How media mogul SK Macharia lost Directline Assurance court battle
Directline was established in 1998 with shareholding split among AKA Investments Ltd (48 per cent), Janus Ltd (32 percent), and Royal Media Services Ltd (20 per cent). Macharia submitted that from 2007, his late son John Gichia Macharia and Janice Theresa Wanjiku Kiarie excluded them from management and falsely claimed that their shares were held in trust for Macharia without any formal declarations
Royal Media Services owner SK Macharia has suffered a major legal setback after the High Court upheld an arbitration award that effectively confirmed he is a minority shareholder in Directline Assurance Company Limited.
The dispute revolved around long-running disagreements over the shareholding and control of Directline Assurance, with Macharia and his allies accusing other shareholders of unlawfully taking control of the company.
Macharia has been fighting over the shareholding of Directline Assurance Company Limited and his rivals accused him of unlawfully taking control of the company while the matter was still pending in court.
The was later referred to an arbitrator who in January 2022, declared Macharia’s rivals the majority shareholders, holding 90.336 per cent of the company’s shares while the Royal Media Services owner held 9.66 per cent shares in the underwriter.
The arbitrator also found that Macharia and his group had unlawfully taken possession of the company’s premises at Hazina Towers and other shareholders from the company.
The other shareholders defended the arbitral proceedings saying they were conducted in accordance with the provisions of Section 19 of the Arbitration Act.
They contended that their attempts to effect a handover of the company’s premises were met with resistance, threats, and obstruction, including attempts at physical intimidation.
The court further heard that Macharia had mismanaging the company by removing records, failing to settle claims, exposing the company to execution proceedings amounting to approximately Sh1 billion.
They urged the court to allow them enforce the award, arguing the company will continue suffering.
The court said the allegations of bias were unsubstantiated, and there was no basis for nullifying the decision.
“In the premise, this Court is satisfied that the impugned Partial Arbitral Award is valid and enforceable pursuant to the provisions of Section 36 of the Arbitration Act and to the extent of the Correcting Memorandum dated 8th June 2022,” said the court allowing the majority shareholders to enforce the decision.
Whereas Macharia sought to quash the award, his rivals pleaded with the court to recognise the same and allow them to enforce the decision.
“Given the said circumstances, this Court is satisfied that the Arbitral Tribunal was properly constituted, and its assumption of jurisdiction cannot be impeached at this stage outside the statutory framework,” said the court.
The court added that Macharia was making an attempt to re-open and re-litigate issues conclusively determined by the arbitration Tribunal.
“This court cannot therefore entertain claims of factual or legal error by the Arbitrator or interfere with such findings,” said the court.
Directline was established in 1998 with shareholding split among AKA Investments Ltd (48 per cent), Janus Ltd (32 percent), and Royal Media Services Ltd (20 per cent).
Macharia argued that the company’s Articles of Association contained a pre-emption Clause requiring existing shareholders to be given priority before shares could be transferred to outsiders.
He submitted that from 2007, his late son John Gichia Macharia and Janice Theresa Wanjiku Kiarie excluded them from management and falsely claimed that their shares were held in trust for Macharia without any formal declarations.
In 2005, the shareholders were Royal Credit Limited with 997 shares (0.01 per cent shareholding), Macharia, Purity Macharia and Karobia, one share each (0.000008 per cent, each), and AKM Investments Ltd 4,978,108 shares (40.6 per cent).
Janus Limited 2,318,738 (20 per cent), Royal Media Services Limited 1,448,212 (11.83 percent), Triple A Capital ltd 3,500,000 (28.58 per cent).
A company registry document (CR12) dated February 12, 2023, showed that AKM Investment held 10.36 per cent, Stenny Investments (in trust for AKM) held 20 per cent,
Triad Networks Limited and Sureinvest Limited each held 20 per cent, Janus Limited (20 per cent), SK Macharia (0.0000000067 per cent), Purity Macharia (0.0000000067 per cent), Royal Media (9.7 per cent), Royal Credit Ltd (0.0066 per cent), and the late Dan Karobia (0.0000000067 per cent).
Macharia challenged the arbitrator’s finding arguing that he was biased and lacked impartiality, and that he denied them a fair hearing.
He also contended that he improperly redefined the parties and issues before him, and disregarded objections and pending court applications.
He said he participated in the proceedings under protest.
The court, however, noted that he filed written submissions and adduced evidence and that the arbitral issued procedural directions applicable to all the parties before it.
