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1. The plaintiff Cosmas Ngati Malungu instituted this suit via a plaint dated 13/02/2024 and filed on 19/02/2024 seeking judgment against the defendants jointly and severally in the following terms:
a) A permanent injunction restraining the defendants either by themselves or their agents, employees, servants, surrogates from selling, alienating, transferring, charging, disposing, trespassing, carrying out illegal survey works or in any manner whatsoever dealing with parcel number Makindu/Kisingo Block 1/ 2.
b) A permanent injunction restraining the 1st defendant from making unilateral decisions on behalf of Mikululo Ranching (Directed Agricultural) Co. Ltd
c) A permanent injunction restraining the 1st defendant from sanctioning any survey works vis-à-vis parcel number Makindu/Kisingo Block 1/ 2 without the resolution of the members of the company duly passed in a properly and lawfully convened Annual General Meeting.
d) A permanent injunction restraining the 1st defendant from soliciting and/or receiving monies from unsuspecting members of public or non-members of the company in the guise of allocating them land belonging to the company and particularly parcel number Makindu/Kisingo Block 1/ 2.
e) A declaration that the 1st defendant’s actions in relation to the company’s prime asset namely Makindu/Kisingo Block 1 /2 amount to breach of trust and duty owed to the company.
f) Any other or further relief as this honorable court may deem fit and just to grant.
2. It is his case that the 1st Defendant Wilson Nduulu Kiangi is the Director and Chairman of Mikululo Ranching (Directed Agricultural) Co. Ltd (the company), a position he has held since incorporation on 19/08/1982. That, the company is registered as the absolute proprietor of the land comprised in Title No. Makindu/Kisingo Block 1/ 2 measuring 16731.0 Ha (the land), situated in Makindu, Makueni County; that Peter Nthuli Nduulu, Benedict Mutuku Nduulu, and Wilfred Malu Nduulu the 2nd, 3rd and 4th defendants are sons of the 1st defendant.
3. The plaintiff avers that he is a bonafide member/shareholder of the company and that all the genuine members are entitled to own a portion of the land once lawful and valid survey works are carried out.
4. He averred that the 1st defendant has been acting in cahoots with the other defendants to execute illegal, illegitimate and fraudulent actions with regard to the land and that the 2nd – 4th defendants have been terrorizing the members of the company with a view to stopping them from voicing their concerns. That the 1st defendant has resorted to unilaterally running the affairs of the company as if it was family business thereby jeopardizing the rights and interests of the real members. That the 1st defendant is guilty of breach of trust in respect of his actions and responsibilities towards the company and should be stopped by this honourable court.
The Preliminary Objection
5. The defendants raised a Preliminary Objection (P.O) against the suit on the following grounds;
a) The plaintiff lacks the locus standi to institute this suit in his capacity as he is neither a member, a shareholder or director of the company.
b) The company being adversely mentioned in the suit has not been joined as a party to prosecute the suit as a legal person with statutory powers to do so.
c) There is a misjoinder of the defendants as parties to the suit and this honorable court has no recourse to hear and determine a suit which is fatally defective, discloses no reasonable cause of action, lacks merit and is an abuse of the court process.
6. The Preliminary Objection was canvassed through written submissions.
Submissions by the Defendants
7. Relying on Mukisa Biscuit Manufacturing Ltd -vs- West End Distributors (1969) E.A 696, it was submitted that a P.O consists of a point of law which has been pleaded or which arises by clear implication out of pleadings and which if argued as a preliminary point may dispose off the suit.
8. As to whether the plaintiff has locus standi to institute the suit, it was submitted that locus standi is a legal principle which means a right to bring action before a court of competent jurisdiction as was defined in Jared Nyauma Ondieki & 6 Others -vs- Football Kenya Federation [2019] eKLR. That the principle behind the requirement to have such right is that the court’s time should not be wasted over hypothetical and abstract questions or at the instance of a mere busy body that has no genuine grievance.
9. It was submitted that the plaintiff has not provided any proof of his membership and this court was urged to take judicial notice that the plaintiff is not a shareholder of the company as per the attached CR12.
