Case Metadata |
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Case Number: | Petition 371 of 2012 |
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Parties: | Jeremiah Gitau Kiereini v Capital Markets Authority, Attorney General |
Date Delivered: | 22 Aug 2013 |
Case Class: | Civil |
Court: | High Court at Nairobi (Milimani Law Courts) |
Case Action: | Judgment |
Judge(s): | David Shikomera Majanja |
Citation: | Jeremiah Gitau Kiereini v Capital Markets Authority & another [2013] eKLR |
Advocates: | Mr Regeru instructed by Njoroge Regeru & Company Advocates for the Petitioner . Mr Ngaca instructed by Waweru Gatonye & Company Advocates for the 1st respondent. Mr Moimbo, Litigation Counsel, instructed by the State Law Officer for the 2nd respondent. |
Court Division: | Constitutional and Human Rights |
County: | Nairobi |
Advocates: | Mr Regeru instructed by Njoroge Regeru & Company Advocates for the Petitioner . Mr Ngaca instructed by Waweru Gatonye & Company Advocates for the 1st respondent. Mr Moimbo, Litigation Counsel, instructed by the State Law Officer for the 2nd respondent. |
Case Summary: | Capital Markets Authority mandate to investigate and take enforcement action to be in accordance with the right to fair administrative action Jeremiah Gitau Kiereini v Capital Markets Authority & another Petition No. 371 of 2012 High Court at Nairobi Constitutional & Human Rights Division D.S. Majanja, J August 22, 2013 Reported by Lynette A. Jakakimba
Brief facts Following boardroom wrangles between rival directors of CMC Holdings Limited (CMCH) which spilled into the public domain, the Capital Markets Authority (CMA) took the decision to suspend the trading in CMCH’s shares on the Nairobi Stock Exchange (NSE) pending investigations. Prior to intervention by the CMA, CMCH had instructed PricewaterhouseCoopers (PwC) to carry out a forensic investigation covering some specific areas of its business and table a report to it. The CMA separately commissioned Webber Wentzel, a South African firm, to conduct a forensic investigation into defined aspects of the financial operations of CMCH and its trading subsidiaries. Webber Wentzel was also asked to review the PwC Report and comment on the methodology applied and the conclusions drawn by PwC. The CMA sent the petitioner a copy of the Webber Report via a letter and notified him through the same that the Board of the Authority had resolved to appoint an ad hoc Committee under section 14 of the Capital Markets Act. The Committee would consist of five persons with a majority of independent members. The Petitioner was requested to appear before the Committee. However through his advocate the Petitioner wrote a letter to the Committee stating that he would not appear before it as participating in its proceedings would occasion grave prejudice to him and to Court proceedings on the same subject matter, which were either pending or were likely to be instituted. The Committee conducted its investigations and upon conclusion submitted its recommendations to the CMA Board. The CMA subsequently issued a press release announcing that it had taken an enforcement action against executive and non-executive directors allegedly found to have flouted the capital markets’ legal and regulatory requirements in relation to the affairs of CMCH. Further that the Petitioner had been disqualified from any appointment as director of any listed company or licensed or approved person, including a securities exchange in the capital markets in Kenya.
Issues
Constitutional Law - fundamental rights and freedoms - right to fair administrative action - right to fair hearing - right to be given proper notice of allegations and opportunity to be heard before an administrative action was taken - where a director in a public listed company was not given an opportunity to be heard and proper notice before the Capital Markets Authority took an enforcement action against him - Constitution of Kenya, 2010, articles 47 and 50 Capital Markets – securities - regulation of securities - mandate of Capital Markets Authority to investigate and take enforcement actions against public listed companies - whether the investigative and enforcement action taken by the Capital Markets Authority against the Petitioner without giving him the right to be heard and no proper notice of allegations against him was an infringement of his right to fair administrative action - Constitution of Kenya, 2010, articles 47 and 50; Capital Markets Act, sections 5 and 11 Jurisdiction – jurisdiction of the High Court - whether the High Court had jurisdiction to determine disputes arising out of decisions of the Capital Markets Authority - Capital Markets Act, section 35A
Constitution of Kenya, 2010 Article 47 “(1) Every person has the right to administrative action that is expeditious, efficient, lawful, reasonable and procedurally fair. (2) If a right or fundamental freedom of a person has been or is likely to be adversely affected by administrative action, the person has the right to be given written reasons for the action. (3) Parliament shall enact legislation to give effect to the rights in clause (1) and that legislation shall— (a) provide for the review of administrative action by a court or, if appropriate, an independent and impartial tribunal; and (b) promote efficient administration.” Article 50 “(1) Every person has the right to have any dispute that can be resolved by the application of law decided in a fair and public hearing before a court or, if appropriate, another independent and impartial tribunal or body. (2) Every accused person has the right to a fair trial, which includes the right— (a) to be presumed innocent until the contrary is proved; (b) to be informed of the charge, with sufficient detail to answer it; (c) to have adequate time and facilities to prepare a defence; (d) to a public trial before a court established under this Constitution; (e) to have the trial begin and conclude without unreasonable delay; (f) to be present when being tried, unless the conduct of the accused person makes it impossible for the trial to proceed; (g) to choose, and be represented by, an advocate, and to be informed of this right promptly; (h) to have an advocate assigned to the accused person by the State and at State expense, if substantial injustice would otherwise result, and to be informed of this right promptly; (i) to remain silent, and not to testify during the proceedings; (j) to be informed in advance of the evidence the prosecution intends to rely on, and to have reasonable access to that evidence; (k) to adduce and challenge evidence; (l) to refuse to give self-incriminating evidence; (m) to have the assistance of an interpreter without payment if the accused person cannot understand the language used at the trial; (n) not to be convicted for an act or omission that at the time it was committed or omitted was not— (i) an offence in Kenya; or (ii) a crime under international law; (o) not to be tried for an offence in respect of an act or omission for which the accused person has previously been either acquitted or convicted; (p) to the benefit of the least severe of the prescribed punishments for an offence, if the prescribed punishment for the offence has been changed between the time that the offence was committed and the time of sentencing; and (q) if convicted, to appeal to, or apply for review by, a higher court as prescribed by law.”
