Capital Markets Authority v Kiereini & another (Civil Appeal 9 of 2014) [2014] KECA 276 (KLR)
The bottom line
#Kenya's Court of Appeal ruled regulators like the CMA cannot impose sanctions on anyone without first giving them a chance to be heard.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the High Court had jurisdiction to entertain the petition despite the alternative remedy of the Capital Markets Tribunal under Sections 35 and 35A of the Capital Markets Act
- 2.Whether the trial court erred in relying on unpleaded matters, namely the limited waiver and lack of notice for enforcement action
- 3.Whether the ad hoc Committee merely carried out investigations, leaving enforcement action to the CMA Board, or conducted a seamless investigation and enforcement process
- 4.Whether Kiereini had a legitimate expectation of a second hearing before the CMA Board and, if so, whether he was entitled to notice before enforcement action
- 5.What place, if any, public interest considerations have in overriding the constitutional requirements of fair administrative action and fair hearing
Key legal issues
#Jurisdiction of the High Court over the constitutional petition despite the alternative remedy of the Capital Markets Tribunal
The High Court had exclusive jurisdiction under Article 165(3) of the Constitution to determine violations of fundamental rights; the existence of the Tribunal did not oust that jurisdiction where the matter was constitutional in form and substance.
The court held that jurisdiction flows from the Constitution or legislation and cannot be expanded by judicial craft. The petition alleged violations of Article 47, which is constitutional in form and substance. The Tribunal does not share the powers of the High Court under Article 165, so the alternative remedy would not be efficacious. The court also found the issue arose from the pleadings and was not raised suo motu by the trial court.
Whether the ad hoc Committee conducted investigation only or investigation and enforcement
The Committee carried out investigations only; enforcement power was not delegated to it and remained with the Board.
On evaluation of the terms of reference and the appointing document, the Committee's function was to verify the Webber report by further investigation and make recommendations. There was no express delegation of the Board's sanctioning powers under Sections 11(3)(cc), 25A and 34A, and no record of the Committee's report. The Board envisaged notifying adversely mentioned persons of the Committee's findings before exercising its coercive powers.
Legitimate expectation of a second hearing before the Board and entitlement to notice before enforcement action
Kiereini had no legitimate expectation of a second hearing on the Committee's findings because he consciously waived the opportunity to be heard before the Committee; however, he was entitled to be heard before sanctions and penalties were imposed.
Kiereini was given a full opportunity to appear before the Committee on the specific allegations and made a conscious decision not to appear, so the Committee's proceedings and findings were valid. The trial court's order setting aside those findings contradicted its own unchallenged finding and had to be corrected. But the summary imposition of sanctions without any opportunity to be heard in mitigation breached Article 47.
Whether public interest could justify the enforcement action notwithstanding the breach of Article 47
Public interest cannot override the fundamental rights to fair administrative action and fair hearing.
The court held that the rights of the individual to fair administrative action and fair hearing are so fundamental that they cannot be limited even by public interest, adopting the authorities cited for the proposition that administrative bodies must comply with the rules of natural justice when exercising quasi-judicial functions.
Whether the trial court erred in relying on unpleaded matters
The issue of fair administrative action arose from the pleadings and evidence and was not raised suo motu by the trial court; the jurisdictional ground of appeal failed.
The court examined the petition, which cited several constitutional provisions and alleged violations, and found that the Article 47 complaint was before the trial court on the pleadings. The objection based on unpleaded issues therefore could not sustain the appeal on jurisdiction.
Legal principles established
#- The High Court's jurisdiction under Article 165(3)(b) and (d)(ii) to adjudicate alleged violations of the Bill of Rights is exclusive and not displaced by an alternative statutory remedy such as the Capital Markets Tribunal where the complaint is constitutional in form and substance.
- A statutory committee vested only with investigative and recommendation functions does not, without express delegation, carry the Board's enforcement powers; enforcement power remains reposed in the Board and must be delegated expressly.
- Even where there is no express statutory requirement for a hearing before sanctions are imposed, the constitutional right to fair administrative action under Article 47 requires that an affected person be heard before sanctions and penalties are imposed.
- Public interest cannot be used to override the fundamental rights of fair administrative action and fair hearing; those rights cannot be limited even by public interest.
- Where a party consciously declines an opportunity to be heard before an investigative committee, the resulting findings are valid and may only be challenged by a lawful order on appeal, not by a constitutional petition in the High Court.
Court orders
#- 1.Appeal allowed insofar as it questions the process ending with the findings made by the committee; the findings were made procedurally and are valid until set aside by a lawful order on appeal
- 2.Order of the trial court setting aside the findings of the committee (as accepted by the Board in the letter dated 3rd August 2012) set aside
- 3.Appeal dismissed insofar as it questions the finding that Article 47 of the Constitution was breached because Kiereini was not heard before sanctions were imposed
- 4.Sanctions, penalties and offences imposed by CMA under Sections 11(3)(cc), 25A and 34A set aside; CMA at liberty to re-impose them if merited only after giving Kiereini the opportunity to be heard
- 5.Disposition relates only to Jeremiah Gitau Kiereini
- 6.Each party to bear its own costs of the appeal and in the High Court
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya at Nairobi
- H.C. Petition No. 371 of 2012
- Jurisdiction invoked
- Article 165(3)(b) and (d)(ii) of the Constitution (first appeal under Court of Appeal jurisdiction)
Relief refused
#CMA's challenge to the finding that its enforcement action breached Article 47 by failing to give Kiereini a hearing before imposing sanctions
The right to fair administrative action is so jealously guarded that sanctions could not be imposed without a hearing even absent express statutory provision
Costs
As there has been partial success, and the matter is of public importance, each party shall bear its own costs of this appeal and in the High Court.
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
We allow the appeal in as far as it questions the process ending with the findings made by the committee on the specific allegations placed before it for investigation, and reiterate that the findings were made procedurally, and are valid until they are set aside by a lawful order on appeal.
The sanctions, penalties and offences imposed by the Capital Markets Authority under Sections 11(3)(cc), 25A and 34A be and are hereby set aside. CMA shall be at liberty to re-impose them if they are merited only after giving the opportunity to Kiereini to be heard.
We dismiss the appeal in so far as it questions the finding of the trial court that Article 47 of the Constitution was breached since Kiereini was not given the opportunity to be heard before sanctions and other penalties were imposed on him.
As there has been partial success, and the matter is of public importance, each party shall bear its own costs of this appeal and in the High Court.
the committee carried out investigations only and that the power of enforcement was not delegated to the committee.
What deserved a constitutional challenge was the summary imposition of sanctions and other penalties before giving Kiereini an opportunity to be heard in mitigation.
Issues in the judgment
#The judgment quotes the trial court's summary in paragraph 23(g) that the Committee's findings are not set aside, yet the trial court's operative order in paragraph 24 quashed the Report and Resolutions including the enforcement action; the Court of Appeal itself noted this internal contradiction of the decision below.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Capital Markets Authority v Kiereini & another (Civil Appeal 9 of 2014) [2014] KECA 276 (KLR)", Case Analysis (2014). Civil Appeal No. 9 of 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2014/276/eng@2014-11-07
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.