[2006] KECMT 3 (KLR)

BOC Kenya Limited v Capital Markets Authority (Appeal 2 of 2006) [2006] KECMT 3 (KLR) (6 October 2006) (Ruling)

Neutral citation: [2006] KECMT 3 (KLR)

Republic of Kenya

In the Capital Markets Tribunal

Appeal 2 of 2006

Morris G. Njage, Chair, T. Davidson, N. Kaburu & Michael G. Waweru, Members

October 6, 2006

Between

BOC Kenya Limited

Appellant

and

The Capital Markets Authority

Respondent

(Being an Appeal under sections 35(1), 35 (2) and 35 of the Capital Markets Acts (Cap 485A, Laws of Kenya) from a direction or decision or action of the Capital Markets Authority and in respect of a matter relating to the Act. IN THE MATTER OF A TAKEOVER OFFER BY BOC KENYA LTD RULING)

Ruling

1. This is a ruling on a preliminary objection raised by Mr. George Oraro for the Appellant on the Tribunal Jurisdiction to hear the Appeal.Before going into the ruling, it is necessary to look into the background of this dispute. By a Memorandum of Appeal dated the 12th of May 2006 and lodged with this Tribunal on the same date, the Appellant appealed to this Tribunal against the decision of the Capital Markets Authority (hereinafter the Authority) dated the 27th April 2006. The Appeal was registered as Appeal No. 1 of 2006 of this Tribunal. It is yet to be determined. There are five prayers of the appeal which are:a.The appeal be allowed.b.The direction or action or decision if any of the Authority be set aside.c.The Authority be ordered to approve the waiver by the Appellant of the condition precedent as to the minimum threshold the Appellant to proceed with implementing and concluding the offer.d.The Authority be ordered to approve the listing of the consideration shares as defined in the offer document on the Nairobi Stock Exchangee.The cost of this Appeal be awarded to the Appellant. 2. After the lodging of the said Appeal and during its pendency, M/S Daly &Figgis Advocates for the Appellant wrote to the Authority a letter dated the 9th of June 2006. The letter is referenced as follows-“Request and application to the Capital Markets Authority of Kenya under Clause 4. 6 of the (Takeover) (“the offer”) by BOC Kenya Ltd (“BOC”) to the shareholder of Carbacid Investment Ltd (“Carbacid”) by the offer Document of 22nd February 2006”In addition, the letter is made-“…. Without prejudice to the Appeal and the position BOC and further and In the alternative to the contentions of the BOC in the appeal aforesaid and otherwise….

3. The details of the application are then given, namely the approval by the Authority to the waiver by BOC of Condition 4. 6 (ii) of the offer document. The Authority replied to that application by its letter of the 13th of June 2006. The materials parts of that letter are as follows-…. Section 35A (17) of the Capital Markets Act, states that upon any appeal to the Tribunal under this Section, the status quo of any matter or activity which Is the subject of appeal shall be maintained until the appeal is determined. The approval sought vide your letter are subject of Appeal No. 1 2006 before the Capital Markets Tribunal. Consequently, the Authority can neither consider the application nor engage. in further correspondence on this matter….”

4. Aggrieved by that decision, the Appellant through M/S Daly & Figgis Advocates filed this appeal on the 29th of June 2006. The reliefs sought are four.a.This Appeal be allowed.b.The decision or action of the Authority be set side with cost.c.The Authority be ordered to consider and approve the applications by the Appellant in respect of the condition precedent set out in clause 4. 6 (ii) of the offer document and permit the Appellant to waive the said condition precedent and forthwith proceed with implementing and concluding the offer.d.The cost of this appeal be awarded to the Appellant.

5. It is against this latter appeal that Mr. Oraro took out his preliminary objections which were three-pronged. Firstly Mr. Oraro argued that as the letter of the 9th of June 2006 by the Appellant to the Authority was made “without prejudice’’ to the appeal, the Appellant did not intend that any legal rights would accrue to the either Appellant or the Respondent. He referred us to the meaning of “without prejudice” in Black’s Law Dictionary 8thEdition at page 1632. Secondly Mr. Oraro submitted that the Tribunal has no Jurisdiction to hear and determine this Appeal under Section 35(1) of the Capital Markets Act, in which case we should down our tools on the authority of Owners of Motors Vessel “Lilian S’’ v Caltex Oil (Kenya) Ltd 1989 KLR 1 at page 14 paragraphs 20-40 and page 15 paras 1-15. 6. Finally, Mr. Oraro submitted that the effect of Appeal No.2 of 2006 is to Undermine Appeal No 1 of 2006 contrary to the status quo provisions in section 35(17) of the Act and that therefore Appeal No.2 of 2006 is an abuse of the court process and ought to be struck out.In Reply Mr. Zul Alibhai for the Appellant did not agree. He submitted that the phrase “without prejudice” used in his firm’s letter of the 9th of June 2006 should be construed broadly and liberally in the light of the letter, spirit, policy and objectives of the Act. He referred us the preamble of the Act which is-“An Act of Parliament to establish a Capital Markets Authority for the purpose of promoting and facilitating the development of an orderly, fair and efficient Capital Markets in Kenya and for connected purposes.”

