Murita Coffee Estate Ltd v Attorney- General and Mbwanju Ltd [1979] KECA 18 (KLR)
The bottom line
#Kenya's Court of Appeal ruled that a struck-off company can still be restored to the register even if the Government has already sold its property.
What this practically means
#Executive summary
#Key legal issues
#Effect of failure to file annual returns on whether a company was 'in operation' at striking-off
The trial judge drew an incorrect inference; failure to file returns is commonly due to oversight, and a company with a mortgagee-installed manager in possession was still in operation.
The court held that non-filing of returns admits of many explanations, most commonly directors' oversight, and cannot without more support the inference that the company had ceased operations. The mortgagee in possession had installed a manager on the farm to maintain it for realisation of the mortgage debt; that manager had stepped into the shoes of the company. The company was therefore in operation within section 339(6), one of the three alternative statutory bases for restoration, each independently sufficient.
Whether restoration is pointless where the Government has disposed of the company's sole asset
No. The two reliefs under section 339(6) are distinct; futility of the revesting relief is no bar to restoration, and the value of a company lies in more than its assets.
The judge had expressly stated he would be prepared to restore the company but declined as pointless because the sole asset had been sold. The court held this self-contradictory, unsupported by evidence of a valid sale, and legally wrong: the second (revesting) relief is ancillary to the first (restoration) relief, not vice versa. Shareholders may resume business, recoup losses, enforce old causes of action, and goodwill may attach to the company's name even if it is left bereft of assets.
Status of the Government as holder of bona vacantia property pending the ten-year restoration window
Section 340's 'belong to the Government' must be construed within the intendment of section 339(6): the Government is an interim custodian until ten years expire, and ought not normally to dispose of immovable property acquired as bona vacantia.
Every section of an Act must be construed as a substantive enactment; section 340's broad words were not intended to derogate from section 339's restorative scheme. Because a court may declare the dissolution void before ten years expire, the Government's apparently absolute ownership is in effect a custodianship in the interest of the company. The unexplained disposal of the farm after the petition was filed drew the trial judge's frank censure and the appellate court's agreement.
Whether section 52 of the Transfer of Property Act (lis pendens) protected the company's land
Section 52 could not aid the company because the right to the immovable property was not directly and specifically in question in the restoration proceedings, and section 138 ousts inquiry into the validity of a government grant.
The court distinguished the lis pendens doctrine: the restoration petition did not directly and specifically question the right to the farm. Further, section 138, borrowed from the Indian Government Grants Act 1895, takes away the court's power to inquire into the validity of a grant made by the Government, so the new grant issued to Mr Koinange after the High Court judgment stood outside the scope of the court's inquiry in these proceedings.
Legal principles established
#- Failure to file annual returns does not necessarily connote that a company is not carrying on business or is not in operation for the purposes of section 339(6).
- Being 'in operation' is one of three alternative statutory grounds in section 339(6) each of which authorises restoration, and 'just' is assessed on the circumstances of each case.
- Restoration of a company's name is not rendered pointless merely because the Government has disposed of its property; the two reliefs under section 339(6) are not inter-dependent.
- Until the ten-year period expires, the Government holds bona vacantia immovable property of a dissolved company as interim custodian, and should not normally dispose of it.
- The policy of the law is that a company struck off the register ought, if at all possible, to be restored rather than terminated.
Court orders
#- 1.Appeal allowed with costs in the Court of Appeal and in the High Court
- 2.Order of the High Court dismissing the petition set aside
- 3.Substituted order that the company's name be restored to the register of companies
- 4.Certificate for two advocates including Queen's Counsel both here and in the High Court
- 5.Reliefs seeking setting aside of the sale to Mr Koinange, accounting, and damages refused
- On appeal from
- High Court of Kenya
- Petition to the Registrar of Companies under section 339(6) of the Companies Act
- Jurisdiction invoked
- First appeal to the Court of Appeal under the applicable appellate provisions from the High Court's dismissal of a petition under section 339(6) of the Companies Act
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Murita Coffee Estate Ltd v Attorney- General and Mbwanju Ltd [1979] KECA 18 (KLR)", Case Analysis (1979). Civil Appeal (from High Court petition under section 339(6) of the Companies Act). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1979/18/eng@1979-08-10
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.