' REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT NAIROBI COMMERCIAL & ADMIRALTY DIVISION
IN THE MATTER OF SECTIONS 10, 35 (1) (E), 44 & 52 OF THE PARTNERSHIPS
ACT, ACT NO. 16 OF 2012
IN THE MATTER OF ORDER 37 RULES 1 & 10 OF THE CIVIL PROCEDURE RULES, 2010
CIVIL SUIT (OS) NO. E324 OF 2024
GRACE NYOKABI KIHARA 1ST APPLICANT
MICHAEL MUGO KIHARA 2ND APPLICANT
-VERSUS-
SOLOMON MUNGAI KIHARA 1ST RESPONDENT
NATHAN GITHU KIHARA 2ND RESPONDENT
LOICE NDUTA ITOTIA 3RD RESPONDENT
THE ESTATE OF MANNASSE WANG’ANG’A 4TH RESPONDENT
RUTH NJOKI KIMANI (SUING AS A REPRESENTATIVE AND ON BEHALF OF THE
ESTATE OF LEONARD WILLIAM KIMANI) 5TH RESPONDENT
JUDGEMENT
BACKGROUND
1. PERIS WAMBUI KIHARA died intestate in October 2001. The family took out letters of administration of the estate intestate, and upon which a certificate of confirmation
of grant was issued on June 29, 2005. The estate was thereafter distributed to all the beneficiaries of the estate. Some of the properties of the estate were not distributed to individual beneficiaries in order to preserve their viability; hence, a partnership was created and registered in the name of JOSHUA KIHARA FAMILY ASSOCIATES.
2. Consequently, a bank account was opened. NSE shares and landed properties registered under the partnership name. Some of the founding partners have since passed away, and the remaining ones are of advanced age. The relationship between the remaining partners has also deteriorated due to the conduct of some, which has, in effect, denied others the use and profit of the jointly owned properties.
3. Some of the partners are being accused of failing to act in good faith towards the partnership and other partners. Thus, acrimony between the remaining partners and constant disagreement on how to manage the partnership''s properties, especially the NSE shares, have also led to the partnership losing substantial amounts of money.
4. The applicants are of advanced age. They are apprehensive of and do not want to pass down the disputes between the founding partners to their children; hence, the need to have the partnership accounts taken and for it to be wound up forthwith.
5. Thus, by an originating summons, the Applicant lodged instant suit against respondents seeking orders.
i. THAT. an order do issue by the Honourable Court dissolving the partnership known as JOSHUA KIHARA FAMILY ASSOCIATES.
ii. an Order do issue by the Honourable Court for the taking of the accounts— distribution of assets and winding up of the JOSHUA KIHARA FAMILY ASSOCIATES partnership.
iii. the Honourable Court be pleased to issue an order to have land parcel No. MUCUCA/Y0\NYARlRl/1296 which is held in trust by CRACE NYOKA31 & NATHAN CITE-IU KIHARA. on behalf of JOSHUA KIHARA FAMILY
ASSOCIATES and subdivided into two equal portions and part of it not consisting of the family cemetery sold and proceeds to form part of the partnership to be distributed.
iv. THAT. the costs of the summons be provided for.
v. any other order that the court may be pleased to grant in the circumstances.
6. The same was supported by an affidavit and a supplementary/ further affidavit and on equal measure the 3rd Respondents opposed it, and a replying affidavit was lodged in reply by the summons herein. Parties were directed to submit their applications via the designated channels, which they complied with.
7. APPLICANTS’ SUBMISSIONS
8. The applicants submit their responses to the following issues.
I. Whether the partnership ought to be dissolved
9. That, the evidence presented before court is of divergent viewpoints as to what ought to be done to the partnership. While the applicants are desirous of having the
partnership dissolved and its assets distributed among the partners, the Respondents are in favor of the partnership continuing to operate and exist.
10. Article 36 of the Constitution provides that:
“(1) Every person has the right to freedom of association, which includes the right to form, join or participate in the activities of an association of any kind.
(2) A person shall not be compelled to join an association of any kind.”
11. It is submitted that a partnership is an association and that the Respondents cannot be permitted to compel the Applicants to be part of an association which they are against being members of contrary to the Constitutional edicts. The Applicants have annexed the disparaging comments made by the 2nd Respondent on the minutes of the partnership meeting on 3/3/2024, which show a great divide and deep wrangles between the partners, making a continuation of the status quo a near impossibility.
12. In the case of Naftaly Arayason v Coreta Mukuhi Ndungi & 3 others [2018] eKLR, in which there was constant wrangles between the partners, the court held that:
“The partnership is wrecked by disputes which have ended up in courts, and the interested parties do not see eye to eye. Apart from the premises occupied by the Plaintiff, it is difficult to say that the partnership is a going concern in the true sense
of the word…. Consequently, in terms of Section 35, 42, 44(1) (c), 45(2) and 46(2) of the Partnerships Act, the court orders that:
Ikinu Gichagi Merchants partnership has broken up, effective from the date of this judgment.
To give effect to the consequent dissolution of the partnership, and in light of the advanced age of the remaining partner, the 4th Defendant, the court directs that the said partner and the widows of the deceased partners who are Defendants herein propose within 30 days, the names of two professional firms who are suitable for appointment by the court as liquidators, to take accounts, collect all partnership property and to distribute it to the persons entitled in terms of Section 42 of the Partnerships Act.
For the avoidance of doubt, the persons entitled to share in the net partnership property are the 1st, 2nd and 3rd Defendants, on behalf of their deceased spouses, and the 4th Defendant in his capacity as a partner of the partnership.”
13. It is also instructive to note that despite stating that the partnership be allowed to continue being in existence, the Respondents failed to propose how much they are willing to pay in order to buy out the shares of the Applicants who have decided to opt out of the partnership hence the only option left is to dissolve the partnership, accounts taken and the assets distributed.