Held
The Report and Resolutions by the Capital Markets Authority regarding the investigation into the affairs of CMC Holdings Limited in as far as they relate to the Petitioner, including the enforcement action taken thereon are quashed; Petitioner’s costs of the petition to be borne by the Capital Markets Authority.
Cases East Africa 1.Commissioner General, Kenya Revenue Authority v Silvanous Onema Owaki t/a Marenga Filling Station Civil Appeal No 45 of 2000 –(Explained) 2.Dry Associates Limited v Capital Markets Authority and another Petition 328 of 2011 –(Considered) 3.In Re the Matter of the Interim Independent Electoral Commission Constitutional Application 2 of 2011-(Mentioned) 5.Kilonzo, Diana Kethi and another v Independent Electoral & Boundaries & 2 others Petition No 359 of 2013 –(Explained) 6.Macharia, Samuel Kamau & Another v Kenya Commercial Bank Limited & 2 others Application 2 of 2011 –(Explained) 7.Ndung’u, Daniel v Director of Public Prosecutions and another Petition No 69 of 2012 –(Mentioned) 8.Republic v Public Service Commission of Kenya ex parte James Nene Gachoka Miscellaneous Application No 516 of 2005 –(Explained) 9.Speaker of the National Assembly v Karume [1992] KLR 22 –(Mentioned) United Kingdom 1.Furnell v Whangarei High Schools Board [1973] AC 660 –(Explained) 2.Harrikisson v Attorney General [1979] 3 WLR –(Mentioned) 3.O’Reilly v Mackman [1983] 2 AC 237 –(Explained) 4.Pearlberg v Varty (Inspector of Taxes) [1972] I WLR 534 –(Mentioned) 5.R (G) v Immigration Appeal Tribunal [2005] 1 WLR 1445 –(Explained) 6.R v Hull University Visitor, ex parte Page [1993] AC 682 –(Explained) 7.R (on the application of Coke- Wallis) v Institute of Chartered Accountants of England & Wales [2011] UKSC 1 –(Explained) Statutes East Africa 1.Capital Markets Act (cap 485A) sections 5, 11, 11A, 13, 14, 25A(1)(c)(i)(ii),(2)(3); 26(2); 34(1)(b) –(Interpreted) 2.Capital Markets (Securities) (Public offers, Listing and Disclosure) Regulations 2002 (cap 485A Sub Leg) regulations 1, 8–(Interpreted) 3.Constitution of Kenya, 2010 articles 10(2)(c); 27, 28, 29(d)(f); 31(c); 35; 40; 47(1); 50; 165(3)(b)(d)(ii) –(Interpreted) Advocates 1.Mr Njoroge Regeru for the Petitioner 2.Mr Ngaca for the 2nd Respondent 3.Mr Moimbo for the 2nd Respondent |
History Advocates: | Both Parties Represented |
Case Outcome: | Allowed |
Disclaimer: | The information contained in the above segment is not part of the judicial opinion delivered by the Court. The metadata has been prepared by Kenya Law as a guide in understanding the subject of the judicial opinion. Kenya Law makes no warranties as to the comprehensiveness or accuracy of the information |
REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT NAIROBI
MILIMANI LAW COURTS
CONSTITUTIONAL AND HUMAN RIGHTS DIVISION
PETITION NO. 371 OF 2012
BETWEEN
JEREMIAH GITAU KIEREINI ….................................. PETITIONER
AND
CAPITAL MARKETS AUTHORITY...................... 1ST RESPONDENT
THE ATTORNEY GENERAL …........................... 2ND RESPONDENT
JUDGMENT
Introduction
Factual Background
[2] Related to No.1 above is the nature, scope and effect of the Committee. The letters received by our client from CMA are either unclear or altogether silent on these, and other issues critical to the hearings of the Committee including:-
(a) The mandate of the Committee and the general or special functions for which it has been appointed.
