Pauline Wangari Muchina & 2 others v Thuo Mathenge & 4 others

2. These applications arise from a dispute involving the management and governance of Mboi Kamiti Farmers Company Limited (the 4th Respondent). Firstly, the grounds and facts adduced in each one of them will be highlighted and followed by a determination thereof. 3. The 1st Application which is dated the 9th December, 2022 was filed by the Plaintiffs (hereinafter referred to as “the Plaintiffs’ Application”) seeking for the following orders: a. Spent. b. Spent c. Spent d. That the court be pleased to grant a temporary injunction against the 1st , 2nd and 3rd Defendants/Respondents by themselves, their agents and/or servants or anyone acting on their behalf from interfering , taking over management and or purporting to act as a director of Mboi Kamiti Farmers Company Limited pending the hearing and determination of this suit. e. That the court be pleased to grant a temporary injunction against the 1st, 2nd and 3rd Defendants/Respondents by themselves, their agents and/or servants or anyone acting on their behalf from interfering , taking over management and or purporting to act as a director of Mboi Kamiti Farmers Company Limited pending the hearing and determination of this suit. f. That the OCPD Kiambu does provide security for purposes of execution of Order (2) and (3) herein above. g. That the costs be borne by the Defendants jointly and severally. 4. In their application, supported by an affidavit sworn by the 3rd Plaintiff, Mr. David Mbugua Ndichu, the Plaintiffs have asserted that they are bona fide members of the 4th Respondent, holding paidup shares and entitled to vote at the company’s Annual General Meetings. They claim that the 4th Respondent has not convened an Annual General Meeting for over 12 years, the last valid Annual General Meetings having been conducted on 18th March, 2010. This failure, according to the Plaintiffs, is a direct contravention of section 275A of the Companies Act, which mandates that Annual General Meeting must be held annually. 5. The Plaintiffs further allege that the 4th Respondent’s records were unlawfully altered following an Annual General Meeting conducted on 24th March, 2009. That although elections were conducted during this meeting and a list of directors submitted to the Registrar of Companies (the 5th Respondent) for registration, the Registrar declined to endorse the list, prompting the filing of Milimani High Court Miscellaneous Civil Case No. 258 of 2009. ThePlaintiffs have averred that this suit was dismissed on 19th February, 2010, with the court directing the 4th Respondent to convene another Annual General Meeting. This meeting was subsequently conducted in March, 2010, and seven directors were elected, as evidenced by a CR12 dated 16th March, 2010. However, subsequent CR12 records, including one dated 9th December, 2022, allegedly show unauthorized alterations, including the unilateral addition of a company secretary without consultation or the consent of members. 6. In view of this, the Plaintiffs accuse the 1st, 2nd, and 3rd Defendants of mismanaging the 4th Respondent, operating in a dictatorial manner, and unilaterally selling company assets to third parties who are not members. This conduct, they have argued, is contrary to the company’s Articles of Association and detrimental to the rights of legitimate shareholders and the Defendant have taken into their interest in the company as perpetual directors who are never exiting office. https://new.kenyalaw.org/akn/ke/judgment/kehc/2024/16683/eng@2024-12-18 2

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7. The Defendants opposed the application through a replying affidavit sworn by the 1st Defendant, Mr. Thuo Mathenge, on 28th February, 2023, and a Notice of Preliminary Objection dated 8th February, 2023. The Defendants contended that Annual General Meetings have been conducted regularly, with the most recent one having taken place on 1st April, 2022. Notices and receipts for earlier Annual General Meetings were allegedly held on 15th May, 2014, 6th May, 2015, 4th August, 2016, 27th September, 2017, and 5th October, 2019 were annexed to the affidavit seeking to persuade the court that 4th Defendant has consistently held Annual General Meetings according to the law. 8. The Defendants have denied allegations of mismanagement, asserting that the company’s affairs have been conducted transparently and in compliance with the law. They argue that the allegations made by the Plaintiffs are not only baseless but also non-compliant with sections 275, 277 and 280 of the Companies Act. 9. On the other hand, the Notice of Preliminary of Objection is premised on the ground that this suit is incompetent and defective for non- compliance with section 275, 277 and 280 of the Companies Act and consequently the Plaintiffs are non- suited to conduct this matter. 