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ELCStruck OutNairobi ELC Suit referenced; suit filed 16th September 2014 (number not stated in judgment)· [2016] KEELC 691 (KLR)

Daniel Githiora Gathua & another v Joe Karanja Njoroge & 3 others [2016] KEELC 691 (KLR)

Environment and Land Court
19 July 2016
LWL N WAITHAKA
963 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan court struck out a land suit because a liquidated cooperative society had no legal power to sue, and a later stay order couldn't fix that.

What this practically means

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Executive summary

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The 1st defendant, Joe Karanja Njoroge, filed a preliminary objection dated 12th May 2015 seeking to strike out the suit on the ground that it offended Sections 63 and 66(1)(b) of the Cooperative Societies Act, Cap 490. The objection was disposed of by written submissions. The 1st defendant argued that the 2nd plaintiff had been put under liquidation before the suit was filed on 16th September 2014, that it had thereby ceased to exist as a body corporate, and that only the liquidator could sue on its behalf, relying on Keekonyokie Farmers Cooperative Society Ltd v Mositet. The plaintiffs admitted the liquidation but contended that the liquidation order had been stayed by Odunga J on 11th March 2015 in Nairobi Judicial Review Case No. 68 of 2015, rendering the objection unsustainable; they further argued that the 1st plaintiff, as a registered owner of one of the sub-divisions of the suit property and a beneficiary, could pursue the claim, citing Yaya Towers Ltd v Trade Bank Ltd and D.T Dobie & Co. Ltd v Muchina. Waithaka J held that upon liquidation the 2nd plaintiff ceased to be a body corporate under Sections 61, 62, 63 and 65 of the Act, and that the subsequent stay of the liquidation order could not retroactively validate actions done while it lacked capacity. The court also found that the 1st plaintiff's beneficiary status gave him no locus standi, and that he had produced no evidence of registered ownership of a subdivision. The objection was upheld, the suit was struck out, and the defendants were awarded the costs of the suit. Judgment delivered at Nyeri on 19th July 2016.

Key legal issues

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01

Capacity of a liquidated cooperative society to institute suit

Holding

The 2nd plaintiff ceased to exist as a body corporate upon liquidation and lacked capacity to file the suit; only the liquidator could sue

Reasoning

The suit was filed on 16th September 2014, by which time the 2nd plaintiff had been put under liquidation (on or before 5th September 2014). Under Sections 61, 62, 63 and 65 of the Cooperative Societies Act, a liquidated society ceases to be a body corporate and its property vests in the liquidator. Section 66(1)(b) therefore required the suit to be brought by the liquidator, not the society.

p. 2
02

Effect of stay of liquidation order

Holding

The stay issued on 11th March 2015 could not validate acts done while the society had no capacity

Reasoning

Although Odunga J stayed the liquidation order in Nairobi Judicial Review Case No. 68 of 2015, the suit had been filed earlier. The court held that the stay could not cure the nullity of actions performed by the society at a time it was non-existent in law; validation could not operate retrospectively.

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Locus standi of the 1st plaintiff

Holding

The 1st plaintiff, though claiming to be a registered owner of a subdivision, had no locus standi to pursue the suit as framed

Reasoning

The pleadings showed the suit property as belonging to the 2nd plaintiff and the interest protected was that of the 2nd plaintiff and its members. Beneficiary status alone did not confer standing, and the 1st plaintiff adduced no evidence proving registered ownership of a subdivision.

p. 2

Legal principles established

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  • A cooperative society put under liquidation ceases to be a body corporate and only the liquidator may sue on its behalf
  • A subsequent stay of a liquidation order cannot retroactively validate steps taken by the society while it lacked legal capacity

Court orders

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  1. 1.The preliminary objection by the 1st defendant is upheld
  2. 2.The suit is struck out
  3. 3.The defendants shall have the costs of the suit

Authorities

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Legislation

  • Cooperative Societies Act, Cap 490 Laws of KenyaSections 61, 62, 63, 65, 66(1)(b), 12

Cases cited (3)

  • Keekonyokie Farmers Cooperative Society Ltd v. Hon. Engineering Peter Mositet & 18 others
    Nairobi ELC Suit No.936 of 2014
  • Yaya Towers Ltd v. Trade Bank Ltd (in liquidation)
    (2000) e KLR
  • D.T Dobie & Co. (Kenya) Ltd v. Joseph Mbaria Muchina & Another
    (1980) e KLR
Jurisdiction invoked
Cooperative Societies Act, Cap 490, Sections 61, 62, 63, 65 and 66(1)(b)

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, "Daniel Githiora Gathua & another v Joe Karanja Njoroge & 3 others [2016] KEELC 691 (KLR)", Case Analysis (2016). Nairobi ELC Suit referenced; suit filed 16th September 2014 (number not stated in judgment). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2016/691/eng@2016-07-19

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