(b)The terms of reference of the Committee.
(c) The procedure to be adopted during the hearings.
(d) The capacity in which our client would appear before the Committee, that is, whether a party under investigation or inquiry, whether as a witness or any other capacity.
(e)Whether our client would be entitled to present any evidence and/or call witnesses in support of his position.
(f) The ultimate objective intended to be achieved or pursued after the business of the Committee had been concluded.
It will be readily appreciated that any hearing conducted in the absence of clarity on the above-listed matters, duly formulated in writing and communicated to interested parties such as our client, would not meet the legal, indeed constitutional threshold, of a fair hearing.
Petitioner’s Case
[3] A declaration that the 1st Respondent has breached the Petitioner’s Fundamental Rights as enshrined in Articles 10, 10(2) B, 10(2)(C), 28, 29 , 29 (D), 29 (F), 31, 31 (C) , 35, 35 (1) (B), 47, 47 (1), 50, 50(1), 50 (2) (A), 50 (2) (K), 50 (2) (L), 27, 27 (1) of the Constitution of the Republic of Kenya.
[4] A declaration that the 1st Respondent’s breach of the Petitioner’s Fundamental Rights as above has caused the Petitioner damage to his reputation and good name.
[5] A declaration that to the extent that the same concerns the Petitioner, the Report and Resolutions by the Board of Directors of the 1st Respondent dated 3rd August 2012 Regarding the investigation into the affairs of CMC Holdings Limited is unlawful and unconstitutional.
[6] A declaration that to the extent that the same concerns the Petitioner, the Report and Resolutions by the Board of Directors of the 1stRespondent dated 3rd August 2012 regarding the investigation into the affairs of CMC Holdings Limited was:
[7] A Judicial Review Order of Certiorari to bring into this Honourable Court and quash the following resolutions contained in the Report and Resolutions of the 1st Respondent dated 3rd August 2012 regarding the investigation into the affairs of CMC Holdings Limited …………
[8] A Judicial Review Order of Prohibition restraining the 1st Respondent acting by itself, its employees and or agents or through such person as may act on its authority from implementing any and all the determinations and/or resolutions contained in the Report and Resolutions by the Board of Directors of the 1st Respondent dated 3rd August 2012 Regarding the investigation into the affairs of CMC Holdings Limited touching on or affecting the Petitioner in any manner whatsoever.
[9] An order of compensation directed at the 1st Respondent compelling it to compensate the Petitioner for the damage caused to him by its actions and the quantum of such compensation to be determined by this Honourable Court.
1st Respondent’s Case
2nd Respondent’s Case
Analysis and Determination
The Jurisdictional question
Whether CMA violated petitioner’s fundamental rights and freedoms
Application of Article 50
Existence of other suits
CMA’s Mandate
The ad hoc Committee
11A. (1) The Authority may delegate any of its functions under this Act to-
(a) a committee of the Board;
(b) a recognized self regulatory organization; or
(c) an authorized person.
Section 14 of the Act further provides as follows:
14. (1) The Authority may appoint committees, whether of its own members or otherwise, to carry out such general or special functions as may be specified by the Authority, and may delegate to any such committee such of its powers as the Authority may deem appropriate.
(2) Without prejudice to the generality of subsection (1), the Authority shall establish -
(a) a committee to hear and determine complaints of shareholders of any public company listed on an authorized securities exchange, relating to the professional conduct or activities of such securities exchange, or any other person or such public company under the jurisdiction of the Authority and recommend actions to be taken, in accordance with rules established by the Authority for that purpose; and
(b) a committee to make recommendations with respect to assessing and awarding compensation in respect of any application made in accordance with rules established by the Authority for that purpose.
Whether the process was fair
[9]…consider the Webber Wentzel investigation findings and determine the validity of the allegations against directors of CMC Holdings Ltd.
[10]…give a fair and reasonable opportunity for the past and current Directors (whether executive or no-executive) of CMC Holdings and any other person the committee may deem necessary to be heard and defend themselves on the allegations attributed to them.
[16]The ad hoc committee shall give recommendations to the Board of the Authority on action to be taken, if any, against the past or current directors (whether or non-executive) of CMC Holdings Limited or any other person on ways to improve the Capital Markets.
[17]Recommendation of the ad hoc committee shall be considered by the Board of the Authority for enforcement or other appropriate action.
Conclusion
Disposition
DATED and DELIVERED at NAIROBI this 22nd day of August 2013
D.S. MAJANJA
JUDGE
Mr Regeru instructed by Njoroge Regeru & Company Advocates for the Petitioner .
Mr Ngaca instructed by Waweru Gatonye & Company Advocates for the 1st respondent.
Mr Moimbo, Litigation Counsel, instructed by the State Law Officer for the 2nd respondent.