Enforcement measuresRepossession following lease termination
Outline the basic repossession procedures following lease termination. How may the lessee lawfully impede the owner’s rights to exercise default remedies?
Kenyan law permits a lessor to exercise self-help remedies subject to the terms of a lease without necessarily applying for a court order. In such instances, a lessee can accede to a lessor’s request to return or surrender the aircraft. Alternatively, if the lessor can gain access to the aircraft, the lessor can proceed with repossession.
In the event a lessee is not cooperative, a lessor can apply to the High Court for an order to repossess or sell the aircraft, or both. In principle, the lessee is to be served with the court application; however, if the lessor is of the opinion that the aircraft is at risk (cannibalisation of engines or parts, or removal of the aircraft from the jurisdiction), an ex parte application can be made to the court on an urgent basis, and orders granted to repossess the aircraft. In either of the cases, the lessor shall need to notify the KCAA of the termination of lease and of its intention to exercise its right to re-register the aircraft, or deregister and export the aircraft from Kenya.
The lessor’s rights to repossess can be impeded by a lessee by applying to the courts for injunctive orders to prevent repossession of the aircraft by a lessor or orders for the restoration of the repossessed aircraft.Enforcement of security
Outline the basic measures to enforce a security interest. How may the owner lawfully impede the mortgagee’s right to enforce?
The enforcement by a creditor of its interest can be achieved by the voluntary surrender of the aircraft by the owner, or by a creditor either exercising self-help remedies or obtaining such court orders that allow for the enforcement of the rights subject to the terms of a security agreement. Under a mortgage, the remedies available are typically the repossession and sale of the aircraft.
Where there is a registered international interest, the remedies available to a creditor under the Cape Town Convention are as follows:
- taking possession or control of the aircraft;
- the selling or granting of a lease; or
- collecting and receiving income arising from the management or use of the aircraft.
The above remedies can be exercised without necessarily going to court. However, it is generally prudent for a creditor to obtain a court order to minimise the risk of any subsequent action that an owner can take as a result of a creditor exercising their rights (eg, a creditor being subject to a claim for trespass by the owner or an aggrieved third party). It is standard practice for a security agreement to grant a creditor a right of egress but such a right is limited to an owner’s property; conversely, a court order grants the same right of egress and can on application extend this right to such premises not captured by the provisions of a security agreement.
In addition, under section 20 of the Consumer Protection Act 2012 (the Consumer Protection Act), where a consumer under a future performance agreement has paid two-thirds or more of his or her payment obligation as fixed by the agreement, any provision in the agreement, or in any security agreement incidental to the agreement, under which the supplier may retake possession of or resell the goods or services upon default in payment by the consumer is not enforceable except by leave obtained from the High Court. This is subject to the debtor’s total potential payment obligation under the agreement, excluding the cost of borrowing, exceeding a prescribed amount (section 17 of the Consumer Protection Act). The court shall in such an instance use its own discretion to either deny or grant leave or grant leave subject to terms and conditions the court advises. However, section 20 of the Consumer Protection Act references the payment by a debtor as his or her payment, raising the question whether the provisions are applicable to corporate entities. To date, there has been no judicial interpretation on whether corporate entities are subject to section 20 of the Consumer Protection Act. Moreover, no regulations have yet been published pursuant to section 17 of the Consumer Protection Act regarding ‘prescribed amounts’, which would bring section 20 of the Consumer Protection Act into operation.
A mortgagee can seek additional court orders to authorise or compel the assistance of the police or such other public entities deemed necessary by it to obtain the relief sought. An ex parte detention order can be also obtained to detain the aircraft, but such orders are issued on the grounds that there is an immediate or imminent risk to the aircraft departing the court’s jurisdiction. Equally under the court process, provided an owner can satisfy the legal requirements for the grant of injunctive orders, a court may provide injunctive orders to restrain a mortgagee from exercising its power of sale, repossession or leasing of the aircraft pending determination of the substantive suit.
