Benson Mutuma Muriungi v C.E.O. Kenya Police Sacco & another [2016] KEHC 7145 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT MERU

SUCCESSION CAUSE NO 129 OF 2015

IN THE MATTER OF THE ESTATE OF MARKSON KIMATHI MUTUMA (DECEASED)

BENSON MUTUMA MURIUNGI….....…….………………..PETITIONER

Versus

 C.E.O. KENYA POLICE SACCO…….……..…….…..1^ST RESPONDENT

RULING

Intermeddling: Are Sacco benefits part of Estate?

[1 ]  Before me is an application seeking the committal of the Respondents to prison or to pay a fine for intermeddling with the free property of the deceased. The application is expressed to be brought under section 45 of the Law of Succession Act, CAP 160 Laws of Kenya, Rule 73 of the Probate and Administration Rules and any other enabling provision of the law. The application is anchored upon the affidavit of Benson Mutuma Muriungi and other grounds which were adduced during the hearing thereof. Mr. Riungu ably argued the case for the Applicant. Counsel emphasized that the deceased was a policeman and a member of the Police SACCO where he had money as well as benefits. According to Mr. Riungu, the said benefits forms part of the free property of the deceased, and could therefore, be dealt with by a personal representative of the deceased. And since there is no grant that had been made to the 1^st Respondent, she did not have the authority in law to deal with the benefits in question. Mr. Riungu was categorical that the by-laws of the SACCO do not constitute ‘’any other written law’’envisaged under section 45 of the Law of Succession Act, and so cannot confer authority on the Respondents to pay over the benefits of the deceased to a person other than a personal representative of the deceased.  Therefore, he urged that, by paying out, and receiving the benefits belonging to the deceased, the 2^nd and 1^st Respondent, respectively committed acts of intermeddling with the free property of the deceased for which they should be committed to prison or penalized to pay a fine as provided for in section 45 of the Law of Succession Act. Counsel cited judicial authority but he distinguished all the authorities cited by the Respondents as being inapplicable in this case. These authorities are duly filed in court.

Respondents: Benefits not part of estate

[2]  The Respondents’ counsels Mr. Igweta and Mr. Ndumbi argued that the benefits in issue were not part of the estate of the deceased and so they needed not a grant to deal with those benefits. Accordingly, the Respondents did not commit any acts of intermeddling. The Respondents urged that, in accordance with the Kenya Police Sacco Society Ltd by-laws Number 20 and 21, every member of the SACCO was entitled to nominate in writing one or more persons as nominee(s), and such duly nominated person shall be entitled to payments of value of the deceased member’s deposits, interest, and dividend after deducting monies owed to the SACCO. By this nomination, the benefits of the deceased member cease to be part of the estate property and are payable to the nominee of the deceased member. They filed authorities to support their stand point.

DETERMINATION

Issue

[3]   I have considered all the arguments by counsels herein, the law and facts of the case. I am convinced that the million dollar issues are two:-

(1) Whether the benefits in the Police Sacco formed part of the estate; and

(2) Depending on the answer to (1) above, whether the Respondents are guilty of intermeddling with the free property of the deceased.

[4]  Essentially, this application rotates around section 45 of the Law of Succession Act. The section provides as follows:-

                        Protection

45.       No intermeddling with property of deceased person

(1)        Except so far as expressly authorized by this Act, or by any other written law, or by a grant of representation under this Act, no person shall, for any purpose, take possession or dispose of, or otherwise intermeddle with, any free property of a deceased person.

(2)        Any person who contravenes the provisions of this section shall—

(a) be guilty of an offence and liable to a fine not exceeding ten thousand shillings or to a term of imprisonment not exceeding one year or to both such fine and imprisonment; and

(b) be answerable to the rightful executor or administrator, to the extent of the assets with which he has intermeddled after deducting any payments made in the due course of administration.

What is intermeddling?

