[2025] KECMT 1 (KLR)

Amana Capital Ltd & another v Capital Markets Authority; Kagiri & another (Interested Parties) (Tribunal Appeal 1 of 2022 & Appeal 3 of 2022 (Consolidated)) [2025] KECMT 1 (KLR) (27 March 2025) (Judgment)

Neutral citation: [2025] KECMT 1 (KLR)

Republic of Kenya

In the Capital Markets Tribunal

Tribunal Appeal 1 of 2022 & Appeal 3 of 2022 (Consolidated)

P Lilan, Chair, G Wangong’u, C Gikonyo, P.Wanga & J Eboko, Members

March 27, 2025

Between

Amana Capital Ltd

Appellant

and

Capital Markets Authority

Respondent

and

Susan Mukuhi Kagiri

Interested Party

As consolidated with

Appeal 3 of 2022

Between

Susan Mukuhi Kagiri

Appellant

and

Capital Markets Authority

Respondent

and

Amana Capital Limited

Interested Party

Judgment

1. The two appeals were consolidated. For clarity purposes, Amana Capital will be referred to as the Appellant, the Capital Markets Authority will be referred to as the Respondent, and Susan Mukuhi Kagiri will be referred to as the Interested Party.

2. On 27 May 2016, the Interested Party (IP) entered into the first investment management agreement (IMA) with the Appellant, Amana Capital Limited (ACL). In this Agreement, ACL was to serve as a portfolio manager for the Interested Party. She invested a total of KES 26 580 196 in the Amana Unit Trust Funds Scheme. She did this in two instalments, KES 11,000,000 on 27 May 2016 and an additional KES 15 million on 16 June 2016.

3. Subsequently, the Appellant advised the Interested Party to switch her investment from the shilling fund. The Agreement for this switch was signed on 11 December 2018. One of the terms of the Agreement was that the IP was at liberty to withdraw her funds after giving ACL a nine-day written notice.

4. The Appellant had invested in the Nakumatt Commercial Paper Program (NCPP) through the Amana Shilling Fund (ASF), a unit trust fund within the Amana Collective investment schemes.

5. On 15 August 2019, the Interested Party applied to withdraw the entire investment sum that she had invested in the Amana Unit Trust Fund. ACL wrote to the IP on 15 October 2019, acknowledging that the IP account had a balance of KES 25,748,303. 28. Further, ACL committed to a payment plan by which they would pay the entire investment amount. According to this plan, the Appellant was to pay the IP KES 25, 748, 303. 28 over seven weeks. There was to be payment of weekly instalments of KES 4,000,000 and the final instalment of KES 1,748,303. 28 plus accrued interest. This final instalment should have been paid on or before 2 December 2019. However, the Appellant only paid KES 8,000,000 of the total investment sum.

6. On 23 November 2018, ASH held an extraordinary general meeting (2018 EGM), and the members agreed upon a resolution. Due to the financial distress Nakumatt Holdings Ltd was experiencing, it was resolved to freeze the Nakumatt asset held in the shilling fund. The 29% represented the portion directly impacted by the frozen Nakumatt asset. This 29% suspension was intended to remain in place for one year, during which time ASF expected either of two things could happen. Either the Nakumatt investment would eventually become fully impaired (written off entirely as a loss), or there would be a recovery or restructuring of the investment with Nakumatt Holdings Ltd that would thereby restore liquidity. To manage this financial impact, it was further resolved to segregate the units into two distinct categories. Class A Units, representing the initially frozen units (the impaired 29%), were directly linked to the problematic Nakumatt asset. Class B Units, which represented the unfrozen units, were not affected by the freezing decision and could be freely redeemed or managed by investors as usual.

7. Thereafter, on 28 February 2020, another Extraordinary General Meeting (2020 EGM) was held, and it was resolved that the moratorium period for redemptions in the shilling fund class B units was extended from the initial 28 days to 6 months. The initial moratorium period was 28 days. Subsequently, in the Annual General Meeting held on 25 September 2020 (AGM 2020), 94% of the ASF unit holders voted to have 59% of the funds written off in the ASF class B and substituted for shares in the Appellant’s.

8. Between 22 October 2019 and 20 January 2020, the Appellant paid the Interested Party KES 8,000,000 and defaulted in making the subsequent payments of KES 17,748,303. 28. Consequently, the IP filed a complaint with the Respondent, Capital Markets Authority, on 11 December 2020 for KES 17, 748, 303. 28. As the inquiry by the Respondent was going on, sometime in 2021, the Appellant paid a further KES 3, 995,111. This left a balance of KES 13,753,303 unpaid.

