[2022] KEHC 16400 (KLR)

Riley Services Ltd v Furniture Elegance Ltd (Civil Appeal 63 of 2018) [2022] KEHC 16400 (KLR) (Civ) (15 December 2022) (Judgment)

Neutral citation: [2022] KEHC 16400 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Civil

Civil Appeal 63 of 2018

JN Mulwa, J

December 15, 2022

Between

Riley Services Ltd

Appellant

and

Furniture Elegance Ltd

Respondent

(Being an Appeal against the Judgment and Decree in Milimani CMCC No. 5300 of 2014 delivered by Hon. K. I. Orenge on 17th January 2018)

Judgment

1. This appeal arises from Milimani CMCC No 5300 of 2014 instituted by the appellant herein against the respondent in the lower court. In the plaint dated August 29, 2014, the appellant alleged that vide an agreement entered into between itself and the respondent, it agreed to provide the respondent with security services at its premises on Bunyala/Uhuru Highway roundabout by installing a radio alarm transmitter and providing a stand by security personnel and motor vehicle to be dispatched upon receipt of an alarm signal. The respondent agreed to make monthly payments for the said services which were duly provided until September 2012 when the appellant terminated the agreement due to non-payment. It therefore sought judgment for:1. Kshs 100,166. 15 being the outstanding amount due under the agreement.2. Costs of the suit.3. Interest.

2. The respondent denied the claim in its defence and claimed that no amount was owing under the agreement as the appellant installed faulty security systems.

3. Upon hearing, the trial court dismissed the suit on the basis that the respondent was a stranger to the proceedings since the job card showed that the agreement was between the appellant and Megamatt. The court also found that the appellant had not filed a resolution of the board authorizing the commencement of the suit and/or proceedings in the lower court.

4. Aggrieved by the said decision, the appellant preferred the instant appeal vide a memorandum of appeal dated February 12, 2018. It raised the following six grounds of appeal:1. That the learned magistrate erred in law and fact in dismissing the suit when the appellant had proved its claim against the defendant on a balance of probability.2. That the learned magistrate misdirected himself in law and fact when he held that the omission by the appellant to file a resolution of its board to commence the suit was fatal to its claim against the respondent given the circumstances of the case and the evidence before the court.3. That the learned magistrate misapprehended and misapplied the law by confusing the purport and decision in the case of Bugerere Coffee Growers Ltd v Seraduka & another (1970) E A 147 and the provisions and requirements of order 4, rule 1(4) of the Civil Procedure Rules.4. That the learned magistrate erred in law by determining the issue of omission to file the appellant's board resolution to commence the suit when the same was not an issue in dispute arising from the pleadings filed by the parties in the suit.5. That the learned magistrate erred in law and in fact in reaching findings not supported by and contrary to the evidence before the court and in failing to consider the evidence before the court in its totality.6. That the learned magistrate erred in law in dismissing the suit when on the evidence before the court, the burden of proof had shifted to the respondent who failed to discharge the same as no evidence in defence was adduced before the court.

5. The appeal was canvassed through written submissions. The appellant submitted that the evidence before the court in the form of invoices sent to the respondent together with the statement of account, established on a balance of probability that the respondent failed to pay for the services rendered as contractually obligated. It submitted that, apart from generally admitting to having a contractual relationship with the appellant and making bare claims of having paid the appellant in its statement of defence, the respondent did not provide any evidence to demonstrate such payment or controvert the appellant's evidence during cross-examination.

6. Further, the appellant faulted the trial magistrate for dismissing its suit on the basis of failure to file a board resolution authorizing the institution of the suit yet this issue was not raised or pleaded in the respondent’s defence. It submitted that the issue only arose in the respondent’s written submissions and thus should not have been given any consideration as submissions are not pleadings and parties are bound by their pleadings. It however admitted that it did not comply with the provisions of order 4 rule 1(4) of the Civil Procedure Rulesbut stated that such omission is no longer considered fatal to a suit.

7. It contended that the failure to file the resolution of the board was an inadvertent omission on its part and in the absence of a contrary explanation and/or evidence of the officer who swore the verifying affidavit not being authorized, it need not be punished. To support this position, the appellant relied on the following cases: Elgon House (2010) Ltd v Meya Agri Traders Limited [2019] eKLR; Spire Bank Limited v Land Registrar & 2 others [2019] eKLR; Peeraj General Trading & Contracting Company Limited, Kenya & another v Mumias Sugar Company Limited [2016] eKLR; and Microsoft Corporation v Mitsumi Computer Garage Ltd (2001) 2 EA 460.

