N N N v S N M [2017] KEHC 3155 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

CIVIL SUIT NO. 51 OF 2012 (O.S.)

IN THE MATTER  OF  DIVISION OF MATRIMONIAL PROPERTY

N N N........................................................APPLICANT

-Versus-

S N M….…………………………….RESPONDENT

J U D G M E N T

1. On 25th September, 2012 the Applicant took out an Originating Summons under Section 17of the Matrimonial Properties Act 2014, Section 3Aof theCivil Procedure ActandOrder 37 Rule 11of the Civil Procedure rules (2010),andSection 93of theLand Registration Act (2012) seeking the following orders from the court:-

(i) A declaration that the properties listed herein with the improvements and the buildings thereon were acquired, improved, developed and maintained by the parties jointly and the said property is held by the Respondent in trust for the Applicant being:

(a) L.R. No. [Particulars Withheld] approximately 0. 1970 Ha, Plot No. 96 located at [Particulars Withheld] Estate, Thika Road.

(b) Plot in [Particulars Withheld] Estate adjacent to the matrimonial home.

(c) Plot No. [Particulars Withheld] located on Thika Road.

(d) Shares in the Company known as [Particulars Withheld]  Limited.

(ii) An injunction to issue restraining the Respondent, his servants and/or agents from alienating, wasting, damaging and/or otherwise interfering with the above mentioned properties pending the hearing and determination of the Originating Summons.

(iii) A declaration that the Respondent is accountable to the Applicant in respect of all the income and rental proceeds in respect of the matrimonial properties.

(iv) That the properties and the income aforesaid be settled in proportions aforesaid or as the court may order.

2. The application was supported by the affidavit of the Applicant and the grounds on the face thereof.  Her case is that she and the Respondent got married on 4th August, 1984 at [Particulars Withheld] Church in Westlands vide certificate No [Particulars Withheld]. The marriage was blessed with two issues, TWN 1 born on 24th June 1985 and TWN 2 born on 23rd June 1989. The parties set up a matrimonial home at Plot No. [Particulars Withheld]  Estate where they cohabited until 15th January, 2007 when they separated. The Respondent was left in occupation of the home which he has exclusive control over to date.

3. The Applicant testified that her contribution to the acquisition of the matrimonial property come through getting the family discounted travel tickets for their travel, by nurturing and being the primary caregiver of their daughters, and by being a companion to the Respondent.  She also contributed by being in charge of the domestic work and general management of the matrimonial home. She submitted that on account of the above, she had proved that she made a contribution to the development of the matrimonial properties.

4. Learned Counsel Mrs. Thongori submitted for the Applicant that the property known as L. R. No.[Particulars Withheld] at[Particulars Withheld] Estate (Matrimonial Home) was bought in February 1984 before the parties got married but was developed with their joint efforts into a matrimonial home during the marriage.  The property was initially registered in the Respondent’s name. It was later transferred into the name of the Company known as [Particulars Withheld] Limited and thereafter back in to the name of the Respondent in 2010.

5. Counsel conceded that initially the above property was not matrimonial property by virtue of Section 5 of the Matrimonial Property Act since it was acquired before the marriage.  It however fell within Section 9 of the Matrimonial Property Act, which provides that property acquired before marriage does not become matrimonial property, but a spouse who makes contribution towards its improvement acquires beneficial interest in the property equal to the contribution made.

6. Counsel observed thatL. R. No.[Particulars Withheld] at [Particulars Withheld] Estatesituated adjacent to the matrimonial home was bought on 24th January, 1984 before the parties got married.

7. Counsel submitted that the property known asL. R. No.[Particulars Withheld] has no title and was acquired during the subsistence of the marriage, but that there is no evidence that the Respondent’s brother contributed any money towards the purchase of the said property. She pointed out that the receipts purported to have been paid in the Respondent’s account by his brother did not show who had paid the money and the brother has not been joined in these proceedings as an interested party.

8. Counsel urged that this property was acquired during the subsistence of the marriage raising a rebuttable presumption that the property is held in trust for the Applicant, pursuant to Section 14 Matrimonial Property Act.  The presumption was not rebutted and the Applicant is therefore entitled to 50% of the property.  Counsel cited the cases of Prest v Petrodel Resources Ltd & Others (2013) UKSC 34 by Lord Sumption in paragraph 52 and HCC 11 of 2007 E.N.K v J.N.K where  Musyoka J stated that:-

“By dint of Section 14(a) of the Matrimonial Property Act, and by reason of the said assets having been acquired during matrimony and especially during cohabitation, the rebuttable presumption kicks in that the said assets are held in trust by the Respondent for the Applicant. The presumption as earlier indicated, is rebutted by evidence to the contrary. The presumption having arisen, the respondent was bound to provide evidence to displace the presumption. The only duty on my part is to determine whether such evidence has been provided that would displace the presumption.”

