REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT NAIROBI
COMMERCIAL AND TAX DIVISION
HCCOMMPET NO. E006 OF 2023
IN THE MATTER OF: ARTICLES 22(1), 27, 40 &47 OF
THE CONSTITUTION OF KENYA, 2010
-AND-
IN THE MATTER OF: ALLEGED CONTRAVENTION OF RIGHTS OR
FUNDAMENTAL FREEDOMS UNDER ARTICLES 10, 27, 40, 47 & 73 OF THE CONSTITUTION OF KENYA, 2010.
-AND-
IN THE MATTER OF: THE BUSINESS REGISTRATION SERVICE ACT 2015
-AND-
IN THE MATTER OF: SECTION 9 OF THE COMPANIES ACT 2015
-AND-
IN THE MATTER OF: ISSUANCE OF ILLEGAL AND FRAUDULENT CR-12 IN RESPECT OF DIRECTLINE ASSURANCE COMPANY LIMITED ON 21ST OCTOBER, 2022, 10TH NOVEMBER, 2022 & 22ND MAY, 2023
-BETWEEN-
DIRECTLINE ASSURANCE COMPANY LIMITED….…….….PETITIONER
-VERSUS-
BUSINESS REGISTRATION SERVICE…………………..1ST RESPONDENT
REGISTRAR OF COMPANIES……….……………….….2ND RESPONDENT
SIDIAN BANK LIMITED………………………………….3RD RESPONDENT
CO-OPERATIVE BANK LIMITED…………………….....4TH RESPONDENT
NCBA BANK LIMITED……………………………..…….5TH RESPONDENT
RULING
1. This Court in a ruling delivered on 1st March, 2024 issued several orders as reproduced hereunder –
i) The Notice of Motion dated 20th June, 2023 is sub judice and without merits and the same is dismissed with costs;
ii) There shall be a stay of further proceedings in the petition dated 20th June, 2023 until the determination of ELRC Cause No. E004 of 2023;
iii) A declaration is hereby issued that Julius Orenge has no authority to plead on behalf of Directline Assurance Company Limited on behalf of the petitioner;
iv) A declaration is hereby issued that the firm of Mogeni & Company Advocates has no authority to act on behalf of the petitioner in the present petition; and
v) The application dated 26th July, 2023 is allowed with costs.
2. Mr. Andrew Gathu Mmbogori, an Advocate of the High Court of Kenya and learned Counsel for the petitioner swore an affidavit on 13th March, 2024 where he averred that on 28th November, 2023, Judge Abuodha dismissed an application in ELRC Cause No. E004 of 2023.
3. On 16th April, 2024 when parties appeared before this Court for mention, Mr. Mmbogori submitted that he had instructions to withdraw the petition herein and for the costs of the petition to be borne personally by Messrs K. Mogeni and J. Orenge for filing the petition without authority.
4. On his part, Mr. K. Mogeni indicated that new information from the Insurance Regulatory Authority regarding the petitioner's Directorship has come to light, and he intends to file an application for review of the Court’s ruling based on the said information.
5. This matter was thereafter scheduled for mention on 5th June, 2024 for directions. On that day, Mr. K. Mogeni requested this Court to hold this matter in abeyance due to another pending case concerning the Shareholding and Directorship of the petitioner.
6. Mr. Mmbogori opposed the said request, reiterating his instructions to withdraw the petition herein because it was filed without proper authorization. He argued that since the application in ELRC Cause No. E004 of 2023 was dismissed by Judge Abuodha, the order for stay of the proceedings herein had elapsed. He contended that the petition herein could not be sustained as it was filed by Advocates who were not properly on record.
ANALYSIS AND DETERMINATION.
7. As was correctly submitted by Mr. Mmbogori, Counsel for the petitioner, and as shown in paragraph 1 of this Court’s ruling of 1st March, 2024, this Court declared that Mr. Julius Orenge lacked authority to plead on behalf of Directline Assurance Company Limited (petitioner), and that the firm of Mogeni & Company Advocates had no authority to act for the petitioner in this matter. This Court also held that Mr. Mmbogori is the Counsel who was properly on record for the petitioner. On 16th April, 2024 and 5th June, 2024, Mr. Mmbogori reiterated that he had instructions to withdraw the petition herein, with costs being personally borne by Messrs K. Mogeni and J. Orenge for filing the petition without authority.