10. On 14th April, 2023, the Plaintiffs filed a supplementary affidavit sworn by the 3rd Plaintiff, Mr. David Mbugua Ndichu, in response to the averments made by the Defendants regarding their application. In this affidavit, the Plaintiffs have clarified that they are bonafide members and shareholders of the 4th Defendant Company, Mboi Kamiti Farmers Company Limited. They have supported this claim by providing evidence of paid-up shares and attaching their respective share certificates, namely Certificate Numbers 14221, 13540, and 12227. 11. The Plaintiffs have argued that their status as shareholders of the company grants them the necessary locus standi to institute the present suit. Further, they submitted that under section 280(2)(b) of the Companies Act, the court is vested with the authority to call for the convening of an Annual General Meeting upon the application of any member of a company who has the right to vote at such a meeting. 12. Moreover, the Plaintiffs have refuted the Defendants’ claims that Annual General Meetings had been held regularly. They have insisted that the alleged Annual General Meetings referenced by the Defendants never took place. They have contended that the notices purportedly issued for these meetings were contradictory, inconsistent, and misleading. Further, they have pointed out that some of the directors named in these notices were already deceased at the time the notices were purportedly issued, thereby rendering the Defendants' claims untenable and untrue. 13. The Plaintiffs have maintained that the lack of valid Annual General Meetings and the questionable authenticity of the notices provided by the Defendants underscored the need for court intervention to rectify the ongoing irregularities within the governance of the 4th Defendant Company. 14. The 2nd Application is dated 28th December, 2023 filed by the Intended Interested Party seeking the following orders: - 15. a. That the leave be granted to Eliud Muchai Kimaniand James Ndegwa Gitauto be joined as the ‘ interested parties’ in this suit. b. That costs be in the cause. The application is premised on among other grounds that the Applicant/Intended Interested party is a member and shareholder of the 4th Defendant Company hence any orders issued by this court against the 4th Defendant, may potentially affect his rights in the company. That he has not been aware of the suit hence to protect his rights in the company, he should be enjoined in the suit. https://new.kenyalaw.org/akn/ke/judgment/kehc/2024/16683/eng@2024-12-18 3

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16. By Mutual consent, the parties agreed to canvass the applications and the Notice of Preliminary Objection through written submissions. The record shows that the parties complied by filing their respective submissions which the court has reviewed and notes that they largely reiterate the facts and arguments summarized above. As such, the submissions will not be reproduced verbatim at this point but will be considered in the analysis. Analysis and Determination 17. Upon reviewing the pleadings, affidavits, and submissions filed by the parties, the following issues arise for determination: a. Whether the notice of Preliminary objection dated 8th February 2023 is merited b. Whether Plaintiff’s have established a prima facie case to warrant the grant of temporary injunction against the 1st to the 3rd Defendant restraining them from taking over the management of the 4th Defendant or selling any of its assets, c. Whether the intended interested party have established a case to be enjoined in the suit. Whether the Notice of Preliminary Objection dated 8th February, 2023 is merited 18. Jurisdiction is the cornerstone of any judicial proceeding and without jurisdiction, a court cannot adjudicate a matter. In this case, the Defendant’s Preliminary Objection is premised on the argument that the plaintiff lack the locus classicus, to initiate this suit hence the issues addressed fall outside this court’s jurisdiction. 19. It is well established that jurisdiction is conferred by statute or the Constitution. In the seminal case of Owners of Motor Vessel “Lillian S” v. Caltex Oil (Kenya) Ltd [1989] KLR 1, the Court of Appeal held that jurisdiction is fundamental and must be determined at the outset of any matter. If a court finds that it lacks jurisdiction, it must down its tools. 