'1. By a plaint dated 12 June 2024 the plaintiffs have prayed for judgment against the respondent for:
“(a) A declaration that the defendants are liable to account to the association the sum of Kshs. 46,048,630 on the ground of their breach of fiduciary duty and/ or fraud by the 1st defendant.
(b)An order that the defendants pay to the association Kshs. 46,048,630.
(c) Payment of interest on (b) above at 12% on from the date of breach until payment in full.
(d) Costs of the suit.
(e) The costs of the successful defendant (if any) be paid by the unsuccessful defendant.
(f) Interest on (d) above at court rates until payment in full.
(g) Any other or further relief which this Honourable Court deems fit to grant.”
2. The plaintiffs have described themselves as male adults of sound mind residing in Mombasa. They have also pleaded that they are “members and officials of the Muslim Association, Mombasa, on whose behalf they have instituted these proceedings in a representative capacity pursuant to the provisions of Order 1, Rule 8 (1) of the Civil Procedure Rules.”
3. It is pleaded in the plaint that the Muslim Association is a society duly registered under the Societies Act, cap. 108 and at times material to the suit, the defendants were respectively the chairman and the treasurer of the association. Accordingly, they owed the association a fiduciary duty. I will henceforth refer to the Muslim Association as simply “the association”.
4. The association held its annual general meeting on 26 February 2023 when a new board of directors was elected. The plaintiff was elected as the vice chairperson of the board while the 2nd plaintiff was elected a board member.
5. When the new board took over, it could not trace funds received by the defendants on behalf of the association during their tenure as officials of the association. A forensic audit of the association’s accounts revealed that the sum of Kshs. 46,048,630/= had been misappropriated.
6. The two defendants entered appearance to the suit and also filed their respective defences contesting the plaintiffs’ claims.
7. In his defence, the 1st defendant has pleaded that the plaintiffs have no locus standi to file this suit. He has contended that he was the chairperson of the association from January 2016 to December 2022 “when he was hounded out and not given a chance to do a proper handover…”. He has denied allegations of financial misappropriation and, in particular, misuse of the funds of the association.
8. Like the 1st defendant, the 2nd defendant’s defence has largely questioned the plaintiffs’ standing to bring suit against the plaintiffs. It is the 2nd defendant’s contention that, contrary to the plaintiffs’ contentions, the plaintiffs are not trustees of the association and, therefore, they cannot purport to sue on behalf of the association.
9. It is also contended that the plaintiffs cannot purport to bring this suit in a representative capacity because they have not obtained leave of the court to file the suit and prosecute it as a representative suit.
10. By a motion dated 4 July 2024 the 1st defendant sought to have the suit struck out on the sole ground that the plaintiffs have no locus standi to file this suit. The application was supported by the 1st defendant’s own affidavit sworn on 4 July 2024. According the affidavit, the constitution of the association provides that it is only the trustees of the association who can sue or be sued on behalf of the association in accordance with the instructions of the board of directors.
11. The 2nd respondent filed a similar application, more particularly, dated 1 July 2024, seeking that the suit be struck out on the same ground that the plaintiffs have no capacity to bring this suit.
12. The 1st plaintiff swore a replying affidavit on his own behalf and on behalf of the 2nd plaintiff opposing the 2nd defendant’s application dated 1 July 2024. The plaintiffs insist that they sued the defendants in a representative capacity, both as members and officials of the association. According to the applicant, this is a suit for the members of the association.
13. Besides responding to the applications, the plaintiffs also filed an application dated 24 July 2024 seeking directions of this Honourable Court under Order 1 rule 8 of the Civil Procedure Rules to the effect that a notice of the suit be given to all members of the association by way of advertisement and that the court be pleased to direct the appropriate form and medium for such public advertisement to ensure that adequate notice is given to members of the association.
