Diamu Enterprises Limited v John (Commercial Case E545 of 2024) [2025] KEHC 18251 (KLR) (Commercial and Tax) (28 November 2025) (Ruling)
Neutral citation:
[2025] KEHC 18251 (KLR)
Republic of Kenya
Commercial Case E545 of 2024
MN Mwangi, J
November 28, 2025
Between
Diamu Enterprises Limited
Plaintiff
and
Mbugua Njiraini John
Defendant
Ruling
1.This Ruling is in respect to the defendant’s Notice of Preliminary Objection dated 6th December 2024.
2.A brief background of this case is that the plaintiff filed this suit on 12th September 2024 seeking judgment against the defendant for a declaration that the defendant breached fiduciary duties and committed fraud, misappropriation and theft of the plaintiff’s assets, an order compelling the defendant to account for and refund Kshs.16,573,629.00 with applicable interest misappropriated from the plaintiff’s accounts, an order for the defendant to return or compensate the plaintiff for unauthorized sales/disposals of specific motor vehicles and trailers valued between Kshs.600,000/= - Kshs.1,200,000/= each and an order for the immediate return of the plaintiff’s ETR machine and invoicing laptop to enable business operations.
3.The plaintiff also prays for an order for refund and settlement of all unauthorized loans taken in the plaintiff’s name, including those from Momentum Credit, with accrued interest and penalties, compensation for financial losses, lost profits and reputational damage, plus a permanent injunction restraining the defendant from interfering with the plaintiff’s business operations, accessing or operating its bank accounts, disposing of or encumbering company assets without authorization, general and exemplary damages for breach, fraud and misappropriation, plus an order for costs of the suit and interest until full payment.
4.In opposition to the suit, the defendant filed a Notice of Preliminary Objection dated 6th December 2024, raising the following grounds –i.That the subject matter is matrimonial properties registered jointly in the names of the Mbugua Njiraini John and Alice Wanjiru Kimani thus the cause of action is division of matrimonial properties; andii.The suit is bad in law because it is a derivative suit which has been filed by the Director of the plaintiff in contravention of Sections 238 & 239 of the Companies Act, 2015.
5.The instant Preliminary Objection was canvassed by way of written submissions. The defendant’s submissions were filed on 19th March 2025 by the law firm of K.M. Mburu & Associates, while the plaintiff’s submissions were filed by the law firm of Kago Mburu & Associates Advocates on 21st March 2025.
6.Mr. Mwangi Mburu, learned Counsel for the defendant submitted that the plaintiff through its Shareholder and Director Alice Wanjiru Kimani, instituted this suit against the defendant, who is also a Shareholder and Director of the plaintiff company. He stated that the causes of action pleaded include breach of fiduciary duty, fraud and misappropriation, conversion and theft, negligence, mismanagement, and breach of trust. The defendant in his statement of defence filed under protest, denied all the allegations and explained that he and his co-director are husband and wife, having been married on 12th December 2013.
7.He contended that the said co-directors have since separated and are currently engaged in a pending divorce matter before the Chief Magistrates Court at Nairobi, being Divorce Cause No. 1085 of 2024 - Mbugua Njiraini John v Alice Wanjiru Kimani. The defendant stated that during the marriage, he incorporated the plaintiff company and out of love and affection, allotted majority shares to his co-director, Alice Wanjiru Kimani. He asserted that the assets forming the subject of this suit are jointly registered in their personal names as husband and wife, rather than in the name of the plaintiff company.
8.Mr. Mwangi relied on the case of Mukisa Biscuits Manufacturing Co. Ltd v West End Distributors Ltd [1969] EA 696, and submitted that the plaintiff’s company co-directors are spouses and that the properties in dispute are matrimonial properties. He cited Sections 7 & 17 of the Matrimonial Property Act, 2013 and argued that since the properties in question fall within the scope of matrimonial property, this Court, sitting as a Commercial and Tax Division, lacks jurisdiction to determine the dispute herein. Counsel referred to the provisions of Section 238 of the Companies Act, 2015 and the case of Prudential Assurance Co. Ltd v Newman Industries Ltd [1982] 1 All ER 354, and stated that the defendant is also challenging the validity of this suit on grounds that his co-director has no locus standi to bring this suit on behalf of the plaintiff company.
