Gilulu Investments Limited & 2 others v Gunga Properties Limited & 9 others (Civil Case E594 of 2021) [2021] KEHC 258 (KLR) (Commercial and Tax) (18 November 2021) (Ruling)
Neutral citation:
[2021] KEHC 258 (KLR)
Republic of Kenya
Civil Case E594 of 2021
WA Okwany, J
November 18, 2021
Between
Gilulu Investments Limited
1st Plaintiff
Acres and Homes Limited
2nd Plaintiff
William K. Gitau
3rd Plaintiff
and
Gunga Properties Limited
1st Defendant
Kofinaf Company Limited
2nd Defendant
Fundamental Property Limited
3rd Defendant
Christopher John Barron
4th Defendant
Stephen Jennings
5th Defendant
Mary Chege
6th Defendant
Rendeavour Services Limited
7th Defendant
Registrar of Companies
8th Defendant
Anthony Wachira Njoroge
9th Defendant
Family Bank Limited
10th Defendant
Ruling
1.The plaintiffs herein sued the defendants seeking the following orders: -
2.
Concurrently with the Plaint, the plaintiffs also filed the application dated 25th May 2021 (hereinafter “the 1st Application”) seeking the following orders: -
Concurrently with the Plaint, the plaintiffs also filed the application dated 25th May 2021 (hereinafter “the 1st Application”) seeking the following orders: -
3.The application is supported by the 3rd Plaintiff’s affidavit and premised on the grounds listed on the face of the application.
4.When the matter first came up for mention ex parte, under certificate of urgency, the court granted interim orders (hereinafter “the impugned orders”) as follows: -
5.The defendants opposed the application through the 8th Defendants replying affidavit dated 9th July 2021. The defendants also filed Grounds of Opposition as follows: -
6.The 1st - 7th Defendants filed an application dated 3rd June, 2021 seeking to set aside and/or discharge of the impugned orders of 26th May, 2021. The Plaintiffs opposed the application through the 3rd Plaintiff’s Replying Affidavit sworn on 25th June, 2021.
7.The 3rd Defendant filed Chamber Summons dated 3rd June, 2021 (hereinafter “the arbitration application”). The application is supported by the affidavit of Maria Koutsou and is premised on the grounds listed on the face of the application.
8.On 15th June, 2021, the law firm of W.G Wambugu & Company Advocates who act for the 8th Defendant in these proceedings filed a Notice of Change of Advocates seeking take over the legal representation of the 1st Plaintiff (Gilulu Investments Limited) from M/S Otieno Ogola & Company Advocates. In addition to the Notice of Change of Advocates, W.G Wambugu & Company Advocates also filed Grounds in Support of the 3rd Defendant’s application for arbitration together with a Replying Affidavit sworn by the 8th Defendant also supporting the 3rd Defendant’s application for arbitration.
9.In a nutshell, the 8th Defendant does not oppose the 3rd Defendant’s request for determination of the dispute herein through the Arbitration forum in London.
10.A preliminary issue therefore arose regarding the legal representation of the 1st Plaintiff. Directions were taken that that the dispute over the 1st Plaintiff’s legal representation and the arbitration application be considered first and that the same be canvassed by way of written submissions.
11.This ruling is therefore in respect to the dispute over the 1st Plaintiff’s legal representation and the 3rd Defendant’s arbitration application.
Legal Representation.The plaintiffs’ Submissions
12.The plaintiffs referred to the exhibits attached to the 3rd Plaintiff’s Further Affidavit as annexures marked WKG-1, WKG-2 and WKG-3 and argued that the said exhibits confirm the 3rd Plaintiff’s position that he is the ultimate beneficial owner of the 1st Plaintiff and that the 8th Defendant cannot purport to exercise control or authority over the said company. It was submitted that whilst acting as a director, the 8th Defendant was a fiduciary and held the said directorship in trust for the 3rd Plaintiff.
13.The plaintiffs submitted that there is ample evidence to demonstrate that the 3rd Plaintiff exercises control over the 1st Plaintiff and that any decisions affecting the 1st Plaintiff are made and authorized by the 3rd Plaintiff. It was submitted that the 8th Defendant’s intention is to forcefully take over the 1st Plaintiff from the 3rd Plaintiff and permanently defeat the 2nd and 3rd Plaintiff’s case as against the Defendants herein.
