The High Court has struck out a case filed by shareholders of collapsed lender Chase Bank accusing audit firm Deloitte & Touche Kenya of professional negligence.
Justice David Majanja ruled that the shareholders had no case against the audit firm because the contract was between the lender and auditor and not the shareholders.
The judge also said a claim on breach of statutory duty is time-bound and ought to have been filed by 2019.
The shareholders including Rinascimento Global Ltd, One Rina Ltd, Trustees of the Employee Ownership programme (ESOP) and 12 others filed the case in December 2021 accusing Deloitte & Touche Kenya of professional negligence, which they said occasioned them loss and damage.
The shareholders challenged the manner in which Deloitte and Touche conducted the audit of the bank for the year 2015.
“As regards the claim against the Defendant, I hold that insofar as the Plaintiff's claim against the Defendant is grounded on contract, there is no privity of contract between the Plaintiffs and the Defendant. That the claim based on tort or breach of statutory duty is barred by the statute of limitations as I have demonstrated,” the judge said.
The audit firm was fined by the Capital Markets Authority last year, over the failure to detect a non-existent Sh2.1 billion Chase Bank account at the central bank that enticed bond investors to offer the collapsed lender billions.
The shareholders said in the case that they have a valid claim that they need to pursue against the audit firm.
They further argued that the appointment of a receiver manager for purposes of acquisition of assets of Chase Bank was a death sentence to it, and an absurd act on the part of the Central Bank of Kenya and the liquidator.
The liquidator of Chase Bank, the Kenya Deposit Insurance Corporation opposed the case and asked the court to strike out the matter arguing the shareholders cannot institute a court case without its consent.
The judge agreed, saying the liquidator was correct to point out that under section 55(1)(o) of the KDIA, only the Liquidator has the power to sue on behalf of an institution in liquidation.
Justice Majanja said the shareholders cannot therefore appropriate Chase Bank’s name to pursue the audit firm.
The audit firm also opposed the case and argued that any loss or damage which the shareholders may have suffered is reflective of the loss or damage which Chase Bank may have suffered.
The court heard that to allow the shareholders to sue in respect of the same alleged actionable wrongs as Chase Bank is suing on would be to allow double recovery.
