The court has dented Former Tetu MP Ndungu Gethenji hopes of controlling the upmarket Kihingo Village estate in Kitisuru, Nairobi.
The estate sits on a 42-acre land.
Justice David Majanja dismissed an application by Kihingo Village (Waridi Gardens) Management One Ltd on Monday seeking to block shareholder resolutions electing new directors and removing Ndungu as chairman at a meeting held at Capital Club on April 13, 2019.
According to the Star newspaper, Majanja heard case E229 in the Milimani Commercial Court over two days in June.
The Kihingo estate was originally developed from 2007 by Kihingo Village (Waridi Gardens) Limited. The equal shareholders in that company were Ndungu, Gitahi Gethenji, Bob Gethenji and their late mother Hilda.
Another company called Kihingo Village (Waridi Gardens) Management Ltd (KVWGM) was set up to run the estate. Initially, each of the 55 houses in the estate were to have one share each.
During all the legal proceedings, Gitahi, Bob and the late Hilda all agreed that there should only be 55 ordinary shares and no B shares.
Management One was set up in 2010 after the sale of the Kihingo Village houses in 2009. Ndungu and his brother Gitahi had one share in Management One which is still the case today.
Management One purported to hold 60 B shares in KVWGM and thereby to control the affairs of the estate in perpetuity as the B shares would outvote the ordinary shares held by the 55 houses. The CR12 for KVWGM still only shows 55 ordinary shares and has never recognised the 60 B shares claimed by Ndungu.
The Star went on to report that in 2013 a group of Kihingo residents went to court to dispute the creation on the B shares. On July 28, 2016, arbitrator John Ohaga ruled that there should be no B shares and only 55 ordinary shares, one for each house on the estate. Arbitration rulings are binding and cannot be subsequently challenged. The award has not been appealed by Ndungu although he lost an application to set it aside.
On Monday, Majanja dismissed the Management One suit because it was brought by Chacha Mabanga who was found not to be legally appointed as a director of the company and who therefore had no authority to bring the suit.
Additionally, the plaintiff did not demonstrate that Management One company had held a legally constituted board meeting to authorise the suit.
Management One has two shareholders, Ndungu and his brother Gitahi Gethenji who both hold one share each. Gitahi testified in court before Justice Majanja and opposed Chacha’s suit on behalf of the company. Gitahi denied being present at the 2018 meeting where Chacha was appointed a director despite his name being recorded in the alleged minutes.
On Thursday, Ndungu’s lawyer gave notice of appeal. It is doubtful that Ndungu can now appeal Majanja’s ruling as he can no longer claim to control Management One which purported to hold the B shares.
However, Justice Majanja in his November 2 ruling rejected a counter-claim that sought to have Ndungu and Chacha disqualified from acting as directors for five years.
The Kihingo residents claimed Ndungu and Chacha had fraudulently prepared the minutes for his appointment as a director of Management One in October 2018.
On August 6, 2019, Gitahi had complained to the Registrar of Companies that he was not present at the alleged board meeting of Management One on November 21, 2018, that appointed Chacha as a director nor was he notified about the meeting. The minutes submitted to the Registrar stated that Gitahi was present.
The stated company secretary for the board meeting was Charles Njenga but he denied being present in a letter to the Registrar of Companies on August 14, 2019. “My purported signature thereon is a forgery for which I shall make a formal report to the police for investigations,” Njenga wrote.
Faced with these anomalies, the Registrar delisted Chacha Mabanga as a director of Management One on August 23, 2019.
Although Justice Majanja found that Chacha was not a legitimate director of Management One, he accepted that Ndungu and Chacha may have believed that they genuinely controlled the purported 60 B shares. “Fraud imports a level of dishonesty and I do not find this element proved as they believed they were asserting the rights of the plaintiff, however, mistaken”, he stated.
However, Majanja stated that “the issue of Class B shares …has been resolved by the award” of arbitrator John Ohaga in 2016 when he decided that there were no B shares.
The Paper reported on its website.