10. It was submitted that derivative actions are the pillars of corporate litigation and a mechanism which allows shareholders to litigate on behalf of the corporation often against an insider or a third party whose action has allegedly injured the corporation. That, the action is designed as a tool of accountability to ensure redress is obtained against all wrongdoers, in the form of a representative suit filed on behalf of the corporation. That, until 2015, the common law guided derivative actions in Kenya. That, ordinarily under common law, one had to fall under the exceptions to the rule in Hass -vs- Harbottle (1843)2 Hare 461, that; “a company is a separate legal personality and the company alone is the proper plaintiff to sue on a wrong suffered by it.” That, the exceptions to the rule were mainly where there was fraud on a minority caused by majority shareholders. That the action to be commenced had also to be in the best interests of the company and without ulterior motives.
11. It was submitted that with the advent of the Companies Act, 2015, the law fundamentally changed where the requirement to fall under the exceptions in Foss -vs- Harbottle (supra) was replaced with judicial discretion to grant permission to continue a derivative action. That judicial approval of the action is what now counts and such approval is based on broad judicial discretion and sound judgment without limit but with statutory guidance.
12. It was submitted that there appears to exist a two-stage process i.e the court must first satisfy itself that there is a prima facie case on any of the causes of action noted under section 238(3) of the Companies Act. That, according to section 239(2), an application for permission will be dismissed if the evidence in support “do not disclose a case” for giving of permission.
13. In this matter, it was submitted that the plaintiff did not seek permission from the court before instituting the suit hence it cannot be rightfully said to be a derivative action. That, for a suit to be a derivative action, the court has to consider several factors. That, according to section 238(3), a derivative action may be brought only in respect of a cause of action arising from an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director of the company. Reliance was placed on Joseph Munyoki Nzioka -vs- Raindrops Ltd & 3 Others [2019] eKLR where the court held that the following conditions had to be satisfied for a suit to qualify as a derivative suit;
a) The applicant must be a member of the company,
b) The proceedings must be in respect to a cause of action vested in the company.
c) The applicant must seek leave to act on behalf of the company.
d) The proceedings must be for the protection of members against unfair prejudice brought under the Companies Act; and
e) The proceedings are in respect of a cause of action arising from an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director of the company.
14. It was submitted that the plaintiff had not provided any document to prove that he is a member of the company, not particulars of any wrongdoing on the part of the 2nd, 3rd and 4th defendants have been provided, and it is apparent that this suit has been brought to settle personal vendetta/ in the pursuit of personal claims.
15. Further that, the reliefs sought in the plaint are not sought on behalf of the company and alternative remedies exist for the plaintiff. Reliance was placed on Ghelani Metals Ltd & 3 Others -vs- Elesh Ghelani Natwarlal & Anor [2017] eKLR where the court declined to give permission to have the suit proceed as a derivative suit.
16. It was submitted that the allegations peddled by the plaintiff are just but mere speculations which are false and only amount to hearsay as the plaintiff has not adduced any cogent evidence to warrant the derivative suit.
Submissions by the Plaintiff
17. It was submitted that the P.O is not an objection in stricto sensu but a feeble maneuverer by the defendants to obfuscate issues, darken the path of justice and unwarrantedly delay the hearing and determination of the suit. That it has not disclosed single pure point of law.
18. On locus standi, it was submitted that the plaintiff has the requisite capacity to sue and that his right to commence the suit is rooted in section 238 of the Companies Act, No 15 of 2017. That, the plaintiff clearly pleaded that he is a bonafide member of the company and to the affidavit in support of his Notice of Motion dated 11/03/2024, he annexed a receipt dated 29/10/98 which states the purpose for which the payment was made, hence the question as to whether or not the plaintiff is a member of the company is a matter of fact whose ascertainment which would require the production and hearing of evidence .
19. Relying on Mukisa Biscuit (supra), it was submitted that a P.O must be on a pure point of law which has been pleaded and which if argued as a preliminary point, may dispose off the suit. That, for a P.O to succeed, the following tests must be satisfied; firstly, it should raise a pure point of law, secondly, it is argued on the assumption that all the facts pleaded by the other side are correct and finally, it cannot be raised if any fact has to be ascertained or if what is sought is the exercise of judicial discretion.
20. With regard to the failure to join the company as a party in the suit, it was submitted that this ground does not amount to or raise any point of law. That, if the defendants had spared time to interact with and interrogate the unambiguous wording of section 238(1)(a) & (b) of the Companies Act, they would have realized that what the plaintiff filed is a derivative suit. That, such a claim is instituted by a member of the company in respect of a cause of action vested in the company and wherein such a member seeks relief for or on behalf of the company.
