Introduction and background
1. The 2nd Respondent is a company incorporated in the Federal Republic of Nigeria (“Alphavision Multimedia”) while the 1st Nominal Respondent is incorporated in Kenya under the Companies Act, 2015 (“Alphavision Kenya”). By a Trust Deed dated 26th June 2018 (“the Trust Deed”), Alphavision Multimedia agreed to transfer and the Petitioner agreed to hold 30 issued shares in Alphavision Kenya in trust and on behalf of Alphavision Multimedia which equaled 30% of the issued ordinary shares of Alphavision Kenya.
2. The 2nd Nominal Respondent(“Radiotelle”) is a subsidiary of Alphavision Kenya and at the time material to this suit had three directors; the Petitioner, the 1st Respondent and Alphavision Kenya. Alphavision Kenya holds 100% of the shares in Radiotelle. The parties agree that the reason for the transfer of 30% shareholding in Alphavision Kenya was to meet the 30% local shareholding threshold for companies applying for a broadcast licence under the Kenya Information and Communication (Broadcasting) Regulations, 2009 and the Kenya Information and Communication Act, 1998.
3. Alphavision Kenya was established to carry out, inter alia, a telecommunication business and currently operates a business in the name and style of Soundcity Radio Kenya where the Petitioner was appointed as the Country Manager as from 23rd April 2018 until termination of her employment by the 1st Respondent on 2nd June 2021.
4. Prior to her termination, Alphavision Kenya gave notice and evinced its intention to propose an ordinary resolution at an extraordinary meeting of Alphavision Kenya to the effect that the Petitioner be removed as a director of Radiotelle. Further, Alphavision Multimedia also issued a special notice dated 7th May 2021 evincing its intention to remove the Petitioner as a director of Alphavision Kenya in an extraordinary general meeting of Alphavision Multimedia held 14th June 2021.
5. The aforementioned intended actions prompted the Petitioner to approach the court by way of the Petition dated 11th June 2021 that was amended on 22nd July 2021 (“the Amended Petition”) accusing the Respondents of oppressive conduct and unfair prejudice in the manner they initiated and ejected her from being a director of Radiotelle and Alphavision Kenya. The Petitioner thus seeks the court’s protection under section 780 and 782 of the Companies Act, 2015 and prays for the following reliefs:
a) A declaration that the affairs of the 1st and 2nd Nominal Respondents have been conducted in manner that is oppressive and unfairly prejudicial to the interests of the Petitioner.
b) A declaration that the purported change of directorship of the 2nd Nominal Respondent is unlawful.
c) A permanent injunction against the Respondent either by themselves or their agents, employees or any persons howsoever working under their direction or instructions from changing, altering or in any way interfering with the shareholding and directorship of ALPHAVISION CMA KENYA LIMITED.
f) A declaration that the purported removal of the Petitioner as a director of the 2nd Nominal Respondent and is null and void ab initio.
fA) A declaration that the purported removal of the Petitioner as a director of the 1st Nominal Respondent and is null and void ab initio.
fB) A declaration that the purported transfer of shares held in the 2nd Nominal Respondent from the 2nd Respondent to Anne Fransiscar Okello is null and void.
fC) A declaration that the purported transfer of shares held in the 1st Nominal Respondent from the 2nd Respondent to the 1st Respondent is null and void.
g) The costs of this petition and interest thereon until payment in full.
h) Such other orders as the court may deem fit and just to grant.
6. The Amended Petition is supported by the Petitioner’s affidavits sworn on 22nd July 2021 and 2nd September 2021 respectively and is opposed by the Respondents and Nominal Respondents through the 1st Respondent’s replying affidavit sworn on 28th July 2021 and the Response to the Amended Petition of the same date. The Amended Petition was disposed by way of written submissions which are now on record where the parties have advanced their respective positions.
The Petitioner’s Case
7. The Petitioner’s case is that the Respondents removed her from directorship and shareholding of the Nominal Respondents through unlawful and unprocedural resolutions contrary to the provisions of sections 139, 141, 287(1), 780(1)(2) and 782 of the Companies Act, 2015.
