https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/6728

Gordon v Mwathi & another (Commercial Case E317 of 2023) [2026] KEHC 6728 (KLR) (Commercial and Tax) (14 May 2026) (Judgment) Neutral citation: [2026] KEHC 6728 (KLR) Republic of Kenya In the High Court at Nairobi (Milimani Commercial Courts) Commercial and Tax Commercial Case E317 of 2023 PM Mulwa, J May 14, 2026 Between Griban Odour Gordon Plaintiff and Dennis Mbithi Mwathi 1st Defendant National Bank of Kenya 2nd Defendant Judgment 1.The Plaintiff sued the Defendants herein vide the Plaint dated 7th July 2023, seeking judgment as follows:i.An order for payment of 50% of the profits allegedly earned by Griden Investment Limited.ii.Compensation for alleged unfair removal.iii.A declaration that his removal as a director and signatory of the company was fraudulent and void, reinstatement as director and signatory.iv.Punitive damages.v.Costs and interest of the suit. 2.The Plaintiff’s case is that he and the 1st Defendant incorporated Griden Investment Limited and jointly opened a bank account with the 2nd Defendant. He contends that sometime in 2017, the 1st Defendant, in collusion with the 2nd Defendant, fraudulently removed him as a signatory and director of the company through forged documents and signatures, and replaced him with one Faith Mwende Kilonzo. 3.The 1st Defendant filed a statement of Defence dated 6th March 2024, denying the Plaintiff’s claim and maintaining that the changes complained of were undertaken pursuant to mutual agreement between the parties and in accordance with lawful company resolutions. The 1st Defendant further contended that the Plaintiff neither contributed capital to the company nor paid for his shares and had no meaningful participation in the affairs of the company. 4.The 2nd Defendant filed its statement of Defence dated 28th March 2024. Similarly denied liability and maintained that the change of signatories was effected upon presentation of duly executed resolutions and after verification of the signatures against the specimen signatures held by the bank. The evidence 5.The Plaintiff testified as Pw1. He maintained that the signatures appearing on items 7,8, & 9 were forged. However, during cross-examination, he conceded that he did not procure any forensic examination report or handwriting expert evidence to support the allegation of forgery. He further confirmed that although he reported the matter to the DCI and Banking Fraud Unit, no criminal charges were preferred against either Defendant. 6.The 2nd Defendant called one witness Dw1 - Fredrick Musau, a branch manager at the 2nd Defendant Bank. He adopted his witness statement dated 6th February 2025 and his list of documents dated 4th October 2024 as his evidence in chief. 7.Dw1 testified that the change of signatories was undertaken in accordance with the bank’s procedures and upon receipt of the requisite corporate documentation, including resolutions, identification documents, KRA PIN certificates, and verification of signatures against the specimen signatures held by the bank. 8.He told the court the only complaint raised was a letter dated 10th February 2021 requesting to have the account blocked. He was not aware of the demand letter dated 3rd June 2022 and received on 7th June 2022. He maintained that a next of kin can also be a signatory of an account. 9.The 1st Defendant did not call any witness in support of his case. 10.At the close of the hearing, parties filed written submissions. The Plaintiff submissions are dated 17th December 2025, the 1st Defendant’s submissions are dated 10th February 2026, while the 2nd Defendant’s submissions are dated 23rd January 2026. Plaintiff submissions 11.The Plaintiff submits that his removal as a director of Griden Investment Limited was unlawful and procedurally flawed for failure to comply with Sections 139 and 141 of the Companies Act. It is argued that no proper notice of removal was issued, no meeting was convened in accordance with the law, and the Plaintiff was denied an opportunity to protest or make representations before his removal. 12.Reliance was placed on decisions including Ndirangu & 4 others v Africastalking (K) Limited & 7 others (2025) and Momanyi v Nzioki & 2 others (2025) for the proposition that failure to comply with the statutory procedure renders the removal defective and susceptible to being declared void. 13.The Plaintiff further contends that he was fraudulently removed as a signatory to account number 01086132113400 held at the 2nd Defendant bank. He alleges that the purported resolution effecting the change contained a forged signature and that the 2nd Defendant failed to exercise due diligence before implementing the changes. It was submitted that the bank failed to verify the Plaintiff’s signature against specimen records, failed to require