21. Reference was made to the Black’s Law Dictionary, 11th Edition where a derivative action is defined as a suit by a beneficiary of a fiduciary to enforce a right belonging to the fiduciary; especially a suit asserted by a shareholder on the corporation’s behalf against a third party usually a corporate officer because of the corporation’s failure to take some action against the third party. A shareholder derivative action is a lawsuit brought by a corporate shareholder, in the name of the corporation, to redress a wrong done to the corporation. Derivative actions are one of the principal means of challenging improper, illegal or unreasonable conduct by corporate management.
22. It was submitted that the meaning of a derivative action given in the Companies Act and Black’s Law Dictionary leaves no room for argument and as such, the P.O is made in utter ignorance of the law and should be dismissed. Reliance was placed on Isaiah Waweru Ngumi & 2 Others -vs- Muturi Ndung’u [2016] eKLR.
23. For the record, it was submitted that the plaintiff has already filed an application dated 11/03/2024 seeking leave to continue the present derivative claim.
24. With regard to misjoinder, non-disclosure of reasonable cause, absence of merit, defects and abuse of the court process, it was submitted that a court would call in aid evidence to ascertain whether a suit is all that. That, this ground flies in the face of the criteria laid down in Mukisa (supra). It was submitted that Order 1 Rule 9 of the Civil Procedure Rules provides that no suit shall be defeated by reason of misjoinder or non-joinder of parties and that the court may in every suit deal with the matter in controversy so far as regards the rights and interests of the parties before it. Reliance was placed on Ghelani Metals (supra).
25. As regards the jurisdiction of this court, reference was made to the definition of the word ‘court’ in the Companies Act to mean; the High Court (unless some other court is specified). It was submitted that the land is an asset of the company and that the plaintiff has disclosed, in his pleadings, that the said asset is in need of protection owing to the injurious acts of the defendants. That, if this was a direct action by the company itself against third parties or directors, seeking injunctive reliefs in relation to the asset, then the jurisdiction of the Environment and Land Court would apply.
26. In conclusion, it was submitted that the P.O is misconceived, an afterthought, a blow in darkness and an abuse of court process.
27. I have carefully considered the Preliminary Objection, the pleadings and rival submissions. The issue for determination is whether the P.O has merit.
Analysis& Determination
28. Both parties relied on the locus classicus in determination of a preliminary objection: Mukisa Biscuit Manufacturing Ltd -vs- West End Distributors (1969) E.A 696 where it was held that a P.O must be a pure point of law which has been pleaded or which arises by clear implication out of pleadings and which if argued as a preliminary point may dispose off the suit.
29. The first ground for this P.O is that the plaintiff lacks the locus standi to institute this suit in his capacity as he is neither a member, a shareholder or director of the company. The plaintiff asserts that he is a member of the company and has even pleaded as much in the plaint. Some of the annextures in his pleadings point to the possibility that he is indeed a member. On the other hand, the defendants assert that the plaintiff is not a member of the company which means that whether or not the plaintiff is a member of the company is an issue for determination by the court and would require the interrogation of evidence to arrive at a a finding. This ground fails for not being a pure point of law.
30. The second ground is that the company has been adversely mentioned in the suit but has not been joined as a party to prosecute the suit as a legal person with statutory powers to do so. Section 238(1) of the Companies Act, Cap 486 Laws of Kenya provides that;
“In this Part, "derivative claim" means proceedings by a member of a company;
(a)in respect of a cause of action vested in the company; and
(b)seeking relief on behalf of the company.”
31. From the plaint, it is evident that the suit before court the suit is challenging the corporate management of the company on grounds of improper, illegal and unreasonable conduct. The nature of the suit is also as defined in the Blacks Law dictionary (supra). Section 238(1) of the Companies Act, Cap 486 Laws of Kenya does not seem to make this a mandatory requirement. In any event this ties with the third ground
32. The third ground is that there is a misjoinder of the defendants as parties to the suit and this honorable court has no recourse to hear and determine a suit which is fatally defective, discloses no reasonable cause of action, lacks merit and is an abuse of the court process. With regard to misjoinder, Order 1 Rule 9 of the Civil Procedure Rules provides that;
“No suit shall be defeated by reason of the misjoinder or non-joinder of parties, and the court may in every suit deal with the matter in controversy so far as regards the rights and interests of the parties actually before it.”
