[2025] KEHC 1986 (KLR)

Jitegemee Trust Limited v Vintage Management Limited & 4 others (Civil Suit 391 of 2006) [2025] KEHC 1986 (KLR) (Commercial and Tax) (7 February 2025) (Judgment)

Neutral citation: [2025] KEHC 1986 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts)

Commercial and Tax

Civil Suit 391 of 2006

FG Mugambi, J

February 7, 2025

Between

Jitegemee Trust Limited

Plaintiff

and

Vintage Management Limited

1st Defendant

Samuel Kiiru

2nd Defendant

Jane Wambui

3rd Defendant

Vivian Wanja

4th Defendant

Ontulili Investment Limited

5th Defendant

Judgment

1. The plaintiff, Jitegemee Trust Limited (Jitegemee) is a company limited by guarantee incorporated under the Companies Act of Kenya, 1978 (Cap 486) (now repealed) on 10th November 1998. Jitegemee instituted this suit through a Plaint amended on 26th October 2007.

2. The background to the suit is that in the 1990s, the Royal Netherlands Embassy (RNE) in conjunction with the Government of Kenya (GOK) started a microfinance system aimed at establishing a revolving fund for women groups in the arid and semi-arid lands (ASAL). In 1994, Vintage Management Services (now Vintage Management Limited), was appointed as a consultant for the ASAL programme to develop a credit scheme for ASAL programme, Laikipia District. The objective of the ASAL programme was to establish a revolving fund for 5 years from 1995.

3. In 1998, Jitegemee was established and took over the ongoing ASAL lending programs valued at Kshs.154,183,310/-. Thereafter, Jitegemee advanced Kshs.588,345,309/- to the 1st defendant Vintage Management Limited (Vintage) through various agreements detailed below:a.The main framework agreement containing the general terms and conditions relating to borrowing between Jitegemee and Vintage for the period 1999-2002. b.Agency agreement dated 2nd July 1999, Jitegemee appointed Vintage as the sole disbursement vehicle to disburse and collect the loan portfolio from the target groups.c.Investment loan agreement dated 11th May 2001, Jitegemee made a direct financial advance to Vintage for the sole purpose of enabling it acquire movable and immovable assets.d.Income bonds agreement dated 29th March 2001 aimed at safeguarding the solvency of Vintage.

4. According to Jitegemee, Vintage initially adhered to the repayment terms but started defaulting in the 2nd quarter of 2001. A sum of Kshs. 300,496,676/- was outstanding as at 22nd May 2006. However, in breach the various agreements, Vintage persistently defaulted despite the 2nd defendant’s promises that it would pay.

5. Jitegemee further avers that it disbursed the initial loan portfolio of Kshs.154,183,309/- and a further disbursement of Kshs.30 million in January 1999. It claimed that on 3rd June 1999, the 2nd and 3rd defendants incorporated the 5th defendant, Ontulili Investments Limited (Ontulili) which acquired Land Reference (LR) Number 1/785 at Kshs.12 million. It subsequently developed the same at Kshs. 96 million from the monies advanced.

6. In addition to the claim for breach, Jitegemee’s claim against the 2nd, 3rd and 4th defendants is for negligence in that they breached their duty of care by failing to exercise reasonable care, skill, diligence and competence in dealing with the monies advanced.

7. Jitegemee further claims that the 2nd, 3rd and 4th defendants acted fraudulently by diverting monies advanced for their benefit through some of their relatives and related companies. It again claims that the 2nd, 3rd and 4th defendants incorporated Ontulili Investments Ltd and operated it to perpetuate a massive fraud against it.

