[2012] KEHC 2014 (KLR)

[2012] KEHC 2014 (KLR)

The court held that, in the absence of explicit statutory provisions in the Kenyan Companies Act regarding the procedure for commencing derivative actions, the established practice is to allow applications for leave to be brought ex parte. This approach is justified to prevent alleged wrongdoers from frustrating or defeating the application at the preliminary stage. The court found that the respondents had satisfied the threshold for leave as set out in Foss v. Harbottle, and that the issues raised in the derivative action were not sub judice, as no other pending suit specifically addressed the holding of an Annual General Meeting and the alleged wrongs by the directors. The court also...

Citation
[2012] KEHC 2014 (KLR)
Parties
Applicant: CMC Holdings Limited; Applicant: Mary W. Ngige; Applicant: Paul Wanderi Ndungu; Applicant: Joel Kamau Kibe; Applicant: Ashok K. Shah; Applicant: Andrew P. Hamilton; Applicant: William Lay; Respondent: Daniel Kimotho Muchiri; Respondent: Alois Wafula Chami; Respondent: Emmanuel Fenswa Masaba; Respondent: Geoffrey Bethuel Maoga
Court
High Court
Court Station
High Court at Nairobi (Milimani Commercial Courts)
Jurisdiction
Kenya
Judgment Date
4 October 2012
Case Number
Miscellaneous Civil Case 273 of 2012
Procedural Posture
Miscellaneous Application / Ruling on Application to Set Aside Ex Parte Leave to Commence Derivative Action
Outcome
application dismissed with costs to the respondents
Judges
DK Musinga
Legal Topics
Derivative Actions, Minority Shareholder Rights, Company Director Duties, Ex Parte Proceedings, Conflict of Interest, Sub Judice Rule
Source Language
English
Commercial and Corporate Civil Procedure Derivative Actions Minority Shareholder Rights Company Director Duties Ex Parte Proceedings Conflict of Interest Sub Judice Rule

Case Brief

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Parties

CMC Holdings Limited

Applicant

Mary W. Ngige

Applicant

Paul Wanderi Ndungu

Applicant

Joel Kamau Kibe

Applicant

Ashok K. Shah

Applicant

Andrew P. Hamilton

Applicant

William Lay

Applicant

Daniel Kimotho Muchiri

Respondent

Alois Wafula Chami

Respondent

Emmanuel Fenswa Masaba

Respondent

Geoffrey Bethuel Maoga

Respondent

Procedural Posture

Miscellaneous Application / Ruling on Application to Set Aside Ex Parte Leave to Commence Derivative Action

Legal Issues

  1. 1 Whether the application to set aside the leave granted ex parte was properly before the court.
  2. 2 Whether an application for leave to commence a derivative action should be brought ex parte or inter partes.
  3. 3 Whether the respondents were entitled to grant of leave to commence the derivative action, i.e., whether the threshold in Foss v. Harbottle was met.

Ratio Decidendi

The court held that, in the absence of explicit statutory provisions in the Kenyan Companies Act regarding the procedure for commencing derivative actions, the established practice is to allow applications for leave to be brought ex parte. This approach is justified to prevent alleged wrongdoers from frustrating or defeating the application at the preliminary stage. The court found that the respondents had satisfied the threshold for leave as set out in Foss v. Harbottle, and that the issues raised in the derivative action were not sub judice, as no other pending suit specifically addressed the holding of an Annual General Meeting and the alleged wrongs by the directors. The court also...

Court Disposition

application dismissed with costs to the respondents

Orders

  • The application to set aside the ex parte leave granted on 10th May 2012 is dismissed.
  • Prayer 3 of the application is struck out in limine for exceeding the scope of leave granted.