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ELCPartially AllowedEnvironment & Land Case 901 of 2014· [2023] KEELC 20015 (KLR)

Iganjo & another v Muriithi (Acting as the administrator and legal representative of the Estate of Mwangi Stephen Muriithi) & 6 others

Environment and Land Court at Nairobi
21 September 2023
LKL. C. Komingoi
11,258 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Environment and Land Court struck out a family's land claim, ruling company shareholding disputes belong in the High Court, and ordered their eviction.

What this practically means

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Executive summary

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The plaintiffs, administrators of the estate of Francis Iganjo Mutahi, claimed that Mutahi, James Kanyotu and Stephen Muriithi each held one share in Kamuta Ltd, the registered owner of LR No. 398/7 and 398/8 Naivasha, and sought injunctions, declarations restoring the shareholding, share transfers, accounts, subdivision of the land and damages for fraud. The defendants denied that Mutahi was a shareholder, variously asserting he was an employee or nominee, and the 7th Defendant counterclaimed for injunction, eviction, accounts and mesne profits or damages for trespass. The court framed four issues, chief among them its own jurisdiction. It held that although the ELC is clothed with jurisdiction over land disputes, the predominant issue was the shareholding of a limited liability company, a matter reserved to the High Court (Commercial Division) under Section 103 of the Companies Act 2015. Departing from earlier directions of 13th October 2017 that had allowed the hearing to proceed, the court struck out the plaintiffs' suit with costs. Applying Salomon v Salomon and Pacific Frontier Seas, it held that an estate of a shareholder is entitled only to shares, not company property. On the counterclaim, it found the plaintiffs in illegal occupation, running hotels and collecting rent without consent, and entered judgment for the 7th Defendant: permanent injunction, eviction within 120 days, an order for accounts of income, general damages of Kshs. 1,000,000/= for trespass in lieu of mesne profits, and costs with interest.

Key legal issues

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01

Jurisdiction of the ELC over shareholding disputes in a land-owning company

Holding

The court held it lacked jurisdiction over the plaintiffs' claim because the predominant issue was the shareholding of the 7th Defendant, a matter for the High Court (Commercial Division) under Section 103 of the Companies Act 2015.

Reasoning

The court examined Section 13 of the Environment and Land Court Act and Article 162(2)(b) of the Constitution, acknowledged jurisdiction over land matters, but found the plaint revolved around shareholding of a limited liability company. It departed from earlier directions of 13th October 2017 that had allowed the hearing to proceed, holding that jurisdiction cannot be conferred by acquiescence or the stage of proceedings.

p. 15
02

Separate corporate personality

Holding

The suit properties belong exclusively to the 7th Defendant; an alleged shareholder cannot claim, subdivide or dissolve company property.

Reasoning

Relying on Salomon v Salomon as applied in Omondi and Pacific Frontier Seas, the court held that shareholders have no proprietary interest in company property beyond their shares, and a probate/administrator claim extends only to shares, not company assets.

p. 18
03

7th Defendant's counterclaim for trespass, eviction and mesne profits/damages

Holding

The counterclaim was proved on a balance of probabilities; the plaintiffs were in illegal occupation and liable, with general damages of Kshs. 1,000,000/= awarded in lieu of mesne profits.

Reasoning

The court found the plaintiffs' family in occupation without the 7th Defendant's consent, running hotels, cottages, horticultural farming and collecting rent. Citing Rajan Shah on mesne profits and Oanda on the election between mesne profits and trespass damages, it awarded general damages for trespass relying on Park Towers.

Legal principles established

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  • The Environment and Land Court has no jurisdiction to determine questions of shareholding in a limited liability company; such disputes fall within the jurisdiction of the High Court (Commercial Division).
  • A shareholder's estate is entitled only to the shares in a company, not to the company's property; the probate court distributes shares but cannot liquidate a company or distribute its assets.
  • A company has a distinct legal personality; shareholders have no proprietary rights to company property apart from their shares, and only the company can enforce its legal rights.
  • Wrongful possession is the essence of a claim for mesne profits; a person in wrongful possession of another's property is liable for mesne profits.
  • A party cannot claim both mesne profits and damages for trespass; the court may grant only one.
  • Once trespass is proved, a party need not prove specific damage or loss to be awarded damages.

Court orders

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  1. 1.Plaintiffs' suit struck out with costs to the defendants
  2. 2.Permanent injunction restraining the plaintiffs, their agents or employees from trespassing, interfering, claiming or dealing in any way with LR No. 398/7 and LR No. 398/8 Naivasha
  3. 3.Plaintiffs, their servants and/or agents directed to vacate LR No. 398/7 and LR No. 398/8 within 120 days from the date of judgment, failing which the 7th Defendant may use lawful means to evict them
  4. 4.OCS Naivasha Police Station directed to ensure compliance of the court orders
  5. 5.Order compelling the plaintiffs to furnish a comprehensive account of income derived from LR No. 398/7 and LR No. 398/8 Naivasha during their occupation and hand over the said income to the 7th Defendant
  6. 6.General damages for trespass of Kshs. 1,000,000/= awarded to the 7th Defendant
  7. 7.Costs of the suit and interest to the 7th Defendant on the counterclaim

Authorities

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Legislation

  • Constitution of KenyaArticle 162(2)(b)
  • Constitution of KenyaArticle 165(3)
  • Environment and Land Court ActSection 13
  • Companies ActSections 103, 177, 178
  • Limitation of Actions ActSection 4(1)
  • Evidence ActSections 107, 108, 109

Cases cited (29)

  • Owners of the Motor Vessel "Lilian S" v Caltex Oil (Kenya) Ltd
    (1989)

    Jurisdiction is everything; a court without jurisdiction cannot take a further step.

