Fresh Thinking Webinar on Data Protection: Overview of the Regulations Concerning Data Protection in Kenya

Posted on July 28th, 2021

Fresh Thinking Webinar on Data Protection

Posted on July 23rd, 2021

Way to Go: Exhaustion of Alternative Remedies and Exceptional Circumstances in Judicial Review

Posted on May 31st, 2021

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Historically, the basis of judicial review in Kenya was derived from the Law Reform Act (Cap. 26) Laws of Kenya and Order 53 of the Civil Procedure Rules, 2010 as better developed by case law on the area. On this basis, judicial review was limited to ensuring compliance by administrative bodies with the principles of proportionality, legitimate expectation and reasonableness in the carrying out of their functions.

However, the promulgation of the Constitution of Kenya, 2010 (the Constitution) brought with it Article 47 which expressly provides for the right to fair administrative action that is expeditious, efficient, lawful, reasonable and procedurally fair. In operationalising Article 47, Parliament subsequently enacted the Fair Administrative Action Act, 2015 (the FAAA). The FAAA has transformed judicial review in Kenya by expanding its scope from a review of the decisions of only public entities or administrative bodies, to include any person, body or authority which exercises a judicial or quasi-judicial function.

In this article we shall look at section 9 of the FAAA, which provides for the procedural aspect of judicial review applications by delineating the circumstances under which one may institute such proceedings. We will then examine the exceptional circumstances that might allow a party to bypass a prescribed statutory remedy and pursue a judicial review remedy through Court instead.

Statutory Remedies

Section 9 (1) of the FAAA provides that a person aggrieved by an administrative action may apply for judicial review of such a decision in the High Court or a subordinate court upon which original jurisdiction is conferred pursuant to Article 22 (3) of the Constitution. However, section 9 (2) of the FAAA limits this avenue of redress by providing a specific threshold to be satisfied whereby administrative action is only subject to judicial review if alternative mechanisms (including internal mechanisms for appeal or review), as well all remedies available under any other written law, are first exhausted.

Section 9 (2) of the FAAA may be viewed as a codification of the doctrine of exhaustion of administrative remedies. In applying the said doctrine, the Court of Appeal in the case of Geoffrey Muthinja & another v Samuel Muguna Henry & 1756 others (2015) eKLR, stated that the requirement is in conformity with Article 159 of the Constitution as it encourages the use of alternative dispute resolution. Of note was the Court’s holding that:

“It is imperative that where a dispute resolution mechanism exists outside Courts, the same be exhausted before the jurisdiction of the Courts is invoked. Courts ought to be the fora of last resort and not the first port of call the moment a storm brews… as is bound to happen. The exhaustion doctrine is a sound one and serves the purpose of ensuring that there is a postponement of judicial consideration of matters to ensure that a party is first of all diligent in the protection of his own interest within the mechanisms in place for resolution outside of Courts.”

For the above reason, a Court before which an application for judicial review is placed often satisfies itself, before seizing jurisdiction, that the parties seeking its intervention have first exhausted the prescribed statutory mechanisms for redress. In the case of Aly Khan Satchu v Capital Markets Authority (2019) eKLR, the High Court (Mativo, J) quashed the decision of the Capital Markets Tribunal on the basis inter alia, that the Tribunal that rendered the impugned decision was not properly constituted and that the applicant had not satisfied the ecxceptional circumstances requirement under section 9 (4) of the FAAA. Further, in recognizing that the Capital Markets Act (Cap. 485A) Laws of Kenya, provides for an express dispute resolution mechanism, the Court remitted the dispute back to a properly constituted Capital Markets Tribunal.

It is noteworthy that a person aggrieved by the decision of an administrative body prescribed by statute to hear a dispute has recourse to pursue redress in the High Court, either as a consequence of a provision of the statute providing for an appellate procedure to the

High Court, or in exercise of the Constitutional right of access to justice. An appeal procedure under statute ordinarily clothes the High Court with appellate jurisdiction which is often confined to determining the propriety of both the decision making process as well as a limited review of the merits of the decision itself.

It is also important to note that administrative bodies created under statute are intended to be constituted by persons who are specially trained or have knowledge in the field in question. This ensures that any grievance arising under the statute is heard by persons who are uniquely qualified to handle the issues at hand and who have the ability to foresee the implications of any decision made.

Exceptional Circumstances

In order to address unique and peculiar circumstances, the Courts have recognised exceptions to the doctrine of exhaustion of remedies, which exceptions are also provided for under the FAAA. Section 9 (4) of the FAAA provides that in exceptional circumstances, and on application by a party, the Court may exempt such party from the obligation of exhausting alternative remedies if the Court considers such exemption to be in the interest of justice. The exceptional circumstances are not outlined in the Act, thus leaving the Courts to exercise their discretion when faced with an application for exemption.

The High Court in the case of Krystalline Salt Limited v Kenya Revenue Authority (2019) eKLR expressed its view on the definition of “exceptional circumstances” as follows:

What constitutes exceptional circumstances depends on the facts and circumstances of the case and the nature of the administrative action at issue. Thus, where an internal remedy would not be effective and/ or where its pursuit would be futile, a court may permit a litigant to approach the court directly. So too where an internal appellate tribunal has developed a rigid policy which renders exhaustion futile.

The Fair Administrative Action Act does not define ‘exceptional circumstances’. However, this court interprets exceptional circumstances to mean circumstances that are out of the ordinary and that render it inappropriate for the court to require an applicant first to pursue the available internal remedies. The circumstances must in other words be such as to require the immediate intervention of the court rather than to resort to the applicable internal remedy.”

In Republic v Council for Legal Education ex parte Desmond Tutu Owuoth (2019) eKLR, the High Court went further to state that in determining whether an exception to internal remedies should be granted in allowing parties to institute judicial review proceedings, the Court must look at whether the internal appeal mechanism available to a party under statute would serve the ends of justice. The Court had previously stated that the doctrine of exhaustion of remedies would not be applied where a party may not have an audience before the forum created, or the party may not have the quality of audience before the forum created which would be proportionate to the interests the party wishes to advance within the suit.

Therefore, a Court is obliged to look at whether the dispute resolution mechanism established under the statute in question is competent in the circumstances of the case to serve the interests of justice, or whether it warrants a party applying for an exemption from the doctrine of exhaustion of remedies.

Of interest, when faced with an application under section 9 (4) of the FAAA, the Courts have looked at the practicality and efficacy of the statutory remedies as well as the nature of the issue at hand when making their decision. For instance, in the case of Republic v Kenya Revenue Authority ex parte Style Industries Limited (2019) eKLR, the Court held that it would grant exemption where it would be impractical to make an application to the administrative body.

For example, where the issue at hand is legal in nature and thus ought to be decided by the Courts rather than an administrative body, the Court would grant the exemption.

Upshot

Our review of case law reveals that parties tend to institute judicial review proceedings in Court for a variety of reasons. It may be that the statutory body that ought to hear the dispute at hand has not been constituted, and yet the dispute is time sensitive in nature, or the nature of the complaint is such that the statutory body cannot render an effective, impartial or dispassionate decision.

However, the downside of pursuing judicial review remedies through Court action is the comparatively longer time that Courts take to hear and determine matters. Another downturn is the fact that judicial review proceedings are restrictive, and save for exceptions, the Courts have been reluctant to delve into a review of the merits of the decision, placing the focus more on the propriety of the decision making process itself.

Delving Deeper: Supreme Court Affirms Dual Enforcement and Investigatory Mandates of the Capital Markets Authority

Posted on May 31st, 2021

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In Issue 12 of our Newsletter published in August 2020, we featured an article on the powers and role of the Capital Markets Authority (the Authority) which concluded that the Authority is empowered to take robust administrative action in combating insider trading, albeit obligated to adhere to the principles of natural justice, the Fair Administrative Action Act, 2015 and the Constitution, while doing so. We also highlighted the appeal processes provided in the Capital Markets Act (the Act) which are to ensure that there are sufficient corrective mechanisms to mitigate and safeguard against any potential excesses or errors that the Authority might make in the carrying out of its mandate.

