The Scope of government’s obligation in the realization of the right to Education of Children from Marginalised and Minority groups
Ndoria Stephen v Minister for Education and 2 others.
Petition No. 464 of 2012
The High Court at Nairobi
Mumbi Ngugi, J
July 30 2015.
Reported by Teddy Musiga & Daniel Hadoto
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Brief facts:
The petition was brought to challenge what the petitioner termed “discriminatory government policies” in provision of education to children from the north and north eastern regions as well as parts of the coast and Rift Valley(what are considered marginalised areas), that barred the children from enjoying their right to education. As a result of discriminatory educational policies by the government, children in those areas were unable to access the right to education on the same basis as children in other more developed parts of the country.
The petitioner amongst others urged the Court to stop the holding of Kenya Certificate of Primary Education (KCPE) and Kenya Certificate of Secondary Education (KCSE) examinations, arguing that if the examinations were allowed to proceed without the issues raised in the instant matter being determined would violate the right to education of the poor, marginalized and children displaced by war.

Issues:
  1. Whether the government of Kenya had violated the right to education of children from marginalised and hardship areas.
  2. Whether the children from marginalized and hardship areas were entitled to special provisions in the admission to secondary schools and public universities.
  3. Whether there was deliberate discrimination and consequently disparity in government resource allocation towards education that resulted into the violation of its obligation to provide access to basic and compulsory education to all children
  4. Whether the respondents had failed to provide learning facilities equitably, as a result of which children from marginalized areas were learning under extreme hardship, thereby, the respondents had violated the provisions of the Constitution and had to be compelled to provide a mechanism that would ensure that facilities were availed to those children.
  5. Whether court could order the abolishing/scrapping out K.C.P.E and K.C.S.E for being unconstitutional and in violation of the right to equality before the law and equal enjoyment of the benefit of the law.
  6. Whether court could order the respondents to produce before it the policies and quotas to be used to ensure that the students from marginalized areas are not disadvantaged or discriminated.
Constitutional Law - fundamental rights and freedoms – right to education - the right of every child to free and compulsory education- enforcement of the right to free and compulsory basic education - realization of the right to free and compulsory basic education by children from marginalised areas and minorities - provision of special education opportunities to children from marginalised areas and minorities- The Constitution of Kenya 2010; articles 53(1)(b) 56(b), 27, 10, 43 (1)(f) and 26; The International Covenant on Economic, Social and Cultural Rights (ICESR) Article 2(1); The Convention on the Rights of the Child (CRC) article 28.
Administrative Law – formulation of government policies - duty of the executive to formulate and implement policies- supervisory power of court over formulation and implementation of policies - The constitution of Kenya 2010; article 21(2), 43

Blacks Law Dictionary 11th Edition defines “discrimination” as under:
The effect of a statute or established practice which confers particular privileges on a class arbitrarily selected from a large number of persons, all of whom stand in the same relation to the privileges granted and between them and those not favoured no reasonable distinction can be found. Unfair treatment or denial of normal privileges to persons because of their race, age, sex, nationality or religion. A failure to treat all persons equally where no reasonable distinction can be found between those favoured and those not

Held:
  1. The Constitution of Kenya 2010 had expressly recognized education as a right for all. Article 43(1) (f) provided that every person had the right to education. With respect to children, article 53 of the Constitution guaranteed to every child the right to free and compulsory education; and article 56 of Constitution required that children from marginalized areas and minorities were to be provided with special educational opportunities.
  2. Article 2(1) of the International Covenant on Economic, Social and Cultural Rights (ICESR) and article 28 of the Convention on the Rights of the Child (CRC), provided that, the right to education had to be realized progressively through local and international economic and technical assistance to the maximum of a state’s available resources.
  3. The Committee on the rights of the child and the Committee on Economic, Social and Cultural General Comment No 13 on the right to education provided that, although the right to education was a progressive right and was subject to availability of resources, the prohibition against discrimination and inequality was subject neither to progressive realization nor availability of resources but applied fully and immediately to all aspects of education.
  4. The government had taken steps with respect to realization of the right to education for all. Therefore there was no a basis for alleging discrimination against the children by government. The petitioner’s arguments with respect to discrimination had not met the legal definition of the term.
  5. The Constitution provided that, the formulation of policy and implementations thereof were within the province of the executive. The state had shown that it had policies in place, and that it had been taking measures, including affirmative action, to ensure that children in marginalized areas accessed education. Article 21 (2) of the Constitution of Kenya, 2010 enjoined the executive to “take legislative, policy and other measures, including the setting of standards, to achieve the progressive realisation of the rights guaranteed under Article 43 of the Constitution of Kenya, 2010.”
  6. Even assuming that the disparities in the area of education were as a result of discrimination, from the material placed before the court the state was acting in accordance with its constitutional duty under article 27(6) of the Constitution which required the state, “to give full effect to the realisation of the rights guaranteed under that article, the State had to take legislative and other measures, including affirmative action programmes and policies designed to redress any disadvantage suffered by individuals or groups because of past discrimination.”
  7. The state had not failed in its obligations to set policies that would have accorded children in marginalized areas access to basic education.
  8. The state had put in place a quota system for admission of children from marginalized areas to secondary and university. Making a declaration to the effect that children from marginalised and hardship areas were entitled to special provision in the admission to secondary schools and public universities in the circumstances would have been redundant as the state was already doing that which the petitioner wished it to be compelled to do.
  9. The government had taken various steps to ensure access to education of children in the marginalized areas. Those included the setting up of grants and bursaries, mobile schools, boarding primary and secondary schools, and in some cases, lunch in school. What had not emerged from the proceedings was the effectiveness of such measures.
  10. The state was taking deliberate steps to ensure that children in marginalized areas had access to education on the same level with children in other areas of the country.
  11. Ordering the respondents to produce before the court policies and quotas that had to be used to ensure that the students from marginalised areas were not disadvantaged or discriminated was unnecessary as the respondents did produce the policies and measures aimed to ensuring access to education.
  12. The petitioner by asking court to abolish Kenya Certificate of Primary Education (KCPE) and Kenya Certificate of Secondary Education (KCSE) was metaphorically speaking, asking the court to throw out the baby with the bath water: because the children from marginalized communities did not access educational facilities and opportunities at the same level as those from other parts of the country, then the entire examination system had to be thrown out.
  13. The prayers to abolish KCPE and KCSE, were essentially, somewhat reckless orders to seek, and the Court could in good conscience even not contemplate them.
  14. There were concerted efforts being made to ensure access to education for the petitioner’s target group. The challenge had been to monitor the implementation of the programmes to ensure realization of the right to education.
  15. Scrapping the National examinations through an order of the Court, without careful consideration of the advantages or benefits of such action against the shortcomings of the present situation, could not work for the benefit of the children in marginalized areas.
Petition dismissed.
Each party was to bear its own costs of the petition.


