Victory Construction Ltd & another v Kirpal Singh & 2 others [2020] eKLR Case Summary

Court
High Court of Kenya at Nairobi, Commercial & Tax Division
Category
Civil
Judge(s)
W. A. Okwany
Judgment Date
October 22, 2020
Country
Kenya
Document Type
PDF
Number of Pages
3

Case Brief: Victory Construction Ltd & another v Kirpal Singh & 2 others [2020] eKLR


1. Case Information:
- Name of the Case: Victory Construction Ltd & Avter Singh Suri v. Kirpal Singh & Amritpal Singh & Techno Asphalt Limited
- Case Number: HCCC NO. E405 OF 2018
- Court: High Court of Kenya at Nairobi, Commercial and Tax Division
- Date Delivered: 22nd October 2020
- Category of Law: Civil
- Judge(s): W. A. Okwany
- Country: Kenya

2. Questions Presented:
The court must resolve two central legal issues:
a. Whether the 2nd plaintiff has the locus standi to institute the suit and to swear affidavits on behalf of the 1st plaintiff company.
b. Whether the applicants have established a case for the granting of the injunctive orders sought.

3. Facts of the Case:
The plaintiffs, Victory Construction Ltd (1st plaintiff) and Avter Singh Suri (2nd plaintiff), are involved in a dispute with the defendants, Kirpal Singh (1st defendant), Amritpal Singh (2nd defendant), and Techno Asphalt Limited (3rd defendant). The 1st and 2nd defendants are directors and shareholders of the 1st plaintiff and are also sons of the 2nd plaintiff. The conflict arose when the 2nd plaintiff, who had taken a loan for the 1st plaintiff's operations, alleged that while he was abroad attending to his ailing wife, the defendants mismanaged the company’s finances and assets. The plaintiffs claim that the defendants opened unauthorized accounts in the name of the 1st plaintiff and have been misappropriating its assets, which led to the filing of applications for injunctions and the return of company property.

4. Procedural History:
The applications were filed on 27th November 2018 and 18th December 2018, seeking various injunctive orders to prevent the defendants from accessing the company's accounts and to compel them to return company assets. Initially, the court granted temporary orders to freeze the accounts pending the hearing of the applications. The matter was subsequently scheduled for written submissions, but the defendants failed to file their submissions by the court's set deadlines. The plaintiffs argued that the defendants’ actions were detrimental to the company, while the defendants denied the allegations and contended that the plaintiffs lacked the authority to initiate the suit.

5. Analysis:
- Rules: The court considered the provisions of Order 4 Rule 1(4) of the Civil Procedure Rules, which requires that when a corporation is the plaintiff, the verifying affidavit must be sworn by an authorized officer of the company. The court also referenced the standards for granting interlocutory injunctions as laid out in *Giella v Cassman Brown & Company Limited* and *American Cyanamid Co. v Ethicom Limited*.

- Case Law: The court cited *Foss v Harbottle* to illustrate that disputes among company directors should generally be resolved internally unless there is evidence of fraud or ultra vires actions. It also referred to *Mrao Ltd v First American Bank of Kenya* for defining a prima facie case, and *Kenya Breweries Ltd & Another v Washington O. Okeyo* regarding the higher standard required for mandatory injunctions.

- Application: The court found that the 2nd plaintiff did not provide sufficient evidence of authorization to represent the 1st plaintiff, which raised questions about his locus standi. Furthermore, the court concluded that the plaintiffs had not established a prima facie case nor demonstrated that the defendants' actions constituted a threat of irreparable harm. The court determined that the issues raised were internal disputes among directors that should be resolved according to the company's articles of association, rather than through injunctions.

6. Conclusion:
The court dismissed both applications, ruling that the plaintiffs failed to meet the necessary legal thresholds for the injunctions sought. The costs of the applications were ordered to abide by the outcome of the main suit, indicating that the dispute would require further resolution in the main proceedings.

7. Dissent:
There were no dissenting opinions noted in the ruling, as the decision was made by a single judge.

8. Summary:
The ruling in *Victory Construction Ltd & Avter Singh Suri v. Kirpal Singh & Amritpal Singh & Techno Asphalt Limited* emphasizes the importance of proper authorization in corporate litigation and the necessity for clear evidence of wrongdoing before courts will intervene in internal company disputes. The decision reflects judicial reluctance to interfere in matters that are fundamentally internal to a corporation, particularly when family dynamics complicate the relationship among directors. The case highlights the need for corporate governance and adherence to procedural requirements in legal actions involving companies.

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