https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7222

Mukuria v Nyarunda & 13 others (Miscellaneous Application E1252 of 2025) [2026] KEHC 7222 (KLR) (Commercial and Tax) (21 May 2026) (Ruling) Neutral citation: [2026] KEHC 7222 (KLR) Republic of Kenya In the High Court at Nairobi (Milimani Commercial Courts) Commercial and Tax Miscellaneous Application E1252 of 2025 BK Njoroge, J May 21, 2026 Between Peter Kariuki Mukuria Applicant and Daniel Kiyondi Nyarunda 1st Respondent Estate Of Francis Kamau Chege 2nd Respondent George Hiro Ritho 3rd Respondent George Ritho Ng'Ang'A 4th Respondent Joseph Githire Waweru 5th Respondent Joseph Karimi Mwangi 6th Respondent John Ng'Ang'A Kamanda 7th Respondent Nelson Mwangi Nduki 8th Respondent Susan Wangui Kariuki 9th Respondent Albert Mwangi Kibeве 10th Respondent Patrick Ngetha Iregi 11th Respondent Krismoh Trans Limited 12th Respondent and Kariithi & Family Enterprises Limited 1st Interested Party Top Notch Tower Ventures Limited 2nd Interested Party Ruling 1.The Applicant filed the Notice of Motion dated 8th December, 2025 seeking the following orders;1.Spent.2.That the Applicant be granted permission to continue the Derivative Claim seeking relief on their behalf and on behalf of Super Metro Limited in respect of the acts and omissions by the Respondents, involving negligence, conflict of interest, default, breach of duty and breach of trust in their capacity as its directors on such terms as the Honourable Court considers fit3.That pending the hearing and determination of this application inter partes, a temporary order of injunction be issued as against the Respondents, their agents, representatives and or other persons acting under their instructions and or their behalf barring them from further selling, alienating, transferring, charging, disposing, removing or in a many manner whatsoever dealing with the assets of the Super Metro Limited.4.That pending the hearing and determination of this suit, a temporary order of injunction be issued as against the Respondents, their agents, representatives and or other persons acting under their instructions and or their behalf barring them from further selling, alienating, transferring, charging, disposing, removing or in a many manner whatsoever dealing with the assets of Super Metro Limited until this matter is finally heard and determined.5.That pending the hearing and determination of this Application inter partes, an interim mandatory injunction be and is hereby issued compelling the 1st to 9th Respondents to immediately reinstate and return all the motor vehicles jointly registered between Super Metro Limited and Kingdom Bank to the possession, control, and management of the Super Metro Limited and that all consequential Road Service Licenses effected in the name of the 12th Respondent be forthwith revoked with immediate effect.6.That pending the hearing and determination of this suit, an interim mandatory injunction be and is hereby issued compelling the 1st to 9th Respondents to immediately reinstate and return all the motor vehicles jointly registered between Super Metro Limited and Kingdom Bank the possession, control, and management of the Super Metro Limited and that all consequential Road Service Licenses effected in the name of the 12th Respondent be forthwith revoked with immediate effect.7.That in the alternative to Orders No. 5 and 6 above, the 1st to 9th Respondents be and are hereby compelled to immediately settle in full the specific loan facility from Kingdom Bank Limited used to finance the acquisition of the said 11 motor vehicles withdrawn from the management of Super Metro Limited.8.That pending the hearing and determination of this suit, the court do issue an order directing that an independent forensic audit be conducted on the accounts of the Super Metro Limited for the financial year 2025 for purposes of establishing the full extent of the funds applied to the payment of expenses of the 12th Respondent and that the Respondents being jointly and severally liable to refund all sums found to be owing to Super Metro Limited upon conclusion of the audit.9.That there be an order of injunction barring the implementation or further implementation of any resolution passed at any purported general meeting as called for and attended by Respondents.10.That the Honourable Court be pleased to make such further or other orders as it may deem just and expedient in the circumstances of this case.11.That costs of the Application be provided for. 2.The Application was supported by the Affidavit of Peter Kariuki Mukuria. He stated that Super Metro Limited is a public transport company operating through a fleet/franchise model with investors managing vehicles under its banner. That the 1st to 11th Respondents, being directors and shareholders, have breached their fiduciary duties. This is through acts of self-dealing, diversion of business opportunities, conflicts of interest, exclusion of shareholders from management, and unlawful dissipation of company assets. 