperatives such as authorising suits by company resolution.

Court orders

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  1. 1.The Preliminary Objection dated 24th September 2018 is sustained/upheld.
  2. 2.The suit commenced by Smart Shop Limited against Daniel Karanja Mutitu vide the Originating Summons dated 11th July 2011 and amended on 19th December 2014 is struck out.
  3. 3.Costs are awarded to the Defendant/Applicant.

Authorities

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Legislation

  • Constitution of KenyaArticle 159(2)(d)

Cases cited (9)

  • Mukisa Biscuits Manufacturing Ltd –vs- West End Distributors
    (1969) EA 696
  • Bugerere Coffee Growers Ltd vs Sebaduka & Another
    (1970) 1 EA 147
  • Omondi v. National Bank of Kenya and Others
    [2001] E.A. 177
  • East Africa Portland Cement Ltd
    [2014] eKLR
  • Affordable Homes Africa Limited vs Ian Henderson & 2 Others
    [2004] eKLR
  • Philomena Ndanga Karanja & 2 Others vs Edward Kamau Maina
    [2015] eKLR
  • Raila Odinga v I.E.B.C & Others
    (2013) eKLR
  • A.J. Limited & Another –V- Catering Levy Trustees & 3 Others
    (2005)
  • Salomon v. Salomon & Co. Ltd
    [1897] A.C. 22
Jurisdiction invoked
Original jurisdiction of the Environment and Land Court over the dispute (defendant contended the court lacked jurisdiction, which was not upheld as a distinct ground)

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, "Smart Shop Limited v Daniel Karanja Mutitu [2019] KEELC 4846 (KLR)", Case Analysis (2019). Originating Summons dated 11th July 2011 (as amended 19th December 2014). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2019/4846/eng@2019-01-17

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