  • Kakuta Maimai Hamisi v Peris Pesi Tobiko & 2 others
    (2013) eKLR

    Importance of jurisdiction (cited by defendants).

  • Samuel Kamau Macharia & another v Kenya Commercial Bank Limited & 2 others
    [2012] eKLR

    A court's jurisdiction flows from the Constitution or legislation and cannot be arrogated.

  • In the Matter of the Interim Independent Electoral Commission
    [2011] eKLR

    Pronouncements on importance of jurisdiction (cited by defendants).

  • Lydia Nyambura Mbugua v Diamond Trust Bank Kenya Limited & Another
    [2018] eKLR

    What a predominant issue entails (cited by defendants).

  • Prudenzio Nicholas Gaitara v Patrick Kariuki Muiruri & 2 Others
    (2019) eKLR

    ELC has no jurisdiction over disputes on internal management of companies; such claims lie in the High Court.

  • Republic v Karisa Chengo & 2 others
    [2017] eKLR

    Jurisdiction of the High Court, ELC and ELRC (cited by defendants).

  • Salomon v Salomon & Co. Ltd
    [1897] AC 22

    Separate legal personality of a company from its shareholders.

  • Victor Mabachi & Another v Nurturn Bates Ltd
    [2013] eKLR

    Company distinct from its owners (cited by defendants).

  • In the matter of the Estate of Gitere Kahura & Another (both deceased)
    [2018] eKLR

    Probate court distributes shares, not company assets (cited by defendants).

  • Gathoni v Kenya Cooperative Creameries Ltd
    [1982] KLR 104

    Limitation of actions (cited by defendants).

  • Rawal v Rawal
    [1990] KLR 275

    Limitation of actions (cited by defendants).

  • Iga v Makerere University
    [1972] EA

    Limitation of actions (cited by defendants).

  • Housing Finance of Kenya Ltd v Pal Homes Ltd
    [2002] 2 KLR

    Concept of nominee shareholder is foreign in Kenyan jurisprudence (cited by defendants).

  • Rajan Shah T/A Rajan S. Shah & Partners v Bipin P. Shah
    [2016] eKLR

    Wrongful possession is the essence of mesne profits.

  • Christine Nyanchama Oanda v Catholic Diocese of Homa Bay Registered Trustees
    (2020) eKLR

    Court can grant either mesne profits or damages for trespass, not both.

  • Park Towers Ltd v John Mithamo Njika & 7 others
    [2014] eKLR

    Once trespass is proved, no need to prove specific damage to be awarded damages.

  • Fredrick Korir v Soin United Women Group
    [2018] eKLR

    Mesne profits must be proved (cited by plaintiffs).

  • Peter Mwangi Mbuthia & Another v Samow Edin Osman
    [2014] eKLR

    Mesne profits must be proved (cited by plaintiffs).

  • Pacific Frontier Seas Ltd v Kyengo & Another
    [2022] KECA 396 (KLR)

    Estate of deceased shareholder entitled only to shares, not company property; probate court cannot liquidate a company.

  • George W M Omondi & Another v National Bank of Kenya Ltd & 2 others
    [2001] eKLR

    Company has distinct personality; only the company can enforce its legal rights.

  • Monica Wangui Njenga v Davis Kinyanjui Njenga & Another
    (2020) eKLR

    Reliefs concerning conduct of company affairs fall within the High Court's jurisdiction, not the ELC.

  • Central Bank of Kenya Ltd v Trust Bank Ltd & 4 others
    [1996] eKLR

    Fraud must be specifically pleaded and proved (cited by 3rd defendant).

  • Kinyanjui Kamau v George Kamau
    (2015) eKLR

    Standard of proof of fraud (cited by 3rd defendant).

  • Vijay Morjaria v Nansingh Madhusinh Darbar & Another
    (2000) eKLR

    Fraud must be specifically pleaded and proved (cited by 3rd defendant).

  • Kagina v Kagina & 2 others
    KECA 242 (KLR)

    No reliance on a witness not shown to be a forensic expert (cited by 3rd defendant).

  • Ernest Kithi Mbula v Esther Nzeli Mutua
    [2019] eKLR

    Court should decide on consistency of testimonies (cited by 4th and 5th defendants).

  • Mbuthia Macharia v Annah Mutua Ndwiga & Another
    [2017] eKLR

    Burden of proof on the party alleging (cited by 4th and 5th defendants).

  • Stephen Kinini Wang'ondu v The Ark Ltd
    [2016] eKLR

    Court should not rely on expert opinion based on falsified documents (cited by 4th and 5th defendants).

Jurisdiction invoked
Article 162(2)(b) of the Constitution and Section 13 of the Environment and Land Court Act

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (4)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Iganjo & another v Muriithi (Acting as the administrator and legal representative of the Estate of Mwangi Stephen Muriithi) & 6 others", Case Analysis (2023). Environment & Land Case 901 of 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/20015/eng@2023-09-21

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