https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/11932

**REPUBLIC OF KENYA** **IN THE HIGH COURT OF KENYA AT NAIROBI** **MILIMANI LAW COURTS** **COMMERCIAL AND TAX DIVISION** **COMM. CASE NO. E050 OF 2018** **BETWEEN** **KAIHO SANGYO COMPANY LIMITED...................................................PLAINTIFF** **AND** **MAEJI KAIHO INTERNATIONAL LIMITED…………………………DEFENDANT** **JUDGMENT** **Introduction and Background** 1. The Plaintiff filed this suit by way of a Plaint dated 12th July 2018 seeking JPY 14,144,339.00, costs of the suit and interest. The Plaintiff averred that it is a company incorporated under the laws of Japan and is a main exporter of used motor vehicles and second-hand spare parts to various destinations including Kenya. Its case is that the parties signed a business Memorandum of Understanding (MOU) dated 26th May 2009, after which a business and trade relationship began in June 2009. 2. That under this arrangement, the Defendant would order used motor vehicles and spare parts from the Plaintiff on credit, the Plaintiff would pack and ship them and the Defendant would clear them at the Port of Mombasa and sell them to its customers in Kenya. The Plaint pleads it was a term of the MOU that the Defendant would establish and supply necessary facilities and equipment, rent a necessary warehouse, recruit human resources and pay all expenses, including cost of goods supplied, government charges, and taxes. 1. The Plaintiff claims that the parties allegedly traded on credit terms, with the Plaintiff maintaining a running credit account, recording goods sent and payments made and that it would prepare pro-forma invoices to assist the Defendant apply for import declaration, packing lists which were verifiable by the Defendant or its agents, and itemized bills. The Plaintiff claims it further supported the Defendant's business by advancing money to help pay import duties and other charges, to be repaid from proceeds of sale and it alleged that the Defendant had an employee resident in Japan tasked with verifying packing of spare parts/vehicles, who at times requested subsistence advances from the Plaintiff. 2. The Plaintiff set out a detailed, itemized list in its plaint of packing lists, bills, and charges spanning 30th June 2009 to 16th September 2016, including numerous packing list/bill entries referenced by shipment codes of different values, Auto parts sent by EMS, a Pajero injector pump parts consignment, a transfer to *Pacific Auto Parts*, Kobe Port accommodation and storage fees, inland charges, inspection fees, and extra bank charges. The Plaintiff avers that the total amount billed, together with expenses such as bank charges, fees, advances to the Defendant and taxes payable by the Defendant, net of all payments made by the Defendant, amounts to JPY 14,144,339. That this is the debt accumulated by the Defendant as at 30th September 2016, which the Defendant has refused, neglected and/or failed to pay despite promises so to do. The Plaintiff states that its managers travelled to Kenya for a meeting to resolve the matter, but negotiations were unfruitful and it issued a demand and notice of intention to sue, which went unanswered. It is for these reasons that the Plaintiff prays for judgment against the Defendant for the JPY 14,144,339, costs of the suit and interest on these sums. 3. In response, the Defendant filed a statement of defence dated 30th August 2018. It avers that the MOU was between the Plaintiff and *Maeji Company Limited* and not the Defendant and that the Defendant was not a known legal entity as at 26th May 2009. The Defendant avers that the MOU between *Maeji Company Limited* and the Plaintiff was intended to establish a joint venture company to be known as *Maeji Kaiho International Limited*, that is the Defendant, which was to deal in selling used auto parts in Kenya. It asserts that the obligations pleaded by the Plaintiff were to be carried out by *Maeji Company Limited*, a company not party to these proceedings and that this company was to supply necessary facilities and equipment, rent the necessary warehouse and supply necessary human resources. 4. The Defendant contends that it did not have any employee residing in Japan tasked with verifying packaging of spare parts/vehicles as stated by the Plaintiff and further denies a statement of account dated 17th November 2017. The Defendant further denies receiving and selling the motor vehicles and used spare parts enumerated by the Plaintiff but avers that the Plaintiff repossessed the engines per the Bill of Lading dated 30th June 2009 valued at JPY 4,467,842, and that the Plaintiff should therefore not claim that amount. That as a consequence of the averments on the repossessed engines, the Defendant denies the allegations on the sum billed and accumulated debt. 5. The Defendant further states that there was no negotiation meeting that bore fruit because it denies owing the Plaintiff the alleged sum of JPY 14,144,339 and that its directors are Mr. Geoffrey Muisyo Musyoka and Mr. Norihito Kondo, holding equal shares, and that Mr. Norihito Kondo is also the Managing Director and/or President of the Plaintiff. The Defendant states that the Plaintiff ought not to have filed this suit while its Managing Director Mr. Kondo is simultaneously a director of the Defendant, and that Mr. Kondo ought to have declared this interest in the pleadings. The Defendant concludes that the suit is bad in law, incompetent, and an abuse of the court process, it denies being issued with any such demand or notice and thus prays that the suit be dismissed with costs. 