[2023] KEHC 19883 (KLR)

Kenya Anti-Corruption Commission v Keittany & another (Anti-Corruption and Economic Crimes Civil Suit 4 of 2016) [2023] KEHC 19883 (KLR) (Anti-Corruption and Economic Crimes) (29 June 2023) (Judgment)

Neutral citation: [2023] KEHC 19883 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Anti-Corruption and Economic Crimes

Anti-Corruption and Economic Crimes Civil Suit 4 of 2016

EN Maina, J

June 29, 2023

(FORMERLY HCCC NO. 897 OF 2006)

Between

Kenya Anti-Corruption Commission

Plaintiff

and

Job Keittany

1st Defendant

Michael Chesikaw

2nd Defendant

Judgment

1. The Plaintiff’s claim, against the Defendants through the Plaint dated 18th August 2006, is for a sum off Kshs. 7,500,000 with interest at court rates and the costs of the case.

2. The Plaintiff, now defunct, is the predecessor of the Ethics and Anti-Corruption Commission while the Defendants were herbalists and researchers and the proprietors of Community Based Organization known as Par Aid that received funds (a grant) from the National Aids Control Council (NACC), a public body. The Grant was intended for a study to test the efficacy of a herbal medicine in the treatment and management of HIV/AIDS and was to be carried out in partnership with Moi University where the tests were to take place. The Plaintiff contends that the defendants used forged receipts to the tune of Kshs. 7,500,000 to account for the funds hence this claim.

3. The Defendants filed separate statements of defence with that of the 1st Defendant being dated 27th September 2006 and that of the 2nd Defendant 29th September 2006.

4. The 1st Defendant vehemently resisted the claim including denying the existence of Par Aid and that he was a partner thereat. He also averred that he had been coerced and intimidated into admitting wrong doing in regard to funds received from the National Aids Control Council (NACC) and urged this court to dismiss the plaintiffs case. The 1st Defendant however died in the course of the trial and on 14th July 2022 Counsel for the Plaintiff urged this court to mark the case against the 2nd Defendant as abated.

5. It is important to note that the Defendants were arraigned in the Chief Magistrates court at Kibera and tried for several counts of the offence of obtaining by false pretenses in Criminal Case No. 7157 of 2007 but were acquitted for insufficiency of evidence.

The Plaintiff’s case 6. The Plaintiff adduced evidence that it undertook investigations on the allegations of unlawful acquisition of public property amounting to Kshs. 7,500,000 by Par Aid an entity registered in the names of the 1st and 2nd Defendants as Chairman and Treasurer respectively; that, investigations by the Plaintiff established that Par Aid used fake receipts to account for the grant of Kshs 7,500,000 disbursed to it by the National Aids Control Council (NACC).

7. The Plaintiff contends that the bulk of the projected costs of the project were to be expended on laboratory tests, but that no such tests were conducted; that, instead, the Defendants provided forged receipts purportedly issued by Moi University. It was the Plaintiffs case that the Grant was disbursed to the Defendants through their bank account at Kenya Commercial Bank, Kipande Branch where both of them were signatories and which funds they withdrew via cheques. The Plaintiff contends therefore that 1st and 2nd Defendants fraudulently misappropriated the public funds belonging to NACC, for their own personal benefit hence unjustly enriching themselves in the sum of Kshs. 7,500,000 at the expense of NACC and they ought to be ordered to restitute the same to NACC.

8. The Plaintiff called 7 witnesses whose evidence is summarized below: PW1 David Kang'ara adopted his witness statement dated 9th September 2021 as his evidence in chief. He testified that he was an investigator with the Ethics and Anti-Corruption Commission, the successor of the Plaintiff and was in conduct of the investigations in this case; That in December 2005, the Plaintiff received a complaint that Par Aid which was registered in the names of the Defendants had used falsified receipts to account for a grant received from NACC; that upon investigations, the Plaintiff established that the Defendants had presented a project proposal and a budget to NACC to support their application for funding of the intended research of the efficacy of a herbal medicine known as Par Aid in the cure of HIV/AIDS. He produced the investigation report and the proposal as PExh 2 and 3 respectively and further stated that a grant agreement dated 29th July 2002, PExh 6 was signed between the Defendants and NACC for a grant of Kshs 7,500,000/-; that the Grant was disbursed to the Par Aid in four equal instalments of Kshs 1,875, 000/- through their KCB Bank Kipande Branch account No [particulars withheld]; that the Defendants breached the terms of the grant agreement by failing to maintain books of account and by failing to account for the usage of the Grant and that the Defendants uttered forged receipts (PExh 11 and 17) purporting to have been issued by Moi University as genuine accounting documents; that the University through a letter written by the Chief Administrative Officer and which was dated 1st September 2004 confirmed that the University had not received a total amount of Kshs 3,833,800/- from Par Aid as alleged. PW1 further testified that the investigations revealed that the Defendants misrepresented that HIV/AIDS tests were conducted on patients as when no such tests had in fact been done; that the 1st Defendant admitted in a confession recorded in court PExh to having fraudulently misappropriated Kshs 1,064. 000/- out of the Grant, which sum the 1st defendant was willing to restitute to NACC but he did not do so. PW1 produced the confession as PExh 13.

