Habiba Mohamed Al-Amin & 2 others v Standard Chartered Bank of Kenya Limited & 8 others [2020] KEELC 259 (KLR)

Sections 8 and 13 of the repealed Companies Act required special resolutions to alter the memorandum and articles, and Section 141 required a three-fourths majority at a general meeting on 21 days notice. The 10 May 1995 meeting was a directors' meeting attended by the three Verjees holding only 3 shares (about 0.02%), absent the majority shareholders. Even counting members not shares, 3 of 5 (60%) fell short of the 75% threshold. The amendment therefore could not bind the company.

While a third party dealing with a company need not verify internal compliance, the rule is subject to exceptions: deemed notice of public documents and suspicious circumstances requiring inquiry. The bank received the special resolution and amended articles, so it knew the power to guarantee was newly acquired; it ought to have called for minutes and asked why the majority shareholders did not sign. Its witness conceded she did not know if the bank asked for minutes or verified the secretary's appointment.

Following the Supreme Court in National Bank of Kenya v Anaj Warehousing, documents prepared by non-advocates are void for all purposes, though instruments prepared by advocates without practising certificates are not void on that ground alone. The bank is not an advocate or public officer, and charges are not exempted instruments; drawing them was even a criminal offence. The court also noted non-compliance with Section 65 of the Registered Land Act on the form of charge instruments.

Section 143(2) of the Registered Land Act bars rectification against a proprietor in possession who acquired the land for valuable consideration without knowledge of, or contribution to, the fraud. The 5th defendant purchased from the 9th defendant for KShs 6,000,000/= and developed the property; the plaintiffs were not in possession at transfer. Instead of restoration, the court ordered compensation of the current value of the property, valued as industrial, payable by the bank which benefited from the sale and drew the illegal instruments.

The defendants' own pleadings averred that BKS Registrars and Kensec Services do not exist, yet Mr. Saini's affidavit evidence suggested resolutions appointing both, in contradictory fashion. Since the existence of these entities was a fact especially within the knowledge of Mr. Saini, the burden of proving it lay on him under Section 112 of the Evidence Act, which he failed to discharge. Consequently no valid secretary acted for the company at the material time.