33. It is therefore clear that an issue of misjoinder cannot lead to disposal of a suit if argued as a preliminary point. In any case, it is really not a straightforward issue to determine before a trial is conducted. As to whether the suit discloses no reasonable cause of action, lacks merit and is an abuse of the court process, the court would need to interrogate the facts and evidence in order to determine whether that is the position.
34. In their submissions, the defendants argued that the plaintiff did not seek permission from the court before instituting the suit hence it cannot be rightfully said to be a derivative action. Section 238(2) of the Companies Act provides that;
A derivative claim may be brought only;
(a)under this Part; or
(b)in accordance with an order of the Court in proceedings for protection of members against unfair prejudice brought under this Act.
35. On the other hand, section 239 of the Companies Act provides that;
(1) In order to continue a derivative claim brought under this Part by a member, the member has to apply to the Court for permission to continue it.
(2)If satisfied that the application and the evidence adduced by the applicant in support of it do not disclose a case for giving permission, the Court;
(a)shall dismiss the application; and
(b)may make any consequential order it considers appropriate.
(3) If the application is not dismissed under subsection (2), the Court;
(a)may give directions as to the evidence to be provided by the company; and
(b)may adjourn the proceedings to enable the evidence to be obtained.
(4) On hearing the application, the Court may;
(a)give permission to continue the claim on such terms as it considers appropriate;
(b)refuse permission and dismiss the claim; or
(c)adjourn the proceedings on the application and give such directions as it considers appropriate.
36. Looking at the above two sections together, it appears to me that in order to continue a derivative claim brought under section 238, the member has to apply to the court for permission to continue it.
37. the plaintiff herein has filed an application dated 11/03/2024 is seeking inter alia for orders that; “the applicant be granted permission to continue the derivative claim seeking relief on behalf of the Mikululo Ranching (Directed Agricultural) Co. Ltd in respect of the acts and omissions by the defendants/respondents, involving negligence, default, breach of duty and breach of trust on the part of the 1st defendant/respondent and on such terms as the honorable court considers and deems fit.”
38. Consequently, it is clear that the plaintiff has complied with the relevant provisions of the law. The defendants relied on Joseph Munyoki Nzioka (supra) to argue that the plaintiff must seek permission of the court before instituting a derivative action. However, a reading of the Judgment reveals that at paragraph 23 of the judgment the court stated;
“23. As seen from the provisions of Section 238 of the Companies Act, for the plaintiff to succeed in an action for a derivative suit-
(i) He must be a member of the Company and this includes a person who is not a member of the Company but to whom shares in the Company have been transferred or transmitted by operation of the law;
(ii) The proceedings must be in respect to a cause of action vested in the Company;
(iii) The proceedings must be seeking relief on behalf of the Company;
(iv) The proceedings must be for protection of members against unfair prejudice brought under the Companies Act; and
(v) The proceedings are in respect of a cause of action arising from an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director of the company.”
39. Further, the court proceeded to state;
“This court granted leave to the plaintiff to file a derivative suit but as it turned out, the plaint and the application seeking leave were filed contemporaneously. That being the case, the plaintiff''s Counsel should have specifically sought for orders to continue with a derivative suit as it had already been filed as at the time the application seeking leave to file the same was made. The foregoing procedural technicality is curable under the provisions of Article 159(2)(d) of the Constitution of Kenya. The derivative suit filed by the plaintiff is deemed as having been properly filed and the plaintiff can continue with prosecution of the same.” ( Emphasis mine)
40. In Joseph Munyoki Nzioka (supra) the holding of the court was that the applicant could seek permission to continue with the with derivative suit that was already filed.
41. From the foregoing, the scale does not balance in favour of the P.O as there are a lot of hanging threads that cannot be neatly cut at this stage, to dispose of the suit as envisaged by a preliminary objection.