In this edition we consider a recent decision of the Supreme Court of Kenya in the case of Alnashir Popat & 7 Others v Capital Markets Authority (2020) eKLR, in which the Supreme Court considered the inquisitorial and enforcement mandate of the Authority.

The Authority’s Inquisitorial and Enforcement Mandate

The Act provides for the inquisitorial powers of the Authority by mandating it to inquire into the affairs of persons it has granted a licence or an approval to, and any public company whose securities are publicly traded or offered on an approved securities market or over the counter market. The Authority may also appoint an auditor to investigate the affairs of any collective investment scheme or public company whose securities are publicly offered or traded on an approved securities exchange or on an over-the-counter market. The Authority’s inquisitorial mandate exists contemporaneously with an enforcement mandate, which ordinarily comes into play after the inquisitorial stage. To this end, the Authority may impose sanctions, give directions, and trace assets of persons it has found to have engaged in fraudulent dealings or insider trading. The Act empowers the Authority to order the placing of caveats against the title to assets or prohibit suspected persons from operating their bank accounts pending the determination of charges that the Authority may have levelled against them. The Authority may also have recourse against any person whose act or omission has resulted in a payment from the Compensation Fund established under the Act to compensate investors who suffer losses due to the failure of a licensed broker or dealer to meet its contractual obligations.

The Imperial Bank Matter

Alnashir Popat & 7 Others v Capital Markets Authority concerned a corporate bond issued by Imperial Bank Limited (now in receivership) (the Bank) that had been approved by the Authority. Things took a grim turn when the Bank’s Managing Director, Mr. Janmohamed, collapsed and died. After his passing, the Acting Managing Director and his deputy revealed to the non-executive Chairman of the Bank’s Board, Mr. Popat (one of the Petitioners in the case) that the deceased had authorised many illegal disbursements of vast amounts of the Bank’s monies in transactions that were concealed from the Central Bank of Kenya (CBK) and the Bank’s Board.

Mr. Popat then moved the Board to appoint a consultant to carry out a forensic audit of the Bank’s financial affairs and report on its accurate financial position. The Board authorised this and also resolved not to utilise the corporate bond issue pending the outcome of the investigations by the consultant. The consultant’s report confirmed the assertions made by the Acting Managing Director and is deputy, and that the Bank had incurred losses running into billions of shillings. The Board reported the matter to the CBK, which on 13th October 2015, placed the Bank under receivership and appointed the Kenya Deposit Insurance Corporation as the Bank’s receiver manager for a period of twelve (12) months. A moratorium was also placed on the Bank.

On this same day, the Authority instructed the Nairobi Securities Exchange not to proceed with the listing of the Bank’s bond issue until further notice. The Authority then decided to inquire into the circumstances prevailing in the Bank during the bond application and approval period to determine whether the Petitioners, i.e. the directors of the Bank, had contravened regulatory requirements. On 6th May 2016, the Respondent served the Petitioners with notices to show cause and required them to respond within fourteen (14) days to various allegations of negligence in the discharge of their mandate as directors of the Bank. The Petitioners were summoned to appear before the Authority’s Board on 24th May 2016 to answer those allegations. However, the hearing did not proceed as the Petitioners filed a Petition before the High Court challenging the proceedings before the Authority.

Proceedings before the High Court and Court of Appeal

In the High Court, the Petitioners challenged the propriety of the Authority’s conduct of the enquiry. The main argument that the Petitioners made was that the Authority, having approved the bond issue, and certain officers, including the Chairman of the Board, having conducted the preliminary enquiry, was conflicted and could not be impartial in the enforcement proceedings. The Petitioners consequently sought an order of certiorari to quash the notices to show cause.

The High Court noted the Authority’s dual inquisitorial and enforcement mandate and the fact that it had considered and approved the bond issue. It found that a well informed and fair-minded observer, given all the facts, would conclude that there existed a possibility of bias on the part of the Authority against the Petitioners. The High Court quashed the notices to show cause as prayed, holding that since the Authority’s regulatory mandate would not be hampered as under Section 11A of the Act, it could delegate its functions to an independent body.

The Authority appealed this decision to the Court of Appeal, the outcome of which was a finding that the overlapping inquisitorial and enforcement functions of the Authority are expressly authorised in the Act. Therefore, the Authority was expected to make unprejudiced judgment on matters it had investigated. The Court of Appeal allowed the appeal and clarified that the Authority was at liberty to continue with the administrative proceedings it had commenced against the Petitioners.

Supreme Court Decision

The Petitioners petitioned the Supreme Court pursuant to Article 163 (4) (a) of the Constitution which provides that appeals shall lie from the Court of Appeal to the Supreme Court as of right in any case involving the interpretation or application of the Constitution. On this basis, the live issues before the Court were whether the overlapping roles that the Act vests in the Authority constitute a violation of the Constitution and whether the Respondent’s attempted enforcement proceedings were or were likely to be biased against the Petitioners.

The apex Court held that whereas the dual roles were not unconstitutional per se, the manner of discharging the dual mandate is what might turn out to be unconstitutional. The Court reasoned that the for the purpose of efficiency and in carrying out the objectives of the Act i.e. expeditious disposal of disputes that arise in the operations of the capital markets, the functions of enforcement and investigation could not be performed by separate bodies. However, when it came to judicial and quasi-judicial proceeding that are likely to adversely affect the rights of the persons or bodies under investigation, the Authority was obligated to comply with the requirements of impartiality and independence under Articles 50 (1) and 47 of the Constitution. The Court noted that the Authority’s power to delegate its functions and powers to other bodies or persons would enable it to fulfil the objectives of the Act while complying with the constitutional requirements of impartiality and independence.

On the issue of bias, the Court held that there was a possibility of bias in the case. It reasoned that the Authority had approved the corporate bond issue and thereafter it emerged that the management of the Bank had been running a scheme of fraudulent disbursements leading to losses in the billions of shillings. As this was a matter that the Authority probably ought to have discovered when conducting due diligence on the bond issue, it would cast aspersions on the Authority’s diligence. Therefore, the Court held that the Authority was unlikely to approach the proceedings with the impartiality appropriate for that decision.

The Court allowed the appeal to the extent that the Authority could proceed with its enforcement proceedings against the petitioners through its delegated authority under section 11A (1) or section 14 (1) of the Act.

The Position in Canada

The case of Brosseau v Alberta Securities Commission (1989) 1 SCR 301 illustrates the Canadian position on the issue of the dual investigative and enforcement mandate of an administrative body. In this case, Brosseau, a solicitor, prepared the prospectus of a company that later became insolvent. The Respondent, who had approved the prospectus of the company, investigated the company to deter[1]mine whether the Appellants should be subject to a cease trading order and deprived them of certain exemptions provided by the Canadian Securities Act.

n the hearing before the Alberta Securities Commission, the Appellants sought an order that the Commission did not have jurisdiction to hold a hearing against them. The Commission ruled that it had jurisdiction and directed that the hearing proceed. Aggrieved by this decision, the Appellants lodged an appeal with the Alberta Court of Appeal which was unsuccessful. The Appellant then lodged an appeal with the Alberta Supreme Court.

The Alberta Supreme Court found that the relevant statute permitted the Commission to be involved in both the investigatory and adjudicatory functions, which does not by itself, give rise to a reasonable apprehension of bias. The reasoning given is that securities commissions, by their nature, undertake several different functions. They would therefore have repeated dealings with the same parties. The Court held that it is not enough to merely claim bias because a Commission, in undertaking its preliminary internal review, did not act like a Court. If it is clear from its empowering legislation that certain activities which might otherwise be considered “biased” formed an integral part of its operations and the Commission has not acted outside its statutory authority, the doctrine of reasonable apprehension of bias cannot be sustained. Therefore, this ground of appeal was dismissed.