9. The Respondent held meetings on 8 October and 2 November 2021, culminating in a hearing on 20 December 2021. The Respondent gave a decision on 7 February 2022 and emailed it to the Interested Party on 9 February 2022. In this decision, the Respondent stated that the Appellant had contravened:-i.Regulations 33(1) and 33(3)(a) of the Capital Markets (Conduct of Business) (market Intermediaries) regulations, 2011, require daily reconciliation of funds held in clients' accounts.ii.Regulation 6 of the Capital Markets (Conduct of Business) (market Intermediaries) regulations, 2011 mandates market intermediaries to ensure that any agreement, written communication, notification, or information that they give or send to clients to whom they provide the service of a regulated activity is presented fairly and clearly.iii.Regulation 18 of the Capital Markets (Collective Investment Schemes), 2001 requires fund managers to keep and maintain a record of all minutes and resolutions regarding a scheme's portfolio.ivAccordingly, the Respondent, in line with section 11(3)(cc)(ii) of the Capital Markets Act, Cap 485A, directed the Appellant to compensate the Interested Party KES 7, 708, 257. 08. This represented 29 % of funds invested (KES 26, 580, 196) within 14 days of the directive. The Appellant was required to submit a report confirming this directive for consideration by the Respondent on or before 21 February 2022.

10. The Appellant, aggrieved by the decision, filed a memorandum of appeal and a statement of facts dated 22 February 2022. This was assigned case number 1 of 2022. Likewise, the Interested Party was partially dissatisfied with the decision of the Respondent filed a memorandum of appeal and statement of facts dated 1 April 2022. This matter was allocated the case no 3 of 2022. Subsequently, when Appeal no 1 of 2022 came up for directions, it was consolidated with Appeal No. 3 of 2022; Susan Mukuhi Kagiri v Capital Markets Authority.

11. The following is a chronological summary of the key events in this case: -i.On 27 May 2016, The Interested Party, Susan Mukuhi Kagiri, entered into an Investment Agreement with Amana Capital Limited (ACL), investing KES 26,580,196 in the Amana Shilling Fund (ASF).ii.On 23 November 2018, an Extra Ordinary General Meeting (EGM) was held by ASF. The meeting resolved that the Nakumatt Asset held in ASF be frozen, and 29% of the total units held due to the frozen asset were suspended from redemption for one year until either fully impaired or recovered from Nakumatt Holdings Ltd or became performing again. Resolved to create two classes of units: Class A (initial units frozen) and Class B (unfrozen units).iii.On 11 December 2018, Susan signed a new investment management agreement with ACL for an investment of KES 26,580,196. ivOn 15 August 2019, Susan applied to withdraw her entire investment amount from ASF, which amounted to KES 25,733,326. 24. vOn 15 October 2019, ACL wrote to Susan, acknowledging her withdrawal request and confirming a balance of KES 25,748,303. 28. Subsequently, ACL committed itself to a redemption plan to repay this amount in seven instalments, completing it by 2 December 2019. vi.Between 22 October 2019 and 20 January 2020, ACL paid Susan KES 8,000,000 but defaulted on the remaining KES 17,748,303. 28. vii.On 28 February 2020, Susan attended an EGM and voted affirmatively, resolving the issue of extending the moratorium on the ASF.viii.25 September 2020 ACL held an Annual General Meeting (AGM). Susan attended this AGM and voted in favour of the resolution that 59% of the ASF Class B funds be written off and substituted for shares in ACL.ix.11 December 2020, Susan lodged a complaint with the Capital Markets Authority about ACL's failure to pay her outstanding funds totalling KES 17,748,303. 28. x.During 2021, ACL paid Susan an additional KES 3,995,000, reducing the outstanding balance.xi.On 7 February 2022, the Capital Markets Authority (CMA) issued an enforcement directive to ACL, directing the fund manager to compensate Susan KES 7,708,257. 08, representing the impaired 29% of her initial investment.xii.On 21 February 2022, ACL filed an appeal (Appeal No. 1 of 2022) challenging the CMA's directive and seeking to set aside the directive to pay KES 7,708,257. 08. xiii.On 1 April 2022, Susan filed an appeal (Appeal No. 3 of 2022) requesting the Tribunal to affirm the CMA directive and further order ACL to pay the outstanding balance of KES 13,753,303 with interest and costs.