42. The preliminary objection be and is hereby over ruled, and is dismissed.
Dated, signed , and delivered virtually this 2nd day of December 2025
Mumbua T Matheka
Judge
Ms Mutua for defendants
Ngolya for the plaintiff/applicants
Applicant in open court
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1. The plaintiff Cosmas Ngati Malungu instituted this suit via a plaint dated 13/02/2024 and filed on 19/02/2024 seeking judgment against the defendants jointly and severally in the following terms:
a) A permanent injunction restraining the defendants either by themselves or their agents, employees, servants, surrogates from selling, alienating, transferring, charging, disposing, trespassing, carrying out illegal survey works or in any manner whatsoever dealing with parcel number Makindu/Kisingo Block 1/ 2.
b) A permanent injunction restraining the 1st defendant from making unilateral decisions on behalf of Mikululo Ranching (Directed Agricultural) Co. Ltd
c) A permanent injunction restraining the 1st defendant from sanctioning any survey works vis-à-vis parcel number Makindu/Kisingo Block 1/ 2 without the resolution of the members of the company duly passed in a properly and lawfully convened Annual General Meeting.
d) A permanent injunction restraining the 1st defendant from soliciting and/or receiving monies from unsuspecting members of public or non-members of the company in the guise of allocating them land belonging to the company and particularly parcel number Makindu/Kisingo Block 1/ 2.
e) A declaration that the 1st defendant’s actions in relation to the company’s prime asset namely Makindu/Kisingo Block 1 /2 amount to breach of trust and duty owed to the company.
f) Any other or further relief as this honorable court may deem fit and just to grant.
2. It is his case that the 1st Defendant Wilson Nduulu Kiangi is the Director and Chairman of Mikululo Ranching (Directed Agricultural) Co. Ltd (the company), a position he has held since incorporation on 19/08/1982. That, the company is registered as the absolute proprietor of the land comprised in Title No. Makindu/Kisingo Block 1/ 2 measuring 16731.0 Ha (the land), situated in Makindu, Makueni County; that Peter Nthuli Nduulu, Benedict Mutuku Nduulu, and Wilfred Malu Nduulu the 2nd, 3rd and 4th defendants are sons of the 1st defendant.
3. The plaintiff avers that he is a bonafide member/shareholder of the company and that all the genuine members are entitled to own a portion of the land once lawful and valid survey works are carried out.
4. He averred that the 1st defendant has been acting in cahoots with the other defendants to execute illegal, illegitimate and fraudulent actions with regard to the land and that the 2nd – 4th defendants have been terrorizing the members of the company with a view to stopping them from voicing their concerns. That the 1st defendant has resorted to unilaterally running the affairs of the company as if it was family business thereby jeopardizing the rights and interests of the real members. That the 1st defendant is guilty of breach of trust in respect of his actions and responsibilities towards the company and should be stopped by this honourable court.
The Preliminary Objection
5. The defendants raised a Preliminary Objection (P.O) against the suit on the following grounds;
a) The plaintiff lacks the locus standi to institute this suit in his capacity as he is neither a member, a shareholder or director of the company.
b) The company being adversely mentioned in the suit has not been joined as a party to prosecute the suit as a legal person with statutory powers to do so.
c) There is a misjoinder of the defendants as parties to the suit and this honorable court has no recourse to hear and determine a suit which is fatally defective, discloses no reasonable cause of action, lacks merit and is an abuse of the court process.
6. The Preliminary Objection was canvassed through written submissions.
Submissions by the Defendants
7. Relying on Mukisa Biscuit Manufacturing Ltd -vs- West End Distributors (1969) E.A 696, it was submitted that a P.O consists of a point of law which has been pleaded or which arises by clear implication out of pleadings and which if argued as a preliminary point may dispose off the suit.
8. As to whether the plaintiff has locus standi to institute the suit, it was submitted that locus standi is a legal principle which means a right to bring action before a court of competent jurisdiction as was defined in Jared Nyauma Ondieki & 6 Others -vs- Football Kenya Federation [2019] eKLR. That the principle behind the requirement to have such right is that the court’s time should not be wasted over hypothetical and abstract questions or at the instance of a mere busy body that has no genuine grievance.
9. It was submitted that the plaintiff has not provided any proof of his membership and this court was urged to take judicial notice that the plaintiff is not a shareholder of the company as per the attached CR12.
