Joseph Kaara Mwethaga v Thabiti Finance Company Limited (In Liquidation) & 4 Others
The bottom line
#Kenya's Court of Appeal threw out a property injunction because the plaintiff sued a company in liquidation without first getting the court's permission.
What this practically means
#Executive summary
#Key legal issues
#Whether leave is required to sue a company in liquidation and the consequence of its absence
Leave of the court is mandatory before proceeding against a company in involuntary liquidation; its absence renders the suit incurably defective and incompetent, and the injunction application in the suit and in the appellate court must fail.
The first defendant was described in the plaint as a company undergoing involuntary liquidation, a fact not disputed. The plaintiff required leave under sections 228 and/or 241 of the Companies Act and/or section 35 of the Banking Act. It was undisputed that no such leave had been obtained, breaching mandatory provisions, so the suit was incompetent and the injunction application could not stand.
Whether the injunction could survive against the second, third, fourth and fifth defendants
No. The basis of the suit and the injunction application was the claim against the first defendant from whom the second and fourth defendants derived title; claims against those defendants in incompetent proceedings must also fail.
Counsel for the plaintiff argued that reliefs against the other defendants were unaffected by the incompetence of the claim against the first defendant. The court rejected this: the entire claim rested on the first defendant's allegedly irregular and fraudulent sale, and the other defendants derived title from it, so the incompetence infected the whole application.
Legal principles established
#- A suit against a company undergoing liquidation commenced without the leave required under sections 228 and/or 241 of the Companies Act and/or section 35 of the Banking Act is incurably defective and incompetent, and any application for injunction in such a suit must fail, including on appeal under rule 5(2)(b).
- Where an injunction claim is founded on title derived from a defendant against whom the proceedings are incompetent, claims for injunction against the derivative title-holders must also fail.
Court orders
#- 1.The application fails and is dismissed with costs
- On appeal from
- High Court of Kenya at Nairobi (Milimani Commercial Court)
- H.C.C.C. No. 453 of 1998
- Jurisdiction invoked
- Rule 5(2)(b) of the Court of Appeal Rules
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Joseph Kaara Mwethaga v Thabiti Finance Company Limited (In Liquidation) & 4 Others", Case Analysis (1998). Civil Application No. NAI. 120 of 1998. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1998/275/eng@1998-06-05
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.