https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/9458

**REPUBLIC OF KENYA** **IN THE HIGH COURT OF KENYA AT NAIROBI** **COMMERCIAL AND TAX DIVISION** **HCCOMM E866 OF 2025** **ANN GATHONI KARAGU.................................1ST PLAINTIFF/APPLICANT** **FRANCIS MWANGI KING'ORI........................2ND PLAINTIFF/APPLICANT** **VERSUS** **JOSEPH HERMAN KIMANI........................1ST DEFENDANT/RESPONDENT** **BOARD OF DIRECTORS OF MUNYAKA** **KUNA COMPANY LIMITED.....................2ND DEFENDANT/RESPONDENT** **AND** **REGISTRAR OF COMPANIES..............................................1ST INTERESTED** **PARTY** **GERALD KIKONYO & 28 OTHERS...........2ND–29TH INTERESTED PARTIES** **RULING** **Introduction** 1. For determination are two competing applications. 2. The first is the Plaintiffs' **Notice of Motion dated** **4th December 2025** seeking various interlocutory and final orders against the Defendants. The principal reliefs sought are orders restraining the 1st Defendant from interfering with the Company's bank accounts, restraining the Defendants from borrowing additional funds, declarations invalidating the Annual General Meeting held on 6th September 2025, nullifying the resolutions passed thereat, and rectifying the Company's register. 3. The Application is based on the grounds on its face and is supported by the affidavit of **Ann Gathoni Karagu** sworn on the same date. 4. On 23rd December 2025, the court granted interim ex parte orders restraining the 1st Defendant from transacting the Company's bank accounts and obtaining further borrowings. 5. The second application is the Defendants' Notice of Motion dated 2nd January 2026 by the 1st and 2nd Defendants seeking review, variation, discharge and setting aside of the orders of 23rd December 2025, together with ancillary relief to enable the Company resume its operations. The Application is supported by the affidavit of **Anthony Gatiru Kanyoro,** sworn on the same date. 6. The 2nd–29th Interested Parties, who are shareholders of the Company, support the Defendants' application and oppose the Plaintiffs' application vide the affidavit of **Patrick Ndegwa Waigera**, dated 31 March 2026. 7. The Applications were canvassed by written submissions. The Plaintiff filed submissions dated 23rd April 2026, whilst the 1st and 2nd Defendants/Respondent’s submissions are dated 16th April 2026. The 2nd – 29th Interested Parties, through A.K. RONO & Co. Advocates, filed submissions dated 10th April 2026. **Analysis and Determination** 1. I have considered the applications, affidavits, annexures and written submissions filed by the parties. 2. The Plaintiffs are shareholders of Munyaka Kuna Company Limited ("the Company"), a private company incorporated under the Companies Act. 3. Their complaint is that the affairs of the Company are being run oppressively and contrary to the Company's Articles of Association by the 1st Defendant, who serves as chairman of the Board. 4. In particular, the Plaintiffs allege that: they were unlawfully denied participation in the Annual General Meeting held on 6th September 2025 through proxy representation; audited accounts were not properly availed; the AGM was conducted unlawfully; Company funds are being mismanaged; and substantial borrowing was procured without shareholder approval. 5. The Defendants deny those allegations. 6. They maintain that all corporate procedures were complied with, audited accounts were made available to shareholders and the AGM was lawfully convened. 7. They further state that the impugned borrowing was undertaken for purposes of facilitating an ongoing construction project on **L.R. No. 209/4401/16 Makadara** and that the interim orders have effectively crippled the Company's operations. 8. The Interested Parties, who comprise a substantial number of shareholders, support the continuation of the project and oppose the injunctive relief sought by the Plaintiffs. 9. They also contend that the present proceedings substantially overlap with HCCOMM E702 of 2024, a derivative suit filed by the Applicants, and therefore the present suit is res judicata. 10. From the parties' arguments, I identify the following issues as arising for determination: 11. Whether the Plaintiffs have established a basis for grant of interlocutory injunctions. 12. Whether the Plaintiffs possess the requisite locus standi. 13. Whether the claims constitute a derivative action requiring leave under the Companies Act. 14. Whether the application is barred by res judicata. 