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Court of AppealDismissedCIV APPLI 182 OF 2006

John Kayeli Olaka v Lawrence Muinde & 2 others [2006] KECA 30 (KLR)

Court of Appeal of Kenya
1 December 2006
EKE.O. KubasuEGE.M. GithinjiJOJ.W. Onyango-Otieno
884 words in judgment
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The bottom line

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Kenya's Court of Appeal ruled that once someone is declared bankrupt, only the Official Receiver can handle their legal affairs — family members cannot step in to pay appeal costs.

What this practically means

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Executive summary

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This is a ruling of the Court of Appeal at Kisumu (E.O. Kubasu, E.M. Githinji and J.W. Onyango-Otieno, JJ A) delivered on 1 December 2006 on a Notice of Motion under Rule 56(2) of the Court of Appeal Rules. By an order made on 29 March 2006, the court had directed that the Official Receiver give a written undertaking that, if the appeal did not succeed, he would pay the costs of the appeal, and that until such undertaking was given and filed the appeal would not be re-listed for hearing. The bankrupt appellant, anxious to have his appeal heard, sought variation of that order so that his relative, Hoskin Indimula Olaka, would instead undertake to pay the costs, or deposit a specified sum of about KShs 30,000 as security. The 1st respondent opposed the application as incompetent, contending that only the Official Receiver could bring it and that the applicant was a stranger; the 2nd and 3rd respondents added, relying on section 9 of the Bankruptcy Act, that only the Official Receiver had capacity to handle the bankrupt's affairs. The court agreed, invoking section 9(1) of the Bankruptcy Act (Cap 53), which vests the debtor's property in the Official Receiver upon a receiving order. Holding that the relative was a stranger to the proceedings, the court dismissed the application with costs to the respondents, leaving the order of 29 March 2006 intact. No earlier authorities were cited; the decision turns on the statutory scheme of the Bankruptcy Act.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether a relative of a bankrupt may, in place of the Official Receiver, give an undertaking or deposit security to pay the costs of the appeal so that the appeal may be listed for hearing
  2. 2.Whether the applicant, being a stranger to the proceedings, had capacity to bring this application

Key legal issues

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01

Capacity of a relative of a bankrupt to provide security for costs of the appeal in place of the Official Receiver

Holding

The application was incompetent and lacked merit; only the Official Receiver may handle the bankrupt's affairs, and a relative undertaking costs is a stranger to the proceedings.

Reasoning

Section 9(1) of the Bankruptcy Act (Cap 53) provides that upon a receiving order the Official Receiver is constituted receiver of the debtor's property, and creditors may not pursue the debtor or his property except with leave of the court. Because the Official Receiver had not given the undertaking ordered on 29 March 2006, the appellant sought to substitute a relative's undertaking and a deposit of KShs 30,000 as security. The court, agreeing with the respondents' counsel, held that the relative is a stranger to the proceedings and the Official Receiver alone has capacity over the bankrupt's affairs, so the application failed.

p. 2

Legal principles established

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  • On the making of a receiving order, the Official Receiver is constituted receiver of the debtor's property, and no creditor has any remedy against the debtor or the debtor's property except with leave of the court on such terms as the court imposes.
  • A relative of a bankrupt has no capacity to give an undertaking or provide security for the costs of the bankrupt's appeal in place of the Official Receiver.

Court orders

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  1. 1.The application dated and brought by Notice of Motion under Rule 56(2) of the Court of Appeal Rules be and is hereby dismissed
  2. 2.Costs of the application to the respondents

The bench

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One judgment of the whole court — no separate or dissenting opinions.

EK
majority
EG
majority
JO
majority
Jurisdiction invoked
Rule 56(2) of the Court of Appeal Rules

Relief refused

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Variation of the order of 29 March 2006 to allow a relative of the bankrupt, Hoskin Indimula Olaka, to give an undertaking/deposit security of KShs 30,000 for the costs of the appeal in place of the Official Receiver

Under section 9(1) of the Bankruptcy Act, only the Official Receiver may handle the bankrupt's affairs; the relative is a stranger to the proceedings

p. 2

Costs

The application was dismissed with costs to the respondents.

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

On the making of a receiving order the official receiver shall be thereby constituted receiver of the property of the debtor, and thereafter, except as directed by this Act, no creditor to whom the debtor is indebted
p. 2Effect of a receiving order - Official Receiver's statutory role (section 9(1), Bankruptcy Act)
the relative of the bankrupt who now seeks to undertake to pay costs for and on behalf of the appellant is a stranger to these proceedings. This application lacks merit. Accordingly we order that this application be and is hereby dismissed with costs to the respondents
p. 2Disposition - dismissal of application to vary the security-for-costs order

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "John Kayeli Olaka v Lawrence Muinde & 2 others [2006] KECA 30 (KLR)", Case Analysis (2006). CIV APPLI 182 OF 2006. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2006/30/eng@2006-12-01

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.