8. Jitegemee seeks the following orders against the Defendants jointly and severally:a.Kshs. 300,496,676/-.b.An injunction restraining the 2nd, 3rd and 5th Defendants, their agents and/ or servants from selling, transferring and dealing with L. R. No. 1/786 pending the hearing and determination of this Suit and/ or satisfaction by the Defendants of any judgment that may be entered in favour of the Plaintiff.c.A permanent injunction restraining the 2nd, 3rd and 5th Defendants their agents and/ or servants from selling, transferring and dealing with possession and ownership of all the allotted and unallotted shares in the 5th Defendant pending the hearing and determination of this Suit and/ or satisfaction by the Defendants of any judgment that may be entered in favour of the Plaintiff.d.An injunction restraining the Defendants, their agents and/ or servants from selling, transferring and/ or disposing off any of their properties which the Plaintiff may reasonably demonstrate to have been acquired through funds disbursed to the 1st Defendant pending the hearing and determination of this Suit and/ or satisfaction by the Defendants of any judgment that may be entered in favour of the Plaintiff.e.An Order for following of the 1st, 2nd 3rd and 4th Defendants’ assets to recover the proceeds of fraud.f.Further and in the alternative, an Order imposing a lien in favour of the Plaintiff over all the assets of the 1st, 2nd, 3rd and 4th Defendants.g.Costs of the Suit.h.Interest on the judgment amount and costs aforementioned at the prevailing court rates; andi.Any other relief that this Court may deem fit to grant.

1st - 4th Defendants’ Response: 9. In response, the 1st – 4th defendants filed a joint statement of defence dated 19th October 2006, denying the claims. They averred that the 4th defendant was a minor and a nominal/paper/sleeping director and was not involved in the management of Vintage. She neither attended any board meetings of the company nor held herself out as a director. She also neither executed any of its documents nor enjoyed any privileges of a director.

10. The defendants pointed out that the ASAL credit programs commenced in 1992 as a pilot programme in Keiyo- Marakwet District under SNV- a Dutch international non-governmental organization. They admitted that Vintage was appointed as consultant of Jitegemee to develop a credit scheme for Laikipia District.

11. However, the defendants denied that Vintage was also charged with internal organization of the district groups, internal disbursements, training of group management and ensuring enterprise development. The duty to oversee the internal organization of the district groups was vested upon the District Social Development officer on behalf of the Government of Kenya through Ministry of Culture and Social Services as per the consultancy agreement.

12. Vintage only rendered training services on tailor-made programmes within the ambit certified by the ASAL programme in Laikipia, Kajiado and Keiyo-Marakwet Districts. It could not make the internal disbursements within the said groups as the disbursements were being issued directly and channelled by ASAL programme by way of cheques to the intermediate Credit Management Committee groups (the CMCs) for onward disbursement to the ultimate borrowers upon approval by the CMCs.

13. Under the credit project, the target communities would appraise, determine and approve the ultimate individual beneficiaries to determine their credit needs, approve and disburse such credit to the said individual beneficiaries and closely monitor performance, growth and enterprise development, if any, of such individual beneficiaries and their guarantors.

14. The defendants admitted that Jitegemee took over the ASAL programme and the alleged loan portfolio of Kshs.154,183,310/- owed by various CMC’s and ultimate borrowers based on the forensic audit conducted. The defendants also conceded that Vintage ceased to provide consultancy services to Jitegemee and thereafter entered into multifarious facilitative agreements aimed at ensuring the continuity of the ASAL programmes at Jitegemee’s direction.

15. The defendants however denied that the Kshs.154,183,310/- was disbursed to Vintage, which merely agreed to collect or recover the outstanding loan portfolio within the context of the ongoing ASAL credit programmes.

16. The defendants admitted that Vintage entered into the main framework agreement, agency agreement dated 2nd July 1999, investment loan agreement dated 11th May 2001 and income bonds agreement dated 29th March 2001. However, they denied that Kshs. 588,345,309/- was advanced. They claimed that under the main framework agreement, Vintage was not a microfinance institution regulated by Central Bank of Kenya (CBK).

17. The defendants admitted that through the agency agreement dated 2nd July 1999, Jitegemee engaged Vintage as its agent for disbursing loans to target groups and repayment collection. However, money disbursed through Vintage and/ or the respective ASAL district companies, namely, Laikipia Development Company Ltd, Kajiado Credit Ltd and Keiyo Economic Empowerment Ltd were not loans to Vintage.

18. The defendants asserted that the income bonds agreement dated 29th March 2001 adversely affected its contractual obligations in relation to the ASAL programmes. It faulted Jitegemee for entering into the agreement to serve its interests while aware that Vintage was insolvent.

19. As regards the repayments in the table of particulars of monies disbursed, the defendants contended that the repayments towards the principal sums were misconceived since they constituted remittances under the agency agreements; that its previous repayments of over Kshs.27 million under the investment loan agreement have not been accounted for and that Kshs.60 million was not a repayment but a return of the income bonds advance declined in good faith.