15. Whether the final orders sought may issue at an interlocutory stage. 16. Whether the interim orders issued on 23rd December 2025 ought to be discharged. **Whether the Plaintiffs have established a basis for grant of interlocutory injunctions** 1. The principles governing interlocutory injunctions are settled. In **Giella v Cassman Brown & Co Ltd [1973] EA 358**, the Court held that an applicant must establish: 2. prima facie case with a probability of success; 3. irreparable injury incapable of compensation by damages; and 4. if in doubt, that the balance of convenience favours the grant of the injunction. 5. In **Nguruman Limited v Jan Bonde Nielsen & 2 Others [2014] eKLR**, the Court of Appeal emphasized that these requirements are sequential and each must be satisfied before injunctive relief may issue. 6. In **Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] eKLR,** a prima facie case was defined as one that discloses an apparent infringement of a right requiring rebuttal. 7. In the present case, the Plaintiffs accuse the Defendants of mismanagement and misuse of Company funds. However, beyond those assertions, no audited report, forensic report, or other independent material has been placed before the court demonstrating misappropriation. 8. Serious allegations of financial impropriety cannot be established through bare assertions. 9. The Defendants have exhibited documents demonstrating that notices were issued, audited accounts prepared, meetings convened, and various approvals obtained in respect of the *Makadara* project. 10. These are contested factual matters. 11. In **Anthony Ndungu Maina v Faith Wanjiku Maina [2015] eKLR**, the court held that an interlocutory court is not required to make definitive findings on disputed evidence. 12. I am therefore unable to conclude that the Plaintiffs have established a prima facie case. **Whether irreparable injury has been demonstrated** 1. The Plaintiffs have not demonstrated injury incapable of compensation by an award of damages. Conversely, the Defendants have shown that the interim orders have adversely affected the operations of the Company. 2. The material before the court demonstrates that: construction works have stalled; loan repayment obligations have been jeopardized; contractors have threatened legal action; and ordinary business operations have been impeded. 3. The Plaintiffs have not offered any undertaking as to damages. Given the commercial consequences of the orders granted, this omission is significant. 4. The second limb of Giella has therefore not been satisfied. **Whether the balance of convenience favours the Plaintiffs** 1. It does not. 2. Courts exercise considerable restraint before interfering with the internal management of companies. 3. In **Foss v Harbottle (1843) 67 ER 189**, the court established the principle that wrongs done to a company are ordinarily to be remedied by the company itself and that courts ought not to interfere with internal corporate management where the company is capable of acting. 4. The rationale for the rule is to preserve corporate autonomy and respect majority rule. The material before me indicates that a substantial number of shareholders support the continuation of the **Makadara project**. 5. The interim orders have the effect of paralysing the operations of the Company. 6. Courts should be slow to issue orders that may destroy the very substratum they are called upon to preserve. 7. The balance of convenience therefore favours discharge of the interim orders. **Whether the claims constitute a derivative action** 1. From the pleadings, the Court notes that the Plaintiffs have framed their case as one protecting shareholders' rights. However, the substance of the complaints concerns alleged mismanagement of Company affairs and misuse of Company assets. 2. Such claims are derivative in nature. 3. Sections 238 and 239 of the Companies Act, 2015, regulate derivative proceedings. Section 239 requires leave of court before such proceedings may proceed. 4. In **Mohamedin Mohamed & Another v Ibrahim Ismail Isaak & Another [2021] KEHC 7313 (KLR),** the court observed that leave acts as a filtering mechanism to prevent frivolous claims. 5. No leave was, however, sought or obtained in the present case. 6. Nevertheless, that omission does not justify terminating the suit at this interlocutory stage. 7. Some of the issues raised by the Plaintiffs, including alleged denial of shareholder participation and compliance with the Articles of Association, are capable of constituting personal shareholder grievances. 