Nakumatt Holdings Limited & another v Ideal Locations Limited [2019] KECA 153 (KLR)
The bottom line
#Kenya's Court of Appeal confirmed that insolvency proceedings against a tenant do not stop land courts from hearing rent and lease disputes.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the ELC had jurisdiction to grant the orders that it did in a suit arising from a landlord and tenant relationship where insolvency proceedings were pending against the 1st appellant before the High Court
- 2.Whether the respondent's suit and application contravened Section 430 of the Insolvency Act, 2015
- 3.Whether the moratorium provisions of Sections 560 and 561 of the Insolvency Act were in effect at the material time, and if so, which court was competent to grant approval for continuation of legal process
- 4.Whether the summary judgment entered against the appellants was justified
Key legal issues
#Jurisdiction of the ELC over landlord-tenant disputes notwithstanding pending insolvency proceedings
The dispute, arising from a sub-lease, related to use and occupation of land and lay within the exclusive jurisdiction of the ELC under Article 162(2)(b) of the Constitution and Section 13 of the ELC Act; the pendency of an insolvency cause did not divest the ELC of jurisdiction.
Under Article 162(2)(b) Parliament established the ELC to hear and determine disputes relating to the use and occupation of, and title to, land, and Section 13 of the ELC Act confers exclusive jurisdiction over such disputes. Article 165(5) bars the High Court from ELC-reserved matters. The cause of action here was the sub-lease, squarely within the ELC's remit. The Constitution does not prohibit the ELC from hearing a land dispute merely because one party faces insolvency proceedings.
Inapplicability of Section 430 of the Insolvency Act to administration
Section 430, which voids attachment, sequestration, distress and execution against a company in liquidation, is part of the liquidation regime and does not apply to a company under administration; peaceable re-entry by a landlord is not prohibited by that section.
The court found a conflation between liquidation (Part VI) and administration (Part VIII) of the Insolvency Act. The objects differ: administration seeks to maintain a company as a going concern while liquidation winds up the company. Because the appellants rested their objection on Section 430, a liquidation provision, that objection could not sustain a challenge to proceedings against a company in administration.
Operation of the moratorium provisions (Sections 560 and 561) and the proper forum for approval
Neither Section 560 nor Section 561 was in effect at the material time because the application for an administration order had been dismissed on 16th November 2017; had approval been required, the High Court, not the ELC, would have been the proper forum.
Section 560 imposes a moratorium on other legal process while a company is under administration, and Section 561 an interim moratorium pending an administration application. Since the administration application had been dismissed by Onguto, J., no moratorium subsisted when the suit was filed or the application heard. The court endorsed the view that the Insolvency Act creates a central forum in the High Court for insolvency disputes, but held that where no moratorium is in effect, an application for approval to continue proceedings is otiose.
Duty to bring subsequent supervening court orders to the attention of the trial court
It was incumbent on the appellants to bring the High Court's administration order of 22nd January 2018 to the attention of the ELC Judge; their failure meant the ELC Judge could not be faulted for proceeding as he did.
The administration order was granted on the same day the ELC proceedings were concluded, and there was no evidence it was brought to the ELC Judge's attention. Counsel for the appellants conceded their advocates should have sought a stay. The court held that a party cannot fault a judge for failing to consider orders that were never placed before him.
Legal principles established
#- Disputes arising from a landlord and tenant relationship involving use and occupation of land fall within the exclusive jurisdiction of the ELC, and the pendency of an insolvency cause involving a party does not oust that jurisdiction where no administration order or interim moratorium under Sections 560 or 561 of the Insolvency Act is in effect.
- Section 430 of the Insolvency Act, which voids attachments and execution against a company in liquidation, falls under Part VI (liquidation) and has no application to a company under administration under Part VIII.
- The competent court to grant leave under Section 561 of the Insolvency Act to continue proceedings against a company under administration is the High Court, which is the court seized of the insolvency matter.
Court orders
#- 1.The appeal is dismissed
- 2.The appellants to pay costs of the appeal to the respondent
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
Wrote the judgment
Wrote the judgment
- On appeal from
- Environment and Land Court at Mombasa
- ELC Case No. 400 of 2017
- Jurisdiction invoked
- First appeal to the Court of Appeal under the Court of Appeal's appellate jurisdiction; the dispute concerned jurisdiction of the ELC under Article 162(2)(b) of the Constitution and Section 13 of the Environment and Land Court Act
Relief refused
#Appellants' challenge to the jurisdiction of the ELC and reliance on the Insolvency Act moratorium provisions
The dispute stemmed from use and occupation of land within the ELC's jurisdiction; Section 430 does not apply to administration; neither Section 560 nor Section 561 was in effect at the material time
Costs
Appeal dismissed with costs to the respondent.
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
The result of the foregoing is that this appeal fails. It is hereby dismissed with costs to the respondent.
we are fully in agreement with the learned Judge that the dispute between the parties, stemming as it did, from the sub lease over the leased premises over L.R. No. 14407 and 16088, is a matter falling within the jurisdiction of the ELC.
Section 430 of the Act on the basis of which the appellants contended that the ELC should have downed its tools, falls under Part VI of the Act and has no application to a company under administration.
the only court with the original jurisdiction to grant leave to continue suits against companies under administration, in my opinion, is the High Court.
It was, in our view, incumbent upon appellants to bring that matter to the attention of the ELC. They did not do so.
Issues in the judgment
#Internal inconsistency in the date of dismissal of the administration application: the judgment twice refers to 16th November 2017 but once states 16th November 2019
Typographical error in the citation of the Supreme Court case ("[21012] eKLR")
Inconsistency in identifying the insolvency cause number: the judgment variously refers to Insolvency Cause No. 10 of 2017, Insolvency Petition No. 10 of 2017, and Insolvency Cause No. 10 and 13 of 2017 (consolidated)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Nakumatt Holdings Limited & another v Ideal Locations Limited [2019] KECA 153 (KLR)", Case Analysis (2019). Civil Appeal No. 27 of 2018. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2019/153/eng@2019-11-28
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.