12. The following are the prayers that each Party is seeking from the Tribunal:1. Amana Capital Limited (Appellant)i.That appeal 1 of 2022 is allowed.ii.The enforcement action decision by the Capital Markets Authority (CMA) dated 7 February 2022, directing Amana to compensate Susan Kagiri KES 7,708,257, be set aside entirely.iii.Costs of the appeal to be awarded to Amana Capital Ltd.2. Susan Mukuhi Kagiri (Interested Party)i.Affirmation of the CMA enforcement directive, requiring Amana Capital to compensate her KES 7,708,257 being the 29% impaired investment.ii.An order directing Amana Capital to pay an additional sum of KES 13,753,303, being the outstanding balance of her total investment amount.iii.An order directing Amana Capital Limited to pay interest on the outstanding balance of the investment amount at court rate from 30 September 2019 until payment in full.ivAn order directing Amana Capital Limited to pay the cost of the proceedings both before the CMA and before the Tribunal, plus interest from the date of lodging the complaint until payment in full.vThat the Tribunal issue such other and further orders as it may deem just and fit.3. Capital Markets Authority (Respondent)The Respondent prays that all the appeals against it be dismissed with costs.

The Appellant’s Case And Submissions 13. The Appellant filed a memorandum of appeal and statement of facts dated 21 February 2022, a reply to the Respondent and Interested Party’s statements of defence dated 23 October 2023 and submissions dated 6 November 2023. The following is a summary of the arguments presented by the Appellant.

Issue (i): Whether the Interested Party is bound by the EGM Resolutions of 23 November 2018 14. The Appellant argues that the dispute is between an investor and a fund manager, not a borrower and lender. They emphasise that when the Interested Party invested in 2016, she was aware of both the possible risks and returns. They assert that the EGM on 23 November 2018 was duly constituted, so the resolutions were validly passed. Accordingly, the resolutions were binding upon all members of the ASF, including theInterested Party. They also assert that the relevant notices, as required, were sent to the Appellant and the other members of the ASF.

15. During the 2018 EGM, the resolutions unanimously froze the Nakumatt Asset, created two classes of shares (Class A for frozen units and Class B for unfrozen units), and suspended 29% of the total units held in the fund due to the frozen asset. Additionally, the Appellant avers that the Interested Party received communication about the resolutions via email on 18 December 2018 and did not contest it until when she filed a complaint with the CMA in 2021. The Appellant avers that the EGM resolutions bind all members, including the Interested Party, she cannot be treated as an exception. The Appellant submits that 'the Interested Party admitted on cross-examination that the said resolution and minutes were sent to her email account, and she had never raised any issue with the email or its contents to the Appellant.’

16. The Appellant cites the case of Chase International Investment Corporation and Another v Laxman Keshra and 3 others [1978] KECA 7 (KLR), which adopts Lord Wright’s holding in Fibrosa Spolka Akayina v Fairbarn Lawson Combe Barbour Ltd [1943] AC 32 at page 61 on unjust enrichment, which emphasises that the goal of equity is to prevent unjust enrichment. Accordingly, the Appellant argues it would amount to unjust enrichment and preferential treatment if the Interested Party was compensated contrary to the binding resolutions that were passed.

17. Moreover, the Appellant states, 'The said investment management agreement did not provide for the source of the funds indicated by the Interested Party and neither did the said Agreement provide that the investment would be a switch from the Shilling Fund. The investment account under the said Agreement was therefore never credited, and neither was the Agreement actualised as no instructions were ever issued by the Interested Party to move funds to the new mandate under the said Agreement.'

18. Simply, the Appellant avers that the new investment management agreement dated 11 December 2018 was never operationalised, as no new account was activated. Hence, she continued to be a member and unit trust holder of the Amana Shilling Fund, actively participating in its activities.

Issue (ii): Whether the Interested Party remained a member of ASF after allegedly applying to withdraw all her units 19. The Appellant states that despite filing a Redemption Form on 15 August 2019, the Interested Party remained an ASF member through her actions. Specifically, she continued receiving monthly interest from ASF between August 2019 and January 2020 and monthly statements. She also actively participated in ASF meetings even after receiving the redemption letter from the Appellant. Thus, the Interested Party is estopped from denying membership post-August 2019 because her conduct indicated continuous membership. In support, the Appellant cites the case of Munya v Kithinji & 2 others (Civil Appeal (Application) 38 of 2013) [2014] KECA 876 (KLR), citingSerah Njeri Mwobi v John Kimani Njoroge Civil Appeal No 314 of 2009, highlighting estoppel by conduct. Accordingly, the Appellant avers that the Interested Party is estopped by her conduct from claiming that the resolutions passed did not apply to her. This is because the Interested Party remained an active member of ASF even after allegedly withdrawing her funds. This is evidenced by her continuous participation, receipt of benefits, and the fact that she did not raise any contestation on her membership status.

20. Additionally, the Appellant avers that the Interested Party remained a member of ASF even after applying to withdraw all her units. This is because first, as at the date of the said application for redemption, the resolution that (29%) of the total units held in the fund due to the frozen asset be suspended from redemption was still in effect. Therefore, Kshs. 7,708,257. 08 was incapable of redemption by the Interested Party. Second, the said Redemption form is only executed by the Interested Party and was not approved or processed by the Appellant.

