How divorce, feuds are breaking up once-stable family-run businesses

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As divorce, closely followed by property rows, bids to become the norm and modern nightmare of any business, the High Court has since 2015 been encouraging warring lovers to handle disputes out of court.

Through this mediation drive, the Judiciary has been able to restore 191 families that were on the brink of divorce — and averted potential battles over child custody, matrimonial assets and family businesses that would have languished in the courts for years.

So vicious are some of the court battles that Court of Appeal judges Philip Waki, Festus Azangalala and Patrick Kiage, while ruling on a divorced couple’s fight over properties, likened the battles to “a murky waterway”.

This, the judges said, was because the “applicable procedural law (used in Kenya) was a piece of archaic legislation enacted in England in 1882 and inherited as a statute of general application in this country.”

While property fights are not new after split ups, it becomes a bit more complicated with businesses as they at times threaten the rights of employees and clients.

ADOPT MEDIATION

So complex are these matters that the Association of Family Business Enterprises (AFBE) chairman Joseph Okelo believes that families in general need to adopt mediation as a dispute resolution mechanism before heading to court.

READ: Trader accuses fiancée of fraud in row over Ridgeways Inn

Mr Okelo, a director of Makini Schools, says the court process often fuels the fire, as warring parties have to hire lawyers whom he believes will in most cases push for going to court to earn their fees.

“With mediation you get the parties involved to sit down and talk directly then they can iron out their issues. With court, you find that the parties even go through the entire process without meeting or talking to each other. We as an association advocate for mediation,” he told the Nation.

Mr Okelo holds that it is a big concern when couples start fighting over businesses, especially when dissolving the company.

He also advises families to form councils and other such organs, which can advise individuals and push for amicable settlements whenever disputes threaten smooth operations.

FEUDING COUPLES

“We must give feuding couples hope of resolving matters. This kiosk could be tomorrow’s Tuskys (Supermarket). Sometimes you can fight with your spouse and from the outside it looks like a very small issue yet on the inside it is a very complicated thing. Have a family council. They will tell people that before you kill this business, there are many other people you are hurting (employees and clients),” Mr Okelo added.

Mr Kamau Karori, a senior partner at Iseme, Kamau & Maema Advocates, holds that resolving such disputes is very complicated as emotions tend to outdo other factors.

Mr Karori, one of the top family lawyers in Kenya, says Parliament’s introduction of the Insolvency Act in 2015 was a good thing, as it gave courts a wider berth to try and find other solutions without having to dissolve businesses.

The Insolvency Act of 2015 has given judges an option of finding other resolutions such as appointment of administrators to run a business under dispute, before deciding whether it is right to dissolve a firm.

“The overriding objective of the new winding up laws is to get another option that will enable the company to continue running. But where emotions are involved, the options are limited. Even if one of the partners is willing to be bought out, the other will not allow it because they do not want to give the other person money. Even if the court was willing to go for another option, neither side wants to give in,” he said.

INNOCENT PARTIES

“Most of the time the court will look at the interest of other innocent parties like clients. If the fight continues, the company will not be able to make money. Nobody recognises the authority of the other.

“When you publish a winding up notice, parties become wary of dealing with that company going forward,” Mr Karori added.

The lawyer believes that the way forward for family businesses is to bring in professional managers to ensure that the company continues to thrive even when there are feuds.

While Mr Karori agrees that mediation is a viable resolution method, he points out that it is dependent on the individuals’ willingness to take that route, as they cannot be forced into it.

“You can always mediate but companies must be run in line with the Companies Act. Most times each partner has an equal share. Sometimes the fallout is so bad that even getting a simple resolution is impossible. So where parties are unable to agree (on mediation) there is limited action.

“Where they (couple) want to use the company as a battleground, that is where there is a big problem,” Mr Karori said.

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RIDGEWAYS INN-THE YARD (KIAMBU ROAD)

Last month, this popular Kiambu Road nightclub joined the growing list of businesses that have become battlegrounds for estranged lovers, as a couple that has been running the establishment for four years took to court after their relationship ended.

Mr Daniel Kimani Kariuki and Ms Sylvia Wamboi Karanja were set to get married, but after their relationship hit a brick wall, it sparked a fight for Ridgeways Inn which they have been jointly running for four years.

Ms Karanja had in 2015 brought her ex-fiancé into Ridgeways Inn’s ownership, which has now become the venue for trench warfare between the former lovers.

The battle has proven to be a complex one, as a lawyer who effected the disputed company directorships now claiming that he did so on instruction from Mr Kariuki, his cousin.

Mr David Kimani Kinyanjui has now claimed in a statement to the Directorate of Criminal Investigations (DCI) that his cousin asked him to effect the transfer so that the couple could get a loan.