Kenya Law
Case Updates Issue 027/2015
Case Summaries
TORT Liability of an occupier for criminal actions of third parties (on his property) under section 3 of the Occupiers’ Liability Act.

Soma Properties Limited v H A Y M (suing as the administrator of the estate of S H (deceased).
Civil appeal no. 74 of 2005
Court of appeal at Nairobi
J E M Githinji, W Ouko and J Mohammed, JJ.A
June 19, 2015
Reported by Teddy Musiga & Daniel Hadoto

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Brief facts:
The respondent had taken their children to Sarit center for an outing. As they walked out of the building, they walked right into cross fire of a gun battle between police officers and robbers who were fleeing the Kenya Commercial Bank. In the exchange of gun fire, their daughter (S) was hit on the neck and subsequently succumbed to the injuries.
The respondent blamed Soma Properties the appellant (proprietor of the land that where Sarit Centre Shopping Complex stands) and instituted an action claiming general and special damages attributing negligence on the part of the appellant, that the shooting and resultant death of the deceased was due to the appellant’s breach of common duty of care owed to the deceased by virtue of being in the premises lawfully.
The appellant denied liability and raised the defense of Volenti non fit injuria. The trial court dismissed that defence and held that the appellant owed but breached a common duty of care to the deceased and was as a result 100% liable for her death. The trial court also reviewed the consent recorded by the parties and substituted the original agreed award of Kshs. 20,000/= with Kshs. 1,000,000/=. In total, the trial court awarded the sum of Kshs 3,351,159.60/= which aggrieved the appellant hence this appeal.

Issues:

  1. Whether an occupier (the appellant) owes visitors (the respondent) a common duty of care to ensure that visitors are reasonably safe while using the premises for the purpose for which they are invited or permitted by the occupier to be there under the Occupier Liability Act.
  2. Whether the appellant met the expected statutory standard of care in exercising their duty of care.
  3. What is the standard of care provided for the in the Occupier Liability Act?
  4. Whether there exists a common duty of care imposed on an occupier to protect those lawfully on his premises against criminal acts of third parties.

Tort - negligence - occupier’s liability - duty and standard of care imposed on a proprietor - duty and standard of care imposed on an occupier for acts criminal acts of a third party - whether there exists a common duty of care imposed on an occupier to protect those lawfully on his premises against criminal acts of third parties. Read More...

Occupiers’ Liability Act Section 2 provided that;

1) The rules so enacted in relation to an occupier of premises and his visitors shall also apply, in like manner and to the like extent as the principles applicable at common law to an occupier of premises and his invitees or licensees would apply, to regulate—

(a) the obligations of a person occupying or having control over any fixed or movable structure, including any vessel, vehicle or aircraft; and
(b) the obligations of a person occupying or having control over any premises or structure in respect of damage to property, including the property of persons who are not themselves his visitors.

Held:

  1. The Occupier Liability Act imposed a duty on the land owners to those who came onto their land to ensure their reasonable safety while on the land.
  2. Sections 2 and 3 of the Occupier Liability Act imposed a duty of care on an occupier and proceeded to define the standard of care that was necessary to fulfil that duty. The words “reasonable” and “reasonably” in those sections emphasized the exact standard of care expected of an occupier. It was a standard measured against the care to be exercised by a reasonably prudent person in the circumstances including the practices and usages prevailing in the community and the common understanding of what was practicable and what was to be expected.
  3. The standard of reasonableness was not one of perfection. Thus an occupier could escape liability if it was established that in the circumstances of the case, there were reasonable systems in place to secure the premises against foreseeable risk and danger.
  4. The party advancing a claim on tort bore the burden of proof; the standard of which is on a balance of probabilities. Section 3 of the Act did not create a presumption of negligence against the occupier of the premises whenever a person was injured on the premises. A plaintiff who invoked that section had to still be able to point to some act or omission on the part of the occupier which caused the injury complained of before liability could attach.
  5. In Kenya, on the basis of the Occupiers’ Liability Act and the common law there was a duty imposed on the occupier to maintain the premises, including all the common areas which were part of the premises in a manner that did not, in all the circumstances, pose any threat to injury or damage to those on the premises, including protection against criminal acts of third parties as long as the risk, injury and damage were foreseeable and the occupier had not restricted, modified or excluded his duty to any visitor or visitors by agreement or otherwise.
  6. Even though the duty did not change, the factors which were relevant to an assessment of what constituted reasonable care had to be necessarily very specific to each situation on the question of foreseeability. To determine when a crime was foreseeable would depend on a number of factors such as the nature of the business, frequency and similarity of prior incidents of crime on the premises and the neighborhood.
  7. By the very nature of the appellant’s business, a larger traffic of people, going shopping and to the banks, were expected to visit the property. All the people lawfully on the premises expected, for the period they were there to be safe. Thus the trial court properly found that the appellant owed to the respondent a common duty of care.
  8. From the records, there could be no question that there was a foreseeable risk in view of the previous robberies and thefts in the premises. There was a sub-lease in which tenants agreed to pay the appellant to enhance security in the premises as well as an indemnity insurance policy, pointing to the foreseeable risk. Bearing that in mind, could it be said that the appellant discharged its “common duty of care” to see that the deceased was reasonably safe in using the premises?
  9. The common duty of care imposed on the occupier a duty to take such care as in “all the circumstances of the case was reasonable” for the safety of his premises. The shooting and wounding of the deceased was not due to lack of precautionary measures but an unfortunate misfortune thus the doctrine of volenti non fit injuria was applicable. Just like the appellant, the deceased did not have full knowledge of the extent of the risk that lay ahead before the shooting.
  10. To demand, like the trial court did that the appellant ought to have done more, in the circumstances and requiring it to have put in place “adequate” measures, was to raise the threshold beyond that set by statute. Because even with the best precautions, robberies still occurred. But what was sought even in the circumstances was that reasonable efforts had to be employed to assure visitors of their safety.
  11. [Obiter]The incident occurred in 1999 and the standard of care expected of the appellant was that which was practicable and expected of it in the circumstances of the time. Compared to today, there were then fewer security threats. Currently, things are very different and the standard of precaution is higher. The danger of armed robbery and increased threat of terrorist attack serves to remind every citizens, business, clubs, buses, aircrafts and shopping malls owners to maintain a high level of vigilance.

    12. Concurring judgment of E M Githinji, JA
  12. Section 3 (2) of the Occupier Liability Act provided that the common duty of care imposed by the Act was for the occupier to take reasonable care in all the circumstances of the case to see that the visitor was reasonably safe. The Act neither imposed on the occupier an absolute common duty of care nor guaranteed a visitor absolute safety. The standard or degree of care depended on the facts of each case.
  13. The respondent failed to provide concrete evidence to prove on a balance of probabilities that the respondent breached the common duty of care. On the contrary, the appellant called on concrete evidence which tended to show that the premises were reasonably safe, that the security provided was reasonable and that there was no practice in the industry to install either metal detectors or CCTV cameras in shopping centers at that time and that it was not practical to use them without interfering with business.
  14. The respondent did not establish a breach of common duty of care by the appellant. The appeal allowed on liability and set aside the judgment appealed from.

The learned Judge in failing to apply the correct principles of the law and the statutory standards erred and came to a wrong decision.
Appeal allowed with the result that the judgment and decree in HCCC No. 1517 of 2002 set aside.
The notice of cross-appeal had no merit and is dismissed.
No orders as to costs on account of the unfortunate circumstances presented in this matter.
CONSTITUTIONAL LAW An Applicant in a Constitutional Petition has Locus Standi to Approach the Constitutional Court where the Petition affects the Public

Haki na Sheria Initiative v Inspector General of Police & 2 others [2015] eKLR
In the High Court of Kenya at Garissa
Petition 6 Of 2015
G. Ndulu, J
July 22, 2015
Reported by Andrew Halonyere &John Ribia

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Brief facts:
Following the attack on Garissa University by terrorists, attacks that led to the loss of over 148 Kenyans, the Inspector General of Police declared a curfew in the Garissa, Wajir, Mandera, and Tana River Counties between the hours 6.30 PM and 6.30 AM. The curfew was originally set for a period of 13 days and later extended for a further 61 days.
The petitioner approached the Court via a Constitutional Petition seeking orders that declared the curfew unconstitutional as it affected the enjoyment of fundamental rights under the constitution and sought conservatory orders to restrict the respondents from effecting the curfew pending the determination of the suit.
The respondent objected on grounds that the application was premature and frivolous, as the curfew had expired. They also objected to the application on the grounds that the petitioner had no locus standi.

Issues:

  1. Whether a Constitutional Petition against a curfew that was about to expire or a Constitutional Petition against a curfew that could be extended was premature and frivolous.
  2. Whether an applicant in a Constitutional petition had locus standi to approach the Constitutional Court where the petition affected the public.
  3. Whether the Curfew was unlawful as it extended beyond the limit of 7 days as stipulated in Section 8 of the Public Order Act.

Constitutional Law – locus standi – locus standi to approach Constitutional Court – whether the applicant in a Constitutional petition has locus standi to approach the Constitutional Court where the petition affects the public – Constitution of Kenya, 2010, article 22(1), (2)(b) and (c)

Administrative Law-Public interest – administrative action – curfew - whether the Curfew was unlawful as it extended beyond the statutory limit of 7 days – Public Order Act, (cap) 56 , section 8. Read More...

Constitution of Kenya, 2010
Article 22 (1)

(1) Every person has the right to institute court proceedings claiming that a right or fundamental freedom in the Bill of Rights has been denied, violated or infringed, or is threatened.

Article 22 (2)(b) and (c)

(2) In addition to a person acting in their own interest, court proceedings under clause (1) may be instituted by;

(b) a person acting as a member of, or in the interest of, a group or class of persons;
(c) a person acting in the public interest.

Public Order Act, Cap 56 , section 8.