20. The defendants denied that Vintage had been adhering to the repayment terms until the 2nd quarter of 2001. They asserted that the repayments were dependent on the actual recoveries from the ultimate individual beneficiaries which became sporadic much earlier, pointing to the table of particulars. They attributed this to the ineffective takeover of the credit programme by Jitegemee, a new, previously unknown entity and/ or previously unforeseen impediments in the recovery process despite due diligence and application of best endeavours.

21. The defendants also denied breach of contract through failure, refusal or neglect to collect monies advanced. It contended that it was unable to collect the monies on account of justifiable non-realization and non-recovery of funds and the widespread default by the target groups/ultimate borrowers for reasons well-known, discussed with and established by Jitegemee.

22. These included the uncoordinated exit of the ASAL programmes sparked off the ubiquitous notion amongst CMCs, CMG’s and ultimate borrowers that the ASAL programmes funds were “ownerless”. Jitegemee and Vintage were thus perceived as imposters that fraudulently assumed ownership of ASAL Programmes and the donor funds to aggrandise themselves.

23. Jitegemee failed to introduce itself to the CMCs, CMG’s and ultimate borrowers to enlighten them on the change of the ownership and management of the ASAL programmes’ credit funds.

24. Jitegemee encountered political hostility and intermeddling from local politicians and provincial administration who openly and incitingly questioned the legal and proprietary status of Jitegemee and urged the CMCs, CMG’s and ultimate borrowers not to recognize it for loan repayment purposes. The CMCs, CMG’s and ultimate borrowers took the opportunity to convert and/ or embezzle the ASAL Credit Programme funds. This was the subject matter of court actions such as Iten Sergoit CMC V Keiyo Economic Empowerment, RMCC No. 10 of 2001.

25. The defendants admitted that Vintage failed to discharge some contractual obligations. It blamed Jitegemee for intermeddling with the internal management and running of the CMCs and CMGs and the ultimate borrowers leading to their dangerous alienation against Vintage. Over 500 loan recovery suits instituted by it were frustrated at the execution stage by logistical difficulties explained to Jitegemee. It lamented that Jitegemee peremptorily directed discontinuance of such court actions without regard to the efficacy of the loan recovery process.

26. The defendants also highlighted the inherent structural weaknesses of the ASAL programmes, high operational costs in the initially targeted areas, unjustifiable failure by Jitegemee to honour its corresponding tax obligations.

27. Alternatively, the defendants asserted that the monies advanced were not loaned to Vintage and are only recoverable from the target groups. They also asserted that the agency agreement dated 2nd July 1999 is legally defective and unenforceable as a loan agreement against it.

28. The defendants admitted that they had discussions with Jitegemee regarding the sustainability of the ASAL programmes following the incidences of political interference. They however denied that they promised that Vintage would pay the advanced monies.

29. The defendants denied that they intended to defraud Jitegemee. They further denied that they acted negligently. Their case is that the 2nd and 3rd defendants acted with reasonable care and skill. Vintage has not failed to account for the monies channelled through it. Vintage’s books of accounts show the manner the credit funds were disbursed. The accounts were being examined and audited by Jitegemee. Jitegemee has failed to exercise its right to recover from the CMCs, CMGs and ultimate borrowers.

The 5th Defendant’s Response: 30. The 5th Defendant filed a statement of defence dated 15th February 2008 denying that the advanced monies were used to acquire LR No. 1/786, Nairobi. It asserted that it was incorporated as a matter of right for the transaction of the various undertakings, not fraudulently as alleged. It also asserted that LR No. 1/786, Nairobi was lawfully acquired by funds contractually furnished by the 1st – 3rd defendants and that the property was developed at approximately Kshs.50 million. It denied that the property is currently valued at approximately Kshs.140 million.

The Evidence: 31. The hearing commenced on 27th March 2023. The plaintiff called one witness, MR. BEN R. N. MBAI (Mr. Mbai) as PW1. He adopted his witness statement dated 18th March 2011, similar to the Plaint, as his evidence in chief. He also produced the plaintiff’s primary and supplementary bundle of documents dated 6th August 2010 and 18th March 2010.

