Linkham Services Limited, the majority shareholder of the collapsed insurance firm Resolution, has been ordered to enter an appearance and defend itself in court.
In what was a first win for Peter Nduati, the founder of Resolution, the court dismissed an application by Linkham to have the dispute resolved through arbitration.
Mr Nduati filed the case seeking to compel Linkham to settle an outstanding balance of $6 million (Sh800 million at current exchange rates), arguing that the alleged default contributed to the insurer’s capital weakness and ultimate collapse in April last year.
“In view of the foregoing, I hold that clause 15.5 of the Share Purchase Agreement (SPA) was exclusionary to clauses 15.2 and 15.3 thereof,” said Justice Alfred Mabeya.
“Accordingly, to the extent that the suit is only for specific performance and injunction, this court has jurisdiction and there need be no reference to arbitration. In the premises, I find that the application is without basis and dismiss the same with costs. The defendants are to enter appearance and deliver their defences as provided for by law.”
The judge noted that since the suit was for specific performance and injunction, the court has jurisdiction to handle the matter and there was no need for the matter to be referred to arbitration.
Mr Nduati claimed that Linkham, under the directorship of Dominic Persad and Michael Cranfield, had failed to pay for the 55 percent stake that it bought in Resolution in 2020.
In response, Linkham brought an application against Mr Nduati and his investment vehicle Pine Creek Limited seeking that the court proceedings be terminated in favour of arbitration.
Linkham told the court that they did not need to file their defence statements or their memorandum of appearance and other pleadings until the arbitral proceedings were concluded.
Linkham said the Share Purchase Agreement of 2020 provided that any disputes arising from the transaction would be resolved through negotiations and if negotiations failed arbitration.
Mr Nduati meanwhile told the court that Linkham had failed to fulfil its duties and obligations under the SPA despite receiving their shares in Resolution Insurance.
Linkham Services was expected to pay the money after purchasing the shares from LeapFrog which had acquired the shares in 2014.
This, he said, compelled him to go to court to get an order for specific performance compelling Linkham to meet their end of the bargain in the SPA and a mandatory injunction compelling the buyer “to assess and settle all outstanding accounts of the interested party [Resolution].”
Mr Nduati also told the court that in clause 15.5 of the SPA, the parties were allowed to seek specific performance orders or injunctive orders and this rendered the arbitration proceedings inoperative.
