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Court of AppealDismissedNotice of Motion dated 2nd June 2021 (Civil Application - Rule 5(2)(b))· [2024] KECA 428 (KLR)

Ng'ang'a v NCBA Bank of Kenya PLC & another (Civil Application 176 of 2021) [2024] KECA 428 (KLR)

Court of Appeal of Kenya
26 April 2024
ASAsike-MakhandiaAMA. K. MurgorMNMumbi Ngugi
2,302 words in judgment
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The bottom line

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The Court of Appeal dismissed a director's attempt to block a bank-appointed receiver, ruling that once a receiver takes over, directors cannot sue on the company's behalf in their own name.

What this practically means

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Executive summary

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This was a rule 5(2)(b) application before the Court of Appeal at Nairobi, in which David Muigai Ng'ang'a sought an interim injunction restraining Kereto Marima from acting as Receiver and Manager of Sheng Shuang Quarry Limited (In Receivership), or alternatively suspension of that appointment, pending an intended appeal against the High Court's dismissal of the company's suit in Machakos HCCC No. E006 of 2021. The applicant alleged the appointment of the receiver breached a status quo order in Machakos Civil Suit No. 25 of 2019 and statutory notice requirements under the Land Act. NCBA Bank opposed, arguing the applicant lacked locus standi in his personal capacity, the receiver's appointment was a contractual right under the debenture, and the appeal was neither arguable nor nugatory. The Court dismissed the application on three grounds. First, it was incompetent because it was brought in the applicant's personal capacity for the first time in the Court of Appeal, bearing no resemblance to the company's suit in the High Court, and so did not arise from a decision appealable under Article 163(4) of the Constitution. Second, following Alfred Njau v City Council of Nairobi, Tudor Grange Holdings and Kissi Petroleum, the applicant, as a director of a company whose receiver had been appointed and gazetted, had no locus standi to sue personally. Third, the interim orders sought were overtaken by events, since the receiver's appointment had already taken effect and there was nothing to restrain or suspend. The application was dismissed with costs in the intended appeal. The Court regretted the delay in delivering the ruling, caused by an administrative omission from the schedule of judgments.

Key legal issues

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01

Competence of the application brought in a personal capacity for the first time on appeal

Holding

The application was incompetent because it was brought in the applicant's personal capacity rather than in the company's name as in the High Court, and therefore did not arise from the High Court decision.

Reasoning

The High Court suit, Machakos HCCC No. E006 of 2021, was brought in the company's name, but the rule 5(2)(b) application was filed by the applicant personally, bearing no resemblance to the suit below. Under Article 163(4), the Court's jurisdiction is confined to appeals from decisions of the superior courts. Since the application did not arise from the High Court decision but amounted to a fresh matter, the Court found it had no jurisdiction and declared the application incompetent.

p. 3
02

Locus standi of a director of a company in receivership

Holding

The applicant had no locus standi to bring the application in his personal capacity once a Receiver had been appointed over the company.

Reasoning

Relying on Alfred Njau v City Council of Nairobi for the meaning of locus standi, and Tudor Grange Holdings and Kissi Petroleum for the effect of receivership on directors' capacity, the Court held that while directors may exceptionally sue to challenge the validity of the instrument or circumstances of a receiver's appointment, this applicant, having brought the application personally and not in the company's name, could not be heard. The Gazettement of the receiver's appointment, which the applicant acknowledged, confirmed the receiver's authority.

p. 4
03

Whether interim orders restraining or suspending an existing receivership could issue

Holding

The orders sought were overtaken by events because the receiver's appointment had already taken effect, leaving nothing to restrain or suspend.

Reasoning

The applicant sought an injunction restraining the 2nd respondent from acting as Receiver and Manager, or alternatively suspension of the appointment. The Court noted that Gazette Notice No. 4166 of 21st April 2021 confirmed the appointment, which the applicant acknowledged while challenging its manner. Since the appointment had already taken effect, the Court found no live subject matter on which interim relief could operate and held the orders incapable of being granted.

p. 4

Legal principles established

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  • Pursuant to the appointment of a receiver, a company's directors have no power to sue on behalf of the company, especially where proceedings could directly infringe on property subject to the receiver's powers.
  • An appellate application that does not arise from the decision appealed against, but is brought in a capacity different from that in which the suit was brought below, is incompetent for want of jurisdiction.
  • Interim orders that would restrain or suspend an appointment already made and in effect are overtaken by events and incapable of being granted.

Court orders

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  1. 1.The Notice of Motion dated 2nd June 2021 is dismissed
  2. 2.Costs in the intended appeal

Authorities

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Legislation

  • Constitution of Kenya, 2010Article 163(4)
  • Court of Appeal Rulesrule 5(2)
  • Land Act 2012section 94
  • Land Act 2012section 90(3)

Cases cited (5)

  • Alfred Njau & Others v City Council of Nairobi
    [1982-88] 1 KAR 229
  • Tudor Grange Holdings Ltd. & others v Citi Bank N.A.
    [1991] All ER
  • Kissi Petroleum Products Ltd v Kobil Petroleum
    Civil Application No. 309 of 2003 at Nairobi
  • Sheng Shuang Quarry Limited v NCBA Bank Kenya Limited
    Machakos High Court Civil Suit No. 25 of 2019
  • Sheng Shuang Quarry Limited (in receivership) v NCBA Bank Kenya Limited & Kereto Marima
    Machakos HCCC No. E006 of 2021
On appeal from
High Court of Kenya, Machakos
Machakos HCCC No. E006 of 2021 - Sheng Shuang Quarry Limited (in receivership) v NCBA Bank Kenya Limited & Kereto Marima
Jurisdiction invoked
Article 163(4) of the Constitution; rule 5(2) of the Court of Appeal Rules

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Ng'ang'a v NCBA Bank of Kenya PLC & another (Civil Application 176 of 2021) [2024] KECA 428 (KLR)", Case Analysis (2024). Notice of Motion dated 2nd June 2021 (Civil Application - Rule 5(2)(b)). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2024/428/eng@2024-04-26

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