One Plot, Two Owners: Double Allocation by Local Authorities

 Across Kenya's growing towns, many people hold plots first allocated by the old municipal and town councils. When those councils were replaced by county governments, records were not always transferred cleanly. A common result is double allocation: the same plot allocated to two people, sometimes decades apart, each holding papers that look genuine.

Allotment letter vs title. An allotment letter is an offer to allocate land, usually subject to conditions such as paying stand premium and rates within a set time. Accepting the offer and meeting the conditions creates an interest that the courts will protect. A title, once issued, is generally conclusive proof of ownership. But section 26 of the Land Registration Act allows a title to be challenged where it was obtained by fraud or misrepresentation, or acquired illegally, unprocedurally or through a corrupt scheme.

How courts resolve competing claims. The Environment and Land Court, which has jurisdiction under Article 162(2)(b) of the Constitution, examines the root of each party's title. Key questions include:

• Who was allocated first, and did they meet the conditions of allotment?
• Was the plot available for allocation when the second allotment was made?
• Do the council minutes, receipts, survey plans and registry records support each claim?
• Did the later allottee know, or ought they to have known, of the earlier interest?

The county government's role. As successor to the former council, the county holds the records and is often a necessary party. Its officers' evidence on how the plot was handled can be decisive.

Patience and preparation. These cases are document-heavy and can take years, especially where the original records are incomplete. Success depends on assembling the full paper trail and witnesses who can explain it.

Takeaways. If you hold an allotment letter, pay all charges promptly, keep every receipt and follow through to a title. Before buying a plot, search county records and the land registry, and visit the site. If someone else claims your plot, seek advice early, before structures go up and positions harden.

You Owe the Money but Need Time: Settling a Debt Claim on Workable Terms

 

Not every defendant in a debt claim disputes the debt. Often a business owner accepts that money is owed but simply cannot pay it all at once. Burying the claim in a weak defence wastes money and goodwill. A negotiated, documented settlement is usually the smarter path.

Why engage rather than ignore. A defendant who ignores the demand or the suit risks a default judgment. That can bring interest, costs and execution against business assets or bank accounts with little warning. Engaging early, through an advocate, keeps control of the timetable in the debtor's hands.

What a good settlement covers.

• the agreed amount, including any reduction of interest or costs;
• a realistic instalment schedule matched to the business's cash flow;
• what happens if an instalment is missed, such as a default clause allowing judgment for the balance;
• whether the claimant will withdraw the suit, or record a consent judgment payable by instalments; and
• an undertaking that no execution will issue while payments are honoured.

Using the court's process. Settlements are often recorded in court as consent orders, which gives both sides certainty. Even after judgment, Order 21 Rule 12 of the Civil Procedure Rules allows the court, for sufficient reason, to order payment of a decree by instalments. That can provide breathing room where negotiation has failed.

Dealing with the other side's advocates. Settlement talks between advocates should be candid and without prejudice. Proposals should be backed by something credible, such as a first payment or evidence of expected income.

How we assist. We review the claim for any genuine dispute over the amount, then propose terms the client can actually meet. We record the settlement so the client is protected from sudden execution.

Takeaways. If you owe money, respond to demands promptly and propose a realistic plan. Only commit to instalments you can pay, since a missed payment often brings the whole balance due at once.

You've Won by Default. Now Get Paid: From Default Judgment to Execution

When a defendant is properly served but does not enter appearance or file a defence, the claimant may obtain judgment in default. It feels like the end of the case, but a judgment is only paper until it is enforced. What happens next decides whether the client actually recovers anything.

How default judgment works. Order 10 of the Civil Procedure Rules allows the court to enter judgment where a defendant fails to appear or defend within the prescribed time. This applies only if service is proved, usually through an affidavit of service. For liquidated claims of a fixed sum, judgment can be final. For other claims, the court may enter interlocutory judgment and then assess damages.

Step one: extract the decree. The decree is the formal document that embodies the judgment. Execution cannot begin without it. The claimant's advocate drafts it, shares it with the other side where required, and has it signed and sealed by the court.