32. Mr. Mbai testified that under the main framework and agency agreements the 1st defendant was the financial intermediary of the plaintiff charged with collecting the existing loan portfolio transferred and the monies disbursed to the Community Based Financial Institutions (CBFIs). That the consideration for the arrangement was a deduction of 20% of the 24% interest collected from the CBFIs. That the plaintiff issued various demand letters to the 1st defendant seeking repayment of the monies advanced. That the 1st defendant also purchased an income bond of Kshs.60 million from the plaintiff out of which Kshs.30 million was paid. That the 1st defendant further took an investment loan of Kshs.18,150,000/- with an outstanding balance of Kshs.3,150,000/-.

33. Mr. Mbai also testified that the 1st defendant was prohibited from assigning its roles to other companies. That the 1st defendant was required to maintain books of account. That the books were inspected in July 2002 by PWC which reported that there were overstated loan balances, unknown borrowers, overstated principal amounts and it was difficult to confirm if the money was lent.

34. Mr. Mbai further stated that after the 1st defendant defaulted, the plaintiff discovered that there was construction going on by the 2nd defendant using Ontulili Investments Limited.

35. During cross-examination, Mr. Mbai confirmed that under section 2. 6 of the main framework agreement, Jitegemee had the right to decide whether to provide the funds as either microenterprise loans or through agency agreements. He asserted that the agency agreements are structured in the form of micro-enterprise loans. In the same breath, he stated that the agency agreements were not converted into microenterprise loans.

36. Mr. Mbai confirmed that the ultimate borrowers were the members of the CBFIs. That Vintage could not initiate recovery proceedings without Jitegemee’s permission. That books and records relating to the agency were Jitegemee’s property. That although Vintage was a collecting agent, it would receive a commission. He maintained that Vintage was responsible for repaying the monies advanced even if it failed to collect from the ultimate borrowers.

37. Mr. Mbai also confirmed that a letter dated 18th November 1999 by the RNE Secretary referred to the three branch companies; that Jitegemee’s CEO was aware of the history of the branch companies; that the minutes of the board meeting of 20th June 2000 confirmed that Jitegemee’s board was aware of and dealt with the branch companies.

38. In closing, Mr. Mbai acknowledged that there were challenges faced in collecting the advanced monies but failed to admit knowledge that the ASAL programme collapsed.

39. The defendants called two witnesses, the 2nd defendant, MR. SAMUEL KIIRU KAMAU (Mr. Kamau) as DW1 and MR. DENNIS WAMBUA (Mr. Wambua), an expert as DW2.

40. Mr. Kamau adopted his witness statement dated 22nd July 2016 as his evidence in chief. He also produced the Defendants’ bundle of documents Volumes A-E dated 1st August 2016, as exhibits.

41. Upon cross-examination, Mr. Kamau confirmed that the 1st defendant freely executed the main framework agreement and the 14 subsequent agency agreements. He also confirmed that the 1st defendant received the money disbursed under the agreements. He admitted that under clause 3(a) of the agency agreements, the 1st defendant was required to repay the loans irrespective of the amounts collected.

42. Mr. Wambua, a certified public accountant, produced an audit report dated 13th August 2013, prepared by his firm, D. K. Wambua and Associates. The report confirmed that Kshs. 588,345,309/- was disbursed by Jitegemee to Vintage. He asserted that Kshs.368,458,705 was repaid and that the outstanding balance was Kshs.200,000,000.

The Submissions: 43. Jitegemee filed written submissions dated 15th November 2023 and the 1st to 5th defendants filed written submissions dated 24th January 2024.

44. Jitegemee submitted that the contractual relationship between it and Vintage under the main framework and agency agreements was that of lender and borrower, not principal and agent respectively; that Section 3 (a) bullet 2 of all the agency agreements provide that Vintage was fully liable to repay the loan irrespective of the actual recovery of the loans from the ultimate borrowers; that Vintage breached the terms and conditions and that the defendants jointly and severally siphoned the loans advanced to purchase and develop LR No. 1/786.

