Skip to content
AI-generated case briefs sourced from Kenya Law · Not legal advice
Caselaw
AI-generated case brief
Case Brief · caselaw.co.ke
ELCDismissedNotice of motion dated 6.10.2021 (suit pending before the Environment and Land Court, Embu)· [2022] KEELC 491 (KLR)

Faustina Njeru Njoka v Kimunye Tea Factory Limited [2022] KEELC 491 (KLR)

Environment and Land Court
15 February 2022
AKA.K. Kaniaru
4,781 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~19 min to read original · ~4 min brief

The bottom line

#

A Kenyan court refused to undo a Kshs 49 million settlement a company signed through former directors, ruling consent orders stand unless fraud is proven.

What this practically means

#

Executive summary

#
Kimunye Tea Factory Limited, the defendant, moved the Environment and Land Court at Embu by notice of motion dated 6 October 2021 seeking to set aside a consent order dated 7 July 2021 and the resultant decree of 8 July 2021, under which it had agreed to pay the plaintiff Faustino Njeru Njoka Kshs. 49,457,500 as balance of the purchase price for land parcels Nthawa/Gitiburi/2440, 1548 and Mbeere/Mbita/2087 within ninety days. The applicant contended that the directors who passed the settlement resolution had ceased office and lacked capacity to bind the company, and that the consent rested on a fraudulent, overvalued valuation. The respondent opposed by grounds of objection and a preliminary objection, arguing that a consent recorded by counsel binds the parties and can only be set aside upon proof of fraud or collusion. The court framed three issues. First, citing a wrong statutory provision does not render an application fatally defective, following Hermanus Phillipus Steyn v Giovanni GnecchiRuscone. Second, grounds of opposition and a preliminary objection address only issues of law and do not rebut sworn averments, so the application stood unopposed, yet still fell for determination on its merits. Third, on setting aside, although the CR12 showed the resolution signatories were former directors, Section 133 of the Companies Act, 2015 validates such acts, the respondent and counsel dealt in good faith, and the company gave no notice of the directorial changes. Fraud was neither particularised nor proven. The application was dismissed with costs to the respondent.

Key legal issues

#
01

Whether citation of wrong legal provisions renders the application fatally defective

Holding

No; failure to cite the correct provision does not invalidate the application, and the court determined it on the merits

Reasoning

The court invoked Article 259's interpretive principles and relied on the Supreme Court's decision in Hermanus Phillipus Steyn v Giovanni GnecchiRuscone, holding that procedural provisions should not be interpreted as cast in stone and that a failure to cite the relevant provision is not fatal to a party's cause. The court therefore proceeded to determine the application on its merits.

p. 4
02

Whether the application stands unopposed given the respondent filed grounds of opposition and a preliminary objection instead of a replying affidavit

Holding

Grounds of opposition address only issues of law; facts deponed in the application were unrebutted, so the application stood unopposed, but the court still had to determine it on its merits

Reasoning

Relying on Daniel Kibet Mutai & 9 others v Attorney General, Peter O. Nyakundi and Kennedy Otieno Odiyo, the court held that grounds of opposition are general averments that cannot amount to a proper denial of allegations made on oath. The preliminary objection also failed the Mukisa Biscuit test as it required scrutiny of facts. However, an unopposed application is not automatically allowed.

p. 4
03

Whether the consent order should be set aside on grounds that the directors who passed the settlement resolution had ceased office and that the valuation was fraudulent

Holding

No; the threshold for setting aside a consent order was not met. Fraud was not particularised or proven, and Section 133 of the Companies Act validates the acts of directors even where they had ceased to hold office

Reasoning

Although the CR12 showed the signatories to the June 2021 resolution were former directors, Section 133 of the Companies Act, 2015 renders their acts valid. The respondent and counsel dealt in good faith with persons who previously held authority, with no notice of the change in directors. Consent orders recorded by counsel bind the parties and can only be set aside on proof of fraud, collusion or grounds justifying rescission of a contract, none of which was established.