14. This court has powers under Section 35 (1)(c) of the Partnership Act, Act No. 16 of 2012, to order for the break-up of a partnership on the application of a partner. The statute under the said section states that:
"(1) A partnership breaks up if— the Court makes an order to break up the partnership on the application of a partner."
Section 36 of the Partnership Act states that:
“(1) A partnership which breaks up in the manner described in section 35 shall carry on with partnership business in so far as it is necessary for—
the dissolution of the partnership.
the winding up of the partnership by partners under section 40; or (c) the winding up of the partnership by a liquidator.”
15. The present summons is further brought under Section 3A of the Civil Procedure Act, which enjoins this court to do justice to the parties.
16. It is submitted that, the Applicants have provided evidence, and which has not been controverted in the response filed by the Respondents, demonstrating that Nathan Githu and Solomon Mungai have been using the partnership property to the exclusion of others. Respondents have also not disputed the Applicant''s assertions that the acrimonious relationship among the partners led to a depreciation in the value of some of the properties, such as the NSE shares, which have seen their values drastically reduce since the partners could not agree to liquidate them before their prices plummeted. It is instructive that the partners have also had issues in accessing the partnership bank account, as deponed to at paragraph 25 of the supporting affidavit.
17. It is submitted that the acrimonious relationship between the partners, which has led to near impossibility in running the affairs of the business, coupled with the fact that the Respondents never made any proposal on buying out the shares of the Applicants means the only option left is for the Honourable Court to order for the break up and/or dissolution of the partnership.
18. II. Whether or not Honourable Court should order for the subdivision of land parcel no. MUGUGA/KANYARIRI/1296 and have it form part of the partnership property to be distributed upon dissolution?
19. On this issue.it is contended the courts have long held that whenever a litigant approaches a court of law to have a dispute resolved, he ought to bring his whole case for determination instead of having litigation conducted in piecemeal. This practice is inspired by the doctrine of Res Judicata which bars further lawsuit on a matter already heard on its merits. In the case of Henderson vs Henderson (1843) 67 ER 313, approvingly quoted by Lady Justice Lucy N. Mbugua in the case of Joshua Ngatu v Jane Mpinda & 3 others [2019] eKLR, it was held that:
“….where a given matter becomes the subject of litigation in, and adjudication by a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigations in respect of a matter
which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence or even accident omitted part of their case. The pleas of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties exercising reasonable diligence, might have brought forward at the time”
20. It is on this principle that the Applicants has moved this Honourable Court to order for the partitioning of the land parcel no. MUGUGA/KANYARIRI/1296 into two equal parts and have the part not forming part of the cemetery land for part of the partnership property to be distributed upon its dissolution. This is because as things stand now, both Nathan Githu and Solomon Mungai have hived off parts of the said property for their exclusive use without considering the other members of the partnership. These are facts that they never controverted in their response to the summons.
21. It is also imperative to note that the partners had already discussed the issue of subdividing the said property as far back as 2018 and even hired a surveyor who created a subdivision plan, which the Kiambu District Surveyor then approved. It is therefore clear that the blanket reference to the said parcel of land as a cemetery is a scheme to ensure only some of the partners benefits from the property at the expense of the others.
22. The Applicants submit that the issue of partitioning the land parcel no. MUGUGA/KANYARIRI/1296 into two equal parts ought to be made part of the present proceedings for the sole purpose of ensuring efficacious resolution of all issues about the affairs of the Joshua Kihara Family Associates partnership.
23. III. How much remaining Partners should pay the Applicants to buy them out from the Business?
24. This is a question that depends on whether the Court is inclined to let the partnership continue without the applicants who have decided that they are no longer interested in continuing as members.
25. The properties of the partnership are as listed in the supporting affidavit of Grace Nyokabi. The consist of:
I. Family Bank account number 012000005113, Kenyatta Avenue Branch
II. NSE shares including, ARM Cement, E.A. Cables Ltd, Eveready East Africa Ltd, Housing Finance Co. Kenya Ltd, Centum Investment Co. Ltd, Kenya Commercial Bank Ltd, Kengen Co. Ltd, Kenya Airways Ltd, Mumias Sugar Co. Ltd, Nation Media Group Ltd, Safaricom Ltd, Tps Eastern Africa Ltd and Williamson Tea Kenya Ltd.
III. Apartment block built on LR No. KAJIADO/KAPUTIEI NORTH/99958 LR No. NAIROBI BLOCK 64/2288 (formerly LR
No. DAGORETTI/KANGEMI/S.91)
IV. Land parcel no. MUGUGA/KANYARIRI/2694
26. It is instructive that the Respondents have not challenged the above listed properties in their filed response. It is further instructive that they have not proposed if and how much they are willing to pay to buy out the shares of the Applicants. However, even if they were willing to buy out the Applicants from the partnership business, it would be paramount that accounts be taken, including the valuation of the said properties, to ensure the amount payable to the Applicants is ascertainable.
27. The partnership herein had no agreement that spells out the shares of each partner; hence, it ought to be assumed that all partners hold equal shares. The issue of shares being equal amongst partners in the absence of a partnership deed spelling out the proportion for each partner in terms of MWK & 2 OTHERS VS RKK (2018) e KLR which held Section 24 of the English Partnership Act 1890 is word for word Section 28(a) of The Repealed Partnership Act. Commenting on the effect of the English Statute Lindley and Banks on Partnership (19th Edition) at page 672
paragraphs 19-17 states: -
“The rule or equality embodied in the above section will, in the absence of any contrary agreement, always be applied when determining partners’ shares in the firm’s fixed capital, income or trading profits and capital or asset surpluses, ie. the amount by which the market value of the partnership assets exceeds their acquisition or book value”.
21. I accept that the same holds for Section 28(a). The rationale for the Rule of Equality being that, in the absence of any express or implied agreement between the partners, the partners consider their shares to be equal notwithstanding their contribution to the partnership be it Capital, Skill, Labour, Business connections or otherwise. It is to be presumed that having not expressed or implied their shares, then the Partners take their
contributions of whatever nature to be equal. If it were otherwise, then they would have said so expressly or by implication. Whilst it may sometimes lead to some seemingly absurd or unjust outcome, it removes the need of putting value to the respective contributions of each partner when they themselves did not find it necessary to do so.