8. The appellant also faulted the trial court for failing to appreciate that the case of Bugerere Coffee Growers Ltd v Seraduka &another (1970) E A 147 which the court relied on in dismissing its suit is clearly distinguishable from the appellant’s case as it concerned the authority of a firm of advocates to bring the proceedings/act for the plaintiff on behalf of the plaintiff company. In the appellant’s view therefore, the trial magistrate failed to consider and evaluate the evidence placed before him in totality and to distil issues for determination therefrom in a manner that would allow the court to objectively render itself on all the issues ventilated by the parties.

9. On the other hand, the respondent submitted that whereas the appellant provided services, the same was done pursuant to a contract between the appellant and Megamatt. It stated that the installations for the outstanding invoices which were the subject matter of the suit, were done at Magezo Chambers which is different from the respondent's known premises. Further, it submitted that installations were faulty as there was no signal from the radio transmitters but the appellant refused to remove them upon termination of services by the respondent shortly upon installation. In the respondent’s view therefore, the appellant failed to prove its case to the required threshold which is on balance of probabilities.

10. As regards compliance with order 4 rule 1(4) of the Civil Procedure Rules, the respondent submitted that it is trite law that a company cannot transact without resolutions having been passed either by the company’s board of director's meeting and recorded in the minutes. It submitted that without resolution, the suit cannot be entertained as it might be disowned for lack of authorization as was emphasized in the case of Thome Farmers Company No 4 Ltd v Farm of Faith Investors Limited [2019] eKLR and Philomena Ndanga Karanja & 2others v Edward Kamau Maina, [2015] eKLR. The respondent contended that the mere fact that it did not plead for dismissal of the suit in its defence does not invalidate the principles of law that requires the filing of board resolutions at any time before a suit filed by a corporation is fixed for hearing. Additionally, it submitted that whereas article 159 of the Constitution requires administration of justice without undue regard to procedural technicalities, it does not accord parties leeway to flaunt the rules of procedure at will as was stated in the case of A J Limited &another v Catering Levy Trustees & 3 Others [2005] eKLR.

Analysis and Determination 11. The court has carefully considered the grounds and record of appeal as well as the parties’ respective submissions in support and in opposition of the appeal. The first issue that arises for determination and which may have the effect of determining the appeal relates to the competency of the suit before the trial court.

12. It is trite law that a suit filed by a corporation must be authorized the company. Order 4 rule 1(4) of the Civil Procedure Rules states thus:“Where the plaintiff is a corporation, the verifying affidavit shall be sworn by an officer of the company duly authorized under the seal of the company to do so.”

13. The common thread that runs across several decisions by various courts, among them being the case of Republic v Registrar General and 13 others [2005] eKLR and those cited by both parties herein is that such authorization may be filed at any time before the suit is fixed for hearing.

14. In the instant case however, it is common ground that the appellant herein never filed a board resolution or anything else authorizing the institution of the suit filed in the lower court at any point in time. The hearing was concluded without any such authorization being placed before the court. It is also common ground that the issue was never raised in the respondent’s defence. It appears to have been touched on slightly during the cross examination of PW1 and expounded on in the respondent’s written submissions filed in the lower court. To that end, this court holds the view that the trial court did not err in law or fact by considering the issue despite the fact that it was not pleaded since the question of board authorization is a matter of law that concerns the capacity or locus standi of parties to institute proceedings before the court. It is a question that a court of law can determine even on its own motion if not pleaded it. See order 4 rule 1(6) of the Civil Procedure Rules and Justice Aburili’s pronouncement in Livestock Research Organization v Okoko & another (Civil Appeal 36A of 2021) [2022] KEHC 3302 (KLR) (29 June 2022) (Ruling).

15. What then was the consequence of the failure to file the authority of the board? The appellant contends that it was not fatal while the respondent holds a contrary opinion. The court notes that the appellant has purported to place reliance on decisions which are clearly distinguishable from the instant case. In the cited cases, the courts found that the absence of authorization by the plaintiff companies were not fatal since the suits were yet to be heard and concluded. The plaintiffs in those suits still had an opportunity to regularize their pleadings and that is why their suits could not be struck out or dismissed.

16. In this case, the appellant has readily conceded that it never placed before the trial court any authority to institute the suit. As noted earlier, the issue arose when its first witness was testifying. That was the perfect opportunity to seek the court’s indulgence to regularize its pleadings but it failed to do so. It therefore follows that there was no valid and/or competent suit before the trial court. Having found so, this court holds the considered view that it would be useless to delve into whether or not the appellant proved is case in the trial court to the required standard.

Conclusion 17. Consequently, the appeal lacks merit and is hereby dismissed. There shall however be no orders as to costs.

18. Orders accordingly.

DELIVERED, DATED AND SIGNED THIS 15TH DAY OF DECEMBER, 2022. J.N. MULWAJUDGE