Kihumo Property Developers (K) Ltd v Sausi t/a Ochoki & Ochoki Associates Advocates

from the Nairobi City County in respect of the suit property regarding its sanitation condition and was subsequently charged with non-compliance with the notice on 8th July 2015. 4. It was also averred that on or about 21st January 2016, the Plainti was sued by Martin Thiong’o Hunyu, Peter Mbugua Hunyu and Veronica Muchera Hunyo the administrators of the estate of Hunyo Njuguna (deceased) in ELC No. 34 of 2016 for fraudulently acquiring land belonging to their late father’s estate. 5. The Plainti pleaded the particulars of fraud which were particularized at paragraph 13 of its plaint as follows: a. Misrepresenting to the Plainti that Hunyu Njuguna (deceased) was selling land. b. Preparing and having the Plainti execute a purported agreement for sale of Land Reference 209/2268 measuring 0.0235 hectares from Hunyu Njuguna well knowing that he was deceased. c. Obtaining Kshs 20,900,000/- while purporting that he will rent the same to Hunyu Njuguna well knowing that he is deceased. d. Obtaining over Kshs 1,244,499 towards purported payment of stamp duty, rates and legal fees among others. e. Causing a Grant to be fraudulently issued to Gee Six (K) Limited and subsequently transferring the same to the Plainti. 6. During trial, James Njogu Njenga testied as PW1 and the sole Plainti’s witness. He adopted his witness statement and bundle of documents dated 24th June 2016 as his evidence in chief and urged the court to grant the prayers sought. 7. On cross-examination, he stated that the company has 6 directors but he had not attached any resolution of the Company conrming the company’s decision to sue. He also stated that he signed the sale agreement in the presence of the Defendant who acted as their Advocate in the matter. He further stated that the transaction was not completed and that the said property had been sold to a third party. 8. When asked if any due diligence was done prior to the transaction, he stated that the same was done through their Advocate Mr. Ochoki. He also stated that a deposit of Kshs 5,000,000/- was paid in cash to the Defendant. He also stated that a loan of Kshs 14,961,000/- was borrowed from the bank and sent to the Defendant. 9. When cross-examined about the transfer, the stated that he could see a dierence in the Advocate’s signatures appearing at the transfer and the agreement of sale. He also told the Court that the title of the property was with their Advocate the Defendant herein. The Defendant’s case. 10. The Defendant led a statement of defence dated 6th December 2019 seeking inter alia that the suit be dismissed. The Defendant also led a Preliminary Objection dated 18th November 2021 to the eect that the suit was commenced without a lawful resolution and or authority of the Plainti company and also that the suit as drawn and led is therefore devoid of competence for want of compliance with substantive legal provisions vis- a-vis institutions of suits inter alia by a legal person and pleadings on behalf of such legal person. https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/18875/eng@2023-07-06 2

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11. The Defendant denied participating in the assignment of lease dated 24th August 1999 wherein Hunyo Njuguna and Peter Mbugua Wainaina had sold L.R. No. 209/2268 to Gee Six (K) Limited at an agreed price of Kshs 15,000,000/-. The Defendant averred that he only participated in the transfer of L.R. No. 209/2268 from Gee Six (K) Limited to Kihumo properties Developers (K) Limited which was a sister company and with the same directors and shareholders. 12. The Defendant also averred that the Plainti had come to court with unclean hands having participated in the sharing agreement done on 24th April 2015 to which Kshs 15,000,000/- was to be distributed as follows: 1. Lawyers fee (Mr. Moi) Kshs 1,350,000/- 2. Anyora Kshs 1,625,000/- 3. Devs Kshs 875,000/- 4. Cyrus Kshs 875,000/- 5. Broker fees Kshs 2,000,000/- Balance was to be issued to the two other directors James Njogu Njenga and Francis Maina Mwangi. 13. The Defendant further denied any particulars of fraud as was pleaded by the Plainti and averred that there was no sale in respect to the said transaction but a transfer from one company to the other with the same directors and shareholders. The Defendant further denied appending his signature in respect to the transfer dated 8th April 2015. 