1. At the hearing, the Plaintiff called two witnesses who testified on its behalf; its Executive Director, Baji Katsuya (PW1) who relied on his witness statement dated 27th June 2018 and he produced the List and Bundle of Documents dated 12th July 2018 (PExhibit 1 - 36) and; Norihiko Kondo, its CEO who relied on his witness statement dated 1st April 2019 and produced the Further List of Documents dated 11th April 2019 (PExhibit 37). On its part, the Defendant presented Geoffrey Muisyo Musyoka (DW1), its director, who relied on his witness statements dated 1st April 2019 and 22nd November 2019 and he produced the Lists and Bundles of Documents dated 11th February 2019 (DExhibit 1-9) and 22nd November 2019(DExhibit 10-37). 2. After hearing the parties, the court directed them to file written submissions which are on record and since the same are a mirror of the parties’ positions highlighted above, I will not rehash the same but make relevant references in my analysis and determination below. **Analysis and Determination** 1. I am in agreement with the Defendant’s submissions that since these are civil proceedings, then the court’s determination is on a balance of probabilities and is guided by the principle that he who alleges must prove. Denning J., in **Miller v Minister Of Pensions [1947]2 All ER 372** discussed the burden of proof and he stated as follows:- *“****That degree is well settled. It must carry a reasonable degree of probability, but not so high as is required in a criminal case. If the evidence is such that the tribunal can say: ‘we think it more probable than not’, the burden is discharged, but, if the probabilities are equal, it is not. Thus, proof on a balance or preponderance of probabilities means a win, however narrow. A draw is not enough. So, in any case in which the tribunal cannot decide one way or the other which evidence to accept, where both parties’ explanations are equally (un) convincing, the party bearing the burden of proof will lose, because the requisite standard will not have been attained.”*** 1. The aforementioned position has now been espoused by our superior courts and finds statutory comfort in **sections 107 and 108** of the ***Evidence Act(Chapter 80 of the Laws of Kenya)*** which provide as follows:- ***107. Burden of proof.*** *(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.* ***108. Incidence of burden.*** *The burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side.* (Also see **Ignatius Makau Mutisya v Reuben Musyoki Muli [2015] KECA 612 (KLR**) 1. From the Plaintiff’s submissions, the court is being asked to determine the following issues: 2. *Whether there was a joint venture or partnership* 3. *Whether the Plaintiff needed to consult or involve the Defendant in filing of the suit* 4. *Whether the Defendant owes the amount claimed by the Plaintiff* **Joint Venture/Partnership** 1. The Plaintiff submits that there was no joint venture or partnership and it relies on the DW1’s testimony, which expressly denied any joint venture and an email dated 25th November 2015 referencing an unsuccessful attempt to establish an “end of life vehicle recycling company” and not evidence of an operative partnership. The Plaintiff submits the true relationship, as captured in both parties' documents and PW1's statement, was a straightforward business/trading relationship. That the Defendant would order parts, the Plaintiff would supply them, and the Defendant would pay in the course of trade in a buyer-seller relationship, not a partnership. The Plaintiff also points to an email dated 11th March 2015 referencing a disputed "development levy/goodwill money" payment, arguing that this and the absence of any minutes, joint accounts, or evidence of profit-sharing/repatriation to PW2 between 2009–2011 further confirm there was no partnership. 2. In response, the Defendant submits that the MOU's actual purpose was for *Maeji Company Limited* and the Plaintiff to form a joint venture company, which became the Defendant and that the obligations under the MOU were assigned to the said *Maeji Company Limited*, not the Defendant. That since the Plaintiff pleaded the MOU as being between itself and the Defendant, and evidence shows otherwise, the Defendant invokes the principle that parties are bound by their pleadings and that evidence at variance with pleadings must be disregarded. 