https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1379

Young Traders Ltd v Gumchem (K) Limited (Civil Appeal 532 of 2020) [2026] KECA 1379 (KLR) (10 July 2026) (Judgment) Neutral citation: [2026] KECA 1379 (KLR) Republic of Kenya In the Court of Appeal at Nairobi Civil Appeal 532 of 2020 W Karanja, LM Njuguna & M Sila, JJA July 10, 2026 Between Young Traders Ltd Appellant and Gumchem (K) Limited Respondent (Being an appeal from the judgment of the High Court at Nairobi (Sergon, J.) dated 6th November 2020 in Civil Appeal No. 804 of 2000) Judgment 1.The respondent filed a suit against the appellant vide a plaint dated 2nd May 2000, seeking an order of special damages of Kshs 11,150,530.00 on account of unlawful damage to its properties. 2.The respondent’s case during trial was that it entered into a 5-year lease agreement with the appellant to lease a part of the appellant’s property on L.R No. 209/8686 (herein referred to as “the suit property”). The respondent contended that on or about 22nd September 1998, one of the appellant’s directors, one Stephen Kinuthia Waithaka (deceased), led a group of persons to the suit property and unlawfully evicted the respondent, and in the process, damaged its properties. 3.On its part, the appellant herein filed its defence dated 8th June 2000, wherein it denied the particulars of malicious damage to property and further pleaded that it was the respondent who breached the terms of the lease by using the suit premises for purposes outside those stipulated therein, and further, by failing to pay its rent regularly. 4.Upon hearing both parties, Sergon J., agreed with the appellant’s position that the respondent was in breach of the lease agreement, but proceeded to find that the appellant failed to raise any complaints with the respondent on the use of the suit premises, thereby accepting the altered use. 5.Regarding the issue of malicious damage to the respondent’s property, the trial court found that although the respondent had constructed illegal structures on the appellant’s property, and the abatement of the nuisance had been triggered by a court order, there was no specific order directing the demolition of the respondent’s properties. In the end, the trial court found that the demolition was unlawful and, by a judgment delivered on 6th November 2020, found in favour of the respondent, and awarded it damages in the sum of Ksh 11,090,530. Aggrieved by that decision, the appellant filed the appeal herein challenging the same. 6.In the memorandum of appeal, the appellant has raised nineteen grounds of appeal, summarized as follows: that the trial Judge erred in; failing to find that the respondent had no capacity to sustain its suit; failing to consider its submissions, passing judgment against the 2nd defendant despite the suit against him having abated; finding that the plaintiff had breached its contractual obligation but still granting it legal protection; and failing to find that special damages were not proven. 7.The appeal was canvassed through written submissions, which were highlighted before this Court when the appeal came up for hearing. According to the appellant, the respondent company was deregistered by the Registrar of Companies in 2006, during the pendency of the suit before the trial court, and therefore, it had no locus to sustain the suit in the High Court. That the respondent was aware of this fact, as the same was brought up during the trial and during the cross-examination of its witness. As such, being Cognizant of this fact, the respondent petitioned the High Court for reinstatement during the pendency of this appeal. 8.The appellant relied on the cases of Kenya Power & Lighting Company Limited vs. Benzene Holdings Limited t/a Wyco Paints [2016] KECA 73 (KLR); Housing Finance Company of Kenya Ltd vs. Embakasi Youth Development Project [2004] eKLR; and Sylvester Barake Maina & Another vs. Registrar of Companies [2019] KEHC 7758 (KLR), in which the courts restated the law that only a juristic person can have locus before a court, and can be subject to rights and liabilities as declared by the court. The appellant emphasized that a non-existent entity or person cannot maintain a court action, and once this is brought to the court’s attention, it cannot allow the case to proceed. That, additionally, according to section 339 of the repealed Companies Act (now section 917 (4)), an application for reinstatement must be made within 6 years of deregistration of the company; however, the respondent’s application was filed 16 years after deregistration. 9.In its written submissions, the appellant has stated that the trial court entered its judgment without considering its submissions, thereby denying the appellant a fair trial. The appellant argues that the trial court failed to distinguish between the company and its deceased managing director, Stephen Kinuthia Waithaka, effectively visiting liability of the individual upon the company after the suit against him had abated. 10.The appellant has challenged the award of special damages of (Kshs 11,090,530), arguing that they were not strictly proven and that the loss assessment report was hearsay. The appellant has relied on the cases of David Bagin vs. Martin Bundi [1997] eKLR, Kenya Women Microfinance Ltd vs. Martha Wangari Kamau [2021] eKLR, and Ryce Motors Limited & Another vs. Elias Muroki [1996] KECA 30 (KLR), which established the principle that special damages must be specifically pleaded and strictly proven. 11.In its submissions, the respondent has responded to each of the nineteen grounds set out in the memorandum of appeal. On the capacity of the respondent to sue, the respondent argues that this point is being raised for the first time on appeal, while the appellant participated in the trial without raising this objection. The respondent has asserted that the striking off was illegal ab initio because no prior notice was served by the Registrar of Companies as required by the Companies Act. The respondent submitted that it was reinstated via a court order, though that order is subject to a separate appeal. 12.On the claim that the trial court failed to consider the appellant’s submissions, the respondent contends that the court considered all the tendered evidence and that it was not bound by the appellant’s submissions. 13.On the allegation that the trial court failed to distinguish between the appellant company and its deceased managing director, the respondent submitted that the director was responsible for the day- to-day operations of the appellant company, and he orchestrated the demolition of the respondent’s premises in the name of the appellant company. The respondent has argued that he was sued in his personal capacity and as the director, for torts committed on behalf of the appellant. The respondent further argues that there was no objection regarding the sustainability of the suit following his death during the hearing, instead, his wife (another director) stepped into his role for the defence. 