14. During trial, Jimmy Sausi Ochoki testied as DW1 and the sole Defendant’s witness. He relied on his witness statement dated 9th March 2021 and bundle of documents dated 6th December 2019 as his evidence in chief. He also added that he did not participate in the assignment of lease which was between Gee Six Limited and Hunyo Njuguna together with Peter Mbugua Wainaina. 15. The court was also informed that the defendant never prepared the transfer. It was also his testimony that the Plainti took possession and requested approval from Nairobi City County to renovate the building and the amount that was paid was used for renovations after the eviction of the previous tenants. He also stated that the Plainti’s company had 6 directors but only one had testied. He further stated that there was no sale of the property since it was just a transfer from Gee Six to the Plainti. 16. It was further stated that the stamp duty in respect to the said transaction was paid and there was a handwritten breakdown of all the expenses and how they had been accounted for including payment of Kshs 720,000/- received by PW1. He also stated that one of the defence witness Cyrus Nyakundi Mosiara was brutally murdered. He further stated that the Ministry of Lands had written a letter objecting to the value of the property being Kshs 15,000,000/- and valued the same at Kshs 60,000,000/- 17. He further stated that the sale agreement was a forgery since it did not bear his full names. He stated that the payment of 5,000,000/- that was received to this law rm was paid to PW1 after it was withdrawn and paid out to PW1 in cash. It was also stated that the payment of Kshs 14,900,000/- was to be used in carryout the renovations and a breakdown of the same had been done. 18. On cross-examination, he stated that he was admitted to the bar on 18th August 2008 and he maintained that the sale agreement was fake as he did not prepare it. He stated that the documents had been forwarded to DCI headquarters for investigations but the said investigations were yet to be concluded. https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/18875/eng@2023-07-06 3

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19. On further cross-examination, he acknowledged receiving Kshs 14,961,000/- and a further Kshs 5,000,000/- which were paid to his law rm. He stated that upon receiving the money, he disbursed the same. He denied ever acting for Mr. Hunyo Njuguna. 20. When re-examined, he reiterated that he did not prepare the sale agreement dated 29th October 2014 and that the same was a forgery. He further stated that he had no reason to misappropriate the over Ksh 20 million which is peanuts. He also stated that the Plainti is still in possession of the property. 21. At the end of the viva voce evidence parties led their respective written submissions. The Plainti ’s written submissions. 22. 23. The Plainti led its written submissions dated 20th February 2023 and raised two issues for determination: a. Whether there was fraud and misrepresentation by the Defendant. b. Whether the Plainti is entitled to the prayers sought. The Plainti submitted that the following particulars of fraud had been proved owing to the evidence tendered to this court. a. Misrepresenting to the Plainti that Hunyo Njuguna (deceased) was selling land. b. Preparing and having the Plainti execute a purported agreement for sale of land reference 209/2268 measuring 0.0235 hectares from Hunyu Njuguna well knowingly that he was deceased. c. Obtaining Kshs 20,900,000/- while purporting that he sent the same to Hunyu Njuguna well knowing that he is deceased. d. Obtained over Kshs 1,244,499 towards purported payment of stamp duty, rates and legal fees among others. e. Causing a grant to be fraudulently issued to Gee Six (K) limited and subsequently transferring the same to the Plainti. 24. The Plainti further submitted that the sale agreement was duly drawn by the defendant, duly witnessed and stamped. They added that they had also produced before this court bank statements and correspondence providing how the Defendant Advocate who was purportedly acting for deceased vendor recovered the proceeds of sale and that the documents that were produced clearly corroborate the active participation from the start to the conclusion of the purported sale. 25. It was their further submissions that the Defendants went to le an application dated 27th January 2020 seeking orders that they be granted leave to conduct forensic tests conrming the signatures attesting to the vendor’s and purchasers’ signatures. However, the defendants failed to tender before this court the report of the outcome conducted by the Directorate of Criminal Investigation (DCI). 26. On whether the Plainti is entitled to the prayers sought, it was submitted that the Plainti was a bonade purchaser in the executed sale of LR No 209/2268 and the refund sought was particularized as follows: i. Kshs 5,000,000/- via RTGS. ii. Kshs 14,961,000/- borrowed through Co-operative Bank and remitted vide RTGs. https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/18875/eng@2023-07-06 4

