The Appellate Court ruling clarifies a long-standing ambiguity in Kenyan matrimonial law where spouses often transferred assets to companies to avoid equitable division during divorce.
The Court of Appeal has ruled that shares acquired during marriage are matrimonial property — even if held under a company — a verdict that potentially affects cases where divorcing spouses are fighting over asset ownership.
According to the court, shares are deemed as assets and anything acquired by any spouse during the union forms part of their matrimonial property, thus is subject to division after dissolution of the marriage.
This ruling clarifies a long-standing gap in Kenyan matrimonial law where spouses often transferred assets to companies to avoid equitable division during divorce.
This effectively means family courts are legally allowed to go behind the corporate veil to scrutinise true ownership of firms and ensure fair division of matrimonial assets based on contributions of each spouse, aligning with the constitutional principle of equality in marriage.
The Court of Appeal held that limited liability companies, where a spouse could be holding shares, can also be joined in a legal dispute involving division of matrimonial property.
RNK versus GKW divorce case
The Appellate Court ruling clarifies a long-standing ambiguity in Kenyan matrimonial law where spouses often transferred assets to companies to avoid equitable division during divorce.
The findings stemmed from a judgement delivered by a three-judge bench comprising Justices Daniel Musinga, Mumbi Ngugi and Francis Tuiyott. The dispute involved a divorced couple referred to anonymously as Mr GKW and Ms RNK to protect their privacy under family court rules.
Following their divorce in 2011, a dispute emerged on sharing of their matrimonial assets since Ms RNK claimed stake in shares held by Mr GKW in seven companies.
Their case escalated to the Court of Appeal after the High Court, in a February 2017 ruling, allowed Ms RNK's application to amend her case to include limited liability companies as respondents in the case.
Mr GKW was aggrieved and appealed the High Court decision, with his advocates arguing that the trial court misdirected itself in allowing the joinder of parties other than spouses in a suit concerning division of their matrimonial property.
It was argued that the summary procedure under the Act did not apply to persons, legal or natural, other than the spouses. This law, which was repealed by the Matrimonial Property Act, 2013, provided a summary procedure for resolving disputes between a husband and wife concerning property ownership.
According to court submissions, Ms RNK wanted 50 percent of the shares registered in the name of her former husband and half of all the properties registered in the companies. She stated that the companies in question were intimately connected to the matrimonial relationship between her and the appellant.
She noted that the matrimonial home, in which they had resided for over 20 years, was registered in one of the holding companies and that it was therefore reasonable and necessary to include the company in the matrimonial proceedings.
However, Mr GKW had argued that including his company shares in the suit went against the letter and spirit of the Married Women’s Property Act. He also argued that Ms RNK should not be allowed to include the firms in the dispute as the application was made 5 years after the case began.
"The court erred in allowing amendments which purport to bestow upon the court jurisdiction to transfer legal title to properties owned by a company to a spouse in proceedings under section 17 of the said Act," said his advocates.
However, the Court of Appeal disagreed and upheld the High Court decision that firms where a spouse holds shares can also be joined in a matrimonial dispute.
The Appellate Court said: "Having considered the ruling of the trial court and the submissions of the parties, we find no basis for interfering with the trial court’s exercise of discretion," said the judges.
"The position of our law is that amendments may be allowed to bring before the court the real issue or controversy between the parties; that mere delay is not a sufficient basis for denying an application for amendment".
Legal experts say this ruling closes a major loophole in matrimonial property disputes.
