Samuel Mureithi Murioki & 1 other v Kamahuha Limited
The bottom line
#Kenya's Court of Appeal confirmed that companies can't deny contracts their directors signed, even without a board resolution.
What this practically means
#Executive summary
#Key legal issues
#Whether the defence raised triable issues
The defence was contradictory, a bare denial and a sham; it raised no triable issues and was properly struck out.
The 1st appellant admitted a sale agreement yet claimed a second agreement with the respondent for the same property; the 2nd appellant denied the sale agreement its own directors signed and sealed, and claimed lack of board resolution while also denying ownership. Under Stores v Pepco, mere denial without reasons is not a defence. The contradictory pleas rendered the defence unmaintainable, frivolous, vexatious and scandalous, and a candidate for striking out.
Effect of lack of board resolution on a company's contract with a third party
The 2nd appellant could not disown the 1st appellant's authority to bind it after taking advantage of the sale agreement and receiving the purchase price; the Turquand rule protects third parties.
The directors of the 2nd appellant signed and witnessed the sale agreement and transfer and the company accepted the purchase price. Pleading lack of board resolution was a convenient explanation of fraudulent conduct. A company cannot approbate and reprobate, and cannot benefit from its own wrongdoing, citing Nebro Properties and Royal British Bank v Turquand.
Appellate interference with discretionary orders
Striking out a pleading is discretionary and an appellate court will not interfere absent misdirection or a clearly wrong decision.
Applying Mbogo v Shah, the court found no misdirection in the trial court's exercise of discretion; the trial court paid due regard to the principles governing striking out of pleadings, including Stores v Pepco, and was not clearly wrong. The appellants' fraudulent and brazen conduct also barred discretionary relief in their favour.
Legal principles established
#- A defence containing bare denials devoid of material particulars and failing to raise bona fide triable issues is liable to be struck out as frivolous, vexatious and scandalous.
- A company cannot defend a claim against a third party by pleading non-compliance with its internal procedures for executing contracts; the rule in Turquand's case protects outsiders dealing with the company in good faith.
- An appellate court will not interfere with the exercise of discretion by a trial court unless satisfied the judge misdirected himself or was clearly wrong, resulting in misjustice.
- A party guilty of fraud and misconduct in the transaction will be denied equitable relief, including discretionary orders.
Court orders
#- 1.The appeal is dismissed with costs to the respondent
- On appeal from
- High Court of Kenya at Nairobi
- H.C.C.C. No. 286 of 2001
- Jurisdiction invoked
- First appeal to the Court of Appeal against the ruling of the High Court (striking out the appellants' defence)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Samuel Mureithi Murioki & 1 other v Kamahuha Limited", Case Analysis (2018). Civil Appeal No. 49 of 2012. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2018/38/eng@2018-12-20
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.