14.It was the plaintiffs’ case that it is not permissible, in law, for joint Plaintiffs to be represented by two different firms of Advocates, except with leave of the Court. The plaintiffs cited English decision in Lewis vs Daily Telegraph 1964 (1) All E.R. 705 as cited in Christopher Kipkorir Lebo & 331 Others V Kenya Power & Lighting Company Limited [2008] eKLR where it was held that: -
15.The plaintiffs argued that it is irregular for W. G. Wambugu & Company Advocates to purport to act for the 1st Plaintiff, yet the 1st, 2nd and 3rd Plaintiffs are properly represented by Otieno Ogola & Company Advocates. They added that the situation is made worse as the 8th Defendant and W. G. Wambugu & Company Advocates purport to act for the 1st Plaintiff and have immediately upon filing the Notice of Change of Advocates taken a position in complete contradiction and conflict with the position taken by the 2nd and 3rd Plaintiffs.
16.The plaintiffs’ case was that the intention of the 8th Defendant and W. G. Wambugu Advocates in purporting to take over the legal representation of the 1st Plaintiff is to concede to the 3rd Defendant’s request for arbitration and thereby torpedo the Plaintiffs’ suit against the Defendants. They urged the court to resist the 8th defendant’s take-over and adopt the position that was taken in a related case where the principle parties are the same as the parties herein being, Tatu City Limited & 3 others vs Stephen Jennings & 6 others, Civil Case No 46 of 2015 [2016] eKLR wherein Tuiyott J. declined to permit a Change of Advocates where the intention was to terminate a suit that was pending before the Court. In the said case, the Court held as follows over the endorsement of notice of appointment: -
17.The plaintiffs emphasized that they have evidence to show that the 2nd Plaintiff paid Kshs. 348,025,547.00 to account number 48000012537 held by the 6th defendant (Rendeavour Services Limited) being part-payment for the purchase price for the for the suit property. They maintained that the 8th defendant did not make any contribution towards the said purchase price and cannot therefore claim that the sale Agreement between the 1st Plaintiff and the 3rd Defendant was for her benefit as the director and “owner” of the 1st Plaintiff.
18.The plaintiffs stated that one Peter W. Kariuki, swore an Affidavit to confirm the 3rd Plaintiff instructed him to sign the Term Sheet dated 29th March, 2016, Agreement for Sale dated 11th July, 2016 and Addendum Agreement dated 24th September, 2018 on behalf of the 1st Plaintiff and not the 8th Defendant.
19.The plaintiffs urged the Court to find that the law firm of M/S Otieno Ogola & Company Advocates is properly on record for the 1st Plaintiff and to strike out and/or expunge the Notice of Change of Advocates and Grounds in Support filed by W. G. Wambugu & Company Advocates, purportedly on behalf of the 1st Plaintiff.
20.On the 3rd defendant’s application dated 3rd June 2021 for an order to stay of proceedings relating to the 3rd defendant and to refer the dispute to arbitration, the Plaintiffs submitted that one of the orders that they seek in the 1st application is for a declaration that the arbitration clause contained at Clause 17 of the Sale Agreement dated 11th July, 2016 is inoperable and incapable of performance.
21.The plaintiff submitted that this suit transcends the parties to the agreement and is not merely a dispute between the 1st Plaintiff and 3rd Defendant, but involves additional proper and necessary parties. According to the plaintiffs, the Arbitration Clause of the Agreement is inoperative and the dispute properly falls for determination by this Honourable Court. Reference was made to the decision in Martin Njuguna Ngugi vs Ahmed Noor Sheikh & Another [2018] eKLR, where the Court considered the involvement of non-parties to an arbitration agreement as follows: -
22.The plaintiffs also cited the decision in Damaris Wanjiru Nganga vs Loise Naisiae Leiyan & another [2015] eKLR where the court declined to refer a dispute to arbitration on the basis that the performance of an agreement was intimately tied to a third party. The court held that: -
23.The plaintiffs observed that even though the 1st defendant is not party to the Sale Agreement between the 1st Plaintiff and 3rd Defendant, it is intricately and intimately tied to the dispute as it is the registered owner of the suit property. They added that the 1st defendant is therefore the Principal Vendor who transacted through the 3rd defendant as the Nominated Vendor.
24.The plaintiffs further noted that the 2nd and 3rd plaintiffs are also, not parties to the Agreement for Sale but are intricately and intimately tied to the dispute as the 2nd Plaintiff paid a huge deposit sum of Kshs. 348,025,547.00 being ten (10%) deposit for the transaction. It was the plaintiffs’ case that the 2nd plaintiff’s participation in this suit is therefore extremely critical for the reason that it made the said payment as the Principal Purchaser and that it must therefore be heard on the dispute. They noted that similar position obtains in respect to the 6th and 10th defendants who received the Kshs. 348,025,547.00 deposit from the 2nd plaintiff. They added that the participation of the 2nd plaintiff, the 6th and 10th defendants is not merely peripheral and that the dispute herein has morphed into one that renders the arbitration clause inoperative thereby leaving the court as the only avenue for settling the dispute.
