Mae Properties Limited v Muigai (Civil Appeal 147 of 2018) [2024] KECA 29 (KLR)
The bottom line
#Kenya's Court of Appeal dismissed MAE Properties' claim against its director, confirming that board-approved plot sales to a director with disclosed pricing were lawful.
What this practically means
#Executive summary
#Key legal issues
#Breach of the statutory duty of disclosure under section 200 of the Companies Act (Cap 486) and Article 84(1) of Table A
No breach: although a declaration at a board meeting is required and knowledge of the interest does not excuse non-declaration, in the circumstances the Board and the sole shareholder had already sanctioned the sales to directors and set price guidelines, so a further declaration would serve no practical purpose
Section 200(1) requires a director interested in a company contract to declare that interest at a directors' meeting, and the duty applies even where the interest is known. However, here Mae's Board resolved in 1993 that directors could purchase plots in the ordinary course of business at market price, Pan Africa as sole shareholder approved the scheme at its 1994 AGM, and price guidelines were set. A further declaration by Mary would merely rehash minuted information; the sole shareholder had given direct and prior approval. Insisting on it would be too pedantic.
Whether the plots were sold at an undervalue contrary to the company's interests
No undervalue established: the plots purchased were non-attractive ones in a marshy area, sold at or above the minimum board-approved prices, and 13 plots at the minimum price were bought by non-directors
The valuation report's probative value was weakened because no evidence of the comparable land transactions underlying it was produced, contrary to the burden in sections 107 and 108 of the Evidence Act. The board had set minimum prices with management tasked to seek better prices; 24 Phase V plots sold at the Kshs 1.2 million minimum, of which 11 went to directors and 13 to non-directors. Mae's own valuer conceded plots 1062, 1063 and 1064 were of lesser value being in a marshy area. Reliance on prime plot prices was misleading.
Whether the transactions were at arm's length and duly sanctioned
The purchases were at arm's length and duly sanctioned by Mae's Board of Directors
Having found no breach of the disclosure duty and no undervalue, the Court concluded the purchases were at arm's length and sanctioned. The Board's resolutions of 24 June and 8 July 1993 and Pan Africa's AGM approval of 1 July 1994 sanctioned sales to directors, with price guidelines set by the Board in September 1995 and by March 1998.
Status of the claim over Plot No. 7785/1062
The company's claim over plot 7785/1062 had no basis because the company repossessed it and refunded the purchase price
The transaction over plot 7785/1062 fell through; Mae decided not to proceed with the sale and refunded Mary the purchase price of Kshs 1,500,000, a decision accepted in a letter dated 25 March 2003. The trial judge found the company's claim in respect of this plot had no basis, and no contrary ground succeeded on appeal.
Legal principles established
#- A director interested in a contract with the company must declare the nature of that interest at a meeting of directors under section 200 of the Companies Act, and the declaration is not excused merely because the interest is already known to the other directors
- Directors must not place themselves, without the company's consent, in a position of potential or real conflict between their duties to the company and their personal interests
- On a first appeal, the Court of Appeal re-evaluates the evidence afresh while making due allowance for having neither seen nor heard the witnesses
Court orders
#- 1.The appeal is dismissed with costs
- On appeal from
- High Court of Kenya
- Jurisdiction invoked
- First appeal to the Court of Appeal under the Court of Appeal's appellate jurisdiction (the judgment does not cite a specific enabling provision)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Mae Properties Limited v Muigai (Civil Appeal 147 of 2018) [2024] KECA 29 (KLR)", Case Analysis (2024). First Appeal from the High Court (not separately numbered in the judgment text). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2024/29/eng@2024-01-25
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.