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iii. Kshs 1,000,000/-. iv. Kshs 900,000/- vide cheque number 110745. v. Kshs 100,000/- in cash. vi. Kshs 170,000/- in cash. vii. Kshs 12,500/- in cash. viii. Kshs 7,460,905/- interest expected to be paid until the loan is fully paid. ix. Kshs 1,000,000/- being legal fees for defending ELC Case No 34 of 2016. Total being Kshs 30,605,404/= 27. The Plainti relied on the following case in support of its case which cases, the court has duly considered; Lawrence Mukiri –vs- Attorney General & 4 others (2013) eKLR, Vijay Morjania –vsNansignh Madhusing Darbar & Another (2000) eKLR and Kinyanjui Kamau –vs George Kamau (2015) eKLR. The Defendant’s written submissions. 28. The Defendant led written submissions dated 8th March 2023. The Defendant submitted that there was no authority obtained by PW1 to sue on behalf of the Plainti and hence therefore pursuant to Order 4 Rule 1 (4) of the Civil Procedure Code the suit was a nullity. Reliance was placed on the cases of High Court Petition No. 600 of 2013, East African Portland Court Limited –vs- The Capital Markets Authority & 5 others, High Court Civil Case No. 45 of 2012 Kenya Commercial Bank Limited –vsStage Coach Management Limited among others which also this court has duly considered. 29. It was also submitted that the then Defendant or his rm did not draw/prepare the sale agreement dated 29th October 2004. Since during the cross-examination of the Defendant, he conrmed that he was admitted to the bar on 18th August 2008 and he was incapable of preparing the same. It was also submitted that the rm of Ochoki and Ochoki was merely receiving money as directed by James Njoroge Njenga and Francis Maina Murega and the same was utilized to carry out major renovations of the old premises on the suit land, and was also paid to auctioneers to evict tenants who had declined to move out of the premises to allow the Plainti carry out its renovations. The other sum of money was utilized to process the transfer between Gee Six (6) (K) Limited and the Plainti by paying stamp duty, registration fees, other sums were used to compromise a suit that had been led at Nairobi City Court as well as pay the accumulated rates and penalties at the Nairobi County Government and that all payments, receipts and authorization notices are contained in the defendants list of documents. 30. It was also submitted that the Plainti could not have purchased a property in the year 2004 and then apply for a loan from Cooperative Bank in the year 2015. The property was owned by the Plainti’s sister company Gee Six (K) Limited way back in 1999. Gee Six (K) Limited was registered owner of L.R. No. 209/2268 vide the Assignment of lease dated 24th August 1999. It was submitted that the Defendant and his rm were involved only in the transferring from Gee Six (K) Limited to Kihumo Properties Developers (K) Limited vide transfer dated 8th April 2015. 31. The Defendant also questioned the involved of PW1 in the said suit and wondered why he had not involved other directors of the company. It was also submitted that Peter Ndiba Kihara, the cousin to PW1 who introduced PW1 to the Defendant’s Oces also sought to have been called to testify as a witness in the suit. The Defendant submitted that it defeats logic as to why the Plainti had applied https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/18875/eng@2023-07-06 5

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and obtained several renovation authorities from Nairobi County Government to renovate a property that they do not own. 32. The Defendant further submitted that the defendant transferred LR No 209/2298 from Gee Six (K) Limited to the Plainti’s names by a transfer instrument dated 8th April 2015 paid its stamp duty and proceeded to present the document to the Lands oce on the 10th April 2015 at 10.45 hours which was attended by J.W. Kameiyu on ocial number 213 as his identication number. The said transfer was eected shortly after the defendant received the money from Muriu Mungai & Co. Advocates. 