Automated Summary
Key Facts
Booth Extrusions Limited (under receivership) applied for a stay of liquidation proceedings pending completion of its receivership process. The creditor, Jeremiah Matogo, opposed the application, arguing that the company lacked legal capacity to file without the Receiver-Manager's authority. The court ruled the application invalid due to lack of such authorization, striking it out with costs to the respondent.
Issues
- Determining if the applicant (Booth Extrusions Limited under receivership) has the legal authority to pursue the stay of proceedings application.
- Whether the liquidation proceedings should be suspended to allow completion of the receivership/administration process as per the Insolvency Act 2015.
Holdings
The Court found that the applicant's motion for a stay of proceedings was a 'non-starter' due to lack of authority from the appointed Receiver-Manager. The application was struck out with costs awarded to the respondent, as the applicant failed to demonstrate the Receiver-Manager's authorization or awareness of the proceedings. The ruling emphasized that a company under receivership must act through its Receiver-Manager, not its directors, to pursue legal actions.
Remedies
The application is struck out with costs to the respondent. It is so ordered.
Legal Principles
The court held that a company under receivership cannot institute legal proceedings in its own name without the authority of the appointed Receiver-Manager. This principle was derived from cases such as Mandev Limited v M.K & Sons Limited (Under Receivership) [2010] eKLR and Cyperr Enterprises Ltd v Metipso Services Ltd [2011] eKLR, which established that directors lose authority to act for the company once a receiver is appointed, and all legal actions must be conducted through the receiver.
Precedent Name
- Cook v Mortgage Debenture Ltd [2016] EWCA Civ 103
- Tudor Grange Holdings Ltd v Citi Bank N.A. [1991] 4 ALL ER 1
- Re Nakumatt Holding [2017] eKLR
- Mandev Limited v M.K & Sons Limited (Under Receivership) & another [2010] eKLR
- Cyperr Enterprises Limited v Metipso Services Limited & 2 others [2011] eKLR
Cited Statute
- Insolvency Act, 2015
- Companies Act, Cap 486 (repealed)
Judge Name
Njoki Mwangi
Passage Text
- The general principle is that once a company has been placed under Receivership it lacks the legal competence to institute a suit or be sued in its company name. It can only sue or be sued through the Receiver.
- There is therefore no way for this Court to ascertain whether or not the applicant's Receiver - Manager is aware of the existence of these proceedings, and whether he intends to participate in them. Having been placed under receivership, the applicant ought to have brought the instant application with the authority of its official Receiver Manager since the outcome of the liquidation proceedings herein have the potential of directly affecting the property which is the subject of the Receiver - Manager's powers.
- In view of the above, it is this Court's finding that the application herein is a non-starter for want of authority from the Receiver-Manager. It is struck out with costs to the respondent. It is so ordered.