Ismail Rahimtulla Trustees Registered & another v Joint Administrators - Spencon Kenya Limited (Under Administration.) & 2 others [2020] KEELC 1296 (KLR)
The bottom line
#Kenya's Environment and Land Court ruled that insolvency rules did not stop landlords suing a company in administration and its personal guarantors over unpaid rent.
What this practically means
#Executive summary
#Key legal issues
#Applicability of Section 432 of the Insolvency Act
Section 432 applies only to companies in liquidation; Spencon Kenya Limited was under administration, so Section 432 was inapplicable
The court analysed Sections 432 and 560 and held they deal with distinct scenarios: liquidation versus administration. Nothing in the pleadings suggested Spencon Kenya Limited was in liquidation, and liquidation and administration orders cannot operate simultaneously. Therefore the leave regime under Section 432 had no application to the suit.
Consent of administrators under Section 560
Consent is a factual matter for the party alleging its absence to prove, not a point of law; the administrators did not contest the claim on this basis
The suit was commenced against the joint administrators who were served and elected not to defend. The Act does not prescribe the form of consent. Whether consent was given is a factual matter to be proved by the party alleging its absence and cannot be raised by the 2nd defendant through a preliminary objection.
Severability of claims against natural-person guarantors
The claim against the 2nd and 3rd defendants, being natural persons, is not subject to the Insolvency Act consent regime and survives independently
Even if lack of administrators' consent had been proved, that would only affect the claim against the company. The claim against the 1st defendant is severable from the claims against the 2nd and 3rd defendants, who are natural persons not subject to Section 560. Failure to obtain consent or approval therefore does not affect the suit against the guarantors.
Jurisdiction of the Environment and Land Court
The ELC has jurisdiction over the dispute, which arises from a lease and car parking licence agreement, under Article 162(2)(b) of the Constitution and Section 13 of the Environment and Land Court Act
Following the Court of Appeal in Nakumatt Holdings Limited & another v Ideal Locations Limited, the court held that a dispute stemming from a lease falls within the ELC's jurisdiction. The Insolvency Act does not amend the Constitution or confer on the High Court jurisdiction constitutionally vested in courts of equal status. The suit was therefore properly before the ELC.
Legal principles established
#- A company under administration is governed by Section 560 of the Insolvency Act, not Section 432 which applies to liquidation; orders of liquidation and administration cannot both be in force simultaneously
- Whether an administrator gave consent to proceedings under Section 560 is a question of fact to be proved by the party alleging its absence, not a point of law for preliminary objection
- Claims against guarantors who are natural persons are not subject to the consent/approval regime of the Insolvency Act and are severable from the claim against the company
- The Insolvency Act does not confer on the High Court jurisdiction over disputes constitutionally vested in the Environment and Land Court
Court orders
#- 1.The Preliminary Objection dated 18/7/2019 lacks merit and is rejected
- 2.The 2nd defendant shall bear the costs of the Preliminary Objection
- Jurisdiction invoked
- Article 162(2)(b) of the Constitution and Section 13 of the Environment and Land Court Act
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Ismail Rahimtulla Trustees Registered & another v Joint Administrators - Spencon Kenya Limited (Under Administration.) & 2 others [2020] KEELC 1296 (KLR)", Case Analysis (2020). Not stated in the judgment text (E&L Case, Nairobi). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2020/1296/eng@2020-09-24
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.