[2017] KEHC 1431 (KLR)
The court held that leave to continue a derivative action under Sections 238 and 239 of the Companies Act 2015 is not a condition precedent to instituting the suit, but must be obtained before the suit is continued. The court found that denying leave at this stage would unjustly prevent the plaintiff from pursuing...
Source-derived case information.
- Citation
- [2017] KEHC 1431 (KLR)
- Parties
- Plaintiff: Stephen Maina Githiga; Defendant: Kiru Tea Factory Co. Ltd; Defendant: Geoffrey Chege Kirundi
- Court
- High Court
- Court Station
- High Court at Nairobi (Milimani Commercial Courts)
- Jurisdiction
- Kenya
- Case Number
- Civil Suit 106 of 2017
- Procedural Posture
- Civil Suit / Application for Leave to Continue as Derivative Action
- Outcome
- Application for leave to continue as a derivative action allowed.
- Judges
- A Mbogholi-Msagha
- Legal Topics
- Derivative Actions, Company Law Procedure, Leave of Court, Shareholder Rights
- Source Language
- en
Source-derived case record
Summary, issues, holding and outcome
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Parties
Stephen Maina Githiga
Plaintiff
Kiru Tea Factory Co. Ltd
Defendant
Geoffrey Chege Kirundi
Defendant
Procedural Posture
Civil Suit / Application for Leave to Continue as Derivative Action
Legal Issues
- 1 Whether the plaintiff should be granted leave to continue the suit as a derivative action under Sections 238 and 239 of the Companies Act 2015.
- 2 Whether leave is a condition precedent to instituting a derivative action or only required before continuation of such suit.
Ratio Decidendi
The court held that leave to continue a derivative action under Sections 238 and 239 of the Companies Act 2015 is not a condition precedent to instituting the suit, but must be obtained before the suit is continued. The court found that denying leave at this stage would unjustly prevent the plaintiff from pursuing the claim, and that issues of merit raised by the defendants pertain to the substantive hearing rather than the threshold for leave. Accordingly, the application for leave was allowed, enabling the plaintiff to proceed with the derivative action.
Court Disposition
Application for leave to continue as a derivative action allowed.
Orders
- Leave is granted to the plaintiff to continue the suit as a derivative action.
- No order as to costs.
Full Case Text
Judgment text and source record
17 paragraphs
REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT NAIROBI
CIVIL SUIT NO. 106 OF 2017
STEPHEN MAINA GITHIGA …………..…………………….PLAINTIFF
VERSUS
KIRU TEA FACTORY CO. LTD …... 1ST DEFENDANT/RESPONDENT
GEOFFREY CHEGE KIRUNDI ….....2ND DEFENDANT/RESPONDENT
RULING
The plaintiff brought this suit against the four defendants on record for several orders set out therein but at an interim stage sought injunctive orders against the 1st and 2nd defendants. At the instance of the court, a direction was made that the plaintiff should first comply with Sections 238 and 239 of the Company’s Act 2015 to confer capacity upon him to bring this suit. These provisions relate to derivative action against the defendants which under company law is informed by the relationship between a party and a limited company.
There is before me an application by way of Notice of Motion under the said provisions of law and relevant provisions of the Civil Act Procedure and Rules, that leave be granted to the plaintiff to continue this suit as a derivative action.
The 2nd defendant who is the chairman of the board of directors of the 1st defendant has filed a replying affidavit opposing the said application. The court having directed that the ruling herein will be based on the affidavits filed, I have read the grounds set out on the face of the application the supporting affidavit of the plaintiff and the replying affidavit of the 2nd defendant.
The leave contemplated under Sections 238 and 239 of the Companies Act aforesaid is not a condition precedent, because the wording refers to continuation of a suit which may as well mean a party may institute a suit before leave is granted but before he or she continues with the same, such leave should be granted.
It is a cardinal principle of justice that a party should not be driven from the seat of judgment however weak his or her case is. If I were to deny the plaintiff leave at this stage that would be the position. The replying affidavit has raised matters of merit relating to the substantive suit and the application for injunction which belong to the province of the main hearing, and where parties will have an opportunity to address the court upon.
For now, I will allow the application for leave as prayed with no order as to costs.
Dated, signed and delivered at Nairobi this 9th Day of November, 2017
A. MBOGHOLI MSAGHA
JUDGE