45. On their part, the defendants submitted that Jitegemee did not adduce any evidence that it advanced the loan to Vintage; that it admitted in its witness statement that the ASAL Credit Programme (ACP) funds had been disbursed to Vintage as its disbursing and ACP managing agent; that the sums of Kshs. 10,150,000/- and Kshs. 8,000,000/- (Kshs. 18,150,000/-) which were fully repaid were investment loans under section 2. 4(ii) of the main framework agreement not part of the ACP funds; that the PWC-audited existing loan portfolio of Kshs. 154,183,310. 00 was a collectable book balance to be collected from the CMCs and remitted to Jitegemee, not a disbursement or advance to be repaid; that under sections 2. 1 and 2. 6 proviso of the MFA and the agency agreements, Jitegemee and Vintage were principal and agent respectively.

46. The defendants also contended that section 2. 4 of the MFA was neither invoked nor applied in the agency agreement and the same was excluded by dint of section 2. 6 (proviso) of the MFA which unequivocally provided that the Trust had opted to provide finance for the on-lending to the ultimate borrowers under an agency agreement instead of the microfinance loans under section 2. 4 of the MFA.

47. Relying on section 120 of the Evidence Act, the defendants contended that in the statement of agreed facts, Jitegemee conceded that Vintage was a commission agent and is estopped from submitting otherwise.

48. The defendants disputed the argument that there was no principle-agency relationship between them. They also contended that the agency agreements were not converted to micro-enterprise loans at a later date as envisaged under section 2. 6 of the MFA. They further submitted that Jitegemee has not proven that the ACP funds disbursed to the 1st defendant were fraudulently diverted.

Analysis and Determination 49. I have considered the pleadings, the evidence, the statement of agreed issues filed on 6th December 2019 and the parties’ respective written submissions. The issues for determination are whether Jitegemee has proved its claims to the required standard and whether it is entitled to the reliefs sought.

50. Under the first issue, three sub-issues can be discerned from the statement of agreed issues, rephrased as follows:i.Whether Vintage is responsible for breach for defaulting in repayment of the monies advanced irrespective of the actual loan recovery from the ultimate borrowers.ii.Whether the 2nd, 3rd and 4th defendants were negligent by failing to run Vintage in a proper manner and failing to collect, remit and account for the monies advanced.iii.Whether the 2nd, 3rd and 4th defendants fraudulently dealt with and diverted to their personal use the ACP funds from the accounts of Vintage through the branch companies and the 5th defendant company.

Breach of the main framework, the agency and the investment loan agreements: 51. It is not disputed that Jitegemee and Vintage entered into the main framework, agency and investment agreements. The central issue is whether Vintage is responsible for breach for defaulting in repayment of the monies advanced irrespective of the actual loan recovery from the ultimate borrowers.

52. According to Jitegemee, the total sum disbursed to the 1st defendant was Kshs.588,345,309/- only Kshs.287,845,635/- was repaid leaving a balance of Kshs.300,496,676/-. The outstanding balance comprises of Kshs.32,646,732/-, Kshs.264,699,944/- and Kshs.3,150,000/- under the main framework, agency and investment agreements respectively.

53. Out of the Kshs. 588,345,309/-, Kshs. 154,183,309/- was the PWC-audited loan portfolio acquired from the ASAL Credit Programme. The defendants argued that the loan portfolio was a collectable book balance to be collected from the CMCs and remitted to the plaintiff, not a disbursement or advance to be repaid. I agree with the defendants that the amount was not disbursed to Vintage by Jitegemee. However, the fact that it was not disbursed does not mean that the 1st defendant was not responsible for collecting and remitting the loan balance to the plaintiff. Section 2. 1 of the main framework agreement provides that:“The ownership to the title to the portfolio of the ACP as audited and valued by Price Waterhouse, which was transferred to the Trust on the basis of the Memorandum of Understanding between the Government of Kenya and the Government of Netherlands is hereby to be collected by the Financial Intermediary as the sole agent of the Trust for that untitled portfolio until collection in full of the same. A separate Agency Agreement will be entered into by the Trust and the Financial Intermediary in respect of the existing audited portfolio and additional disbursement if so decided.”

54. Under section 2. 4 of the main framework agreement, Jitegemee could provide funding to Vintage on the basis of term loans and income notes. Three types of term loans were provided for including micro-enterprise loans for on lending by Vintage to ultimate borrowers through CBFIs, investment loans and working capital loans.

55. Jitegemee claims Kshs. 264,699,944/- being the outstanding balance of the monies advanced to Vintage under 14 agency agreements. It relied on Section 3 (a) bullet 2 of all the agency agreements to assert that Vintage was fully liable to repay the loan irrespective of the actual recovery of the loans from the ultimate borrowers.