his physical presence as allegedly required by internal procedures, and ignored several complaints and follow-up letters raising concerns over the changes. The Plaintiff maintains that the inclusion of Faith Mwende Kilonzo as a new signatory, despite being listed as next of kin to the 1st Defendant, ought to have raised suspicion and prompted further verification by the bank. 14.The Plaintiff relied on authorities, including Muturi & Another v Thuku & Another [2018] and Word of Life Center Church and Ministries v Ecobank Kenya Limited [2025] KEHC 1694 (KLR) to argue that a bank owes a contractual duty of care to its customers to comply strictly with the customer mandate and exercise reasonable care and skill in processing account instructions. It was submitted that where forged documents are used to alter account mandates or authorize transactions, the bank may be held liable for losses occasioned thereby. The Plaintiff also invoked the principles of vicarious liability as stated in Muwonge v Attorney General of Uganda [1967] EA 17 and Bazley v Curry [1999] 2 SCR 534, contending that the 2nd Defendant is liable for the acts or omissions of its employees carried out in the course of their employment. 15.On the basis of the foregoing, the Plaintiff urged the Court to find that both his removal as director and removal as signatory were unlawful, fraudulent, and void, and to grant the reliefs sought in the Plaint including restoration as director and signatory, compensation, punitive damages, costs, and a share of the company profits. 1st Defendant’s submissions 16.The 1st Defendant submitted that the Plaintiff failed to strictly prove the allegations of fraud as required in law. Reliance was placed on Vijay Morjaria v Nansingh Madhusingh Darbar & Another [2000] eKLR and Kinyanjui Kamau v George Kamau [2015] eKLR for the principle that fraud must not only be specifically pleaded but also proved to a standard higher than a balance of probabilities. 17.It was contended that the Plaintiff merely made generalized allegations of forgery and collusion without producing any forensic evidence, expert testimony, or documentary material to impeach the authenticity of the resolutions and signatures presented to the bank. The Defendants maintained that the change of signatories was effected pursuant to valid company resolutions and in accordance with the 2nd Defendant’s internal banking procedures. 18.The 1st Defendant further submitted that the Plaintiff failed to prove that he had been unlawfully removed as a director or signatory of Griden Investment Limited. It was argued that the Plaintiff did not produce any CR12, company resolutions, or records from the Registrar of Companies evidencing such removal. On the contrary, the 1st Defendant relied on a CR12 dated 16th November 2023 which allegedly confirmed the company’s directorship status. 19.The Defendants maintained that no breach of Sections 139 and 141 of the Companies Act had been demonstrated and that the allegations of unlawful removal remained speculative and unsupported by evidence. Reliance was placed on Rai v ABSA Bank (Kenya) PLC; Rai Investment Limited (Interested Party) [2025] KEHC 5302 (KLR) for the proposition that banks act on the mandate issued by the corporate customer and not individual signatories. 20.On the claim for 50% of the company profits, the 1st Defendant submitted that the Plaintiff failed to prove any financial contribution, shareholding, or entitlement to profits. It was contended that no evidence was produced to show payment for shares, contribution of capital, or participation in the running of the business. According to the 1st Defendant, the business operations were financed solely by the 1st Defendant and third parties. Reliance was placed on Mliwa v Mkoji [2023] KEHC 3398 (KLR) for the proposition that a party claiming financial contribution or entitlement must adduce credible evidence in support thereof. The Court was therefore urged to dismiss the Plaintiff’s suit with costs. 2nd Defendant’s submissions 21.The 2nd Defendant submitted that the Plaintiff failed to strictly prove the allegations of fraud and forgery as required in law. Reliance was placed on authorities including Vijay Morjaria v Nansingh Madhusingh Darbar & Another [2000] eKLR, for the principle that fraud must not only be specifically pleaded but distinctly and strictly proved. The 2nd Defendant argued that although the Plaintiff alleged forgery of his signature, he failed to tender any forensic evidence, handwriting analysis, expert report, or investigative findings to substantiate the claim. It was submitted that the Plaintiff merely denied the signatures from the witness box, which was insufficient to establish fraud to the required standard. 