14. I directed that the question whether the plaintiffs’ suit ought to be struck out should be heard first because, logically, if the suit is struck out, there would be point in the plaintiffs seeking directions under order 1 rule 8 of the Civil Procedure Rules. In any event, the applications seeking to strike out the suit were filed, first in time.
15. A letter dated 15 May 2023 addressed to the secretary of the association by the Assistant Registrar of Societies, a copy of which has been exhibited to the plaintiffs’ affidavit, shows the office bearers of the society to be Mohammed Zahir Alavi, as the Chairman, and Amjad Parveez Malik as the vice chairperson. The other officers are Haroon Saeed Mehmood who is named as the secretary and Shakil Ahmed indicated to be the treasurer. I take it that these are the officers of the association who were elected in the association’s Annual General Meeting of 26 February 2023.
16. These persons would constitute the principal officers of the association and, ordinarily, they would be the appropriate persons to sue on behalf of the association in any action accruing to the association. But according to the Constitution of the association, in particular, clause 16.8 thereof, it is the trustees of the association who can sue or be sued on behalf of the association. This clause reads as follows:
“16.8 The trustees can sue under instructions from the Board of Directors or be sued for (sic) on behalf of the association.”
17. In their submissions, the plaintiffs have urged that this clause does not exclusively vest in the trustees with the mandate to sue or to be sued on behalf of the association. Members of the association, it has been urged, can sue in a representative capacity under order 1 rule 8(1) of the Civil Procedure Rules.
18. But in their plaint, it is pleaded that the plaintiffs have not only sued on behalf of the members of the association but they have sued on behalf of the association as well. This is what I gather at paragraph 2 of the plaint to mean; it reads as follows:
“The plaintiffs are members and officials of the Muslim Association, Mombasa, on whose behalf they have instituted these proceedings in a representative capacity pursuant to the provisions of Order 1 Rule 8 (1) of the Civil Procedure Rules.”
19. It is not in dispute that the plaintiffs are not trustees of the association and neither are they the association’s principal officers. They cannot, therefore, purport to initiate legal proceedings, on behalf of the association, to recover the association’s property when the association’s constitution is clear that such an action can only be taken by the trustees. The plaintiffs’ argument that clause 16.8 of the association’s constitution is couched in such a away that, it leaves open for any member of the association to take a legal proceedings on behalf of the association is not tenable because, in law, only the principal officers or trustees of a society registered under the Societies Act may sue or be sued in an action for or against the society.
20. It follows that the plaintiff’s suit would not be viable to the extent that it is to have been filed on behalf of the association contrary to clause 16.8 of the association’s constitution.
21. But the suit has not been filed on behalf of the association only. It is also stated to be a representative suit according to which any member of a defined section of the public with a defined objective may act on behalf of the rest of the members of that group.
22. Again this background of the plaintiffs’ suit, the question that presents itself in the defendants’ applications is whether, besides the requirement that only the principal officers or the registered trustees of a society can sue or be sued on behalf of the society registered under the Societies Act, a member of a society can file a representative suit on behalf of members of the association.
23. Unlike unincorporated associations such as societies registered under the Societies Act, limited liability companies have a legal personality of their own and they can sue or be sued in their own name. Whenever a wrong is done to them, the proper plaintiff in such entities in any proceedings or action for remedy would be the entities themselves. This is what is commonly referred to “the rule in Foss versus Harbottle” after the decision in Foss vs Harbottle (1843) 67 ER 189.
24. In that case Sir James Wigram, Vice Chancellor, stated at page 202 that:
“The Victoria Park Company is an incorporated body, and the conduct with which the defendants are charged in this suit is an injury not to the plaintiffs exclusively; it is an injury to the whole corporation by individuals whom the corporation entrusted with powers to be exercised only for the good of the corporation.