8. The application in ELRC No. E004 of 2023 was dismissed by Judge Abuodha in a ruling delivered on 28th November, 2023. The said ruling had not been delivered by the time the application dated 20th June, 2023 was heard on 12th October, 2023. This Court therefore granted orders staying further proceedings in the petition dated 20th June, 2023 filed in this Court, until the determination of the application in ELRC Cause No. E004 of 2023.
9. The record shows that neither the respondents nor their Counsel object to the withdrawal of the petition herein. The only objection came from Mr. K. Mogeni Advocate, who, as per this Court's ruling dated 1st March 2024, lacks the legal standing to object to the said withdrawal.
10. In the premise, the only issue left for determination by this Court is who should bear the costs of this petition. Having found that the petition herein was filed without the petitioner’s authority, the petitioner cannot be subjected to pay costs of a cause it did not sanction in the first place. In the case of Bugerere Coffee Growers Limited v Sebaduka & another [1970] EA 147 cited by the Court in the case of Nextgen Mall Management Company Limited v Netcom Investments Limited & another [2021] eKLR it was held as follows-
“(i) 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; no such resolution had been passed authorizing these proceedings;
(ii) where an advocate has brought legal proceedings without authority of the purported plaintiff the advocate becomes personally liable to the Defendants for the costs of the action.
(iii) the advocates should be ordered to pay the costs.”
11. Additionally, in the case of East African Portland Cement Ltd v Capital Markets Authority & 4 others [2014] eKLR, the Court held that costs of the suit therein were to be borne personally by Counsel for the petitioner and the deponents who made depositions in the petition therein for want of authority. The said Court cited the case of Affordable Homes Africa Limited v Ian Henderson & 2 others HCCC No 524 of 2004 which stated the following -
“…The upshot of these considerations is that in the absence of a board resolution sanctioning the commencement of this action by the company, the company is not before the court at all. For that reason, the preliminary objection succeeds and the action must be struck out with costs, such costs to be borne by the advocates for the plaintiff.” (Emphasis added).
12. I agree with the decision by Mumbi Ngugi J., (as she then was) in East African Portland Cement Ltd v Capital Markets Authority & 4 others (supra) that -
“First, as an Advocate and an officer of the Court, the Counsel responsible for the filing of this petition was fully aware, or should have been aware, of the requirements of the law with regard to the filing of suits by companies, and had a duty to advice his client(s) not to file proceedings if there was no or no clear authority to do so. Secondly, he presented to the Court the resolution alleged to evidence the requisite authority when it clearly did not meet the requirements of the law, then attempted to cure it by presenting a document whose authenticity is in doubt…………………………………………………
As for the two deponents, they were also fully aware, as senior officers of the company, that the authority of the company, granted in accordance with the company’s Articles of Association, was required before they engaged the company in litigation. They, too, bear responsibility for the filing of the present matter.”
13. Having considered the circumstances surrounding the filing of the petition dated 20th June, 2023, and the fact that the petitioner did not authorize the filing of the same, the said petition is hereby marked as withdrawn with costs. The said costs shall be borne jointly and severally by the law firm of Mogeni & Company Advocates, being the firm of Advocates who filed the said petition ostensibly on behalf of the petitioner, and Mr. Julius Orenge who made depositions in the filing of the petition, without the authority Directline Assurance Company Limited (petitioner).
It is so ordered.
DATED, SIGNED and DELIVERED at NAIROBI on this 19th day of July 2024. Ruling delivered through Microsoft Teams Online Platform.
NJOKI MWANGI
JUDGE
In the presence of:
Mr. Mmbogori for Directline Assurance Company Limited/Petitioner
Mr. Chacha h/b for Mr. K. Mogeni & Mr. Julius Orenge (not properly on
record for the Petitioner)
Ms B. Wokabi – Court Assistant.