9. PW2 - Beatrice Wangui Gathirwa adopted her witness statement dated 13th November and testified that she was the Acting Deputy Director Finance and Administration at NACC from December 2004 to December 2008. She confirmed that the Par Aid project was approved for funding as a national project by NACC and that public funds in the sum of Kshs 7,500,000 was disbursed from NACC to Par Aid in 4 monthly instalments.

10. PW3 – Hon. Justice Nzioki Wa Makau testified that whereas he is currently a Judge of the Employment and Labour Relations Court at Nairobi he was previously an Investigator at the Plaintiff and that on 26th April 2006, the 1st Defendant (deceased) recorded a confession in which he admitted that he misappropriated funds in the sum of Kshs. 1,064,000 and promised to repay the monies in three monthly instalments but did not do so. PW3 testified that the confession (PExh 13) was recorded before Honourable Margaret Wachira, then a Senior Principal Magistrate, in his presence and that of Inspector Ndemwa.

11. PW 4 - Professor Alex Chemtai testified that he is a retired Professor of Immunology at the Moi University College of Health Services; that he was the founding Chairman of the Institutional Research and Ethics Committee (IREC) which had the mandate of reviewing and approving research proposals at Moi University; that the Par Aid proposal was tabled before the IREC for approval as a matter of urgency for reason that the 1st Defendant (deceased) was to travel to Paris to obtain a patent for his herbal medicine; That the said proposal was reviewed by four experts in that field and found defective in form and content in over eight areas and hence found not in line with the stipulated guidelines of IREC and for that reason IREC declined to issue the expedited approval as requested. He stated that however, due to pressure he was forced to issue an expedited approval, which he did on 5th August 2002. He testified that on 30th August 2004, he wrote to the Chief Administrative Officer at the Moi University stating that he had issued the expedited approval under duress but his attempt to withdrawal the approval was overruled. He stated that he resigned.

12. PW 5 - Margaret Gimaiyo a retired Senior Internal Auditor at Moi University testified that she audited the receipts purportedly submitted by the Defendants to account for part of the grant. She testified that she audited 57 receipts issued on different dates to different persons and found that some serial numbers on the receipts had not been issued by Moi University and the other receipts had in fact been issued to different persons for different purposes; that the fake receipts were very similar to the ones Moi University had to issue in terms of serial numbers.

13. PW 6 - Fredrick Kiogora Mwangi testified that he is retired Financial Management Specialist at NACC. He explained how approvals for disbursements were made and how the funds were disbursed to Par Aid; He testified that he executed the Grant (EXB.P6) on behalf of the Financial Management Agency and that NACC had the responsibility of monitoring the use of the grant and receiving the audit reports from the Defendants.

14. PW 7 - Kennedy Mwinzi Munyoki, the Assistant Manager Business Banking at KCB Kipande House testified that the Par Aid bank account number [particulars withhed] was opened on 19th July 2002 with both Defendants as signatories. He produced the account opening and confirmation of signatories forms as PExh 7 and 19. He confirmed that the Grant was deposited into the said bank account in four tranches of Kshs 1,875,000 each and produced copies of the cheques and bank statements PExh 20 (a) and (b) and 21. He stated that the money was withdrawn by both Defendants vide cheque encashment over the counter as both were signatories to the said bank account and that the account was closed on 17th May 2005.