28. RESPONDENT SUBMISSIONS
29. the Respondents'' written submissions are as follows.
30. The Joshua Kihara Family Associates partnership was formed for the "viability" of the remainder of the estate of the late Peris Wambui Kihara, the mother of the partners of the partnership, but without a partnership deed. The "viability" explanation was contained in paragraph 5 of the Applicants Supporting Affidavit. Nonetheless, the Applicant cites the following provision of the law together with other provisions in order to court to dissolve the partnership.
31. "44. Power of Court to make order removing partner or breaking up partnership
(1) The Court may, on the application of any partner, make an order— (a) removing the partner from the partnership.
II. removing another partner from the partnership; or (c) breaking up the partnership.
III. (2) In making an order under subsection
IV. (1), the Court shall have regard to—
V. the partner''s capability of performing a partner''s duties in the
partnership; (b) the effect of the partner''s conduct on the partnership business.
VI. any breach, by a partner, of a term of the partnership agreement;
VII. any fraud, misrepresentation or non-disclosure by any partner when the partners enter into a partnership or modify a partnership agreement.
VIII. any event that occurs making it unlawful for the partner to remain a partner; (O any losses incurred by the partnership and the prospects of carrying on the business partnership profitably.
IX. (g) any other ground the Court considers appropriate."
32. Paragraphs 8,9 & 10 of the Supporting Affidavit depict a picture of acrimony between the parties. In paragraph 3 in response the Respondents depone that "there is no dispute about the foundation of the partnership, but its management is what is in contention. " The management of the partnership has always been done in a manner that preserves the intention of the partnership, and this is documented in meetings and their conclusions captured in minutes annexed and marked NGK2. Accordingly, the powers of the court to dissolve the partnership under Section 44 of the Partnership Act cannot be sustained, for the intention of the formation of the partnership has been met and continues to be met.
33. The foundation is not disputed, as its basis is a family partnership whose assets comprised the remainder of the family matriarch''s estate and additional assets acquired from the estate''s profits. Amongst the assets is the family Cemetery MUGUGA/KANYARIRI/2694. This is conceded in the affidavit in support of the application.
34. The Applicant wishes that the unutilized portion of the family cemetery be hived off and sold. The Applicant in this demand does not act in good faith, as they do not offer an alternative resting place for family members when making this proposal. This is contrary to the provisions of Section 10 of the Partnership Act which provides.
I. "(1) A partner has a duty to act in good faith towards— (a) the partnership; and
II. the other partners in the partnership, in relation to all matters affecting the partnership."
35. The Applicants'' claim in paragraphs 18 and 19 that structures have been erected is unproven without conclusive evidence of boundary encroachments. This trite law that he who alleges must prove, in In Anne Wambui Ndiritu vs Joseph Kiprono Ropkoi & Another [20051 1 EA 334, the Court of Appeal held that:
"-As a general proposition under Section 107 (1) of the Evidence Act, Cap 80, the legal burden of proof lies upon the party who invokes the aid of the law and substantially asserts the affirmative of the issue. There is however the evidential burden that is case upon any party the burden of proving any particular fact which he desires the court to believe in its existence which is captured in
Sections 109 and 112 of the Act." Similarly, the rest of the allegations in the Affidavit in support have not been asserted in the affirmative.
36. The Applicants say in paragraph 25 that they have had difficulty in accessing the partnership bank account. According to the respondents'' annexure marked NGK3, the 1 st Applicant made withdrawals on January 17, 2024, and December 4, 2023. By this action the 1 st Applicant exercised their mutual rights under 10 (3) of the Partnership Act which provides a partner exercise "The mutual rights and duties of the partners, and the mutual rights and duties of the partnership and the partners, whether arising under this Act or the partnership agreement, are subject to the duty imposed on a partner by subsection (1)." Therefore, it cannot be said that the Applicants have been denied the right to participate in the affairs of the partnership whilst it is clear that they have exercised their mutual right.
37. In Mwaura Wang''ombe & Another Vs James Muite Rugunya eKLR Sergon J found that "the plaintiff has not convinced this court vide its evidence that the partnership should be dissolved. " The Applicants'' originating summons lacks merit and should be dismissed. The partnership and its objects ought to stand and continue meeting its objectives
38. ISSUES ANALYSIS AND DETERMINATION
39. After going through pleadings and the parties’ submissions I find the issues are;
. Whether there is sufficient ground/s for the dissolution of the partnership subject herein?
.If above in affirmative, how will the partnership assets/properties be distributed?
Namely.
I. Family Bank account number 012000005113, Kenyatta Avenue Branch
II. NSE shares including, ARM Cement, E.A. Cables Ltd, Eveready East Africa Ltd, Housing Finance Co. Kenya Ltd, Centum Investment Co. Ltd, Kenya Commercial Bank Ltd, Kengen Co. Ltd, Kenya Airways Ltd, Mumias Sugar Co. Ltd, Nation Media Group Ltd, Safaricom Ltd, Tps Eastern Africa Ltd and Williamson Tea Kenya Ltd.
III. Apartment block built on LR No. KAJIADO/KAPUTIEI NORTH/99958
IV. LR No. NAIROBI BLOCK 64/2288 (formerly LR No. DAGORETTI/KANGEMI/S.91)
V. Land parcel no. MUGUGA/KANYARIRI/2694
40. 3.Who is to bear the costs of the suit?
41. On whether the partnership should be dissolved.
42. the applicants submit that Nathan Githu and Solomon Mungai have been using the partnership property to the exclusion of others. The acrimonious relationship among the partners led to a depreciation in the value of some properties, such as the NSE shares, which have seen their values drastically reduce since the partners could not agree to liquidate them before their prices plummeted. The partners have also had issues accessing the partnership bank account, as deposed to in paragraph 25 of the supporting affidavit.