Issue (iii): Whether the Interested Party is bound by the Resolutions of the AGM of 25 September 2020 21. The Appellant notes that on 25 September 2020, the Interested Party attended the Annual General Meeting (AGM), actively participating and voting affirmatively on the resolution that 59% of the ASF Class B funds be written off and substituted for shares in Amana Capital Limited. Consequently, the Appellant argues that the Interested Party is estopped by her own conduct from denying her membership and the binding nature of this resolution. The Appellant cites Otundo & 5 others v Creek Marketing and Development Limited [2024] KECA 353 (KLR), referring to D & C Builders v Sidney Rees [1966] 2 QB 617, emphasising estoppel by conduct. Amana invokes this case to support the principle of estoppel by conduct, emphasising that the Interested Party actively participated in subsequent meetings (the AGM of 25 September 2020), thereby consenting to resolutions that impaired 59% of her investment in ASF Class B, substituting it for equity shares. Therefore, she should not later claim contrary rights or compensation as it would contradict her earlier actions.

Issue (iv): Whether the Interested Party is entitled to the prayers sought in Appeal No. 3 of 2022 22. The Interested Party seeks the following: An affirmation of the enforcement directive that required Amana to pay compensation of KES 7,708,257 being 29% impairment; Payment of KES 13,753,303 as outstanding balance; Interest on the balance and Costs of proceedings. The Appellant contests these claims. On the 29% impairment (KES 7,708,257. 08) they aver that this amount was validly frozen under Class A due to the EGM resolution of 23 November 2018, which is binding to all members. Thus, compensating the Interested Party exclusively would be inequitable. On the outstanding balance of KES 13,753,303, they aver that the Interested Party misrepresented facts by ignoring subsequent withdrawals and interest payments. Specifically, between May 2017 and May 2021, the Interested Party through a monthly standing order. Additionally, on 25 September 2020, the Interested Party supported a resolution converting 59% of ASF Class B funds into equity. Thus, no cash payment remains owed. Thus, the Appellant argues that the Interested Party is estopped from claiming compensation beyond her legitimate entitlements. Having participated in and consented to the relevant resolutions. Cites again Chase International Investment Corporation and Another v Laxman Keshra and 3 others [1978] KECA 7 (KLR) on the concept of unjust enrichment to emphasise the idea that the Interested Party would benefit unjustly. Specifically, they argue that allowing the Interested Party to be exempted from the EGM resolutions of 23 November 2018 and compensating her separately would amount to unjust enrichment and unfair preferential treatment.

Respondent’s Case And Submissions 23. The Respondent filed a statement of defence and facts dated 4 October 2023 and submissions dated 19 February 2025. The following is a summary of the arguments presented by the Respondent.

Whether the Interested Party is bound by the resolutions of the EGM held on 23 November 2018 24. The Respondent argues that the resolutions made at the EGM on 23 November 2018 are not binding on the Interested Party because the Appellant failed to comply with statutory notice requirements. Specifically, the Respondent emphasises the importance of notices, stating:Regulation 17(2)(k) of the Capital Markets (Collective Investment Schemes) Regulations, 2001 provides that one of the principal duties of a fund manager is to prepare and timeously dispatch all notices under the Regulations. Regulation 84 also requires the fund manager to send notices of at least 21 days. Regulation 91 specified when the notices were deemed to have been served properly. Further, section 284(1) of the Companies Act, 2015 requires the notice of an EGM to be sent to each member of the company.

25. The Respondent stresses that notices are fundamental for transparency and investor protection, noting that the Interested Party was never notified of the EGM. Accordingly, the Respondent reiterates that the Appellant did not file any document showing that a notice for the EGM was served upon the Interested Party. Moreover, the Appellant's witness, Mr Reginald Kadzutu, failed to show that a notice had been dispatched to the Interested Party through her email address.

26. The Respondent avers that the requirement is not a mere procedural formality. Instead, it is a sacrosanct and fundamental obligation. This is because it is the cornerstone of ensuring fairness, transparency and due process, as it gives members an opportunity to participate, deliberate and exercise their rights in the decision-making process. The Respondent cited a number of authorities in support of this issue. Young v Ladies Imperial Club [1920] 2 KB 523, Wambeye Kimweli Marakia v Board of Directors, Nzoia Water Services Co. Ltd & Others [2021], Auto Japan (Mombasa) Limited v Malik Ali Zaka & 2 Others [2021] eKLR.

27. The Respondent further avers that while a majority approval at the meeting determined the resolutions. The validity of those resolutions and their binding nature on the Interested Party also rested on the Appellant ensuring that they adhered to the legal requirements for meetings. Accordingly, the Respondent argues that the Interested Party, who was deprived of notice, cannot be bound by decisions made in her absence and that her silence does not cure this fundamental defect.

