Kawakanja Limited v Jane Gathoni Muraya Kanyotu & 6 others [2014] KECA 99 (KLR)
The bottom line
#The Court of Appeal froze Shs.283 million in dividends and paused a family succession case, confirming a company's money belongs to the company, not its shareholders.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the applicant has made out a case under rule 5(2)(b) of the Court of Appeal Rules to entitle it to stay of the orders of 10.2.2014 and 12.2.2014 and stay of proceedings in Succession Cause No. 1239 of 2008 pending the intended appeal
Key legal issues
#Jurisdiction under rule 5(2)(b) of the Court of Appeal Rules
Jurisdiction under rule 5(2)(b) vests where an appeal has been filed or a notice of appeal has been given in compliance with rule 75; both notices of appeal having been lodged, the Court's jurisdiction was established.
The Court reiterated that the rule's basic aim is to provide interim relief where the High Court has determined a matter and the aggrieved party has appealed or intends to appeal. Notices of appeal dated 13.2.2014 and 17.2.2014 were lodged in respect of the orders of 10.2.2014 and 12.2.2014 respectively, so jurisdiction had vested in the Court.
Arguability of the intended appeals
The intended appeals were arguable: the released dividends were the property of the applicant company, and the consent order was made when its advocate had been excluded from the proceedings without its consent.
The Court held that the Shs.283,448,925.80 dividends belonged to Kawakanja Ltd as a separate legal person; the High Court's release of the money under a consent order to which the applicant was not privy, at a time when its advocate M.T. Adala had been excluded, infringed the applicant's rights. The exclusion of counsel and the denial of legal representation also raised arguable points, satisfying the twin principles of arguability and nugatory effect.
Separate legal personality and shareholders' rights over company property
A limited liability company is a legal person separate from its members; its money and property are not the shareholders', and shareholders cannot lay claim to dividends declared in favour of the company.
Relying on Salomon v Salomon & Co Ltd, the Court rejected the 1st respondent's argument that because the deceased owned nearly all the shares, the company's money would ultimately go to those now owning it. The company was a going concern; its dividends were its property, and a family meeting had no legal capacity to hire or fire counsel for the company.
Legal principles established
#- To obtain stay under rule 5(2)(b), an applicant must show an arguable appeal (not frivolous, but not necessarily bound to succeed) and that the appeal would be rendered nugatory if stay is not granted.
- Dividends declared by another company in favour of a limited liability company belong to that company; shareholders, whether controlling or otherwise, have no legitimate claim of right to them, as the company is a separate legal person.
Court orders
#- 1.The proceedings in Succession Cause No. 1239 of 2008 in the High Court at Nairobi are stayed for six months to facilitate hearing and disposal of the appeals.
- 2.Before determination of the appeals there shall be no dealings with, withdrawal, transmission, use as guarantee or pledge, or interference with the dividends amounting to Shs.283,448,925.80 and interest, if any, held in the joint account of A. M. Wahome & Co. Advocates and Judy Thongori & Co. Advocates at Equity Bank Prestige Centre, Westlands, Nairobi.
- 3.The applicant's intended appeals shall be fast-tracked and heard on priority.
- 4.The costs of the consolidated applications shall abide the outcome of the appeals.
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
Wrote the judgment
Wrote the judgment
- On appeal from
- High Court of Kenya at Nairobi, Family Division, Milimani
- Succession Cause No. 1239 of 2008
- Jurisdiction invoked
- Rule 5(2)(b) of the Court of Appeal Rules, exercised where a notice of appeal has been given in compliance with rule 75
- Consolidated with
- Civil Application No. NAI 30 of 2014 (22/2014)
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
The proceedings in the Succession Cause No.1239 of 2008 in the High Court at Nairobi are stayed for six months to facilitate hearing and disposal of the appeals.
Before the determination of the appeals there shall be no dealings relating to the dividends amounting to Shs.283,448,925.80 and interest, if any, thereon, released by African Liaison and Consultants Ltd to and held in the joint account by the advocates for the administrators
The applicant's intended appeals shall be fast-tracked and shall be heard on priority.
An arguable appeal is one that is not frivolous but not necessarily one that is bound to succeed. All that an applicant needs demonstrate is that there is an arguable point or points of law.
The contention by the 1st respondent that Advocate M. T. Adala's appointment was nullified by the family does not appear to hold water as the family meeting alluded to had no capacity in law to hire or fire counsel for the applicant.
Issues in the judgment
#The judgment states the 7th respondent supported the application but earlier describes the 4th, 6th and 7th respondents as 'interested parties' at the hearing, and the hearing record lists '4th interested party' and non-appearing '1st, 2nd, 3rd, 5th and 6th interested parties' although the parties are elsewhere consistently called respondents.
The impugned orders of 10th February 2014 are described in places as 'consent orders' recorded by consent on 12th February 2014, while the orders quoted as made on 10.2.2014 include the dividend release order; the dates and characterisation of the orders are somewhat inconsistently presented.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Kawakanja Limited v Jane Gathoni Muraya Kanyotu & 6 others [2014] KECA 99 (KLR)", Case Analysis (2014). Civil Application No. NAI 29 of 2014 (UR 22/2014). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2014/99/eng@2014-03-31
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.