3.The Applicant further contended that the Respondents clandestinely incorporated the 2nd Interested Party and the 12th Respondent. This is to operate competing transport services thereby prejudicing the company and its stakeholders. He asserts that, since the company remains under the control of the alleged wrongdoers, a derivative action is the only viable mechanism to safeguard the company’s interests. This is to prevent continued mismanagement, and avert irreparable loss. 4.In response, the 1st to 9th and 11th to 12th Respondents and the 2nd Interested Party filed a Notice of Preliminary Objection dated 6th January, 2026 on the following grounds;i.The Court lacks jurisdiction to entertain the Applicant’s case.ii.The Applicant’s case ought to go to arbitration first, as per the Applicant's attached memorandum and Articles of Association (Section 32 of the Memarts).iii.This Application lacks merit and therefore ought to be dismissed. 5.Further to the above, the 10th respondent also filed a Replying Affidavit sworn on 15th January, 2026 alongside a Notice of Preliminary Objection dated 15th January, 2026 on the following grounds;a.The Court lacks jurisdiction to hear and determine the application as its jurisdiction to hear the application has been challenged.b.The Court lacks jurisdiction to hear and determine the instant Application for the following reasons:a.The dispute is subject to mandatory arbitration pursuant to section 32 of the Amended Articles of Super Metro Limited.b.The Applicant has not obtained prior leave of the court as required under section 239(1) of the Companies Act 2015, to institute derivative proceedings on behalf of Super Metro Limited.c.The Applicant lacks the locus standi to institute these proceedings for lack of leave of court to institute derivative suit/action.c.The application is grossly incompetent, a thorough misconception of the law, incurably defective, scandalous, frivolous, vexatious and an abuse of the court’s process & should be dismissed with costs. Issues for determination 6.The Court has carefully considered the Preliminary Objections dated 6th January, 2026 and 15th January, 2026 raised as well as the written submissions. The Court has taken into consideration the oral highlights by Counsel for the parties. The Court frames the single issue for determination as follows;a.Whether the court has jurisdiction to determine this suit. Analysis 7.It was the Respondents’ position that the suit commenced without jurisdiction, in violation of a binding arbitration clause. That this was without statutory leave, and without locus standi, and is by definition, scandalous, frivolous, vexatious, and an abuse of Court process. 8.It was also the Respondents’ consensus that Section 6 (1) of the Arbitration Act requires the Court to stay proceedings. This is where there is a valid arbitration agreement covering the dispute and a party seeks a stay before taking any substantive step. 9.The Court notes that both the Applicant and the Respondents presented before the Court the Amended Articles of Association. It is undisputed that Clause 32 of the said Articles contains and arbitration clause which provides; Arbitration - Differences to be ReferredWhenever any difference arises between the Company on the one hand and any of the members, their executors, administrators, or assigns on the other hand, touching on true intent or construction, or the incident, or consequences of these Articles, or of the statutes, or touching anything then or thereafter done, executed, omitted, or suffered in pursuance of these Articles. or any claim on account of any such breach or alleged breach, or otherwise relating to the premises. or to these articles or to any statutes affecting the Company, every such difference. shall be referred to the decision of an arbitrator, to be appointed by the parties in difference, or if they cannot agree upon a single arbitrator, to be appointed by the parties in difference, or if they. Cannot agree upon a single arbitrator to the decision of two arbitrators. of whom one shall be appointed by such each of the parties in differences. 10.Section 6(1) of the Arbitration Act and it provides: -“(1)A court before which proceedings are brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than the time when that party enters appearance or files any pleadin.gs or takes any other step in the proceedings, stay the proceedings and refer the parties to arbitration unless it finds—(a)that the arbitration agreement is null and void, inoperative or incapable of being performed; or(b)that there is not in fact any dispute between the parties with regard to the matters agreed to be referred to arbitration.” 11.The tenor and import of Section 6(1) of the Arbitration Act is that where parties to a contract consensually agree on arbitration as their dispute resolution forum of choice, the Courts are obliged to give effect to that agreement. 12.Is there a dispute to be referred to arbitration? Notably, the Applicant alleged that the Respondents are acting in a callous, negligent and/or otherwise in breach of their trust and duties to the company. That the company is currently flouting its own Memorandum and Articles of Association, the Companies Act, 2015 and the code of conduct. On the other hand, the Respondents maintained that they have not mismanaged the affairs of the company nor participated in any alleged mismanagement. 13.There is indeed a dispute between the parties and as provided under the Arbitral Clause “every such difference shall be referred to the decision of an arbitrator”. 14.Additionally, Article 159(2) (c) of the Constitution as read together with Section 6(1) of the Arbitration Act lays emphasis that where parties to a contract consensually agree on arbitration as their dispute resolution forum of choice, the Courts are obliged to give effect to that agreement. 