Abdalla Kibue & 906 others v Agricultural Finance Corporation & 5 others [2019] KEELC 3046 (KLR)
The bottom line
#The court struck out a shareholder's derivative claim for lacking prior court permission and refused late joinder by 288 land occupants, directing them to file their own suit.
What this practically means
#Executive summary
#Key legal issues
#Whether the Applicant could bring a derivative claim without leave of the court
The Application dated 26th January 2018 was struck out for want of locus standi and for being contrary to statute.
Section 239(1) of the Companies Act requires a member to apply to the court for permission to continue a derivative claim. The Applicant never obtained such leave, so he lacked the requisite locus standi. Further, the Companies Act defines the competent court as the High Court, not the Environment and Land Court. There was also no evidence that those pleading for the 2nd Defendant were not its Directors, the Directors' list reflecting the company registry and the General Meeting of 9th February 2018 having ratified the advocates' appointment and adopted the draft consent.
Whether the 288 Applicants should be joined as Plaintiffs
The joinder application dated 17th May 2018 (amended 5th February 2019) was declined as not meritorious.
Although Order 1 Rule 10(2) of the Civil Procedure Rules permits joinder of a necessary party, the application may be refused where it causes practical problems, delay or unnecessary costs. The 288 Applicants waited over four years, moving only when settlement negotiations between the Plaintiffs and Defendants were at an advanced stage, and did not demonstrate prejudice from the likely consent. The court advised them to file an independent suit if they claim entitlement to the suit land.
Whether the 288 Applicants were entitled to a temporary injunction
The injunction application dated 30th November 2018 could not issue following refusal of joinder.
Since the 288 Applicants were not enjoined in the suit, they could not obtain injunctive relief protecting possession of L.R. No. 5938, 11610 and 10314. The injunction application was premised on their joinder and preserving the status quo pending determination of the suit; once joinder was refused, the foundation for the injunction fell away.
Legal principles established
#- A member intending to pursue a derivative claim must first obtain the court's permission before continuing it, failing which he lacks locus standi.
- Derivative claims under the Companies Act lie in the High Court, not the Environment and Land Court.
- An application for joinder may be refused where it would cause unnecessary delay or costs, or is made late in the proceedings.
Court orders
#- 1.The Application dated 26th January 2018 is struck out with costs
- 2.The Application dated 30th November 2018 for an injunctive order cannot issue
- 3.The Applications dated 26th January 2018, 5th February 2019 and 30th November 2018 are dismissed with costs
- Jurisdiction invoked
- Jurisdiction of the Environment and Land Court over land known as L.R. No. 5938, 11610 and 10314; the court held derivative claims under the Companies Act fall to the High Court
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Abdalla Kibue & 906 others v Agricultural Finance Corporation & 5 others [2019] KEELC 3046 (KLR)", Case Analysis (2019). . Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2019/3046/eng@2019-05-31
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.