10. It was submitted that derivative actions are the pillars of corporate litigation and a mechanism which allows shareholders to litigate on behalf of the corporation often against an insider or a third party whose action has allegedly injured the corporation. That, the action is designed as a tool of accountability to ensure redress is obtained against all wrongdoers, in the form of a representative suit filed on behalf of the corporation. That, until 2015, the common law guided derivative actions in Kenya. That, ordinarily under common law, one had to fall under the exceptions to the rule in Hass -vs- Harbottle (1843)2 Hare 461, that; “a company is a separate legal personality and the company alone is the proper plaintiff to sue on a wrong suffered by it.” That, the exceptions to the rule were mainly where there was fraud on a minority caused by majority shareholders. That the action to be commenced had also to be in the best interests of the company and without ulterior motives.
11. It was submitted that with the advent of the Companies Act, 2015, the law fundamentally changed where the requirement to fall under the exceptions in Foss -vs- Harbottle (supra) was replaced with judicial discretion to grant permission to continue a derivative action. That judicial approval of the action is what now counts and such approval is based on broad judicial discretion and sound judgment without limit but with statutory guidance.
12. It was submitted that there appears to exist a two-stage process i.e the court must first satisfy itself that there is a prima facie case on any of the causes of action noted under section 238(3) of the Companies Act. That, according to section 239(2), an application for permission will be dismissed if the evidence in support “do not disclose a case” for giving of permission.
13. In this matter, it was submitted that the plaintiff did not seek permission from the court before instituting the suit hence it cannot be rightfully said to be a derivative action. That, for a suit to be a derivative action, the court has to consider several factors. That, according to section 238(3), a derivative action may be brought only in respect of a cause of action arising from an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director of the company. Reliance was placed on Joseph Munyoki Nzioka -vs- Raindrops Ltd & 3 Others [2019] eKLR where the court held that the following conditions had to be satisfied for a suit to qualify as a derivative suit;
a) The applicant must be a member of the company,
b) The proceedings must be in respect to a cause of action vested in the company.
c) The applicant must seek leave to act on behalf of the company.
d) The proceedings must be for the protection of members against unfair prejudice brought under the Companies Act; and
e) The proceedings are in respect of a cause of action arising from an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director of the company.
14. It was submitted that the plaintiff had not provided any document to prove that he is a member of the company, not particulars of any wrongdoing on the part of the 2nd, 3rd and 4th defendants have been provided, and it is apparent that this suit has been brought to settle personal vendetta/ in the pursuit of personal claims.
15. Further that, the reliefs sought in the plaint are not sought on behalf of the company and alternative remedies exist for the plaintiff. Reliance was placed on Ghelani Metals Ltd & 3 Others -vs- Elesh Ghelani Natwarlal & Anor [2017] eKLR where the court declined to give permission to have the suit proceed as a derivative suit.
16. It was submitted that the allegations peddled by the plaintiff are just but mere speculations which are false and only amount to hearsay as the plaintiff has not adduced any cogent evidence to warrant the derivative suit.
Submissions by the Plaintiff
17. It was submitted that the P.O is not an objection in stricto sensu but a feeble maneuverer by the defendants to obfuscate issues, darken the path of justice and unwarrantedly delay the hearing and determination of the suit. That it has not disclosed single pure point of law.
18. On locus standi, it was submitted that the plaintiff has the requisite capacity to sue and that his right to commence the suit is rooted in section 238 of the Companies Act, No 15 of 2017. That, the plaintiff clearly pleaded that he is a bonafide member of the company and to the affidavit in support of his Notice of Motion dated 11/03/2024, he annexed a receipt dated 29/10/98 which states the purpose for which the payment was made, hence the question as to whether or not the plaintiff is a member of the company is a matter of fact whose ascertainment which would require the production and hearing of evidence .
19. Relying on Mukisa Biscuit (supra), it was submitted that a P.O must be on a pure point of law which has been pleaded and which if argued as a preliminary point, may dispose off the suit. That, for a P.O to succeed, the following tests must be satisfied; firstly, it should raise a pure point of law, secondly, it is argued on the assumption that all the facts pleaded by the other side are correct and finally, it cannot be raised if any fact has to be ascertained or if what is sought is the exercise of judicial discretion.
20. With regard to the failure to join the company as a party in the suit, it was submitted that this ground does not amount to or raise any point of law. That, if the defendants had spared time to interact with and interrogate the unambiguous wording of section 238(1)(a) & (b) of the Companies Act, they would have realized that what the plaintiff filed is a derivative suit. That, such a claim is instituted by a member of the company in respect of a cause of action vested in the company and wherein such a member seeks relief for or on behalf of the company.