Issue (b): Whether the Interested Party is bound by the resolutions of the AGM held on 25 September 2020 28. The Respondent submits that the Interested Party remained a member of the ASF scheme even after initiating the redemption process. This is because membership persists as long as the investor lawfully holds units. The Respondent relies on statutory interpretation of the Capital Markets (Collective Investment Schemes) Regulations, 2001, particularly the definitions of “unit” and “holder.” “A unit holder's membership arises from ownership of units, and it logically follows that such membership persists as long as units remain under their ownership. Hence, partial redemption does not terminate membership.

29. In this case, despite not participating in the EGM on 23 November 2018, the Interested Party thereafter attended and actively participated in the subsequent meetings in February and September 2020. In these meetings, she participated and voted affirmatively on key resolutions. Therefore, the Interested Party was bound by the resolution of the 25 September 2020 AGM, converting 59% of ASF Class B investments into equity.

Issue (c): Whether the Interested Party is entitled to compensation of KES 13,753,303. 00 as opposed to KES 7,708,257. 08 30. The Respondent argues that the Interested Party’s claim for KES 13,753,303 is not valid due to her affirmative participation in the September 2020 AGM resolution. Therefore, based on the definition of a unit holder as espoused by the Respondent in issue two above, the Interested Party remained a unit holder. Hence, she was bound by the decisions by participating in the subsequent meetings. Specifically, at that meeting, it was resolved to convert 59% of ASF Class B units into equity shares.

31. Hence, the Respondent provided the following calculations on the amount that was actually owed to the Interested Party. Before the AGM, her investment balance was KES 17,639,988. 52 (as at 30 April 2020). After applying the 59% impairment (KES 10,407,593. 23), her balance was reduced to KES 7,232,395. 29. Subsequently, the Interested Party received an additional payment of KES 3,995,000 in 2021, further reducing the balance to KES 3,237,395. 29.

32. Therefore, the Respondent argues that the Interested Party is estopped by her conduct from claiming the higher amount as she explicitly consented to the impairment. She cannot lawfully claim the original KES 13,753,303. 00 as this figure ignores her participation and affirmative voting in the impairment decision at the AGM. The Respondent supports this argument by referring to the case of Serah Njeri Mwobi v John Kimani Njoroge [2013] eKLR. The case emphasised that the doctrine of estoppel operates as a principle of law that precludes a person from asserting something contrary to what is implied by that person's previous actions or statements.

Interested Party’s Case & Submissions 33. The Interested Party filed a memorandum of appeal and statement of facts dated 1 April 2022, a statement of defence and facts dated 14 September 2023, and submissions dated 17 October 2024. The following is a summary of the arguments presented by the Interested Party.

Issue (i): Whether the enforcement action issued by the authority should be upheld 34. The Interested Party submits that the enforcement action issued by the Capital Markets Authority (CMA) on 7 February 2020 should be upheld. They argue specifically that the resolutions of the 23 November 2018 EGM were not binding on the Interested Party because she was never notified of the EGM, nor did she attend it. Consequently, the CMA correctly directed Amana Capital Limited (ACL) to unfreeze 29% of the Interested Party’s units.

35. The Interested Party highlights that Regulation 18 of the Capital Markets (Collective Investment Schemes) Regulations, 2001 requires fund managers to keep and maintain a record of all minutes and resolutions in respect of the scheme’s portfolio. However, the Appellant contravened this regulation by failing to keep proper records. Consequently, this made it difficult to establish the validity of the EGM dated 23 November 2018. On the issue of the burden of proof on notification, the Interested Party cites the Evidence Act, Sections 107(1) specifically, “Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts…must prove that those facts exist.” That is, show the Interested Party received notice of the said meeting. Hence, the Interested Party argues that the Appellant failed to discharge this burden of proof, and thus, the enforcement action should be upheld.

Issue (ii): Whether the Appellant has the obligation to honour their commitment/redemption plan 36. The Interested Party argues that the Appellant is obligated to honour the redemption plan. She emphasises that the terms of their agreements bind parties and invokes the principle of estoppel. They point to Clause 6(9) of the Investment Management Agreement dated 11 December 2018, which explicitly states, “Funds may be withdrawn after issuance of a nine (9) day written notice.” They note the Appellant's acknowledgement letter dated 15 October 2019 confirming the balance of KES 25,748,303. 28 and agreeing to repay in seven instalments. The Interested Party emphasises that the Appellant defaulted on this Agreement, paying only KES 8,000,000 initially, later paying a further KES 3,995,000 during CMA proceedings, leaving a balance of KES 13,753,303.