20. In their submissions dated 23rd March, 2023, the Defendants/Respondents have argued that the Plaintiffs had not attached any evidence of membership or share certificates to support their claim of being members of the 4th Defendant Company, Mboi Kamiti Farmers Company Limited. The Defendants have contended that neither the Plaintiffs’ documents nor the supporting affidavit sworn by the 3rd Plaintiff, Mr. David Mbugua Ndichu, contained proof of membership. They maintained that the Plaintiffs had failed to meet the basic threshold required to establish jurisdiction under the Companies Act and that their inability to demonstrate membership rendered the suit incompetent and without merit. To reinforce their position, the Defendants relied on the decision in the case of Assia Pharmaceuticals v Nairobi Veterinary Centre Ltd., Nairobi (Milimani) HCCC No. 391 of 2000, asserting that the absence of evidence of membership fundamentally undermined the Plaintiffs’ claim and warranted dismissal of the suit in limine. 21. On the other hand, the Plaintiffs/Applicants, have submitted and argued that they had sufficiently demonstrated their membership in the 4th Defendant Company. They have pointed out that their supplementary affidavit, sworn by Mr. David Mbugua Ndichu on 2nd April, 2023, included annexures of their share certificates, which confirmed their status as members. The Plaintiffs have submitted that the existence of these share certificates invalidated the Defendants’ claim that they lacked membership. 22. The Plaintiffs have further contended that the Defendants’ Preliminary Objection could not succeed because it raised factual issues that required verification and were therefore unsuitable for determination as a pure point of law. In support of this argument, they have relied on the principles https://new.kenyalaw.org/akn/ke/judgment/kehc/2024/16683/eng@2024-12-18 4

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set out in the case of Janet Syokau Kaswii v Kathonzweni Financial Service Association [2014] eKLR, which quoted Mukisa Biscuit Manufacturing Co. Ltd. v West End Distributors Ltd. (1969) EA 696. The Plaintiffs have emphasized that a Preliminary Objection should only be raised where it involves a clear point of law that does not require further evidence or factual inquiry. The Plaintiffs have urged the court to adopt the principle that it should be slow to strike out suits and, instead, endeavor to allow matters to proceed to a full determination on their merits. They have contended that their suit was valid and that the Defendants’ Preliminary Objection was baseless. 23. The court has carefully reviewed the Defendants’ Notice of Preliminary Objection, the parties’ submissions, and the supplementary affidavit filed by the Plaintiffs. Upon evaluation, the court finds that the Plaintiffs attached evidence of their membership in the 4th Defendant Company, including share certificates bearing Numbers 14221, 13540, and 12227. These certificates correspond to the Plaintiffs’ member Numbers 095/479, 001/269, and 001/8003, respectively. The Defendants did not challenge the authenticity of these certificates, which the court finds to be sufficient proof of the Plaintiffs’ membership and shareholding in the 4th Defendant Company. 24. It is well established that a Preliminary Objection can only be raised where it involves a pure point of law. As articulated in the case of Mukisa Biscuit Manufacturing Co. Ltd. v West End Distributors Ltd. (1969) EA 696, a Preliminary Objection cannot be sustained where facts require ascertainment or where it seeks the exercise of judicial discretion. In this case, the issue of whether the Plaintiffs are members or shareholders of the 4th Defendant Company is a factual question that requires evidence from both parties. It cannot, therefore, be resolved at this preliminary stage or through a Preliminary Objection. Consequently, the court finds that the Defendants’ Notice of Preliminary Objection fails to meet the threshold for a valid Preliminary Objection. The objection lacks merit and cannot be sustained.The Defendants’ Notice of Preliminary Objection dated 8th February, 2023 is hereby dismissed. The costs of the Preliminary Objection shall be in the cause. Whether the Plaintifis Have Established a Prima Facie Case to Warrant the Grant of a Temporary Injunction 25. The key issue before the court is whether the Plaintiffs have demonstrated a prima facie case that justifies the issuance of a temporary injunction restraining the 1st, 2nd, and 3rd Defendants from taking over the management of the 4th Defendant or from disposing of its assets pending the hearing and determination of the suit. 26. The principles for granting a temporary injunction are well established in the landmark case of Giella v Cassman Brown & Co. Ltd. [1973] EA 358, which requires an applicant to demonstrate the following: 27. a. A prima facie case with a probability of success; b. Irreparable harm that cannot be compensated by damages if the injunction is not granted; and c. That the balance of convenience tilts in favor of granting the injunction. In assessing whether a prima facie case has been established, the court must examine the material presented to determine whether the Plaintiffs have shown an apparent infringement of their rights that warrants judicial intervention. As noted in the case of Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] KLR 125, a prima facie case means: “ A case which, on the material presented to the court, a tribunal properly directing itself will conclude that there exists a right which has apparently been infringed by the opposite party as to call for an explanation or rebuttal from the latter.” https://new.kenyalaw.org/akn/ke/judgment/kehc/2024/16683/eng@2024-12-18 5

