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ELCStruck OutNotice of Motion dated 22/01/2021 ( JR No. 263 of 2019-related taxation matter)· [2021] KEELC 1536 (KLR)

Mbugua Nganga and Co Advocates v Kenya Planters Cooperative Union Limited [2021] KEELC 1536 (KLR)

High Court of Kenya
12 October 2021
JKJ. G. Kemei
1,656 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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An advocate lost a Kshs. 46.9 million fee claim because he sued Kenya Planters Co-operative Union in liquidation without first getting the court's permission.

What this practically means

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Executive summary

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The Applicant advocate filed a notice of motion dated 22/01/2021 seeking judgment of Kshs. 46,965,845.96 against Kenya Planters Co-operative Union Ltd in terms of a Certificate of Taxation issued on 11th June 2020, with interest at 14% per annum, and adoption of the certificate as a decree of the Court. The Applicant relied on section 51(2) of the Advocates Act, contending that the retainer was undisputed and the certificate of costs unchallenged and therefore final. The Respondent opposed through its liquidation team leader, Stephen Kamau Njoroge, arguing that KPCU had been placed under liquidation by the Commissioner for Cooperative Development on 23/8/2019, that no legal entity called KPCU Ltd existed, that the taxation proceeded ex parte, and that the Applicant's remedy lay in lodging a claim with the liquidators under the Cooperative Societies Act. The Respondent relied on the Court of Appeal's stay in CA No. 76 of 2020, which maintained status quo ante pending appeal and thus reverted KPCU to liquidation despite the High Court's quashing of the liquidation in JR 263 of 2019. The Court framed two issues: competence and merit. Holding that the Respondent remained under liquidation when the application was filed, and applying section 432(2) of the Insolvency Act, section 64 of the Cooperative Societies Act (importing section 228 of the repealed Companies Act), and the Kagaa Farmers' precedent, the Court found that proceedings against a company in liquidation without leave are a nullity. The application was struck out with no orders as to costs.

Key legal issues

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01

Competence of the application given the Respondent's liquidation

Holding

The application was incompetent because the Respondent was under liquidation when it was filed and no leave of the Court had been obtained.

Reasoning

The Court of Appeal stayed the High Court judgment in JR 263 of 2019 quashing the liquidation, maintaining status quo ante and thereby reverting KPCU to liquidation. Under section 432(2) of the Insolvency Act and section 64 of the Cooperative Societies Act (applying section 228 of the repealed Companies Act), proceedings against a society in liquidation require leave. The applicant obtained no leave, so the application was a nullity and was struck out.

p. 2
02

Effect of the Court of Appeal stay in CA No. 76 of 2020

Holding

The stay maintaining status quo ante reverted KPCU to a state of liquidation notwithstanding the High Court's quashing order.

Reasoning

The High Court in JR 263 of 2019 had quashed the Commissioner of Cooperatives' decision to liquidate KPCU. The Court of Appeal on 19/3/2021 granted a stay and decreed status quo ante, meaning the setting aside of the liquidation was stayed. There being no evidence the liquidation had been set aside, appealed or vacated, the Respondent remained in liquidation on the date the application was filed.

p. 2

Legal principles established

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  • When a company or co-operative society is in liquidation, legal proceedings against it may be begun or continued only with the leave of the Court and subject to such conditions as the Court considers appropriate.
  • Proceedings undertaken against a company under liquidation without leave are a nullity.
  • Section 64 of the Cooperative Societies Act applies the winding-up provisions of the Companies Act mutatis mutandis to co-operative societies.

Court orders

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  1. 1.The application is struck out
  2. 2.No orders as to costs

Authorities

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Legislation

  • Advocates Actsection 51(2)
  • Cooperative Societies Actsections 62-67, 62(1)(b)(c), 64, 65, 66 and Schedule
  • Companies Act (repealed) Cap 486sections 225, 228, 235
  • Insolvency Act, 2015section 432(2)

Cases cited (7)

  • Lubulellah & Associates Advocates v N K Brothers Limited
    [2014] eKLR
  • Gichuki King'ara & Co. Advocates v Mugoya Construction & Engineering Ltd
    [2015] eKLR
  • Re Kenya Bus Services Ltd
    [2019] eKLR
  • Michael Kadowee Karisa v African Safari Club (In Liquidation through its liquidator, Official Receiver) Interested Party UAP Provincial Insurance Co. Ltd
    [2019] eKLR
  • Kagaa Farmers' Co-operative Society v Daniel Githiora Garuha & another
    [2019] eKLR
  • Civil Appeal No. 367 of 2014 (arising from JR 312 of 2014)
  • Civil Appeal No. 76 of 2020 (arising from JR 263 of 2019)
Jurisdiction invoked
Inherent jurisdiction to adopt certificates of taxation under section 51(2) of the Advocates Act; competence determined under the Insolvency Act, 2015, the Cooperative Societies Act and (repealed) Companies Act Cap 486

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, "Mbugua Nganga and Co Advocates v Kenya Planters Cooperative Union Limited [2021] KEELC 1536 (KLR)", Case Analysis (2021). Notice of Motion dated 22/01/2021 ( JR No. 263 of 2019-related taxation matter). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2021/1536/eng@2021-10-12

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