https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/12731

Mbole & another v Kamongo & another (Commercial Suit E025 of 2025) [2026] KEHC 12731 (KLR) (5 June 2026) (Ruling) Neutral citation: [2026] KEHC 12731 (KLR) Republic of Kenya In the High Court at Machakos Commercial Suit E025 of 2025 BM Musyoki, J June 5, 2026 Between Arnold Mbole 1st Plaintiff Policy Oracle Limited 2nd Plaintiff and Meshack Musyoki Kamongo 1st Defendant Hezron Kivai Kiio 2nd Defendant Ruling 1.This ruling is in respect of two applications which were on 30-09-2025 ordered to be heard together by way of written submissions. The first application is the plaintiff’s notice of motion that dated 12th August 2025 which seeks the following orders;1.That the Honourable court be pleased to certify this application as one of extreme urgency, dispense with service in the first instance and hear it on a priority basis and during the current High Court of Kenya August Recess, 2025.2.That pending the hearing and determination of this application inter-parties the Honourable Court be pleased to grant a temporary order of injunction freezing all transactions on the Bank Account Number 9114790019 held by Policy Oracle Limited, the 2nd Applicant at NCBA Bank Kenya Limited, Kitengela Branch.3.That pending the hearing and determination of this suit, the Honourable Court be pleased to grant a temporary order of injunction freezing all transactions on the Bank Account Number 9114790019 held by Policy Oracle Limited, the 2nd Applicant at NCBA Bank Kenya Limited, Kitengela Branch.4.That pending the hearing and determination of this suit, the Honourable Court be pleased to issue an order compelling the Respondents to furnish the Applicants with the minutes of the Board Meeting that authorized withdrawal of funds from Bank Account Number 9114790019 in the name of the 2nd Applicant together with the notice(s) requisitioning for the said meeting.5.That this Honourable Court be pleased to grant the 1st Applicant leave to continue these proceedings in terms of Section 239 of the Companies Act, Cap 486.6.That the Respondents bear the costs of the Application herein. 2.The second application is the defendant’s notice of motion dated 20th September 2025 seeking the following orders;1.That the Honourable Court be pleased to strike out the entire suit as the same is fatally defective having been filed by an individual without proper authority.2.That the costs of tuis application be provided for. Averments of the parties 3.In support of their application, the 1st plaintiff deponed that him and the defendants are directors and shareholders of the 1st plaintiff who is a consultancy firm and holder of bank account number 9114790019 held at NCBA Bank Kitengela Branch. He added that on 12-06-2025, the 2nd plaintiff was paid by National Cancer Institute for a mandate that had been executed by it but the respondents sidelined him and unilaterally withdrew funds from the 2nd plaintiff’s account. He proceeded to give a breakdown of the withdrawals as; sum of Kshs 253,000.00 withdrawn on 28-05-2025 and Kshs 622,000.00 withdrawn on 26-06-2025. The withdraws were after the 2nd plaintiff had received monies from its named customers and went to the defendants’ own use and not for promotion of the objects of the 2nd plaintiff. 4.The 1st plaintiff added that when he approached the defendants about the withdrawals, they became hostile and threatened to eject him from the membership of the 2nd plaintiff. The defendants proceeded to unilaterally and irregularly change the designated receiver of mobile alerts messages for all transactions from him to the 1st defendant. According to him, the defendants have stopped promoting the objects of the 2nd plaintiff and have turned it to an object of their own enrichment to the detriment of the plaintiffs. 5.He added that since the incorporation of the 2nd plaintiff, no shareholders’ or directors’ meetings have been requisitioned and the defendants have conspired to work together to alienate him from the affairs of the 2nd plaintiff. He stated further that no returns have been filed with the Registrar of Companies. He claims that the 2nd plaintiff stands to suffer irreparable damages and that no prejudice or harm will occur upon the defendants if the orders are granted. 6.The defendants did not file an affidavit in response to the plaintiffs’ application. Instead on 30-09-2025, their advocate told the court that their reply was in their notice of motion dated 20-09-2025. That notice of motion was supported by affidavit of 1st defendant sworn on 20th September 2025 and supplementary affidavit sworn on 14th October 2025. 7.The 1st defendant stated that he was the managing director of the 2nd plaintiff. He swore that on 12-06-2025, the 1st plaintiff rendered his resignation as a director and shareholder of the 2nd plaintiff with effect from 15th June 2025 upon which through resolution made in a meeting held on 12-06-2025 which the 1st plaintiff attended, he was removed as one of the bank signatories and the bank was duly notified of the changes. The 1st plaintiff also alongside the defendants physically presented himself to the bank for purposes of issuing instructions for the change of signatories. As such, the 1st plaintiff had no authority to represent the 2nd plaintiff. The 1st defendant added that the 1st plaintiff through a letter from his advocates dated 25-07-2025 confirmed his resignation and demanded compensation to which the defendants responded through his letter dated 7th August 2025. 