(1) The Cabinet Secretary, on the advice of the Inspector-General of the National Police Service may, if he considers it necessary in the interests of public order so to do, by order (hereinafter referred to as a curfew order) direct that, within such area and during such hours as may be specified in the curfew order, every person, or, as the case may be, every member of any class of persons specified in the curfew order, shall, except under and in accordance with the terms and conditions of a written permit granted by an authority or person specified in the curfew order, remain indoors in the premises at which he normally resides, or at such other premises as may be authorised by or under the curfew order.

(2)(a) It shall be a condition of every permit granted under subsection (1) of this section that the holder thereof shall at all times while acting under the authority thereof during the hours of darkness carry a light visible at a distance of twenty-five feet.
 (b) Subject to paragraph (a) of this subsection, a permit under subsection (1) of this section may be granted subject to such conditions, to be specified in the permit, as the authority or person granting it may think fit.

(3) A curfew order shall be published in such manner as the authority making it may think sufficient to bring it to the notice of all persons affected thereby, and shall come into force on such day, being the day of or a day after the making thereof, as may be specified therein, and shall remain in force for the period specified therein or until earlier rescinded by the same authority or by the Minister as hereinafter provided:

Provided that no curfew order which imposes a curfew operating during more than ten consecutive hours of daylight shall remain in force for more than three days, and no curfew order which imposes a curfew operating during any lesser number of consecutive hours of daylight shall remain in force for more than seven days.

(4) Deleted by Act No. 19 of 2014, s. 4(b)

(5) The variation or rescission of a curfew order shall be published in like manner as that provided in subsection (3) of this section for the publication of a curfew order.

(6) Any person who contravenes any of the provisions of a curfew order or any of the terms or conditions of a permit granted to him under subsection (1) of this section shall be guilty of an offence and liable to a fine not exceeding ten thousand shillings or to imprisonment for a term not exceeding three months, or to both such fine and such imprisonment.

(7) A certificate under the hand of the authority making, varying or rescinding a curfew order, specifying the terms, and the date and manner of publication, of such order, variation or rescission, shall be prima facie evidence thereof in all legal proceedings.

(8) Any person who, without lawful excuse, carries or has in his possession, in any area in which a curfew order is in force and during the hours during which the curfew imposed thereby is operative, any offensive weapon shall be guilty of an offence:

Provided that no person shall be convicted of an offence under this section if he proves to the satisfaction of the Court that he carried or had in his possession the offensive weapon—

(i) solely for domestic or defensive purposes within enclosed premises which he lawfully occupied or in which he was lawfully present; or
(ii) with the authority of his employer and solely for domestic or defensive purposes within enclosed premises in the lawful occupation of his employer. [Act No. 53 of 1960, s. 6, L.N. 402/1963, L.N. 153/1965, Act No. 19 of 2014, s. 4.]

Held:

  1. The fact that the curfew was about to expire, and that if the curfew was to continue it would have to be extended, did not make the petition premature. The mischief had already been in operation and that mischief required to be addressed by the Court when the applicant approached the court. The application was not premature or frivolous.
  2. The petitioner had locus standi to approach the Court. There was no requirement that the petitioner in a Constitutional petition was to be given permission by members of the public before the petitioner approached the Court; even if the orders sought would have affected the public, or be directly affected by the violation challenged. The Constitution of Kenya, 2010 widened the latitude of applicants who pursued claims for violation of Constitutional rights. All those who fell within the parameters of article 22 of the Constitution had locus standi to approach the Court.
  3. However, the issue of whether or not the curfew was unconstitutional because it affected the enjoyment of fundamental rights under the Constitution was a matter that could not be determined by the Court at the preliminary stage.
  4. The 1st and 2nd respondents had powers to impose a curfew under Section 8 of the Public Order Act. The said section limited the period of the curfew to a maximum of seven days only when the curfew covered hours of daylight. The curfew did not cover the hours of daylight. The Court, at the preliminary stage, was not persuaded that the curfew could not last for a maximum of seven days.
  5. The petitioner established that he had a locus standi and a prima facie case at the preliminary stage. However, though the petitioner had locus standi and a prima facie case, it failed to show the Court that it would suffer damage to its Constitutional rights should the conservatory orders sought not be granted.
Application dismissed, costs of the application would be determined in the main petition.
COMPANY LAW

A Shareholder Can File a Suit Against the Registrar General of Companies for Purposes of Investigating or Inspecting the Affairs of a Company or Rectification of the Members Register.

Obsidition Investments Limited v Attorney General & another [2015] eKLR
In the High Court of Kenya at Nairobi
Miscellaneous Cause 490 Of 2014
F Gikonyo, J
July 22, 2015
Reported by Andrew Halonyere & John Ribia

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Brief facts:
The Registrar General of Companies suspected that the applicant was being mishandled. Subsequently the respondent quashed an allocation of shares to shareholders by the applicant, giving reason that the allocation was not supported by a board resolution.
The applicant moved to Court to seek orders declaring that the decision of the respondent was unlawful and that the respondent possessed no power that would have entitled her to alter and amend the register without an Order of the Honorable Court. The applicant also sought orders of stay that would halt the execution of the respondent’s decision until the suit was determined and orders of stay to stop the respondents from taking any action or step that would interfere with the shareholding and directorship of the company and would prejudice the orders issued by the court.
The respondent objected the application on the grounds that a shareholder could not bring proceedings in respect of irregularities in the conduct of Companies’ Internal affairs. The respondent also objected on the grounds that the applicant sought for judicial remedies in a civil application, that the applicant erred in not instituting judicial review proceedings as it was the only avenue by which the applicant could receive redress. Finally the respondent objected on the grounds that the applicant had not met the requirements necessary to be awarded temporary injunctions and orders of stay of execution.