37. The Interested Party reiterates that the Appellant cannot simply enter into a contract, breach it, and then proceed to seek refuge from the Tribunal. The Appellant argues that since all parties have the freedom to contract, once they exercise that freedom, the Courts cannot interfere with their freedom to contract. The only time courts can interfere is when it is shown that the signature in the contract was obtained by fraud or misrepresentation.

38. The Interested Party cites several cases in support of their argument on the issues of contractual obligation and estoppel. These are South Nyanza Sugar Co. Ltd v Leonard O. Arera [2020] eKLR, National Bank of Kenya Ltd v Pipe Plastic Samkolit (K) Ltd [2002] 2 E.A. 503; Pius Kimaiyo Langat v Co- operative Bank of Kenya Ltd [2017] eKLR; John Chamia & 6 others v Board of Trustees National Social Security Fund & another [2013] eKLR; Securicor Courier (K) Ltd v Benson David Onyango & Another [2008] eKLR, referencing L’Estrange v Graucob Ltd [1934] 2 K.B. 394; Curtis v Chemical Cleaning & Dyeing Co. Ltd [1951] 1 All E.R. 631.

Issue (iii): Whether the 2020 AGM Resolutions can apply to the Interested Party 39. The Interested Party submits that the AGM Resolutions of 2020 cannot apply to the Interested Party because she had already applied for withdrawal on 15 August 2019. The Appellant had acknowledged this withdrawal by issuing a redemption plan letter dated 15 October 2019. As a result, after 15 October 2019, the Interested Party was no longer an active investor but rather a creditor awaiting repayment. This is because, after 15 October 2019, the Interested Party had no contract with the Appellant. Accordingly, the Interested Party cannot be bound by any resolutions arising from a meeting of investors post-15 October 2019. Nevertheless, the Interested Party further emphasises that in attending the subsequent meetings, she only gave temporary accommodation to the Appellant for repayment. Hence, her action did not constitute a renewed investment.

Issue (iv): Who should bear the costs of these proceedings 40. The Interested Party asserts that the Appellant should bear the costs of these proceedings because the proceedings resulted entirely from the Appellant’s breach of contractual obligations and statutory duties. Further, the Interested Party emphasises that she suffered financially since the funds at issue were her severance pay after being declared redundant from her previous employment.

Issues For Determination And Analysis 41. Upon reviewing the pleadings, written submissions and the oral evidence adduced by the parties, the Tribunal identifies the following as the issues for consideration:i.Whether the resolutions passed at the 23 November 2018 EGM are binding on the Interested Partyii.Whether the Interested Party remained a member of the Amana Shilling Fund after submitting her redemption request in August 2019iii.Whether the 25 September 2020 AGM resolutions are binding on the Interested PartyivWhether the Interested Party is entitled to the entire amount claimed (KES 13,753,303) in addition to the 29% portion (KES 7,708,257. 08) or only the lattervAwarding of interest in the matter

Issue 1 Whether the resolutions passed at the 23 November 2018 EGM are binding on the Interested Party 42. The law mandates the requirement of proper notice to be served for a meeting. In this specific case, Regulations 17 and 84 of the Capital Markets (Collective Investment Schemes) Regulations, 2001 explicitly require a written notice to be sent to all unit holders. Regulations 17 and 84 create a “sacred duty” as per Young v Ladies Imperial Club case to notify all unit holders. Regulation 91 provides, ‘Any notice or document served by post shall be deemed to have been served on the fourth day following that on which the letter containing the same is posted, and in providing such service, it shall be sufficient to prove that such letter was properly addressed, stamped and posted; and any notice or document left at a registered address or delivered other than by post shall be deemed to have been served on the day it was so left or delivered.’ (emphasis ours) This implies that, in this case, the notice would have been deemed served if there was proof of it being sent via email.

43. The Respondent and Interested Party asserted that the Appellant was not served with a notice for the EGM on 23 November 2011. Moreover, the Appellant did not produce evidence to show a contrary position that the Interested Party was served. Additionally, the minutes of the meeting indicate that the attendance list is attached. However, this list could not be traced and was not produced. Therefore, it is not possible to confirm the attendance of the Interested Party. Accordingly, if proper notice is not issued, then consequences will follow. Case law underscores that a fundamental requirement for binding a member is notice.

44. Hence, failure to comply with this duty of serving notice invalidates the resolutions vis-à-vis the unnotified member. See the cases of Wambeye Kimweli Marakia v Board of Directors, Nzoia Water Services Co. Ltd & 2 others; Nzoia Water Services Co. Ltd (Interested Party) [2021] KEHC 6561and Auto Japan (Mombasa) Limited v Malik Ali Zaka, Muhammad Suleiman & Qamar U-Zamar [2021] eKLR.