Step two: choose the right mode of execution. Depending on the debtor's assets, the options include:

• attachment and sale of movable property through a licensed auctioneer;

• garnishee proceedings to seize money held by third parties, such as bank balances;

• attachment of immovable property; and

• a notice to show cause why the debtor should not be committed to civil jail, where there is evidence they can pay but refuse.

Expect a fight. Defendants who ignored the suit often reappear at execution and apply under Order 10 Rule 11 to set the judgment aside. Courts will consider whether service was proper, whether the defendant has a defence that raises triable issues, and the reason for the delay. Solid proof of service from the start is the best protection.

Takeaways. Keep careful records of how and when the defendant was served. After judgment, move quickly to extract the decree and enforce it, before assets are moved. Investigate the debtor's assets early so that execution targets something real.

LIFTING THE VEIL OF INCORPORATION

There are two areas that allow a company’s veil of incorporation to be lifted thus exposing the members to liability.

These can be found in Common Law and in Statute

At Common Law

Illegality

At common law, if a company engaged in an illegal business e.g. terrorism, the Courts have held that the veil could be lifted, This is now codified in a number of statutes such as the Anti Money Laundering and Proceeds of Crime Act, Environmental Management Act, Tax procedure Act.

Where Company is acting as an agent of members

This instance can be described by the case of Daimler Co -vs- Continental Tyres – German Co. In this case, a company was incorporated in England to sell tires made in Germany by a German company. The shareholders were all German except one who was born in Germany and had become a naturalized British citizen. 

After the outbreak of the first world war between England and Germany, continental tire being the German company did not pay any amount claiming that it would amount to trading with an enemy nation thus violating trading with enemy act 1914. The secretary initiated an action against the same. The same was adjudged in favor of the German company meaning that the company had an enemy character. The secretary approached the house of lords against the decision of the court of appeal.

The house of lords allowed the appeal and held that though the company is a separate artificial person from its shareholders when the shareholders or the agents who are having the control of the company are from the enemy country, then the company will assume an enemy character and not otherwise. 

The court thought that the character of individual shareholders cannot affect the character of the company when everything is at peace or when it is not wartime, but when it is wartime, the agents or anyone who is taking instructions from such shareholders who is from an enemy country is important to consider to determine the character of the company as a whole. The court very strongly held that in this case, it is presumed that the company had enemy character, being the secretary holding just 1 share out of 25000 shares who is from England and the rest being from Germany, the court held that the onus is one the company to prove that the secretary was not taking orders from other shareholders from an enemy country. 

The Ratio decidendi, in this case, is that the Court established that the action and character of the shareholders can influence the actions of that particular company and the company can acquire enemy character because if the shareholders who are from the enemy country take decisions for the company[1].

Further reference can be found in the case of Firestone Tires Co -vs- Llewellyn.

Improper conduct/Fraud

A company’s veil may be lifted due to improper or fraudulent conduct. In the case of Jones -vs- Lippman Jones agreed to sell land to Lippman. He changed his mind. He thereafter formed a company and transferred the land to the company in a bid to avoid the sale. 

The Company refused to transfer the land to Lippman. The matter went before the Court for specific performance, the Court, in ordering specific performance ruled that: “the defendant company is the creature of the first defendant, a device and a sham, a mask which he holds before his face in an attempt to avoid recognition by the eye of equity.”

Another instance where a Company was used as a sham is to be found in the case of Gilford Motors Company -vs- Horne.

For the protection of revenue

For tax purposes and for purposes of discharging various tax burdens a Company’s veil may be lifted to prevent tax evasion.

By way of Statute

 

A company’s veil will be lifted if it is trading in a name other than its registered name

 

A company’s veil can be lifted if the Company failed to publish names as prescribed /required by Act.

 

For purpose of group accounts, group of company, the Act requires each of the members be dissolved and accounts done separately before the group.