Issues:

  1. Whether judicial review was the appropriate and only remedy available in the circumstances of the case.
  2. Whether a shareholder could file a suit for purposes of investigation or inspection of the affairs of the company or rectification of members register.
  3. Whether the court could issue orders to stay execution and grant temporary injunctions upon the applicant establishing a prima facie case.

Company Law – principles of constitutional law- principle of derivative claim - whether a shareholder could file a suit for purposes of investigation or inspection of the affairs of the company or rectification of members register – Companies Act, (cap) 486, sections 118, 164, 165 &166.
Civil Procedure and Practice – stay of execution – temporary injunction -whether the court could issue orders to stay execution and grant temporary injunctions upon the applicant establishing a prima facie case – Civil Procedure Act, (cap) 21, sections 1A, 1B & 3A.

Judicial Review –remedies-circumstances under which judicial review could be granted-whether judicial review was the appropriate and only remedy available in the circumstances of the case. Read More...

Words and Phrases – definition-prima facie case means -case is a case in which on the material presented to the Court a tribunal properly directing itself will conclude that there existed a right which had apparently been infringed by the opposite party to call for an explanation or rebuttal from the latter – or the standard which is higher than an arguable case -Mrao Ltd vs. First American Bank of Kenya Ltd and 2 others (2003) KLR 125

Companies Act, Cap 486
Section 118

(1) if;

(a) the name of any person is, without sufficient cause, entered in or omitted from the register of members of a company; or
(b) default is made or unnecessary delay takes place in entering on the register the fact of any person having ceased to be a member,

The person aggrieved, or any member of the company, or the company, may apply to the court for the rectification of the register.
(2) Where an application is made under this section, the court may either refuse the application or may order rectification of the register and payment by the company of any damages sustained by any party aggrieved.
(3) On an application under this section the court may decide any question relating to the title of any person who is a party to the application to have his name entered in or omitted from the register, whether the question arises between members or alleged members, or between members or alleged members on the one hand and the company on the other hand, and generally may decide any question necessary or expedient to be decided for rectification of the register.
(4) In the case of a company required by this Act to send a list of its members to the registrar, the court, when making an order for rectification of the register shall by its order direct notice of the rectification to be given to the registrar

Section 164

(1) (a) Where the registrar has reasonable cause to believe that the provisions of the Companies Act are not being complied with, or where, on perusal of any document which a company is required to submit to him under the provisions of this Act, he is of opinion that the document does not disclose a full and fair statement of the matters to which it purports to relate, he may, by a written order, call on the company concerned to produce all or any of the books of the company or to furnish in writing such information or explanation as he may specify in his order.
(b) Such books shall be produced and such information or explanation shall be furnished within such time as may be specified in the order.
(2) On receipt of an order under subsection (1) it shall be the duty of all persons who are or have been officers of the company to produce such books or to furnish such information or explanation so far as lies within their power.
(3) If any such person refuses or neglects to produce such books or to furnish any such information or explanation he shall be liable to a fine not exceeding two hundred shillings in respect of each offence.
(4) If after examination of such books or consideration of such information or explanation the registrar is of the opinion that an unsatisfactory state of affairs is disclosed or that a full and fair statement has not been disclosed the registrar shall report the circumstances of the case in writing to the court.

Section 165

(1)The court may appoint one or more competent inspectors to investigate the affairs of a company and to report thereon in such manner as the court directs;

(a) in the case of a company having a share capital, on the application either of not less than two hundred members or of members holding not less than one-tenth of the shares issued;
(b) in the case of a company not having a share capital on the application of not less than one-fifth in number of the persons on the company’s register of members.

(2)The application shall be supported by such evidence as the court may require for the purpose of showing that the applicants have good reason for requiring the investigation, and the court may, before appointing an inspector, require the applicants to give security, to an amount not exceeding ten thousand shillings for payment of the costs of the investigation.

Section 166
Without prejudice to its powers under section 165 the court;

(a) shall appoint one or more competent inspectors to investigate the affairs of a company and to report thereon in such manner as the court directs, if the company by special resolution declares that its affairs ought to be investigated by an inspector appointed by the court; and

(b) may do so, if it appears to the court upon a report from the registrar that there are circumstances suggesting;

(i) that the company’s business is being conducted with intent to defraud its creditors or the creditors of any other person or otherwise for a fraudulent or unlawful purpose or in a manner oppressive of any part of its members or that it was formed for any fraudulent or unlawful purpose; or
(ii) that persons concerned with its formation or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards it or towards its members; or
(iii) that its members have not been given all the information with respect to its affairs which they might reasonably expect; or
(iv) that it is desirable so to do.

Held:

  1. The Companies Act provided for specific remedies under sections 118, 164, 165 and 166 which were quite apart from judicial review. It would be legally fallacious to ignore remedies which were specifically provided for in the special legislation governing companies. Judicial Review would not provide remedies of investigation and inspection of company affairs under sections 164, 165 and 166 of the Companies Act. Those remedies were provided for under the Companies Act and were most aptly applied for under the jurisdiction of the Court.
  2. The Applicant was a shareholder of the company and as such had locus standi to file the application. The respondent erred when he argued that a member or shareholder of a company could not file a suit for purposes of investigation or inspection of the affairs of the company or rectification of members register. Section 118 of the Companies Act provided that an aggrieved party, any member of the company or the company itself could apply for redress of rectification of the company register. Members of a company, aggrieved creditors, the company itself or the Registrar were listed under Sections 264, 165 and 166 of the Companies Act as being capable to apply or requisition an investigation on company affairs. Matters which fell under section 118, 164, 165 and 166 did not require a party to commence derivative suit on behalf of the company in order for relief to be granted by Court.
  3. In civil cases, a prima facie case is a case in which on the material presented to the Court a tribunal properly directing itself will conclude that there existed a right which had apparently been infringed by the opposite party to call for an explanation or rebuttal from the latter. A prima facie case is more than an arguable case. It is not sufficient to raise issues but the evidence must show an infringement of a right, and the probability of success of the applicant’s case upon trial. This is standard which is higher than an arguable case. (Mrao Ltd vs First American Bank of Kenya Ltd and 2 others (2003) KLR 125)
  4. The applicant had established a prima facie case that its right had been infringed especially given the manner in which the register of members was altered; that laws had been contravened in the manner the affairs of the company had been run and in the manner the Registrar General of Companies had exercised her power.