21. Reference was made to the Black’s Law Dictionary, 11th Edition where a derivative action is defined as a suit by a beneficiary of a fiduciary to enforce a right belonging to the fiduciary; especially a suit asserted by a shareholder on the corporation’s behalf against a third party usually a corporate officer because of the corporation’s failure to take some action against the third party. A shareholder derivative action is a lawsuit brought by a corporate shareholder, in the name of the corporation, to redress a wrong done to the corporation. Derivative actions are one of the principal means of challenging improper, illegal or unreasonable conduct by corporate management.
22. It was submitted that the meaning of a derivative action given in the Companies Act and Black’s Law Dictionary leaves no room for argument and as such, the P.O is made in utter ignorance of the law and should be dismissed. Reliance was placed on Isaiah Waweru Ngumi & 2 Others -vs- Muturi Ndung’u [2016] eKLR.
23. For the record, it was submitted that the plaintiff has already filed an application dated 11/03/2024 seeking leave to continue the present derivative claim.
24. With regard to misjoinder, non-disclosure of reasonable cause, absence of merit, defects and abuse of the court process, it was submitted that a court would call in aid evidence to ascertain whether a suit is all that. That, this ground flies in the face of the criteria laid down in Mukisa (supra). It was submitted that Order 1 Rule 9 of the Civil Procedure Rules provides that no suit shall be defeated by reason of misjoinder or non-joinder of parties and that the court may in every suit deal with the matter in controversy so far as regards the rights and interests of the parties before it. Reliance was placed on Ghelani Metals (supra).
25. As regards the jurisdiction of this court, reference was made to the definition of the word ‘court’ in the Companies Act to mean; the High Court (unless some other court is specified). It was submitted that the land is an asset of the company and that the plaintiff has disclosed, in his pleadings, that the said asset is in need of protection owing to the injurious acts of the defendants. That, if this was a direct action by the company itself against third parties or directors, seeking injunctive reliefs in relation to the asset, then the jurisdiction of the Environment and Land Court would apply.
26. In conclusion, it was submitted that the P.O is misconceived, an afterthought, a blow in darkness and an abuse of court process.
27. I have carefully considered the Preliminary Objection, the pleadings and rival submissions. The issue for determination is whether the P.O has merit.
Analysis& Determination
28. Both parties relied on the locus classicus in determination of a preliminary objection: Mukisa Biscuit Manufacturing Ltd -vs- West End Distributors (1969) E.A 696 where it was held that a P.O must be a pure point of law which has been pleaded or which arises by clear implication out of pleadings and which if argued as a preliminary point may dispose off the suit.
29. The first ground for this P.O is that the plaintiff lacks the locus standi to institute this suit in his capacity as he is neither a member, a shareholder or director of the company. The plaintiff asserts that he is a member of the company and has even pleaded as much in the plaint. Some of the annextures in his pleadings point to the possibility that he is indeed a member. On the other hand, the defendants assert that the plaintiff is not a member of the company which means that whether or not the plaintiff is a member of the company is an issue for determination by the court and would require the interrogation of evidence to arrive at a a finding. This ground fails for not being a pure point of law.
30. The second ground is that the company has been adversely mentioned in the suit but has not been joined as a party to prosecute the suit as a legal person with statutory powers to do so. Section 238(1) of the Companies Act, Cap 486 Laws of Kenya provides that;
“In this Part, "derivative claim" means proceedings by a member of a company;
(a)in respect of a cause of action vested in the company; and
(b)seeking relief on behalf of the company.”
31. From the plaint, it is evident that the suit before court the suit is challenging the corporate management of the company on grounds of improper, illegal and unreasonable conduct. The nature of the suit is also as defined in the Blacks Law dictionary (supra). Section 238(1) of the Companies Act, Cap 486 Laws of Kenya does not seem to make this a mandatory requirement. In any event this ties with the third ground
32. The third ground is that there is a misjoinder of the defendants as parties to the suit and this honorable court has no recourse to hear and determine a suit which is fatally defective, discloses no reasonable cause of action, lacks merit and is an abuse of the court process. With regard to misjoinder, Order 1 Rule 9 of the Civil Procedure Rules provides that;
“No suit shall be defeated by reason of the misjoinder or non-joinder of parties, and the court may in every suit deal with the matter in controversy so far as regards the rights and interests of the parties actually before it.”