8. Regarding the resolution of 14th June 2021 which resulted in her removal, the Petitioner contends that while the 1st Respondent indicated that he voted on his own behalf and as a proxy of Alphavision Kenya, this resolution, which resulted in her removal, was not supported by a resolution of the corporate entity he was purporting to act on behalf of. She asserts that this is contrary to section 298 of the Companies Act, 2015 as there was no resolution appointing the 1st Respondent as a proxy. She therefore submits that the resolution removing her as a director is null and void ab initio.
9. The Petitioner further contends that since the 1st Respondent, being a Nigerian citizen, does not have a work permit issued under the Kenya Citizenship and Immigration Act, 2011 his actions as a director and any actions taken in that capacity as a director of the 1st and 2nd Nominal Respondents are illegal.
10. The Petitioner also complains that she received a letter dated 8th April 2021 from the 3rd Respondent, directing her to transfer her shares in the Alphavision Kenya to a third party. She urges the court to take judicial notice of the conventional dealings in regard to transfer of shares in a corporate of entity as the same cannot be transferred without consideration and the voluntary acceptance by the transferee. She therefore submits that the resolution to transfer her shares contravenes the provisions of the model Articles of Association under the Companies Act, 2015 Regulations and that in any event, the impugned resolution is not dated hence doubtful.
11. The Petitioner urges the court to find that the Respondents conduct of illegally holding meetings with a view to remove her from her directorship amounts to prejudicial and oppressive conduct within the meaning of section 780 of the Companies Act, 2015.
12. The Petitioner impugns the Trust Deed, stating that it is an illegal contract and therefore void ab initio as it was solely entered into to circumvent the Kenya Information and Communication (Broadcasting) Regulations, 2009 and the Kenya Information and Communication Act (1998) in respect to ownership of a broadcasting company by foreigners.
The Respondents’ Case
13. The Respondents oppose the Amended Petition. The Respondents’ case is that under the Trust Deed, the Petitioner was to hold 30 shares in Alphavsion Kenya in trust for Alphavision Multimedia to satisfy the 30% local shareholding threshold. To this end, the Respondents state that the Petitioner is not a paid up shareholder of Alphavision Kenya or Radiotelle.
14. The Respondents aver that this court lacks jurisdiction to hear and determine the Amended Petition as section 9 of the Trust Deed provides for referral of any dispute to an arbitral Panel. Further, that the court’s jurisdiction is ousted by section 6 of the Civil Procedure Act as the issues raised by the Petitioner regarding her employment by the Respondents and her services thereto are substantially in issue in the case of Alpha Vision Multimedia Limited & 2 Others v Sintoyia Kasaine Employment and Labour Relations Court Case Number ELRCC/E463/2021.
15. The Respondents state that having established that the Petitioner never held any validly paid-up shares in any of the Nominal Respondents, they state on a ‘without prejudice’ basis that the Petitioner ceased to hold office as a director in both Alphavision Kenya and Radiotelle under Article 25 (f) of the Model Articles of Association to which both companies subscribed to.
16. The Respondents confirm that the Petitioner received the two notices for removal as a director of Alphavision and Radiotelle and that she attended the special general meeting that was held on 14th June 2021 where a resolution for her removal was passed by majority members of both companies despite her objections. The Respondents submit that if the court grants the prayers sought in the Amended Petition, this would amount to creating of rights where they do not exist.
Analysis and Determination
17. I have considered the Amended Petition, the response thereto and the parties’ respective submissions and I note that the Respondents have challenged the jurisdiction of the court on the basis that section 9 of the Trust Deed provides for a referral of any dispute to an arbitral panel as follows:
Any dispute, difference, or question which may arise at any time between the parties touching upon interpretation of this Deed on the rights and liabilities of either party, with respect hereto or otherwise arising in respect of the matters subject of this Deed shall be referred to the decision of a single arbitrator to be agreed upon between the two parties...
18. The Respondents’ objection is grounded under section 6 of Arbitration Act which part material to this application provides as follows:
6(1) A court before which proceedings are brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than the time when that party enters appearance or otherwise acknowledges the claim against which the stay of proceedings is sought, stay the proceedings and refer the parties to arbitration unless it finds—
(a) that the arbitration agreement is null and void, inoperative or incapable of being performed; or
(b) that there is not in fact any dispute between the parties with regard to the matters agreed to be referred to arbitration.
