Automated Summary
Key Facts
Dry Associates Limited (DAL) operated as a licensed fund manager in Kenya's capital markets. In 2011, DAL discovered that its employee Timothy Karanja had committed fraud in the Crown Berger Commercial Paper Program, leading to a loss of over Kshs. 35 million in investor funds. The Capital Markets Authority (CMA) investigated and found DAL responsible for inadequate risk management systems and internal controls, resulting in a financial penalty of Kshs. 1,056,033.40 and directives to improve compliance. DAL petitioned the court, alleging violations of its constitutional rights to fair administrative action (Article 47) and protection of property (Article 40), claiming it was denied a proper hearing and that CMA acted arbitrarily. CMA defended its actions as necessary to protect investors and within its statutory mandate. The court ultimately dismissed the petition, finding no constitutional breaches.
Issues
- Article 47 – the right to fair administrative action.
- Article 40 – the right to protection of property.
- Article 50(1) – the right to a fair trial.
- Article 35 – access to information.
- Article 48 – access to justice.
- Article 27 – right to equality and freedom from discrimination.
Holdings
- The court determined that the petitioner's allegations of discrimination (Article 27) lacked merit, as the CMA's actions were consistent with statutory obligations and not discriminatory.
- The court held that the CMA's exercise of its regulatory powers under Article 47 of the Constitution was fair and procedurally just, as the petitioner was provided sufficient opportunity to respond to allegations before sanctions were imposed.
- The court ruled that the petitioner's request for access to information (Article 35) was not actionable, as it had not formally requested the information from CMA prior to filing the petition.
- The court found no violation of the right to access justice (Article 48), as the petitioner retained available legal remedies under the CMA Act and the judicial system.
- The court dismissed the petitioner's claim that its right to property (Article 40) was violated, finding that the CMA's penalties were lawful and not arbitrary.
- The court held that an order of mandamus could not be issued against the Director of Public Prosecutions (DPP), as prosecution decisions fall within the DPP's constitutional discretion.
Remedies
The court found the petition lacked merit and dismissed it. Costs were awarded to the interested party (CROWN) who was brought into proceedings by the petitioner. The court did not grant any of the petitioner's requested reliefs including declarations, injunctions, or mandamus orders. It held that the CMA's actions did not infringe the petitioner's constitutional rights and that the regulatory process was fair and lawful.
Legal Principles
- The court applied the principle of natural justice under Article 47 of the Constitution, emphasizing procedural fairness in administrative actions. It cited cases like Pearlberg v Varty to balance fairness with administrative efficiency and held that CMA's process was not arbitrary or unfair.
- The court determined vicarious liability under the CMA Act, holding the petitioner (DAL) responsible for its employee's fraudulent actions despite arguments that the employee acted outside his employment scope. This was supported by cases like Joseph Suri Nyateng v H.P. Mashru Limited.
Precedent Name
- Joseph Kimani Mwai v Town Clerk Kangema
- Pearlberg v Varty (Inspector of Taxes)
- Meme v R
- Anarita K Njeru v Republic (No. 1)
- Kooragang Investments Property Limited v Richardson and Wrench Limited
- Joseph Suri Nyateng & Another v H. P. Mashru Limited
- Mwona Ndoo t/a Ngomeni Bus Services v Kakuzi Limited
- Kenya Society for the Mentally Handicapped v Attorney General & Others
- Kenya National Examination Council v Republic exp. Geoffrey Njoroge & Others
- ABN Amro Bank NV v Le Monde Foods Limited
- Commissioner General, Kenya Revenue Authority v Silvanous Onema Owaki t/a Marenga Filling Station
Cited Statute
- Constitution of Kenya
- Capital Markets Authority Act
- Capital Markets (Licensing Requirements) (General) Regulations 2002
Judge Name
D.S. Majanja
Passage Text
- 95. In conclusion, I find and hold that the petitioner's rights under Article 47 of the Constitution have not been infringed.
- 98. ... the action to impose sanction which is authorised by section 11(3) of the Act is not arbitrary in its application nor is the CMA authorised to impose sanctions and penalties that would run afoul of Article 40(2).
- 58. Having heard the parties and read the submissions, I think these allegations in respect of infringement of fundamental rights are as follows: (a) Article 50(1) – the right to a fair trial. (b) Article 27 – right to equality and freedom from discrimination. (c) Article 35 – access to information. (d) Article 47 – the right to fair administrative action. (e) Article 40 – the right to protection of property (f) Article 48 – access to justice.