9. Counsel asserted that the Applicant contributed in a non-monetary sense by having the matrimonial home used to secure a loan for the hostel development, having been a companion to the Respondent, providing child care and doing domestic work.  Counsel submitted that the Applicant had shown that the property belonged to the Respondent and that she was beneficially entitled thereto.  Further in her testimony she had shown that she worked with Cameroon Airlines in 1988 and was earning a salary of Kshs. 4,400 which she used towards household expenses, such as buying food for the family and the needs of the children.

RESPONDENTS SUBMISSIONS

10. The Respondent swore a replying affidavit dated 1st November, 2012.  He deposed that he bought the properties known as plot ballot No. [Particulars Withheld] in [Particulars Withheld] V (FIVE) measuring approximately 0. 5 and L.R. No. [Particulars Withheld] at [Particulars Withheld] Estate in January and February, 1984 respectively before he married the Applicant.  The developments on L.R. No. [Particulars Withheld] were done without the assistance of the Applicant while plot No. [Particulars Withheld] V (FIVE) has not been developed to date.

11. After his retirement from Regional Center after 21 years of service, he and his brother one SNM jointly purchased Plot No. [Particulars Withheld], Thika Road as evidenced by the sale agreement and bank slips. It does not have a title to date. That although it was purchased during marriage. The Applicant did not make any contribution in form of finance, labour, garden upkeep or productivity thereof.  The Respondent together with three friends formed [Particulars Withheld] Ltd and raised funds to construct a student’s Hostel on it and the Applicant did not contribute towards the construction of the Hostel.

12. Mr. Kamaara Learned Counsel for the Respondent submitted that the Applicant acknowledged that properties No. [Particulars Withheld] and [Particulars Withheld] were acquired single handily by the Respondent before marriage. She gave no numbers to assist the Court and the Respondent to determine, or assess exactly what proportions, or portions, or shares, or rates of the properties were being claimed. The impression given in the summary of claim and originating summons is that the Applicant is claiming the whole of the properties enumerated.

13. The Respondent stated that he paid for 90% value of the tickets the Applicant said she obtained and also paid for other travel and shopping expenses. Further that no figures or amounts were given in evidence to show how much the Applicant enabled the family to save with the discounted tickets and that although the Applicant had a salary, she did not spend any money in the construction of the house at all.

14. The Respondent clarified that the loan advanced by one Mrs. Morton was not put towards construction of the house as stated by the Applicant but was purely for educational needs of the children and it was he and not the Applicant who borrowed the money and repaid it. Further that by the time the Applicant left home on 15th January 2007 after 20 years of marriage, their two daughters were of legal age and it was the Respondent who continued providing money for their education locally and abroad.

15. The Respondent contended that he paid for household upkeep and provided the Applicant with two credit cards for monthly expenses which facts were not controverted in evidence. Further that the Honda Civic was bought using dollars from his previous employer’s account overseas as was set out in his evidence.

16. He argued that evidence of this development was clear from the Memorandum and Articles of Association for the company and minutes. This property belongs to the Company which has developed it by erecting 96 residential hostel rooms thereon. When the Respondent left in 2007, only 24 hostel rooms had been constructed on the property. Proceeds from the rents receivable are ploughed back into the construction of the project and no dividends have been shared to date.

17. It was argued that the shareholding of the company had been proved by the documentary evidence produced in Court and Property belonging to the Company can only be distributed under the Companies Act and not the Matrimonial Properties Act. The Respondent offered his matrimonial home to be used as security for a loan since L.R No. [Particulars Withheld] did not have a title deed to be offered as security. A nominal sum of Ksh. 2,000,000/= was shown on transfer to him as consideration and therefore the company was not selling a valuable property for only 2 million.

18. He explained that he swore an affidavit just to assist the company to obtain the title deed but he did not mean that the land was his. That the alleged manipulation of title to L.R. No.[Particulars Withheld] which was clearly explained, was his efforts to assist the company to obtain the construction loan from the bank, and could not be interpreted to mean that L.R No. [Particulars Withheld] belonged to him.