14.On the allegation that the trial court erred by protecting the respondent, though it had breached the terms of the lease agreement, the respondent argues that the court found that the appellant had accepted the altered use of the premises and, therefore, had waived its right to claim a breach. The respondent further asserts that it was evicted without due process before the lease expired, therefore, the appellant should not benefit from its own invasion. 15.As for the defence advanced by the appellant that it acted on the grounds of a court order, the respondent contends that the court order directed the removal of the nuisance, but it did not authorize the demolition that occurred. 16.On the proof of special damages, the respondent submitted that the author of the assessment report died during the suit, allowing the court to admit the report under section 33 (b) of the Evidence Act. The respondent avers that the appellant was aware of the claimed amount since 2000 but only offered a general denial and never challenged the specific items or the assessment. 17.As a first appeal, the jurisdiction of this Court is settled. Article 164(3) of the Constitution and section 3 (1) of the Appellate Jurisdiction Act provide for the Court’s jurisdiction to hear appeals from the High Court. Rule 31(1) of the Court of Appeal Rules empowers this Court to reappraise the evidence on record, and where necessary, make its own findings. We note that despite the nineteen grounds listed in the memorandum of appeal, Counsel for the appellant, when highlighting submissions before us, emphasized one main issue, being the legal status and capacity of the respondent company, to maintain and sustain the suit against the appellant. 18.The respondent’s suit was filed on 2nd May 2000, at which time, it was a duly registered entity. It is, however, common ground that by a Gazette Notice No. 2217 dated 24th March 2006, the Registrar of Companies gave notice that the respondent company would be struck off the register of companies and subsequently dissolved within three (3) months, if no cause was shown to the contrary. The core of the dispute, therefore, centres on whether a company that has been struck off the register of companies retains the legal personality necessary to be subject to rights and liabilities in a suit. 19.The appellant's position is that, despite this evidence being placed before it, the trial court declined to consider this evidence and proceeded to hear and determine the suit in favour of the respondent.On its part, the respondent argues that the appellant is only presenting this argument now. What is the correct position? A perusal of the amended record of appeal at page 295 clearly shows that the Gazette Notice formed part of the appellant’s bundle of documents before the trial court. The same is listed as item number 28 of the 1st defendant's list of documents at page 187 of the record of appeal. The Gazette Notice formed part of the record in HCCC No.1260 of 2004, as the same was produced by DW3 (see page 505) of the record of appeal. 20.By the time the trial was concluded and judgment entered in November 2020, the respondent company had ceased to exist for a period of about 14 years. The claim that it was in the dark about the deregistration cannot hold as the notice was placed in the Kenya Gazette, and the same formed part of the respondent’s bundle of documents during the trial. Further, upon obtaining the said judgment in its favour and an award of over Kshs. 11,090,530, the respondent petitioned the High Court pursuant to the provisions of the Companies Act for restoration in Misc Application Cause No. E733 of 2021. Evidence available in the supplementary record of appeal dated 13th April 2023, however, shows that the High Court vacated its order reviewing and setting aside the order made by Mabeya, J. on 15th December 2021, restoring the respondent to the companies register. This order has not been set aside. Therefore, as it stands, the respondent company remains deregistered in the companies register. 21.This Court in Kenya Power & Lighting Company Limited vs. Benzene Holdings Limited t/a Wyco Paints [2016] KECA 73 (KLR) held as follows:“It has been held consistently by the courts over the years that a company that has been dissolved cannot maintain an action and conversely that no action can be brought against it simply because it does not exist in the eyes of the law. This principle was emphasized as long ago as 1923 by Bankes L.J in Banque Internationale De Commerce (supra), which was subsequently in 1959 cited with approval by Templeton, J, of then Supreme Court of Kenya in Fort Hall Bakery Supply Co. vs. Fredrick Muigai Wangoe (1959) EA 474, who said:“The party seeking to maintain the action is in the eye of our law no party at all but a mere name only, with no legal existence…A non-existent person cannot sue, and once the court is made aware that the plaintiff is non- existent, and therefore incapable of maintaining the action, it cannot allow the action to proceed… Since a non- existent plaintiff can neither pay nor receive costs, there can be no order as to costs”. 22.In light of this well-established position, the legal status of the respondent is the threshold issue that determines the validity of the entire proceedings at the trial court. Furthermore, because the mandatory statutory window of restoration has long passed, the respondent is effectively a non-existent company. 23.The evidence tendered on the legal capacity of the respondent was an important piece of evidence before the trial court. It is the finding of this Court that the respondent’s legal status was extinguished by the 2006 Gazette Notice, and the learned Judge improperly ignored the evidence that the respondent lacked capacity during the proceedings, as it was dissolved. The trial court failed to take into consideration that important matter which it ought to have taken into account. The effect of this finding is that this appeal succeeds and it is hereby allowed with costs to the appellant. 24.With that determination, no purpose will be served by considering the other grounds in the memorandum of appeal. 25.Orders accordingly. DATED AND DELIVERED AT NAIROBI THIS 10TH DAY OF JULY 2026.W. KARANJA....................................JUDGE OF APPEALL. NJUGUNA....................................JUDGE OF APPEALMUNYAO SILA....................................JUDGE OF APPEALI certify that this is a True copy of the originalSignedDeputy Registrar