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Court of AppealPartially AllowedCivil Appeal No. 132 of 2014 (consolidated with Civil Appeal No. 133 of 2014)· [2016] KECA 73 (KLR)

Kenya Power & Lighting Company Limited v Benzene Holdings Limited t/a Wyco Paints [2016] KECA 73 (KLR)

Court of Appeal of Kenya
25 November 2016
ASAsike-MakhandiaWilliam OukoW. OukoKMK. M'Inoti
2,719 words in judgment
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The bottom line

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Kenya's Court of Appeal threw out a fire-damage lawsuit because the suing company had already been dissolved, confirming that a company that no longer legally exists cannot sue or be sued.

What this practically means

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Executive summary

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The respondent's industrial premises were destroyed by fire in November 1996 and it sued the appellant power company for negligence, obtaining judgment before Visram, J. for Kshs.6,028,226 plus costs and interest. Within seven days the appellant applied, invoking section 3A of the Civil Procedure Act, to set aside the proceedings and judgment and strike out the suit on the ground that the respondent had been dissolved and struck off the register of companies and thus lacked capacity. Ali-Aroni, J. dismissed the application, holding that the appellant should have sought review under the rules rather than the court's inherent jurisdiction. The appellant's two appeals - against the substantive judgment (Civil Appeal No. 132 of 2014) and against the discretionary ruling (Civil Appeal No. 133 of 2014) - were consolidated by consent. The Court of Appeal began with the second appeal, reasoning that its outcome would render the first moot. It held that the Civil Procedure Rules contain no provision for setting aside a final judgment, so resort to inherent jurisdiction under section 3A was proper; that a dissolved company cannot maintain or defend an action; and that Ali-Aroni, J. misdirected herself by insisting on the review route and by failing to consider the merits of the application. The court allowed the appeal, set aside the proceedings and judgment, struck out the respondent's suit, and made no order as to costs since a dissolved party can neither pay nor receive costs. The substantive appeal on the cause of the fire was not considered.

Key legal issues

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01

Availability of the court's inherent jurisdiction to set aside a final judgment

Holding

The inherent power under section 3A of the Civil Procedure Act may be invoked to set aside a final judgment where the ground relied upon (here, the plaintiff's lack of capacity due to dissolution) is not covered by the express review provisions; insisting on order 45 review was a misdirection.

Reasoning

The rules provide for setting aside default judgments only; there is no express provision for setting aside a final judgment. Review under order 45 has stringent conditions not designed for the ground raised. Section 3A vests residual power to make orders necessary for the ends of justice or to prevent abuse of process, broadened by sections 1A and 1B and Article 159. Ali-Aroni, J. erred by insisting the application be brought under the review provisions instead of considering its merit.

p. 3
02

Capacity of a dissolved company to participate in litigation

Holding

A dissolved and struck-off company has no legal existence and cannot sue or be sued; an action prosecuted by such an entity is a nullity and must be struck out.

Reasoning

The respondent was struck off the register by gazette notice on 12th August 2004, before the trial commenced in September 2005, and its counsel did not disclose this. Following Banque Internationale De Commerce and Fort Hall Bakery, a non-existent person cannot maintain an action. The holding-company and subrogation arguments were irrelevant since the suit was brought and prosecuted in the respondent's own name.

p. 4
03

Interference with judicial discretion on appeal

Holding

Ali-Aroni, J. improperly exercised her discretion by considering irrelevant issues and failing to consider the merits of the application, warranting appellate interference.

Reasoning

The settled Mbogo v Shah standard permits interference where discretion is exercised on a misdirection or irrelevant matters leading to a wrong conclusion. The learned Judge insisted the application ought to have been brought under the review rules rather than section 3A and thereby failed to consider its merits, arriving at the wrong conclusion.

p. 5

Legal principles established

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  • A company that has been dissolved cannot maintain an action, and no action can be brought against it, because it has no legal existence; once the court is made aware that a party does not exist, it cannot allow the action to proceed.
  • The Civil Procedure Rules have no provision for setting aside a final judgment; the inherent jurisdiction under section 3A of the Civil Procedure Act may properly be invoked for that purpose where the ground relied on is not covered by the express provisions for review.
  • An appellate court may interfere with the exercise of judicial discretion only where it is clearly wrong on account of misdirection or reliance on irrelevant matters.

Court orders

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  1. 1.Appeal against the ruling of Ali-Aroni, J. allowed with no orders as to costs
  2. 2.Order dismissing the application dated 12th August 2008 substituted with an order allowing it
  3. 3.Respondent's suit struck out and the proceedings and judgment set aside
  4. 4.Civil Appeal No. 132 of 2014 not considered as moot
On appeal from
High Court of Kenya at Nairobi
H.C.C.C. No. 2139 of 1999
Jurisdiction invoked
First appeal to the Court of Appeal under the Civil Procedure Act (appeal from the High Court)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (6)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Kenya Power & Lighting Company Limited v Benzene Holdings Limited t/a Wyco Paints [2016] KECA 73 (KLR)", Case Analysis (2016). Civil Appeal No. 132 of 2014 (consolidated with Civil Appeal No. 133 of 2014). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2016/73/eng@2016-11-25

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.