Where the security interest is a registered international interest, in the event an owner is insolvent and the insolvency is a default event under a mortgage, the International Interests Act, provides that the owner or a receiver or administrator of the owner has a period of 60 days within which to give possession of the aircraft to the mortgagee.Priority liens and rights
Which liens and rights will have priority over aircraft ownership or an aircraft security interest? If an aircraft can be taken, seized or detained, is any form of compensation available to an owner or mortgagee?
Under Regulation 6(1) of the Civil Aviation (Regulatory Fees and Charges for Air Navigation Services) Regulations 2014, the Director-General of the KCAA, or any person authorised by him or her in writing, may detain any aircraft whose owner has refused or neglected to pay the prescribed charges payable.
Repairers who have undertaken work on an aircraft may have a lien over the aircraft and a lienholder subject to any existing contract and statute, can exercise a power of sale.
Under the Insolvency Act 2015, certain debts shall have priority over all other claims, including those of secured creditors. In summary, these are:
- first, costs related to the administration of the liquidation (including fees of the liquidator or trustee, legal and court fees to institute insolvency proceeds and the preservation of assets);
- second, employee wages and dues, tax dues deducted from employee income, as well as court and tribunal fees in relation to employer and employee disputes; and
- third, taxes due on a company such as corporate and withholding tax, along with customs and excise tax.
In addition, Kenya made a declaration under article 39(1)(a) of the Cape Town Convention that the following rights and interests shall have priority over a registered international interest ‘whether in or outside insolvency proceedings’:
- payments due to workers arising out of employment relations;
- liens created by repairers on objects in their possession;
- liens created by bailees on objects in their possession; and
- taxes, duties and levies due to the government.
Kenya also made a declaration under article 39(1)(b) of the Convention that nothing in the Cape Town Convention shall affect the right of a state or state entity, intergovernmental organisation or other private provider of public services to arrest or detain an object under the laws of that state for payment of amounts owed to such entity, organisation or provider directly relating to those services in respect of that object or another object.
Seizure, confiscation and requisition
Under the Kenya Defence Forces Act 2012, an officer of the defence forces may, if necessary in the interests of defence or public safety, issue a requisition. In such an occurrence, the owner (or operator if leased) shall be entitled to payment for the use of the aircraft, any damage caused (except a total loss or damage attributable to fair wear and tear) and, in the event of total loss, the value of the aircraft immediately preceding the occurrence of the loss.
There are also powers given to the president under sections 3 and 4(2)(g) of the Preservation of Public Security Act (Chapter 57 of the Laws of Kenya) to publish regulations for the preservation of public security, which may make provision for the compulsory acquisition, requisition, control or disposition of any movable property. No regulations of this nature have been published as at this time.
Additionally, an aircraft can be confiscated or forfeited if it is used in the commission of an offence, pursuant to section 47 of the Narcotics Drugs and Psychotropic Substances Act, 1994. A notice of seizure is granted to the owner. In the event the owner is convicted, a notice shall be published and a party with a security interest in the aircraft shall thereafter have 30 days to apply to the High Court for relief, failure of which all interests shall be void upon a final order being made by the court.Enforcement of foreign judgments and arbitral awards
How are judgments of foreign courts enforced? Is your jurisdiction party to the 1958 New York Convention?
Under the Foreign Judgments (Reciprocal Enforcement) Act Chapter 43 Laws of Kenya (Foreign Judgments Act), the judgment of a superior court of England shall need to be registered to take effect as a judgment of a High Court of Kenya. An application to register the judgment accompanied by a certificate in prescribed form (certifying the various particulars of suit and the judgment issued) issued by and under the seal of the original court in England and signed by a judge or registrar, or an affidavit by the judge or registrar shall need to be made to a High Court of Kenya. In addition, a certified or notarised copy of the judgment shall need to be submitted for consideration for registration. The Foreign Judgments Act recognises the judgments and orders (among others) from a designated court whereby a sum of money is made payable or movable property is ordered to be delivered to a person.
A judgment of a New York court is not registrable in Kenya and a party seeking to enforce shall need to sue upon the judgment under Kenyan law.
Kenya is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 following its accession on 10 February 1989.