15.The question that vexes the Court is where the challenge envisioned by Section 6(1) of the Arbitration Act is by way of a Preliminary Objection or a formal application. This Court finds favour in filing of formal applications rather than Preliminary Objections. The Court would have to examine the facts, including the arbitral clause in the Memorandum and Articles, to establish its existence and application. The Applicant does not concede to the Preliminary Objection. Hence it becomes a live and a contested issue. In as much that the law may appear very clear on this issue and a plethora of decisions have been made by the Court, it is an issue that can only be established through facts. The are defence to an application under Section 6(1) of the Arbitration Act. The Respondent could argue acquiescence to jurisdiction, that there is no dispute capable of arbitration or that the arbitral agreement is inapplicable. Such defences render the matter not suitable for determination by way of a Preliminary Objection. This is because they invite factual responses as well as arguments. The Court would have to move away from the letter of the law to fact. Once facts are introduced, it ceases to be a pure point of law for determination by the Court. 16.The Court refers to the Court of Appeal decision in Niazsons (K) Ltd v China Road & Bridge Corporation Kenya [2001] KECA 376 (KLR). Bosire JA had this to state (underline emphasis ours);“Whether or not an arbitration clause or agreement is valid is a matter the Court seized of a suit in which a stay is sought is duty bound to decide. The aforequoted section does not expressly state at what stage it should do so. However, a careful reading of the section leaves no doubt that the Court must hear that application to come to a decision one way or the other. It appears to me that all an applicant is obliged to do is to bring his application promptly. The Court will then be obliged to consider three basic aspects. First, whether the applicant has taken any step in the proceeding other than the steps allowed by the said section. Second, whether there are any legal impediments on the validity, operation or performance of the arbitration agreement. Third, whether the suit indeed concerns a matter agreed to be referred….………. I think that once an application under section 6(1) of the Arbitration Act, has been made it is incumbent upon the judge seised of the matter to deal with it as a whole, to discover whether any of the legal impediments set out in the section exist as to disentitle the applicant to a stay. Determination of some of the issues which were raised call for the examination of the evidence. It is for that reason that I think that the appellant should not have raised the three points it did, in limine, but should have made them part of its grounds for opposing a stay as the three grounds are an integral part of the issues the Court is obliged to consider and rule on in an application under that section. A finding as to whether or not there exists a dispute capable of being referred to arbitration cannot in my view be the subject matter of a preliminary objection. Likewise the finding one way or the other whether an arbitration agreement is inoperative or incapable of being performed also requires an examination of the evidence. It is my view that the learned judge erred in allowing the appellant to raise the three points in limine. That is the more so because on the authority of the case of Mukisa Biscuit Co v West End Distributors [1969] EA 696, a preliminary point raises purely points of law. Law JA observed at p 700 that:"So far as I am aware, a preliminary objection consists of a point of law which has been pleaded, or which arises by clear implication out of pleadings, and which if argued as a preliminary point may dispose of the suit." And Newbold P at p 701, observed that:"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." 17.Just like the Court of Appeal has stated, the Court reaches a finding that Objections to suits under Section 6(1) of the Arbitration Act ought to be by way of formal applications. 18.As to whether the Applicant has locus standi and that leave was required prior to instituting a derivative suit, the Court is equally not convinced that this point was well taken as a Preliminary Objection. The Applicant is seeking the very leave that he is accused of not having obtained. It would appear that for good order the Preliminary Objection on this point ought to have been a response to the application for leave. The Court is yet to consider the application for leave to institute a derivative action under Sections 238 and 239 of the Companies Act. 19.The upshot is that the Court is not persuaded that the Preliminary Objections were well taken. The same are overruled. 20.As to costs the same lie at the discretion of this Court. They follow the event. They are awarded to the Applicant. Determination 21.The Notice of Preliminary Objections dated 6th January, 2026 and 15th January, 2026 are hereby overruled and struck out. 22.The costs thereof are awarded to the Applicant. 23.It is so ordered. DATED, SIGNED AND DELIVERED AT MILIMANI THIS 21ST DAY OF MAY, 2026.NJOROGE BENJAMIN K.JUDGEIn the presence of;Miss Orengo for Mr. Aman for the Plaintiff/Applicant.Mr. Ndungu for the for the 1st to 9th and 11th to 12th Respondents as well as the 2nd Interested Party.N/A for the 10th Respondent.Ms. Susan Nzioka - Court Assistant.