43. Thus the acrimonious relationship between the partners, which has led to near impossibility in running the affairs of the business, coupled with the fact that the Respondents never made any proposal on buying out the shares of the Applicants means the only option left is for the Honourable Court to order for the break up and/or dissolution of the partnership.
44. Respondent rejoinder is that "there is no dispute about the foundation of the partnership, but its management is what is in contention. " The management of the partnership has always been done in a manner that preserves the intention of the partnership, and this is documented in meetings and their conclusions captured in minutes annexed and marked NGK2. Accordingly, the powers of the court to dissolve the partnership under Section 44 of the Partnership Act cannot be sustained, for the intention of the formation of the partnership has been met and continues to be met.
45. In Kenya, partnerships are dissolved under the Partnerships Act (Cap. 29, 2012) through mutual agreement, expiration of term, notice of dissolution, death or bankruptcy of a partner, or court orders in cases of fraud, persistent breach of
agreement, or illegality. The process involves settling accounts, distributing assets, and potentially filing a Form BN/6 with the Business Registration Service (BRS) to close the partnership formally.
46. Court Order: A partner applies to the court to dissolve the partnership due to:
47. A partner''s permanent incapacity to perform their duties. A partner''s conduct that prejudices the business. Wilful or persistent breaches of the partnership agreement by a partner. The business consistently operating at a loss. Fraud or misrepresentation by a partner during the formation of the partnership.
50. A court in Kenya will dissolve a partnership if an application is made by a partner, creditor, or interested person, and the court orders it under Section 35 of the Partnerships Act 2012. This can occur due to factors such as the business becoming impossible to continue, a partner''s misconduct, or the partnership becoming unlawful.
51. Power of Court to make order ……. breaking up partnership as provided hereunder.
The Court may, on the application of any partner, make an order—breaking up the partnership. In making an order under subsection (1), the Court shall have regard to—
I. the effect of the partner’s conduct on the partnership business.
II. any breach, by a partner, of a term of the partnership agreement.
52. any fraud, misrepresentation or non-disclosure by any partner when the partners enter a partnership or modify a partnership agreement.
I. any event that occurs making it unlawful for the partner to remain a partner.
II. any losses incurred by the partnership and the prospects of carrying on the business
III. partnership profitably.any other ground the Court considers appropriate.
53. Circumstances for a Court to Dissolve a Partnership
54. A court may order the dissolution of a partnership under the following specific circumstances, as outlined by the Kenyan Partnerships Act:
55. Application by a Partner:
56. A partner can apply to the court to dissolve the partnership if the business is no longer possible to carry on, or if a partner has been guilty of misconduct that prejudices the carrying on of the business.
57. Reasons for Court Dissolution; When a partner applies to the court for dissolution, the grounds for the application can include:
58. Impossibility of Carrying on the Business:
59. Breach of Partnership Agreement:
Deliberate and repeated breaches of the partnership agreement by a partner can also lead to a court order. (f) when the court deems it just and equitable for the partnership to be dissolved. This was illustrated in case of Re Yenidje Tobacco Co Ltd [1916] 2 Ch 426 where the court issued a dissolution order of the partnership, because the relationship between the two partners became so strained that they stopped speaking to each other. The court believed that a state of mutual hostility or hatred is incompatible with running a partnership business.In the case of Re: Yenidje Tobacco Co, the principle established was that a private company could be wound up under the "just and equitable" clause if its circumstances mirrored those of a partnership dissolution, specifically if a deadlock had occurred due to a breakdown in trust between the shareholders. The court determined that when a private company essentially functions as a partnership and the shareholders cannot collaborate effectively, leading to an operational deadlock, it is and equitable to wind up the company, even if the deadlock itself is not explicitly a ground for partnership dissolution.
60. This trite law that he who alleges must prove, in In Anne Wambui Ndiritu vs Joseph Kiprono Ropkoi & Another [20051 1 EA 334, the Court of Appeal held that:
"-As a general proposition under Section 107 (1) of the Evidence Act, Cap 80, the legal burden of proof lies upon the party who invokes the aid of the law and substantially asserts the affirmative of the issue. There is however the evidential burden that is case upon any party the burden of proving any particular fact which he desires the court to believe in its existence which is captured in Sections 109 and 112 of the Act."
61. The Applicants complain that Nathan Githu and Solomon Mungai have been using the partnership property to the exclusion of other partners, a fact not refuted by the respondents. Respondents have also not disputed the Applicant''s assertions that the acrimonious relationship among the partners led to a depreciation in the value of some properties, such as the NSE shares, which had seen their values drastically reduce since the partners could not agree to liquidate them before their prices plummeted. It is instructive that the partners have also had issues in accessing the partnership bank account, as deponed to at paragraph 25 of the supporting affidavit.
62. The acrimonious relationship between the partners, which has led to near impossibility in running the affairs of the business, coupled with the fact that the Respondents never made any proposal on buying out the shares of the Applicants means the only option left is for the Honourable Court to order for the breakup and/or dissolution of the partnership.
63. It is not enough for the Respondents to argue that the mutual rights and duties of the partners, and the mutual rights and duties of the partnership and the partners, whether arising under this Act or the partnership agreement, are subject to the duty imposed on a partner by subsection (1)." Therefore, it cannot be said that the Applicants have been denied the right to participate in the affairs of the partnership whilst it is clear that they have exercised their mutual right. It was incumbent upon the respondent to specifically the complaints raised by applicants and demonstrate how they were remedying the same.