The position in Canada is thus similar to that prevailing in Kenya as highlighted by the reasoning of the Kenyan Supreme Court in Alnashir Popat & 7 Others v Capital Markets Authority, which concurred with the Alberta Supreme Court in Brosseau v. Alberta Securities Commission.

Yes, I Agree: A Guidance Note on Consent in Relation to Data Protection

Posted on May 31st, 2021

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Introduction

In today’s world, there is exponential growth in the dissemination of personal data by the average person. From registering a mobile phone number, applying for a job opportunity, enrolling in a course, or creating a social media account, the sharing of personal data is as inevitable as it is pervasive. The increasing need for data sharing raises concern over whether the data gathered is always used in a proper and lawful manner.

To effectively address this concern, the Data Protection Act, 2019 (the Act) was passed into law. The Act provides for an obligation on the person who determines the purpose and means of processing data (Data Controller) and the person who processes data (Data Processor) to obtain consent from the person to whom the personal data relates (Data Subject) prior to obtaining and processing data.

Definition of Consent

Consent is only considered lawful when the Data Subject is offered a genuine opportunity to accept or decline the terms offered for the processing of his personal data. To that end, section 2 of the Act defines consent as any express, freely given, specific, informed indication by a Data Subject that he or she wishes for their personal data to be processed in a certain manner.

That express agreement may be given by a statement or a clear affirmative action. This definition brings out four elements of consent:

a. Choice

The Data Subject should be given a genuine choice and control over the use of their data. This is actioned by allowing them to refuse the consent without any detriment and being able to withdraw their consent easily once consent has already been given. Further, consent should not be bundled up as a condition of service unless it is necessary for that service, otherwise it will not be deemed as freely given. Any undue influence and pressure put upon the Data Subject to provide his or her consent invalidates the consent.

b. Specificity

There must not be any room for doubt as to whether the Data Subject was sufficiently informed. The request for consent should be separate from other terms and conditions, communicated clearly, simply and in plain language.

Consents should be reviewed and refreshed as necessary where purposes or processing activities evolve. Informed consent also covers the issue of capacity, where it is assumed that adults have the capacity to consent unless there is reason to believe the contrary.

The Data Subject must be informed of all circumstances surrounding the data processing including which data is to be processed, the duration, manner and specific purposes of processing, as well as its consequences. They must also know who is processing the data, whether the data will be transferred to third parties, the consequences of refusing consent, as well as whether consenting to the data processing is a condition for concluding the contract.

To ensure that specific and informed consent has been obtained, the Data Controllers and Data Processors should provide the following information as a bare minimum:

  • The name of the Data Controller, Data Processor and each of the third parties who will rely on the consent
  • The purposes of processing the data. Separate consents should be obtained for each processing purpose as the notion of ‘evolving consent’ does not exist
  • Separate consents should be obtained for each processing activity unless those activities are clearly interdependent
  • Details of the right to withdraw consent at any time

c. Express

Express consent refers to a clear oral or written statement confirming the granting of consent.

Where consent has been obtained orally, a record of the script should be kept. In no circumstance would an implied consent inferred through actions be deemed to be express, even if the said actions are apparent enough to satisfy the basic definition of consent. The same must be confirmed in words.

d. Affirmative

This is an obvious indication that a Data Subject has consented to their personal data being processed and in the manner it is being processed. However, the United Kingdom’s Information Commissioner’s Office published a guidance on consent in which it confirmed that affirmative action leaves room for implied methods of consent. The guidance gives the example of an individual dropping a business card into a prize draw box at a coffee shop. Though implied, it is a clear indication that the Data Subject agrees to their personal data being processed solely for the purposes of the prize draw.

Nevertheless, affirmative action is required to establish consent and it can be achieved by a deliberate and specific action agreeing or “opting-in” to processing. This could include signing a consent statement, selecting from equally prominent yes/no options, responding to an email requesting consent or ticking a box on paper or electronically.

Silence or a failure to “opt out” is not consent as it does not involve clear affirmative action. The Court of Justice of the European Union (the CJEU) recently delivered Judgment in Bundesverband der Verbraucherzentralen und Verbraucherverbande – Verbraucherzentrale Bundesverband eV v Planet49 (2020) 1 WLR 2248 a case which provided further clarity regarding the validity of a consent where a Data Subject failed to opt out. The case was brought to the CJEU against Planet49, an online gaming company that hosted a promotional lottery on its website. The website had consent checkboxes for use of personal data. Among the checkboxes provided, was one to obtain consent for use of web analytics cookies for the purposes of providing targeted ads to the Data Subject, which was pre-ticked. The issue for determination was whether a pre-ticked checkbox constituted valid consent.

In its Judgment, the CJEU held that there was no valid consent for the following reasons:

  1. access to information already stored in the data subject’s terminal equipment was permitted by way of a pre-ticked checkbox
  2. the data subject needed to deselect to refuse his consent which does not show active behaviour on the part of the data subject
  3. the consent was given not separately but at the same time as confirmation in the participation in an online lottery

The CJEU also considered whether the consent was specific and informed and noted that the duration of the operation of cookies and whether or not third parties may have access to those cookies must be provided.

Conditions for Consent

It ought to be borne in mind that a Data Controller or Data Processor bears the burden of proving that they obtained a Data Subject’s consent for the use of their personal data for a specified purpose.

Further, the Data Subject has the right to withdraw his or her consent at any time. Such withdrawal shall not affect the lawfulness of processing based on prior consent before his or her withdrawal.

In order to determine whether consent was freely given, it will be considered whether the consent was provided such that, performance of a contract or provision of a service was conditional on the consent and further whether, the consent was truly necessary for the performance of that contract or service.

It is noteworthy that a Data Controller and a Data Processor should be consistent in their application of a lawful basis over another. For example, when investigating the validity of consent obtained, they cannot retrospectively utilise another lawful and favourable basis as

envisaged in section 30 of the Act to justify the processing of data.

In addition, obtaining consent does not diminish the Data Controller’s or Data Processor’s obligations to observe the principles of processing data with regard to fairness, necessity and data quality. It is therefore important for Data Processors and Data Controllers to determine the most appropriate legal ground for processing personal data prior to obtaining the said data.

Consent by Children

Section 33 of the Act provides that a Data Controller or Data Processor shall incorporate appropriate mechanisms for age verification and only process data relating to a child where consent is given by the child’s parent or legal guardian.

Recording and Managing Consent

Records of consent should be kept and retained for as long as the data is being processed based on the consent, so that compliance with the accountability obligations under the Act is demonstrated.

Records can include who consented, what they consented to, what they were told at the time, how they consented and whether consent has been withdrawn. In the event the consent has been withdrawn, the retention of personal data shall be permitted if it is strictly necessary for putting forward or defending a legal claim in accordance with the Act.

Additionally, consents should be kept under review. As stated above, evolving consents do not exist and as such data processors and data controllers are expected to refresh consents at appropriate intervals as the purpose or processing activity evolves or changes.

Conclusion

In ending, we reiterate that it is crucial for Data Controllers and Data Processors to review and update their internal processes for obtaining, storing, and using personal data as the Act has placed an enormous burden on them to prove the legality of their said processes, especially with regard to validity of consent. In this regard, the office of the Data Commissioner has issued a guidance note on the subject, which should be referred to when navigating the issue of consent under the Act.

‘Ad-Sense’: Thoughts on Direct Digital Marketing and Data Protection in the Information Age

Posted on May 31st, 2021

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The rise of the information age has forced businesses to re-evaluate their modes of carrying on business with a key shift in advertising. Advertising is no longer the dominant way to pay for information and culture. What previously was the purview of corporate logic has been replaced by algorithms and informational architecture meant to create a personalised experience for the user. In the heightened noise of marketing, with all fighting for the user’s attention, the temptation to directly engage the user with a targeted and personal advertisement is understandable, yet such engagement often comes at the risk of violating the user’s right to privacy. In this article, we explore ways through which a business can navigate these murky waters and strike a balance between respecting a customer’s right to privacy whilst creating an effective and satisfactory user experience through direct marketing.

