Simon Kandie & 7 others v Richardson Kipkoech Bundotich & 5 others [2014] KEELC 676 (KLR)
The bottom line
#Kenya's Environment and Land Court allowed minority shareholders to sue directors over company land, dismissing a preliminary objection and confirming shareholders' right to sue when directors control the company.
What this practically means
#Executive summary
#Key legal issues
#Jurisdiction of the ELC over internal company decisions affecting company land
The court has jurisdiction because the dispute concerns title to and dealings with a parcel of land owned by the company
The ELC is established under Article 162(2)(b) and Section 4(1) of the Environment and Land Court Act with original and appellate jurisdiction over environment and land disputes under Section 13(1). Although the challenge is to decisions of company directors, the subject matter is a parcel of company land; a court mandated to deal with issues affecting that parcel cannot refuse to deal with decisions by its directors or members affecting it.
Locus standi of shareholders suing directors in control of the company
The plaintiffs, as shareholders, have locus standi under the fraud-on-the-minority/wrongdoer-control exceptions to the rule in Foss v Harbottle
The directors, who alone control the company, are alleged to be disposing of company land without shareholder consent. They cannot be expected to sue themselves. Applying the Edwards v Halliwell exceptions, the rule in Foss v Harbottle is relaxed where the wrongdoers control the company, allowing a minority shareholders' derivative-type claim.
Allegations of forged and undated affidavits in a preliminary objection
Such allegations are issues of fact requiring proof by evidence and cannot be determined in a preliminary objection
The defendants alleged that the verifying and supporting affidavits were undated and bore forged signatures. Applying the Mukisa Biscuit principle that a preliminary objection must be a pure point of law, the court held these matters require evidence, including documentary proof and expert witnesses, and therefore cannot be resolved at this interlocutory stage.
Legal principles established
#- A preliminary objection must raise a pure point of law argued on the assumption that all facts pleaded are correct; it cannot be raised where facts must be ascertained or judicial discretion exercised
- A court's jurisdiction flows from the Constitution or legislation and cannot be assumed beyond what is conferred by law
- The rule in Foss v Harbottle is relaxed in favour of a minority where the wrongdoers are themselves in control of the company, permitting a derivative action
Court orders
#- 1.The Notice of Preliminary Objection dated 1st October, 2013 is dismissed with costs to the plaintiffs
- 2.Interim orders are extended for 90 days within which the Notice of Motion dated 10th September, 2014 should be set down for hearing
- Jurisdiction invoked
- Article 162(2)(b) of the Constitution and Section 13(1) of the Environment and Land Court Act (No. 9 of 2011)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Simon Kandie & 7 others v Richardson Kipkoech Bundotich & 5 others [2014] KEELC 676 (KLR)", Case Analysis (2014). Not stated in the judgment (ELC suit, Nakuru). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2014/676/eng@2014-10-17
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.