Cytonn Investment Partners Five (CIP5 LLP) & another v Official Receiver (Civil Appeal E116 of 2024) [2025] KECA 1955 (KLR)
The bottom line
#Kenya's Court of Appeal dismissed Cytonn SPVs' challenge, confirming that property claims in a liquidation must go through the liquidator, not separate lawsuits.
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 proper procedure for determining fraud was adhered to
- 2.Whether the homeowners were denied the right to be heard
- 3.Whether the doctrine of tracing was properly applied and whether the property rights of a bona fide purchaser for value were violated
- 4.Whether the SPVs are separate legal entities from the companies in liquidation
Key legal issues
#Whether the trial court made a conclusive finding of fraud
The Court adopted its decision in the consolidated related appeals that the Judge's remarks that the scheme was 'akin to fraud' were carefully worded and obiter, not a finding of fraud
The learned Judge stated the two Companies were involved in a scheme which was akin to fraud, not that they were involved in fraud. Consistent with the Court's decision in Civil Appeal No. E091 of 2024 (with related appeals), the remarks were obiter with no binding force. A conclusive finding of fraud could only be made after the appellants present their claims to the liquidator.
Whether the homeowners and purchasers were denied the right to be heard
No reversal on this ground: the pending joinder application was never decided, and affected persons must lay their claims before the liquidator
Since no decision was made on the joinder application by Kenneth Ochieng Macakiage, the Court could not reverse the learned Judge on it. Relying on Benedicta Mukulu Musembi, any person disputing inclusion of its property in the liquidation process is at liberty to lay the claim before the liquidator, and dissatisfaction with the liquidator is not a basis to avoid that process.
Whether the doctrine of tracing was properly applied and whether vesting orders were lawful
The vesting and preservation orders were lawful; the liquidator was entitled to take over the SPV property pending distribution to creditors or release of any portion found not to belong to the insolvent entities
The Court reiterated its finding that the Official Receiver was entitled to take the view that the SPV properties were acquired with sums advanced by CHYS and CPN, unsecured loans never repaid. Claims that the SPVs relied on other finances are to be dealt with in the liquidation process, with the SPVs bearing the burden of proving third-party contributions.
Separate legal personality of the SPVs
The SPVs could not rely on corporate separateness or privity of contract to shield the property from the liquidation process
Adopting the reasoning endorsed in Benedicta Mukulu Musembi, the SPVs had not demonstrated that the projects were independent of funds from CHYS's creditors; CHYS's influence through its CEO remained unbroken and concerns persisted that the SPVs were structured to obscure the location of creditor funds and frustrate recovery efforts.
Legal principles established
#- Persons claiming property included in a liquidation must lay their claims before the liquidator rather than challenge the liquidation process
- Upon appointment, the liquidator takes control not only of property to which the company is entitled but also property to which it appears to be entitled, with claimants free to place objections with the liquidator
- Issuance of preservation and vesting orders is aligned with the liquidator's statutory duty under section 444 of the Insolvency Act, and includes taking over management of property in the interest of creditors
- Where there is no express finding of fraud, the stringent standard of proof required for findings of fraud is not applicable
- It is for the SPVs and their financiers to prove that part of the assets acquired by them resulted from third-party contributions
Court orders
#- 1.Appeal dismissed with costs
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya
- Jurisdiction invoked
- First appeal to the Court of Appeal against a High Court ruling in insolvency proceedings
Relief refused
#Setting aside the vesting orders over the Riverun property in favour of the Official Receiver
The Court found the appeal without merit and endorsed its prior holdings that the liquidator was entitled to take control of property the company appears to be entitled to
Reversal of the learned Judge's remarks on fraud
The Court agreed with the respondent that the finding on fraud was obiter and that a conclusive finding of fraud could only be made in the liquidation process
Costs
Appeal dismissed with costs to the respondent
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.
Based on the foregoing, we find no merit in this appeal which we hereby dismiss with costs.
The option, we reiterate, is not to challenge the liquidation process but to lay the claim before the liquidator.
upon appointment, the liquidator is mandated to take control of, not only the property to which the company is entitled but also those properties to which the company appears to be entitled.
Since there was no express finding of fraud the stringent standard of proof required in findings of fraud was not applicable.
It was upon the SPVs and their financiers to prove that part of the assets acquired by them were as a result of contributions by third parties, either wholly or in part.
We agree that the issuance of preservation and vesting orders are aligned with the liquidator’s statutory duty to gather, manage and distribute the insolvent estate in a manner that ensures equitable treatment of all creditors.
Issues in the judgment
#Paragraph 25 reproduces the appellants' submission framing ('it was submitted behalf of the appellants') within the Court's own statement of issues, an apparent drafting slip
The acreage figures are inconsistent within the judgment: 59.08 acres in one passage and 59.57 acres in another for MLL's share
The property is described variously as located in LR No 5910, Ruiru and as LR No 28223/3, Kiambu
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Cytonn Investment Partners Five (CIP5 LLP) & another v Official Receiver (Civil Appeal E116 of 2024) [2025] KECA 1955 (KLR)", Case Analysis (2025). Civil Appeal No. E116 of 2024. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2025/1955/eng@2025-11-21
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.