9.Mr. Mwangi stated that the defendant’s co-director instituted this suit without first seeking leave of the Court and without a valid Board resolution authorizing the filing of the same since the purported Board resolution dated 3rd September 2024 is ultra vires and of no legal effect. Counsel contended that his co-director lacks the requisite standing to institute these proceedings on behalf of the plaintiff company. He submitted that this Court lacks the requisite jurisdiction to entertain this dispute and that the defendant’s co-director has no locus standi to institute this suit.
10.Mr. Simon Mburu, learned Counsel for the plaintiff cited the case of Mukisa Biscuits Manufacturing Co. Ltd v West End Distributors Ltd (supra) and submitted that the defendant’s Notice of Preliminary Objection dated 6th December 2024 does not raise a pure point of law. Counsel argued that the said Preliminary Objection which challenges the legality of the plaintiff’s Board resolution dated 3rd September 2024, requires factual proof regarding its validity, authenticity, and the circumstances of its preparation, which issues can only be determined upon examination of evidence and therefore fall outside the scope of a Preliminary Objection.
11.Mr. Mburu stated that the defendant’s claim that the plaintiff’s Director and the defendant are spouses involved in a divorce cause raises factual matters, such as the existence and relevance of the marriage and divorce proceedings, which can only be established through affidavit evidence and cannot be determined purely on points of law. He submitted that the instant Preliminary Objection is improperly before this Court and ought to be struck out. The above notwithstanding, Counsel submitted that the subject properties in question are registered in the name of the plaintiff company, as evidenced by the logbooks, bank statements, and other supporting documents.
12.He relied on the doctrine of separate legal personality as established in the case of Salomon v Salomon & Co. Ltd [1897] AC 22 (HL) and asserted that the plaintiff company is a distinct legal entity from its shareholders and Directors, and its assets cannot be treated as matrimonial property merely because its Directors are spouses. Mr. Mburu referred to the case of NGV v CNV also known as CHM [2022] KEHC 16645 (KLR) and submitted that the Matrimonial Property Act, 2013, only applies to property jointly owned and acquired by spouses, not to assets belonging to a corporate entity.
13.On the defendant’s contention that this suit should have been instituted as a derivative action, Mr. Mburu submitted that the rule in Foss v Harbottle [1843] 2 Hare 461 and Sections 238 - 239 of the Companies Act, 2015, apply only where an individual shareholder seeks to sue on behalf of a company. He stated that in this case, the plaintiff company itself is the proper party to the suit, having passed a resolution authorizing the proceedings. He cited the Court of Appeal case of Rai & others v Rai & others [2002] 2 EA 537 and asserted that there is no basis for invoking the derivative suit procedure, and since the plaintiff company has independently resolved to institute this action, it has the requisite capacity to sue.
Analysis And Determination.
14.Upon perusal of the defendant’s Notice of Preliminary Objection dated 6th December 2024 and the written submissions by Counsel for the parties, the issue that arises for determination is whether the Notice of Preliminary Objection herein should be sustained.
15.The defendant’s Preliminary Objection principally challenges this Court’s jurisdiction to hear and determine this suit on the grounds that the dispute involves matrimonial property jointly owned by Mr. Mbugua Njiraini John and Ms Alice Wanjiru Kimani, thereby making the cause of action one for division of matrimonial assets. Further, that the suit is defective as it constitutes a derivative action instituted by the plaintiff’s Director in contravention of Sections 238 and 239 of the Companies Act, 2015.