19. The Respondent urged that the Applicant’s claim of financial contribution to this property was not supported by any evidence. The property was financed by contribution from his retirement benefits, his brother and three others who formed the company and acquired shares in it.  The minutes of the company dated 14th August 2005 showed that he was appointed by the other shareholders to be the full time supervisor at the site during construction of the hostels. Only the shareholders contributed to the acquisition and development of the company. The Applicant never bought shares, or attended any meetings and was not involved in any way in the construction.

20. Learned Counsel Mr. Kamaara submitted for the Respondent that under Section 14 of the Matrimonial Property Act, a trust was presumed where property was acquired during marriage but was registered in the name of one spouse. The other spouse claims as a beneficiary under a presumption of trust. He averred that the only property acquired during marriage was L.R No.[Particulars Withheld] which belonged to [Particulars Withheld]  Ltd and not the Respondent. That the initial purchase was by the Respondent jointly with his brother and the Applicant’s claim that the same was a family company because the Respondent and the daughters held 72% of the shares was untenable because shareholding in a company was administered through the various structures of the company and not by family relationships.

ANALYSIS AND DETERMINATION

21. I have carefully analysed the facts  and submissions presented as well as the case law cited in support of the rival contentions, and frame the main issues for determination as follows:

1) Whether the properties in question were acquired during marriage;

2) whether the claimant contributed to the acquisition thereof;

3) How the properties should be divided if contribution in (b) above is established.

22. From the evidence the property known as L.R. No.[Particulars Withheld] Estate was bought in February 1984 while the parties got married on 4th August 1984. The parties were in agreement that it was developed into their matrimonial home during coverture. The said property was registered in the Respondent’s name and later transferred into the name of [Particulars Withheld] Limited and later still transferred back into the Respondent’s name.

23. The Applicant testified that her contribution to the development of the property in monetary and non-monetary terms, was by way of assisting in clearing bushes, planting trees and hedges, and providing food and supervision as well as wages to the workers who were constructing the matrimonial home while she and the Respondent stayed in the two bedroomed guest house.  She also stated that she utilized her income towards running of the household expenses, buying food for the family and providing for the diverse needs of the children.  That she also contributed money for travelling to India to buy building materials to complete the matrimonial home and to purchase household goods for the house.

24. The Applicant’s other contribution is said to have come through getting the family discounted travel tickets for their travel, by nurturing and being the primary caregiver of their daughters, and by being a companion to the Respondent.  She also contributed by being in charge of the domestic work and general management of the matrimonial home. She submitted that on account of the above, she had proved that she made a contribution to the development of the matrimonial home and the Respondent agreed partly that she contributed to the development of the matrimonial home.

25. The Matrimonial Property Act at Section 2 has recognized that contribution towards acquisition of matrimonial property takes both monetary and non-monetary forms, which essentially opens the field of contribution to both spouses without distinction on the basis of remunerative employment. It includes:

a) Domestic work and management of the matrimonial home

b) Child care

c) Companionship

d) Management of family business and property and

e) Farm work

26. From the above, it is my considered view that indeed the Applicant contributed both through monetary and non-monetary forms in ways that Section 2 of the Act has outlined. She contributed to the improvements done on the property by way of non-monetary contribution that is domestic work and management of the matrimonial home, child care and companionship. The Respondent was said to be away from the family at times for months, and although he may have left the Applicant with money for maintenance of the family while he was away, it fell on the Applicant to make the home and raise the children.  In any case none of the parties produced receipts of what they contributed towards the house.

27. The Respondent acquired a vacant lot before his marriage to the Applicant but by implication, it became a matrimonial property when he donated it for them to build their matrimonial home therein. Taking into account what I have stated above, I am of the view that this matrimonial property where the parties made a home and lived for about 20 years and contributed towards its improvements and development at different levels, was held in trust by the Respondent for the Applicant.

28. I find that the Applicant demonstrated her contribution with respect to this property and she was entitled to an equal share.  I accept as did Waki J (as he then was) in Civil Appeal No. 128 of 2014, to which the Applicant referred this court that taking care of the children, matrimonial home and the farm amounted to non-monetary contribution.

29. With regard to the property known as L. R. No.[Particulars Withheld], the evidence is that this was not matrimonial property.  It was acquired before marriage and the family kept some dairy cattle on it for two years.  By the time the Applicant left home the farming had long ceased due to unprofitability and there were no developments on this parcel of land. Ten years after divorce and separation, the Respondent started to develop a residential house on this property through a loan secured by the title deed of the matrimonial home.