[5]  There is no specific definition of the term intermeddling provided in the Law of Succession Act. The Act simply prohibits taking possession of or disposing of, or otherwise intermeddling with, any free property of a deceased person by any person unless with the express authority of the Act, any other written law or a grant of representation under the Act. But in my understanding, the use of wide and general terms such as; ‘’for any purpose’’ and‘’or otherwise intermeddle with’’ in the Act portends that the category of the offensive acts which would amount to intermeddling is not heretically closed or limited to taking possession and disposing of the property of the deceased. I would include in that category such acts as; taking possession, or occupation of, disposing of, transferring, exchanging, receiving, paying out, distributing, donating, charging or mortgaging, leasing out, interfering with existing lawful liens or charge or mortgage of the free property of the deceased in contravention of the Law of Succession Act or any other written law. I do not pretend to close the list either or make it exhaustive. The list could be long. However, any act or acts which will dissipate or diminish or put at risk the free property of the deceased are acts of intermeddling in law.

[6]   I treat this subject as important because intermeddling with the free property of the deceased is a very serious criminal charge for which the person intermeddling may be convicted and sentenced to a jail term or fine or both as prescribed under section 45 of the Law of Succession Act. Parties should also note that the law has emphasized the need to protect the free property of the deceased by providing for a very firm stance on intermeddling; has clothed the court with wide powers to punish for intermeddling and to issue any appropriate order(s) of protection of the estate against any person. Even the police officers and administration officer have powers to take steps towards protection of and prevention of intermeddling with the free property of the deceased. This is the nature of matters before me. I will now proceed to determine whether the assets or funds in question form part of the free property of the deceased. Depending on my finding thereto, I will decide whether there has been intermeddling with the free property of the deceased.

[7]  Mr. Ondieki argued that the property which is subject of this application is not part of the free property of the deceased. Mr. Riungu argued that the assets form part of the estate of the deceased, hence, by paying out those funds the Respondents intermeddled with the free property of the deceased. Based on these arguments, I will propose a hypothesis: Not all properties which relate to the deceased form part of the estate for purposes of the Law of Succession Act CAP 160 of the Laws of Kenya. I now set out to prove or deny this hypothesis based on the law.

What constitutes estate or free property of the deceased?

[8]  According to the Law of Succession Act:

"Estate"means the free property of a deceased person;             

And:

"Free property", in relation to a deceased person, means the property of which that person was legally competent freely to dispose during his lifetime, and in respect of which his interest has not been terminated by his death;

Case law would shed more light on these provisions and I am content to cite a passage from the Indian case of Balgangadhar Tilak vs. Ganesh Srikrishna 26 Ilr Bombay 792, that:

“The grant of probate only perfects the representative title of the executor to the property which belonged to the testator and over which he had disposing power...”

Therefore, a reading of the law reveals that there are properties which the deceased cannot freely dispose of during his lifetime, and in respect of which his interest has been terminated by his death; such property does not form part of the free property of the deceased. Which are these properties?

[9]  Literary works provide useful information. For instance, William Musyoka, Law of Succession at pages 235 and 236 discusses some types of assets that do not vest in the deceased’s personal representatives; such property include:-

(a) Property held by the deceased as a joint tenant;

(b) Sums payable under a discretionary pension scheme;

 (c) Property subject matter of a donatio mortis causa; and

(d) Property of the deceased which is the subject of a statutory nomination made by the deceased.                                                                                            

Up to this point, it is clear that some type of assets which relate to the deceased person may not necessarily form part of the estate of the deceased for purposes of Law of Succession Act. I will discuss each of these categories or types of assets in anticipation of a pleasing contrast, for better understanding of the law as well as proper grounding of the decision that I will make in this application.

Property held by the Deceased as a Joint Tenant

[10]  Property held under a joint tenancy is subject to the rule of survivorship. Under the said rule the deceased ceases to be entitled to the property on his death where he or she is survived by one or more joint tenants; the surviving joint tenant takes the deceased’s share by virtue of their surviving the deceased. Therefore, property in joint tenancy or ownership will only form part of the deceased’s estate where the deceased is the only surviving joint tenant.

Money Payable under a Discretionary Pension Scheme

[11]  As a general rule, discretionary pension schemes may allow the contributor to nominate a third party who will receive themember’s benefits on the death of the contributor. However, such nomination is merely indicative of the deceased’s contributor wishes; it neither gives property rights to the nominee nor legal ownership of any part of the Trust to the deceased contributor so as to form part of the deceased's estate. Similarly, the trustees are not bound to pay the nominated funds to the nominee. The reason is because the trustees are the legal owners of the Trust property. Nevertheless, the discretion of the Trustees is guided at first instance by the nomination which is taken to be the wishes of the deceased contributor. And where the trustees exercise their discretion in favour of the nominated person, they pay the lump sum or pension directly to the third party. See for example rule 19 of the Retirement Benefits (Individual Retirement Benefits Schemes) Regulations 2000, which provide that upon the death of a member, the benefits payable from the scheme should be paid to the nominated beneficiary, and if the deceased had not named a beneficiary, then the trustees should exercise their discretion in the distribution of the benefits to the dependants of the deceased.See the case of In the Matter of the Estate of Alice Oriedo Okeng’o Alias Alice Akeng’o Oriedo Kakamega Succession Cause No.151 of 2009 Mwita J observed as follows:

“…the pension payment cannot be said to be free property of the deceased. The Retirement Benefits Act has also excluded pension from a deceased person’s estate for purposes of administration. However that does not mean the dependants of the deceased are not entitled to payments. The applicants as dependants of the deceased are entitled to payments from the scheme in terms of both the trust deed and the rules thereto.”

The Subject Matter of a Donatio Mortis Causa

[12]   Another type of assets which do not form part of the estate of the deceased is assets subject of a donatio mortis causa, (gift causa mortis or Gift in Contemplation of Death); such assets pass directly to the donee. A donatio mortis causa is a gift made by a person during their lifetime but in contemplation of his imminent death. See section 31 of the Law of Succession Act.

Property under Statutory Nominations

[13]   On this category of properties, Musyoka J in the case of In the Matter of the Estate of Carolyne Achieng’ Wagah (Deceased) Nairobi High Court Succession Cause No. 1374 of 2004, clearly stated the law as follows:

“It is the law that funds the subject of a nomination do not form part of the nominators estate, and therefore such funds cannot pass under the will of the deceased or vest in his personal representative. Such funds are not subject to the succession process, and should be dealt with in accordance with the law governing nomination. Nominations are statutory, in the sense of them being specifically provided for by a particular statute.”

[14]  In Kenya nominations are prescribed in statutes; statutory nomination. They are permissible mainly in savings and investments in cooperative societies and provident or pension schemes. For example, nominations under the Co-operative Societies Act are statutory. Section 39 (1) of the Co-operative Societies Act provides that upon the death of a member, a co-operative Society may transfer the share or interest of the deceased member to: a person nominated in accordance with the Act or the rules made under it; or if, no person has been nominated, to such person as may appear to be the personal representative of the deceased member. The monies due to the deceased member will only be paid over to the personal representative of the deceased member where there is no valid nomination in place. Accordingly, the property which is subject of a statutory nomination is not free property of the deceased member; it does not pass or vest in the personal representative of the deceased member or to the estate; it passes directly to the nominee. Such property under statutory nomination is administered in accordance with the relevant Act and the regulations thereto. And when such monies are paid in accordance with the nomination by-laws of the Sacco, the payment is not in violation of the law.

[15]  With the above knowledge, the court is properly grounded to determine the application before me. Mr. Riungu’s argument that the by-laws by the SACCO do not constitute ‘’any other written law’’ envisaged in section 45 of the Law of Succession Act looked quite attractive and appealing to the ear. However, the fact thatthe Kenya Police Savings and Credit Co-operative Society Limited and the Kenya Police Sacco Society Limited are duly registered and regulated under the Co-operative Societies Act Cap 490 laws of Kenya and the Sacco Societies Act changes everything.What a pleasing contrast? I have already stated that Section 39 of the Co-operative Societies Act allows the society to pay monies due to a deceased member to a nominee of the deceased member or to such other person who appears to be the personal representative of the deceased member.  The Sacco paid the monies due to the deceased member to the 1^st Respondent who was the duly nominated nominee by the deceased member herein. The nomination and payment was done pursuant to the Co-operative Societies Act and clause 20 and 21 of the Kenya Police Sacco Society Ltd by-laws which provide as follows:-         

                        20. NOMINEE                                 

20.1.    Every member shall nominate in writing one or more persons as nominee(s). The nomination shall be attested to by at least two witnesses who are members of the Sacco society.

20.2.    The names of such nominee(s) shall be entered in the nominee register.

20.3.    Provided that a member shall have the right to change his/her nominee in writing in the presence of at least two attesting witnesses who are members of the Sacco society.