25.The plaintiffs further submitted that since the Agreement for Sale in question was in respect to property situate in Kenya where both the Vendor and Purchaser reside and further, the deposit having been paid to the 6th Defendant who is also is resident in Kenya through the 10th defendant which is a Kenyan bank and, that further the agreement indicates that the applicable law is Kenyan laws, it will be pointless to refer the dispute to arbitration in a foreign jurisdiction.
26.The plaintiffs’ case was that the 2nd and 3rd Plaintiffs have a constitutional right to access justice pursuant to Article 48 of the Constitution which right will be violated should the matter be referred to arbitration where they will not be able to participate and present their cases. It was submitted that the effect of locking out the eleven additional necessary parties from participating in the Arbitral proceedings is that the suit property and the deposit sum of Kshs. 348,025,547.00 would be permanently kept away from the reach of the 2nd and 3rd Plaintiffs.
27.The Plaintiffs maintained that the request for arbitration is also, not genuine and that the 8th Defendant’s attempt to take over the 1st Plaintiff is proof of complete lack of bonafides in the prayer for arbitration. They accused the 8th Defendant of colluding with the 1st, 3rd, 4th and 5th Defendants herein to concede to the Arbitration by first purporting to irregularly change legal representation of the 1st Plaintiff in order to accede to the 3rd Defendant’s request for Arbitration and thereafter conduct Arbitral proceedings in London strictly between the “1st Plaintiff and 3rd Plaintiff” in total exclusion of the proper and necessary parties. The plaintiffs cited the decision of the Court of Appeal decision in United India Insurance Company Ltd, Kenindia Insurance Company Ltd & Oriental Fire & General Insurance Company Ltd vs East African Underwriters (Kenya) Ltd [1985] eKLR wherein it was held that: -
28.The plaintiffs submitted that the above holding applies to this case as the suit property is situate in Kenya, the deposit towards the purchase price was paid in Kenya and to a Kenyan Bank (Family Bank) and a Kenyan Company (Rendeavour Services Limited). They added that parties to the dispute are in Kenya, competent and compellable witnesses are readily available in Kenya and that it is Kenyan law that applies in the Agreement for Sale. they argued that Kenya is therefore, the natural forum for determination of the dispute.
The 3rd Defendant’s Submissions
29.The 3rd defendant submitted that in determining the proper person to control the affairs of the 1st plaintiff, the court ought to be guided by the principles of the conflict of laws. Counsel submitted that the instant dispute had a foreign component thus requiring the parties to show what the law in the foreign country stipulates with regard to the dispute. Counsel referred to the case of Export Import Bank of America vs Royal Media Services limited & 4 others [2020] eKLR where the court held as follows; -… it is important to note that although that is what is provided in those documents the same was not pleaded nor was it proved. Instead both the learned counsels in this matter submitted in their written submissions that are the law in the state of New York which this court should apply to this matter. Even in that there was a discordance in what the law provides.According to the learned counsel for the defendants Dr. Kamau Kuria Senior Counsel (SC) the court should apply both the foreign and Kenyan Law. The learned counsel for Ex-Imp Bank Ms. Raore submitted that Kenyan Law applied and in the alternative the law of New York State applied.In my view and in view of the fact the Ex-Imp Bank failed to plead and to prove the law that is applicable, it follows that it is the Kenyan Law that will apply. I find support on this from a Canadian case JP Morgan Chase Bank v. Lanner (The), 2008 FCA 399 (CanL11), [20091 4 FCR 109, thus:
"Per Richard C.J. (Ryer J.A. concurring): Whenever a Canadian court is asked to apply the substantive law of a foreign jurisdiction, it must apply a "choice of law" analysis using Canadian conflict of laws rules. Absent a statutory and/or treaty provision directing the forum to apply a particular choice of law rule, Canadian common law conflict of laws rules will apply in a proceeding where a court is asked to apply foreign law. The first step in a choice of law analysis is the determination of the legal nature of the questions or issues to be 
adjudicated. The court must then determine what choice of law rule applies to that particular category and finally apply the appropriate jurisdiction's law to the issue. In general, foreign law must be specifically pleaded and proved to the satisfaction of the court. Otherwise the court will apply the law of the forum. "(emphasis mine.)8.That stand is also what is stated by the learned authors Dicey, Morris and Collins in their book. "The conflict of laws". I shall quote passages from 
that book at pages 319 to 326 that speak to this as follows:"Foreign law must be pleaded. The general rule is that if a party wishes to rely on a foreign law he must plead it in the same way as any other facts.