Defense case 15. As stated earlier the 1st Defendant died in the course of the hearing and his case was marked as abated. The 2nd Defendant testified that he was acquitted in the criminal case; Kibera Anti-Corruption Case No 7157 of 2007. That in that case the court found that the receipts were not forged; That the court also found that the research was carried out and concluded. That the issues in this suit had therefore been already heard and determined. He stated that the funds were duly accounted for. He relied on the auditor’s report in his bundle as DExh 1-4 and contended that each disbursement was accounted for as it was a condition precedent prior to the next disbursement. He stated that the documents used in accounting for the funds were confiscated by the Plaintiff; That he was the treasurer of Par Aid but the research belonged to the 1st Defendant (deceased) and that there were 3 doctors in Eldoret and Nairobi who were involved in the project and it was they that recruited the participants. He contended that all approvals for the project were obtained; that tests were undertaken on patients and that there were no complaints regarding the documents submitted to NACC. In cross examination, he testified that tests were done on participants; that samples were taken to Moi University to test the viral load but the doctors retained some of the receipts. He explained that the 1st Defendant was not a medical doctor and further that cheques were always drawn in the name of the 1st Defendant and he would only counter-sign. He reiterated that all their documents pertaining to this case were confiscated by the Plaintiff Commission.

Submissions by the Plaintiff 16. Learned Counsel for the Plaintiff framed two issues for determination being; whether 1st and 2nd Defendants misappropriated the grant disbursed to them jointly as Par Aid (Herbalists and Researchers) by NACC; and whether the 1st and 2nd Defendants are jointly and severally liable.

17. Counsel submitted that the Defendants misappropriated the Grant; that in an attempt to account for the Grant, the Defendants furnished the NACC with a report on Use of Funds tabulating the costs incurred in the project which report was a summary of different expenses without supporting documents to prove the expenses; that a further attempt to account for the Grant was the impugned receipts purportedly issued by Moi University for laboratory services and HIV screening, which receipts were disowned by the said Moi University. Counsel stated that an audit of the said receipt revealed that the genuine receipts issued by Moi University with the same serial numbers as those presented by the defendants, were for different purposes and had been issued to different persons. That the audit report prepared by Bernny & Associates purporting to account for the use of the Grant does not bear a signature as required of an audit report and that the documents that should accompany such a report were also missing. She stated, that in Criminal Case No. 7157 of 2007: Republic v Job Keittany & Michael Chesikaw, the proprietor of Bernny & Associates testified that the said audit report was prepared by an unqualified person.

18. On the second issue, Counsel submitted that the Defendants are liable jointly and severally; that it is not in dispute that Par Aid (Herbalists and Researchers), a community-based organization, was registered in the names of both Defendants; that the mandate for the bank account no. [particulars withhed] for the two Defendants to sign. Counsel contended that the Defendants withdrew the Grant funds from their KCB bank account over the counter through cheques; signed by both Defendants. She contended that PW 7 had testified that the funds could not have been withdrawn by one Defendant without the other and therefore the scheme to unjustly benefit themselves at the expense of NACC could not succeed without the involvement of both Defendants.

19. Counsel stated that the 2nd Defendant did not produce any documents for the Grant or any form of accounting that he had taken as the treasurer of Par Aid. Counsel added that the 2nd Defendant did not produce any documents to prove Par Aid properly accounted for the funds; that the only document the 2nd Defendant relied on was an unsigned audit report of Par Aid for the period ended 30th June 2003 by Berny & Associates which report was disowned by the proprietor of the audit firm.

20. Counsel submitted that the defendants therefore illegally misappropriated Kshs. 7,500,000 thereby unjustly enriching themselves at the expense of NACC. Counsel placed reliance on the case of Samuel Kamau Macharia v Kenya Commercial Bank Limited, Kenya Commercial Finance Company Limited [2003] eKLR. Counsel urged this court to grant the prayers sought.

The submissions of the 2nd Defendant 21. Learned Counsel for the 2nd Defendant submitted that he produced sufficient evidence to rebut the plaintiffs’ claims; that on the allegation that the funds were fraudulently obtained, there is no doubt that the project was approved and that it was undertaken as confirmed by several doctors some of who testified in the criminal case. Counsel stated that on the alleged misrepresentation that HIV/AIDS tests were conducted on patients as part of the project when no such tests were conducted, this was disproved as several prosecution witnesses admitted during the criminal trial that the research took place.

22. On the alleged forgery of receipts, Counsel submitted that the author of the audit report had testified at the criminal trial that the audit was done at his office by a junior who had apparent and ostensible authority and that the trial court was satisfied as to the authenticity and authorship of the audit report. Counsel stated that the plaintiff had seized all the documents that the Defendants could have used to exonerate themselves; that the Plaintiff chose which documents to make available in this case but it decided not to present or make available documents which would have extricated the Defendants on the pretext that the documents were lost.

23. Counsel asserted that the onus was always on the Plaintiff to record an inventory of all the things they seized and it could not have been the Defendants’ duty to do so as they had been arrested. Counsel stated that the Defendants were greatly prejudiced by the actions of the Plaintiff in seizing the documents and that this claim was lodged with the ulterior motive to render the defendants helpless. Counsel urged this court to dismiss the suit with costs.