Execution stayed, temporary injunctions granted and costs awarded in the cause.
LAND LAW Concept of House without Land in the Coastal Area Obsolete

Alwi Mohamed Alwi v Swaleh Omar Awadh
High Court at Malindi
Environment and Land Court
ELC Civil Case No. 44 of 2015
O A Angote, J
June 26, 2015
Reported by Emma Kinya Mwobobia

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Brief facts
The Plaintiff purchased a building standing on the suit land which he had since demolished with the intention of putting up another one. According to the Plaintiff, he shared the suit land with the Defendant and consequently, the said portion was subdivided into two with the approval of the Council. The plaintiff claims that the Defendant commenced construction of a structure on the suit land without approval. However, the Defendant's case was that he did not share the suit property with the Plaintiff; that he purchased the suit property in 1980 and that he intended to extend the house that was currently on the suit property. According to the Plaintiff, what he purchased was a house without land which he had since demolished and intended to build another one. None of the parties had annexed the title document on the affidavit showing the registered proprietor of the suit property. However, both parties were agreeable that what they purchased were houses without land.

Issue:

  1. Whether the concept of a house without land was amenable in the operative statutes of Land Law in the laws of Kenya

Land Law-house without land-concept of house without land under the Land Titles Act- where two parties had erected temporary structures without ownership of the suit land – practice only unique to the coastal area – whether the concept of house without land was amenable in the operative statutes Read More...

Held:

  1. Having purchased a house without land standing on the suit land which was still intact, the Defendant could not build an extension of the said house to cover almost the entire plot without the consent of the proprietor of the land. The Defendant did not own the land in question and his interest was only limited to the house he bought in 1980.
  2. It was not clear how the Plaintiff could legally commence construction of a new building altogether when he only purchased a house on the suit property which he had either since demolished or collapsed on its own. It would be difficult for the Plaintiff to ascertain the amount of space he would occupy while undertaking the construction on the suit property.
  3. The scenario that was now playing before the court showed the difficulties that arose when proprietors of land did not want to part with their land but at the same time wanted to allow purchasers to build houses on the land and pay them ground rent. It was time, with the promulgation of the Constitution, the Land Act and the Land Registration Act which repealed the Land Titles Act, that the concept of a house without land which had been recognized in the coastal area for decades should be buried and forgotten.
  4. The operative land statutes did not recognize the concept of a house without land any longer. The concept of a house without land, although recognised under the repealed Land Titles Act, defied the existing definition of “land” and “lease” in the laws of Kenya. It was therefore questionable why, even with the changes in the laws, the County Government of Kilifi would still approve the construction of a building by a person who did not have a beneficial or legal interest in a piece of land on which he proposed to put up a house.
  5. It was of concern with such approvals what would happen in the event the owner of the land demanded his land back after a person had invested in constructing a building on the same land. The answer could only be that the person would loose his investment because land had been defined by the Constitution to include the surface of the earth and the sub-surface rock. With the repeal of the Land Titles Act, any other definition of land would be unconstitutional.
  6. The Courts observations were just but cautionary to the people intending to put up buildings on land that did not belong to them considering the changes in the land laws. However, for the purposes of the instant application, the Defendant could not lay a claim on the whole land considering that he had only purchased an existing house and not the land. He could not therefore put up any other structures on the land without the written consent of the registered proprietor. Consequently, he should be restrained from putting up the proposed extension pending the hearing of the suit.

Application allowed
LAND LAW Notice to redeem a mortgage issued under rule 15(d) of the Auctioneers Rules cannot serve as a notice to sell under section 96(2) of the Land Act.

David Ngugi Ngaari v Kenya Commercial Bank Limited
Civil case no 135 of 2013 (formerly ELC No. 303 of 2013)
Commercial & Admiralty Division at Milimani
June 18, 2015
J F Gikonyo, J
Reported by Teddy Musiga & Daniel Hadoto

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Brief facts:
The borrower (Dama Developers Limited) obtained a loan of Kshs. 15,000,000 from the respondent (Kenya Commercial Bank) for purposes of developing four-storey residential flats. The applicant was a guarantor to the borrower and guaranteed the said loan by charging a portion of the subject parcel of land. The respondent engaged the services of a company that was to undertake the construction. It was a term of the loan agreement that the Borrower could commence repayment of the principal sum immediately the residential units were completed and occupied and upon rent being collected, and that only interest on the principal amount while construction was in progress. The construction company later withdrew from the project citing lack of funds which caused financial and mental anguish to the Applicant.