Direct Digital Marketing: The Basics

Hamman and Papaodulos define direct digital marketing (DDM) as a system of marketing where the marketer communicates directly with the intended customer over a medium, with the expectation that such interaction will elicit a measured response, often positive. Whereas traditional direct marketing can take various forms such as the use of fliers, DDM involves the use of a digital medium such as a mobile phone, e-mail, television, or web-based platforms for the direct or indirect purpose of promoting a good or a service. Practically, this can take the form of Short Message Services (SMS) alerts sent to a person informing them of the latest offers in a particular restaurant or email alerts notifying a user of an ongoing promotion in a department store.

In Kenya, an attempt to codify the meaning of DDM has been made under regulation 13 of the Draft Data Protection (General) Regulations, 2021 (the Draft Regulations) which are still under consideration. Regulation 13 stipulates that a data processor or controller will be deemed to have used data for commercial purposes where they send a catalogue through any medium which addresses a data subject; display an advertisement on an online media site where a data subject is logged on using their personal data relating to the website the data subject has viewed – this includes the use of data collected by cookies to target users; send an electronic message to a data subject about a sale or other advertising material relating to a sale, using personal data provided by a data subject.

The foregoing definition of DDM casts a wide net as to the possible forms of DDM that may be used by advertisers in marketing. This includes covert methods of targeting audiences such as the use of cookies and data analytics to determine the age, gender and sites visited by a data subject for the purposes of determining which forms of advertisements should be displayed to the user, as well as overt methods such as the use of SMS to target a data subject.

It is critical to note that under the Draft Regulations, a person will not be considered to have utilised a data subject’s personal data for DDM purposes, where the personal data is not used or disclosed to identify or target particular recipients. For instance, the use of data analytics by a data processor or controller for the purposes of estimating the content most viewed by users, or the resources a user sought when using an organisation’s website, would not qualify as DDM. However, should the organisation proceed to either use personal data collected from an analytical review of their website, such as one’s age and gender to then target the user during their next visit to the organisation’s website or to sell that data to an advertiser, then such use would effectively qualify as DDM thus calling for the application of the Data Protection Act, 2019 (DPA).

The Risk

For DDM to be successful, marketers need to address a target audience. To accomplish this, marketers will ordinarily require large volumes of personal data thus the crux of direct marketing. This is premised on the fact that most of the data sought by marketers is often of a personal nature such as details of a person’s name, age, gender, residence, purchase habits or preferences. In most instances, this data is likely to be collected from a consumer’s interaction with the concerned entity or platform. DDM may however present a risk to a marketer, where the marketer obtains a consumer’s personal data without their consent. An example would be the collection of one’s phone number by a hotel while booking one’s accommodation where the hotel uses such information to send promotional messages on their discounted rates, without disclosing to the customer that they intended to use the customer’s phone number for that purpose. As innocuous as such collection, storage and subsequent use might seem, it presents a real legal risk to the enterprise. To begin with, such collection would be a violation of a data subject’s rights under section 26 (1) (a) of the DPA which provides that a data subject has the right to be informed of the use to which their personal data is to be put. Further, these actions would constitute a violation of section 30 (1) of the DPA which prohibits the processing of a data subject’s personal data without their consent. In addition to this, the resultant storage and use of a customer’s data in the example above would be in further breach of the DPA which prohibits the use and storage of personal data without obtaining a data subject’s consent. As such, the enterprise is likely to incur liability for breaching the user’s right to privacy thereby exposing the business to the risk of lawsuits and regulatory fines. The unlawful disclosure of personal data constitutes an offence under the section 72 (1) of the DPA and upon conviction, one would be liable to a fine not exceeding KES 3,000,000 (USD 30,000) or to a term of imprisonment not exceeding ten (10) years or both.

Solutions

a. Obtain consent

Businesses that intend to adopt a DDM strategy should obtain consent from their intended audience before carrying out any advertising campaign. This obligation is founded on the provisions of section 30 (1) of the DPA which imposes the obligation to obtain a data subject’s consent before processing any data upon a data controller or data processor. The above position is further bolstered by the provisions of regulation 14 (1) of the Draft Regulations which sets out the instances in which commercial use of personal data other than sensitive data may be permitted.

Under regulation 14 (1), a data controller or processor would be permitted to use personal data if they meet five (5) conditions. Firstly, the data controller or processor must have collected the personal data sought to be used from the data subject. Secondly, the data subject must be notified that direct marketing is one of the purposes for which the data has been collected. Additionally, the data subject must have consented to such use of their personal data. Further, the data controller or processor must provide an opt-out mechanism for the data subject to not receive the DDM communications.

Generally, opt-out mechanisms allow a data subject to withdraw their consent from the use of their personal data in DDM. Practically, this may be in the form of an unsubscribe button. To effect this, regulation 15 (1) of the Draft Regulations prescribes the features that should accompany an opt-out mechanism. First, opt-out mechanisms must have a visible, clear, and easily understandable explanation of how to opt-out, such as instructions written in simple language and in a font size that is easy to read. Also, opt-out mechanisms must use a simplified process for opting-out that requires minimal time and effort. In addition, opt-out mechanisms must provide a direct and accessible communication channel and be free or involve not more than a nominal cost to a data subject. Finally, the data subject must have not made an opt-out request at the time of the collection, use and/or processing of the data.

b. Use the data obtained for a limited purpose

The obligations of a business entity are not strictly limited to lawfully obtaining data. A business must also ensure that they use the data obtained for the purpose for which it was acquired. Where the initial purpose for which personal data was obtained changes, a data controller may still use the data, subject to obtaining consent from the data subject for the changed use. This is in line with regulation 5 (3) of the Draft Regulations which provides that where the data controller or processor intends to use personal data for a new purpose, it shall ensure that the new purpose is compatible with the initial purpose. For instance, if a business collects a customer’s phone number for the purposes of determining whether payment made through a mobile money payment platform has been effected, the same number should not be used to send out promotional messages. To use such data for a purpose which is not intrinsic to the root purpose would constitute a violation of the data subject’s rights under section 26 of the DPA.

c. Respect the data subject’s rights

A data subject has a right under section 26 (c) of the DPA to object to the processing of their personal data. Examples of this include the sending of SMSs to specific codes calling for the cessation of promotional marketing messages or the clicking of an unsubscribe button on email marketing. It is critical to note that once a customer has objected to the processing of their data, then, any subsequent use of such data becomes unlawful, and the marketer runs the risk of incurring liability for such use. For this reason, once a customer objects to the use and or processing of their data, a business is obliged to comply with the same and cannot continue to use the customer’s data.

d. Adopt data protection by design in devising DDM Strategies

The use of DDM as a marketing strategy involves the collection and subsequent storage of data. Therefore, a business which seeks to adopt DDM must at the very core ensure that its technical and organisational measures are designed at all times to implement the data protection principles in an effective manner and integrate necessary safeguards for the purposes of processing. The above obligation is consistent with the provisions of section 41 (2) of the DPA, which mandates data processors and data controllers to adopt technical and operational measures that implement the data protection principles at the time of determining the means of processing the data and at the time of processing data. Failure to adopt technical and organisational measures that ensure data protection by design, may expose the business to a data breach and potential legal liability. It is thus important for a business to ensure that the technical and operational measures adopted comply with this principle.

e. Notify the data subject in case of breach

If a data breach occurs, the business must first notify the data subject of the breach, the nature of data lost, and the intended remedial action taken up to prevent further loss of data. This obligation is imposed by section 43 (1) (b) of the DPA which mandates a data controller to notify a data subject of any unauthorised access or risk of unauthorised access to the data subject within forty-eight (48) hours. Such notification not only serves to alert the data subject of the expected loss of personal data, but also allows the data subject to take on remedial actions as an end-user such as changing or updating their credentials, which can stave off the worst of attacks.