45. The Appellant’s reliance on the argument of unjust enrichment presupposes that Ms Kagiri had an equal or constructive opportunity to vote and be bound like other unit holders. However, since there is no proof that she received notice, the premise for “equal treatment” does not hold because she was excluded from the decision-making process. Hence, the decision is not binding on her.

46. Further to the happening of this EGM on 23 November 2018, there were other relevant developments. On 11 December 2018, the Interested Party signed a new contract with the Appellant. This new contract still listed the full principal sum of KES 26,580,196. Moreover, subsequent statements sent to her by the Appellant did not show a 29% “set aside” as per the EGM that took place on 23 November 2018. Accordingly, the Appellant cannot run away from the new contract and its obligations that they signed with the Interested Party. Hence, these happenings undermine the claim that the EGM impairment took effect against her.

47. Further, according to this new Agreement, she switched her investment from the shilling fund to a low-risk investment portfolio comprised of treasury bills and treasury bonds. This is a further indication, as per the new Agreement, that the Interested Party was no longer under the ASF funds. Therefore, this further clarified that her funds were unaffected by the 2018 EGM.

Issue 2: Whether the Interested Party remained a member of the Amana Shilling Fund after submitting her redemption request in August 2019 48. As highlighted by the Respondent, in collective investment schemes, the submission of a redemption request obligates the fund manager to liquidate the units. Until the manager fully pays out, the investor's status can be mixed, as either a part investor or part creditor. This understanding is inferred from analysing the definition of a ‘unit’ and ‘holder’ as per the Capital Markets (Collective Investment Schemes) Regulations, 2001. That is, a unit holder’s membership arises from their ownership of units. Consequently, membership persists as long as they retain/hold any units under their ownership. The Interested Party submitted a request to withdraw her funds by 15 August 2019, and the Appellant accepted and provided a redemption plan via a letter dated 15 October 2019. Accordingly, by this date, the Appellant may have had a mixed status as part investor and part creditor.

49. Nevertheless, careful examination of this redemption plan letter brings to light a key fact. Part of this letter specifically states, ‘your investment account under member number ××××× has a balance of Ksh 25, 748, 303. 28 as at 30 September 2019. ’ The inference to be drawn from this statement is that by October 2019, the Appellant recognised KES 25. 7 million owing to the Appellant. The redemption plan letter bears the signature of the Appellant's chief financial officer and the company's stamp. This indicates that the fund treated her as someone who was owed that sum as a creditor rather than an active unit holder subject to new EGM/AGM risks. Simply, the 15 October 2019 redemption plan shows Amana accepted her request, effectively recognising her as a creditor.

50. Further, the statements the Interested Party received after the redemption request continued to reflect the unpaid investment capital of 25. 7 million or the fund manager’s partial settlement obligations. Hence, it would be proper to infer that the Interested Party had no choice but to engage in Amana’s updates or meetings to ensure repayment. Thus, while she technically may still have an outstanding balance with the fund, her primary role from October 2019 onward was that of a redeeming investor (or creditor) rather than an active member in the usual sense.

Issue 3 Whether the 25 September 2020 AGM resolutions are binding on the Interested Party 51. Unlike the 2018 EGM, it is undisputed that the Interested Party received and responded to the notice for an AGM ON 25 September 2020. Generally, attending an AGM and voting signals an Agreement with its outcome. Further, a redemption request does not automatically terminate membership until funds are fully disbursed. Hence, the principle of estoppel by conduct may apply to the Interested Party. If the Interested Party still legally owned any units at that point, her attendance and affirmative vote would typically bind her to the AGM resolution, impairing 59% of Class B units. The fundamental question is whether the 2020 AGM resolutions truly affected her redemption funds if those funds were essentially due and not re-invested under the scheme’s Class B structure.

52. The Tribunal notes that there are two likely positions. If the Interested Party still legally owned any units at that point, as contended by the Appellant, then her affirmative vote would typically bind her to the AGM resolution impairing 59% of Class B units. Hence, the question to consider is whether her vote had any practical effect if she was already in redemption mode. If, however, her investment was already deemed payable in full under the redemption plan, the 2020 resolution would not validly affect her.

53. Accordingly, the Tribunal notes that by October 2019, the Interested Party had already lodged a complete redemption request. The Appellant accepted and clearly stated that the outstanding amount was Ksh 25. 7 million and agreed to pay out in set instalments. As such, the Interested Party's capacity at the 2020 AGM could be viewed not as an ongoing investor but as a creditor monitoring her pending payout. Consequently, the 25 September 2020 AGM resolutions do not have a binding effect on the Interested Party. Neither did her vote have any practical effect, as she was already in redemption mode. The redemption plan letter clearly indicated how much was owed to her. Moreover, it is the Appellant who continued sending notices and invitations to the InterestedParty to attend the said meetings. The Interested Party simply acquiesced to these invitations.

