Hellen Wanjiru Kiragu & Mary Njeri Kiragu (suing as the legal representatives of the estate of the late James Kiragu Kigotho (deceased) v James Ndung’u Miringu [2014] KEHC 35 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAKURU

E.L.C. NO. 152 OF 2013

HELLEN WANJIRU KIRAGU and

MARY NJERI KIRAGU (suing as the legal

representatives of the estate of the late

JAMES KIRAGU KIGOTHO (deceased)...............PLAINTIFFS

VERSUS

JAMES NDUNG’U MIRINGU...................................DEFENDANT

RULING

1. Before the Court is a Notice of Motion dated 6th November, 2013 taken out by the  plaintiff under Order 8 Rule 3 ( 1),  Order 51 Rule 1 of the  Civil Procedure  Rules (2010) and Section 3A  of  the Civil Procedure Act and all enabling provisions of  the Law. The application seeks the following orders inter alia:

a) That the plaintiffs be granted leave to amend the plaint filed herein

b) That the amended plaint be deemed as duly filed upon payment of the prerequisite court filing fees and the   defendant do have corresponding leave  to  file   his   amended defence

c) That costs of this application be provided for.

2. The application is premised on  the grounds on  its face and is supported by  the affidavit of Hellen Wanjiru Kiragu, who depones that  it  is necessary to  amend  the  plaint  to include  the  Liquidation agent of Kenya  Finance  Bank Ltd and Joseph Githirwa Muturi t/a  Muga  Auctioneer & General  Agents  as defendants, to assist the court determine the real issues  in   this suit,  namely to  uncover whether there  was  fraud perpetrated by the proposed defendants as alleged by the  plaintiff; that  it   was  also necessary to amend the plaint as the allegations of fraud as contained in  the plant ought to  be  itemised as required by the legal provisions on  framing pleadings which could not have  been  possible without  including  the  intended defendants.

3. The  application is contested vide the defendant's Grounds of Opposition dated 20th  November, 2013 on  the grounds  that  the plaintiffs have no  locus to  institute  this suit; that  the application is  bad in  law, unwarranted  and an abuse of  the court  process; that  the cause of  action against the parties sought to  be enjoined has been caught up by  limitations and/ or  is premature; that the application breaches  provisions  of  the Companies Act  and   the Auctioneers  Act.

4. On15th January, 2014 parties agreed to dispose of the application by way of written submissions. The applicant filed their written submissions on27th January, 2014 while the defendants filed theirs on 4thFebruary, 2014.

5. Counsel for   the Plaintiff, submitted that the proposed amendment was necessary and was made in the interest of justice so that the court could determine the real issues in controversy.  Further the defendant would suffer no prejudice or injustice if the application was allowed. They relied on  the cases of Quip  Limited v East African Marine Systems Ltd [2009]eKLR  and Harrison C. Kariuki v Blue Shield Insurance Co  Ltd whereWaweru J,  in upholding the  court of appeal's decision in  the case of Central Kenya Limited VS.  Trust  Bank Limited  (2000)  EARL  36held that the guiding principle in  the application to  amend pleadings  is  that  the  same  will  be liberally  and  freely permitted unless prejudice and injustice will  be  occasioned to  the opposite party.

6. Counsel for the defendant submitted that the application was made in  contravention of  the rules of natural justice and fell  within  the exception  in  the   case of  Harrison   C. Kariuki v  Blue Shield Insurance Co  Ltd(supra) because the  application  was  tainted with lethargy and the amendments sought  to introduce  new,  illegal and inconsistent cause of action. He further submitted that the amendments were  meant to delay justice as the plaintiff knew  even   before  filing suit  what  had  transpired  and should have  joined  the proposed  defendants  from the beginning; that the  proposed defendants  should have been served with this application so  that they could participate in its  hearing as  they would  be affected  by  any  orders issued by the  court. They relied on the case of Republic v Kigera CR Appeal No. 48 of 1986.

7. Counsel further  submitted  that  the action  was  time barred   as against   the proposed  3rd Defendant  (the auctioneer) since  the  challenged sale occurred on7th December, 2007  which is  now  more than 6 years ago. Furthermore, proceedings against the liquidator (proposed 2nd defendant) were incompetent, as   they defied the provisions of Section 228 of the Companies Act, which required that leave of the court be sought before enjoining or bringing proceedings against   the   liquidator.  The applicant having filed no such application, the joinder of the proposed 2nd defendant in the suit was premature and illegal.  He relied on the case of Ruth Wanjiku Kagiri v Reliance Bank Limited (in liquidation) & 2 others [2012] eKLR.

8. I have read and carefully considered the pleadings and submissions by the parties to this application. The issue that stands out for determination is whether the plaintiff should be allowed to amend the plaint.