The court may decide a question of foreign law without proof if it is requested to do so by both parties....It is now well settled that foreign law must, in general, be proved by expert evidence. Foreign law cannot be proved merely by putting the text of a foreign enactment before the court, nor merely by citing foreign decisions or books of authority. Such materials can only be brought before the court as part of the evidence of an expert witness. Since without his assistance the court cannot evaluate or interpret them. This may be especially important (even if the ultimate task of the judge is made little easier) when the foreign law in quest is found in a number of sources whose relationship to each other is not easily understood or explained, or in cases in which the essence of the foreign law is that a local judge will inform himself as to what the material principles of religious law require in circumstances in which he is not bound to follow previous decisions, even his own, and there is no tradition of textbook writing. No precise or 
comprehensive answer can be given to the question who, for this purpose, is a competent expert. A judge or legal practitioner from the foreign country is always competent.(ii)Use of foreign sources. An English court will not conduct its own researches into foreign law, in the common law system, the trial is not an inquisition into the content of relevant foreign law any more than it is an inquisition into other factual issues that the parties tender for decision by the court". But if an expert witness refers to foreign statutes, decisions or books the court is entitled to look at them as part of his evidence."
"Per Richard C.J. (Ryer J.A. concurring): Whenever a Canadian court is asked to apply the substantive law of a foreign jurisdiction, it must apply a "choice of law" analysis using Canadian conflict of laws rules. Absent a statutory and/or treaty provision directing the forum to apply a particular choice of law rule, Canadian common law conflict of laws rules will apply in a proceeding where a court is asked to apply foreign law. The first step in a choice of law analysis is the determination of the legal nature of the questions or issues to be 
adjudicated. The court must then determine what choice of law rule applies to that particular category and finally apply the appropriate jurisdiction's law to the issue. In general, foreign law must be specifically pleaded and proved to the satisfaction of the court. Otherwise the court will apply the law of the forum. "(emphasis mine.)8.That stand is also what is stated by the learned authors Dicey, Morris and Collins in their book. "The conflict of laws". I shall quote passages from 
that book at pages 319 to 326 that speak to this as follows:"Foreign law must be pleaded. The general rule is that if a party wishes to rely on a foreign law he must plead it in the same way as any other facts.
The court may decide a question of foreign law without proof if it is requested to do so by both parties....It is now well settled that foreign law must, in general, be proved by expert evidence. Foreign law cannot be proved merely by putting the text of a foreign enactment before the court, nor merely by citing foreign decisions or books of authority. Such materials can only be brought before the court as part of the evidence of an expert witness. Since without his assistance the court cannot evaluate or interpret them. This may be especially important (even if the ultimate task of the judge is made little easier) when the foreign law in quest is found in a number of sources whose relationship to each other is not easily understood or explained, or in cases in which the essence of the foreign law is that a local judge will inform himself as to what the material principles of religious law require in circumstances in which he is not bound to follow previous decisions, even his own, and there is no tradition of textbook writing. No precise or 
comprehensive answer can be given to the question who, for this purpose, is a competent expert. A judge or legal practitioner from the foreign country is always competent.(ii)Use of foreign sources. An English court will not conduct its own researches into foreign law, in the common law system, the trial is not an inquisition into the content of relevant foreign law any more than it is an inquisition into other factual issues that the parties tender for decision by the court". But if an expert witness refers to foreign statutes, decisions or books the court is entitled to look at them as part of his evidence."
30.The 3rd defendant submitted that the court should apply Kenya’s Company law in respect to the passing of a Board resolution and the power of the directors to appoint an advocate since the parties failed to prove the standard set by court on foreign company law. Counsel submitted that there is need to apply sections 140 and 142 of the Companies Act which provide for the scope and the nature of the directors’ duties to make decisions in the company. Reference was made to the decision in Bugerere Coffee Limited vs the Seraduka & Anor. (1970) EA 147 where it was held as follows: -"When companies authorize the commencement of legal proceedings, a resolution or resolutions have to be passed either at a company or Board of Directors' meeting and recorded in the minutes, but no resolution had been passed authorizing the proceedings in this case. The Court held further that where an advocate has brought legal proceedings without authority of the purported plaintiff the applicant becomes personally liable to the 
defendants for the costs of the action."
defendants for the costs of the action."