IN THE HIGH COURT OF KENYA AT NAIROBI
COMMERCIAL AND TAX DIVISION
HCCOMMPET NO. E006 OF 2023
IN THE MATTER OF: ARTICLES 22(1), 27, 40 &47 OF
THE CONSTITUTION OF KENYA, 2010
-AND-
IN THE MATTER OF: ALLEGED CONTRAVENTION OF RIGHTS OR
FUNDAMENTAL FREEDOMS UNDER ARTICLES 10, 27, 40, 47 & 73 OF THE CONSTITUTION OF KENYA, 2010.
-AND-
IN THE MATTER OF: THE BUSINESS REGISTRATION SERVICE ACT 2015
-AND-
IN THE MATTER OF: SECTION 9 OF THE COMPANIES ACT 2015
-AND-
IN THE MATTER OF: ISSUANCE OF ILLEGAL AND FRAUDULENT CR-12 IN RESPECT OF DIRECTLINE ASSURANCE COMPANY LIMITED ON 21ST OCTOBER, 2022, 10TH NOVEMBER, 2022 & 22ND MAY, 2023
-BETWEEN-
DIRECTLINE ASSURANCE COMPANY LIMITED….…….….PETITIONER
-VERSUS-
BUSINESS REGISTRATION SERVICE…………………..1ST RESPONDENT
REGISTRAR OF COMPANIES……….……………….….2ND RESPONDENT
SIDIAN BANK LIMITED………………………………….3RD RESPONDENT
CO-OPERATIVE BANK LIMITED…………………….....4TH RESPONDENT
NCBA BANK LIMITED……………………………..…….5TH RESPONDENT
RULING
1. This Court in a ruling delivered on 1st March, 2024 issued several orders as reproduced hereunder –
i) The Notice of Motion dated 20th June, 2023 is sub judice and without merits and the same is dismissed with costs;
ii) There shall be a stay of further proceedings in the petition dated 20th June, 2023 until the determination of ELRC Cause No. E004 of 2023;
iii) A declaration is hereby issued that Julius Orenge has no authority to plead on behalf of Directline Assurance Company Limited on behalf of the petitioner;
iv) A declaration is hereby issued that the firm of Mogeni & Company Advocates has no authority to act on behalf of the petitioner in the present petition; and
v) The application dated 26th July, 2023 is allowed with costs.
2. Mr. Andrew Gathu Mmbogori, an Advocate of the High Court of Kenya and learned Counsel for the petitioner swore an affidavit on 13th March, 2024 where he averred that on 28th November, 2023, Judge Abuodha dismissed an application in ELRC Cause No. E004 of 2023.
3. On 16th April, 2024 when parties appeared before this Court for mention, Mr. Mmbogori submitted that he had instructions to withdraw the petition herein and for the costs of the petition to be borne personally by Messrs K. Mogeni and J. Orenge for filing the petition without authority.
4. On his part, Mr. K. Mogeni indicated that new information from the Insurance Regulatory Authority regarding the petitioner's Directorship has come to light, and he intends to file an application for review of the Court’s ruling based on the said information.
5. This matter was thereafter scheduled for mention on 5th June, 2024 for directions. On that day, Mr. K. Mogeni requested this Court to hold this matter in abeyance due to another pending case concerning the Shareholding and Directorship of the petitioner.
6. Mr. Mmbogori opposed the said request, reiterating his instructions to withdraw the petition herein because it was filed without proper authorization. He argued that since the application in ELRC Cause No. E004 of 2023 was dismissed by Judge Abuodha, the order for stay of the proceedings herein had elapsed. He contended that the petition herein could not be sustained as it was filed by Advocates who were not properly on record.
ANALYSIS AND DETERMINATION.
7. As was correctly submitted by Mr. Mmbogori, Counsel for the petitioner, and as shown in paragraph 1 of this Court’s ruling of 1st March, 2024, this Court declared that Mr. Julius Orenge lacked authority to plead on behalf of Directline Assurance Company Limited (petitioner), and that the firm of Mogeni & Company Advocates had no authority to act for the petitioner in this matter. This Court also held that Mr. Mmbogori is the Counsel who was properly on record for the petitioner. On 16th April, 2024 and 5th June, 2024, Mr. Mmbogori reiterated that he had instructions to withdraw the petition herein, with costs being personally borne by Messrs K. Mogeni and J. Orenge for filing the petition without authority.