33. It was also submitted that in the absence of a board resolution, minutes, authority to the rm of Mongeri, Kinyanjui & Co. Advocates of expressly authorizing the said law rm to institute a suit on behalf of the Plainti, the fact that out of six directors/shareholders only one wrote a statement and indeed testied and the fact that Mr. Francis Maina Mwangi whose passport photo, ID number and PIN number appears on the transfer dated 8th April 2015 did not testify in support of Plainti’s case is a clear indication that PW1, solely organized, arranged and indeed managed to defraud the Plainti in which he serves as a director. 34. The Defendant concluded his submissions by stating that the Plainti had not made any reference to his preliminary objection and hence this court should proceed to dismiss the suit with costs. Analysis and determination. 35. The court has perused the pleadings, analyzed the evidence adduced during trial, considered the written submissions led by the parties and is of the view that the following are the issues for determination: i. Whether the Plainti’s suit led herein is fatally defective for having commenced without a lawful resolution and authority of the Plainti’s company. ii. Whether the Plainti has proved the particulars of fraud. iii. Whether the Plainti is entitled to the remedies sought. Issue No. 1 Whether the Plainti’s suit is fatally defective for having been instituted without a lawful resolution and authority from the Plainti’s company. 36. The Defendant raised an objection to the suit for the reasons that the suit had been commenced without a lawful resolution and or authority of the Plainti company and that no such authority has been conferred to James Njogu Njenga to sue in the name of the Plainti company. 37. In the Defendant’s submissions dated 8th March 2023, the Defendants submitted extensively on the said issue and referred to several authorities for consideration which the court has considered. The Plainti never addressed the said issue in its written submissions. 38. Order 4 Rule 1 (4) of the Civil Procedure Rules 2010, deals with particulars to be contained in a plaint and states that: “ where the Plainti is a corporation, the verifying adavit shall be sworn by an Ocer of the Company duly authorized under seal of the company to do so.” 39. The Plainti describes itself as a limited company and therefore the deponent of the verifying adavit ought to demonstrate that he or she has authority to do so. In the instant suit, I have seen the Plaint dated 24th June 2016, I have also seen that the same was accompanied by a Verifying Adavit sworn https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/18875/eng@2023-07-06 6

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by James Njogu Njenga on 24th June 2016 who swore the Verifying Adavit as the Director of the Plainti. 40. In the case of Leo Investments Ltd v Trident Insurance Company Ltd (2014) eKLR Odunga J. found that the mere failure to le the resolution of the Corporation together with the Plaint did not invalidate the suit and the associated himself with the decision of Kimaru J. in the case of Republic vs. Registrar General and 13 Others Misc. Application No. 67 of 2005 [2005] eKLR where the court held as follows:” …such a resolution by the Board of Directors of a company may be led at any time before the suit is xed for hearing as there is no requirement that the same be led at the same time as the suit. Its absence is, therefore, not fatal to the suit.” 41. In the case of Spire Bank Limited v Land Registrar & 2 others [2019] eKLR the Court of Appeal stated as follows: “ …It is essential to appreciate that the intention behind order 4 rule 1 (4) was to safeguard the corporate entity by ensuring that only an authorized ocer could institute proceedings on its behalf. This was to address the mischief of unauthorized persons instituting proceedings on behalf of corporations, and obtaining fraudulent or unwarranted orders from the court. The company’s seal that is axed under the hand of the directors ensured that they were aware of, and had authorized such proceedings together with the persons enlisted to conduct them. And where evidence was produced to demonstrate that a person was unauthorized, the burden shifted to such ocer to demonstrate that they were authorized under the company seal. With this in mind, we dare say that the provision was not intended to be utilized as a procedural technicality to strike out suits, particularly where no evidence was produced to demonstrate that the ocer was unauthorized.” 