31.Reference was also made to the case of East African Safari Air Ltd vs Anthony Kegode & Another in which Emukule J. observed that:
32.Counsel submitted that the 3rd plaintiff was neither a director nor a shareholder of the 1st defendant company and that the 8th defendant should be allowed to run the company as she is the director of the 1st plaintiff.
33.On the arbitration application, counsel submitted that the 1st plaintiff and the 3rd defendant executed an agreement which, at Clause 17.2 provided for an elaborate arbitration process in London. The 3rd defendant maintained that only parties to the agreement should go for arbitration. It was submitted that the parties to the agreement are foreign companies that voluntarily made a choice regarding the forum for their future dispute resolution.
The 8th Defendant’s Submissions
34.The 8th defendant submitted that the law firm of W. G. Wambugu and Company Advocates is properly on record as they act on the instructions of the director of the Company.
35.On the arbitration application, counsel submitted that the parties are bound by the terms of their agreement in view of the fact that they made a choice on the forum for dispute resolution. Reference was made to the decision in Union Technology Kenya Ltd vs County Government of Nakuru 2017 eKLR where the court held that: -
Analysis and Determination
36.I have carefully considered the pleadings filed herein, the submissions made by the parties over the twin issues of the 1st Plaintiff’s legal representation and whether the dispute should be referred to Arbitration. I have also considered the law and the authorities that the parties cited.
Arbitration
37.It was not disputed that the 1st plaintiff and the 3rd defendant executed an agreement on 11th July 2016 which provided for the dispute resolution forum and the applicable law. Clause 17.2 of the said agreement provides that; -
38.A simple reading of the above clause reveals that the parties to the agreement chose arbitration as their preferred method and forum for dispute resolution. The plaintiff’s case, however, was that the dispute herein is not one within the contemplation of the Arbitration clause as captured in the said clause as it involves other parties who were not privy to the agreement. According to the plaintiff, there are eleven other additional proper and necessary parties to the suit who were not privy to the agreement between the 1st plaintiff and the 3rd defendant and who would be barred from participating in the arbitral proceedings should the matter be referred to arbitration.
39.The 3rd defendant, on the other hand, submitted that the orders to refer the dispute to arbitration are sought as between the 1st plaintiff and the 3rd defendant only. According to the 3rd defendant the other parties to the suit can continue with the suit before the court.
40.Section 6(1) of the Arbitration Act provides an enforcement mechanism available to a party who wishes to compel an initiator of court proceedings, with respect to a matter that is the subject of an arbitration agreement, to refer the dispute to arbitration. The said section stipulates as follows: -
41.In Eunice Soko Mlagui vs Suresh Parmar & 4 others [2017] eKLR the court observed that; -
42.I have perused the prayers sought in the plaint and I note that they are against all the defendants jointly and severally. It is common ground that the arbitral clause is between the 1st plaintiff and the 3rd defendant and can only be enforced on the said parties. I am guided by the decision in Savings & Loan (K) Limited vs Kanyenje Karangaita Gakombe & Another [2015] eKLR where it was held that: -
43.Guided by the above decision, the provisions of the arbitral clause of the parties’ contract and the privity of contract doctrine, I find that the rights and obligations under a contract are only conferred/imposed on the parties to that contract and cannot be enforced on parties who did not participate in the contract in question. Strictly speaking, and as was correctly stated by the 3rd defendant, the subject agreement was executed between the 1st plaintiff and the 3rd defendant who are the parties that should ideally subject their dispute to arbitration.
44.A perusal of the plaint and other pleadings however reveals that the plaintiffs have outlined the role played by each of the 11 other parties in the suit. The pleadings further reveal that the said 11 other parties acquired rights or obligations under the said agreement that any court or tribunal handling the dispute cannot ignore or wish away. The plaintiffs stated that that even though the 1st defendant is not party to the Sale Agreement between the 1st Plaintiff and 3rd Defendant, it is intricately and intimately connected to the dispute as it is the registered owner of the suit property.
45.The plaintiffs further explained that even though the 2nd and 3rd plaintiffs were not parties to the Agreement for Sale they are also intricately tied to the dispute as the 2nd Plaintiff paid the 10% deposit sum of Kshs. 348,025,547.00 for the purchase of suit land. It was the plaintiffs’ case that the 2nd plaintiff’s participation in this suit is therefore extremely critical for the reason that it made the said payment as the Principal Purchaser. They also noted that a similar position obtains in respect to the 6th and 10th defendants who received the Kshs. 348,025,547.00 deposit from the 2nd plaintiff.