“It was not, nor could it successfully be, argued that it was a matter of course for any individual members of a corporation thus to assume to themselves the right of suing in the name of the corporation. In law the corporation and the aggregate members of the corporation are not the same thing for purposes like this; and the only question can be whether the facts alleged in this case justify a departure from the rule which, prima facie, would require that the corporation should sue in its own name and in its corporate character, or in the name of someone whom the law has appointed to be its representative.”
25. The rule was restated in Edwards versus Halliwell (1950) ER 1064 in the following terms:
“The rule in Foss-v-Harbottle, as I understand it, comes to no more than this. First, the proper Plaintiff in an action in respect of a wrong alleged to be done to a company or association of persons is prima facie the company or the association of persons itself. Secondly, where the alleged wrong is a transaction which might be made binding on the company or association and on all its members by a simple majority of the members, no individual member of the company is allowed to maintain an action in respect of that matter for the simple reason that if a mere majority of the members of the company or association is in favour of what has been done, then cadit quaestio; or if the simple majority challenges the transaction, there is no valid reason why the company should not sue.”
26. Even then, the learned judge in Foss versus Harbottle(supra) held that there are exceptions to this general rule and held, thus:
“The first objection taken in the argument for the defendants was that the individual members of the corporation cannot in any case sue in the form in which this bill is framed. During the argument I intimated an opinion, to which, upon further consideration, I fully adhere, that the rule was much too broadly stated on the part of the defendants. I think there are cases in which a suit might properly be framed. Corporations like this, of a private nature, are in truth little more than private partnerships; and in cases which may easily be suggested it would be too much to hold that a society of private persons associated together in undertakings, which, though certainly beneficial to the public, are nevertheless matters of private property, are to be deprived of their civil rights, inter se, because, in order to make their common objects more attainable, the Crown or the Legislature may have conferred upon them the benefit of a corporate character. If a case should arise of injury to a corporation by some of its members, for which no adequate remedy remained, except that of a suit by individual corporators in their private characters, and asking in such character the protection of those rights to which in their corporate character they were entitled, I cannot but think that the principle so forcibly laid down by Lord Cottenham in Wallworth v. Holt (4 Myl. & Cr. 635; see also 17 Ves. 320, per Lord Eldon) and other cases would apply, and the claims of justice would be found superior to any difficulties arising out of technical rules respecting the mode in which corporations are required to sue. (see page 203)
“I follow, with entire assent, the opinion expressed by the Vice-Chancellor in Preston v. The Grand Collier Dock Company, that if a transaction be void, and not merely voidable, the corporation cannot confirm it, so as to bind a dissenting minority of its members. (at page 207-8)”(Emphasis added).
27. In Edwards versus Halliwell (supra) L.J. Jenkins stated that “...the rule (in Foss v. Harbottle) is not an inflexible rule and it will be relaxed where necessary in the interests of justice”.
28. The exceptions to the rule were articulated by the House of Lords in Prudential Assurance Company Limited v Newman Industries Limited and Others (1982) 1 ALL ER 364 at page 357 as follows:
“(a)There is no room for the operation of the rule if the alleged wrong is ultra vires the corporation, because the majority shareholders cannot confirm the transaction;
(b) There is also no room for the operation of the rule if the transaction complained of could be validly sanctioned only by special resolution or the like because a simple majority cannot confront a transaction which requires the concurrence of a greater majority; and
(c) There is an exception to the rule where what has been done amounts to fraud and the wrongdoers are themselves in control of the company.”
29. And according to L.G. Gower in his book, “The Principles of Modern Company Law”, 3rd Edition there are two other exceptions to the rule in Foss versus Harbottle and these are where it is alleged that the personal rights of the plaintiff shareholder have been or are about to be infringed; and, any other case where the interests of justice require that the general rule, requiring suit by the company, should be disregarded.
30. In all these circumstances that comprise the exception to the rule in Foss versus Harbottle, a shareholder would be entitled to initiate a derivative action in his own name.