64. In the case of Naftaly Arayason v Coreta Mukuhi Ndungi & 3 others [2018] eKLR, in which there was constant wrangles between the partners, the court held that:
"The partnership is wrecked by disputes which have ended up in courts, and the interested parties do not see eye to eye. Apart from the premises occupied by the Plaintiff, it is difficult to say that the partnership is a going concern in the true sense of the word…. Consequently, in terms of Section 35, 42, 44(1) (c), 45(2) and 46(2) of the Partnerships Act, the court orders that:
Ikinu Gichagi M
[...truncated]
IN THE HIGH COURT OF KENYA AT NAIROBI COMMERCIAL & ADMIRALTY DIVISION
IN THE MATTER OF SECTIONS 10, 35 (1) (E), 44 & 52 OF THE PARTNERSHIPS
ACT, ACT NO. 16 OF 2012
IN THE MATTER OF ORDER 37 RULES 1 & 10 OF THE CIVIL PROCEDURE RULES, 2010
CIVIL SUIT (OS) NO. E324 OF 2024
GRACE NYOKABI KIHARA 1ST APPLICANT
MICHAEL MUGO KIHARA 2ND APPLICANT
-VERSUS-
SOLOMON MUNGAI KIHARA 1ST RESPONDENT
NATHAN GITHU KIHARA 2ND RESPONDENT
LOICE NDUTA ITOTIA 3RD RESPONDENT
THE ESTATE OF MANNASSE WANG’ANG’A 4TH RESPONDENT
RUTH NJOKI KIMANI (SUING AS A REPRESENTATIVE AND ON BEHALF OF THE
ESTATE OF LEONARD WILLIAM KIMANI) 5TH RESPONDENT
JUDGEMENT
BACKGROUND
1. PERIS WAMBUI KIHARA died intestate in October 2001. The family took out letters of administration of the estate intestate, and upon which a certificate of confirmation
of grant was issued on June 29, 2005. The estate was thereafter distributed to all the beneficiaries of the estate. Some of the properties of the estate were not distributed to individual beneficiaries in order to preserve their viability; hence, a partnership was created and registered in the name of JOSHUA KIHARA FAMILY ASSOCIATES.
2. Consequently, a bank account was opened. NSE shares and landed properties registered under the partnership name. Some of the founding partners have since passed away, and the remaining ones are of advanced age. The relationship between the remaining partners has also deteriorated due to the conduct of some, which has, in effect, denied others the use and profit of the jointly owned properties.
3. Some of the partners are being accused of failing to act in good faith towards the partnership and other partners. Thus, acrimony between the remaining partners and constant disagreement on how to manage the partnership''s properties, especially the NSE shares, have also led to the partnership losing substantial amounts of money.
4. The applicants are of advanced age. They are apprehensive of and do not want to pass down the disputes between the founding partners to their children; hence, the need to have the partnership accounts taken and for it to be wound up forthwith.
5. Thus, by an originating summons, the Applicant lodged instant suit against respondents seeking orders.
i. THAT. an order do issue by the Honourable Court dissolving the partnership known as JOSHUA KIHARA FAMILY ASSOCIATES.
ii. an Order do issue by the Honourable Court for the taking of the accounts— distribution of assets and winding up of the JOSHUA KIHARA FAMILY ASSOCIATES partnership.
iii. the Honourable Court be pleased to issue an order to have land parcel No. MUCUCA/Y0\NYARlRl/1296 which is held in trust by CRACE NYOKA31 & NATHAN CITE-IU KIHARA. on behalf of JOSHUA KIHARA FAMILY
ASSOCIATES and subdivided into two equal portions and part of it not consisting of the family cemetery sold and proceeds to form part of the partnership to be distributed.
iv. THAT. the costs of the summons be provided for.
v. any other order that the court may be pleased to grant in the circumstances.
6. The same was supported by an affidavit and a supplementary/ further affidavit and on equal measure the 3rd Respondents opposed it, and a replying affidavit was lodged in reply by the summons herein. Parties were directed to submit their applications via the designated channels, which they complied with.
7. APPLICANTS’ SUBMISSIONS
8. The applicants submit their responses to the following issues.
I. Whether the partnership ought to be dissolved
9. That, the evidence presented before court is of divergent viewpoints as to what ought to be done to the partnership. While the applicants are desirous of having the
partnership dissolved and its assets distributed among the partners, the Respondents are in favor of the partnership continuing to operate and exist.
10. Article 36 of the Constitution provides that:
“(1) Every person has the right to freedom of association, which includes the right to form, join or participate in the activities of an association of any kind.
(2) A person shall not be compelled to join an association of any kind.”
11. It is submitted that a partnership is an association and that the Respondents cannot be permitted to compel the Applicants to be part of an association which they are against being members of contrary to the Constitutional edicts. The Applicants have annexed the disparaging comments made by the 2nd Respondent on the minutes of the partnership meeting on 3/3/2024, which show a great divide and deep wrangles between the partners, making a continuation of the status quo a near impossibility.
12. In the case of Naftaly Arayason v Coreta Mukuhi Ndungi & 3 others [2018] eKLR, in which there was constant wrangles between the partners, the court held that:
“The partnership is wrecked by disputes which have ended up in courts, and the interested parties do not see eye to eye. Apart from the premises occupied by the Plaintiff, it is difficult to say that the partnership is a going concern in the true sense
of the word…. Consequently, in terms of Section 35, 42, 44(1) (c), 45(2) and 46(2) of the Partnerships Act, the court orders that:
Ikinu Gichagi Merchants partnership has broken up, effective from the date of this judgment.
To give effect to the consequent dissolution of the partnership, and in light of the advanced age of the remaining partner, the 4th Defendant, the court directs that the said partner and the widows of the deceased partners who are Defendants herein propose within 30 days, the names of two professional firms who are suitable for appointment by the court as liquidators, to take accounts, collect all partnership property and to distribute it to the persons entitled in terms of Section 42 of the Partnerships Act.
For the avoidance of doubt, the persons entitled to share in the net partnership property are the 1st, 2nd and 3rd Defendants, on behalf of their deceased spouses, and the 4th Defendant in his capacity as a partner of the partnership.”
13. It is also instructive to note that despite stating that the partnership be allowed to continue being in existence, the Respondents failed to propose how much they are willing to pay in order to buy out the shares of the Applicants who have decided to opt out of the partnership hence the only option left is to dissolve the partnership, accounts taken and the assets distributed.