In conclusion, the use of DDM, whilst a viable and useful method of reaching and engaging with one’s clientele, is often laden with the risk of violating a customer’s right to privacy. To avoid such risk, businesses are advised to adopt a DDM strategy that is alive to the target’s right to privacy and data protection duties and obligations.

Going Paperless: Advent of Digital Land Transactions Systems in Kenya

Posted on May 31st, 2021

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In tandem with the advent of the digital age, states and organisations are moving to adopt modern, open, data-centric and digitally enabled operations and systems. These systems offer many benefits both to the public and private sector including efficiency, cost-saving and convenience. It is on this premise that there is a distinct transition from manual to paperless and digitised records and systems.

Kenya has not been left behind. The Ministry of Lands and Physical Planning (the Ministry) has recognized the need to embark on its own transformative journey. As such, the Ministry has embarked on an initiative to digitise the Registry and the introduction of electronic land transactions systems. This initiative has been named the National Land Information Management System (the NLIMS) which we highlight in this article.

We also highlight the key features of the conversion process under the Sectional Properties Act No. 21 of 2020 (the SPA), an Act which has far-reaching effects on land ownership for developments such as apartments, units and offices.

The Digitisation of Land Records

NLIMS is a digitised land records system aimed at improving service delivery for the general public in relation to land transactions. NLIMS’ objective, as pronounced by the Ministry, is to enhance efficiency, transparency and security of land records, while reducing land transaction costs and opportunities for fraud. This digitised system is set to go hand-in-hand with the other land management developments, creating a platform for the smooth transitioning of other proposed mechanisms.

Legislative Background

The recent milestones in the development of a digitised land registration framework are anchored in various laws and statutes as stipulated below:

a. The Constitution of Kenya, 2010

The Constitution of Kenya, 2010, at Chapter Five deals with matters relating to land and the environment. Article 60 of the Constitution provides that land in Kenya shall be held, used and managed in a manner that is equitable, efficient, productive and sustainable, in accordance with principles such as sustainable and productive management of land resources and transparent and cost-effective administration of land.

b. Land Act, 2012

Pursuant to section 6 (h) of the Land Act, 2012 the Cabinet Secretary is empowered to co-ordinate the development and implementation of a National Land Information System, in collaboration with the National Land Commission. This section has ushered in the advent of the digitised records at the Registry through a contemplated “one-stop shop’’ system.

c. Land Registration Act, 2012

The Land Registration Act, 2012 (LRA) at section 54 (5), aims at streamlining land administrative processes. It stipulates that the Registrar shall register long-term leases and issue certificates of lease over apartments, flats, maisonettes, town houses or offices having the effect of conferring ownership, if the property comprised is properly geo-referenced and approved by the statutory body responsible for the survey of land.

d. Sectional Properties Act, 2020

The SPA at section 13 (2), provides that all long-term sub-leases that are intended to confer ownership of an apartment, flat, maisonette, town house or an office that were registered before the commencement of the SPA, shall be reviewed to conform to section 54 (5) of the LRA highlighted above.

e. Land Registration (Electronic Transactions)

Regulations, 2020

The Land Registration (Electronic Transactions) Regulations, gazetted in July 2020 (the Regulations), provide the framework for the roll-out of an electronic land transactions system. The Regulations provide for the conduct of searches on an electronic system, valuation for payment of stamp duty online and registration of interests in land on the electronic land register. The Regulations also make provision for the execution of instruments using electronic signatures by parties.

The Conversion of Units

In a bid to harmonise legislative provisions specifically in the LRA and SPA, the Ministry is spearheading various initiatives including the conversion of titles. This is being undertaken by replacing old land reference numbers with new title numbers, created under newly established land registration units. The conversion process is set to unify the land registration systems, while conforming to sustainable land management principles.

In this regard, on 7th May 2021, the Ministry issued a Notice (the Notice) stating that it would work towards the conversion of longterm leases registered based on architectural drawings to conform to section 54 (5) of the LRA. The Notice also provides that the Ministry shall no longer register long-term leases supported by architectural drawings to confer ownership. Additionally, registration will be premised on a sectional plan with the property being geo-referenced and approved by the Director of Surveys. We shall keep abreast with any developments on this Notice post publication of this edition of the Newsletter and shall issue further insights on the same as and when necessary.

Sectional Property

Some eight (8) years since the enactment of the land laws in 2012, the newly enacted SPA has come into force, replacing the earlier Sectional Properties Act of 1987. The enactment of the SPA was intended to align registration of sectional properties with current land legislation, noting that the Registered Land Act (Cap. 300) Laws of Kenya (RLA), which substantively governed sectional units under the 1987 statute, was repealed. The SPA has not departed significantly from the RLA. However, the SPA emphasises the aim of regulating and providing for the division of buildings into units that can be owned by individuals, while providing for the use and management of common property. Some of the salient features introduced by the new SPA include:

a. Unexpired Residue of the Term on the Title

The SPA provides that it shall only apply in relation to land that is held on freehold or leasehold title with a residual term of not less than twenty-one (21) years, with an intention to confer ownership.

b. Conversion of Units and Issuance of Certificates of Lease

Where sub-leases intended to confer ownership of an apartment, flat, maisonette, town house or an office and were registered before the commencement of the SPA, the said sub-leases shall be reviewed in order to conform with the provisions of the LRA to the extent that the property is geo-referenced and approved by the Director of Surveys, in order to issue Certificates of Lease within a period of two (2) years.

c. Closure of Old Registers

The SPA also provides that the Registrar shall close the registers made under the Certificate of Title/Lease and register the sectional plan in a sectional plan register. The Registrar shall proceed to open new registers depending on the nature of interest that was in the Title/Lease that was submitted.

d. Restriction of Use and Density

The SPA also introduces restrictions on the by-laws of a corporation under the statute from materially changing the use or density of the common property, without the approval of the relevant county government.

e. Dispute Resolution Mechanisms

The SPA provides for both internal dispute resolution mechanisms through a Dispute Resolution Committee (DRC) and recourse to the Environment and Land Court (ELC) on appeal from the DRC’s decision.

Procedure for Conversion

With regard to the process to be followed for conversion, firstly, all sectional plans submitted for registration will need to be geo-referenced; to indicate the parcel plans, the number identifying the unit, the approximate floor area of each unit, and the user of the units.

Thereafter, the plans must be signed by the proprietor, signed and sealed by the Director of Surveys, registered and a Certificate of Title/Lease issued for each unit.

For purposes of conversion of already registered long-term sub-leases, the owners of the property will be required to submit the following documents at the Registry:

  • A sectional plan
  • The original title document (i.e. head title)
  • The long-term lease previously registering the unit
  • The rent apportionment for the unit

The Registrar may dispense with the production of the original title, if the developer is unwilling or is unavailable to surrender the title for the purposes of conversion. Upon submission of the above, the sectional plan will be registered and the original register closed. A new register will thereafter be opened for each unit, with a registered sectional plan. Finally, a Certificate of Lease shall be issued.

Way Forward

We note that digitisation of land records does not come without its fair share of challenges. Not only does the adoption of technology pose a major challenge due to a cultural heritage of “paper filing”, but several rules and regulations still require approval by the relevant state agencies, to effectively implement a digitised system. Further, the digitalisation of any record management systems including that of land, requires security features that would guarantee the security of land records and boost public confidence.

Moreover, in spite of the developments, there are various concerns around the conversion process. Some aspects of the conversion procedure for instance remain unclear, while the Conversion Guide issued by the Ministry does not exhaustively address the concerns. In this regard, it is noted that the draft Sectional Property Regulations (currently undergoing stakeholder consultation) are under consideration. The Regulations, once promulgated, are set to provide clarity on the processes and documentation required for the conversion process. Until then, stakeholders and the general public remain in the dark on some of the procedures prescribed in the SPA.

