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High CourtDismissedELD ELC (not stated in judgment; application dated 3rd July 2020)

Kabiyet Agro and General Enterprises v Bernard Rop & Others

Environment and Land Court
10 July 2020
HOH. A. Omondi
2,384 words in judgment
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The bottom line

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If your company is under receivership, you cannot sue directly; you must act through the appointed Receiver Manager.

What this practically means

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Executive summary

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Kabiyet Agro and General Enterprises, a company in receivership, applied by notice of motion dated 3rd July 2020 for a temporary injunction to restrain the Receiver Manager, Bernard Rop, and the chargeholder, Eastern and Southern Trade Development (PTA) Bank, from auctioning LR No. Eldoret Municipality Block 10/81 together with a milk processing plant and machinery, pursuant to an auctioneer's notice and a Daily Nation advertisement for an auction fixed for 10th July 2020. The applicant, which had borrowed USD 1,117,000 in 2005 and admitted an indebtedness exceeding Kshs 600 million, argued that the receivership preserved its equity of redemption, that sale by private treaty would fetch a better price, and that the auction was timed to exploit the principal director's illness. The respondents opposed, contending that the suit was filed without the Receiver Manager's authority, that the directors were functus officio upon receivership, that the claims were res judicata having been raised in Eldoret ELC No. 66 of 2015, and that the applicant had delayed. Applying Giella v Cassman Brown, Omondi J found no prima facie case since the debt was admitted and negotiations could not be compelled; the feared under-pricing was compensable because the applicant's preferred buyers could bid at the auction; and the balance of convenience favoured the respondents given the escalating debt. Relying on Mandev Ltd v M.K. and Sons and the court's earlier decision in ELC No. 66 of 2015, the court held the suit defective for want of the Receiver Manager's authority and the matters res judicata under section 7 of the Civil Procedure Act. The application was dismissed with costs to the respondents.

Key legal issues

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01

Prima facie case for interlocutory injunction

Holding

Not established; the applicant admitted the debt and its complaint about failed negotiations was self-defeating.

Reasoning

The applicant did not deny owing over Kshs 600 million and only sought time to sell privately. Since a party cannot be forced into negotiations, the claim that the suit would be rendered nugatory was self-defeating, so the first Giella limb failed.

p. 2
02

Irreparable loss and balance of convenience

Holding

Feared under-pricing was compensable; potential buyers could bid at the auction; convenience favoured the respondents.

Reasoning

The alleged loss was fear of under-pricing relative to private offers. Those purchasers could attend the auction and bid, cushioning the loss. The debt dated from 2005 and had escalated, so delay increased the amount owed; fairness favoured the auction.

p. 3
03

Locus standi of a company in receivership

Holding

Following Odeny J in Eldoret ELC No. 66 of 2015 and Mandev Ltd v M.K. and Sons, the suit was defective for want of the Receiver Manager's authority.

Reasoning

The court adopted its earlier approach in ELC No. 66 of 2015, where Mandev Ltd was considered and it was held that a company under receivership can only sue through the Receiver Manager; the directors became functus officio.

p. 3
04

Res judicata

Holding

The reliefs sought (declaration that equity of redemption was clogged and injunction against sale of the same property) were previously litigated in Eldoret ELC No. 66 of 2015.

Reasoning

Section 7 of the Civil Procedure Act bars re-litigation of matters directly and substantially in issue in a former suit between the same parties. The applicant had sought identical declarations and injunctions in the 2015 suit over the same property.

p. 3

Legal principles established

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  • A company under receivership lacks legal competence to sue or be sued in its own name; proceedings must be instituted through the Receiver Manager.
  • Matters previously litigated between the same parties over the same property are res judicata under section 7 of the Civil Procedure Act.

Court orders

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  1. 1.The application dated 3rd July 2020 was dismissed
  2. 2.Costs of the application awarded to the respondents

Authorities

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Legislation

  • Civil Procedure Actsection 7

Cases cited (4)

  • Giella vs. Cassman Brown & Co. Ltd
    [1973] EA 358

    Conditions for grant of an interlocutory injunction: prima facie case, irreparable injury, balance of convenience

  • Mrao Ltd vs. First American Bank of Kenya Ltd & 2 Others
    [2003] KLR 123

    Definition of a prima facie case in a civil application

  • Mandev Ltd v M.K. and Sons
    [2010] eKLR

    A company under receivership lacks legal competence to sue in its own name; suits must be through the Receiver Manager

  • Kabiyet Agro and General Enterprises v Bernard Rop & Eastern and Southern Trade Development (PTA) Bank, Eldoret ELC No. 66 of 2015

    Prior suit between same parties over same property; suit held defective for want of Receiver Manager's authority

Jurisdiction invoked
Original civil jurisdiction of the Environment and Land Court over the charged land parcel LR No. Eldoret Municipality Block 10/81

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, "Kabiyet Agro and General Enterprises v Bernard Rop & Others", Case Analysis (2020). ELD ELC (not stated in judgment; application dated 3rd July 2020). Source:

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