8. The application in ELRC No. E004 of 2023 was dismissed by Judge Abuodha in a ruling delivered on 28th November, 2023. The said ruling had not been delivered by the time the application dated 20th June, 2023 was heard on 12th October, 2023. This Court therefore granted orders staying further proceedings in the petition dated 20th June, 2023 filed in this Court, until the determination of the application in ELRC Cause No. E004 of 2023.
9. The record shows that neither the respondents nor their Counsel object to the withdrawal of the petition herein. The only objection came from Mr. K. Mogeni Advocate, who, as per this Court's ruling dated 1st March 2024, lacks the legal standing to object to the said withdrawal.
10. In the premise, the only issue left for determination by this Court is who should bear the costs of this petition. Having found that the petition herein was filed without the petitioner’s authority, the petitioner cannot be subjected to pay costs of a cause it did not sanction in the first place. In the case of Bugerere Coffee Growers Limited v Sebaduka & another [1970] EA 147 cited by the Court in the case of Nextgen Mall Management Company Limited v Netcom Investments Limited & another [2021] eKLR it was held as follows-
“(i) 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; no such resolution had been passed authorizing these proceedings;
(ii) where an advocate has brought legal proceedings without authority of the purported plaintiff the advocate becomes personally liable to the Defendants for the costs of the action.
(iii) the advocates should be ordered to pay the costs.”
11. Additionally, in the case of East African Portland Cement Ltd v Capital Markets Authority & 4 others [2014] eKLR, the Court held that costs of the suit therein were to be borne personally by Counsel for the petitioner and the deponents who made depositions in the petition therein for want of authority. The said Court cited the case of Affordable Homes Africa Limited v Ian Henderson & 2 others HCCC No 524 of 2004 which stated the following -
“…The upshot of these considerations is that in the absence of a board resolution sanctioning the commencement of this action by the company, the company is not before the court at all. For that reason, the preliminary objection succeeds and the action must be struck out with costs, such costs to be borne by the advocates for the plaintiff.” (Emphasis added).
12. I agree with the decision by Mumbi Ngugi J., (as she then was) in East African Portland Cement Ltd v Capital Markets Authority & 4 others (supra) that -
“First, as an Advocate and an officer of the Court, the Counsel responsible for the filing of this petition was fully aware, or should have been aware, of the requirements of the law with regard to the filing of suits by companies, and had a duty to advice his client(s) not to file proceedings if there was no or no clear authority to do so. Secondly, he presented to the Court the resolution alleged to evidence the requisite authority when it clearly did not meet the requirements of the law, then attempted to cure it by presenting a document whose authenticity is in doubt…………………………………………………
As for the two deponents, they were also fully aware, as senior officers of the company, that the authority of the company, granted in accordance with the company’s Articles of Association, was required before they engaged the company in litigation. They, too, bear responsibility for the filing of the present matter.”
13. Having considered the circumstances surrounding the filing of the petition dated 20th June, 2023, and the fact that the petitioner did not authorize the filing of the same, the said petition is hereby marked as withdrawn with costs. The said costs shall be borne jointly and severally by the law firm of Mogeni & Company Advocates, being the firm of Advocates who filed the said petition ostensibly on behalf of the petitioner, and Mr. Julius Orenge who made depositions in the filing of the petition, without the authority Directline Assurance Company Limited (petitioner).
It is so ordered.
DATED, SIGNED and DELIVERED at NAIROBI on this 19th day of July 2024. Ruling delivered through Microsoft Teams Online Platform.
NJOKI MWANGI
JUDGE
In the presence of:
Mr. Mmbogori for Directline Assurance Company Limited/Petitioner
Mr. Chacha h/b for Mr. K. Mogeni & Mr. Julius Orenge (not properly on
record for the Petitioner)
Ms B. Wokabi – Court Assistant.