Skip to content
AI-generated case briefs sourced from Kenya Law · Not legal advice
Caselaw
AI-generated case brief
Case Brief · caselaw.co.ke
Court of AppealAllowedCivil Application No. NAI 29 of 2014 (UR 22/2014)· [2014] KECA 99 (KLR)

Kawakanja Limited v Jane Gathoni Muraya Kanyotu & 6 others

Court of Appeal
31 March 2014
EGE. N. GithinjiJMJ. W. MweraGKG. B. M. Kariuki
5,048 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~20 min to read original · ~4 min brief

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

#
Kawakanja Limited, a family company in which the late James Kanyotu held all but one share, moved the Court of Appeal under rule 5(2)(b) of the Court of Appeal Rules in two consolidated applications seeking stay of orders made by Kimaru, J. on 10 and 12 February 2014 in High Court Succession Cause No. 1239 of 2008 (the estate of James Kanyotu) and stay of the succession proceedings pending intended appeals. The applicant's grievance was that its advocate, M.T. Adala, was excluded from the proceedings by the presiding judge, after which consent orders were recorded releasing dividends of Shs.283,448,925.80 declared by African Liaison and Consultant Services Limited in the applicant's favour into the joint account of the administrators' advocates. The respondents included the widows and children of the deceased; the 4th, 6th and 7th respondents supported the application while the 1st respondent opposed, arguing the orders were overtaken by events and the money was not in danger. The Court held that its jurisdiction had vested because notices of appeal had been lodged, and applying the twin rule 5(2)(b) principles, found the appeals arguable: the dividends were the property of the applicant as a separate legal person, and the consent order was made without the applicant's participation while its advocate was excluded, denying it legal representation. The Court found the appeal would be rendered nugatory if the money were distributed. It allowed the applications, staying the succession proceedings for six months, freezing the dividend account until the appeals were determined, fast-tracking the appeals, and ordering the costs of the applications to abide the outcome of the appeals. This ruling binds the High Court, which may not distribute the dividends or proceed with the succession cause during the stay period.

Key legal issues

#
01

Jurisdiction under rule 5(2)(b) of the Court of Appeal Rules

Holding

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.

Reasoning

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.

p. 6
02

Arguability of the intended appeals

Holding

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.

Reasoning

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.

p. 7
03

Separate legal personality and shareholders' rights over company property

Holding

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.

Reasoning

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.

p. 7

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. 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. 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. 3.The applicant's intended appeals shall be fast-tracked and heard on priority.
  4. 4.The costs of the consolidated applications shall abide the outcome of the appeals.
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

Key timeline

#

Practical implications

#

Frequently asked questions

#

Cite this brief

#

Cite this brief

Caselaw, "Kawakanja Limited v Jane Gathoni Muraya Kanyotu & 6 others", 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.