22.The 2nd Defendant further submitted that the change of signatories was effected upon presentation of corporate resolutions and documentation which appeared regular on their face, and that the signatures therein were verified against specimen signatures held by the bank. It was contended that the bank complied with its internal protocols and standard banking procedures, and that no evidence was adduced to demonstrate negligence, recklessness, or bad faith on the part of the bank. The 2nd Defendant maintained that a bank’s duty is limited to acting on the mandate of its customer and exercising reasonable care, but it is not required to investigate internal corporate disputes unless there is an apparent irregularity on the face of the documents presented. 23.On the alleged breach of Sections 139 and 141 of the Companies Act, the 2nd Defendant submitted that those provisions regulate internal corporate governance and impose obligations upon the company and its officers rather than third-party financial institutions. It was argued that even assuming there was irregularity in the company’s internal processes, the bank could not be held liable absent proof that it acted with knowledge of the irregularity or in bad faith. 24.The 2nd Defendant relied on the principle of indoor management, contending that a third party dealing with a company is entitled to assume that internal company procedures have been properly complied with where the documentation presented appears regular. 25.The 2nd Defendant further submitted that the reliefs sought by the Plaintiff, including restoration as director and signatory, payment of 50% of company profits, compensation, and punitive damages, could not properly issue against the bank. It was contended that such claims arose from internal corporate disputes between the Plaintiff, the 1st Defendant, and the company itself, and that the bank neither determined directorship nor had any proprietary interest in the company’s profits. The 2nd Defendant therefore urged the Court to find that no fraud, negligence, conspiracy, or breach of statutory duty had been proved against it and to dismiss the suit with costs. Analysis and determination 26.I have considered the pleadings, the evidence tendered, and the rival submissions by counsel. In my view, the issues for determination are:i.Whether the Plaintiff proved fraud, forgery, or conspiracy against the Defendants;ii.Whether the Plaintiff proved that he was unlawfully removed as a director and signatory of Griden Investment Limited;iii.Whether the 2nd Defendant breached any duty owed to the Plaintiff; andiv.Whether the Plaintiff proved entitlement to the reliefs sought. Whether the Plaintiff proved fraud or forgery 27.The gravamen of the Plaintiff’s case is the allegation that the 1st Defendant, in collusion with the 2nd Defendant, forged his signature and fraudulently removed him as a signatory and director of Griden Investment Limited, the company. 28.It is trite law that fraud must not only be specifically pleaded, but must also be strictly proved. The standard of proof is higher than a balance of probabilities, though not beyond reasonable doubt. 29.In Kinyanjui Kamau v George Kamau [2015] eKLR, the Court of Appeal held that:“The law is clear that allegations of fraud must be strictly proved; although the standard of proof may not be so heavy as to require proof beyond reasonable doubt, something more than a mere balance of probabilities is required.” 30.In the present case, although the Plaintiff alleged forgery of his signature, he did not tender any forensic evidence, handwriting analysis, document examiner’s report, or expert testimony to substantiate the allegation. Indeed, he admitted during cross-examination that no forensic analysis was undertaken on the disputed signatures. 31.Further, the letter dated 15th November 2017 requesting the removal of the Plaintiff as a signatory to the account bears the Plaintiff’s signature. No expert evidence was tendered to demonstrate that the signature appearing thereon was forged or otherwise unauthentic. 32.Equally significant is the fact that despite reporting the matter to the DCI and Banking Fraud Investigation Unit, no investigative findings implicating the Defendants were produced before Court and no criminal proceedings were shown to have been instituted. 33.The Court cannot make a finding of fraud on the basis of mere suspicion or allegation. Fraud must be distinctly pleaded and strictly proved. In the absence of technical or corroborative evidence, the Plaintiff’s allegations remained unsupported. 34.On the other hand, the evidence tendered by Dw1 was that the bank acted upon resolutions and documentation presented to it and verified the signatures against the specimen signatures held by the bank. That evidence was not displaced by any technical or expert evidence to the contrary. 