How 33-year war for control of clothes companies has tested court’s patience

About 33 years ago, a dispute arose over the control and management of Manchester Outfitters' suiting division (now called King Woolen Mills Ltd) and its subsidiary Galot Industries by a bank-appointed receiver.

The two family-owned companies are registered in Kenya as manufacturers of clothes and property developers respectively.

The dispute moved to court in 1990 and is yet to be determined, thanks to delay tactics that have been exposed by High Court Judge Alfred Mabeya in a tough-worded ruling.

The judge attributed the delays to a family feud over directorship and shareholding of the companies and conflict on who has the authority to appoint lawyers in the litigation.

“This is a matter that has been in our court corridors for 33 years now. This is unacceptable. The court will not allow the grumbling and disagreement about directorship in the plaintiffs to derail the determination of this long-standing dispute,” said Justice Mabeya.

The court held that it won’t allow the disagreements to delay the determination of the dispute.

The genesis of the dispute is the decision of Standard Chartered Bank Financial Services Limited to appoint A.D. Gregory as receiver-manager to run Manchester Outfitters Ltd.

The receiver was appointed in September 1990 over the alleged default on a Sh2.3 million loan borrowed by Manchester Outfitters in 1982.

Three decades

According to the judge, the determination of the dispute pitting the two companies against the bank and the receiver manager has been delayed over the three decades due to internal wrangles over control of Manchester Outfitters and Galot Industries.

The businesses were started by businessman Mohan Galot and his late brother Lalchand Galot.

The longstanding fight concerning control of the companies is between Mohan Galot against his three nephews Pravin Galot, Rajesh Galot, and Narendra Galot.

In the suit between the companies and the bank-appointed receiver, the wheels of justice have been moving slowly because of the disputed change of directorship of the firms and the change of advocates.

Justice Mabeya said the court would not be dragged into the internal wrangles and that the hearing must proceed with the lawyers appointed by Mr Mohan.

“The court refuses to be drawn into that procrastination. It would proceed with the firm appointed by Mr Mohan who has religiously done so both in the Court of Appeal and Supreme Court,” said Justice Mabeya.

He declined requests by Rajesh Galot and Pravin Galot to change advocates representing the companies.

In the request by Mr Rajesh, he wanted to have the law firm of Kenyatta Odiwuor & Co Advocates get on record in the matter on behalf of Manchester Outfitters in place of the law firm of Meshack Odero & Co Advocates.

Mr Rajesh stated that Mr Mohan had ceased to be a director of Manchester Outfitters after resigning on September 14, 1988.

He said the resignation was confirmed by the registrar of companies and that Mr Mohan could not invoke Article 10 of the Articles of Association since he was no longer a director of the company.

Mr Rajesh said that the board of directors of Manchester Outfitters had passed a resolution on February 2, 2023 that the firm of Kenyatta Odiwuor & Co advocates do represent the company.

Mr Pravin sought leave to have the law firm of Odera Were Advocates to get on record for Galot Industries Limited in place of the firm of Meshack Odero & Company Advocates.

Purported directors

Mr Pravin stated that the proprietor of the firm of Meshak Odero & Company advocates had passed on and the plaintiff was desirous to have the firm of Odera Were Advocates represent it after the delivery of judgment.

But Mr Mohan opposed and contended that over the 33 years the matter was in court, he was the one appointing advocates for the companies in accordance with Article 10 of the Articles of Association.

He stated that he had been appointing advocates to represent the companies without protest by Mr Rajesh and Mr Pravin.

“The issue of representation had been fully determined with finality,” he said adding that he also paid the legal fees from his resources without the involvement of the “purported directors”.

Mr Mohan stated that he had been the director of the two companies for 33 years during which period he had signed documents in that capacity.

In those years, he had appointed advocates in the case and the authority was derived from Article 10 of the Articles of Association. He said he had appointed the firm of Nyachoti & Co Advocates to represent the companies.

He was echoed by Jophese Obonyo Yogo, who is the Company Secretary for the two companies, and who stated that the company secretary had never participated in the appointment of the intended advocates on behalf of the plaintiffs.

The Court was also referred to several decisions by both the Supreme Court of Kenya and the Court of Appeal where the issue of representation by the parties arose.

“It is apparent, therefore, that the issue of representation of the plaintiffs has been before the courts before and is not a new issue,” said Justice Mabeya.

The judge also noted that the issue of directorship and shareholdings of the companies is yet to be determined and is pending in another suit.

“The High Court is yet to determine the directorship of the said companies as directed by the Supreme Court. It is curious that the two law firms have only appeared in this matter after 33 years of its life. Only after the Court of Appeal has fully heard the Appeal and remitted back the case for assessment of damages,” said Justice Mabeya.

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