31. Would a member of unincorporated body such as a society registered under Societies Act initiate a suit under similar circumstances albeit in a representative capacity? If the restatement of the rule in Edwards versus Halliwell (supra) is anything to go by, the answer to this question is in the affirmative. In his judgment, an excerpt of which has been reproduced and which I have to quote again for emphasis, Jenkins L.J. was clear that the rule in Foss versus Harbottle applied to associations as much as it applied to companies of distinct legal personality. The learned judge held:
“The rule in Foss-v-Harbottle, as I understand it, comes to no more than this. First, the proper Plaintiff in an action in respect of a wrong alleged to be done to a company or association of persons is prima facie the company or the association of persons itself. Secondly, where the alleged wrong is a transaction which might be made binding on the company or association and on all its members by a simple majority of the members, no individual member of the company is allowed to maintain an action in respect of that matter for the simple reason that if a mere majority of the members of the company or association is in favour of what has been done, then cadit quaestio; or if the simple majority challenges the transaction, there is no valid reason why the company should not sue.”(Emphasis added).
32. By parity of reasoning, and to the extent that that the rule in Foss versus Harbottle is not exclusive to juristic persons but cuts across to bodies without legal personality of their own, the exceptions to the rule in Foss versus Harbottle would apply with equal measure to associations, including societies registered under the Societies Act. For, what option would be left to members of an association, such as the association in this suit if, by chance, the principal officers or the registered trustees, for instance, conspire amongst themselves to defraud the same society that they have been entrusted to protect? Is it logical to argue, in these circumstances, that only the principal officers or registered trustees of the association, can sue on behalf of and for the benefit of the society when it is obvious that they cannot sue themselves? I reckon that where facts, comprising the exemptions to the rule in Foss versus Harbottle obtain, and subject, of course, to the provisions of the Societies Act or any other written law, members of such a society may take matters into their own hands and file, not a derivative suit but a representative suit, as contemplated under order 1 rule 18 of the Civil Procedure Rules,
33. This leads me to the conclusion that the plaintiffs’ suit is sustainable to the extent that it is a representative suit.
34. I must add that the suit is not irredeemable merely because the plaintiffs pleaded that they have sued on behalf of the association and members of the association. For the reasons I have given, even if it was to be assumed that the plaintiffs are principal officers of the association, they could not, in that capacity, possibly sue on behalf of the association and, at the same time plead that their suit is representative in its nature and character. Indeed, it behoved the plaintiffs to frame their suit distinctly and unambiguously so that the defendants are not embarrassed in determining the form which their defence is to take.
35. One decision that I would wish to cite in opting to sustain the plaintiffs’ suit rather than strike it out is the case of D.T. Dobie & Company (Kenya) Ltd v Joseph Muchina & Another (1980) eKLR, where the Court of Appeal held that:
“If an action is explainable as a likely happening which is not plainly and obviously impossible, the court ought not to overact by considering itself in a bind summarily to dismiss the action. A court of justice should aim at sustaining a suit rather than terminating it by summary dismissal. Normally a lawsuit is for pursuing it.
No suit ought to be summarily dismissed unless it appears so hopeless that it plainly and obviously discloses no reasonable cause of action and is so weak as to be beyond redemption and incurable by amendment. If a suit shows a mere semblance of a cause of action, provided it can be injected with real life by amendment, it ought to be allowed to go forward for a court of justice ought not to act in darkness without the full facts of a case before it.
On the other hand, if there is a point of law which merits a serious discussion, the court should be asked to proceed under order XIV rule 2. (Per Madan JA at page 9).
36. I doubt the plaintiffs’ suit falls into the category of suits that the court described as “hopeless”. I am not persuaded that it discloses no reasonable cause of action and neither am I convinced that it is so weak that it is beyond redemption by way of amendment. Without belabouring the point, I reach the inevitable conclusion that I find no merit in the defendants’ applications, respectively dated 1 July 2024 and 4 July 2024. They are hereby dismissed. Costs will abide the outcome of the suit. Orders accordingly.