(2) ………………….. [Emphasis mine]
19. In order to invoke section 6 aforesaid, the party seeking the stay must make an application within the time limited, that is, not later than the time when the party enters appearance or otherwise acknowledges the claim by filing a defence. Once the application is filed, the court will then consider whether there are grounds to refuse the application. This position was succinctly expressed by Bosire JA., in Niazsons (K) Ltd v China Road & Bridge Corporation Kenya NRB CA Civil Appeal No. 157 of 2000 [2001] eKLR, Bosire JA., as follows:
It appears to me that all an applicant is obliged to do is to bring his application promptly. The Court will then be obliged to consider three basic aspects. First, whether the applicant has taken any step in the proceeding other than the steps allowed by the said section. Second, whether there are any legal impediments on the validity, operation or performance of the arbitration agreement. Third, whether the suit indeed concerns a matter agreed to be referred.
20. The right to apply for stay is lost once the party seeking the stay files a defence or in the words of the statute, “acknowledges the claim …. “ This what the Court of Appeal stated in Adrec Limited v Nation Media Group Limited NYR CA Civil Appeal No. 75 of 2017 [2017] eKLR:
It should be emphasized that the right to seek and obtain stay of proceedings under section 6(1) of the Arbitration Act is lost the moment a defence is filed in the proceedings. By dint of the defence, the party filing it subjects itself to jurisdiction of the court and cannot thereafter resile from that position.
21. In this instance, the Respondents did not file an application for stay but raised the issue in their Response to the Amended Petition dated 28th July 2021 in which they state that under section 9 of the Trust Deed the dispute ought to be referred to an Arbitral Panel. It also prayed that, ‘’This Honourable Court be pleased to refer the hearing of the Amended Petition to an Arbitral Panel in line with section 9 of the Trust Deed executed between the parties to the Dispute.’’
22. From the statutory provisions and authorities cited, the court cannot accede to the Respondents’ request to refer the matter to arbitration for two reasons. First, they failed to file an application for stay in line with Rule 2 of the Arbitration Rules, 1997 which provides that, “Application under sections 6 and 7 of the Act shall be made by summons in the suit.” This means that the Respondents ought to have made the application by summons within the time limited and not by way of a preliminary objection. Second, by filing the Response to the Amended Petition, the Respondents effectively waived their right to proceed to arbitration in this case. The totality of this finding, is that the court cannot stay the proceedings and refer the matter to arbitration under the provisions of section 6 of the Arbitration Act. In the circumstances, it is not necessary to deal with the objections available to the Petitioner to avoid the arbitration agreement under the Trust Deed.
23. Although the parties have raised several factual and legal issues regarding the conduct of the Respondents, I propose consider whether the court can grant the prayers sought in the Amended Petition in light of those issues.
24. The Petitioner’s case is mainly grounded on the provisions of section 780 of the Companies Act, 2015 (“the Companies Act”) which provides, in part, as follows:
780 (1) A member of a company may apply to the Court by application for an order under section 782 on the ground—
(a) that the company’s affairs are being or have been conducted in a manner that is oppressive or is unfairly prejudicial to the interests of members generally or of some part of its members (including the applicant); or
(b) that an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be oppressive or so prejudicial.
25. If the Petitioner establishes that the affairs of the company affairs are being conducted in an unfair and prejudicial manner, then the court may grant the reliefs set out in section 782 of the Companies Act as follows:
782(1) If, on the hearing of an application made in relation to a company under section 780 or 781, the Court finds the grounds on which the application is made to be substantiated, it may make such orders in respect of the company as it considers appropriate for giving relief in respect of the matters complained of -
(2) In making such an order, the Court may do all or any of the following:
(a) regulate the conduct of the affairs of the company in the future;
(b) require the company—
(i) to refrain from doing or continuing an act complained of; or
(ii) to do an act that the applicant has complained it has omitted to do;
(c) authorise civil proceedings to be brought in the name and on behalf of the company by such person or persons and on such terms as the Court directs;
(d) require the company not to make any, or any specified, alterations in its articles without the leave of the Court:
(e) provide for the purchase of the shares of any members of the company by other members or by the company itself and, in the case of a purchase by the company itself, the reduction of the company’s capital accordingly.
(3) Subsection (2) does not limit the general effect of subsection (1).