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28. The Plaintiffs assert that the 1st, 2nd, and 3rd Defendants have unlawfully taken over the management of the 4th Defendant Company, Mboi Kamiti Farmers Company Limited. They contend that the Defendants have failed to hold valid Annual General Meetings for over a decade, contrary to the requirements of the Companies Act and the 4th Defendant’s Articles of Association. The Plaintiffs allege that the Defendants have been mismanaging the company and disposing of its assets to the detriment of other shareholders. 29. The Plaintiffs argue that these actions are unauthorized and constitute a breach of their rights as members and shareholders of the 4th Defendant. They request the court’s intervention to restrain the Defendants from continuing with these alleged actions, which they claim are detrimental to the company’s interests and those of its legitimate shareholders. 30. The Defendants have countered these allegations by presenting evidence, including several CR12 forms, indicating that the 1st, 2nd, and 3rd Defendants are duly appointed directors of the 4th Defendant. They assert that they have been lawfully managing the affairs of the company and have provided notices and documentation showing that Annual General Meetings have been held regularly, with the most recent one allegedly conducted on 1st April, 2022. 31. The Defendants contend that the Plaintiffs have failed to demonstrate at what point the 1st to 3rd Defendants ceased to hold office as directors. They argue that the Plaintiffs’ claims are unsubstantiated and lack merit, emphasizing that the company’s records, including the CR12 forms annexed to their affidavits, confirm the legitimacy of their directorship. 32. The court has reviewed the materials presented by both parties, including the Plaintiffs’ affidavits and the CR12 forms annexed by both the Plaintiffs and the Defendants. These CR12 forms are critical as they represent the official record of the directors of the company, as maintained by the Registrar of Companies. This court has taken note that the CR12 forms annexed by the Defendants indicate that the 1st, 2nd, and 3rd Defendants are listed as duly appointed directors of the 4th Defendant Company. These records are presumed to be accurate and authoritative unless evidence to the contrary is presented. The Plaintiffs have not provided any clear or conclusive evidence to show that the Defendants have ceased to hold office or that their appointment as directors has been invalidated. 33. The Plaintiffs have not pointed to any specific event, resolution, or legal action that resulted in the 1st to 3rd Defendants ceasing to be directors of the company. In the absence of such evidence, the court is bound to rely on the official CR12 records, which confirm the Defendants’ status as directors until the contrary is shown upon full trial. 34. While the Plaintiffs have alleged that the Defendants have been mismanaging the company, they have not provided substantive evidence to support these claims. For example, there is no detailed evidence showing financial mismanagement, irregular transactions, or illegal asset disposals. The Plaintiffs’ allegations remain largely speculative and unsupported by documentary evidence. 35. The Plaintiffs claim that no valid Annual General Meetings have been held since 2010, yet the Defendants have presented notices and receipts purporting to demonstrate that Annual General Meetings were conducted. While the Plaintiffs have raised questions about the legitimacy of these Annual General Meetings, particularly concerning the validity of the notices, the court notes that such disputes are factual in nature and cannot be conclusively determined at this interlocutory stage. 36. However, the court is mindful of its obligation to balance the competing interests of the parties while ensuring that the 4th Defendant Company remains a going concern. The issuance of a temporary injunction is a drastic measure that could disrupt the company’s operations and adversely affect its https://new.kenyalaw.org/akn/ke/judgment/kehc/2024/16683/eng@2024-12-18 6