Issues for determination 24. Learned Counsel for the parties filed a list of Agreed Issues on 26th March 2007. The issues are:-1. Is there a community based organization known as Par Aid (herbalists And Researchers) (hereinafter simply referred to as “PAR AID”), and was the 1st Defendant a proprietor thereof?2. Did the National AIDS Control Council (hereinafter “NACC”) accept a project proposal by the Defendants to research into the efficacy of PAR AID herbal medicine in the treatment of HIV/AIDS infections?3. Did NACC grant Kshs. 7,500,000. 00 to the Defendants to fund the aforesaid research on terms that it would be utilized strictly to meet the costs and obligations incurred under the project?4. Did the Defendants, in breach of the terms of the aforesaid financing, fraudulent misappropriate the said sum of Kshs. 7,500,000. 00 granted by NACC?5. Have the Defendants been unjustly enriched to the sum of Kshs. 7,500,000. 00 at the expense of NACC?6. Is the instant suit incompetent, an abuse of court process and bad in law for non-joinder of NACC as a party to the suit?7. Did the 1st Defendant voluntarily admit having fraudulently misappropriated the sum of Kshs. 1,064,000. 00 from NACC or was such admission obtained by the Plaintiff under duress and through coercion and inducement?8. Did the plaintiff use unlawful means of intimidation to gather evidence to adduce in the instant civil suit?9. Is the suit fatally defective having been filed by Stephen Macharia Kimani Advocate, an employee of the Plaintiff?10. Was demand and notice of intention to sue issued to the 1st Defendant?11. Is the plaintiff entitled to judgment against the Defendant jointly and severally for Kshs? 7,500,000. 00; costs of and incidental the suit; and interest at court rates on the sum claimed together with costs?”

25. The above issues seem to have been abandoned as Counsel for the parties did not submit on the same. Instead Counsel for the Plaintiff framed the following issues: -a.Whether the 2nd Defendant misappropriated the Kshs. 7,500,000 grant disbursed to Par Aid (Herbalists and Researchers) by NACC; andb.Whether the 2nd Defendant is liable to restitute the NACC to the extent of the funds lost

Analysis and determination Issue (a) Whether the Defendant misappropriated the Kshs. 7,500,000 grant disbursed to Par Aid (Herbalists and Researchers) by NACC; 26. The undisputed facts of this case are that contrary to the averment by the 1st Defendant Par Aid, was in existence and that between August 2002 and July 2003 Par Aid, which was registered as a Community Based Organization to the names of the Defendants received a grant of Kshs 7,500,000/-, public funds, from NACC to fund a proposed project to test the efficacy of a herbal medicine on HIV/AIDS patients. It is also not in dispute that the said funds were deposited into the Defendants’ KCB Bank Account No [pariculars withheld] in four equal batches. Both Defendants were signatories to the said bank account and one could not withdraw money without the other. It is also not contested that the Defendants were required to account for the funds and that they did so using receipts allegedly issued by Moi University. They also relied on an audit report which they purported to have been prepared by Benny & Associates. It transpired that the persons who were subject of the study would have their tests for the efficacy of the drugs done at Moi University and the Grant would cater for the expenses.

27. This court finds however that the receipts presented by the Defendants to account for the Grant and which they alleged were from Moi University were forgeries. There was evidence which I find is credible that the genuine receipts bearing the same numbers had been issued by Moi University to different persons and were for different figures. For instance, Receipt Serial No. 213026 purportedly issued to Par Aid for Kshs. 25,600 allegedly for HIV Screening for 32 patients on 23rd August 2002 had been issued by Moi University for Kshs. 250. 00 (PExh 12); Receipt Serial No. 213037 purportedly issued to Par Aid for Kshs 20,000/- for screening of HIV for 25 patients on 24th August had been issued to a different person by Moi University for Kshs. 200 and Receipt Serial No. 221981 purportedly issued to Par Aid for Kshs 129,500/- for CD4, Viral Load, Renal function for 7 patients on 14th November 2002 had been issued to a different person by Moi University for Kshs. 500. There was also evidence that some of the receipts surrendered by the Defendants were yet to be reached by the University and were therefore outright forgeries. Further the dates on the receipts were different from those on the receipts at the University. The numbers of the receipts were different all of which are facts which this court confirmed upon perusing them.

