[2022] KEHC 12195 (KLR)

B & K Design Limited v Njeri & another (Civil Case 73 of 2014) [2022] KEHC 12195 (KLR) (Commercial and Tax) (5 May 2022) (Judgment)

Neutral citation: [2022] KEHC 12195 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Civil Case 73 of 2014

WA Okwany, J

May 5, 2022

Between

B & K Design Limited

Plaintiff

and

Emmaculate Mwaura Njeri

1st Defendant

Chase Bank Kenya Limited

2nd Defendant

Judgment

1. The plaintiff herein, B & K Design Limited, instituted this suit through the plaint dated February 26, 2014 and amended on August 21, 2015 seeking judgment against the defendants as follows: -a.An injunction do issue restraining the defendants their servants, agents and/or those operating under them from interfering and/or meddling with the affairs and running of the plaintiff’s company pending the hearing and determination of this suit.b.General damages.c.Special Damages of kshs 5,430,412. d.Any other amount credited to bank account number 001268285002. e.Cost and interest of the suit.f.Any other further relief that this honourable court may deem fit to grant.

Plaintiffs case 2. The plaintiff is a limited liability company incorporated under the Companies Act chapter 486 Laws of Kenya and is engaged in interior design, interior fit outs and interior decor works.

3. The plaintiff avers that its initial shareholders were Jamlick Butali Simiyu and Stephen Kanja Waigi holding 500 shares and 495 shares respectively but that the company altered its shareholding to include the 1st defendant and one Wanja Gikonyo. The plaintiff states that it appointed the 1st defendant as its director pursuant to a resolution made on May 26, 2011 but that the plaintiff resigned from her directorship position in June 2012 and that she also ceased to be a signatory to the company’s bank accounts even though she retained her shareholding in the company.

4. The plaintiff’s case is that the 1st defendant wrote to the plaintiffs bankers requesting them to stop honouring the company’s transactions thereby blocking the plaintiff’s access to its accounts. The plaintiff claims that the 1st defendant, fraudulently and without the plaintiff’s consent, opened a parallel company bank account where she is the sole signatory. The plaintiff contended that the 1st defendant’s act, of opening a parallel bank account after her retirement, was fraudulent. The company faulted the 1st defendant for diverting the sum of kshs 5,430,412 to the parallel bank account.

1st Defendant’s case 5. Through her statement of defence dated May 23, 2016, the 1st defendant denied the allegation that she voluntarily resigned from her position of a director of the plaintiff company or that differences between her and her co- director/estranged husband triggered the purported change in the bank account mandate. She states that she still holds the position of a director of the company and denies the claim that her actions resulted in the plaintiff’s inability to access its bank accounts.

6. The 1st defendant further denies the allegation that she solely opened a parallel bank account with the 2nd defendant in the plaintiffs name adds adds that the said account number 00xxxxx5002 (hereinafter “the 2nd account”) was opened in August 2013 with the full knowledge, participation of her estranged husband Mr Jamlick Butali Simiyu in their capacity as directors. She states that the opening of the said bank account was not unlawful or fraudulent and did not interfere with the smooth operation of the plaintiff company.

7. At the hearing of the case, the 1st defendant reiterated the contents of her defence and adopted her witness statement as her evidence in chief. She also produced the list of documents dated February 7, 2020. nd in August 2013 to ease its operations and added that the board resolution ratifying the opening of the said account was in the 2nd defendant’s custody. She confirmed that she had the mandate to operate the 2nd account and that the company utilized the money withdrawn from the said account for its business operations.On cross-examination, she testified that the plaintiff opened the 2

The 2nd defendant’s case 8. The 2nd defendant filed a statement of defence dated December 8, 2015 wherein it states that the 2nd account was opened following the plaintiff’s board resolution. It was the 2nd defendant’s case that the plaintiff authorized the 1st defendant to open the 2nd account in order to ease its operations.

9. The 2nd defendant maintained that it was not informed of 1st defendant’s alleged resignation. The 2nd defendant did not call any witnesses at the hearing of the case.

Analysis and determination 10. I have carefully considered the pleadings, the oral and documentary evidence adduced during the hearing together with the parties’ respective submissions. The main issues for determination are: -a.Whether the bank account A/C 001xxxx002 was opened fraudulently without the plaintiff’s instructions.b.Whether the 1st defendant fraudulently transferred the sum of kshs 5,430. 412 to the parallel bank account.

11. The plaintiff submitted that the 1st defendant did not have its authority to open and operate the 2nd account after her resignation as director.

12. In a rejoinder, the 1st defendant argued that she did not resign as a director of the Company and that she opened the 2nd account together with her husband and co-director Mr Jamlick Butali Simiyu.

13. Section 107 of the Evidence Act stipulates as follows regarding burden of proof in civil cases: -“107. (1)Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.(2)When a person is bound to prove the existence of any fact it is said that the burden of proof lies on that person.”

14. The plaintiff produced a letter dated June 11, 2012 to support its claim that the 1st defendant resigned from her position as the company’s director. A perusal of the said letter reveals that it was signed by 1st defendant. The 1st defendant did not challenge the authenticity of the said letter or claim that it was a forgery.