 

Investigating membership- a company’s veil may be lifted by the state when undertaking investigations and inspections under the Companies Act. This can also appear in the investigations of affairs of the company by the registrar of Companies or the Court. If the registrar has reason to believe the company is being used for improper use. The veil may lifted for investigation

 

Failure to file relevant tax returns;

 

A company’s veil may be lifted during takeovers and mergers where approvals are required- who are the significant shareholders as the Competition Authority considers this.

 

The veil of a company may be lifted during Dissolution/consolidation, especially where part of issued share capital has not been paid up.

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[1] https://indianlawportal.co.in/daimler-co-v-continental-tyre-and-rubber-co/

ATTRIBUTES OF A CORPORATE ENTITY

1)     DISTINCT PERSONALITY

When a company is registered, it comes into being as a separate/distinct legal entity.

 

Read the case of Salomon -vs- Salomon on what a separate legal entity entails. In summary, the crux of the case was that, as a creditor to the company, Salomon could recover during liquidation, contrary to the argument by the unsecured creditors.

 

In the case of Lee -vs- Lee Air Farming Ltd, Lee was the principal shareholder of the company but the wife could recover on behalf of the estate. Why?

 

When individuals become members of a company, they agree to let a separate legal entity carry on business. It is also difficult to contribute capital if the company and the individual are the same.

 

Part IV, S34, and 35 of the Companies Act dictate that Contracts can only be executed by directors or authorized persons. This is a fundamental Principle fundamental but it is frequently challenged in the event of one-member companies. In that scenario, there exist doubts as to whether in fact there is a distinction between the one party and the company, that notwithstanding, they are different

 

Every shareholder despite the number of shares held is in law separate and distinct from the company. It is thus not automatic that a shareholder can bind the company in a contract or other obligations, obligations arise if the contract is executed by a director or any other authorized person.

 

Even though directors have powers, they can only act within their powers (where powers of directors are not provided, then the decision of the majority of directors carries the day). A Director who enters into a contract/obligation in excess of his/her powers will be personally liable.

 

2. Perpetual Succession

A Company once registered is deemed to have perpetual succession. Perpetual succession does not mean a company lives forever. It means the life of a company is not dependent on the timeline of its members. Hence, the company will have perpetual succession even when it is time-bound

The interest of members limited to

a)         Share Capital

b)         Amount guaranteed for company ltd by guarantee

c)         Any other agreement as per memorandum

 

A company has perpetual succession even where it has an expressly provided term e.g. 25 yrs.

A company therefore can only be dissolved/liquidated in the manner provided for in the statute.

Of importance is to ensure that the life of the company continues despite whatever happens to its members.

 

3.         Limited Liability.

A company’s liability may be limited:

By shares- the amount of subscribed and issued shares.

By Guarantee- the amount stated in the memorandum having been guaranteed by the members.

 

4.         Capacity to enter into a contract

 

A Company has the capacity to enter into contracts and be bound by obligations thereto. An outsider is not necessarily required to inquire into the internal affairs of the company.

 

A Person dealing company in good faith has no duty to enquire into the powers of a director. However, this only applies if a person can prove it is done in good faith. In compliance with any applicable laws such as procurement and tax laws. Good faith also means that one must act within reason.

In some instances (S.35) A director can be personally liable for obligations accrued while acting ultra vires.

 

Pre-Incorporation Contracts S44

At contract law, pre-incorporation contracts (entered into on behalf of or for benefit of the company by promoters before a company is registered) did not bind companies.

 

Under Cap 486, the repealed Companies Act, the law treated pre-incorporation on contract as non-existent. Directors couldn’t ratify such contracts. The only option available was to enter into new contracts with similar terms.

 

However, under the 2015 Act (S.44) members can ratify and continue with the pre-incorporation contract obligations. These contracts are now recognized and can be ratified and continued with. However, there is no obligation to do this. The ratification is not automatic but must be done formally.

Subsequent to the ratification, if there was a breach before the company came into being, the promoters will be liable.

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CORPORATE GOVERNANCE : COMPANIES

   

This is governed by the Companies Act 2015 and its subsequent amendments.

 

Why do people form Companies?

