[2023] KEHC 23303 (KLR)

JRS Group Limited v Rishi Hauliers Limited (Civil Appeal 117 of 2019) [2023] KEHC 23303 (KLR) (3 October 2023) (Judgment)

Neutral citation: [2023] KEHC 23303 (KLR)

Republic of Kenya

In the High Court at Kisumu

Civil Appeal 117 of 2019

MS Shariff, J

October 3, 2023

Between

JRS Group Limited

Claimant

and

Rishi Hauliers Limited

Respondent

Judgment

1. Vide a plaint dated June 26, 2018 the Appellant herein sued the Respondent for a liquidated sum of Kshs 993,700 costs of the suit and interest at court rates.

2. Interlocutory judgment was initially entered for the Appellant but the Respondent successfully moved the trial court to have it set aside.

3. Upon the interlocutory judgment having been set aside, the Respondent was ordered to file its defence and witnesses statement within 30 days from the date of the ruling. The Respondent did not comply and its application for extension of time was subsequently declined with costs to the Appellant. Whereafter the Appellant’s case proceeded on formal proof.

4. The trial court then proceeded dismiss the Appellant’s case for what it termed as improper institution of the case given that the Appellant had not filed any resolution by its directors authorizing the institution of the case. The trial court also awarded the Respondent costs.

B. Appeal: 5. The Appellant was aggrieved by the said judgment and thus preferred the current appeal which is premised on the following grounds:i)That the trial magistrate erred in fact and law in dismissing a suit that was undefended.ii)That the learned trial magistrate erred in law and misdirected herself fundamentally in dismissing the Appellant’s claim by giving undue regard to procedural technicalities.iii)That the learned trial magistrate erred in law when it found that in the circumstances of the case before it, where there was an authority to act issued to Milkon Ondigo by the Director/Chairman and General Manager who is the secretary to the board after the board had deliberated on the same and the authority to act was the board resolution.iv)That the learned trial magistrate erred in law by putting an unnecessary intrusion into the internal affairs of the company and by rejecting the authority to act duly issued through a board resolution and signed by the Director/Chairman and the secretary to the board who is the general manager.v)That the learned trial magistrate erred in fact and law in awarding the defence cost of the suit even though there was no defence on record duly filed in accordance with the civil Procedure Rules by the Defendants and neither did the defence on record comply with the order 11 of the civil Procedure Code.vi)That the trial magistrate erred in fact and law by dismissing the Plaintiff’s suit for lack of proper board resolution when the same was not contested by the defence nor raised by the defence.vii)That the trial magistrate’s judgment albeit, a discretionary one was plainly wrong.

C. Submission: 6. This appeal was canvassed by way of written submissions.

C. (i) Appellant’s submissions: 7. The Appellant submits that the Respondent did not file any defence to its suit wherefore there were pleadings before the trial court that challenged the propriety of the institution of the suit for want of a resolution by the company to institute the suit.Reliance has been placed on the case of first Community Bank Ltd –vs- Cecil A Miller t/a Miller & company Advocates (Commercial Case No. E055/2019 (2021) KEHC 284 (KLR), where the court disallowed a preliminary point of objection that assaulted the filing of a suit without filing a resolution of the board of directors of the company due to want of pleadings that raised that defence.

8. The Appellant maintains that the issue of failure to file a resolution of the board of directors in concomitant with the plaint was not a matter that was pleaded before the trial court wherefore it was not put for determination by the trial court. Reference has been made to the case of Antony Francis Inarehan t/a AF Warehan & 2 Others –vs- Kenya Post Office Savings Bank (2004) eKLR.

9. The Appellant assaults the judgment of the trial magistrate for the award of costs to the Respondent on grounds that the award was unjustified given that the Respondent, did not file any defence witnesses statements nor a list of documents. The case of Cecilia Karuru ngaya –vs- Barclays Bank of Kenya 7 Another (20160 eKLR has been cited for the holding that whereas the award of costs is at the discretion of the court, the same ought not be punitive.