14. This court has powers under Section 35 (1)(c) of the Partnership Act, Act No. 16 of 2012, to order for the break-up of a partnership on the application of a partner. The statute under the said section states that:
"(1) A partnership breaks up if— the Court makes an order to break up the partnership on the application of a partner."
Section 36 of the Partnership Act states that:
“(1) A partnership which breaks up in the manner described in section 35 shall carry on with partnership business in so far as it is necessary for—
the dissolution of the partnership.
the winding up of the partnership by partners under section 40; or (c) the winding up of the partnership by a liquidator.”
15. The present summons is further brought under Section 3A of the Civil Procedure Act, which enjoins this court to do justice to the parties.
16. It is submitted that, the Applicants have provided evidence, and which has not been controverted in the response filed by the Respondents, demonstrating that Nathan Githu and Solomon Mungai have been using the partnership property to the exclusion of others. Respondents have also not disputed the Applicant''s assertions that the acrimonious relationship among the partners led to a depreciation in the value of some of the properties, such as the NSE shares, which have seen their values drastically reduce since the partners could not agree to liquidate them before their prices plummeted. It is instructive that the partners have also had issues in accessing the partnership bank account, as deponed to at paragraph 25 of the supporting affidavit.
17. It is submitted that the acrimonious relationship between the partners, which has led to near impossibility in running the affairs of the business, coupled with the fact that the Respondents never made any proposal on buying out the shares of the Applicants means the only option left is for the Honourable Court to order for the break up and/or dissolution of the partnership.
18. II. Whether or not Honourable Court should order for the subdivision of land parcel no. MUGUGA/KANYARIRI/1296 and have it form part of the partnership property to be distributed upon dissolution?
19. On this issue.it is contended the courts have long held that whenever a litigant approaches a court of law to have a dispute resolved, he ought to bring his whole case for determination instead of having litigation conducted in piecemeal. This practice is inspired by the doctrine of Res Judicata which bars further lawsuit on a matter already heard on its merits. In the case of Henderson vs Henderson (1843) 67 ER 313, approvingly quoted by Lady Justice Lucy N. Mbugua in the case of Joshua Ngatu v Jane Mpinda & 3 others [2019] eKLR, it was held that:
“….where a given matter becomes the subject of litigation in, and adjudication by a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigations in respect of a matter
which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence or even accident omitted part of their case. The pleas of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties exercising reasonable diligence, might have brought forward at the time”
20. It is on this principle that the Applicants has moved this Honourable Court to order for the partitioning of the land parcel no. MUGUGA/KANYARIRI/1296 into two equal parts and have the part not forming part of the cemetery land for part of the partnership property to be distributed upon its dissolution. This is because as things stand now, both Nathan Githu and Solomon Mungai have hived off parts of the said property for their exclusive use without considering the other members of the partnership. These are facts that they never controverted in their response to the summons.
21. It is also imperative to note that the partners had already discussed the issue of subdividing the said property as far back as 2018 and even hired a surveyor who created a subdivision plan, which the Kiambu District Surveyor then approved. It is therefore clear that the blanket reference to the said parcel of land as a cemetery is a scheme to ensure only some of the partners benefits from the property at the expense of the others.
22. The Applicants submit that the issue of partitioning the land parcel no. MUGUGA/KANYARIRI/1296 into two equal parts ought to be made part of the present proceedings for the sole purpose of ensuring efficacious resolution of all issues about the affairs of the Joshua Kihara Family Associates partnership.
23. III. How much remaining Partners should pay the Applicants to buy them out from the Business?
24. This is a question that depends on whether the Court is inclined to let the partnership continue without the applicants who have decided that they are no longer interested in continuing as members.
25. The properties of the partnership are as listed in the supporting affidavit of Grace Nyokabi. The consist of:
I. Family Bank account number 012000005113, Kenyatta Avenue Branch
II. NSE shares including, ARM Cement, E.A. Cables Ltd, Eveready East Africa Ltd, Housing Finance Co. Kenya Ltd, Centum Investment Co. Ltd, Kenya Commercial Bank Ltd, Kengen Co. Ltd, Kenya Airways Ltd, Mumias Sugar Co. Ltd, Nation Media Group Ltd, Safaricom Ltd, Tps Eastern Africa Ltd and Williamson Tea Kenya Ltd.
III. Apartment block built on LR No. KAJIADO/KAPUTIEI NORTH/99958 LR No. NAIROBI BLOCK 64/2288 (formerly LR
No. DAGORETTI/KANGEMI/S.91)
IV. Land parcel no. MUGUGA/KANYARIRI/2694
26. It is instructive that the Respondents have not challenged the above listed properties in their filed response. It is further instructive that they have not proposed if and how much they are willing to pay to buy out the shares of the Applicants. However, even if they were willing to buy out the Applicants from the partnership business, it would be paramount that accounts be taken, including the valuation of the said properties, to ensure the amount payable to the Applicants is ascertainable.
27. The partnership herein had no agreement that spells out the shares of each partner; hence, it ought to be assumed that all partners hold equal shares. The issue of shares being equal amongst partners in the absence of a partnership deed spelling out the proportion for each partner in terms of MWK & 2 OTHERS VS RKK (2018) e KLR which held Section 24 of the English Partnership Act 1890 is word for word Section 28(a) of The Repealed Partnership Act. Commenting on the effect of the English Statute Lindley and Banks on Partnership (19th Edition) at page 672
paragraphs 19-17 states: -
“The rule or equality embodied in the above section will, in the absence of any contrary agreement, always be applied when determining partners’ shares in the firm’s fixed capital, income or trading profits and capital or asset surpluses, ie. the amount by which the market value of the partnership assets exceeds their acquisition or book value”.
21. I accept that the same holds for Section 28(a). The rationale for the Rule of Equality being that, in the absence of any express or implied agreement between the partners, the partners consider their shares to be equal notwithstanding their contribution to the partnership be it Capital, Skill, Labour, Business connections or otherwise. It is to be presumed that having not expressed or implied their shares, then the Partners take their
contributions of whatever nature to be equal. If it were otherwise, then they would have said so expressly or by implication. Whilst it may sometimes lead to some seemingly absurd or unjust outcome, it removes the need of putting value to the respective contributions of each partner when they themselves did not find it necessary to do so.