46.Having regard to the position presented by the plaintiffs regarding the role played in the transaction by every party cited in the case, I find that whichever angle one considers the case, it will not be possible to conclusively resolve the it without the involvement of the eleven other parties. It is my finding that the situation would have been different if the dispute was only between the 1st plaintiff and the 3rd defendant, in which case, this court would not hesitate but refer the dispute to arbitration in line with the initial intention of the parties to the agreement.
47.My finding is that referring the dispute as between the 1st plaintiff and the 3rd defendant only to arbitration while the rest of the parties pursue their case before this court, as was suggested by the 3rd defendant, would create a scenario where there are parallel proceedings over the same subject matter in two different forums. This court is at a loss as to how the two forums will determine the dispute, in the absence of the 11 other parties who are reported to have played critical roles in the subject dispute under consideration. Most importantly, considering claim that the suit land belongs to the 1st defendant, who was not a party to the sale agreement, one wonders how a decision will be made before the arbitral tribunal concerning the said land in the absence of the 1st defendant.
48.Article 159 (2) (c) of the Constitution mandates the courts to be guided, in the exercise of judicial authority, by the principles, inter alia, that justice shall not be delayed. The said Article also provides that alternative forms of dispute resolution including reconciliation mediation, arbitration and traditional dispute resolution mechanisms shall be promoted as long as they do not violate the bill of rights or repugnant to justice and morality or results in outcomes which are repugnant to justice and morality or inconsistent with the Constitution.
49.In the instant case, I am not persuaded that referring the matter to arbitration will promote the access to justice that is envisaged under Article 159 of the Constitution as it will have the effect of driving away other necessary parties from the seat of justice. It is my finding that the justice of this case will require that the suit be determined before this court which has the jurisdiction to hear and determine it. I therefore decline to grant the orders sought in the arbitration application. The costs of the said application shall abide the outcome of the main suit.
Legal Representation of the 1st Plaintiff
50.The next issue for determination is who between the law firms of Otieno Ogola & Company and M/s W. G. Wambugu & Company should represent the 1st plaintiff. The 3rd plaintiff submitted that the 8th defendant intentionally concealed, from the court, the fact that she had already ceased to actively participate in the 1st Plaintiff’s activities as a director and that she had on numerous occasions requested the 3rd plaintiff to appoint other persons as directors of the 1st plaintiff. It was further submitted that the 3rd plaintiff exercises control over the 1st plaintiff and that the decisions made in respect to the 1st plaintiff were authorized by the 3rd plaintiff.
51.It was therefore the 3rd plaintiff’s case that it was irregular for the law firm of W. G. Wambugu & Company Advocates to purport to act for the 1st plaintiff when all the plaintiffs are represented by Otieno Ogola & Co advocates.
52.The 3rd defendant, on the other hand, submitted that the court should apply the Kenya’s Company law which stipulates that an advocates power to act in a suit is conferred through a board resolution. It was the 3rd defendant’s Case that the 8th defendant, having presented the legal documents showing that she is the director and owner of the 1st plaintiff, should appoint the advocate to act in the suit. Counsel also stated that the 3rd plaintiff is a stranger to the suit as he did not adduce any documentary evidence from the Company registry to show its association with the 1st plaintiff.
53.It is trite that a Company is a separate legal entity from its members or shareholders and that the affairs of a Company are governed by Company Law. In the case of Assia Pharmaceuticals vs Nairobi Veterinary Centre Ltd HCCC No.391 of 2000, it was held that: -
54.The parties herein seek this court’s intervention in determining the law firm that rightfully represent the 1st plaintiff. I have perused the annexure marked MC-4 attached to the 8th respondent’s further affidavit dated 9th July 2021 which the 8th respondent states, is the 1st Plaintiff’s board resolution appointing M/S W. G. Wambugu and Co advocates to defend, prosecute and represent it in the proceedings touching on the subject matter. I have also perused the 3rd plaintiff exhibits WKG-1 WKG-2 WKG-3. The said exhibits indicate that 3rd plaintiff and the 8th defendant had a prior advocate/client relationship concerning the agreement that is the subject matter of this suit. The 3rd plaintiff avers that the said relationship culminated in a consensus/arrangement over the running of the affairs of the 1st Plaintiff company.
