Kamotho Waiganjo (Suing as the Liquidator/Trustee of Dawa Pharmaceuticals Staff Retirement Benefits Scheme (in liquidation) v Dawa Pharmaceuticals Ltd (in Receivership) & another [2017] KECA 466 (KLR)
The bottom line
#Kenya's Court of Appeal confirmed that receiver-managers answer to the banks who appointed them, not to a company's workers or its old debts.
What this practically means
#Executive summary
#Key legal issues
#Liability of receiver/managers for pre-receivership debts
Receiver/managers are agents of the debenture holders, not of the company; their duties are defined by the instruments appointing them, and they are not bound to settle debts incurred before their appointment.
Relying on Lochab Brothers and Lubega, the court held that a receiver and manager appointed under a debenture is appointed by the debenture holders to preserve and realise the security for their benefit. Their primary duty is to the debenture holders. Once their assignment ends, control reverts to the directors. The consent order limited the receivers' liability to Kshs. 2,060,000 covering post-receivership liabilities, discharging them from past non-remittances.
Retrospective application of Act No. 8 of 2003 amendment to section 311 of the Companies Act
The amendment introducing retirement benefits contributions as preferential debts did not apply retrospectively to a receivership occurring in 2001, before the amendment's commencement in December 2003.
Applying the Supreme Court's dictum in Samwel Kamau Macharia that statutes are prima facie prospective unless retrospective effect appears by express words or necessary implication, the court agreed with the 1st respondent that the amendment did not have retrospective application. It also noted it was unknown how many employees were clerks or servants and whether claims fell within the twenty thousand shillings cap.
Res judicata arising from pendency of H.C.C. Case No. 1667 of 2001
The court declined to decide the res judicata question because the learned Judge made no determination whether the earlier suit was pending at the time of hearing.
The trial judge considered both suits sought similar reliefs but made no factual finding on whether H.C.C. No. 1667 of 2001 was pending when the originating summons was heard. Absent such a finding, the Court of Appeal was not obliged to consider the question for the same reason.
Legal principles established
#- All statutes other than declaratory, procedural or evidentiary statutes are prima facie prospective; retrospective effect is not given unless by express words or necessary implication, and this applies equally to amendments.
- Receiver/managers appointed under a debenture are agents of the debenture holders who appointed them, their primary duty is to those debenture holders, and they are not personally or otherwise bound to settle the company's pre-receivership debts except as their instrument of appointment provides.
Court orders
#- 1.Appeal dismissed
- 2.No orders as to costs
- On appeal from
- High Court of Kenya at Nairobi
- H.C.C.C. No. 600 of 2004
- Jurisdiction invoked
- First appeal to the Court of Appeal under Rule 29(1) of the Court of Appeal Rules
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (1)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Bernard Kamau Kariuki & 37 others v Kenya Planters Co-operative Union [2018] KEELRC 962 (KLR)[2018] KEELRC 962 (KLR)12 Oct 2018
Cite this brief
#Cite this brief
Caselaw, "Kamotho Waiganjo (Suing as the Liquidator/Trustee of Dawa Pharmaceuticals Staff Retirement Benefits Scheme (in liquidation) v Dawa Pharmaceuticals Ltd (in Receivership) & another [2017] KECA 466 (KLR)", Case Analysis (2017). Civil Appeal No. 68 of 2011. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2017/466/eng@2017-06-23
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.