'
“(a) A declaration that the defendants are liable to account to the association the sum of Kshs. 46,048,630 on the ground of their breach of fiduciary duty and/ or fraud by the 1st defendant.
(b)An order that the defendants pay to the association Kshs. 46,048,630.
(c) Payment of interest on (b) above at 12% on from the date of breach until payment in full.
(d) Costs of the suit.
(e) The costs of the successful defendant (if any) be paid by the unsuccessful defendant.
(f) Interest on (d) above at court rates until payment in full.
(g) Any other or further relief which this Honourable Court deems fit to grant.”
2. The plaintiffs have described themselves as male adults of sound mind residing in Mombasa. They have also pleaded that they are “members and officials of the Muslim Association, Mombasa, on whose behalf they have instituted these proceedings in a representative capacity pursuant to the provisions of Order 1, Rule 8 (1) of the Civil Procedure Rules.”
3. It is pleaded in the plaint that the Muslim Association is a society duly registered under the Societies Act, cap. 108 and at times material to the suit, the defendants were respectively the chairman and the treasurer of the association. Accordingly, they owed the association a fiduciary duty. I will henceforth refer to the Muslim Association as simply “the association”.
4. The association held its annual general meeting on 26 February 2023 when a new board of directors was elected. The plaintiff was elected as the vice chairperson of the board while the 2nd plaintiff was elected a board member.
5. When the new board took over, it could not trace funds received by the defendants on behalf of the association during their tenure as officials of the association. A forensic audit of the association’s accounts revealed that the sum of Kshs. 46,048,630/= had been misappropriated.
6. The two defendants entered appearance to the suit and also filed their respective defences contesting the plaintiffs’ claims.
7. In his defence, the 1st defendant has pleaded that the plaintiffs have no locus standi to file this suit. He has contended that he was the chairperson of the association from January 2016 to December 2022 “when he was hounded out and not given a chance to do a proper handover…”. He has denied allegations of financial misappropriation and, in particular, misuse of the funds of the association.
8. Like the 1st defendant, the 2nd defendant’s defence has largely questioned the plaintiffs’ standing to bring suit against the plaintiffs. It is the 2nd defendant’s contention that, contrary to the plaintiffs’ contentions, the plaintiffs are not trustees of the association and, therefore, they cannot purport to sue on behalf of the association.
9. It is also contended that the plaintiffs cannot purport to bring this suit in a representative capacity because they have not obtained leave of the court to file the suit and prosecute it as a representative suit.
10. By a motion dated 4 July 2024 the 1st defendant sought to have the suit struck out on the sole ground that the plaintiffs have no locus standi to file this suit. The application was supported by the 1st defendant’s own affidavit sworn on 4 July 2024. According the affidavit, the constitution of the association provides that it is only the trustees of the association who can sue or be sued on behalf of the association in accordance with the instructions of the board of directors.
11. The 2nd respondent filed a similar application, more particularly, dated 1 July 2024, seeking that the suit be struck out on the same ground that the plaintiffs have no capacity to bring this suit.
12. The 1st plaintiff swore a replying affidavit on his own behalf and on behalf of the 2nd plaintiff opposing the 2nd defendant’s application dated 1 July 2024. The plaintiffs insist that they sued the defendants in a representative capacity, both as members and officials of the association. According to the applicant, this is a suit for the members of the association.
13. Besides responding to the applications, the plaintiffs also filed an application dated 24 July 2024 seeking directions of this Honourable Court under Order 1 rule 8 of the Civil Procedure Rules to the effect that a notice of the suit be given to all members of the association by way of advertisement and that the court be pleased to direct the appropriate form and medium for such public advertisement to ensure that adequate notice is given to members of the association.