3. In his testimony, PW1 stated that he indeed signed the MOU himself and he admitted that *Maeji Company Limited* and the Defendant are two different companies and that there is no MOU between the Plaintiff and the Defendant. PW2 also admitted that the MOU was between *Maeji Company Limited* and the Plaintiff and not between the Plaintiff and the Defendant. Further, that when the MOU was being signed on 26th May 2009, the Defendant had not been incorporated and that as per DExhibit 2, it was incorporated on 5th June 2009. In an email dated 15th May 2009, PW 1 admitted that he wrote to DW 1 about making payment of USD 50,000 for purposes of setting up a joint venture account. Going through the evidence, I find that the MOU's own text is unambiguous that it is *"..made and entered into by and between Maeji Co Ltd... and Kaiho Sangyo Co Ltd"* and is expressed to be *"…concerning the foundation of joint venture company, Maeji Kaiho International Ltd.*" It is clear that the Defendant is described as the product of the MOU, not a party to it. Further, the MOU is dated 26th May 2009 and DExhibit 2 shows the Defendant was only incorporated on 5th June 2009, eleven days later. It is obvious that a company cannot execute a contract before it exists and this is not a matter of interpretation but a straightforward incapacity point. 4. Since PW1 was the Plaintiff's witness, his concession on cross-examination that he signed the MOU himself, and the Defendant had not yet been incorporated at the time is evidence that the MOU was not between the Plaintiff and the Defendant. The email of 15th May 2009 corroborates the joint-venture characterization and since PW1 admitted that it was discussing a USD 50,000 payment for setting up a joint venture account, I find that this is consistent with and not contradictory to the MOU's own recital that it concerned the foundation of a joint venture. This closes off any argument that the joint venture language in the MOU was just loose or informal drafting and I find that indeed, the Plaintiff and a third party had an MOU to establish the Defendant as a joint venture vehicle. 5. However, my analysis of the entire evidence also demonstrates that the Plaintiff’s cause of action does not rest on the MOU alone and that whereas the Plaintiff misdescribes the MOU, DW1 and the Defendant’s own documents including the CR12, statement of account and payment records seem to concede an active buyer-seller relationship with the Plaintiff after incorporation of the Defendant. DW 1 admitted that the agreement was to bring the goods to Mombasa, the Defendant would clear the goods and then profit is shared. Once shipment was done, DW 1 would pay customs and duty fees and also pay for warehousing, offices and rent. 6. I will therefore agree with the Plaintiff that the relationship between the parties was that of a buyer and seller and not that of a joint venture or partnership. **Consultation with the Defendant before filing the suit** 1. This issue is framed around the Defendant's procedural objection that PW2, who was also a director of the Defendant, filed the present suit without a board resolution from the Defendant rendering the suit improper. The Plaintiff's position is that it is a distinct limited liability company from its Chairman and directors personally and that a director's private dealings with another entity cannot bar the Plaintiff from suing that entity. The Plaintiff contends the Defendant company's very formation was tainted by forgery, misrepresentation and falsified documents, in a process the Plaintiff's Chairman, PW2 was not party to, such that the Defendant could not establish any of its own directors' genuine participation in its operations. 2. On the forgery allegations, PW2 testified he never signed the Defendant's formation documents, lease, or guarantee, his name was misspelled on them and he produced his passport proving he was outside Kenya when the documents were allegedly executed and that he never met the attesting advocate and DW1 could not produce evidence such as travel records supporting its shifting claim that documents were carried to Japan for signature. The Plaintiff also submits it was improper for the same advocate to have acted for both parties in the underlying transaction and then act solely for the Defendant once a dispute arose. 1. In response, the Defendant submits in the affirmative, that its directors are PW2 and DW1 as per Form *CR12* dated 26th April 2016 and 30th November 2015 and PW2's denial of being a director is an afterthought, since he never reported the CR12 forms as forgeries to police. That an email dated 18th April 2009 from PW2 to DW1 referencing transmission of PW2’s passport and company registration documents is cited as corroboration and the Defendant also submits, in the affirmative, that PW2 and DW1 hold equal 50/50 shares in the Defendant, relying on an email dated 15th May 2009 from PW1 to DW 1 discussing a USD 100,000 capital injection split equally between the two. 2. It is not lost to the court that allegations of of forgery must not only be pleaded but proved and to a standard higher than a balance of probabilities which is the civil standard of proof (see **Kiarie & 2 others v Magera [2018] KECA 467 (KLR)** and **Vijay Morjaria v Nansingh Madhusingh Darbar & another [2000] KECA 223 (KLR).