28. RESPONDENT SUBMISSIONS
29. the Respondents'' written submissions are as follows.
30. The Joshua Kihara Family Associates partnership was formed for the "viability" of the remainder of the estate of the late Peris Wambui Kihara, the mother of the partners of the partnership, but without a partnership deed. The "viability" explanation was contained in paragraph 5 of the Applicants Supporting Affidavit. Nonetheless, the Applicant cites the following provision of the law together with other provisions in order to court to dissolve the partnership.
31. "44. Power of Court to make order removing partner or breaking up partnership
(1) The Court may, on the application of any partner, make an order— (a) removing the partner from the partnership.
II. removing another partner from the partnership; or (c) breaking up the partnership.
III. (2) In making an order under subsection
IV. (1), the Court shall have regard to—
V. the partner''s capability of performing a partner''s duties in the
partnership; (b) the effect of the partner''s conduct on the partnership business.
VI. any breach, by a partner, of a term of the partnership agreement;
VII. any fraud, misrepresentation or non-disclosure by any partner when the partners enter into a partnership or modify a partnership agreement.
VIII. any event that occurs making it unlawful for the partner to remain a partner; (O any losses incurred by the partnership and the prospects of carrying on the business partnership profitably.
IX. (g) any other ground the Court considers appropriate."
32. Paragraphs 8,9 & 10 of the Supporting Affidavit depict a picture of acrimony between the parties. In paragraph 3 in response the Respondents depone that "there is no dispute about the foundation of the partnership, but its management is what is in contention. " The management of the partnership has always been done in a manner that preserves the intention of the partnership, and this is documented in meetings and their conclusions captured in minutes annexed and marked NGK2. Accordingly, the powers of the court to dissolve the partnership under Section 44 of the Partnership Act cannot be sustained, for the intention of the formation of the partnership has been met and continues to be met.
33. The foundation is not disputed, as its basis is a family partnership whose assets comprised the remainder of the family matriarch''s estate and additional assets acquired from the estate''s profits. Amongst the assets is the family Cemetery MUGUGA/KANYARIRI/2694. This is conceded in the affidavit in support of the application.
34. The Applicant wishes that the unutilized portion of the family cemetery be hived off and sold. The Applicant in this demand does not act in good faith, as they do not offer an alternative resting place for family members when making this proposal. This is contrary to the provisions of Section 10 of the Partnership Act which provides.
I. "(1) A partner has a duty to act in good faith towards— (a) the partnership; and
II. the other partners in the partnership, in relation to all matters affecting the partnership."
35. The Applicants'' claim in paragraphs 18 and 19 that structures have been erected is unproven without conclusive evidence of boundary encroachments. This trite law that he who alleges must prove, in In Anne Wambui Ndiritu vs Joseph Kiprono Ropkoi & Another [20051 1 EA 334, the Court of Appeal held that:
"-As a general proposition under Section 107 (1) of the Evidence Act, Cap 80, the legal burden of proof lies upon the party who invokes the aid of the law and substantially asserts the affirmative of the issue. There is however the evidential burden that is case upon any party the burden of proving any particular fact which he desires the court to believe in its existence which is captured in
Sections 109 and 112 of the Act." Similarly, the rest of the allegations in the Affidavit in support have not been asserted in the affirmative.
36. The Applicants say in paragraph 25 that they have had difficulty in accessing the partnership bank account. According to the respondents'' annexure marked NGK3, the 1 st Applicant made withdrawals on January 17, 2024, and December 4, 2023. By this action the 1 st Applicant exercised their mutual rights under 10 (3) of the Partnership Act which provides a partner exercise "The mutual rights and duties of the partners, and the mutual rights and duties of the partnership and the partners, whether arising under this Act or the partnership agreement, are subject to the duty imposed on a partner by subsection (1)." Therefore, it cannot be said that the Applicants have been denied the right to participate in the affairs of the partnership whilst it is clear that they have exercised their mutual right.
37. In Mwaura Wang''ombe & Another Vs James Muite Rugunya eKLR Sergon J found that "the plaintiff has not convinced this court vide its evidence that the partnership should be dissolved. " The Applicants'' originating summons lacks merit and should be dismissed. The partnership and its objects ought to stand and continue meeting its objectives
38. ISSUES ANALYSIS AND DETERMINATION
39. After going through pleadings and the parties’ submissions I find the issues are;
. Whether there is sufficient ground/s for the dissolution of the partnership subject herein?
.If above in affirmative, how will the partnership assets/properties be distributed?
Namely.
I. Family Bank account number 012000005113, Kenyatta Avenue Branch
II. NSE shares including, ARM Cement, E.A. Cables Ltd, Eveready East Africa Ltd, Housing Finance Co. Kenya Ltd, Centum Investment Co. Ltd, Kenya Commercial Bank Ltd, Kengen Co. Ltd, Kenya Airways Ltd, Mumias Sugar Co. Ltd, Nation Media Group Ltd, Safaricom Ltd, Tps Eastern Africa Ltd and Williamson Tea Kenya Ltd.
III. Apartment block built on LR No. KAJIADO/KAPUTIEI NORTH/99958
IV. LR No. NAIROBI BLOCK 64/2288 (formerly LR No. DAGORETTI/KANGEMI/S.91)
V. Land parcel no. MUGUGA/KANYARIRI/2694
40. 3.Who is to bear the costs of the suit?
41. On whether the partnership should be dissolved.
42. the applicants submit that Nathan Githu and Solomon Mungai have been using the partnership property to the exclusion of others. The acrimonious relationship among the partners led to a depreciation in the value of some properties, such as the NSE shares, which have seen their values drastically reduce since the partners could not agree to liquidate them before their prices plummeted. The partners have also had issues accessing the partnership bank account, as deposed to in paragraph 25 of the supporting affidavit.