14. I directed that the question whether the plaintiffs’ suit ought to be struck out should be heard first because, logically, if the suit is struck out, there would be point in the plaintiffs seeking directions under order 1 rule 8 of the Civil Procedure Rules. In any event, the applications seeking to strike out the suit were filed, first in time.
15. A letter dated 15 May 2023 addressed to the secretary of the association by the Assistant Registrar of Societies, a copy of which has been exhibited to the plaintiffs’ affidavit, shows the office bearers of the society to be Mohammed Zahir Alavi, as the Chairman, and Amjad Parveez Malik as the vice chairperson. The other officers are Haroon Saeed Mehmood who is named as the secretary and Shakil Ahmed indicated to be the treasurer. I take it that these are the officers of the association who were elected in the association’s Annual General Meeting of 26 February 2023.
16. These persons would constitute the principal officers of the association and, ordinarily, they would be the appropriate persons to sue on behalf of the association in any action accruing to the association. But according to the Constitution of the association, in particular, clause 16.8 thereof, it is the trustees of the association who can sue or be sued on behalf of the association. This clause reads as follows:
“16.8 The trustees can sue under instructions from the Board of Directors or be sued for (sic) on behalf of the association.”
17. In their submissions, the plaintiffs have urged that this clause does not exclusively vest in the trustees with the mandate to sue or to be sued on behalf of the association. Members of the association, it has been urged, can sue in a representative capacity under order 1 rule 8(1) of the Civil Procedure Rules.
18. But in their plaint, it is pleaded that the plaintiffs have not only sued on behalf of the members of the association but they have sued on behalf of the association as well. This is what I gather at paragraph 2 of the plaint to mean; it reads as follows:
“The plaintiffs are members and officials of the Muslim Association, Mombasa, on whose behalf they have instituted these proceedings in a representative capacity pursuant to the provisions of Order 1 Rule 8 (1) of the Civil Procedure Rules.”
19. It is not in dispute that the plaintiffs are not trustees of the association and neither are they the association’s principal officers. They cannot, therefore, purport to initiate legal proceedings, on behalf of the association, to recover the association’s property when the association’s constitution is clear that such an action can only be taken by the trustees. The plaintiffs’ argument that clause 16.8 of the association’s constitution is couched in such a away that, it leaves open for any member of the association to take a legal proceedings on behalf of the association is not tenable because, in law, only the principal officers or trustees of a society registered under the Societies Act may sue or be sued in an action for or against the society.
20. It follows that the plaintiff’s suit would not be viable to the extent that it is to have been filed on behalf of the association contrary to clause 16.8 of the association’s constitution.
21. But the suit has not been filed on behalf of the association only. It is also stated to be a representative suit according to which any member of a defined section of the public with a defined objective may act on behalf of the rest of the members of that group.
22. Again this background of the plaintiffs’ suit, the question that presents itself in the defendants’ applications is whether, besides the requirement that only the principal officers or the registered trustees of a society can sue or be sued on behalf of the society registered under the Societies Act, a member of a society can file a representative suit on behalf of members of the association.
23. Unlike unincorporated associations such as societies registered under the Societies Act, limited liability companies have a legal personality of their own and they can sue or be sued in their own name. Whenever a wrong is done to them, the proper plaintiff in such entities in any proceedings or action for remedy would be the entities themselves. This is what is commonly referred to “the rule in Foss versus Harbottle” after the decision in Foss vs Harbottle (1843) 67 ER 189.
24. In that case Sir James Wigram, Vice Chancellor, stated at page 202 that:
“The Victoria Park Company is an incorporated body, and the conduct with which the defendants are charged in this suit is an injury not to the plaintiffs exclusively; it is an injury to the whole corporation by individuals whom the corporation entrusted with powers to be exercised only for the good of the corporation.
“It was not, nor could it successfully be, argued that it was a matter of course for any individual members of a corporation thus to assume to themselves the right of suing in the name of the corporation. In law the corporation and the aggregate members of the corporation are not the same thing for purposes like this; and the only question can be whether the facts alleged in this case justify a departure from the rule which, prima facie, would require that the corporation should sue in its own name and in its corporate character, or in the name of someone whom the law has appointed to be its representative.”