15. The general rule is that parties are bound by their signatures. I am guided by the decision in Josephine Mwikali Kikenya vs Omar Abdalla Kombo & Another [2018] eKLR, wherein it was held thus: -“The general rule is that a party of full age and understanding is normally bound by his signature to a document, whether he reads it or not. See Levison Vs Patent Steam Carpet Cleaning Co Ltd [1977] 3 All ER 498. Putting it another way, he is estopped by his/her signature thereon from denying his consent to be bound by the provisions/terms contained in that document.”

16. In light of the holding in the above-cited case, I find that the 1st defendant cannot disown the signature she appended on the resignation letter dated June 11, 2012. The question that begs an answer is whether, following her resignation as a director, the 1st defendant automatically ceased to be a signatory to the plaintiff’s accounts. In other words, did the plaintiff inform the 2nd defendant of the 1st defendant’s resignation as director? Was the resignation actualized through changes in the registrar of companies records?

17. I have perused the 2nd defendant’s account opening forms dated October 4, 2012 that were produced in the 1st defendants list of documents. The forms indicate that the account’s signatories are the 1st defendant herein and Jamlick Butali Mwaura. I note that the signing instructions indicate that ‘any two to sign jointly’. I also note that according to the registrar of companies official records (CR12), the directors of the company are listed as the 1st defendant and Jamlick Butali Simiyu.

18. This court is therefore at a loss as to how the 1st defendant could have signed the account opening forms in October 2012 if she had indeed resigned from the position of director in June 2012. The plaintiff did not tender any material to show that the 1st defendant ceased to be a signatory to its accounts following her alleged resignation or if the 2nd defendant was formally notified of any changes in the account operations mandate so as to justify the claim that the 2nd account was opened and operated fraudulently.

19. Furthermore, the plaintiff did not present the account opening forms in respect to the 2nd account to show that the said account was solely opened and operated by the 1st defendant. The burden rested on the plaintiff to prove its case on the allegation of fraud to the required standards.

20. It is trite that allegations of fraud not only be particularized but must also be strictly proved. This is the position that was taken in Mutsonga –VS- Nyati[1984] KLR at page 426, where it was held that: -“Allegations of fraud must strictly be proved and although the standard of proof may not be so heavy as to require proof beyond reasonable doubt, a high degree of probability is required, which is something more than a mere balance of probabilities and it is a question for the judge to answer”.

21. Considering the fact that the company herein was a family business and the undisputed fact that that the 1st defendant and her co-director Jamlick Butali Simiyu were husband and wife, one cannot rule out the possibility that their operations in the company may not have been in strict compliance with the company’s articles of association.

22. I note that the company’s articles of association have no specific provision with regard to the opening or running of the company’s bank accounts. It was not disputed that the 1st defendant was a shareholder in the company and it was not clear whether the company’s account operations were solely in the hands of the directors.

23. Turning to the claim for the payment of kshs 5,430,412, the plaintiff alleged that the said amount was due to it from Kenya Power & Lighting Company (KPLC) for some work done but that on January 30, 2016, the 1st defendant fraudulently diverted the money to the 2nd account where she was the sole signatory. On her part, the 1st defendant stated that she acted in the best interest of the company and within the confines of its memorandum and articles of association.

24. It is trite that a claim for special damages must not only be specifically pleaded but must also be strictly proved before they can be awarded. In Hahn vs Singh, Civil Appeal No. 42 Of 1983 [1985] KLR 716, the Court of Appeal held that: -“Special damages must not only be specifically claimed (pleaded) but also strictly proved…. for they are not the direct natural or probable consequence of the act complained of and may not be inferred from the act. The degree of certainty and particularity of proof required depends on the circumstances and nature of the acts themselves.”

25. As a natural corollary of the above position, courts have insisted that a party must present actual receipts of payments made to substantiate loss or economic injury. In the present case, I find that even though the plaintiff pleaded its claim for kshs 5,430,412, the same was not strictly proved. The plaintiff produced bank statements in respect to both accounts but did not disclose how it arrived at the said sum of kshs 5,430,412 allegedly received from KPLC. I have perused the statements of account and I note that they do not show how the alleged transfer was done. As I have already noted in this judgment, allegations of fraud must be strictly proved through cogent evidence at a degree of proof higher than the ordinary proof of balance of probabilities.

26. I find that the allegation of fraud was not proved to the required standards. The plaintiff did not prove that it had any dealings whatsoever with KPLC or that it received the said amount from KPLC. I am therefore not satisfied that the plaintiff proved the claim for special damages to the required standards.

27. In conclusion, I find that the plaintiff’s case falls short of the threshold of proof set for civil claims and I therefore dismiss it. Owing to the fact that the case relates to squabbles in family business/company, I direct that each party shall bear his/her own costs.

DATED, SIGNED AND DELIVERED VIRTUALLY AT NAIROBI THIS 5THDAY OF MAY 2022. W A OKWANYJUDGEIn the presence of: -Ms Otieno for Wandabwa for plaintiff.Court assistant- Sylvia