56. The defendants took the position that Vintage was not responsible for payment of the outstanding balance because it was merely a commission agent. It pointed out that the agency agreements recognised the ultimate borrowers who were members of self-help groups. It also contended that the monies advanced to Vintage through the agency agreements were not converted to microfinance loans as provided under section 2. 6 of the MFA.

57. Para. 2 of Section 3(a) of the Agency Agreement dated 2nd July 1999 reads as follows:“3. The Agents hereby undertake and agree with the Trust that they will at all times during the continuance in force of the Agreement observe and perform the terms and conditions set out in this Agreement and in particular;(a)…-The financial intermediary is fully responsible for repayment, irrespective of the actual loan recovery from the ultimate borrowers.”

58. On the contention that Vintage was a mere commission agent, I note from the agreements that indeed Vintage was entitled to a commission. However, from both the main framework agreement and the agency agreements, I garner that Vintage was more than a mere commission agent and was responsible for on lending monies advanced by Jitegemee to CBFI’s, disbursing, accounting and collecting the repayments. I also note that the agency agreements recognised the ultimate borrowers who were members of self-help groups. However, this recognition does not absolve Vintage from its undertaking to repay the monies advanced “irrespective of the actual loan recovery from the ultimate borrowers.”

59. The defendants further relied on section 2. 6 of the main framework agreement which reads in part as follows:“The Trust may opt to provide finance for on-lending to ultimate borrowers under an Agency Agreement, rather than Micro-enterprise loans. Agency Agreements will be converted into Micro-enterprise loans at a later date.”

60. It could be argued that the above clause means that Jitegemee could advance monies for on-lending to ultimate borrowers through an agency agreement rather than microfinance loans. However, it is doubtful that the clause meant that that Vintage was not responsible for payment of the outstanding balance. I therefore reject the defendants’ contentions.

61. The defendants further alluded to some of the challenges encountered in the collection of the monies advanced from the CBFI’s including political interference and the introduction of Jitegemee as a new and foreign entity. The plaintiff’s witness, Mr. Mbai admitted that there were challenges in collecting the funds. However, this does not absolve Vintage from its responsibility to pay the monies advanced.

62. In National Bank of Kenya Ltd V Pipeplastic Samkolit (K) Ltd & Another, [2001] eKLR, the Court of Appeal stated that:“A Court of law cannot re-write a contract between the parties. The parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved. There was not the remotest suggestion of coercion, fraud or undue influence in regard to the terms of the charge.Further, Shah JA observed in the case of Fina Bank Limited V Spares & Industries Limited (CA No 51 of 2000) (unreported):“It is clear beyond peradventure that save for those special cases where equity might be prepared to relieve a party from a bad bargain, it is ordinarily no part of equity’s function to allow a party to escape from a bad bargain.”

63. Accordingly, the Court finds that Vintage is responsible for breach for defaulting in repayment of the monies advanced irrespective of the actual loan recovery from the ultimate borrowers.

Negligence by the 2nd, 3rd and 4th defendants: 64. The next sub-issue is whether the 2nd, 3rd and 4th defendants were negligent. The particulars of negligence by the 2nd, 3rd and 4th defendants set out in the Amended Plaint are:a.Deliberately refusing to pay to the plaintiff the sum lent to the 1st defendant without any lawful cause.b.Failing to collect and remit to the plaintiff money lent to the target groups.c.Failing to run the 1st defendant company in a proper manner as required by law, custom and regulations.d.Failing to account for the moneys advanced to the 1st defendant by the plaintiff for on lending to individual members.

65. The elements that must be established to prove that there was negligence are a duty of care, breach of that duty and causation, that is, a link between the breach and the loss suffered. The first element to be established is duty of care. Jitegemee entered into the main framework, agency and investment agreements with Vintage. There was no contract between Jitegemee and the 2nd, 3rd and 4th defendants.

66. Jitegemee produced an official company search dated 6th February 2007, showing that the 2nd, 3rd and 4th defendants are the directors of Vintage. The law is that the directors of a company hold the fiduciary duty of loyalty and to act in good faith towards the company to act in good faith and a duty of care and skill. These duties are owed to the company itself and are enforced by the company or shareholders.

