[2005] KEHC 614 (KLR)
The court held that the preliminary objection raised by the defendant was not proper as it did not meet the threshold of a pure point of law. The question of whether the company or the receiver is liable under the contract requires examination of the facts, specifically whether the agreement relates to property...
Source-derived case information.
- Citation
- [2005] KEHC 614 (KLR)
- Parties
- Plaintiff: Kienzeco Limited; Defendant: Kenatco Taxis Limited (in Receivership)
- Court
- High Court
- Court Station
- High Court at Nairobi (Milimani Commercial Courts)
- Jurisdiction
- Kenya
- Case Number
- Civil Case 306 of 2005
- Procedural Posture
- Civil Case / Ruling on Preliminary Objection
- Outcome
- preliminary objection dismissed
- Legal Topics
- Receivership Liability, Preliminary Objection, Company in Receivership, Breach of Contract
- Source Language
- en
Source-derived case record
Summary, issues, holding and outcome
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Parties
Kienzeco Limited
Plaintiff
Kenatco Taxis Limited (in Receivership)
Defendant
Procedural Posture
Civil Case / Ruling on Preliminary Objection
Legal Issues
- 1 Whether a suit can be maintained against a company in receivership for breach of contract.
- 2 Whether the preliminary objection raised on the ground of non-suiting the plaintiff is proper in law.
- 3 Whether the liability lies with the company or the receiver in contract matters during receivership.
Ratio Decidendi
The court held that the preliminary objection raised by the defendant was not proper as it did not meet the threshold of a pure point of law. The question of whether the company or the receiver is liable under the contract requires examination of the facts, specifically whether the agreement relates to property within the security. Since a company in receivership retains its corporate status and can be sued, and because the determination of liability depends on the factual matrix of the agreement and the scope of the receivership, the suit cannot be struck out at this stage. The preliminary objection was therefore dismissed, allowing the substantive application to proceed.
Court Disposition
preliminary objection dismissed
Orders
- The preliminary objection is dismissed with costs to the plaintiff.
- The substantive application may proceed.
Full Case Text
Judgment text and source record
20 paragraphs
REPUBLIC OF KENYA IN THE HIGH COURT OF KENYA AT NAIROBI MILIMANI COMMERCIAL COURTS Civil Case 306 of 2005
KIENZECO LIMITED ……………………..……..…………………..PLAINTIFF
VERSUS
KENATCO TAXIS LIMITED …………………………………….DEFENDANT
(IN RECEIVERSHIP)
RULING
On an application of the 7. 6.2005 for orders seeking injunctive relief against the Respondent Company Mr. Njoroge took a preliminary point that the suit be struck out as the Plaintiff was non suited. He referred to sec. 348 (2) of the Companies Act which states that a Receiver appointed out of court be personally liable on any contract entered into by him.
The Plaint alleges that the Defendant entered into an agreement with the Plaintiff. It recognizes that the Defendant is in Receivership.
Mr. Njoroge relied on the case of Kisii Petroleum Products Ltd. V Kobil Petroleum CA No. NAI 309 of 2003in whichO’Kubasu J. A. cited with approval a passage from Halsbury’s Laws of England (4th Edition) at paragraph 1159 where it stated that “the appointment of a Receiver is one of the events which causes a floating change to crystallize. As regards all the property comprised in the security over which the Receiver is appointed, the director’s powers are of necessity paralysed”.
Mr. Odera opposed the preliminary objection as not being a proper matter to be raised in a preliminary objection. He relied on the statement of Newbold P in the case of Mukisa Biscuit Co. v West End Distributors (1969) E. A. page 696 in which he said;
“The first matter relates to the increasing practice of raising points, which should be argued in the normal manner, quite improperly by way of preliminary objection. A preliminary objection is in the nature of what used to be a demurrer. It raises a pure point of law which is argued on the assumption that all the facts pleaded by the other side are correct. It cannot be raised if any fact has to be ascertained or if what is sought is the exercise of judicial discretion. The improper raising of points by way of preliminary objection does nothing but unnecessarily increase costs and, on occasion, confuse the issues. This improper practice should stop”.
He submitted whether a Receiver was personally liable in contract was a matter for consideration of the Deed of Appointment and Debenture.
He relied on the case of Anspar Beverages Ltd v. Development Bank Ltd. cc. No.1155 of 2002, which dealt with the rights of a Company in Receivership to all.
In this case the suit is against the Company. A Company in receivership still has its corporate status intact. There are many cases where a third party can sue a company in Receivership to establish liability against the company. The position is not analogous to a company being wound up where under Sec. 228 of the Companies Act no proceedings shall be proceeded with or commenced against the company except by leave of the court.
It is for the Applicant to establish that it has a right to sue the company for breach of contract and that the company is liable under the said Agreement and not the Receiver.
It must be borne in mind that the powers of the directors are paralysed only in respect of the property comprised in the security. If the agreement relates to property not included in the security then the company can be liable. Which is the correct position in this case is a matter for consideration and as such this suit cannot be struck out without an examination of the position on the facts.
In the result this is not a matter, which can be raised as a preliminary objection within the definition as stated by Newbold P above and the same is dismissed with costs. The substantive application can now proceed.
Dated and delivered in Nairobi this 25th day of October, 2005.
P. J. RANSLEY
JUDGE