9. The  courts have over  time in  various cases, allowed amendments of  pleadings in almost all   instances  except where such an amendment would result in  an injustice or prejudice to  the other party which cannot properly be compensated for in costs (See  Beoco  Ltd VAlfa Laval   Co. Ltd  (1994) 4  All ER. 464).  The power to order amendment of pleadings is discretionary power. Albeit wide, it is exercised upon defined legal principles. I wish to be guided by   the decision in AAT Holdings Limited V Diamond Shields International Limited NBI HCCC No.  442 of 2013 where the court held as follows,

"The general power of the court to amend pleadings draws from Section 100 of   the Civil Procedure Act (hereafter the CPA). Parties to the suit also have a right to amend their pleadings at any stage of  the proceedings, abeit that right is not absolute, for it is dependent upon the discretion of the court. I agree with counsel for the Defendant that the discretion should be exercised judicially. Section 100 of the CPA and Order 8 Rule 3 of the CPR, provides a broad criteria which should guide the court in the exercise of discretion that;1)  the amendment should be necessary for purposes of determining the real question  or issue which has been raised by parties; and 2) is just to  do so. Case law has then broken down these broad requirements into biteable and defined principles of law which circumscribe the exercise of discretion in an application for amendment of pleadings. The principles were set out by the Court of Appeal in Central Kenya Ltd V Trust Bank Ltd & 5 Others Civil Appeal No.  222 of 1998 as shown below:-

i) That are necessary for determining the real question in controversy.

ii) To avoid multiplicity of suits provided there has been no undue delay.

iii) Only where no new or inconsistent cause of action is introduced i.e.  if the new cause of action does not arise out of   the  same  facts or substantially  the same facts as a cause of action.

iv) That no vested interest or accrued legal rights is affected; and

v) So long as it does not occasion prejudice or injustice to the other  side which cannot be properly compensated  for in costs

10. Whereas, 1 agree that amendments of pleadings should be allowed in  almost all  instances except where such an amendment would result in  an injustice or  prejudice to  the other  part which cannot  properly be  compensated for  in costs, the   defendant has raised an  important issue about seeking  leave  before instituting proceedings against  a Company in liquidation.

11. Section 228of the Companies Act Cap 486 provides:

"When a winding-up order has been  made or an interim liquidator has been appointed under section  235,  no action or  proceeding  shall  be proceeded with or commenced against  the Company except by  leave of  the court and subject to such terms as the court may impose."

12. In one  of the cases  relied on  by Counsel for the defendant, Ruth Wanjiku Kagiri V Reliance Bank Limited (In  Liquidation) & 2 others [2012] eKLR, the court  cited with approval the  case  of  Kissi Petroleum Products Ltd v Kobil Petroleum  [2006]eKLR,   where the court of  appeal held "...The  winding up order has already been made by  the winding up  court. It is not however operational because this Court has stayed its rigours. Such an order of stay cannot, however, whittle down the provisions of the section 228. Until the winding up order is set aside, leave of the court is still required for the continuation of the proceedings by the company. Leave to institute the appeal has not been obtained.  The applicant is seeking a discretionary Order.  In dealing with the application, the court cannot ignore the provisions of section 228 as any appeal without leave of the court would be incompetent..."

13. Similarly In the case of David Gilbert Hastie & Another V Trust Bank Ltd.  (In Liquidation)  [2009] eKLR  the court held, "Upon reading  the  provisions  of the Companies Act   and authorities  relied upon and upon hearing submissions regarding the  issue, it  is clear that  the proceedings by  or  against a company in liquidation  must be controlled by   court to avoid the disposing of  the company's assets for  the benefit of  only some  of the creditors.  It   is therefore mandatory that before commencing suit, leave must be obtained from the court. Failure to do so renders the suit a nullity. In this case there is no doubt that the plaint was filed one day before the leave was granted."

14.   In   the instant  case,  there  is   no   doubt  that  the plaintiff is  seeking to  enjoin the 2nd   defendant without leave of  the  court as required under Section 228 of the Companies Act  Cap, 486.  In  my  view  the   applicant has prematurely  brought  this  application  against  the proposed 2nd defendant  without following the  laid   down procedure.

15.  As regards  the proposed 3rd defendant, he   was merely an  agent of  the  bank  acting on   its instruction when he  sold  the  suit property by way  of Public Auction. Without the liquidator of the bank as a party in this suit there is no claim by the plaintiffs against the   proposed 3rd defendant and he is therefore an unnecessary party in the absence of the proposed 2nd defendant.

16.  For the above reasons, the Notice of Motion dated 6th November, 2013 is struck out with costs.

Dated and Signed at Nakuru this 10th day of October 2014.

L N WAITHAKA

JUDGE

PRESENT

Mr Njuguna for Respondents

N/A for            Applicants

Emmanuel Maelo: Court Assistant

L N WAITHAKA

JUDGE