Muthaiga Mini Market Ltd v Leisure Lodges Ltd
Muthaiga Mini Market Ltd v Leisure Lodges Ltd  eKLR
Muthaiga Mini Market Limited v Leisure Lodges Limited
High Court, at Mombasa
June 18, 2002
Civil Case No 371 of 2001
Company Law – winding up – winding up by the court – powers of the liquidator – control of such powers – section 241 of the Companies Act (cap 486).
Company Law - winding up – where the court does not make a winding up order – when interim liquidators are entitled to pay out of the company’s property – right of the interim liquidator over the property of the company – whether the liquidator is personally liable for contracts which he makes – rule 27(3) of the Companies Winding Up Rules – section 239 of the Companies Act (cap 486).
The plaintiff claimed against the defendant moneys for goods supplied at the request of the defendant for which payment had not been made. The plaintiff claimed a further amount for a dishonoured cheque issued by the defendant.
The defendant averred that at the material time, the company was in the hands of joint interim liquidators pending a dispute between the shareholders. The documents regarding the claim were passed to the joint liquidators to settle. The defence alleged that the interim liquidators were personally liable for the claim. The defendant agreed that the interim liquidators were authorized to carry on business so far as may be necessary for the beneficial winding up thereof but did not include the power to run the company into debt.
1. Under section 241(1) of the Companies Act (cap 486) the liquidator has power to carry on the business of the company so far as may be necessary for the beneficial winding up thereof.
2. Beneficial winding up does not necessarily refer to financial benefit but, at least when winding up is for a reconstruction includes the carrying on of the business for a smooth takeover by a new company.
3. Section 241(3) of the Companies Act (cap 486) provides that the exercise by a liquidator in a winding up by the court of the powers conferred by that section shall be subject to the control of the court, and any creditor or contributory may apply to court with respect to any exercise or proposed exercise of any of those powers.
4. No application was made in this case to control the powers exercised by the interim liquidators during the period they were in office.
5. In the present case the Court never proceeded to make a winding up order and therefore, under rule 27(3) of the Companies Winding Up Rules the interim liquidators are entitled to be paid out of the property of the company all costs, charges and expenses properly incurred by them as interim liquidators.
6. Section 239 of the Companies Act provides that the interim liquidator shall take into his custody or under his control all the property and things in action to which the company is or appears to be entitled.
7. Where the liquidator carried on business he can do all things reasonably necessary for carrying it on, and accordingly he can buy and sell and make contracts, draw and accept and endorse bills of exchange.
8. In carrying on business, the liquidator is not prima facie liable on the contracts which he makes but he should be careful to act in the name of the company and to disclose the fact that the company is in liquidation, so that no one may be misled.
9. The liquidators in this case were agents of the company in carrying business and all debts and liabilities incurred on behalf of the company by them must be met by the company out of the assets of the company.
Stead, Hazel and Co v Cooper  1 KB 840
Schmithoff, CM., Thompson, JH (1968) Palmer’s Company Law London: Stevens & Sons Ltd, Edinburgh: W Green & Son 21st Edn p789
1. Civil Procedure Rules (cap 21 Sub Leg) order I rule 14; order VI rule 13(1)(b), (c)
2. Companies Act (cap 486) sections 219(f); 241(1), (2), (3); 239
3. Companies Winding up Rules (cap 486 Sub Leg) rule 27(3)