10. The Appellant submits that no one from the company has complained of want of authority to institute the suit. Reliance has been placed on the case of Livestock Research Organization –vs- Okeko 7 Another (Civil Appeal 36A of 2021 (2022) KEHC 3302 (KLR) (29 June 2022 (Ruling0 Neutral Citation.

11. The Appellant prays that the judgment of the trial court be set aside and instead judgment be entered for it as against the Respondent for a sum of Kshs 993,700 plus costs and interest at court rates until payment in full.

C. ii Respondent’s Submissions: 12. The Respondent supports the judgment of the trial court and submits that the Appellant has treated its case in the lower court with triviality and had failed to discharge its burden of proof.

13. The Respondent submits that the Appellant had failed to comply with the provisions of Order 4 Rule 1 (4) of the Civil Procedure Rules which required that a resolution be passed by the board of a company authorizing the commencement of a suit. The cases of Ibacho Trading Company Limited –vs- Samuel Aecha Ordora & 3 Others (2017) KLR, Kenya Commercial Bank Ltd –vs Stage Coach Management LTD (2014) eKLR and Directline Assurance Company Ltd –vs- Tomson Ondimu 92019) eKLR have been cited to support the Respondent’s position.

14. The Respondent submits that the question of want of a resolution of the Appellant’s board of directors authorizing the filing of the suit was a mater of law and it need not have been pleaded and that the trial court was proper to flag it suo motto. Reliance has been placed on the case of Pancras T. Swai –vs- Kenya Breweries Ltd (2014) eKLR.

15. On the issue of award of costs the Respondent submits that pursuant to Section 27 of the Civil Procedure Act (CAP 21 Laws of Kenya) costs follow the event.

D. Analysis and determination: 16. The duty of a first Appellant court was enunciated and the case of Gitobu Imanyara & 2 others v Attorney General [2016] eKLR, the Court of Appeal stated that;“[A]n appeal to this Court from a trial by the High Court is by way of retrial and the principles upon which this Court acts in such an appeal are well settled. Briefly put, they are that this court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowances in this respect”

17. I have re-evaluated, reanalyzed and scrutinized the evidence before the trial court in an exercise akin to a retrial and I do find that the lack of the company’s board of directors resolution to sue was not pleaded before the trial court wherefore it was an issue that was open for determination by it.

18. It is instructive to note that the court had initially entered an interlocutory judgment in favour of the Appellant and were it not for the subsequent successful setting aside application filed by the Respondent, the Appellant’s case would have proceeded for formal proof in the first instance.

19. I do agree with the Appellants that non of its shareholders nor directors had disputed the authority of the Plaintiff to institute the suit for recovery of the debt owed to it by the Respondent for provision of security services. In the absence of any challenge by the Appellant’s shareholders or directors, whose interest are intended to be safeguarded by Order 4 rule 1(4) the trial court had no legal basis for dismissing the Appellant’s suit. The trial court was duty bound to consider the overriding objective of the case before it as espoused under sections 1A and 1B of the Civil Procedure Act and the need to dispense substantive justice as enshrined in article 159 (2) (e) of the constitution of Kenya 2010.

20. On the issue of costs I do find that the Respondent had been condemned to pay costs of its application for extension of time and given that it did not file any pleadings, there was justification for the exercise of the judicial discretion in its favour on the award of costs. In any event the Respondent did not incur any costs in filing pleadings given that it filed non.

21. Premised upon the above analysis I do find that the trial court considered extraneous issues that were not before it for determination and it thus erred in law by not adhering to the reknown legal principle that states that parties are bound by their own pleadings and so is the court.

22. On the balance I do find that the Appellant had duly proved its case before the trial court on a preponderance of evidence and was therefore entitled to a favourable judgment.

E. Conclusion: 23. The appeal herein is thus meritorious and I therefore set aside the judgment of the trial court and I instead enter judgment for the Appellant as against the Respondent for a sum of Kshs.993,700 plus interest at rates from 26th June, 2018 until payment in full.

24. The Appellant is awarded costs of the lower court case and of this appeal.

DELIVERED, DATED AND SIGNED AT KISUMU THIS 3RD DAY OF OCTOBER, 2023. MWANAISHA. S. SHARIFFJUDGE