The Applicant thus alleged that; he was duped by the Respondent into executing a charge; and that there was an element of fraud and misrepresentation on the part of the Respondent. The Respondent, contractors and quantity surveyors therefore conspired in a bid to defraud the Applicant of his hard earned property and investment where his matrimonial home stood. Had the contractors completed the residential units as agreed, the same would have raised rent sufficient to repay the loan. The Applicant continued paying Kshs.150, 000/- per month as a sign of good will despite his financial woes authored by the Respondent.
The Respondent had through Freeman Auctioneers arranged to dispose of the subject parcel of land by way of public auction on 28th February 2013 as advertised in the Daily Nation Newspaper of the 21st February 2013 without issuing the requisite statutory notice. The Respondent wished to sell the said parcel of land at a price below the current value of the said parcel of land as per the valuation report.
The applicant thus sought an injunction to restrain the respondent from selling the suit parcel of land pending the hearing and determination of the instant suit. He argued on the following grounds that; first, the respondent did not issue the requisite statutory notice notifying the applicant of the intended sale of the charged property by auction. Second, the respondent failed to conduct a proper forced valuation and has instead undervalued the charged property to the detriment of the applicant. Third, the applicant disputed the penalties and interest accrued on the principal amount borrowed. Fourth, that there was fraud on him by the contractors and the defendant and fifth, that the charged property was of a unique nature as it contained his matrimonial home to which he had extreme sentimental attachment.

Issues:

  1. Whether matrimonial property (homes) can be sold under the Mortgagee’s statutory power of sale.
  2. Whether a Mortgagee’s statutory power of sale once lawfully accrued could be stopped or postponed where the Mortgaged property was a matrimonial property.
  3. Whether the failure to issue and serve statutory notice pursuant to section 90(2) of the Land Act infringes on the chargor’s equity of redemption.
  4. Whether the notice to redeem issued under rule 15(d) of the Auctioneers Rules could serve as a notice to sell under the Land Act.

Land Law – Mortgages & Charges - contract of guarantee- claim where the applicant guaranteed the principal borrower by charging his portion of land -where the property was matrimonial property - liability of guarantor with respect to charged property - whether the loan agreement enabled a chargee to realize the security offered by exercising the statutory power of sale.
Land Law – Mortgages & Charges – redemption of mortgages & charges – mortgagees statutory power of sale - . whether matrimonial property (homes) can be sold under the Mortgagee’s statutory power of sale - whether a Mortgagee’s statutory power of sale once lawfully accrued could be stopped or postponed where the Mortgaged property was a matrimonial property - - Land Act section 96(2); Auctioneer Rules, Rule 15 (d)
Land Law – Mortgages & Charges - redemption of mortgages & charges - exercise of statutory power of sale- statutory notice of sale - form of such notice - whether the failure to issue and serve statutory notice pursuant to section 90(2) of the Land Act infringes on the chargor’s equity of redemption - whether the notice to redeem issued under rule 15(d) of the Auctioneers Rules could serve as a notice to sell under the Land Act - Land Act section 96(2); Auctioneer Rules, Rule 15 (d)

Civil practice and procedure - injunction- interlocutory injunction -application by applicants to restrain the respondents from selling the suit property -where the suit property was charged to the defendants- where the applicants defaulted on payment - applicable principles- whether the applicant established a prima facie case Read More...

Section 96(2) of the Land Act

“Before exercising the power to sell the charged land, the chargee shall serve on the chargor a notice to sell in the prescribed form and shall not proceed to complete any contract for sale of the charged land until at least forty days have elapsed from the date of the service of the notice to sell”.

The Auctioneers Rules; Rule 15 (d)

Upon receipt of a court warrant or letter of instruction the auctioneer shall in the case of immovable property—

(d) give in writing to the owner of the property a notice of not less than forty-five days within which the owner may redeem the property by payment of the amount set forth in the court warrant or letter of instruction;

Held:

