Pan Africa Insurance Holdings Limited & another v Dickson Ngatia Gachuche [2021] KEELC 1497 (KLR)

The court defined fiduciary duties by reference to Black's Law Dictionary and Gower's Principles of Modern Company Law, identifying duties of loyalty and good faith, care and skill, and the duty to avoid conflicts. The evidence showed the Defendant was entitled to purchase only one plot at the approved discounted price but bought seven plots, failed to disclose his interest as required by Section 200 of the repealed Companies Act and regulation 84(1) of Table A, and paid below market value as evidenced by the unchallenged valuation of Ms Gitari. This occasioned loss to the Plaintiffs.

The court held that the duty of loyalty and good faith includes the duty not to profit from a position of trust and the duty to avoid conflicts of interest, citing Regal (Hastings) Ltd v Gulliver and Aberdeen Rly Co v Blaike. Since the Defendant purchased the plots in breach of those duties without disclosure and at prices below prevailing market value, the acquisition was unlawful, and he is treated as holding the property on trust for the company.

The Defendant argued the claim was contractual and barred by Section 19(4) of the Limitation of Actions Act, having been filed ten years after the 1994-1997 transactions. The court held that the Defendant, as a director, was a trustee of the Plaintiffs' assets, and the claim involved concealment of the prices paid, amounting to fraudulent breach of trust. Section 20(1) excludes limitation periods for such claims, consistent with the decision in Mae Properties Ltd v Joseph Kibe.

The court found the Plaintiffs had proved their case to the required civil standard. The price differential between market value and what the Defendant paid was Kshs.5,700,000, and loss of use was calculated at 12% of the principal from date of purchase to filing suit at Kshs.11,178,069.86. The valuation report was unchallenged and unrebutted. A declaration of trust was issued together with an award of the aggregate sum, general damages of Kshs.500,000 and costs with interest.