 

(a)    Enable owners to limit their liability-Liability is limited to the Share capital contributed or the amount guaranteed in case of insolvency

 

(b)   Perpetual Succession- it is not affected by the existence of its members and can therefore exist forever. For example, the IBEA Company still exists 200 years after it was formed

 

(c)    Company structure –The members need not be engaged in day/day activities. Managers must act in the best interests of members as members will check them. Members cannot make decisions for individual gains but rather benefit the entire company. It allows members to employ expert managers

 

(d)   A Company potentially has a wider source of capital. A large number of shareholders subscribe to the capital unlike the situation in sole proprietorship and partnership

 

(e)    Transferability of shares especially in public companies

Disadvantages

(a)    Registration and compliance involve a substantial amount of time and effort. Especially in filing tax returns.

 

(b)   Management and control complex than any other form of business association.

 

(c)    Inefficient- Adequate Notice has to be given. Anything done by the directors should be subject to consultation between them and the shareholders.

 

(d)   Agency Problem arises- At times, tension may arise between members and directors. The members may feel and think directors are not performing well in the management of the Company.

 

(e)    Frequent tax filing obligations.

 

Who is a member of a company?

 

These are the persons that have subscribed to the share capital of the company, they have subscribed to the Articles of the company and/or given a guarantee. A member can also be any other person who the Articles provides is a member

 

A stakeholder of a company is any person whose well-being will be affected by the well-being of co-members, directors, employees, suppliers, contractors, government

 

The Companies Act defines a beneficial owner as “the natural person who ultimately owns or controls a legal person or arrangements or a natural person on whose behalf transactions are conducted, and include persons who exercise ultimate effective control over a legal person or arrangement.”

 

Under the Companies Regulations, a beneficial owner is a natural person who directly or indirectly:

 

a.      holds at least ten percent (10%) of the issued shares of the company;

b.     exercises at least ten percent (10%) of the voting rights in the company;

c.      holds the right to appoint or remove a director of a company; or exercises significant influence or control over a company.

·        A Shareholder is a person who has subscribed to the share capital of the company

Types of Companies:

·        Private Companies (Private Limited)

This is a company whose articles provide that the members of the public cannot subscribe to the share capital.  

 

·        Public Companies

This is a company whose membership is open to members of the public. Members of the public can subscribe to the share capital. Its Certificate of incorporation provides it is a public limited company. There is also no limit as to the capacity of members.

 

·        Unlimited Company

 

In this type of company, there is no limit on what members will contribute during insolvency. There is no limit on the liability of members and the Certificate of incorporation states the liability of members is unlimited.

 

·        Limited Liability Company

This is a company whose liability is limited to shares subscribed.

 

·        Company Limited by guarantee

This is a company whose liability is guaranteed by the members of the company vide legal instruments

 

·        Foreign Companies

According to Section 974 of the Companies Act, it is mandatory for all foreign companies carrying on business in Kenya to be registered. Carrying on business does not include buying shares. Anything that involves the provision of goods and services for monetary consideration.

 

Consequences of Registration

Companies Act reaffirms the principle under Salomon -vs- Salomon. That a company is a separate legal entity, with perpetual succession and be sued, own property, enter contracts in its name and all other juridical persons are allowed to do.

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NOTICE OF NEW WEBSITE AND LAUNCH OF PODCAST - QUINCY ON THE LAW

Dear esteemed readers and followers.

It is with great delight that I address you for the first time in 2022.

After much deliberation and thought, we at Niccolaw have decided to maintain this blog site due to its utility. 

We, therefore, revoke the earlier notice of revocation.

Further, we have launched our second website which is referenced as Niccolaw. The website shall operate hand in hand with this one.

We have equally launched a podcast that offers law bytes, legal tips, commentary and marginal legal advise on Kenyan, Regional and International law. 

The Podcast can be found on Spotify, Anchor, Google Podcasts, Amazon Music, Castbox, Pocket Casts, Radio Public and all other podcast platforms/directories. Kindly subscribe. 

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Much gratitude,

QUINCY JESSE KIPTOO AG.