Kiptoo alias Barnge’tuny Kiptoo & 3 others v Rono & 4 others (Environment & Land Case E024 of 2023) [2024] KEELC 4048 (KLR)
The bottom line
#A Kenyan court confirmed shareholders can sue company directors over company land, and directors accused of wrongdoing cannot choose the company's lawyers.
What this practically means
#Executive summary
#Key legal issues
#Jurisdiction of the ELC over derivative suits concerning land
The ELC has jurisdiction where, applying the predominant purpose test, the dispute is essentially about land notwithstanding its derivative/company-law character
Article 162(2)(b) and Section 13 of the ELC Act vest jurisdiction over land disputes. The 4th Plaintiff is a land buying company; the reliefs sought - survey, subdivision and transfer of L.R. No. 1866/14 to shareholders - can only issue from the ELC. The dispute does not concern company law per se, so the court is clothed with jurisdiction.
Locus standi of the Plaintiffs as members/shareholders
The 1st and 2nd Plaintiffs have locus standi (the latter as a beneficiary to whom shares were transmitted by operation of law); the 3rd Plaintiff has none
Section 238(6)(b) defines a member to include one to whom shares have been transferred or transmitted by operation of law. The 1st Plaintiff's alias appears on the Defendants' own member list and no evidence disproved his identity. The 2nd Plaintiff is listed as a beneficiary of a deceased shareholder. The 3rd Plaintiff is neither an administrator nor a named beneficiary of his deceased father's estate.
Res judicata
The suit is not res judicata; the failure to comply with the prior consent order and post-survey anomalies are fresh circumstances
Although the subject land is the same, the cause of action here - the directors' default on the consent order and anomalies in the subsequent survey and subdivision - did not and could not exist when the former suits were decided. Under the fresh-circumstances exemption (Siri Ram Kaura), the suit is exempt from res judicata. The Defendants also failed to annex the previous judgments.
Representation of the 4th Plaintiff by Maritim & Company Advocates
The firm is not properly on record; the directors, being the Defendants and alleged wrongdoers, had no authority to instruct advocates for the company
In a derivative suit the directors are sued for wrongs to the company. Permitting them to appoint counsel for the plaintiff company would create a grave conflict of interest and give the alleged wrongdoers power to defeat the suit. Applying Delphis Bank and the Foss v Harbottle reasoning in Moir, the instruction was a nullity and the Notice of Change of Advocates falls away.
Legal principles established
#- Directors sued as alleged wrongdoers in a derivative suit have no authority to appoint an advocate for the plaintiff company
- ELC jurisdiction over a derivative claim involving a land-buying company is determined by the predominant purpose test
- Misjoinder of a party does not defeat the suit; the improperly joined party's name may be struck out
- An advocate who acts without authority of the purported plaintiff is personally liable for costs
Court orders
#- 1.The Plaintiffs' Notice of Preliminary Objection dated 9th June 2023 succeeds in its entirety
- 2.This court has jurisdiction to hear and determine the instant suit
- 3.The 1st and 2nd Plaintiffs have the requisite locus standi to institute this suit on behalf of the 4th Plaintiff
- 4.The 3rd Plaintiff has no locus standi to institute this suit and his name be struck off these proceedings
- 5.The suit is not res judicata
- 6.The Defendants and the firm of Maritim and Company Advocates shall bear the costs of the Plaintiffs' P.O dated 9th June 2023
- 7.The Defendants shall bear ¾ of the costs of their P.O dated 20th July 2023
- Jurisdiction invoked
- Article 162(2)(b) of the Constitution and Section 13 of the Environment and Land Court Act
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Kiptoo alias Barnge’tuny Kiptoo & 3 others v Rono & 4 others (Environment & Land Case E024 of 2023) [2024] KEELC 4048 (KLR)", Case Analysis (2024). Not stated in judgment (ELC suit, Eldoret). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2024/4048/eng@2024-04-29
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.