55.I note that in the said further affidavit, the 3rd plaintiff made damning revelations/claims against the 8th defendant ranging from breach of advocate/client confidentiality and material non-disclosure. At paragraphs 4 to 7 of the further affidavit, the 3rd plaintiff states as follows; -
4.Initially, the 8th Defendant acted for the me as my Advocate and even 
organized for the meeting between myself and the 5th Defendant, which the 8th Defendant christened in her correspondence as a meeting between the "the buyer and the seller" in respect to Property LIQ No 11285 measuring 1005 acres. The 8th Defendant has further acted for me in other transactions with Tatu City Limited and the 4th and 5th Defendants herein. Exhibited herewith and marked as WKG-I is correspondence in proof thereof.
organized for the meeting between myself and the 5th Defendant, which the 8th Defendant christened in her correspondence as a meeting between the "the buyer and the seller" in respect to Property LIQ No 11285 measuring 1005 acres. The 8th Defendant has further acted for me in other transactions with Tatu City Limited and the 4th and 5th Defendants herein. Exhibited herewith and marked as WKG-I is correspondence in proof thereof.
5.I must state out at the outset, that the 8th Defendant has now turned to be 
a crooked and rogue Advocate who does underhand deals with the 
adversaries of her former client, myself. The 8th Defendant is now using information she received from me in her capacity as my Advocate against me. I will demonstrate In this Affidavit, that there is a clear intention to 
permanently defeat my lawfully acquired purchaser's Interest In the suit property and keep the suit property away from my reach and this 
Honourable Court.
a crooked and rogue Advocate who does underhand deals with the 
adversaries of her former client, myself. The 8th Defendant is now using information she received from me in her capacity as my Advocate against me. I will demonstrate In this Affidavit, that there is a clear intention to 
permanently defeat my lawfully acquired purchaser's Interest In the suit property and keep the suit property away from my reach and this 
Honourable Court.
6.I am advised by the Plaintiffs' Advocates on record, which advise I verily believe to be sound, that it amounts to professional misconduct for an Advocate, like the 8th Defendant who initially acted for me, to now turn against me and act for the interest of my adversaries.
7.The 8th Defendant is now acting in concert with the 3rd 4th and 5th Defendants to fraudulently and unlawfully take over the conduct and legal representation of the 1st Plaintiff with an intention to torpedo the 1st, 2nd Plaintiffs' and my claim against the Defendants in this suit and concede to the 3rd Defendant's request for Arbitration in London as sought in the 3rd Defendant's Notice of Motion dated 10th June, 2021. The following flow of 
events and material facts suffice to demonstrate this conduct:-a.The 8th Defendant has purported to file a Notice of Change of Advocates on behalf of the 1st Plaintiff, Gilulu Investments Limited;b.The 8th Defendant has further , purported to swear and file a Replying 
Affidavit on behalf of the 1st Plaintiff, with an express intention to irregularly and unlawfully take over the legal representation of the 1st Plaintiff and concede to the 3rd Defendant's Notice of Motion dated 10th June, 2021 for determination of the dispute herein in arbitration;
c.The 8th Defendant has intentionally concealed from this Honourable Court the fact that I am the ultimate beneficial owner of the 1st plaintiff. The 8th defendant is quilty of material non-diclosure;d.The 8th Defendant has Intentionally concealed from this Honourable Court the fact that she had already actively ceased acting as a director of the 1st Plaintiff and requested me on numerous occasions to appoint 
other persons as director(s) of the 1st Plaintiff Exhibited herewith and collectively marked as WKG-2 arc true extracts of correspondences 
between me and 8th Defendant in proof thereof;e.The 8th Defendant has Intentionally concealed from this Honourable Court the fact that she has indeed already surrendered to me the original 
registration documents of the 1st Plaintiff and she no longer acts for me 
in matters concerning the 1st Plaintiff. Exhibited herewith and 
collectively marked as WKG-3 is a forwarding letter signed by the 8th Defendant and true copies of all documents concerning the registration and ownership of the 1st Plaintiff;f.I laving ceased acting as a director of the 1st Plaintiff, the 8th Defendant 
cannot now turn around and claim that she exercises authority over the 1st Plaintiff as to purport to swear an Affidavit on its behalf; andg.The 8th Defendant cannot now pretend to suffer from selective amnesia 
and intentionally conceal from this Honourable Court the above-stated material facts. In view of the 8th Defendant's demonstrated conduct 
hereinabove, this Honourable Court must disregard the averments made 
in Affidavits filed by her and treat those averments with utmost suspicion. The 8th Defendant has become a rogue lawyer.