25. The rule was restated in Edwards versus Halliwell (1950) ER 1064 in the following terms:
“The rule in Foss-v-Harbottle, as I understand it, comes to no more than this. First, the proper Plaintiff in an action in respect of a wrong alleged to be done to a company or association of persons is prima facie the company or the association of persons itself. Secondly, where the alleged wrong is a transaction which might be made binding on the company or association and on all its members by a simple majority of the members, no individual member of the company is allowed to maintain an action in respect of that matter for the simple reason that if a mere majority of the members of the company or association is in favour of what has been done, then cadit quaestio; or if the simple majority challenges the transaction, there is no valid reason why the company should not sue.”
26. Even then, the learned judge in Foss versus Harbottle(supra) held that there are exceptions to this general rule and held, thus:
“The first objection taken in the argument for the defendants was that the individual members of the corporation cannot in any case sue in the form in which this bill is framed. During the argument I intimated an opinion, to which, upon further consideration, I fully adhere, that the rule was much too broadly stated on the part of the defendants. I think there are cases in which a suit might properly be framed. Corporations like this, of a private nature, are in truth little more than private partnerships; and in cases which may easily be suggested it would be too much to hold that a society of private persons associated together in undertakings, which, though certainly beneficial to the public, are nevertheless matters of private property, are to be deprived of their civil rights, inter se, because, in order to make their common objects more attainable, the Crown or the Legislature may have conferred upon them the benefit of a corporate character. If a case should arise of injury to a corporation by some of its members, for which no adequate remedy remained, except that of a suit by individual corporators in their private characters, and asking in such character the protection of those rights to which in their corporate character they were entitled, I cannot but think that the principle so forcibly laid down by Lord Cottenham in Wallworth v. Holt (4 Myl. & Cr. 635; see also 17 Ves. 320, per Lord Eldon) and other cases would apply, and the claims of justice would be found superior to any difficulties arising out of technical rules respecting the mode in which corporations are required to sue. (see page 203)
“I follow, with entire assent, the opinion expressed by the Vice-Chancellor in Preston v. The Grand Collier Dock Company, that if a transaction be void, and not merely voidable, the corporation cannot confirm it, so as to bind a dissenting minority of its members. (at page 207-8)”(Emphasis added).
27. In Edwards versus Halliwell (supra) L.J. Jenkins stated that “...the rule (in Foss v. Harbottle) is not an inflexible rule and it will be relaxed where necessary in the interests of justice”.
28. The exceptions to the rule were articulated by the House of Lords in Prudential Assurance Company Limited v Newman Industries Limited and Others (1982) 1 ALL ER 364 at page 357 as follows:
“(a)There is no room for the operation of the rule if the alleged wrong is ultra vires the corporation, because the majority shareholders cannot confirm the transaction;
(b) There is also no room for the operation of the rule if the transaction complained of could be validly sanctioned only by special resolution or the like because a simple majority cannot confront a transaction which requires the concurrence of a greater majority; and
(c) There is an exception to the rule where what has been done amounts to fraud and the wrongdoers are themselves in control of the company.”
29. And according to L.G. Gower in his book, “The Principles of Modern Company Law”, 3rd Edition there are two other exceptions to the rule in Foss versus Harbottle and these are where it is alleged that the personal rights of the plaintiff shareholder have been or are about to be infringed; and, any other case where the interests of justice require that the general rule, requiring suit by the company, should be disregarded.
30. In all these circumstances that comprise the exception to the rule in Foss versus Harbottle, a shareholder would be entitled to initiate a derivative action in his own name.
