Mutuku v Redspace International Limited & 2 others (Commercial Cause E699 of 2021) [2022] KEHC 155 (KLR) (Commercial and Tax) (24 February 2022) (Ruling)
Neutral citation number: [2022] KEHC 155 (KLR)
Republic of Kenya
Commercial Cause E699 of 2021
JN Mulwa, J
February 24, 2022
Between
Jonathan Maingi Mutuku
Plaintiff
and
Redspace International Limited
1st Defendant
Collins Omondi Haggai
2nd Defendant
Phelesia Anyango Kibuye
3rd Defendant
Ruling
1.Before the Court is a Notice of Motion dated 28th September, 2021 brought under Section 1A, 1B and 3A of the Civil Procedure Act, Order 13 Rule 1 and 2 of the Civil Procedure Rules 2010 and Section 786, 787 and 789 of the Companies Act 2015.
2.The Plaintiff seeks orders the following orders:
3.The Application is predicated on the grounds on the face of it and the Plaintiff’s Supporting Affidavit sworn on even date.
4.It is opposed vide Replying Affidavits sworn on 27th October, 2021 and 30th November, 2021 by the 2nd Defendant and 3rd Defendant respectively.
5.The issues for determination are:
Judgment on admission
6.The Plaintiff avers that one of the reliefs sought in his Plaint filed herein on 22nd July, 2021 is a declaration that he is entitled to 200 ordinary shares in the 1st Defendant Company. He avers that the 2nd Defendant expressly admitted in the Statement of Defence filed on 7th September, 2021 that the Plaintiff is entitled to 125 ordinary shares in the 1st Defendant Company. The Plaintiff therefore submits that the 2nd Defendant’s partial admission entitles him to judgment on admission as regards the 125 ordinary shares which should be transferred to him pending the determination of the other issues raised in the Plaint.
7.On his part, the 2nd Defendant avers that the Plaintiff is bound by the averment in his Plaint that he is entitled to 200 shares and will need to prove at the substantive hearing of this case, that he is entitled to the said number of shares and not the 125 stated in the 2nd Defendant’s Statement of Defence. The 2nd Defendant further contends that summary judgment on admission cannot be entered against him alone yet such an order is bound to affect even the 1st and 3rd Defendants who have both denied the Plaintiff’s entitlement to any shares in the company. In his submissions, the 2nd Defendant urges that there was no admission on his part in the Statement of Defence which would justify the entry of summary judgment against the Defendants herein.
8.As for the 3rd Defendant, she avers that there is absolutely no basis for transfer of any shares to the Plaintiff at this stage or at all.
9.Order 13 Rule 2 of the Civil Procedure Rules on which the prayer for judgment on admission is premised provides as follows: -
10.This provision is aimed at ensuring that in instances where certain claims are evidently and clearly admitted by one party in a suit, the claiming party is able to obtain a summary judgment for the same pending the disposal of disputed claims. It also ensures that a party does not incur unnecessary costs. In Choitram v Nazari [1984] eKLR, Madan, J.A. when considering the purpose of the then Order XIII Rule 6 which is similar to the current Order 13 Rule 2 stated thus:-
11.In Ideal Ceramics Ltd v Suraya Property Group Ltd[2017] eKLR, the court stated:-
12.The admission of facts contemplated by Order 13 Rule 2 are not limited to pleadings. They may also be in correspondence, other admitted documents or even oral, provided that they are unequivocal, plain, unambiguous and do not require evidence or lengthy interpretation of documents to be determined. It must be an admission that raises no doubt as to the intention of the party making it. In Synergy Industrial Credit Limited v Oxyplus International Limited & 2 others [2021] eKLR, Mativo J stated thus:
13.Notably however, judgment on admissions is not a matter of right but a discretionary power of the court which must be exercised judiciously on the facts and circumstances of each case. See Cassam v Sachania [1982] eKLR. This means that the court is not bound to pass a decree.
14.I have perused the 2nd Defendant’s Statement of Defence and the minutes of a meeting held on 13th October, 2020 which the Plaintiff relies on as the basis for the admission of facts. I note from the two documents that the 2nd Defendant admits that the Plaintiff’s investment in the 1st Defendant Company could only entitle him to 125 shares. The 2nd Defendant has however expressly denied the Plaintiff’s entitlement to the 200 shares claimed in his Plaint dated 22nd July, 2021. Additionally, the 2nd Defendant has in his said Statement of Defence raised other issues relating to the Plaintiff’s compliance with the oral agreement entered into with the 2nd Defendant and the late Joseph Wadawi to invest in the 1st Defendant Company.
15.In my view therefore, the Plaintiff has not demonstrated that there is a plain, unambiguous and unequivocal admission of facts by the Defendants herein that would entitle him to a summary judgment on admission. The issues raised by all the Defendants herein cannot be wished away summarily without the benefit of a full trial where the same will be determined on the basis of evidence.
Appointment of an inspector for investigation of the 1st Defendant’s affairs
16.On this, the Plaintiff accused the 2nd and 3rd Defendants as well as the late Joseph Wadawi of managing the affairs of the 1st Defendant Company in an opaque, secretive, unprofessional and fraudulent manner to his detriment. He submitted that as a minority shareholder therein, he qualifies to bring an application under Section 786 of the Companies Act, 2015 for investigation of the company’s affairs in order to hold the perpetrators to account.
17.Both the 2nd and 3rd Defendant contend that the Plaintiff has no locus standi to seek such an order as he is not a member of the 1st Defendant Company.
18.Inspection of a company’s affairs on application of a company’s members is provided for under section 786 of the Companies Act as follows:
19.Section 785(1) (c) of the Companies Act defines a member of a company as any person to whom shares in the company have been transferred or transmitted by operation of law. As it stands, the Plaintiff does not own any shares in the 1st Defendant Company and none has been transferred to him. This means that he has no capacity to seek an order for inspection of the 1st Defendant’s affairs until such a time that whatever shares he is entitled to, if any, will have been transferred to him. For now, he is a stranger in the company and cannot be granted such an order.
20.The upshot is that the Plaintiff’s Notice of Motion dated 28th September, 2021 lacks merit and is dismissed with costs.
DATED AND SIGNED AT NAIROBI THIS 24TH DAY OF FEBRUARY, 2022HON. J. N. MULWAJUDGE