events and material facts suffice to demonstrate this conduct:-a.The 8th Defendant has purported to file a Notice of Change of Advocates on behalf of the 1st Plaintiff, Gilulu Investments Limited;b.The 8th Defendant has further , purported to swear and file a Replying 
Affidavit on behalf of the 1st Plaintiff, with an express intention to irregularly and unlawfully take over the legal representation of the 1st Plaintiff and concede to the 3rd Defendant's Notice of Motion dated 10th June, 2021 for determination of the dispute herein in arbitration;
c.The 8th Defendant has intentionally concealed from this Honourable Court the fact that I am the ultimate beneficial owner of the 1st plaintiff. The 8th defendant is quilty of material non-diclosure;d.The 8th Defendant has Intentionally concealed from this Honourable Court the fact that she had already actively ceased acting as a director of the 1st Plaintiff and requested me on numerous occasions to appoint 
other persons as director(s) of the 1st Plaintiff Exhibited herewith and collectively marked as WKG-2 arc true extracts of correspondences 
between me and 8th Defendant in proof thereof;e.The 8th Defendant has Intentionally concealed from this Honourable Court the fact that she has indeed already surrendered to me the original 
registration documents of the 1st Plaintiff and she no longer acts for me 
in matters concerning the 1st Plaintiff. Exhibited herewith and 
collectively marked as WKG-3 is a forwarding letter signed by the 8th Defendant and true copies of all documents concerning the registration and ownership of the 1st Plaintiff;f.I laving ceased acting as a director of the 1st Plaintiff, the 8th Defendant 
cannot now turn around and claim that she exercises authority over the 1st Plaintiff as to purport to swear an Affidavit on its behalf; andg.The 8th Defendant cannot now pretend to suffer from selective amnesia 
and intentionally conceal from this Honourable Court the above-stated material facts. In view of the 8th Defendant's demonstrated conduct 
hereinabove, this Honourable Court must disregard the averments made 
in Affidavits filed by her and treat those averments with utmost suspicion. The 8th Defendant has become a rogue lawyer.
56.I further note that the 8th defendant did not controvert the 3rd Plaintiff’s averments and especially the claim that she had handed over the running of the 1st plaintiff’s affairs to him. This court is of the view that the full import of the 3rd plaintiff’s averments in the further affidavit can only be unpacked at the full hearing of the suit or through the cross examination of the 8th defendant as was requested by the 3rd plaintiff in his further affidavit. I further find that it is not within this court’s mandate or place to dictate or determine how the internal affairs of the 1st plaintiff should be managed. The Companies Act spells out the procedure to be followed in the management of the affairs of companies. Indeed, courts have taken the position that they should exercise restraint and be careful not to interfere with the affairs of the company. This position is supported by the decision in the case of Foss v Harbottle (1843) 2 Hare 261 wherein it was held that: -
57.Similarly, in E.A Safari Air Ltd. vs Anthony Ambaka Kegode & Another [2011] eKLR while quoting the decision in Danish Mercantile Co. Ltd vs Beaumont & Another [1951] 1 All ER 925 the Court of Appeal set out the principles to be considered in a situation where an action was commenced in the name of a company without authority and held that: -
58.Guided by the above cited authorities and bearing in mind the fact that the 8th defendant did not deny the 3rd plaintiff’s averment that she relinquished the management of the affairs of the 1st plaintiff company to him (the 3rd Plaintiff), I find that the issue of the 1st Plaintiff’s legal representation should be resolved through the forum set out by the Companies Act by resolution of the board of the said company. Consequently, I direct the parties to furnish this court with the board resolution indicating the advocate appointed to act for the 1st plaintiff in this matter. I further direct that the matter be mentioned on 14th February 2022 to confirm compliance.
DATED, SIGNED AND DELIVERED VIA MICROSOFT TEAMS AT NAIROBI THIS 18TH DAY OF NOVEMBER 2021 IN VIEW OF THE DECLARATION OF MEASURES RESTRICTING COURT OPERATIONS DUE TO COVID-19 PANDEMIC AND IN LIGHT OF THE DIRECTIONS ISSUED BY HIS LORDSHIP, THE CHIEF JUSTICE ON THE 17TH APRIL 2020.W. A. OKWANYJUDGEIn the presence of: -Mr. Otieno Willis for Plaintiff.Mr. Ahmednassir and Ms Hannan for 1st - 7th Defendants.Ms Mutua for Onsare for 10th Defendant.Mrs Wambugu for 8th Defendant/Respondent.Court Assistant: Margaret| HCCC NO. E594 OF 2021 | 0 |