(4) The company is entitled to be served with a copy of the application and to appear and be heard as respondent at the hearing of the application-
26. Without going into the details of what constitutes oppressive and unfairly prejudicial conduct, the petitioner must surmount a threshold issue; that she is a member of the company. It is only a member of the company who has the standing to move the court for relief against such conduct. In this case, although the Petitioner is a shareholder, she holds the shares in Alphavision Kenya in trust and on behalf of Alphavision Mutimedia in accordance with the Trust Deed dated 26th June 2018.
27. Although section 104 of the Companies Acts, 2015 prohibits registration of trusts in the register of members, this does not relieve a trustee of its trust obligations under the instrument. In other words, the trust instrument is a contract interparties and will be enforced as such against the conscience of the trustee.
28. As a Trustee for Alphavision Multimedia, the Petitioner does not have any independent right of a shareholder and acts for the benefit of the Beneficiary, who in this case is the majority shareholder. This is confirmed by the following covenants in the Trust Deed:
1.2 That the Trustee will hold the Thirty (30) issued shares in trust for the beneficiary and hereby agrees that she will at the request and cost of the Beneficiary convey the same to such persons or persons at such time or times and in such a manner or otherwise deal with the shares as the Beneficiary may direct or appoint.
1.3 The Trustee may exercise the right or power, with regard to the Thirty (30) shares, after consultation and in accordance with the instructions of the Beneficiary, which right may be exercised by the holder of such shares as the material time including any right to power to allot new shares, issue bonus shares or distribute any Property of the Company provided the Trustee shall not be entitled to dividends payable for the shares.
1.4 The Trustee shall attend and exercise all rights and vote at any General Meeting of the Company in respect of the said shares, preferably after consultation with the Beneficiary, but not in such a manner prejudicial to the interests of the Beneficiary with respect to any single decision.
1.5 The Trustee shall execute all proxies or other documents which shall be necessary or proper to enable the Beneficiary or its assigns to attend and vote at a General Meeting of the Company in place of the Trustee, if so requested; and
1.6 The Beneficiary shall at all times have the power and discretion to replace the Trustee with such other person or persons it may deem fit on account of illness, incapacity, failure to account, or upon due resignation of the Trustee or otherwise.
29. From the provisions of the Trust Deed, it is clear that the Petitioner as Trustee cannot act in a manner inconsistent with the interests of the Beneficiary. Since the Beneficiary is the majority shareholder in Alphavision Kenya, the Petitioner cannot maintain a claim for oppressive and unfair and prejudicial conduct. Moreover, under the Trust Deed, which is binding on her, as Petitioner has undertaken to act in accordance with the interests of the Beneficiary, she cannot turn around and claim oppression when her personal interest and those of the Beneficiary diverge. In the circumstances the court declines to prayer (a) of the Amended Petition.
30. The relationship between the Petitioners, 2nd Respondent and the Nominal Respondents is first and foremost governed by the Trust Deed. As I have found, the Petitioner can only act in the interests of the Beneficiary and if the Beneficiary, in this case, Alphavision Multimedia, wishes to change the directorship in which it holds the controlling stake, then the court cannot intervene in the manner prayed for by the Petitioner. For the court to insist on the Petitioner remaining a director or shareholder of the Nominal Respondent would be contrary to the Trust Deed which allows the Beneficiary to direct how the 30 shares in the Alphavision Kenya should be dealt with including transferring shares to a third party. I therefore reject prayers (b), (c), (f) and (fA) of the Amended Petition.
31. On the issue of transfer of shares, Clause 1.2 of the Trust Deed is clear that the Trustee is bound to transfer the shares as instructed by the Beneficiary. In the circumstances, the court cannot re-write contractual provisions. Moreover, the court cannot interfere with the transfer of shares to a third party in the absence of the third party. The third party, who is a beneficiary of the shares, must be heard on the matter.
32. Although the Petitioner has raised matters concerning the breach of Kenya Citizenship and Immigration Act, 2011, the Kenya Information and Communication (Broadcasting) Regulations, 2009 and the Kenya Information and Communication Act, 1998, I am of the view that these issues are better dealt with by the relevant authorities. Ultimately, the relationship between the Petitioner and Alphavision Multimedia and consequently her relationship with Alphavision Kenya and Radiotelle arises from the Trust Deed.
Disposition
33. For the reasons I have outlined above, I now dismiss the Amended Petition with costs to the Respondents.
DATED and DELIVERED at NAIROBI this 19th day of MAY 2022.
D. S. MAJANJA
JUDGE