31. Would a member of unincorporated body such as a society registered under Societies Act initiate a suit under similar circumstances albeit in a representative capacity? If the restatement of the rule in Edwards versus Halliwell (supra) is anything to go by, the answer to this question is in the affirmative. In his judgment, an excerpt of which has been reproduced and which I have to quote again for emphasis, Jenkins L.J. was clear that the rule in Foss versus Harbottle applied to associations as much as it applied to companies of distinct legal personality. The learned judge held:
“The rule in Foss-v-Harbottle, as I understand it, comes to no more than this. First, the proper Plaintiff in an action in respect of a wrong alleged to be done to a company or association of persons is prima facie the company or the association of persons itself. Secondly, where the alleged wrong is a transaction which might be made binding on the company or association and on all its members by a simple majority of the members, no individual member of the company is allowed to maintain an action in respect of that matter for the simple reason that if a mere majority of the members of the company or association is in favour of what has been done, then cadit quaestio; or if the simple majority challenges the transaction, there is no valid reason why the company should not sue.”(Emphasis added).
32. By parity of reasoning, and to the extent that that the rule in Foss versus Harbottle is not exclusive to juristic persons but cuts across to bodies without legal personality of their own, the exceptions to the rule in Foss versus Harbottle would apply with equal measure to associations, including societies registered under the Societies Act. For, what option would be left to members of an association, such as the association in this suit if, by chance, the principal officers or the registered trustees, for instance, conspire amongst themselves to defraud the same society that they have been entrusted to protect? Is it logical to argue, in these circumstances, that only the principal officers or registered trustees of the association, can sue on behalf of and for the benefit of the society when it is obvious that they cannot sue themselves? I reckon that where facts, comprising the exemptions to the rule in Foss versus Harbottle obtain, and subject, of course, to the provisions of the Societies Act or any other written law, members of such a society may take matters into their own hands and file, not a derivative suit but a representative suit, as contemplated under order 1 rule 18 of the Civil Procedure Rules,
33. This leads me to the conclusion that the plaintiffs’ suit is sustainable to the extent that it is a representative suit.
34. I must add that the suit is not irredeemable merely because the plaintiffs pleaded that they have sued on behalf of the association and members of the association. For the reasons I have given, even if it was to be assumed that the plaintiffs are principal officers of the association, they could not, in that capacity, possibly sue on behalf of the association and, at the same time plead that their suit is representative in its nature and character. Indeed, it behoved the plaintiffs to frame their suit distinctly and unambiguously so that the defendants are not embarrassed in determining the form which their defence is to take.
35. One decision that I would wish to cite in opting to sustain the plaintiffs’ suit rather than strike it out is the case of D.T. Dobie & Company (Kenya) Ltd v Joseph Muchina & Another (1980) eKLR, where the Court of Appeal held that:
“If an action is explainable as a likely happening which is not plainly and obviously impossible, the court ought not to overact by considering itself in a bind summarily to dismiss the action. A court of justice should aim at sustaining a suit rather than terminating it by summary dismissal. Normally a lawsuit is for pursuing it.
No suit ought to be summarily dismissed unless it appears so hopeless that it plainly and obviously discloses no reasonable cause of action and is so weak as to be beyond redemption and incurable by amendment. If a suit shows a mere semblance of a cause of action, provided it can be injected with real life by amendment, it ought to be allowed to go forward for a court of justice ought not to act in darkness without the full facts of a case before it.
On the other hand, if there is a point of law which merits a serious discussion, the court should be asked to proceed under order XIV rule 2. (Per Madan JA at page 9).
36. I doubt the plaintiffs’ suit falls into the category of suits that the court described as “hopeless”. I am not persuaded that it discloses no reasonable cause of action and neither am I convinced that it is so weak that it is beyond redemption by way of amendment. Without belabouring the point, I reach the inevitable conclusion that I find no merit in the defendants’ applications, respectively dated 1 July 2024 and 4 July 2024. They are hereby dismissed. Costs will abide the outcome of the suit. Orders accordingly.
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