16.In the case of the Owners of the Motor Vessel “Lillian S’ v Caltex Oil (Kenya) Ltd [1989] KLR 1, Nyarangi, JA., held as follows on the issue of jurisdiction–
17.The defendant’s case is that he is a co-director of the plaintiff company and that he and his co-director are husband and wife, respectively. He explained that during the subsistence of their marriage, he incorporated the plaintiff company and allotted the majority of its shares to his wife. He maintained that the assets in dispute are registered jointly in their personal names as husband and wife, rather than in the name of the plaintiff company and therefore constitute matrimonial property. The defendant further argued that his co-director instituted this suit without first obtaining leave of the Court and without a valid Board resolution authorizing its filing, asserting that the alleged resolution dated 3rd September 2024 is ultra vires and legally ineffective. He contended that his co-director lacks the requisite authority and locus standi to institute these proceedings on behalf of the plaintiff company.
18.The plaintiff on the other hand, contended that the suit properties are registered in its name and cannot therefore be classified as matrimonial property. It submitted that no leave was required before instituting this suit, as it was filed by the company in its own name pursuant to a duly passed Board resolution authorizing these proceedings. It contended that the provisions of Sections 238 and 239 of the Companies Act, 2015, are inapplicable.
19.The plaintiff further contended that the defendant’s challenge to the validity of the Board resolution dated 3rd September 2024 raises factual issues concerning its authenticity and the circumstances of its preparation, matters that can only be determined through evidence and therefore fall outside the purview of a Preliminary Objection. Additionally, the plaintiff argued that the question of whether its Director and the defendant are spouses involved in divorce proceedings also raises factual issues, such as the existence and relevance of the marriage and divorce cause, which require affidavit evidence and cannot be determined purely as points of law. The plaintiff asserted that the Preliminary Objection herein is misconceived and should be struck out.
20.Having carefully considered the parties’ submissions and the authorities cited, I am not persuaded that the instant Notice of Preliminary Objection meets the threshold of a valid Preliminary Objection. The objection raises issues that are not purely points of law but rather matters requiring factual ascertainment and evidentiary proof. In particular, the challenge to the legality of the Board resolution dated 3rd September 2024 and the allegations relating to the personal relationship between the plaintiff’s Director and the defendant introduce factual questions that must be proved through evidence.
21.In order for a Preliminary Objection to be successful, it must raise pure points of law. It must be argued on the assumption that all the facts pleaded by the opposing party are true, but it cannot be raised where the Court is required to ascertain facts or exercise its judicial discretion. The Court of Appeal in Mukisa Biscuits Manufacturing Co. Ltd v West End Distributors Ltd (supra), clearly outlined the principles defining a valid Preliminary Objection as follows –
22.In the said case, Sir Charles Newbold P., stated thus-
23.The Supreme Court weighed in on the issue of Preliminary Objections in Aviation & Allied Workers Union Kenya v Kenya Airways Limited & 3 others [2015] KESC 23 (KLR) and stated as follows-
24.In this case, determining the validity or legality of the Board resolution, the existence of a spousal relationship between Ms Kimani and the defendant, whether or not the suit properties are registered in the name of the plaintiff company or in the joint names of Ms Kimani and the defendant and whether or not leave of Court was a prerequisite before filing this suit, would require the Court to evaluate evidence, which falls outside the scope of a Preliminary Objection. Consequently, this Court finds that the Notice of Preliminary Objection raised by the defendant is not sustainable in law.
25.In the circumstances, this Court finds that the instant Preliminary Objection is without merits. It is hereby dismissed with costs to the plaintiff.It is so ordered.
DATED, SIGNED AND DELIVERED AT NAIROBI ON THIS 28TH DAY OF NOVEMBER, 2025. RULING DELIVERED THROUGH MICROSOFT TEAMS ONLINE PLATFORM.NJOKI MWANGIJUDGEIn the presence of:-Ms Mwangi h/b for Mr. Simon Mburu for the plaintiffMr. Mwangi Mburu for the defendantMs B. Wokabi – Court Assistant.