REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA
AT KAKAMEGA
MISCELLANEOUS CASE NO. E22 OF 2021
REHEMA MARENDE OMULISA.....................................................................APPLICANT
VERSUS
MWANAIDI AUMA HAMISI........................................................................RESPONDENT
RULING
1. These proceedings began at the Kadhi’s court, where they were initiated as Kakamega KCMisc. Application No. 11 of 2019, over death benefits that had accrued to the late Ibrahim Omulisia Keya, to be referred to as the deceased, a former employee of the County Government of Kakamega, being NSSF benefits, his last salary and death gratuity with the Lapfund. The dispute placed before me relates to the moneys held by the Lapfund, which the deceased had allegedly nominated Rehema Maranda Melisa, the applicant herein, his daughter, as the beneficiary of the said funds, and the moneys were deposited into her account.
2. The deceased was a polygamist. He had married twice. The respondent is from the other house. When the funds from Lapfund was paid to the applicant, she moved the Kadhi’s court to block the release of the money by the bank the applicant, ostensibly on the basis that the same formed part of the estate of the deceased, and should have been made available to the estate for distribution to all the survivors of the deceased.
3. In the application before me, the applicant argues that the deceased had exercised his right and nominated her as the beneficiary of the funds held at Lapfund, and that the making of orders by the Kadhi’s court, freezing her account, to stop her from utilizing the said funds, amounted to a violation of her rights.
4. The only question for me to determine whether the said funds had been nominated to the applicant, and, if so, whether they were available for handling as part of the e state of the deceased.
5. The moneys in dispute are managed by a retirement benefits scheme. Such funds are governed by the Retirement Benefits Act, Cap 167, Laws of Kenya. Under section 36A of the Retirement Benefits Act, upon the death of a member of a scheme, the benefit payable from the scheme shall not form part of the estate of the deceased, for the purpose of administration, and that the said funds shall instead be paid by the trustees of the scheme in accordance with the scheme rules.
6. Subsidiary legislation made under the Retirement Benefits Act, that is the Retirement Benefits (Occupations Retirement Benefits Schemes) Regulations, 2000, carries similar provisions, at regulation 23, where it directs schemes to make rules providing that upon the death of a member, the benefits payable from the scheme, be paid to the nominated beneficiary, and where the member fails or omits to nominate a beneficiary, the trustees of the scheme ought to have discretion to determine how the benefits were to be distributed amongst the dependants of the deceased member. The regulation further states that the nomination is not binding on the scheme, for the trustees are given discretion to refuse to pay according to the nomination, for reasons to be recorded.
7. The effect of the provisions in the Retirement Benefits Act and the Retirement Benefits (Occupations Retirement Benefits Schemes) Regulations, 2000 is that retirement benefits do not form part of the estate of the deceased, and should not be administered at any stage under succession law. The investment ought to be paid to the persons that the member of the scheme has nominated. If there are no nominees then the trustees of the scheme will not hand over the funds to the estate, instead the trustee of the scheme should determine how the money is to be distributed amongst the dependants of the deceased. In addition, the trustees have discretion to disregard the nomination, for reasons to be recorded or given, and proceed to pay the money to the dependants of the deceased, just like in the case where there is no nomination. Nominations under the Retirement Benefits Act are, for that reason, said to be discretionary, as opposed to being mandatory or binding.
8. The courts have pronounced themselves on the law on retirement benefits. In In the Matter of the Estate of Alice Oriedo Okeng’o alias Alice Okeng’o Oriedo Kakamega HCSC No. 151 of 2009 (Mwita J) (unreported), the court stated that pension or retirement benefits are not free property, and the Retirement Benefits Act has excluded them from the estate of the deceased for the purposes of administration. It was stated that the persons entitled to such pension payments access them in accordance with the terms of the trust deeds and the rules governing the particular pension scheme, rather than through the estate. In In re Estate of Carolyne Achieng Wagah (Deceased) [2015] eKLR (Musyoka J), it was said that where issues arise with respect to nominated funds in a pension or retirement scheme, the process of addressing them was that set out in the Retirement Benefits Act and the subsidiary legislation to it. See also David Gachura Mukuru vs. Jackline Mbithe [2016] eKLR (Gikonyo J).
9. What I have stated above constitutes the law on the matter. The record before me is scanty. I have not seen any evidence that the deceased had nominated his funds with Lapfund to the applicant. In the circumstances, all I can state is that if there is a nomination on record held by Lapfund in favour of the applicant, then she is entitled to the nominated funds, unless the trustee exercise discretion to pay the same against the nomination. If the Lapfund decides to pay against the nomination, it would also be acting fully within its power. A dispute relating to the nomination, whether contesting the nomination or the decision by the trustees to pay against the nomination, ought not be escalated to court, before the parties exhaust the dispute resolution mechanisms set out in the Retirement Benefits Act and the Retirement Benefits (Occupations Retirement Benefits Schemes) Regulations, 2000.
10. The final order that I make herein is that the applicant’s account should remain frozen, with respect to the retirement benefits, until she provides evidence that there is a nomination in her favour duly executed by the deceased. Upon the furnishing of such proof, the orders made by the Kadhi’s court shall be set aside, and the matter referred to the relevant dispute resolution mechanisms set up under the Retirement Benefits (Occupations Retirement Benefits Schemes) Regulations, 2000. If no proof is availed, the said freezing order shall subsist, but the Kadhi’s court shall still be obliged to refer the matter to the dispute resolution mechanisms established under the Retirement Benefits (Occupations Retirement Benefits Schemes) Regulations, 2000, for the court has no jurisdiction to deal with the dispute as a succession issue, in view of section 36A of the Retirement Benefits Act. The freezing order shall be lifted only after the dispute is resolved by the dispute resolution mechanisms established under the Retirement Benefits (Occupations Retirement Benefits Schemes) Regulations, 2000. Let the trial court file be returned to the Kadhi’s court. The High Court file shall be closed.
11. It is so ordered.
DATED, SIGNED AND DELIVERED IN OPEN COURT AT KAKAMEGA THIS 17TH DAY OF SEPTEMBER 2021
W. MUSYOKA
JUDGE