Issue 4 Whether the Interested Party is entitled to the entire amount claimed (KES 13,753,303) in addition to the 29% portion (KES 7,708,257. 08) or only the latter 54. The cases of South Nyanza Sugar Co. Ltd v Leonard O. Arera [2020] eKLR, National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & Another [2002] 2E.A. 503 and Pius Kimaiyo Langat v Co-operative Bank of Kenya Ltd [2017] eKLR underscore that courts will uphold contractual obligations unless they are lawfully superseded. Accordingly, as stated in the case of Serah Njeri Mwobi v John Kimani Njoroge [2013] eKLR in such a case, the doctrine of estoppel ‘precludes a person from asserting something contrary to what is implied by a previous action or statement of that person.’

55. As discussed above, the 23 November 2018 EGM is not binding on the Interested Party due to a lack of notice. Hence, the 29% portion (KES 7,708,257. 08) that was set aside during the said meeting is owed to her. Additionally, by the time the AGM of 25 September 2020 occurred, the Interested Party's position as a creditor was already established. This is affirmed by the statement made by the Appellant in the redemption plan letter. This letter recognised KES 25. 7 million minus partial payouts that had already been made. Moreover, statements sent to her following her redemption request did not show the segregation of any funds as impaired or subject to Class B reclassification. Accordingly, the 2020 AGM resolution should not lawfully expropriate redeemed funds that Amana was contractually bound to pay.

56. Consequently, the Interested Party’s entire holding was subject to a valid redemption arrangement prior to the 2020 AGM. Therefore, the 59% impairment resolution during the 2020 AGM would not reduce her entitlement. She is entitled to the full redemption sum initially acknowledged by the Appellant.

Issue 5 Should interest be awarded in the suit? 57. A general principle underpinning section 26 Civil Procedure Act is that interest is awarded to compensate the successful Party for being kept out of their money. By awarding interest from the time payment was due until actual payment, the court ensures the plaintiff is made whole for the delay. This prevents the unjust enrichment of the defendant who made use of the money during the interim period. Under Section 26(1) Civil Procedure Act, the trial court has broad discretion to award interest “at such rate as the court deems reasonable” from the date the suit is filed until payment in full. The Tribunal is further guided by the principles espoused by the Court of Appeal in the case of Kipchumba v Board of Governors, Tambach Teachers Training College, Civil Appeal No. 100 of 2019, [2023] KECA 802 (30 June 2023) on awarding interest in a suit. Specifically, paragraphs 27 and 28 it states as follows:Second, the court has the discretion to award and the rate of interest to cover: the period from the date the suit is filed to the date when the court gives its judgment;and the period from the date of the judgment to the date of payment of the sum adjudged due or such earlier date as the court may, in its discretion.Lastly, Section 26 of the Act is not applicable to the period before a suit is filed.Instead, interest prior to the date of the suit is a matter of substantive law and is only claimable where under an agreement where there is stipulation for the rate of interest, such as a contractual rate of interest, or where there is no stipulation, but interest is allowed by mercantile usage, which must be pleaded and proved, or where there is statutory right to interest or where an agreement to pay interest can be implied from the course of dealing between the parties.

58. Accordingly, in this matter, interest can be claimed from the date of filing suit.

59. Finally, on the issue of costs the general rule is that costs follow the event. The successful Party gets the costs. The Tribunal is also guided by section 35A(18) Capital Markets Act.The Tribunal shall have power to award the costs of any proceedings before it and to direct that costs shall be paid in accordance with any scale prescribed for suits in the High Court or to award a specific sum as costs.

Disposition 13. In the upshot, this Tribunal, by unanimous decision, finds that the Appeal No. 1 of 2022 is without merit while Appeal No. 3 of 2022 has merit. Accordingly, we make the following orders: -i.The appeal No. 1 of 2022 is hereby dismissed in its entirety.ii.The CMA’s enforcement directive dated 7 February 2022, requiring payment of the 29% impairment (KES 7,708,257. 08), is upheld.iii.The Appellant pay the Interested Party the remaining balance of KES 13,753,303 with interest at the rate of 12 % from the date of filing the appeal until payment in full.ivThe Appellant shall bear the costs of both the Interested Party and the Respondent.

DATED AND DELIVERED AT NAIROBI THIS 27 DAY OF MARCH 2025. HON. PAUL LILAN, MBS (Chairman)Hon. Godwin Wangong’uHon. Dr Constance Gikonyo, PhD (Member)Hon. Paul Wanga (Member)Hon. Josephine Eboko (Member)