7. The objectives of the Authority are provided for under section 11 of the Act, which are so far as in material to this case. –a.The development of all aspect of the Capital Markets with Particular emphasis on the removal of impediments to, and the creation of incentives for longer term investments in productive enterprise.b.To facilitate the existence of a nationwide system of stock market and brokerage services so as to enable wider participation of the public in the stock market.c.Creation maintenance and regulation of market in which securities can be issued and traded in an orderly, fair, and efficient manner through implementations of a system in which the market participation is self-regulating to the maximum practicable extent.d.The protection of investor interest.

8. Mr Alibhai further submitted that Tribunal has jurisdiction. He relied on sections 35(1) d and (e) and 35A 1(4) of the Act. His other authorities are Halsbury’s laws of England 4thEdition Vol,1(1) at paragraph 68, Vol 44 at paragraph 966, and Volume 44 (1) at paragraph 1232,1290 and 1412; Craies on statute Law 7th edition at pages 366 and 371-2; our own decision in Shah Munge & partners v the Capital Markets Authority in Appeal No.1 &2 of 2002; Republic v Maithia & another ex-parte waudi (2003) LLR 4513 (HCK); Eastbourne Corporation v Fortes Ice cream Parlour (1995) Ltd. (1959) 2 All E.R 103 and DPP Schildkamp (1969) 3 All E.R 1640. On the issue of status quo, Mr. Alibhai submitted that the issue in the two appeal is totally different. In appeal No. 1 of 2006, the issue is whether there was an effective waiver, while Appeal No,2 relates to request for a waiver out of time. Those are the rival arguments.

9. We have considered the submissions of the learned counsels and also the materials and authorities placed before us.We will start with the issue of jurisdiction. We hold that section 35(1) and 35A are complimentary. In the Owner of Motor Vessel Lilian S’’ case Nyarangi J. A quoted the definition of jurisdiction at page 14 paragraph 30-50 in these terms.“By jurisdiction is meant the Authority which a court has to decide matters that are litigated before it or to take cognizance of matters presented in a formal way for its decision”.We adopt the definition of jurisdiction Section 35A (4) is in following terms-“The Tribunal shall upon an appeal made to it by the Authority or by a committee. or officer of the Authority or nay matter relating to this act, enquire into the matter and make award thereon and every award made shall be notified by the Tribunal to the parties concerned, the Authority or any committee or officer thereof as the case may be”.

10. An Appeal has been made to us by the Appellant herein in writing on some matter relate to the Act, and we are enjoined and empowered to enquire into it.The Appellant is entitled to award thereon and to be notified of such an award. To this extent,we hold that we have jurisdiction.The matter for consideration is whether the Appellant having received a decision of the Authority on his Application and having preferred an Appeal No. 1 of 2006, was entitled to any further audience before the Authority on the same subject matter – further in the alternative or otherwise and without prejudice to the Authority which is to-“…promote and facilitate the development of orderly fair and efficient Capital Markets Kenya.

11. This mission statement is the threshold of the objective spirit policy and letter of the Act.Rule 9 (1) of theCapital Markets Tribunal Rules 2002 provide that-“The Appellant may at any time before the Appeal is heard withdraw the appeal by notice in writing to the secretary”.

12. This rule in our opinion envisages a change of circumstances of the Appellant after the entering an Appeal. we shall not speculate as to what may bring about such changes. But looking at the spirit of the rule, the spirit and letter of the Act, and the mission statement of the Authority are still open to an Appellant who has Appealed. Once such an Appellant who has Appealed as aforesaid goes back to the Authority, the Authority has responsibility to give him audience and give him a decision “without prejudice to the filed appealed. This is because unless the appeal is withdrawn, the decision thereon is Tribunals under S35A (4) and the Authority is not permitted to sit on appeal on its own decision. We therefore vigorously with the dogmatic conclusion of the Authority in its letter dated the 13th of June 2006 that it.“Can neither consider the application nor engage in further correspondent on this matter.”

13. The Authority had a duty and responsibility to give Audience to the Appellant in the circumstances.Having said that, our concern now whether this appeal before us is competent. Can a party who has made an application to the Authority and received a decision, referred an Appeal from such decision, gone back to the Authority. “Without prejudice”, has been entertained and his later refused, appeal to this tribunal in a second, third, or even fourth appeal and ad infinitum? Such a situation will degenerate into a multiplicity of appeals, a situation both absurd, chaotic and most definitely an abuse of the court process. Indeed, the position is prevented by section 35(17) which provides.“Upon any appeal to the Tribunal under this section, the status quo of any matter or activity is the subject of the appeal, shall be maintained until the appeal is determined.”

14. 1.At the beginning of the ruling, we set out the reliefs claimed in the two appeals. The substance of relief numbers (c) and (d) in Appeal No.1 2006 is materially the same with relief numbers (c) in appeal 2. of 2006. A decision in Appeal No. 1 of 2006 will therefore in our opinion address all the Appellant s grievance in Appeal No.2 of 2006. We are therefore unable to agree with Mr Alibhai, the learned counsel for the Appellant that the two appeals are different.2. The upshot is that we agree with Mr Oraro, learned counsel for the respondent that this appeal is filed contrary to section 35(17) of the Act.3. This Appeal is hereby struck out.4. In view of the conduct of the Authority in this matter we hold that each party bears its own cost of this appeal.

DELIVERED DATED AND SIGNED AT NAIROBI THIS 6TH DAY OF OCTOBER 2006. MORRIS.G. NJAGE – ChairmanTERRY DAVIDSON – MemberNELSON KABURU - MemberMICHAEL.G. WAWERU- MemberRuling delivered in the presence of Mr Alibhai for the Appellant and Mr. George Oraro for the respondent.