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ELCDismissedCase No 204 of 2017· [2019] KEELC 363 (KLR)

Joel O. Onchiri & 38 others v Ngenda Location Ranching Co. Ltd & another [2019] KEELC 363 (KLR)

Environment and Land Court
19 December 2019
DOD. O. Ohungo
2,684 words in judgment
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The bottom line

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Kenya's Environment and Land Court confirmed it can hear land-buying company disputes where the real issue is land ownership, and refused to strike out the buyers' claim.

What this practically means

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Executive summary

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This ruling of the Environment and Land Court at Nakuru (D. O. Ohungo, J) determined a preliminary objection and Notice of Motion dated 25th September 2018, both filed by the 2nd defendant in a suit brought by 36 plaintiffs, members of the 1st defendant, a land-buying company. The plaintiffs allege the 1st defendant sold the suit property to the 2nd defendant without the consent of shareholders, and seek, among other relief, annulment of the sale. The 2nd defendant objected that the court lacked jurisdiction under section 3 of the Companies Act, 2015 (the dispute being between a company and its members), that the Act and articles of association ousted jurisdiction, and that the plaintiffs lacked locus standi to bring a derivative action without leave under sections 238 and 239. It also sought striking out of the suit against it as frivolous, vexatious and an abuse of process. The court applied the predominant purpose test (adopting Suzanne Butler v Redhill Investments) and held that, although aspects of the suit concern the company and its members, the dispute boils down to ownership of land, which falls squarely within ELC jurisdiction under Article 162(2)(b) and section 13 of the ELC Act. On the striking-out application, the court, guided by Kivanga Estates and Mukisa Biscuit, held that striking out is a draconian remedy to be applied sparingly; a semblance of cause of action was disclosed and any shortcomings were curable by amendment. Both the preliminary objection and the application were dismissed with costs to the plaintiffs.

Key legal issues

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01

Jurisdiction of the ELC over a suit involving a land-buying company and its members

Holding

The ELC has jurisdiction because the predominant purpose of the suit is resolution of a dispute over ownership of land

Reasoning

Although section 3 of the Companies Act defines 'the court' as the High Court and the member-company dispute would ordinarily lie there, the suit also challenges the validity of a contract for sale of land. Applying Article 162(2)(b) and section 13 of the ELC Act, which confer jurisdiction over contracts granting enforceable interests in land, the court applied the predominant purpose test and found the dispute principally concerns land ownership, within ELC jurisdiction.

p. 3
02

Whether the suit against the 2nd defendant should be struck out as frivolous and vexatious

Holding

The application was refused; a semblance of a cause of action is disclosed and defects are curable by amendment

Reasoning

The 2nd defendant's contention that the sale was valid goes to the merits and cannot be determined on a striking-out application. The plaintiffs identified the cause of action (sale without shareholders' consent) and relief (annulment of the sale). Striking out is a draconian remedy applied sparingly and only in plain cases. Arguments raised amounted to a premature merits assessment which must await trial.

p. 4

Legal principles established

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  • Where a suit raises cross-cutting issues concerning both company disputes and land ownership, jurisdiction is determined by the predominant purpose test
  • Striking out pleadings is a draconian remedy to be applied sparingly, only in plain cases where no semblance of cause of action is disclosed and the defect is incurable by amendment

Court orders

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  1. 1.The preliminary objection dated 25th September 2018 is dismissed with costs to the plaintiffs
  2. 2.Notice of Motion dated 25th September 2018 is dismissed with costs to the plaintiffs

Authorities

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Legislation

  • Companies ActSection 3
  • Companies ActSections 238 and 239
  • Constitution of Kenya, 2010Article 162
  • Environment and Land Court Act, 2011Section 13
  • Civil Procedure Rules, 2010Order 1 Rules 10(2) and 14; Order 2 Rule 15(1)(b)(c) and (d)

Cases cited (6)

  • Mukisa Biscuit Manufacturing Co. Ltd vs West End Distributors Ltd
    (1969) EA 696
  • Republic v Resident Magistrate's Court at Kiambu Ex parte Geoffrey Kariuki Njuguna & 19 others
    [2017] eKLR
  • Law Society of Kenya v Martin Day & 3 others
    [2015] eKLR
  • Suzanne Butler & 4 Others v Redhill Investments & Another
    [2017] eKLR
  • Kivanga Estates Limited v National Bank of Kenya Limited
    [2017] eKLR
  • Mpaka Road Development Ltd. v Kana
    [2004] 1EA 161
Jurisdiction invoked
Article 162 of the Constitution of Kenya, 2010 as read with section 13 of the Environment and Land Court Act, 2011

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, "Joel O. Onchiri & 38 others v Ngenda Location Ranching Co. Ltd & another [2019] KEELC 363 (KLR)", Case Analysis (2019). Case No 204 of 2017. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2019/363/eng@2019-12-19

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