8. The question whether particular claims are derivative or personal claims is therefore best left for determination at trial or upon a properly constituted objection. **Whether the application is barred by res judicata** 1. The Interested Parties invoke Section 7 of the Civil Procedure Act and contend that the issues were previously litigated in HCCOMM E702 of 2024. 2. In **Independent Electoral and Boundaries Commission v Maina Kiai & 5 Others [2017] eKLR**, the Court of Appeal outlined the elements of res judicata. The Court stated that: “Thus, for the bar of res judicata to be effectively raised and upheld on account of a former suit, the following elements must all be satisfied, as they are rendered not in disjunctive, but conjunctive terms; * 1. The suit or issue was directly and substantially in issue in the former suit. 2. That former suit was between the same parties or parties under whom they or any of them claim. 3. Those parties were litigating under the same title. 4. The issue was heard and finally determined in the former suit. 5. The court that formerly heard and determined the issue was competent to try the subsequent suit or the suit in which the issue is raised 1. In this case, although there appears to be considerable overlap between the two proceedings, the material presently before the court is insufficient to establish with certainty that every issue presently raised was directly and substantially in issue and finally determined. 2. I therefore decline to determine the matter on that basis at this interlocutory stage. **Whether the final orders sought may issue at an interlocutory stage** 1. The Plaintiffs seek nullification of an AGM, invalidation of resolutions, restructuring of governance and rectification of the Company's register. These are substantive final remedies. 2. In **Kenya Breweries Ltd & Another v Washington Okeyo [2002] 1 EA 109**, the Court of Appeal held that mandatory injunctions at an interlocutory stage are only granted in exceptional circumstances. The Court was clear that: “there must be special circumstances shown over and above the establishment of a prima facie case for a mandatory injunction to issue, and even then only in clear cases where the Court thinks that the matter ought to be decided at once” 1. Similarly, in **Locabail International Finance Ltd v Agro-Export & Another [1986] 1 All ER 901**, the court held that such relief should only issue in unusually clear cases. 2. This is not one such case. The dispute is fact-intensive and heavily contested. Granting the orders sought would effectively determine the suit without a trial. 3. The court declines to do so. **Whether the ex parte orders ought to remain in force** 1. Ex parte orders are extraordinary remedies and are granted on the basis of utmost good faith and full disclosure. 2. In **Bahadurali Ebrahim Shamji v Al Noor Jamal & 2 Others [1998] eKLR**, the Court of Appeal affirmed that material non-disclosure constitutes a proper basis for discharge of ex parte orders. 3. Regardless of whether there was deliberate non-disclosure, continuation of the interim orders is no longer tenable. 4. Their continued operation would occasion disproportionate prejudice to the Company, its shareholders and third parties. 5. The interests of justice therefore favour their discharge. 6. **Disposition** 7. Accordingly, the court makes the following orders: 8. The Plaintiffs' Notice of Motion dated **4th December 2025** is dismissed. 9. The interim orders issued on **23rd December 2025** are hereby discharged and set aside. 10. The Defendants' Notice of Motion dated **2nd January 2026** is allowed. 11. Munyaka Kuna Company Limited shall be at liberty to operate its bank accounts and conduct its ordinary business in the ordinary course pending hearing and determination of the suit. 12. For avoidance of doubt, the Defendants shall continue to keep proper books of account and avail audited accounts to shareholders in accordance with the Companies Act and the Company's Articles of Association. 13. Nothing in this ruling shall constitute a final determination regarding the legality of the Annual General Meeting held on 6th September 2025 or the substantive rights of the parties, which shall be determined at trial. 14. The costs of both applications are awarded to the Defendants and the 2nd–29th Interested Parties. 15. It is so ordered. **DATED, SIGNED, AND DELIVERED AT NAIROBI THIS 25TH DAY OF JUNE 2026** **** **HON. MR. JUSTICE MOSES ADO *Judge of the High Court***