The court held that neither of the siblings – Mr James Ndung’u Gethenji and his elder brother Gitahi Gethenji – can exercise supremacy over the management of the property known as Kihingo Village (Waridi Gardens), as they hold equal shares.
Justice David Majanja of the Commercial Court held that none of the two brothers can appoint an additional or other director of the property’s management firm known as Kihingo Village (Waridi Gardens) Management One Ltd. None of the two siblings constitute the majority of the company’s shareholders.
Kihingo Village (Waridi Gardens) Management One Ltd was registered on October 5, 2010; with Mr Ndung’u and Mr Gitahi as directors and shareholders each holding one ordinary share.
While ruling on management dispute of the property that sits on a 42-acre land, the judge quashed the decision of Mr Ndung’u to single-handedly appoint Julius Chacha Mabanga as a director of the company.
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Mr Ndung’u is a former MP for Tetu and a former chairman of the Parliamentary Defence Committee.
Beginning of row
The dispute started after eight shareholders of the company held an Annual General Meeting (AGM) on April 13, 2019 and passed major resolutions that were aimed at amending the company’s Articles of Association.
The meeting, held at Capital Club, made attempts to remove the company’s 60 (Class B) shares, which had given the two siblings authority and control of the company that owns a posh residential estate comprising 55 palatial houses.
Another resolution was to remove the company’s representatives from the Board, administration and management.
The shareholders who are also owners of the houses include Mr William Edward Pike, Mr Gitahi Gethenji, Naresh Mehta, Sheetal Khanna, Kishor Kumar Varsani, Mohan Singh Panesar, Samuel Mwangi Wambu and Varsani Harji Dhanji.
During the meeting, the eight shareholders had resolved to remove Mr Ndung’u, Mr Cecil Miller, Eric Giovani and Chacha Mabanga from the office of directors. They were replaced with Mr Varsani, Mr Wambu, Mr Panesar and Mr Pike.
An additional resolution was to remove Scribe Services and Woodvale Associates as the company’s secretary and auditors, respectively. They also agreed that the Bustani Club, which is situated within the estate, was the property of the company and should benefit all the 55 occupants of the houses as they are also shareholders.
In its court papers, the company indicated that its proxy in the meeting voted against the said resolutions and in applying the principles of voting by shares, the resolutions to remove its shares and representatives from the board were defeated.
However, the defeated resolutions were attempted to be registered at the office of the registrar of companies.
This led to the interference of the management of the company’s assets including fixtures, fittings, furniture, equipment, building and structures found at Bustani Club (Club House), which is valued at Sh5 billion.
In its case, the company stated that the actions of the eight shareholders contravened its Articles of Association which provide that the chair and deputy chair were to be nominated by the holder of the 60 Class B shares to effect the changes in the Board.
However, in a counterclaim, the eight shareholders made allegations of fraud against Mr Ndung’u and Mr Mabanga.
They said on October 12, 2018; an application for linking the company was filed by Mr Ndung’u with his brother Gitahi as directors and shareholders. The application was verified on October 16, 2018.
Change of directors
They added that on November 21, 2018 an application for change of directors was lodged in the Company registry using Mr Ndung’u’s e-Citizen account, where Mr Mabanga was appointed a director.
Further, they claimed that Mr Ndung’u and Mr Mabanga forged minutes of a meeting allegedly held on November 21, 2018, which had defeated attempts by the eight shareholders to conduct changes in management of the company. They had claimed the move was criminal in nature.
The shareholders had urged the court to find that Mr Ndung’u and Mr Mabanga had committed forgery by filing the alleged fake minutes at the Company Registry. They were filed by a Mr Charles Njenga, an alleged Company Secretary, whom they claimed not to know.
The minutes were purported to be genuine, defeating proposals to remove Mr Ndung’u and Mr Mabanga from management.
However, Justice Majanja cleared Mr Ndung’u and Mr Mabanga from the fraud allegations following a finding that the claims were not proved.
“Fraud imports a level of dishonesty and I do not find this element proven on the part of Ndung’u and Mabanga as they believed they were asserting the rights of the company however mistaken,” said the judge.
Also at the heart of the dispute was the manner in which the controlling shares described as Class B Shares were created.
Mr Gitahi had denied being a party to the establishment of those shares, which gave him and his brother powers to control and oversee the management of the estate.
But the court noted that Mr Gitahi did not argue that the shares were created illegally.
“It is for this reason that as long as the shares were still existent prior to April 13 AGM, Mr Mabanga and Mr Ndung’u were entitled to act in the belief that they were bonafide on behalf of the company. I cannot therefore impute fraud in their actions,” said the judge, while dismissing the counter-claim.
The judge also declined a request by the shareholders to disqualify Mr Ndung’u and Mr Mabanga from holding directorship positions of any company, including Kihingo.
In their request, the eight shareholders wanted court to issue disqualification orders restraining Mr Ndung’u and Mr Mabanga from acting or attempting to join any company as directors for 15 years. The request was based on the claims of fraud.
Mr Ndung’u had appointed Mr Mabanga as a director of the company after his brother Gitahi resigned. As a result, Mr Mabanga had become a majority shareholder.
The court struck out the case following a finding that it was not properly filed because neither Mr Ndung’u nor Mr Gitahi acting alone could authorise the lodging of the suit or appoint additional or other directors. None of the two brothers constitute the majority of the company’s shareholders as they hold equal shares.
He also ruled that Mr Mabanga was not qualified to be a director of the company and was not lawfully appointed by Mr Ndung’u acting alone.
“Consequently, Mr Ndung’u either acting alone or with Mr Mabanga, could not authorise the filing of the case on behalf of the company,” ruled the judge. He ordered each side to bear its own costs, stating that they had won and lost in equal measure.