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stakeholders. On the other hand, denying the injunction could expose the Plaintiffs to irreparable harm if their allegations of mismanagement are later proven to be true. 37. Given the conflicting evidence presented, the court must take a cautious approach. While the Plaintiffs have raised legitimate concerns about governance and the need for Annual General Meetings, the Defendants have demonstrated, through the CR12 records, that they are currently recognized as the directors of the company. There is no evidence before the court to suggest that the Defendants have ceased to hold office or that their actions as directors are unauthorized. 38. Thus, the court finds that the Plaintiffs have not established a prima facie case sufficient to justify the issuance of a temporary injunction restraining the 1st to 3rd Defendants from managing the affairs of the 4th Defendant. The Defendants’ status as directors, as evidenced by the CR12 forms, remains unchallenged. The Plaintiffs have also failed to demonstrate irreparable harm that cannot be compensated by damages should their claims succeed at trial. 39. At this stage, the court is inclined to prioritize the preservation of the 4th Defendant Company as a going concern while ensuring that the substantive issues raised by the Plaintiffs are addressed in the main suit. As such, the application for a temporary injunction is declined. 40. However, the court directs that the parties to expedite the hearing of the main suit to address the Plaintiffs’ concerns regarding governance, directorship, and the alleged failure to convene Annual General Meetings. Whether the intended interested party have established a case to be enjoined in the suit. 41. On the last issue, the underlying question for the Court to determine is whether the Intended Interested Parties, Mr. Eliud Muchai Kimani and Mr. James Ndegwa Gitau, have established a sufficient case to warrant their joinder as parties in this suit. In their application, they seek to be allowed to participate in these proceedings as Interested Parties, asserting that their joinder is necessary for safeguarding their rights as shareholders of Mboi Kamiti Farmers Company Limited (the 4th Defendant). 42. In civil litigation, joinder of parties is necessary for ensuring the efficient and complete resolution of disputes. Thus, the central question is whether the Intended Interested Parties have demonstrated an identifiable legal interest or stake in the matter that would justify their inclusion in the proceedings. 43. Order 1 rule 10(2) of the Civil Procedure Rules, 2010 which is necessary in 44. the circumstances provides as follows: “ The court may at any stage of the proceedings, either upon or without the application of either party, and on such terms as may appear to the court to be just, order that the name of any party improperly joined, whether as plaintiff or defendant, be struck out, and that the name of any person who ought to have been joined, whether as plaintiff or defendant, or whose presence before the court may be necessary in order to enable the court effectually and completely to adjudicate upon and settle all questions involved in the suit, be added." 45. This provision empowers the court to add parties whose participation is necessary for the effective and complete adjudication of the matter. 46. Rule 2 of the Constitution of Kenya (Protection of Rights and Fundamental Freedoms) Practice and Procedure Rules, 2013 (Mutunga Rules), defines "Interested party" as a person or entity that has an https://new.kenyalaw.org/akn/ke/judgment/kehc/2024/16683/eng@2024-12-18 7

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identifiable stake or legal interest or duty in the proceedings before the court but is not a party to the proceedings or may not be directly involved in the litigation. 47. On the other hand, the Supreme Court of Kenya in the case of Trusted Society of Human Rights Alliance v Mumo Matemo & 5 Others [2014] eKLR clarified the threshold for joinder as follows: “ An interested party is one who has a stake in the proceedings, though he or she was not party to the cause ab initio. He or she is one who will be affected by the decision of the court when it is made, either way. Such a person feels that his or her interest will not be well articulated unless he himself or she herself appears in the proceedings and champions his or her cause.” 48. Similarly, the Supreme Court in the case of Francis Karioki Muruatetu & Another v Republic & 5 Others [2016] eKLR outlined guidelines for joinder of Interested Parties, wherein they stated that: a. The party must demonstrate personal interest or stake in the matter. b. The interest must be identifiable and not remote. c. The Intended Interested Party must show how their participation will aid the court in effectively determining the issues at hand. 49. Now applying the above principles to facts of this case, the Intended Interested Parties argue that they are shareholders of the 4th Defendant Company and that the outcome of the proceedings will directly affect their rights and interests. They assert that their joinder is essential for ensuring that their interests as shareholders are represented and protected. 