  1. Mortgages on matrimonial property would not be created on such property without first obtaining the consent of the spouse. No sale of the matrimonial property would be carried through without giving the necessary notices to the spouse or spouses of the Mortgagor. Those protections once availed could not prevent sale of a matrimonial home where the necessary consents had been obtained and all notices given to all parties with an interest in the matrimonial home, which was given as security for a loan or credit facility.
  2. Any property whether it was a matrimonial or spiritual house, which was offered as security for loan/overdraft was made on the understanding that the same stood the risk of being sold by the lender if default was made on the payment of the debt secured.
  3. Charged properties were intended to acquire or were supposed to have a commercial value otherwise lenders would not accept them as securities. The sentiment of ownership which had been greatly treasured in this country over the years had in many situations given way to commercial considerations. Before lending, many lenders banks and mortgage houses were increasingly insisting on valuations being done so as to establish forced sale values and market values of the properties to constitute the securities for the borrowings or credit facilities. Loss of the properties by sale was clearly contemplated by the parties even before the security was formalized.
  4. It was quite arrogant for the Applicant to think that conversion of a Mortgaged property into a matrimonial home would provide some form of indomitable shield from realization of a security given in a Mortgage under the law. The law on creating Mortgage on and sale of matrimonial home only aimed at ensuring the consent of the spouse or spouses was sought before such property was Mortgaged, and relevant notices were served on the spouse who had given consent to the Mortgage before the exercise of Mortgagee’s statutory power of sale.
  5. The protection of a matrimonial home within the set-up of the law on mortgages and the Land Act was not, to be used as the spear by a defaulter on or as absolution of contractual obligations under a Mortgage.
  6. The fact that the Mortgaged property was matrimonial property would only become relevant if the applicant alleged lack of consent of the spouse in the creation of the Mortgage herein or notice on the spouse or spouses has not been accordingly issued as by law required. But where the right of Mortgagee’s statutory power of sale had lawfully accrued, it could not be stopped or postponed because the Mortgaged property was a matrimonial home.
  7. The fact that the charged property was a matrimonial home alone could not suffice as a ground of granting an injunction as long as the chargee had fully adhered to the law.
  8. The law was that a guarantee was a separate and distinct contract from the borrower’s contract. The guarantee was, therefore, enforceable as such. Except, however, the guarantor who had given his land as guarantee and a charge had been registered, he also enjoyed the protections offered to a chargor under the Land Act.
  9. The principal debtor should have been served with the requisite statutory notice to remedy any default within 90 days, and he should have been fully informed of the acts needed to remedy the default and his right to apply for relief. The notice had to fully comply with section 90(1) of the Land Act. The notice had to be copied to the guarantor because the liability of the guarantor could arise upon default by the principal borrower.
  10. The Notice under section 90(1) of the Land Act was properly issued and liability on the guarantor attached. However, after the borrower had failed to remedy the default in accordance with the notice issued under the law, the chargor, who was the guarantor, was entitled to a notice of not less than 40 days under section 96(2) of the Land Act before the chargee could sell the charged property. The rationale of the position of the law was that once a mortgage always a mortgage.
  11. The charge created on the suit land was a charge for all purposes and intents within the sense of the Land Act and such charge did not become of a different character because it had been created by and over the land of a guarantor of the borrower; it was a charge in favor of the lender.
  12. The notice under section 96(2) of the Land Act was mandatory; it preceded and was quite apart from the Redemption Notice issued under rule 15 of the Auctioneers Act.
  13. Section 96 (2) of the land act provided that before exercising the power to sell the charged land, the charge had to serve on the charger a notice to sell in the prescribed form and could not proceed to complete any contract for sale of the charged land until at least 4 days had elapsed from the date of the service of the notice to sell.
  14. There were attempts to fuse the requirement in section 96(2) of the Land Act with Rule 15 of the Auctioneers Rules, 1997. Some arguments seemed to suggest that a Notice of Redemption under Rule 15 of the Auctioneers Act was sufficient for purposes of section 96(2) of the Land Act. There was clear legal bifurcation between those two laws and any attempt to fuse the two only increased the confusion of the purpose of section 96(2) of the Land Act.
  15. One could have thought that the Redemption Notice under the Auctioneers Act was sufficient because; it came after the Statutory Notice; it was for 45 days which was more than the 40 days under section 96(2) of the Land Act; served the purpose of giving an opportunity to the Chargor to redeem the property; and notified the Chargor of impending sale of the property if the sum demanded was not paid within the period of 45 days provided in the Notice.
  16. The requirements under section 96(2) of the Land Act were mandatory and quite separate from the requirements under the Auctioneers Act. The Redemption Notice under the Auctioneers Act was also mandatory but it was issued separately from and after the one under section 96(2) of the Land Act; strictly in that sequence.
  17. When Parliament enacted section 96(2) of the Land Act, the provisions of the Auctioneers Act were existing law as per section 7 of the Sixth Schedule of the Constitution. Again, rule 15 of the Auctioneers Rules applied to sale by public auction of any immovable property in execution of a decree or on instructions such as by a chargee. It was not specially tailored for purposes of section 96(2) of the Land Act.
  18. Until the enactment of the Land Law, 2012, equity of redemption had been left to judicial interpretation and case law. But it had gained statutory expression in section 89 of the Land Act which provided expressly that equity of redemption would not be extinguished except in accordance with the provisions of the said Act.
  19. Exercise of Chargee’s Statutory Power of Sale would only extinguish the Chargor’s Equity of Redemption if it was strictly exercised in accordance with the Land Act.
  20. Section 96(2) of the Land Act was one of the provisions of the Land Act which reinforced the Chargors Equity of Redemption therefore, section 96(2) of the Land Act was not an embellishment in the statute or a duplication of or could be read to mean Rule 15 in the Auctioneers Act.
  21. That requirement of a notice to sell under section 96(2) of the Land Act that the chargee could not proceed to complete any contract for sale of the charged land until at least forty days had elapsed from the date of the service of the notice to sell, were still points of judicial debate.
  22. The notice to sell should have been in the prescribed form but nothing prohibited the said notice being issued on behalf of the chargee by its authorized agents.
  23. The law envisaged a minimum of 40 days to elapse before completing a contract for sale of the charged land, which could mean the notice, should have been for more than 40 days except any contract for sale of the charged land cannot be completed at least before 40 days have elapsed.
  24. The notice under section 96(2) of the Land Act was a notice to sell not a notice to signify an intention to sell. Did it therefore, mean the notice under section 96(2) of the Land Act could specify the date of sale as did the redemption notice issued under the Auctioneers Rules?
  25. In the absence of a Notice to sell under section 96(2) of the Land Act, the Statutory Power of Sale couldn’t be exercised even if the Statutory Notice, the Notification of Sale and the Redemption Notice had been issued. That was a potent ground for an injunction. None was issued.
  26. The failure to issue that Notice under section 96(2) of the Land Act would not invalidate a statutory Notice which had been issued properly under section 90 of the Land Act.
  27. There was absolutely no fraud on the part of the Respondent. If the contractors and the surveyors were negligent or left the site without notice, they were the ones who were to carry the blame as professionals. Indeed, professionals carried professional liability to the developer and so they should be sued and held liable as such.
  28. The Applicant had been paying a monthly repayment of Kshs. 150,000. That was good gesture on their part after the contractors abandoned the site. He was not, an indolent or malicious defaulter as he had been portrayed by the Respondent.

The Respondent bank render to the Applicant statements of account of the loan herein in accordance with the terms of the loan agreement within the next 30 days.
Upon rendering the accounts in (a) above, the bank comply with section 96(2) of the Land Act and issue a notice to sell the charged property.
Such sale thereafter of the charged property will abide by all relevant provisions of the Auctioneers Act;
The Respondent shall not sell the charged property as long as the above two conditions are not fulfilled.
Temporary injunction restraining the proposed sale of the charged property subject to the fulfillment of conditions (a) and (b) above doth issue.
The application succeeded.
Each party bears’ own costs. It is so ordered.