30. The Applicant’s claim on this property stems from the fact that Respondent was developing this property with money borrowed using the security of the matrimonial home and that she contributed to that extent. Further that when they kept cows on the property, she contributed by looking for feeds and delivering milk to customers every day for five years and the proceeds were given to the Respondent. The Respondent denied this and submitted that the Applicant kept the proceeds from the sale of milk.

31. In determining the ownership and development of this property I am guided by Section 5and 9 of the Act which provides that:

(5)…the interest of any person in any immovable or movable property acquired or inherited before marriage should not form part of matrimonial property and

(9) that where one spouse acquires property before or during marriage and the property acquired during the marriage does not become matrimonial property, but the other spouse makes contribution towards the improvement of the property, the spouse who makes a contribution acquires beneficial interest in the property equal to the contribution made…”

32. Property acquired or inherited before marriage does not form part of matrimonial property. In this case, both the Applicant and Respondent admitted that the land in question was owned by the Respondent before marriage. It therefore cannot form part of matrimonial property for division.  Under Section 9 of the Matrimonial Act a spouse only acquires beneficial interest equal to the contribution made towards the improvement of that property during marriage.

33. It is noteworthy that the Respondent charged the matrimonial home 10 years after separation and divorce from the Applicant and even though it has been established elsewhere in this judgment that the Applicant has an interest in the matrimonial home, the loan acquired to finance the construction in L.R. No.[Particulars Withheld] by charging the  matrimonial home that was still under the name and control of the Respondent ten years after divorce cannot entitle the Applicant to a beneficial share in L.R. No. [Particulars Withheld].

34. Additionally, the contention by the Applicant that she also contributed by looking for feeds and delivering milk to customers every day at Trattoria and Creamy Inn and therefore she is entitled to the share of the property is untenable. This is because, the dairy farming had long ceased even before the divorce of the parties for reasons of unprofitability and it is safe to say that the proceeds of the said business was used by the parties for the benefit of their family.

35. The property known as L.R. No.[Particulars Withheld] and the Shares in the company known as [Particulars Withheld] Limited go together for reasons that the hostels erected on L.R. No. [Particulars Withheld] are managed by [Particulars Withheld] Limited Company and therefore discussions of the two are in separable. The Applicant submitted that this property was acquired during marriage and therefore formed part of matrimonial property. The Respondent was the beneficial owner of the property for reasons that he had sworn an Affidavit stating that he was the proprietor of this land.  That there was no evidence that his brother gave him money towards the purchase of the said property as the pay-in-slips did not show who paid the money.

36. The Applicant observed further that the Respondent’s brother has not been joined in the proceedings in the capacity of an interested party or even as a witness to prove that he paid for the purchase of that property. She submitted that for the Respondent to borrow money for the development of the hostels, he offered his matrimonial home as collateral and in order to do this he had to transfer the ownership of the home from himself to the company.

37. The Applicant argued that the Respondent used the matrimonial home as he wished by transferring the home from himself to the company then back to himself for the construction at a nominal consideration of Kshs.2,000,000/=  when the proposed development failed to secure City Council approval.  Further that the other shareholders would not have agreed for the Respondent to donate free shares to his children without contribution as he did as this would water down the value of the shares.

38. The Applicant contented therefore that the property having been acquired during marriage, it fell under Section 14of theMatrimonial Property Act which stated that in such a case there was a rebuttable presumption that the property was held in trust for her. Further that the presumption had not been rebutted and therefore she was entitled to 50% of the property by virtue of the matrimonial home being charged for the hostel development.

39. The Respondent’s rejoinder was that though the property was acquired during marriage, it was through his efforts jointly with his brother SNM.  He later formed a company with his brother and other shareholders for purposes of developing the property. He contended that property owned by the company could not be distributed under the Matrimonial Properties Act but through the Companies Act or regulations set out under the Memorandum and Articles of Association of the Company.

40. The Respondent averred that the Applicant’s contention that he owned the property despite clear and uncontroverted evidence to the contrary ought to be dismissed. That the fact that he was able to move the matrimonial home from his name to the company and back to his name did not detract from the fact that title of the property belonged to the company. Further that he had explained in a credible way his efforts to assist the company to obtain a construction loan from the bank and this could not be interpreted to mean that the land belonged to him

41. The Respondent stated that the Applicant had not proved how she contributed in monetary and non-monetary ways towards acquisition or development of this property and that she did not buy any shares in the company, neither did any of the shareholders sell or transfer shares to her. He submitted that it was well settled in law that shares owned by one spouse in a company were not matrimonial property and could not be distributed under that Act, and for this reason her claim was incompetent and untenable.