Nonetheless, the Ministry must be applauded for the significant steps it has made towards the realisation of an effective land management system, as contemplated under the Constitution. It is the hope of Kenyans that the next steps taken by the Ministry will accelerate and improve the ongoing digital transformation with effective stakeholder participation, to ensure that all views are taken into account.

9 to 5?: Examining The Pros and Cons of Part-Time Employment

Posted on May 31st, 2021

By Georgina Ogalo-Omondi | Rosemary Chepkorir | Hellen Mutua

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The early 1990s saw a transformation in the Kenyan labour market with the marked rise in part-time and casual workers. This was brought about by efforts to cut labour costs since casual and part-time workers were thought to be ineligible to employment benefits as compared to full-time employees. The trend continues to date, more so in the wake of the Covid-19 pandemic which has wreaked havoc on the global and national economy and is set to continue doing so. It is therefore an appropriate time to consider the nature and meaning of part-time employment; the advantages and disadvantages it offers to both employers and employees alike; and the prevailing law on part-time employment.

What is Part-time Employment?

The International Labour Organization Part-Time Work Convention, 1994 (the Convention) defines a part-time worker as an employed person whose normal hours of work are less than those of comparable full-time workers. Locally, the term “normal” working hours is not defined in the Employment Act, 2007 (the Act) making it difficult to define a part-time worker. The Act confers power on employers to regulate employees’ working hours in line with their contract of service but does not expressly state the maximum working hours of an employee.

Rule 5 of the Regulation of Wages (General) Order which constitute the regulations under the Labour Institutions Act, 2007 provides that the normal working week shall constitute a maximum of fifty-two (52) hours spread out over six (6) days of a calendar week. It further provides that the normal working week of a person doing night work should be not more than sixty (60) hours per work week. While this rule provides the law on maximum working hours, nothing is stated about normal working hours or the threshold from which part-time work begins. This is despite part-time workers constituting a significant number of the workforce in Kenya. Foreign legislations are known to provide a threshold under which an employee is considered to be working part time, which should stand as a challenge to the Kenyan Parliament to define normal working hours as well as to provide clarity in matters concerning part-time employees.

Pros and Cons of Part-time Work to Employees

Whilst most employees would opt to be employed on a full-time basis, some are forced to take the part-time work route for diverse reasons. However, it is important to note that part-time work offers certain advantages to employees. First, it can be a suitable learning process for a young person hoping to gain clarity as to which field they should pursue a career in. It also allows people with other pressing commitments to take up work in a flexible manner. This proves to be a viable option for students who ordinarily attend classes as well as primary care givers who have to take care of their loved ones at home.

Part-time work also has its disadvantages considering that it is perceived to be a cost cutting measure for employers meaning that such employees often do not enjoy the employment benefits that full-time employees do. These include health benefits, provision of food, water and housing, paid leave and set out procedure during termination and dismissal. Further, part-time workers often do not get the full protection of the Act as accorded to full-time employees, hence providing a platform for employers to exert greater control over them. This is more so because such employees are not unionisable given the temporary nature of their work. For these reasons, most employees tend to seek full time employment as the employment benefits, legislative protection and ability to join a union contribute towards greater stability and security at work.

Pros and Cons of Part-time Work to Employers

Offering part-time employment is an attractive option to employers because of the cost cutting opportunities it presents owing to the fact that part-time workers are considered to be ineligible for employee benefits. Furthermore, employers can exert greater control over the labour force since the employees are not unionisable. In addition to the above, hiring and dismissing part-time workers does not require the procedural rigmarole that is envisaged under the Act.

From the employers’ perspective, more so those that require less skilled labour, there are no pitfalls in hiring part-time employees. For those that require highly skilled employees such as universities when hiring lecturers, there is need to consider the cost of high employee turnover especially where the employees find better terms elsewhere. Suffice to state, recruitment and training processes for highly skilled employees, whether employed on a part time of full-time basis tend to be costly.

Rights of Part-time Employees under the Convention

From the above exposition, Kenyan labour legislation does not provide for part-time employees. Therefore, Kenyan Courts tend to look to the Convention to determine the meaning of part-time work and the rights of such workers. This is the practice despite the fact that Kenya has not ratified the Convention.

The Convention largely treats part-time employees the same way it does full-time employees. It engenders the view that the only difference between part-time and full-time employees should be in the pay they receive. To this end, the Convention states that part-time workers have the right to unionize and are entitled to the conditions that full-time employees are entitled to. This includes maternity/paternity leave, sick leave, paid annual leave and public holidays, and procedural fairness when it comes to termination of employment. The Convention also proffers voluntary transition from full-time to part-time work arrangements on the part of employees. This is to prevent such employees from being relegated to part-time status against their will. Taking the approach of the Convention, part-time employees ought to be treated as full-time employees and be entitled to the full benefits that come with such status. If the hours worked is all that separates full-time and part-time employees, then it is only just to accord them the same rights and benefits.

Kenyan Jurisprudence

The Act defines an employee as a person employed for wages or a salary and includes an apprentice and indentured learner. It does not go on to differentiate between full-time and part-time employees but makes reference to the type of work employees undertake using the terms “piece-work” and “task.” Piece-work is defined as any work that an employee does and is paid according to the amount of work performed irrespective of the time occupied in its performance. On the other hand, a task is defined as such amount of work as can, in the opinion of an authorised officer, be performed by an employee in an ordinary working day.

These definitions are only used to define how an employee is to be paid. For a task, they are to be paid on a quantum meruit basis, i.e. for the portion of the task that has been done as at the time their pay is due. For piece-work, employees are to be paid in proportion to the amount of work they have done that month or when they complete the work, whichever is earlier. Notably, in both cases the worker is identified as an employee, and not a casual worker. This means that they are entitled to the full benefits and conditions of work that employees are entitled to.

In Valentine Ataka v Karatina University (2019) eKLR, the claimant, a lecturer employed on a part-time basis, sought to be paid his dues as per the oral contract of employment he had entered with the respondent. The Court found that he was indeed a part-time employee at the university as per the contract and performed work that was in the nature of piece work even though the employer defined the periods within which he was to do his work. The Court considered the provisions of the Convention in making a finding that the employee was indeed a part-time employee but did not consider the rights of such employees as the issue did not arise. The Court ordered the respondent to pay the claimant his dues for the work he had done.

In Peterson Guto Ondieki v Kisii University (2020) eKLR, the claimant, who was a lecturer, sought among other prayers, that the Court compel the respondent to engage him on a full-time basis as a permanent employee as he was being treated differently compared to his colleagues. His claim for discrimination was met with the defence that he was a part-time lecturer and therefore could not expect to be treated the same way as full-time lecturers. Further, the Court cited the freedom of contract that allowed employers and employees to agree on the terms and conditions of employment. The position of a part-time worker in Kenya was not explored nor the attendant rights. However, the Court cited the Act’s protections and provisions without distinguishing the position of the employee as a part-time worker.

Lastly, in Simon Ndungu Kabau v Hillock Country Club (2014) eKLR, the Court considered a claim alleging unlawful termination seeking terminal dues and certificate of service, among others. One of the issues that the Court considered is whether the claimant was a part-time employee as the respondent had claimed. The Court considered the hours that the employee worked to determine this issue. On finding that it was common ground that the employee worked forty (40) hours a week, the Court held that the claimant was a full-time employee and proceeded to apply the protections outlined in the Act for employees.

From the jurisprudence above, Kenyan legislation remains unclear as to the definition and the rights of part-time employee. It could therefore be argued that since the Act does not differentiate employees on this basis, part-time employees should be treated the same as full-time employees, with the difference between them being the salary paid. In addition to the above, the maximum working hours as stated in the foregoing, is fifty-two (52) hours in a six (6) days’ work week, presents the need for Parliament to clearly set out the working hours that constitute part-time work.