33. It is therefore clear that an issue of misjoinder cannot lead to disposal of a suit if argued as a preliminary point. In any case, it is really not a straightforward issue to determine before a trial is conducted. As to whether the suit discloses no reasonable cause of action, lacks merit and is an abuse of the court process, the court would need to interrogate the facts and evidence in order to determine whether that is the position.
34. In their submissions, the defendants argued that the plaintiff did not seek permission from the court before instituting the suit hence it cannot be rightfully said to be a derivative action. Section 238(2) of the Companies Act provides that;
A derivative claim may be brought only;
(a)under this Part; or
(b)in accordance with an order of the Court in proceedings for protection of members against unfair prejudice brought under this Act.
35. On the other hand, section 239 of the Companies Act provides that;
(1) In order to continue a derivative claim brought under this Part by a member, the member has to apply to the Court for permission to continue it.
(2)If satisfied that the application and the evidence adduced by the applicant in support of it do not disclose a case for giving permission, the Court;
(a)shall dismiss the application; and
(b)may make any consequential order it considers appropriate.
(3) If the application is not dismissed under subsection (2), the Court;
(a)may give directions as to the evidence to be provided by the company; and
(b)may adjourn the proceedings to enable the evidence to be obtained.
(4) On hearing the application, the Court may;
(a)give permission to continue the claim on such terms as it considers appropriate;
(b)refuse permission and dismiss the claim; or
(c)adjourn the proceedings on the application and give such directions as it considers appropriate.
36. Looking at the above two sections together, it appears to me that in order to continue a derivative claim brought under section 238, the member has to apply to the court for permission to continue it.
37. the plaintiff herein has filed an application dated 11/03/2024 is seeking inter alia for orders that; “the applicant be granted permission to continue the derivative claim seeking relief on behalf of the Mikululo Ranching (Directed Agricultural) Co. Ltd in respect of the acts and omissions by the defendants/respondents, involving negligence, default, breach of duty and breach of trust on the part of the 1st defendant/respondent and on such terms as the honorable court considers and deems fit.”
38. Consequently, it is clear that the plaintiff has complied with the relevant provisions of the law. The defendants relied on Joseph Munyoki Nzioka (supra) to argue that the plaintiff must seek permission of the court before instituting a derivative action. However, a reading of the Judgment reveals that at paragraph 23 of the judgment the court stated;
“23. As seen from the provisions of Section 238 of the Companies Act, for the plaintiff to succeed in an action for a derivative suit-
(i) He must be a member of the Company and this includes a person who is not a member of the Company but to whom shares in the Company have been transferred or transmitted by operation of the law;
(ii) The proceedings must be in respect to a cause of action vested in the Company;
(iii) The proceedings must be seeking relief on behalf of the Company;
(iv) The proceedings must be for protection of members against unfair prejudice brought under the Companies Act; and
(v) The proceedings are in respect of a cause of action arising from an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director of the company.”
39. Further, the court proceeded to state;
“This court granted leave to the plaintiff to file a derivative suit but as it turned out, the plaint and the application seeking leave were filed contemporaneously. That being the case, the plaintiff''s Counsel should have specifically sought for orders to continue with a derivative suit as it had already been filed as at the time the application seeking leave to file the same was made. The foregoing procedural technicality is curable under the provisions of Article 159(2)(d) of the Constitution of Kenya. The derivative suit filed by the plaintiff is deemed as having been properly filed and the plaintiff can continue with prosecution of the same.” ( Emphasis mine)
40. In Joseph Munyoki Nzioka (supra) the holding of the court was that the applicant could seek permission to continue with the with derivative suit that was already filed.
41. From the foregoing, the scale does not balance in favour of the P.O as there are a lot of hanging threads that cannot be neatly cut at this stage, to dispose of the suit as envisaged by a preliminary objection.
42. The preliminary objection be and is hereby over ruled, and is dismissed.
Dated, signed , and delivered virtually this 2nd day of December 2025
Mumbua T Matheka
Judge
Ms Mutua for defendants
Ngolya for the plaintiff/applicants
Applicant in open court
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