But the Ridgeways Inn fight is not a unique one, as over the years the corridors of justice have seen several cases pitting former lovers against each other.

FRED BLACK INSURANCE BROKERS, ACADEMY OF DANCE AND ARTS (KAREN, NAIROBI)

In March last year, Ms Pernille Duckworth sued her ex-husband Michael Duckworth, amid other court battles between them, including a divorce case.

Ms Duckworth claimed in the suit that her ex-husband and a businessman identified as Thomas Ruhiu Kariuki had been lying to regulators and police that her Fred Black Insurance Brokers is involved in money laundering.

She added that Mr Duckworth had asked a number of Fred Black Insurance Brokers to jump ship to another firm that he incorporated after their bitter divorce.

Ms Duckworth accused Mr Kariuki of threatening to continue with the information spread unless he is given a 35 per cent stake in Fred Black Insurance Brokers.

But Mr Duckworth insisted that his ex-wife forged documents to show that he had left the company, and that the matter had been reported to the police. The British national denied attending any board meetings that resolved to have him exit the insurance brokerage firm.

INSOLVENCY PETITION

Just three years earlier, Mr Duckworth had filed an insolvency petition to wind up the Academy of Dance and Arts, a school they co-own.

He argued that the sour relationship with his ex-wife had made it impossible to have any board meetings and pass any resolutions.

He added that Ms Duckworth had frustrated all attempts at an out-of-court settlement, and that she was single-handedly running the school in violation of the Companies Act, which requires consent from all directors before any decisions are made.

Ms Duckworth in response argued that her estranged husband was trying to use the insolvency petition to get an upper hand in their divorce proceedings. She denied frustrating Mr Duckworth’s efforts to sell his stake in the Academy of Dance and Arts.

Her ex-husband says Ms Duckworth refused to let him sell his stake at Sh55 million. Ms Duckworth argued that the school, and her ex-husband’s shares, needed to be valued before being sold to third parties.

MARY HAPPY SCHOOL, EASTLEIGH, NAIROBI

Mary Happy School in Eastleigh has also become a battleground for divorced couple — Ms Mary Wambui Kamau and her estranged lover Mr Richard Kirimi Kinoti.

After the two started cohabiting, Ms Kamau invited Mr Kinoti into her school’s business. After their love for each other faded Ms Kamau and her two daughters sued Mr Kinoti, claiming that he had fraudulently transferred three school buses to himself.

Ms Kamau and her daughters in 2016 obtained temporary orders barring Mr Kinoti from interfering with the school’s operations. Mr Kinoti fought back, challenging the order at the Court of Appeal.

At the Appellate Court Mr Kinoti wanted to be given access to Mary Happy School’s operations, have his Sh300,000 per term salary reinstated and for school fees to be paid into a bank account in which he was a signatory before love turned sour.

High Court judge Francis Tuiyott in June argued that the couple’s filings made the suit appear to be a winding up suit, yet neither Ms Kamau nor Mr Kinoti had asked to dissolve the school.

The judge ordered the two parties to decide on the issues to be determined before proceeding with the suit.

GRANNIES FIGHT OVER RENTAL PROPERTIES (NAKURU)

In March last year, Court of Appeal judges Philip Waki, Festus Azangalala and Patrick Kiage ruled on a dispute between two senior citizens.

At the time of the judgment, the man was 80 years old, and his ex-wife was 78. The estranged couple was fighting for a number of parcels of land in Nairobi, Nyahururu, Gilgil and a block of shops in Nakuru’s Bahati area.

Their identities were hidden in the court documents. The two got married in 1961, and both were employed. The man, only identified as P.N.N. in the court record, was then earning Sh350 monthly, while the lady identified as Z.W.N. was on Sh270 per month. They retired in 1990.

Trouble in their marriage however started in 1987 when the husband decided to walk out of the marriage. The couple would make up in 1999, but Mr P left again in 2001 to allegedly cohabit with another woman only identified as M.G.

RETAIN PROPERTY

Ms Z claimed that Ms M.G. was her ex-husband’s mistress. She insisted that the properties at the heart of the court case were hers, but held in trust by Mr P.

In 2009, High Court judge Roselyn Nambuye ruled that the Nakuru block of shops was not matrimonial property which allowed Mr P to retain them.

The judge added that a 50-acre farm in Gilgil was matrimonial property, and allowed Ms Z to retain the home and relinquish other developments on the land to Mr P.

She also held that a piece of land in Nairobi’s Donholm suburb was matrimonial property and ordered that it be sold and the proceeds be divided equally. Mr P appealed the decision.

Justices Waki, Azangalala and Kiage dismissed the appeal.

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