Coulson Harney IP Partner Dragged to Court by MMC Africa in Multi-Million Shilling Partnership Dispute

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This blogger has recently come across the case of Edward Muriu Kamau & 4 others all trading as Muriu, Mungai & Co. Advocates v John Syekei Nyandieka [2014] in which Muriu, Mungai & Co. Advocates (MMC Africa) asked the Court to appoint a single Arbitrator to hear and determine a dispute between the firm and one of its former partners, John Syekei who is now Partner and Head of Intellectual Property (IP) at Coulson Harney Advocates (CH). The court however declined to appoint an Arbitrator and directed both parties to submit a nominee to the Chairman of the Institute of Arbitrators, who in turn will consider the candidacy of the nominees and appoint a sole arbitrator from the list submitted by the parties. A copy of the ruling is available here.

According to MMC Africa, it offered partnership to Syekei vide a Partnership Deed dated 1st July, 2009. The partnership offer of 5% shares in the Firm was on account of Syekei’s expertise and personal achievement in the area of IP. Syekei accepted the offer and executed the Deed on executed on 7th July, 2009. On 4th March, 2010, MMC Africa claims that Syekei resigned from the Partnership with immediate effect, contrary to the Deed which required that any outgoing Partner should give adequate notice and precluded an outgoing Partner from soliciting business from the firm’s clients for a period of six (6) months. MMC Africa contends that Syekei in breach of these provisions, solicited the Firm’s clients while planning his departure; refused to hand over his portfolio or work after resignation; interfered with the Firm’s information and technology system; and further to this, induced two of the Firm’s employees to also resign and join his prospective employer.

Syekei denies MMC Africa’s assertions claiming that the latter grossly misrepresented the value of the Firm at Kshs 500 Million. As result of this representation, Syekei accepted the Firm’s offer of 5% shares believing it would be equivalent to Kshs 25 Million, which according to the Deed would be paid from the profit pool made by the Firm on a quarterly basis. However Syekei avers that the Firm did not make good its intention of deducting Syekei’s share of the profit to go towards the purchase of his shares. More fundamentally, Syekei contends that he was only permitted to inspect the audited partnership accounts of the Firm for the years 2005, 2006 and 2007 after signing the Partnership Deed, wherein he learnt that the Firm had declared losses in 2005 and 2006; and made a profit of slightly more than Kshs. 600,000/=. According to Syekei, this discovery of the Firm’s state of affairs was clearly at variance with the representation made to him that the Firm was valued at Kshs. 500,000,000. Syekei contended he was unhappy with the running of the firm and decided to resign however the partners of the Firm declined him from serving the contractual period as per the Deed. It was also Syekei’s contention that he did not induce any staff of the Firm to leave employment and that any such employee left the Firm out of his or her own volition.

In light of the above, both parties agreed that, according the signed Deed, any dispute arising between the Partners, including any outgoing Partner, about the Partnership or its accounts or transaction would be submitted to arbitration. However the parties bitterly disagree on the qualifications of the arbitrator, with MMC Africa preferring the arbitrator to be a senior advocate and Syekei insisting the arbitrator be a seasoned auditor or accountant.

In arriving at its ruling, the court finds as follows:

“The tone and pitch of the submissions show this is a hotly contested matter. (…) A dispute has been declared and no party says anything to the contrary. The sole arbitrator who was appointed resigned or withdrew or better still, declined appointment for good reason. So no party is in default here. This application may not, therefore, strictly speaking be said to be one arising out of the procedure under section 12(5) and (7) of the Arbitration Act. I think, in the circumstances of this case, the dispute being between the Partners, and is about the Partnership or its accounts or transactions, the Arbitrator should be nominated on the request of any Partner by the Chairman for the time being of the Institute of Arbitrators and according to the provisions of the Arbitration Act.”

This blogger submits that this on-going partnership dispute between CH’s IP Partner and MMC Africa will have ripple effects on private legal practice in Kenya as a whole and IP practice in particular. We will be closely following the developments in this case.

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