Prudenzio Nicholas Gaitara v Patrick Kariuki Muiruri & 2 others [2014] KEELC 168 (KLR)
The bottom line
#A Kenyan shareholder suing to protect company property lost because he never sought the court's permission required for a derivative claim.
What this practically means
#Executive summary
#Key legal issues
#Whether the Plaintiff, a minority shareholder, had locus standi to bring the application in his own name
He did not: the rule in Foss v Harbottle makes the company the proper plaintiff, and the derivative-action exception required leave which the Plaintiff never sought or obtained
The court applied the rule in Foss v Harbottle as explained in Prudential Assurance v Newman Industries and Rai & 3 Others v Rai, and in Dadani v Manji, which the court adopted: a company, not an individual shareholder, enforces rights vested in the company. The exception permits a derivative suit, but Kenyan courts follow the English procedure requiring the plaint plus an application for permission to continue the derivative action to be heard before other steps. The Plaintiff produced no evidence of such an application or grant of leave, so the application was incompetently before the court and was struck out.
Whether the Plaintiff met the threshold for temporary and mandatory injunctions
Not reached on the merits, because the application failed at the threshold locus stage
The court framed locus as the preliminary issue conditioning whether the injunction thresholds (prima facie case, irreparable harm, balance of convenience under Giella v Cassman Brown) would be reached. Having found the Plaintiff lacked competence to prosecute a derivative claim without leave, the court did not proceed to consider the merits of the competing allegations of fraud, the transfer to the 3rd Defendant, or the defence of bona fide purchaser, and instead struck out the Notice of Motion.
Legal principles established
#- The proper plaintiff in respect of a wrong done to a company is prima facie the company itself, and a shareholder may bring a derivative action only under limited exceptions, requiring leave at the earliest opportunity after instituting the suit
- A plaintiff pursuing a derivative claim must seek leave to continue the proceedings at the earliest opportunity, and only thereafter move to the other stages or steps in the cause
Court orders
#- 1.The Notice of Motion dated 14th November 2013 is struck out
- 2.The Plaintiff shall meet the costs of the Notice of Motion dated 14th November 2013
- Jurisdiction invoked
- Not expressly invoked in the excerpt; the application was brought under sections 1A, 1B, 3A and 63(c) and (e) of the Civil Procedure Act and Order 40 Rules 1, 2 and 4(1) of the Civil Procedure Rules
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Prudenzio Nicholas Gaitara v Patrick Kariuki Muiruri & 2 others [2014] KEELC 168 (KLR)", Case Analysis (2014). Not stated in the excerpt provided. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2014/168/eng@2014-08-01
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.