[2021] KEHC 12582 (KLR)

IN THE HIGH COURT OF KENYA AT NAIROBI

MILIMANI LAW COURTS

COMMERCIAL AND TAX DIVISION

CORAM: D. S. MAJANJA J.

CIVIL CASE NO. E149 OF 2020

BETWEEN

CHARLES GOMBA t/a

CHARLES GOMBA & COMPANY ADVOCATES ...........PLAINTIFF

AND

MAGEETA INVESTMENTS LIMITED ................................DEFENDANT

RULING

Introduction

1. What is before the court is an application dated 14th September 2020 filed by the Plaintiff under Order 2 Rule 15(1)(b), (c) and (d)andOrder 13 Rule 2 of the Civil Procedure Rules seeking orders, inter alia, that the Defendant’s Statement of Defence dated 18th June 2020 be struck out and judgment entered as prayed in the Plaint dated 19th May 2020 or in the alternative, judgment on admission be entered in favour of the Plaintiff against the Defendant as prayed in the said Plaint.

2. The application is supported by the Plaintiff’s affidavit sworn on 14th September 2020. It is opposed by the replying affidavit of Sarika Magon, a director of the Defendant (“the Company”), sworn on 11th December 2020.

Background

3. The Plaintiff’s case set out in the Plaint dated 19th May 2020 is grounded on a Memorandum of Agreement headed Retainer of Legal Services dated the 25th September, 2016, (“the Retainer”) and made between the Plaintiff and the Company in which the Company retained the Plaintiff to provide it and its affiliate companies with legal and ancillary services.

4. The Retainer provided that the Plaintiff was to be paid Kshs. 20,000,000. 00 exclusive of VAT on account of legal services offered and/or to be offered between December 2015 and 31st December, 2019. The fees were to be paid on or before 31st December 2019. The Plaintiff claims that the Company agreed to pay the fees on behalf of its affiliate companies but that the Company has ignored and/or refused to respond to his demand for fees and now claims Kshs. 23,372,790. 00.

5. The Company responded by filing a Statement of Defence dated 18th June 2020. It denied that it executed the Retainer and only became aware of it when served with the Plaint and accompanying documents. It disclaimed the Retainer on the ground that the Special Power of Attorney purportedly dated August 2016 and registered as P/A 70031/1 on 13th November 2018 and executed between Ashish Magon, a director of the Company as the donor and Papinder Kaur Atwal as done purportedly authorizing the the donee to act on behalf of the Company (“the Special Power of Attorney”). It avers that the Special Power of Attorney is the subject of Criminal investigations by the Serious Crimes Unit of the Directorate of Criminal Investigations.

6. The Company also states that the it has not ratified any action undertaken by the Plaintiff pursuant to the Special Power of Attorney and that it is not privy to the claims made and position of various suits allegedly instituted on its behalf by the Plaintiff.

The Application

7. The Plaintiff’s application is based on the contention that the Company has admitted the debt owed. It also contends that the Plaintiff has instructed it to recover debts from some of its tenants.

8. The Plaintiff deponed that Sarika Magon, who filed the witness statement on behalf of the Company, is neither a Director nor shareholder of the Company and has never instructed his firm. That Ms Sarika is a stranger to the transactions between his firm and the Company, she cannot support the Defendant’s case.

9. He stated that the Company has always been run by Mr. Ashish Magon who has always been a Director of the Company. Mr. Gomba stated that there is no evidence that Mr. Ashish’s signature was forged. He contended in so far as Mr. Ashish has not deponed to this fact, the allegations by Ms Sarika are hearsay evidence.

10. Mr. Gomba further contended that Mr Ashish admitted that Ms Papinder had authority to enter into the Retainer between his firm and the Company and that Ms Papinder always had authority to act on behalf of Mr. Ashish as evidenced by pleadings and documents filed in CMCC No. 3849 of 2016, Jean Tedo Business Group V Mageeta Investments Limited.

11. The Plaintiff submits that under section 35 of the Companies Act, 2015, a contract may be made on behalf of a company, by a person acting under its authority, express or implied. He further depones that despite denying the claim, Mr. Ashish has been making overtures to him in a bid to settle this matter. He submits that the Company does not have a valid defence.

Company’s Response.

12. In her deposition, Ms Sarika denies that the Company appointed Ms Papinder to serve as a director, member and/or proxy member of the board of the Company. That Ms Papinder did not have the mandate to act, operate and/or present herself as a director of the Company.

13. The Defendant contends that the Company and Mr. Ashish are two separate legal entities. It submits that in order for the Company to be liable for a director’s actions, then the actions have to be ratified by the other directors of the Company. It submits that in this case the Company has not done so and that the Special Power of Attorney relied on has not been ratified and as such the Company is not liable.

Analysis and Determination

14. The issue for consideration is whether the Defendant’s Statement of Defence should be struck out for being frivolous, vexatious and an abuse of the court process. The principles upon which the court acts in considering applications to strike out pleadings under Order 2 rule 15 of the Civil Procedure Rules have been settled in several cases. The court is guided by the general principle that striking out of a pleading is a draconian act and that it should be circumspect in doing so unless there are clear grounds. In D.T. Dobie & Company (Kenya) Ltd v Muchina[1982] KLR 1 the Court of Appeal expressed the principle as follows:

No suit ought to be summarily dismissed unless it appears so hopeless that it plainly and obviously discloses no reasonable cause of action and is so weak as to be beyond redemption and incurable by amendment. If a suit shows a mere semblance of a cause of action, provided it can be injected with real life by amendment, it ought to be allowed to go forward for a court of justice ought not to act in darkness without the full facts of a case before it.

15. The thrust of the Company’s defence is that it denies instructing the Plaintiff on the ground, the Special Power of Attorney that gave the Plaintiff authority to act for the Company under the Retainer does not bind the Company as it was not ratified by it. Under the Special Power of Attorney, the Donor, Ashish Maghon, described himself as a director of the Company. It is arguable whether a director of a Company can donate the power of a company to a third party without authority of the Company. In my view, this is an issue that will require full ventilation including an inquiry of the circumstances of the parties’ transactions, including the parties’ involvement in other suits, to resolve this issue.

16. The Plaintiff also seeks judgment on admission under Order 13 Rule 2of theRules. In Choitram v Nazari[1984] KLR 327 Madan JA., held that, “Admissions have to be plain and obvious, as plain as a pikestaff and clearly readable because they may result in judgment being entered. They must be obvious on the face of them without requiring a magnifying glass to ascertain their meaning.”

17. I have reviewed the Plaintiff’s documents and I do not find anything so plain and obvious as an admission of the debt owed by the Company. As stated before, the Company has challenged the Special Power of Attorney between Mr. Ashish and Ms Papinder. This, as I have held, is a triable issue that warrants the matter to go to full trial.

Disposition

18. For reasons I have set out above, the Plaintiff’s application dated 14th September 2020 lacks merit. It is dismissed with costs to the Defendant.

DATEDandDELIVEREDatNAIROBIthis29th day of JANUARY 2021.

D. S. MAJANJA

JUDGE

Court of Assistant: Mr M. Onyango

Mr Gomba instructed by Charles and Company Advocates for the Plaintiff.

Ms Kihara instructed by Chege Kariuki and Associates Advocates for the Defendant.