** In his testimony, even though PW2 stated that he did not know he was a director of the Defendant, he conceded that he had delegated much of the day-to-day operations of the company to PW1. He also stated that it is possible that he was a director of the Defendant if PW1 stated so. On his absence from Kenya in March and April 2009, he was referred to an email dated 28th April 2009 written by a Kyande of the Kenya Revenue Authority acknowledging his presence in Kenya at that time. 3. I find PW2’s own uncertainty as to his status in the Plaintiff and the Defendant as corrosive to his credibility on collateral facts. If PW2 cannot say with confidence whether he is even a director of the Defendant, going so far as to say "it is possible if PW1 says so”, this significantly weakens the reliability of his more specific, categorical claims that he never signed the Articles of Association, lease and guarantee or that he was never present before the attesting advocate and his name was misspelled. A witness who is vague about the big picture but supposedly certain about granular details such as signatures, attestation, spelling errors invites scrutiny from the court. This is the kind of testimony the court reasonably finds falls short of the cogent and clear threshold ***Vijay Morjaria(supra)*** requires. Once again, forgery is, in substance, an allegation of criminal conduct and courts require more than a balance of probabilities precisely because the consequences of such a finding are serious and because it is easy for a party to allege forgery defensively once a debt claim turns against them. Therefore, the bar must be clear and convincing evidence, not merely evidence that tips the scale. 4. Further, PW2 conceding that he delegated day-to-day operations entirely to PW1 does two things. One, it explains why he might genuinely not know what was signed on his behalf and two, it undermines the narrative that he was closely tracking or would necessarily have noticed forged documents bearing his name. I find that passive, hands-off principals are poor witnesses to affirmative claims about what specifically did or did not happen to documents purportedly bearing their signature. I also find that the KRA email is the most damaging piece for the forgery claim. This is independent, contemporaneous, third-party documentary evidence and not something either party generated for litigation purposes. If a KRA official placed PW2 in Kenya around 28th April 2009, this directly contradicts the passport-based claim of absence during the same period. In my view, passports can show entry/exit stamps that are open to interpretation of dates, stopovers or re-entries but a third-party acknowledgment of presence on a precise date is harder to explain away. 5. Lastly, the corroborating CR12 and Company records confirm his directorship and shareholding as a matter of official record and these are prima facie evidence of the company records (see **Arnold Kipkirui Langat v Atticon Limited & 6 others; Linkit Limited (Affected Company) [2021] KEHC 7197 (KLR)**]. The Plaintiff did not upstage this evidence or impeach their credibility or veracity and overall, I agree that the forgery allegations are not made out to the required standard. 6. In any event, I tend to agree with the Plaintiff that it did not need to consult or seek permission of the Defendant just because PW2 was a common director in both companies. This court has always affirmed that that a company is a distinct legal entity separate from its shareholders and directors, and that the liabilities of the company are not automatically transferable to its directors (see **Salmon vs Salmon [1987] AC 78).** As stated, the Plaintiff and Defendant are two separate corporate entities, each with the capacity to sue and be sued in their own name. The fact that PW2 wears two hats, that of a senior role in the Plaintiff and a director/shareholder role in the Defendant as per the CR12 and company records does not merge the two companies or give either one a veto over what the other does in its own corporate capacity. 1. I agree with the Plaintiff’s submission that as stated by the Court of Appeal in **Saraf Limited v Augusto Arduin [2016] KECA 177 (KLR),** there is *“…no law that makes it a requirement for a limited liability company that has been sued to furnish proof or to demonstrate that its Board of Directors or its shareholders have authorized it to defend the suit. If this were the law, logistical reasons would render it difficult or near impossible for companies to defend suits having regard to the strict time-lines within which appearance and defence must be filed.”* Indeed, a party dealing with a company or a court assessing a filed suit is entitled to presume internal formalities were observed, and there's no freestanding requirement to prove a board resolution before suing (Also see ***Royal British Bank v Turquand* 1856 A 11 ER. 886**; “the Rule in ***Turquand****”*). 