p. 6

Legal principles established

#
  • Citation of a wrong provision does not render an application fatally defective where the court's jurisdiction is otherwise properly invoked
  • A consent order entered into by counsel is binding and can only be set aside on grounds such as fraud, collusion, or an agreement contrary to the policy of the court
  • Under Section 133 of the Companies Act, 2015, the acts of a director are valid notwithstanding a defective appointment, disqualification, or cessation of office
  • A person dealing with a company in good faith has no obligation to verify the authority of a person purporting to act for the company who previously held such authority, absent notice of any doubt as to capacity

Court orders

#
  1. 1.The application dated 6.10.2021 seeking to set aside the consent order of 7.7.2021 and the resultant decree of 8.7.2021 is dismissed
  2. 2.Costs of the application are awarded to the respondent

Authorities

#

Legislation

  • Constitution of Kenya, 2010Article 159(2)
  • Constitution of Kenya, 2010Article 259
  • Civil Procedure ActSections 1A, 1B, 3 & 3A
  • Civil Procedure RulesOrder 51 Rule (1)
  • Civil Procedure RulesOrder 51 Rule 14
  • Companies Act, 2015Section 133

Cases cited (16)

  • Kenya Commercial Bank Limited & Another, Civil Appeal No. 276 of 1997
  • Flora Wasike Vs Destimo Wamboko (1988) IKAR / Civil Appeal No. 81 of 1984
    (1988) KAR
  • SMN Vs ZMS, MWS, The Director of Public Prosecutions and the Chief Magistrate Nakuru, Civil Appeal No. 205 of 2014
  • Kasmir Wesonga Ongoma & Another Vs Ismael Etoicho Wanga, Civil Appeal Case No. 25 of 1986
  • Daniel Kibet Mutai & 9 others v Attorney General [2019] eKLR, Civil Appeal No. 95 of 2016
    [2019] eKLR
  • Peter O. Nyakundi & 68 others v Principal Secretary, State Department of Planning, Ministry of Devolution and Planning & another [2016] eKLR
    [2016] eKLR
  • Kennedy Otieno Odiyo & 12 Others v Kenya Electricity Generating Company Limited [2010] eKLR
    [2010] eKLR
  • Leisure Lodges Limited Vs Dr. Lalit D. Kotak
  • Mukisa Bisquit Manufacturing Co. Limited Vs West End Distributors Ltd (1969) EA 696
    (1969) EA 696
  • George Oraro Vs Baker Eston Mbaja Hccc No. 85 of 1992
    HCCC No. 85 of 1992
  • Mehuba Gelan Kelil & 2 Others Vs Abdulkadir Abdilhim & Others (2015) eKLR
    (2015) eKLR
  • Civil Appeal No. 66 of 2015 (unnamed)
  • Hermanus Phillipus Steyn v Giovanni GnecchiRuscone [2013] eKLR
    [2013] eKLR
  • Lazarus Kirech v Kisorio Arap Barno [2018] eKLR, Eldoret E&L Case No. 26 of 2013
    [2018] eKLR
  • Board of Trustees National Social Security Fund v Micheal Mwalo [2015] eKLR
    [2015] eKLR
  • Kenya Commercial Bank Ltd vs Specialised Engineering Co. Ltd [1982] KLR 485
    [1982] KLR 485
Jurisdiction invoked
Articles 159(2) of the Constitution, Sections 1A, 1B, 3 & 3A of the Civil Procedure Act and Order 51 rule 1 of the Civil Procedure Rules

Key timeline

#

Practical implications

#

Frequently asked questions

#

Later judgments citing this (13)

#

Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

#

Cite this brief

Caselaw, "Faustina Njeru Njoka v Kimunye Tea Factory Limited [2022] KEELC 491 (KLR)", Case Analysis (2022). Notice of motion dated 6.10.2021 (suit pending before the Environment and Land Court, Embu). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2022/491/eng@2022-02-15

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.