8.He added in the supplementary affidavit that, the 2nd plaintiff was fully compliant with all statutory requirements including filing of statutory returns and holding meetings. He added that all the withdrawals were made for purposes of running the 2nd plaintiff and with agreement and presence of all the directors including the 1st plaintiff before he resigned. He also gave narrations of consultancy services jobs they received from clients and the payments thereof between 16th May 2024 and 7th July 2025 and stated that during that period, only three withdrawals had been made without involvement of the 1st plaintiff because he had resigned from the 2nd plaintiff. Analysis and determination 9.I have read the submissions of the plaintiffs dated 24th November 2025 and those of the defendants dated 23rd October 2025. I will begin with the defendants’ application for the sole reason that, if I were to strike out the suit, there would be nothing upon which the plaintiffs’ application can be ventilated. 10.The defendants submit that the suit was made in bad faith and did not qualify or deserve to be a derivative suit. The plaintiff submits on this issue that, Section 239 of the Companies Act did not require authority of the company for one to file a derivative suit. A derivative suit is defined in Section 238 of the Companies Act to mean proceedings by a member of a company in respect of a cause of action vested in the company and seeking relief on behalf of the company. In Ghelani Metals Limited & 3 others v Elesh Ghelani Natwarlal & another [2017] KEHC 4629 (KLR), it was held that;“‘The statutory provisions to be met include the requirement under s. 238(3) of the Companies Act that the derivative action be commenced only in respect of a cause of action arising from an actual or proposed act or omission involving negligence, default, breach of duty, breach of trust by a director of the company. It is also necessary to establish that the claimant is a member of the company.The court then has the onus of determining whether the permission ought to be granted and on what terms.’ 11.The plaintiff claims to be a member of the 2nd plaintiff while the defendants claim that he resigned in a meeting held in 12-06-2025. What has been placed before this court in proof of the resignation is a letter dated 12-06-2025, a resolution of the 2nd plaintiff made on the same date, minutes of the 2nd plaintiff’s director’s meeting held on 12-06-2025 and a letter dated 25-07-2025 from the 1st plaintiff’s advocates addressed to the 2nd plaintiff. Although I have no reason to doubt the authenticity of the minutes, resolution and the letter of resignation, it is not clear to me whether the same were acted upon. It would have been better if the defendants produced a search or a CR12 form from the Registrar of Companies showing that the 1st plaintiff was no longer a member of the 2nd plaintiff. The one produced by the plaintiffs as annexure ‘AM-1’ shows that the 1st plaintiff was still a member of the 2nd plaintiff as at 11-08-2025. 12.The defendants claim that the 1st plaintiff’s letter dated 25th July 2025 which has been produced as annexure ‘MMK3’ in the 1st defendant’s supporting affidavit confirmed his resignation and sought compensation. My reading of paragraph two of the letter shows that the advocates were claiming that as at the date of the letter, the 1st plaintiff was a shareholder and director of the 2nd plaintiff and that he was removed as a signatory of the bank account in June 2025. Removal from being a signatory of the bank account is not the same as removal from membership of the company. With this kind of information, it may not be safe to conclude that the process of resignation was completed. 13.There being a possibility however remote it is that, the 1st plaintiff is still a member of the 2nd plaintiff, I do not think that it is appropriate at this stage to strike out the suit. It has been held that striking out pleadings should be the last resort and should be done where the case is so hopeless that it is not capable of being cured or saved by an amendment. The Court of Appeal buttressed this position in Kivanga Estates Limited v National Bank of Kenya Limited [2017] KECA 591 (KLR) where it held that;“It is not for nothing that the jurisdiction of the court to strike out pleadings has been described variously as draconian, drastic, discretionary, a guillotine process, summary and an order of last resort. It is a powerful jurisdiction, capable of bringing a suit to an end before it has even been heard on merit, yet a party to civil litigation is not to be deprived lightly of his right to have his suit determined in a full trial. The rules of natural justice require that the court must not drive away any litigant from the seat of justice, without a hearing, however weak his or her case may be. The flip side is that it is also unfair to drag a person to the seat of justice when the case brought against him is clearly a non-starter. The exercise of the power to strike out pleadings must balance these two rival considerations." 