2. Whether PW2, by holding a role in both companies, owed some duty to disclose that conflict or seek consent from the Defendant before allowing the Plaintiff to sue it is a question of directors' fiduciary duties and it runs between PW2 and the respective boards/shareholders but it is not a defence available to the Defendant as a bar to the Plaintiff's suit. Indeed, if a common director's presence on both sides meant one company needed the other's "permission" to sue, this would effectively immunize any two companies with an overlapping director from ever holding each other to account through litigation which in my view, is an outcome the ***Companies Act*** does not require and which would undermine, rather than serve, the protective purpose of separate legal personality. I therefore dismiss this objection by the Defendant. **Amounts claimed by the Plaintiff** 1. The Plaintiff submits that the Defendant's own exhibited statement of account dated 17th December 2011 shows an outstanding balance of JPY 18,531,068 as at that date, with the disputed repossessed engines already set off by a credit of JPY 4,903,000 entered on the same date, meaning that dispute was already resolved within the account itself. That after 17th December 2011, the Defendant ordered further goods totaling JPY 42,253,168 and adding the pre-existing balance JPY 18,531,068 to these further supplies gives a total debt of JPY 60,784,236. The Plaintiff submits that the Defendant made subsequent payments totaling JPY 41,149,538, plus was credited JPY 4,903,000 for the engines, giving total credits of JPY 46,052,538 giving a resulting balance due of JPY 14,731,698, which the Plaintiff submits accounts for the marginal difference from the pleaded sum. As such, the Plaintiff submits it has proven its case to the required standard through witness testimony, evidence produced and the Defendant's own statements of account and payment records, and asks the court to enter judgment as prayed in the Plaint. 1. In response, the Defendant submits that the Statement of Account dated 17th November 2017 was undisputed, contrary to the Plaintiff's claim and that this Statement of Account was never produced as an exhibit in the suit as the Plaintiff's attempt to introduce it by way of an application in 2022 was rejected by the Court. The Defendant submits in the affirmative that the Plaintiff did repossess engines under Bill of Lading dated 30th June 2009 worth JPY 4,467,842 and that the pleaded claim is JPY 14,144,339, but the Plaintiff's own submissions arrive at a different figure of JPY 14,731,698 which the Defendant submits is at variance with the pleaded amount. That PW1 and PW2 admitted on cross-examination that they did not know how the JPY 14,144,339 figure was calculated which is precisely why the Plaintiff later tried to introduce the 2017 Statement of Account. The Defendant contends that written submissions cannot cure this evidentiary gap, since submissions are not evidence. 2. Going through the evidence, I am in agreement with the Defendant that none of the Plaintiff’s witnesses was able to demonstrate how the pleaded sum of JPY 14,144,339 was arrived at and they expressly admitted as much. The Plaintiff cannot explain its own pleaded figure, and the numbers in play don't reconcile with each other because the pleaded sum in the plaint is JPY 14,144,339, the Plaintiff's own submissions' reconstruction puts it at JPY 14,731,698 and the Defendant's arithmetic, using the Plaintiff's own pleaded supply and payment figures places it at JPY 36,887,573. The Plaintiff’s direct admission from its own witnesses that the pleaded quantum has no evidentiary foundation is damaging to the Plaintiff’s claim. Indeed, the application to introduce the 2017 statement only confirms that it was a post-hoc attempt to backfill a gap that had already been exposed. 3. The sums sought by the Plaintiff are in nature of special damages which must be pleaded and strictly proved. Even if the December 2011 Statement balance of JPY 18,531,068 is accepted, nothing in this statement explains how the parties got from that figure to the pleaded JPY 14,144,339 and that gap is precisely what PW1 and PW2 admitted, under cross-examination, they could not explain. This statement might support the opening balance in the Plaintiff's post-hoc reconciliation in its submissions but it does nothing to cure the failure of proof on the ultimate pleaded sum, which remains the more fundamental defect in the Plaintiff's case. It is therefore my finding that the Plaintiff has failed to prove that the Defendant owes it the pleaded sums. **Conclusion and Disposition** 1. In the upshot, I find that the Plaintiff has not made out its case on a balance of probabilities and I now dismiss the suit with costs being awarded to the Defendant. **DATED SIGNED AND DELIVERED virtually at NAIROBI this 17TH DAY OF JULY 2026.** **............................................................................** **J.W.W. MONGARE** **JUDGE** **IN THE PRESENCE OF:-** 1. Ms. Ocholla holding brief for Mr. Guantai for the Plaintiff. 2. Mr. Ngure holding brief for Mr. Uvyu for the Defendant. 3. Amos- Court Assistant