Lochab Brothers v Kenya Furfural Co Ltd [1983] KECA 51 (KLR)
The bottom line
#Kenya's Court of Appeal ruled that receivers cannot sue in their own name, and attached goods aren't lost until sold.
What this practically means
#Executive summary
#Key legal issues
#Locus standi of receivers to object to attachment in their own name
Receivers and managers appointed out of court under a debenture are agents of the company and cannot bring objection proceedings in their own name alone; they must act in the name of the company or otherwise as deemed expedient under the debenture, and the non-joinder of the party with legal or equitable title was fatal.
The court followed Carver v MacJohn and the English authorities (Rhodes v Dawson, Re Sacker, Re Sartoris's Estate) that a receiver has no property vested in him and acquires no right of action by his appointment. Objecting in one's own name is no different from suing in one's own name. Order I rule 9 could not cure the defect because the receivers held no legal or equitable interest in the goods and never sought to amend by joining DFCK or the company.
When execution is complete
Execution is completed by seizure and sale of the attached property, not by seizure or attachment alone; until sale, the attached goods remain subject to the floating charge which crystallises on the appointment of receivers and takes priority over the execution creditor.
The court relied on Mackenzie v Pharmico (Simpson J) and Palmer's Company Law and the Supreme Court Practice to hold that attached goods in the custody of the court broker remain the company's property and subject to the floating charge; on appointment of a receiver the charge crystallises into a fixed charge with priority. Section 27 of the Sale of Goods Act was held inapplicable as the Act applies only to goods as defined therein.
Lawfulness of the receivers' appointment
Where the appointment is out of court, the debenture deed governs its propriety; the onus lay on the company and the debenture holder to prove the security had become enforceable under clauses 8 and 9, and that onus was not discharged, so this ground also succeeded.
Madan JA held that whether DFCK had made demand or whether Furfural had breached covenant 6(f) were matters within the knowledge of Furfural and the debenture holder, not the execution creditor, so the burden of proving lawful appointment fell on the appointing side, which produced no evidence. Whether the security was in jeopardy was irrelevant since the receivers were neither appointed under clauses 8 and 9 nor by the court.
Relevance of Colonial Blankets Trading Co and the Sale of Goods Act
Colonial Blankets was distinguished: it turned on section 27(1) of the Sale of Goods Act and letters of hypothecation, which create neither possession nor sale rights, and the receivers there had not seized the goods, so the case had no bearing on these proceedings.
The court differentiated hypothecation from a debenture: a hypothecation gives only a right of realization by judicial proceedings, without possession or sale rights. The judgment also noted that section 27 of the Sale of Goods Act applies only to goods as defined in that Act and is not of general application to execution proceedings.
Legal principles established
#- A receiver appointed out of court under a debenture acquires no right of action by his appointment and cannot sue or originate objection proceedings in his own name; he must sue in the name of the person entitled to the legal or equitable title
- Execution of a decree is completed by seizure and sale of the attached property, not by attachment alone; until sale the goods remain the property of the execution debtor and no property passes to the execution creditor
- A floating charge created by a debenture crystallises on the appointment of a receiver and, upon crystallisation, takes priority over execution creditors where the attached property has not yet been sold
- Objection to attachment may be made at any time prior to payment out of court of the proceeds of sale under order XXI rule 53(1)
Court orders
#- 1.Appeal allowed with costs
- 2.Order of the High Court (Mbaya J allowing the objection) set aside
- 3.Objection proceedings dismissed with costs
- On appeal from
- High Court of Kenya at Eldoret
- Civil Suit No. 53 of 1982
- Jurisdiction invoked
- First appeal to the Court of Appeal under the constitution/statute establishing the Court of Appeal (provision not cited in judgment)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Lochab Brothers v Kenya Furfural Co Ltd [1983] KECA 51 (KLR)", Case Analysis (1983). Not stated in judgment (suit below: High Court Civil Suit No. 53 of 1982, Eldoret). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1983/51/eng@1983-11-21
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.