50. The Intended Interested Parties claim that they were not initially aware of the suit but, upon learning of it, acted promptly to seek joinder. They further contend that their exclusion from the proceedings could lead to adverse orders being issued without their input, thus potentially affecting their rights in the company. 51. In view of the above facts, the court finds that the Intended Interested Parties have demonstrated an identifiable legal interest in the proceedings. As shareholders of the 4th Defendant Company, they have a direct stake in the management and governance of the company, which are the core issues in dispute. The Plaintiffs have raised allegations of mismanagement and unauthorized disposal of company assets, which, if proven, could adversely affect the interests of all shareholders, including the Intended Interested Parties. The Supreme Court in the Mumo Matemo case emphasized that an Interested Party must have a tangible stake in the matter, and the Intended Interested Parties have sufficiently shown that their rights as shareholders could be affected by the outcome of the proceedings. 52. Under order 1 rule 10(2) of the Civil Procedure Rules, the court must determine whether the presence of the Intended Interested Parties is necessary for the effective and complete adjudication of the suit. The court notes that the Plaintiffs have alleged that the 4th Defendant Company has not held valid Annual General Meetings for over a decade and that decisions affecting the company’s governance have been made without proper consultation. The Intended Interested Parties, as shareholders, are directly affected by these issues and may provide additional insights or evidence that will assist the court in resolving the dispute comprehensively. Joinder of the Intended Interested Parties will also ensure that any orders issued by the court take into account the interests of all stakeholders, thereby reducing the likelihood of future litigation. 53. The argument that joinder will complicate the proceedings is not persuasive. The participation of the Intended Interested Parties is unlikely to prejudice the existing parties, as their involvement will be limited to protecting their interests as shareholders. Furthermore, joinder will enhance the inclusivity https://new.kenyalaw.org/akn/ke/judgment/kehc/2024/16683/eng@2024-12-18 8

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and fairness of the proceedings, ensuring that the court’s decision reflects the interests of all relevant stakeholders. 54. In conclusion, this court is satisfied that the Intended Interested Parties have satisfied the legal threshold for joinder as Interested Parties. They have demonstrated a direct and identifiable legal interest in the proceedings, which arises from their status as shareholders of the 4th Defendant Company. Their participation is necessary to ensure the complete and effective adjudication of the dispute, as well as to protect their rights and prevent the issuance of adverse orders that may affect them without their input. 55. In light of the foregoing analysis and findings, the court makes the following final orders: a. The Preliminary Objection dated 8th February, 2023 is hereby dismissed as it does not meet the threshold for a valid Preliminary Objection. The costs of the Preliminary Objection shall be in the cause. b. The Plaintiffs’ Notice of Motion dated 9th December, 2022 seeking temporary injunctive relief against the 1st to 3rd Defendants is dismissed. However, the assets of the 4th Defendant shall not be disposed without approval in a Special General Meeting conducted in accordance with Articles of the Company. c. The Intended Interested Parties, Mr. Eliud Muchai Kimani and Mr. James Ndegwa Gitau, have demonstrated a sufficient legal interest in the proceedings. The Notice of Motion dated 28th August, 2023 is therefore allowed, and the two individuals are hereby joined in the suit as Interested Parties. d. The costs of both applications shall also be in the cause. e. Further, the court directs the parties to expedite the hearing of the main suit where the substantive issues raised, including the management, governance, and convening of Annual General Meetings for the 4th Defendant Company may be addressed. The parties are required to comply with all pre-trial directions within the next fourteen days to ensure a timely resolution of the dispute. It is so Ordered. DATED, SIGNED, AND DELIVERED AT KIAMBU THIS …18TH DAY OF DECEMBER 2024. D.O CHEPKWONY JUDGE In the presence of: M/S Kibebo counsel for Plaintiffs M/S Wayiego holding brief for Mr. M. Kamau counsel for 11st and 2nd Interested Parties No appearance for and by counsel for Defendants Court Assistant - Martin https://new.kenyalaw.org/akn/ke/judgment/kehc/2024/16683/eng@2024-12-18 9

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