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ELCPartially AllowedEnvironment & Land Petition 4 of 2022· [2023] KEELC 21775 (KLR)

AWG v DNK & another; Gichaga (Proposed Interested Party)

Environment and Land Court
21 November 2023
1,542 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
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The bottom line

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Kenya's Environment and Land Court set aside a consent that reshaped a company's shareholding because the majority shareholder was left out of the deal.

What this practically means

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Executive summary

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This ruling by the Environment and Land Court at Nairobi (LN Mbugua, J) determines an application dated 14.8.2023 by Daniel Mahiri Gichaga, a proposed interested party, in a petition between DR AWG (Petitioner) and DR DNK (1st Respondent) and Crescent View Holdings Limited (2nd Respondent). The Applicant sought joinder as an interested party, leave for Jinaro & Company Advocates to come on record for him and the 2nd Respondent, setting aside of a consent dated 20.4.2023 recorded in Mediation Reference No. MLM/MED/279/2002 on grounds of material non-disclosure, collusion and fraud, and an order reversing the change of the 2nd Respondent's directorship/shareholding. The Petitioner filed a preliminary objection contending lack of locus standi, that the court was functus officio after judgment and decree, and that no pending suit existed. The court dismissed the objection because all its grounds required interrogation of facts, contrary to the pure-point-of-law test in Oraro v Mbaja. On the merits, the court found that the 1st Respondent had transferred all his shares and retired as director by resolution dated 15.1.2021, so the parties to the consent lacked capacity to sign it without the majority shareholder's knowledge. The consent and all transactions arising from it relating to shareholding in the 2nd Respondent were set aside, the Applicant was joined as an interested party, and counsel was allowed on record. Each party was ordered to bear its own costs. The sought registrar-of-companies reversal order was not granted.

Key legal issues

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01

Preliminary objection - pure point of law

Holding

Objection dismissed because all grounds require interrogation of facts

Reasoning

Applying Oraro v Mbaja, the court held that a preliminary objection must rest on pure points of law. The grounds raised - locus standi, functus officio and absence of a pending suit - would each require factual interrogation, so the objection could not stand.

p. 3
02

Setting aside the consent of 20.4.2023

Holding

Consent set aside because parties lacked capacity to sign it without the majority shareholder

Reasoning

The consent was recorded in mediation and affected shareholding of the 2nd Respondent. Documents showed the 1st Respondent had transferred all his shares and retired as director on 15.1.2021. As the Applicant was majority shareholder at the time, the parties to the consent had no capacity to bind the company's shareholding without his knowledge or consent.

p. 3
03

Joinder of the Applicant as interested party

Holding

Applicant enjoined as he is directly affected and named in the consent

Reasoning

Applying Order 1 Rule 10(2) and the Muruatetu threshold, the court found the Applicant's majority shareholding and specific mention in the impugned consent constituted a personal, identifiable and proximate interest, distinct from anything peripheral, justifying his enjoinment.

p. 3

Legal principles established

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  • A preliminary objection must raise a pure point of law; objections requiring interrogation of facts fail
  • A consent judgment may be set aside only where obtained by fraud, collusion or agreement contrary to the policy of the court
  • A party directly affected by litigation and specifically mentioned in an impugned consent has a proximate stake warranting joinder as interested party

Court orders

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  1. 1.Jinaro & Co. Advocates allowed to come on record for the applicant and 2nd defendant
  2. 2.Daniel Mahiri Gichaga joined in the proceedings as an Interested Party
  3. 3.The consent dated 20.4.2023 set aside and any transactions arising out of it relating to shareholding in the 2nd defendant set aside
  4. 4.Each party to bear their own costs of the preliminary objection and the application

Authorities

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Legislation

  • Civil Procedure RulesOrder 1 Rule 10(2)
  • Civil Procedure RulesOrder 10 Rule 11
  • Constitution of Kenya (Protection of Rights and Fundamental Freedoms) Practice and Procedure Rules, 2013Rule 7(1)

Cases cited (9)

  • Mukhisa Biscuit Manufacturing Company Ltd v West End Distributors Ltd
    1969 EA 696

    Definition of a preliminary objection as a pure point of law

  • Oraro v Mbaja
    [2005] eKLR

    A preliminary objection must raise a pure point of law

  • Board of Trustees National Social Security Fund versus Micheal Mwalo
    [2015] eKLR

    Grounds for setting aside a consent judgment

  • Francis Karioki Muruatetu and Another v Republic & 5 Others
    [2016] eKLR

    Threshold for admission of an interested party

  • Gladys Nduku Nthuki v Letshego Kenya Limited; Mueni Charles Maingi (Intended Plaintiff)
    [2022] eKLR

    Any party reasonably affected by pending litigation is a necessary and proper party

  • Spire Bank Limited v Land Registrar & 2 others
    [2019] eKLR

    Relied on by applicant in support of the notice of motion

  • Assia Pharmaceuticals v Nairobi Veterinary Centre Ltd
    Nairobi (Milimani) HCCC No. 391 of 2000

    Relied on by applicant in support of the notice of motion

  • Communications Commission of Kenya and 4 others v Royal Media Services Limited & 7 others
    [2014] eKLR

    Relied on by applicant in support of the notice of motion

  • Samson Munikah Practicing as Munikah & Company Advocates v Wedube Estates Limited
    Nairobi Civil Appeal No. 126 of 2005

    Relied on by applicant in support of the notice of motion

Jurisdiction invoked
Original petition jurisdiction of the Environment and Land Court; joinder and setting aside powers under Order 1 Rule 10(2) and Order 10 Rule 11 of the Civil Procedure Rules

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, "AWG v DNK & another; Gichaga (Proposed Interested Party)", Case Analysis (2023). Environment & Land Petition 4 of 2022. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/21775/eng@2023-11-21

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