Parting Shot

Part-time employees are only differentiated from full-time employees in that the former work for comparatively lesser hours. Kenya has neither defined the work-hour threshold that differentiates the two nor the rights of such employees. Part-time work offers advantages and disadvantages for both employees and employers, which both should consider carefully before entering into an employment contract. Whilst the Convention treats full-time and part-time employees the same with a difference in salary, the Act is silent on their position, leaving the labour market to treat them largely as casual workers. Notably, Courts have also not offered express guidance on the rights of part-time employees as against full-time employees. The ball is therefore in the Kenyan Parliament’s court; to adopt the Convention and provide clarity as to the status of part-time work and the rights of such workers.

Analyse This: An Overview of the Recently Published Credit Reference Bureau Regulations

Posted on September 21st, 2020

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A Credit Reference Bureau (CRB) is an entity that gathers past and current credit information on customers of financial institutions such as banks, microfinance institutions, saving and co-operative societies, analyses the information and generates reports on the credit standing of those individuals.

The Cabinet Secretary for the National Treasury and Planning promulgated the CRB Regulations on 8th April 2020 (the new Regulations), pursuant to section 31(3) of the Banking Act (Cap. 488) Laws of Kenya. The new Regulations repealed previous Regulations published in 2013. The new Regulations provide a framework for sharing customers’ credit information and seek to enhance the protection of borrowers.

The Central Bank of Kenya (CBK) advised that the new Regulations were developed through a consultative process that lasted about two (2) years, with one of the key objectives being to strengthen Kenya’s Credit Information Sharing System (CIS) which has been operational since 2010.

Registering a CRB Business
In order to operate a CRB business in Kenya, the company must obtain a licence from the CBK. The application should be submitted in the prescribed form together with supporting documents. These documents include the company registration documents, sworn declarations of the proposed officials, the company’s audited financial statements for the last three (3) years and a prototype of the credit report. The application must be accompanied by a non-refundable fee of KES 10,000 (USD 100).

Since CRBs are expected to handle vital financial information, a site inspection of the applicant’s premises may also be conducted. This is intended to enable the CBK to determine the adequacy of the applicant’s safety and security systems. The application for a licence should be determined by the CBK within ninety (90) days from the date of receipt of all the required information.

Once a licence is issued, a CRB is required to submit to the CBK an irrevocable Bank Guarantee for KES 1,000,000 (USD 10,000). The guarantee may be used by the CBK to recover penalties that may be imposed on the CRB from time to time, and which the CRB does not settle as and when required. Whenever such recovery is made from the guarantee, the CBK shall notify the CRB, which is required to furnish the CBK with a new guarantee within thirty (30) days of the notification.

It is important to note that a CRB licence is non-transferable to third-parties. Further, the holder of the licence is required to renew it annually on or before the 31st of December each year.

Information Sharing
Previously, there were complaints by disgruntled members of the public who had been blacklisted for loans they had never taken or had cleared a long ago. With this in mind, CRBs are now obligated to ensure that customer information is obtained from credible and verifiable sources and is accurate. The new Regulations seek to achieve these objectives by several means.

First, a CRB must undertake a due diligence and suitability assessment on any third-party information provider it seeks to engage. This exercise should unravel the nature and character of the third-party’s ownership, business, soundness of the third-party’s information management system and the accuracy and integrity of the third-party’s information records. A CRB should not engage a third-party whose information is based on estimates.

Secondly, a CRB must seek approval of the CBK, in order to obtain or disseminate information obtained from a third-party or is publicly available. Such information includes information from government registries, licensing authorities, county governments or the Kenya Revenue Authority (KRA). This approval is necessary given that some information in public offices may not be up to date or the records may be missing or misplaced.

Where public information is obtained, the CRB is required to undertake measures to confirm the information’s accuracy and authenticity from an independent source with direct knowledge of the information, prior to including it in a report. Similarly, where information relates to Court proceedings, the CRB is required to verify the accuracy of the information not more than twenty-one (21) days before the information is included in the report. This is to ensure that such information is both accurate and current.

Thirdly, all customer information shall be submitted to CRBs with such identification details as would enable them link a customer to all transactions with another person or persons. Where incomplete or inaccurate information is submitted to a CRB, the CBK may impose a penalty on the financial institution or third-party, as it may consider appropriate.

Lastly, the officials of CRBs, financial institutions or third-party credit information providers are under a perpetual duty of confidentiality as regards information that may be exchanged between the parties pursuant to the Regulations. The duty is indeterminate as it extends beyond the persons’ tenure of employment or association of any of the parties. Moreover, any unauthorized disclosure of information amounts to a criminal offence.

Reporting Requirements
The new Regulations also impose strict reporting requirements on CRBs, in terms of which information may or may not be held or disclosed. In this regard, a CRB should not include in its database or credit report, information concerning a customer’s race, belief, colour, ethnic origin, religion, political affiliation, sexual orientation, physical and mental handicaps, state of health or medical information. This is to prevent the CRB’s clients from developing any bias when processing loan applications from their customers. However, noting that Shar’iah compliant products usually infuse the Islamic religion to commerce, the above restriction does not apply to them.

A credit score may be computed in such a manner as the CBK may specify. Every report is required to contain the credit score of the person to whom the information relates and a customer’s credit score should not solely be used to deny the customer a facility. However, it is one of factors to be considered in arriving at the decision. A credit appraisal by an institution integrating the customer’s credit score is required to be in writing and to be provided to the customer as part of its notification to the customer.

Customer Safeguards
The new Regulations have included some progressive provisions, to safeguard a customer’s interest in the exchange of information between concerned parties. For example, a third-party must obtain its customer’s written consent before furnishing a CRB with the customer’s credit information.

Moreover, where an institution intends to submit negative credit information to a CRB, it should furnish the customer with thirty (30) days’ written notice or such a shorter notice as the contract between
the institution and the customer may provide.

A CRB should not charge for any first application by a customer for a clearance certificate. Further, a customer has a right to access his/her credit report free of charge from a CRB in any of the following cases:

  • Once a year
  • Within thirty (30) days of receiving an adverse action notice
  • Once every six (6) months after requesting the CRB to correct inaccurate information

Finally, a minimum threshold has been introduced in the regulations, to the effect that a CRB shall not receive from any third-party a report on any negative credit information involving a customer where the value of the subject matter is less than KES 1,000 (USD 10). This is an important safeguard for customers, as it will ensure only relevant information is exchanged and considered in the credit evaluation.

Offences
As is often said, “with great power comes great responsibility”. Since CRBs are at the epicenter of a network handling sensitive customer information, the law has established some offences related to the mishandling of such information.

Such offences include the unauthorised disclosure of information by a director, member, officer or other employee of a CRB or subscriber, where the penalty upon conviction is a fine of KES 500,000 (USD 5,000) or two (2) years imprisonment or both.

Failure by a CRB to comply with any of its responsibilities under the new Regulations is also punishable upon conviction through a fine of KES 500,000 (USD 5,000) or such other sanction as might be issued by the CBK.

The denial of a customer of a credit facility or other financial service solely on the basis of a credit score is also proscribed at the penal consequence upon conviction of a fine of KES 2,000,000 (USD 20,000) or such other sanctions as might be prescribed by law.

Failure to comply with the requirements governing the cross-border sharing of information attracts a potentially heavy penalty, upon conviction, of a fine of up to KES 10,000,000 (USD 100,000) together with such other sanction as the CBK might prescribe.

Conclusion
CRBs have been previously accused of misusing sensitive or confidential information of Kenyans. They include the questionable blacklisting of persons as uncreditworthy, even where loans have been long paid, thereby denying such persons financing. Other complaints have centered around the materiality of debt, as some people with minimal loan balances have also found themselves listed by these organizations.