35.In the premises, I find that the Plaintiff failed to strictly prove the allegations of fraud or forgery against the Defendants. Whether Plaintiff proved unlawful removal as director and signatory 36.The Plaintiff further contended that his removal as a director was undertaken in contravention of Sections 139 and 141 of the Companies Act. 37.Section 139 of the Companies Act deals with the Resolution to remove directors from office. The section provides that:a.A company may, by ordinary resolution at a meeting, remove a director before the end of the director's period of office, despite anything to the contrary in any agreement between the company and the director.b.However, a special notice is required for a resolution to remove a director under this section or to appoint a person to replace the director so removed at the meeting at which the director is removed. 38.Further, Section 141 thereof provides for the Director’s right to protest against removal, as follows:1.On receipt of notice of a motion for a resolution to remove a director under section 139, the company shall send a copy of the notice to the director concerned.2.The director, whether or not a member of the company, may be heard on the discussion of the motion at the meeting. 39.While the Plaintiff alleged non-compliance with those provisions, no documentary evidence was produced demonstrating that he had, in fact, been removed as a director of the company. 40.On the contrary, the 1st Defendant relied on a CR12 dated 16th November 2023, which confirms that the Plaintiff remains a director of the company. Indeed, it is the only official document placed before the Court confirming the company’s directorship status. In the circumstances, the allegation that the Plaintiff was removed as a director of the company was not proved. 41.The Court therefore finds that the allegation of unlawful removal as a director was not proved. 42.With regard to the removal as a signatory, the evidence on record demonstrates that the 2nd Defendant acted upon documents presented to it by the company. The Plaintiff did not establish that the documents were facially irregular or that the bank had notice of any alleged illegality. Whether the 2nd Defendant breached the duty owed to the Plaintiff 43.The relationship between a bank and its customer is contractual. A bank owes a duty to comply with the customer’s mandate and to exercise reasonable care and skill in carrying out its obligations. This principle was restated in Word of Life Center Church and Ministries v Ecobank Kenya Limited [2025] KEHC 1694 (KLR). 44.However, where the customer is a corporate entity, the bank is entitled to rely on resolutions and documentation presented by the company, provided such documents appear regular on their face. The law does not impose upon banks the obligation to investigate internal corporate disputes absent apparent irregularity or notice of fraud. 45.The doctrine of indoor management protects third parties dealing with companies in good faith. In essence, a third party dealing with a company is entitled to assume that the company’s internal procedures have been properly complied with. 46.In the present case, the Plaintiff failed to demonstrate that the 2nd Defendant acted negligently, recklessly, or in bad faith. No banking expert evidence was tendered to establish breach of banking procedures or deviation from industry standards. 47.The evidence before Court instead demonstrates that the bank acted upon resolutions presented to it and verified the signatures against specimen signatures held in its records. 48.I therefore find no basis upon which liability can attach against the 2nd Defendant. Whether the Plaintiff is entitled to the reliefs sought 49.The Plaintiff sought payment of 50% of the company profits, compensation, reinstatement as director and signatory, punitive damages, and costs. 50.However, no evidence was produced demonstrating the Plaintiff’s financial contribution, shareholding, or entitlement to the alleged profits. The Plaintiff admitted that his alleged contribution was made in cash and no documentary proof thereof was tendered before Court. 51.In Mliwa v Mkoji [2023] KEHC 3398 (KLR), the Court held that a party claiming financial contribution or entitlement must adduce credible evidence in support thereof. 52.The Plaintiff failed to establish any legal or evidentiary basis upon which the Court can grant the reliefs sought. Disposition 53.In the upshot, I find that the Plaintiff failed to prove his case on a balance of probabilities. Consequently, the Plaintiff’s suit is hereby dismissed with costs to the Defendants. JUDGMENT DELIVERED VIRTUALLY, DATED AND SIGNED AT NAIROBI THIS 14TH DAY OF MAY 2026.P.M. MULWAJUDGEIn the presence of:Mr. Nabenda for PlaintiffMr. Muriithi h/b for Mr. Mogaks for 1st DefendantMs. Wabwire h/b for Mr. Willy for 2nd DefendantCourt Assistant: Lispa