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ELRCPartially AllowedApplication dated 6th February, 2024 (unnumbered in judgment)· [2024] KEELRC 1664 (KLR)

Cosmas v Eldoret Mattresses Limited & another (Cause 66 of 2017) [2024] KEELRC 1664 (KLR)

Employment and Labour Relations Court
28 June 2024
MOMAUREEN ONYANGO
1,669 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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If you're suing a Kenyan company in liquidation, join the Official Liquidator, but only the High Court can approve continuing the case.

What this practically means

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Executive summary

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The Claimant filed an application dated 6th February 2024 seeking leave to join the Official Liquidator as 3rd Respondent, leave to amend the amended pleadings, that the draft-amended amended memorandum of claim be deemed filed and served, and costs. The application arose because the 1st Respondent company had been placed under liquidation in High Court Commercial and Admiralty Division Insolvency Petition No. E007 of 2018, with judgment delivered on 5th March 2019 directing the Official Liquidator to take over management of the company; the Claimant learned of this only in January 2023. The application was unopposed and disposed of by written submissions, with the Claimant relying on Civicon Limited v Kivuwatt Limited, Order 1 Rule 10 and Order 8 Rule 5 of the Civil Procedure Rules, and sections 432, 444 and 445 of the Insolvency Act. The court framed two issues: its power to join the Official Liquidator and the merit of the orders sought. It held that upon liquidation the liquidator assumes the company's liabilities and pending defences, making joinder necessary. However, since section 432(2) requires approval for continuing proceedings against a company in liquidation and the Act defines 'court' as the High Court, the ELRC limited its jurisdiction to the joinder only, directing the Claimant to obtain leave from the liquidation court. The application was granted only in part: leave to amend was allowed, the amended claim to be filed and served within 14 days, with costs in the cause.

Key legal issues

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01

Whether the ELRC has power to join the Official Liquidator to the suit

Holding

The court's jurisdiction is limited to the joinder of the liquidator only; approval to continue proceedings against a company in liquidation lies with the High Court, which the Act defines as 'court'

Reasoning

The court accepted that upon liquidation the liquidator assumes control of the company's property and liabilities, including defence of pending suits, making joinder necessary. However, section 432(2) requires court approval to continue proceedings, and the Act defines 'court' as the High Court. The ELRC therefore limited itself to joinder and directed the Claimant to seek leave from the liquidation court.

p. 4
02

Whether leave to amend pleadings should be granted

Holding

Leave to amend was granted, the application being unopposed and amendments enabling the court to determine the real questions in controversy

Reasoning

Relying on Rule 14(6) of the ELRC (Procedure) Rules, 2016 and Order 8 Rule 5 of the Civil Procedure Rules, the court found power to permit amendment after close of pleadings with leave. No prejudice was demonstrated; the Official Liquidator did not respond despite service, so the application was undefended.

p. 3

Legal principles established

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  • When a liquidation order is made and the official liquidator takes over a company's assets and management, the company loses capacity to defend pending suits and the liquidator must be joined to proceedings against the company.
  • After a liquidation order, legal proceedings against the company may be begun or continued only with the approval of the High Court under section 432(2) of the Insolvency Act.

Court orders

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  1. 1.That the Claimant/Applicant be granted leave to amend the amended pleadings as set out in the draft-amended amended memorandum of claim herein annexed
  2. 2.That the draft-amended amended memorandum of claim be filed and served within 14 days
  3. 3.Costs shall be in the cause

Authorities

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Legislation

  • Insolvency Actsection 432
  • Insolvency Actsection 444
  • Insolvency Actsection 445
  • Employment and Labour Relations Court (Procedure) Rules, 2016Rule 14(6)
  • Civil Procedure RulesOrder 1 Rule 10
  • Civil Procedure RulesOrder 8 Rule 5

Cases cited (1)

  • Civicon Limited v Kivuwatt Limited & 2 Other
    [2015] eKLR
Jurisdiction invoked
Employment and Labour Relations Court (Procedure) Rules, 2016, Rule 14(6) read with the Civil Procedure Rules (Order 1 Rule 10, Order 8 Rule 5) and sections 432, 444 and 445 of the Insolvency Act

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, "Cosmas v Eldoret Mattresses Limited & another (Cause 66 of 2017) [2024] KEELRC 1664 (KLR)", Case Analysis (2024). Application dated 6th February, 2024 (unnumbered in judgment). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/1664/eng@2024-06-28

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