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ELCStruck OutSuit dated 3rd July, 2017 (High Court, Kitale)· [2017] KEELC 366 (KLR)

Kuza Farms and Allied Limited v Dubai Bank Kenya Limited (In Liquidation) [2017] KEELC 366 (KLR)

Environment and Land Court
20 December 2017
MNMwangi Njoroge
1,775 words in judgment
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The bottom line

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Kenya's Environment and Land Court struck out a suit against a bank in liquidation because the plaintiff did not get court sanction first, and directors personally pay the costs.

What this practically means

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Executive summary

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The plaintiff, a company placed under receivership and whose land (LR. No. Kaisagat/Chepkoilel Block 6/Sambut 7 in Trans-Nzoia County) was subject to a threatened sale by Dubai Bank Ltd (in liquidation), filed a plaint on 3rd July, 2017 together with a notice of motion seeking, among other things, sanction under Section 56(2) of the Kenya Deposit Insurance Corporation Act and temporary injunctions restraining the defendant from selling or dealing with the property. The defendant filed a replying affidavit, grounds of opposition and a preliminary objection on two grounds: first, that the suit and application were premature for failing to seek prior sanction under Section 56(2); and secondly, that the suit was instituted by a director of a company in receivership without the consent of the receiver managers. The court determined the preliminary objection first. It found that Section 56(2) requires the court's sanction before any action, injunction or civil proceeding is commenced or continued against an institution in liquidation. The plaintiff's own conduct in Misc. Application No. 507 of 2016, where it sought leave before filing suit, amounted to an admission that prior sanction was necessary, yet the plaint and injunction application were filed without sanction. Filing the plaint first and including the sanction prayer within the suit was presumptuous. The court allowed the first limb of the preliminary objection, struck out both the plaint and the notice of motion, awarded costs to the defendant, and directed that those costs be paid personally by the directors of the plaintiff. The second ground of the objection and the injunction prayers were not reached.

Key legal issues

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Whether sanction under Section 56(2) of the KDIC Act must precede the filing of a suit against an institution in liquidation

Holding

Yes; sanction must be sought in advance, and a suit filed with a prayer for sanction within it is premature and liable to be struck out

Reasoning

Section 56(2) requires prior sanction before any injunction or civil proceeding is commenced or continued against an institution in liquidation. The plaintiff itself acknowledged in an earlier miscellaneous application (Misc. No. 507 of 2016) that leave was required before filing suit, yet filed the plaint and injunction application without sanction. Filing the plaint first and including a sanction prayer within the suit presumptuously assumes leave will be granted. The suit failed this crucial test and was struck out.

p. 3

Legal principles established

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  • Sanction of the court must be obtained before commencing or continuing any action, injunction or civil proceeding against an institution in liquidation under the KDIC Act

Court orders

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  1. 1.Allowed the first limb of the defendant's preliminary objection
  2. 2.Struck out the plaint dated 3rd July, 2017
  3. 3.Struck out the Notice of Motion dated 3rd July, 2017
  4. 4.Costs to the defendant, to be paid personally by the directors of the plaintiff
Jurisdiction invoked
Section 56(2) of the Kenya Deposit Insurance Corporation Act, No. 10 of 2012

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (1)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Kuza Farms and Allied Limited v Dubai Bank Kenya Limited (In Liquidation) [2017] KEELC 366 (KLR)", Case Analysis (2017). Suit dated 3rd July, 2017 (High Court, Kitale). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2017/366/eng@2017-12-20

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