The new Regulations have clearly demonstrated the government’s attempt to sanitize the industry, whether in terms of heavily regulating information circulation, relevance or materiality of information in CRB reports or the creation of offences in the event of a CRB’s non-compliance. Apart from penal sanctions, CRBs also run the risk of losing their licences in the event of contravention of the new Regulations. This will hopefully tilt the balance of power in favour of customers, as the dissemination of their sensitive information will going forward be undertaken by CRBs under strict protocols.

It is also important to note that all information held by a CRB is the property of the CBK. Upon the CRB’s winding up or cessation of operations, the information shall revert to the CBK. This guarantees the safety of customer information, so that it is at all times safeguarded from access by unauthorized persons.

The More, the Wiser: Empanelment of Extraordinary Benches in the Court Of Appeal

Posted on September 21st, 2020

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Empanelment of a bench of judges refers to the administrative action of appointing several judges, to preside over a case or to hear an appeal. In the Court of Appeal empanelment of a bench would entail appointing an uneven number of judges being not less than three (3) in number, to hear and determine the matter either through a unanimous decision or by way a majority decision.

Section 13 (1) (b) of the Court of Appeal (Organization and Administration) Act, 2015 provides the President of the Court of Appeal is “…responsible for the allocation of cases and the constitution of benches, including ordinary and extraordinary benches, of the Court” amongst other functions. The Act does not define what an extraordinary bench is but from the meaning of the word extraordinary, it is taken to mean that the Court would be constituted in a unique, unusual or exceptional manner i.e. in a numerically greater coram than usual. This was remarked upon by the President of the Court of Appeal, Justice Ouko (P), in the case of Multichoice (Kenya) Ltd v Wananchi Group (Kenya) Limited & 2 Others (2020) eKLR:

“The Act does not define what extraordinary benches are but, in my assessment, these would not be the usual benches of one judge (in chambers) or three in open Court, but of a number greater than these provided that the number is odd.”

Whereas section 5 (3) of the Appellate Jurisdiction Act (Cap. 9) Laws of Kenya provides for making of rules for the purposes of “fixing the numbers of judges who may sit for any purpose”, this provision has not been taken advantage of and no such rules have ever been made. In the circumstances, empanelment of appellate benches (whether ordinary or extraordinary) has come to be matter of practice, rather than procedural rule, and is a function carried out by the President of the Court. This observation is well captured in the aforementioned case of Multichoice (Kenya) Ltd v Wananchi Group (Kenya) Limited:

“Though the Rules Committee is empowered under section 5 (3) (i) of the Appellate Jurisdiction Act to make rules to fix the number of judges of the Court comprising an uneven number not being less than three, no such rules, unfortunately have been made. So that, apart from section 5 (3) (i) and the general provisions in section 13 (1) (b) of the Court of Appeal (Organization and Administration) Act, the empanelling of benches has been a matter of practice and not rules of procedure.”

In the Multichoice (Kenya) Ltd v Wananchi Group (Kenya) Limited case, Justice Ouko took a walk down memory lane and re-traced the practice of empanelment of a five-judge (or extraordinary) bench, pointing out that the power to empanel a five-judge bench rested with the President of the Court, while the process could be initiated either through an oral application made by a party before a three judge bench, or through a formal letter to the President of the Court:

“I take advantage of this appeal to, briefly outline…the correct practice and the proper circumstances for constituting a bench of more than three judges in this Court because the long-held practice appears to have been lost along the way. In the past it was the function of the President of the Court (in the years 1954 to 1977 when the predecessor of the Court had President) or the Presiding Judge in the years immediately preceding the promulgation of the 2010 Constitution, to constitute such benches. Today acting on an oral application, a three-judge bench would direct that the President of the Court constitutes an enlarged bench…Sometimes, in response to mail from advocates, the Presiding Judge or President would empanel the bench. As way back in history as 1954, it was recognized by the predecessor of this Court…that the role of empanelling a five-Judge bench rested with the President of the Court.”

Having touched upon the process and means through which an extraordinary bench might be empanelled, we turn now to consider the grounds or basis upon which such empanelment might be made.

Departure from Previous Decisions
One of the grounds upon which one may request for the empanelment of an extraordinary bench would be where one would be asking the Court to depart from one or more of its previous decisions i.e. potentially upsetting precedent, in recognition of the fact that while the Court should abide by the doctrine of precedent, it is nevertheless free in both civil and criminal cases to depart from previous decisions, when it is right to do so.

In the case of Income Tax v T (1974) EA 549, Justice Spry (Ag. P) explained as follows —being a reiteration of an earlier decision of the Court of Appeal in PHR Poole v R (1960) EA 63:

“A full Court of Appeal has no greater powers than a division of the Court; but if it is to be contended that there are grounds, upon which the Court could act, for departing from a previous decision of the Court, it is obviously desirable that a matter should, if practicable, be considered by a bench of five judges.”

Review of Conflicting Decisions
Closely related to a situation where the Court is directly asked to depart from a previous decision, (not previously thought to be wrong), is where the Court has unwittingly given varying opinions on a matter. Whilst the Court is not bound by its previous decision, the doctrine of stare decisis calls for deference to precedent, while conflicting decisions on the same issue necessarily means that one school of thought is wrong.

Thus, while stating that the “strengthening of the normal bench of three by two more heads” was desirable when the Court was called upon to review inconsistent decisions, the Court of Appeal rendered itself as follows in Eric V. J. Makokha & 4 Others v Lawrence Sagini & 2 Other (1994) eKLR

“Some muted but not impolite observation was made about the numerical composition of the Court by the applicant’s counsel but the breadth and sophistication of the submissions made to us for four whole days, justified the strengthening of the normal bench of three by two more heads. Because of the hierarchical structure of the Court, it is also the practice adopted to review inconsistent decisions of this Court.”

Substantial Question of Law
The Constitution does not define what a substantial question of law is (it may well be argued that any question of law is substantial), but Justice Majanja attempted a definition in the case of Harrison Kinyanjui v Attorney General & Another (2012) eKLR, where he held that:

“…the meaning of ‘substantial question’ must take into account the provisions of the Constitution as a whole and the need to dispense justice without delay particularly given specific fact situation. In other words, each case must be considered on its merits by the judge certifying the matter. It must also be remembered that each High Court judge, has authority under Article 165 of the Constitution, to determine any matter that is within the jurisdiction of the High Court. Further, and notwithstanding the provisions of Article 165(4), the decision of a three Judge bench is of equal force to that of a single judge exercising the same jurisdiction. A single judge deciding a matter is not obliged to follow a decision of the Court delivered by three judges.”

In Santosh Hazari v Purushottam Tiwari (2001) 3 SCC 179, the Supreme Court of India summarized the question of whether a matter raises a substantial question of law as follows:

  • directly or indirectly, it affects substantial rights of the parties
  • the question is of general public importance
  • it is an open question, in that the issue has not previously been settled by the Court
  • the issue is not free from difficulty
  • it calls for a discussion for alternative view

The above considerations shed some light as to what would amount to “a substantial question of law” for the purposes of empanelment of an extraordinary bench. As Justice Odunga succinctly stated in Wycliffe Ambetsa Oparanya & 2 Others v Director of Public Prosecutions & Another (2016) eKLR:

“…a Court seized with the question as to whether or not an extraordinary bench is required may also consider whether the matter is moot in the sense that the matter raises a novel point; whether the matter is complex; whether the matter by its nature requires a substantial amount of time to be disposed of; the effect of the prayers sought in the petition and the level of public interest generated by the petition.”

Upshot
There is no doubting the juridical benefit derived from drawing upon the collective wisdom, experience and understanding of an increased number of judicial heads put together, where the circumstances call for the same. It is a recourse that perhaps the Rules Committee of the Court of Appeal might make readily available by promulgating the Rules envisaged under section 5 (3) of the Appellate Jurisdiction Act, which would stipulate the procedure and grounds for the empanelment of an extraordinary bench.

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