14.Ayim v Multitrade Industrial Supplies Limited & 2 others; Arican Banking Corporation (Interested Party) [2022] KEHC 16231 (KLR) 15.I now turn to the plaintiff’s application. I have already held that the 1st plaintiff’s resignation from the 2nd plaintiff has not been proved. He therefore has a right to bring a derivative suit as long as he meets the threshold for doing so. A derivative suit will be allowed where it has been shown that the company is suffering or likely to suffer loss or damage from acts of insiders or the directors or third parties and the directors are or those in control of the company are not willing to protect it. Honourable Justice E.C. Mwita (as he then was) held Avim v Multitrade Industrial Supplies Limited & 2 others; African Banking Corporation (Interested Party) [2022] KEHC 16231 (KLR) that;“As already adverted to, it is the requirement of law that a derivative action be brought on behalf of and for the benefit of the corporation. Since the action is by a shareholder against officers or directors of a company, it is brought on behalf of the corporation and the shareholder sues and acts only as a representative plaintiff for the corporation. The objective of the suit is to stop actions of directors or shareholders that are destructive to the corporation’s affairs. Any damages recovered in the suit belong to the corporation and not the plaintiff as a person. In other words, the shareholder would only indirectly benefit as one of the owners of the company." 16.The 1st plaintiff has averred that he has been locked out of the affairs of the 2nd plaintiff. He has also claimed that the withdrawals from the company’s account went to personal use of the defendants. The defendants have responded to this allegation by stating that the withdrawals were meant and went to payments and settlement of overheads of the works they were undertaking. They have however not given details or particulars of these expences but general statements. It may be true that the withdrawals were for use and benefits of the 2nd plaintiff as a company is not expected to run without costs. However, for singular fact that the defendants have kept the costs and expences to themselves and locked the 1st plaintiff out, I am inclined to find that the 1st plaintiff has established a case for leave to continue the derivative action. I therefore hold that the prayer for that leave is merited. 17.For the same reasons given above, I am convinced that the 1st plaintiff has established a prima fascie case with a probability of success in respect to his continued membership in the 2nd plaintiff. That means that he has satisfied the first condition for granting the prayer for injunction. I will therefore proceed to consider whether the plaintiffs have demonstrated that they are likely to suffer irreparable damages if the prayer for injunction is not granted. 18.In my opinion, the prayer for freezing all transactions in the specified account would do more harm than good to the 2nd plaintiff. Looking at the nature of business the 2nd plaintiff is engaged in and the values of the transactions complained of, there won’t be much to be lost if the company is let to run while the litigation is going on. In any case, freezing the specified account only will not necessarily stop the defendants from running accounts in other banks. Looking at the prayers in the plaint, there is no demonstratable possibility of any of the plaintiffs suffering loss that cannot be compensated by an award of damages. in prayer (b), the 1st plaintiff is asking to be paid profits share of Kshs. 331,920.00 while the rest of the prayers do not show any possible loss that is personal to the 1st plaintiff neither is there risk posed against the 2nd plaintiff. 19.Since I have held that there is no demonstration of likelihood of irreparable damages, the second condition for grant of orders of injunction has not been met. Since the conditions must be present concurrently, the prayer for injunction is not merited. 20.The plaintiffs have admitted in their submissions that granting prayer 4 of the application would be superfluous as it has been overtaken by events by the fact that the defendants have disclosed in the supplementary that they withdrew money without involving the 1st plaintiff and have supplied statement of the account. The same is therefore not appropriate for granting. 21.In view of what I have stated above, I proceed to make the following orders;1.The defendant’s application dated 20th September 2025 is dismissed.2.The 1st plaintiff is granted leave to continue these proceedings in terms of Section 239 of the Companies Act Chapter 486 of the Laws of Kenya.3.The rest of the prayers in the plaintiffs’ application dated 12th August 2025 are dismissed.4.I make no orders as to costs in both applications. DATED SIGNED AND DELIVERED AT NAIROBI THIS 5TH DAY OF JUNE 2026.B.M. MUSYOKIJUDGE OF THE HIGH COURT.Ruling delivered in absence of the parties.