67. From my reading of the particulars, Jitegemee seeks to enforce the Company’s right. In Foss V Harbottle, [1843] 67 ER 189, it was established that a wrong alleged to have been done to a company, can only be remedied by an action by the company itself. See Benard V Davis & 2 Others, [2022] KEHC 250 (KLR). Therefore, Jitegemee’s claim for negligence by the 2nd, 3rd and 4th defendants fails.

Fraud by the 2nd, 3rd and 4th defendants: 68. I now move to the issue of whether the 2nd, 3rd and 4th defendants fraudulently dealt with and diverted to their personal use the ACP funds from the accounts of Vintage through the branch companies and the 5th defendant company.

69. The particulars of fraudulent conduct by the 2nd, 3rd and 4th set out in the Amended Plaint are:a.diverting funds for on lending by the 1st defendant to their own use;b.misappropriating and misusing the funds lent to the 1st defendant for their personal gain;c.incorporating other related companies (Laikipia Development Company Limited, Kajiado Community Credit Limited, Ontulili Investment Company Limited, Keiyo Economic Empowerment) for the sole purpose of siphoning funds from the 1st defendant;d.failing to account to the plaintiff for the moneys lent to the 1st defendant;e.misappropriating the funds lent to the 1st defendant by the plaintiff for purposes that were unlawful and detrimental to the plaintiff.f.Deliberately failing to maintain proper or any books of account by indicating names of loanees and ghost beneficiaries with a view to diverting funds for their personal use.

70. Black’s Law Dictionary, 2nd Ed. states that:“Fraud consists of some deceitful practice or willful device, resorted to with intent to deprive another of his right, or in some manner to do him an injury. Fraud, as applied to contracts, is the cause of an error bearing on a material part of the contract, created or continued by artifice, with design to obtain some unjust advantage to the one party, or to cause an inconvenience or loss to the other.”

71. In Vijay Morjaria V Nansingh Madhusingh Darbar & Another, [2000] eKLR the Court noted that:“It is well established that fraud must be specifically pleaded and that particulars of the fraud alleged must be stated on the face of the pleading. The acts alleged to be fraudulent must, of course, be set out, and then it should be stated that these acts were done fraudulently. It is also settled law that fraudulent conduct must be distinctly alleged and distinctly proved, and it is not allowable to leave fraud to be inferred from the facts.”

72. The rationale for the above is that fraud is quasi-criminal and it has a higher threshold of proof than an ordinary civil claim which is proved on a balance of probabilities. See: R.G Patel V Lalji Makanji [1957] EA 314.

73. The particulars of fraud were that the 2nd, 3rd and 4th defendants acted fraudulently by diverting monies advanced for their benefit through some of their relatives and related companies. Jitegemee’s witness Mr. Mbai admitted that the branch companies were proposed by the Royal Netherlands Embassy, a fact that Jitegemee Chief Executive Officer and Board were aware of and that they were incorporated in the books of accounts and various agreements.

74. Therefore, I find that the claim that the 2nd, 3rd and 4th defendants used the three branch companies to perpetuate fraud by diverting funds through them is unsubstantiated.

75. Jitegemee also claims that the 2nd, 3rd and 4th defendants incorporated the 5th defendant (Ontulili Investments Ltd) and operated it to perpetuate a massive fraud against it. It claims that the time of its purchase of LR No. 1/786 and development of the property coincided with the time when Vintage defaulted in repayment of the monies advanced. However, in my view this is not enough to impute fraud on the 2nd, 3rd and 4th defendants. In Ndolo V Ndolo, [2008] 1KLR (G &F) 742 it was observed that:“In cases where fraud is alleged, it is not enough to simply infer fraud from the facts.”

76. Therefore, the claim for fraud by the 2nd, 3rd and 4th defendants fails.

Conclusion 77. In conclusion, I enter judgment for Jitegemee (the Plaintiff) against Vintage (the 1st Defendant) for:i.Kshs. 300,496,676. 00ii.Costs of the suitiii.Interest on (1) and (2) above at court rates from the date of filing the suit.

DATED, SIGNED AND DELIVERED IN NAIROBI THIS 7TH DAY OF FEBRUARY 2025. F. MUGAMBIJUDGE