28. There was also evidence, which in my considered view, proved that the Audit Report relied upon by the Defendants to account for the funds was a forgery. The proprietor of Benny & Associates distanced himself from the report and stated that the person who prepared it did not have authority to do so although she had a general authority to prepare reports.

29. The 2nd Defendant did not adduce any evidence to rebut that of the Plaintiff instead contending that the documents which he could have used were seized by the Plaintiff hence rendering him helpless to defend himself. I am not however convinced that the seizure of the documents rendered him helpless. In my considered view if indeed the tests were carried out and the documents he used to account for the Grant were from Moi University the 2nd Defendant could have obtained the originals or copies thereof from the subjects of the trials. This court had by a ruling dated 22nd March 2017 (Achode J, as she then was,) allowed parties to produce certified copies of the documents that were in their possession. This was upon confirming that the originals which had been produced during the criminal trial were lost.

30. The 2nd Defendant relied heavily on the judgment delivered in Chief Magistrate’s Court Kibera Criminal Case No. 7157 of 2017 and argued that the judgment extricated them from those allegations. It is however trite that not all judgments of other courts are binding on a court and that it is not in all circumstances that they are conclusive proof of the matters which they state. Indeed, Section 44 of the Evidence Act Cap 80 states that only judgment in rem are binding on other courts. Section 45 which relates to other judgments touching on matters of a public nature such as this one, states:-“Other judgments of a public nature.45. Judgments, orders or decrees, other than those mentioned in Section 44 of this Act, are admissible if they relate to matters of a public nature relevant to the inquiry, but such judgments, orders or decrees are not conclusive proof of that which they state.”

31. Clearly therefore the judgment referred to by the Defendant is not conclusive proof of what it states and so is not binding on this court. It would only have been binding if this case was a criminal case purporting to charge the defendants with the offences they had been acquitted of. That judgment cannot therefore exonerate the Defendants from this claim.

32. The documents produced by 2nd Defendant did nothing to rebut the Plaintiff’s evidence that the sum of Kshs.7,500,000 was never accounted for and that the defendants purported to account for the same using forged documents hence fraudulent accounting. Therefore, Issue (a) has been proved on a balance of probabilities and can only be answered in the affirmative.

Issue (b) Whether the 2nd Defendant is liable to restitute the NACC to the extent of the funds lost 33. The principle of restitution is intended to prevent a person from retaining money or benefit derived from another which it is against conscience that he should keep it, and he should, in justice, restore it to the owner. The Plaintiff defined unjust enrichment as in Goff and Jones, Law of Restitution, and argued that the principle presupposes three factors: -a.that the defendant has been enriched by the receipt of a benefit;b.that he has been so enriched at the expense of the plaintiff;c.that it would be unjust to allow him to retain the benefit: andd.that there is no defense or bar to the claim.

34. Counsel contended that the Defendants, having been unjustly enriched from NACC to the extent of Kshs. 7,500,000 should be ordered to refund the amount, with interest.

35. In the case of Samuel Kamau Macharia v Kenya Commercial Bank Limited, Kenya Commercial Finance Company Limited [2003] eKLR, while determining a claim for restitution the court cited the case of Fibrosa Spolka Akeyjna v Fairbairn Lawson Combe Barbour, Ltd, [1943] AC 32, and stated as follows:“It is clear that any civilized system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is, to prevent a man from retaining the money of, or some benefit derived from another which it is against conscience that he should keep. Such remedies in English law are generically different from remedies in contract or in tort and are now recognized to fall within a third category of the common law which has been called quasi-contract or restitution.”

36. The plaintiff has proved, on a balance of probabilities, that the Defendants misappropriated the sum of Kshs. 7,500,000 belonging to NACC through their Community Based Organization Par Aid. The 1st Defendant (deceased) indeed made a commitment through a confession recorded before a Magistrate and committed to refund Kshs 1,064,000 to the NACC which promise was not fulfilled. No evidence was adduced to prove that the confession was obtained through coercion, threats or intimidation. It is my finding that the Defendants unjustly benefitted from funds which ought to have benefitted the public in finding a cure for HIV/AIDS. The Defendants is therefore liable to restitute NACC for the misappropriated funds.

37. The upshot is that the Plaintiff’s claim succeeds. As the 1st Defendant is deceased, the 2nd Defendant shall pay to the Plaintiff the sum of Kshs. 7,500,000, with interest at the prescribed rate of 12% per annum from the date of receipt of the funds. He shall bear the costs of the suit.

SIGNED, DATED AND DELIVERED VIRTUALLY ON THIS 29TH DAY OF JUNE, 2023. E. N. MAINAJUDGE