                        21.       PAYMENT TO NOMINEE

21.1.    The Sacco society after obtaining such documentary proof of the death of a member as it may consider necessary, shall pay to the nominee the value of the deceased member’s deposits, interest and dividend after deducting monies owed to the Sacco society, if any. 

Position of by-laws

[16]  Once a Co-operative Society and a SACCO are registered, they enjoy certain statutory privileges; other than becoming body corporates with a seal, perpetual succession, power to sue or be sued, they are also permitted to make by-laws which will regulate the doing of all things which are necessary to give effect their statutory responsibilities as corporate. To show the importance the law has placed on the by-laws by a Co-operative Societies and or a Sacco, one of the essential documents which must accompany an application for registration of a Co-operative Society or SACCO Society is a copy of the by-laws. See sections 6 and 24 of the Co-operative Societies Act Cap 490 laws of Kenya and the Sacco Societies Act, Cap 490A, respectively. The character of the by-laws under the Co-operative Societies Act is stated in sections 12 and 13 of the said Act that:  Once by-laws are registered, they bind the society and the members thereof to the same extent as if they were signed by each member and contained covenants on the part of each member for himself and his personal representatives to observe all the provisions of the by-laws. Therefore, the by-laws in this case were made pursuant to the law i.e. the Co-operative Societies Actand the Sacco Societies Act; they are binding on the Sacco as well as the members and their personal representatives. The by-laws also regulate the operations of the Sacco on all matters contained in the by-laws. Again, these by-laws regulate the relationship among the Sacco, members, their nominees and their personal representatives as the case may be. Of importance, these by-laws give effect to the statutory nominations provided for in the enabling laws. The by-laws do not confer power to make statutory nominations or power to pay dues of a deceased member to such nominees; they simply give the Sacco the practical mechanism on how members will nominate their respective nominees under the law. I should say that statutory nominations are not in any way in conflict with or in contravention of the Law of Succession Act. Therefore, it bears repeating that, disposal of benefits, deposits, interest and dividend due to the deceased member is regulated by the Co-operatives Act and By-laws of the Sacco. Therefore, I do not agree with Mr. Riungu that the payments herein were not authorized by law in the manner envisaged under section 45 of the Law of Succession Act. They were authorized by the Co-operative Societies Act and the SACCO Societies Act.

[17]  I have not been shown any evidence that the deceased did not nominate the 1^st Respondent as his nominee for purposes of receipt of his deposits, interest and dividend from the Sacco society. The Sacco society has stated that the nominee for purposes of by-law No 20 and 21 was the 1^st Respondent to whom they paid the deceased member’s deposit, interest and dividend as per their by-law. In light thereof, with the nomination of the 1^st Respondent as the nominee, she became solely entitled to receive the benefits from the Sacco Society. The monies which are subject of the nomination under the Co-operative Societies Act, the Sacco Societies Act and the by-laws made there to do not form part of the estate of the deceased for purposes of sharing or distribution among the other beneficiaries of the estate. Except, however, if such payments under statutory nomination are received by a person who is also a beneficiary in the estate, it shall be taken into account when the court in a succession cause is determining entitlement in or share of the net estate finally accruing to the particular beneficiary. Accordingly, in paying on behalf of, and by receiving the benefits from the Sacco, the 2^nd Respondent and the 1^st Respondent, respectively, did not commit acts of intermeddling with the free property of the deceased. Before I close, I should state that I will not determine the other arguments by the Respondents on the alleged incompetence of these proceedings in general and on revocation of the grant herein as those issues are directly in issue in the pending applications herein and deserve to be heard on their merits. Similarly, whether the 1^st Respondent was divorced from the Applicant is also a substantive issue which should be canvassed as such in the cause itself.

The upshot     

[18]  The upshot, therefore, is that I dismiss the application dated 24^th August 2015. I will award costs to the Respondent because, looking at the nature and the entire circumstances of the application, they are the successful parties. There is also nothing in law or in their conduct which will impel the court to deny them costs. And, without punishing the Applicant, the Respondents deserve a recompense of the expenses they have committed in defending thisapplication. It is so ordered.

Dated, signed and delivered in open court at Meru this 28^thday of January 2016

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F. GIKONYO

JUDGE

In the presence of:

Mr. Riungu advocate for the applicant

Mr. Murango Advocate for Ndubi advocate for 1^st respondent

Mr. Igweta advocate for the 2^nd respondent.

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F. GIKONYO

JUDGE