42. On the Applicant’s claim under Trust, he submitted that Section 14 of the Matrimonial Properties Act presumed a Trust, where property was acquired during marriage but was registered in the name of one spouse, and the other spouse would claim as a beneficiary under the presumption of Trust. He averred that in this case the property had been proved to belong to a company. The Applicant’s claim that this was a family company because he and the daughters held 72% shares was untenable as shareholdings in companies were administered through various structures in the company and not family relationships.

43. The main issue for determination regarding the property known as L.R. No.[Particulars Withheld] and the shares in [Particulars Withheld] Limited, is whether this Court has jurisdiction to grant the relief sought by the Applicant on her entitlement to the said parcel of land and shares in the company.  I call to mind the findings of the court in Housing Finance Company of Kenya Limited v Faith Kimeria & Another (1998) eKLR.  Faith Kimeria filed a suit against her husband, by way of an Originating Summons under Section 17 of the Married Women Properties Act (MWPA).

44. Faith was seeking a declaration that an immovable property situate in Nairobi and registered in the sole name of her husband was owned jointly by her and her husband. The property had however been charged to Housing Finance Company Limited, the appellant. Faith made an application to join the appellant in those proceedings as a co-defendant. The appellant’s argument before the High Court was, inter alia, that the provisions under which the orders were sought did not apply to it. The court agreed with the appellant and held that the wife had no cause of action at all against the appellant.

45. In the case of S.N.K. v M.S.K & 5 others (2015) eKLRR.N Nambuye, D.K Musinga and A.K Murgor JJA held as follows:

“We believe that the above issue was exhaustively dealt with by this Court in Muthembwa v Muthembwa, Civil Appeal No. 74 of 2001 which was cited in Mereka v Mereka, Civil Appeal No. 236 of 2001 where the Court construed the jurisdiction under Section 17 of the MWPA as extending to shares in limited liability companies owned by the parties.” The court however held that a trial court in such proceedings had no jurisdiction to distribute properties registered in the name of the company in which the spouses were shareholders. The court held:

“if there are disputes between husband and wife as to their respective rights to the shares in a company registered in the name of one spouse, then the court, like in the case of any other property in dispute between husband and wife has power to ascertain the respective beneficial rights of husband and wife to the disputed shares. It can declare, like the learned C.A did in this case, that one spouse holds a certain number of shares in trust for the other spouse. What the court cannot do under Section 17 of  the 1882 Act, like in respect of all other properties, is to order the transfer of the legal titles to property or in other words to pass proprietary interest from one spouse to the other.”

46. Shares owned by the Respondent in the company cannot be construed as matrimonial property and be distributed under the principles set out in the Matrimonial Properties Act. The Applicant has not proved that she contributed in monetary or non-monetary ways towards acquisition or development of the property, or that she bought any shares in the company.  This court therefore has no jurisdiction to grant the reliefs sought by the Applicant with respect to Plot No. [Particulars Withheld] and the shares in [Particulars Withheld] Limited which manages the hostels in the said Plot.

47. It is trite law that a company is a separate legal person/entity from its shareholders and directors as was espoused in the English case of Salomon v Salomon (1887) AC 22. From the foregoing I find that the said Property in L.R No.[Particulars Withheld] managed by [Particulars Withheld]  Limited belongs to the company and therefore the Applicant can only make a claim to the company shares under the provisions of the Company Act.

48. Having carefully considered the rival arguments on each of the grounds raised by the Applicant, I find that only the grounds set out with respect to the matrimonial home L.R No.[Particulars Withheld] can succeed.  The property shall therefore be available for distribution at the ratio 50:50 between the parties. In the premise the application succeeds and is allowed to that extent only.

49. It is noted however that the property is currently charged for a loan that the Respondent acquired from the bank to build his residence on the adjacent property to the matrimonial home and it may not be practicable for the land to be sold.  It is therefore ordered as follows:

i) that the property  known as L.R No.[Particulars Withheld] on which comprises the matrimonial home be valued by a valuer to be agreed by the two parties within the next sixty (60) days.

ii) Failure to agree on a valuer within sixty (60) days each party to appoint their own valuer.

iii) The Respondent shall have the option of paying the Applicant half the value of this property.

Each party shall bear its own costs.

SIGNED DATED and DELIVERED in open court this 2nd day of October, 2017.

…………………

L. A. ACHODE

JUDGE