43. Thus the acrimonious relationship between the partners, which has led to near impossibility in running the affairs of the business, coupled with the fact that the Respondents never made any proposal on buying out the shares of the Applicants means the only option left is for the Honourable Court to order for the break up and/or dissolution of the partnership.
44. Respondent rejoinder is that "there is no dispute about the foundation of the partnership, but its management is what is in contention. " The management of the partnership has always been done in a manner that preserves the intention of the partnership, and this is documented in meetings and their conclusions captured in minutes annexed and marked NGK2. Accordingly, the powers of the court to dissolve the partnership under Section 44 of the Partnership Act cannot be sustained, for the intention of the formation of the partnership has been met and continues to be met.
45. In Kenya, partnerships are dissolved under the Partnerships Act (Cap. 29, 2012) through mutual agreement, expiration of term, notice of dissolution, death or bankruptcy of a partner, or court orders in cases of fraud, persistent breach of
agreement, or illegality. The process involves settling accounts, distributing assets, and potentially filing a Form BN/6 with the Business Registration Service (BRS) to close the partnership formally.
46. Court Order: A partner applies to the court to dissolve the partnership due to:
47. A partner''s permanent incapacity to perform their duties. A partner''s conduct that prejudices the business. Wilful or persistent breaches of the partnership agreement by a partner. The business consistently operating at a loss. Fraud or misrepresentation by a partner during the formation of the partnership.
50. A court in Kenya will dissolve a partnership if an application is made by a partner, creditor, or interested person, and the court orders it under Section 35 of the Partnerships Act 2012. This can occur due to factors such as the business becoming impossible to continue, a partner''s misconduct, or the partnership becoming unlawful.
51. Power of Court to make order ……. breaking up partnership as provided hereunder.
The Court may, on the application of any partner, make an order—breaking up the partnership. In making an order under subsection (1), the Court shall have regard to—
I. the effect of the partner’s conduct on the partnership business.
II. any breach, by a partner, of a term of the partnership agreement.
52. any fraud, misrepresentation or non-disclosure by any partner when the partners enter a partnership or modify a partnership agreement.
I. any event that occurs making it unlawful for the partner to remain a partner.
II. any losses incurred by the partnership and the prospects of carrying on the business
III. partnership profitably.any other ground the Court considers appropriate.
53. Circumstances for a Court to Dissolve a Partnership
54. A court may order the dissolution of a partnership under the following specific circumstances, as outlined by the Kenyan Partnerships Act:
55. Application by a Partner:
56. A partner can apply to the court to dissolve the partnership if the business is no longer possible to carry on, or if a partner has been guilty of misconduct that prejudices the carrying on of the business.
57. Reasons for Court Dissolution; When a partner applies to the court for dissolution, the grounds for the application can include:
58. Impossibility of Carrying on the Business:
59. Breach of Partnership Agreement:
Deliberate and repeated breaches of the partnership agreement by a partner can also lead to a court order. (f) when the court deems it just and equitable for the partnership to be dissolved. This was illustrated in case of Re Yenidje Tobacco Co Ltd [1916] 2 Ch 426 where the court issued a dissolution order of the partnership, because the relationship between the two partners became so strained that they stopped speaking to each other. The court believed that a state of mutual hostility or hatred is incompatible with running a partnership business.In the case of Re: Yenidje Tobacco Co, the principle established was that a private company could be wound up under the "just and equitable" clause if its circumstances mirrored those of a partnership dissolution, specifically if a deadlock had occurred due to a breakdown in trust between the shareholders. The court determined that when a private company essentially functions as a partnership and the shareholders cannot collaborate effectively, leading to an operational deadlock, it is and equitable to wind up the company, even if the deadlock itself is not explicitly a ground for partnership dissolution.
60. This trite law that he who alleges must prove, in In Anne Wambui Ndiritu vs Joseph Kiprono Ropkoi & Another [20051 1 EA 334, the Court of Appeal held that:
"-As a general proposition under Section 107 (1) of the Evidence Act, Cap 80, the legal burden of proof lies upon the party who invokes the aid of the law and substantially asserts the affirmative of the issue. There is however the evidential burden that is case upon any party the burden of proving any particular fact which he desires the court to believe in its existence which is captured in Sections 109 and 112 of the Act."
61. The Applicants complain that Nathan Githu and Solomon Mungai have been using the partnership property to the exclusion of other partners, a fact not refuted by the respondents. Respondents have also not disputed the Applicant''s assertions that the acrimonious relationship among the partners led to a depreciation in the value of some properties, such as the NSE shares, which had seen their values drastically reduce since the partners could not agree to liquidate them before their prices plummeted. It is instructive that the partners have also had issues in accessing the partnership bank account, as deponed to at paragraph 25 of the supporting affidavit.
62. The acrimonious relationship between the partners, which has led to near impossibility in running the affairs of the business, coupled with the fact that the Respondents never made any proposal on buying out the shares of the Applicants means the only option left is for the Honourable Court to order for the breakup and/or dissolution of the partnership.
63. It is not enough for the Respondents to argue that the mutual rights and duties of the partners, and the mutual rights and duties of the partnership and the partners, whether arising under this Act or the partnership agreement, are subject to the duty imposed on a partner by subsection (1)." Therefore, it cannot be said that the Applicants have been denied the right to participate in the affairs of the partnership whilst it is clear that they have exercised their mutual right. It was incumbent upon the respondent to specifically the complaints raised by applicants and demonstrate how they were remedying the same.
64. In the case of Naftaly Arayason v Coreta Mukuhi Ndungi & 3 others [2018] eKLR, in which there was constant wrangles between the partners, the court held that:
"The partnership is wrecked by disputes which have ended up in courts, and the interested parties do not see eye to eye. Apart from the premises occupied by the Plaintiff, it is difficult to say that the partnership is a going concern in the true sense of the word…. Consequently, in terms of Section 35, 42, 44(1) (c), 45(2) and 46(2) of the Partnerships Act, the court orders that:
Ikinu Gichagi M
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