42. In view of the above, it is clear that it was sucient for the authorized person to depose that he or she was duly authorized, but in the event of a complaint that such, person was unauthorized then it was upto the disputing party to demonstrate with evidence that there was no such authority or that the person was not a director of the Company. In the instant case, there was no dispute that James Njogu Njenga who testied as PW1 was not a director of the Plainti Company and as such the objection led by the Defendant in respect to his Preliminary Objection dated 18th November 2021 and as raised at paragraph 23 of the Defendant’s statement of defence fails. Issue No. 2 Whether the Plainti has proved the particulars of fraud. 43. The Plainti pleaded and particularized fraud against the Defendant. Paragraph 13 of the plaint dated 24th June 2016 particularized fraud against the Defendant as follows: a. Misrepresenting to the Plainti that Hunyu Njuguna (deceased) was selling land. b. Preparing and having the Plainti execute a purported agreement for sale of land reference 209/2268 measuring 0.0235 hectares from Hunyu Njuguna well knowing that he was deceased. c. Obtaining Kshs 20,900,000/- while purporting that he will remit the same to Hunyu Njuguna well knowing that he is deceased. d. Obtaining over Kshs 1,244,499 towards purported payment of stamp duty, rates and legal fees among others. https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/18875/eng@2023-07-06 7

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e. 44. Causing a grant to be fraudulently issued to Gee Six (K) Limited and subsequently transferring the same to the Plainti. A party alleging fraud must specically plead the particulars of fraud and lead evidence to prove the allegations of fraud. Whether there was fraud or not needs production of evidence. Fraud is dened under the Black’s Law Dictionary 10th Edition as “A knowing misrepresentation or knowing concealment of a material fact made to induce another to act to his or her detriment”. To decipher that there was fraud it is important that knowledge of the existence of fraud be established on the part of the Defendants. How then can fraud be proved? The Court of Appeal in Mombasa Civil Appeal No. 312 of 2012 Eml Limited v Registrar of Titles Mombasa & 2 others [2014] eKLR held; “ Allegations of fraud are allegations of a serious nature normally required to be strictly pleaded and proved on a higher standard than the ordinary standard of balance of probabilities”. Similarly, the Court of Appeal decision in the case of John Kamunya & another v John Nginyi Muchiri & 3 others [2015] eKLR held that: “we nd that the law is clear as put by Mr. Karanja that matters of “fraud” must be strictly and specically pleaded before these can be interrogated by a court of law. Alternatively, even though not pleaded, these may be raised in the cause of the trial, evidence tendered on them, submission made on them and then left for the court to determine.” 45. In the case of Gladys Wanjiru Ngacha vs Treresa Chepsat & 4 Others, [2013] eKLR, the Court held that: “ …. Allegations of fraud must be strictly proved: although the standard of proof may not be so heavy as to require proof beyond reasonable doubt, something more than a mere balance of probabilities is required. It is not enough for the appellant to have pleaded fraud; she ought to have tendered evidence that proved the particulars of fraud to the satisfaction of the trial court. In Mutsonga vs. Nyati (1984) KLR 425, at pg 439, this Court held: “Whether there is any evidence to support an allegation of fraud is a question of fact”. 46. A party alleging fraud must specically plead the particulars of fraud and specically lead evidence to prove the allegations of fraud. There are steps that must be taken to prove fraud. In the case of Vijay Morjaria Vs Nansign Madhusihn Darbar & Another (2000) eKLR, the court of Appeal stated as follows”“ It is well established that fraud must be specically pleaded and that particulars of the fraud alleged must be stated on the face of the pleading. The acts alleged to be fraudulent must of course be set out, and then it should be stated that these acts were done fraudulently. It is also settled law that fraudulent conduct must be distinctly alleged and as distinctly proved, and it is not allowable to leave fraud to be inferred from the facts”. 47. The same procedure goes for allegations of misrepresentation and illegally as outlined under Order 2 rule 4 of the Civil Procedure Rules. As regards the standard of proof, the court of Appeal in the case of Kinyanjui Kamau Vs George Kamau (2015) eKLR expressed itself as follows:“ It is trite law that any allegations of fraud must be pleaded and strictly proved. (See Ndolo Vs Ndolo (2008) 2 KLR ( G & F) 742 wherein the court stated that:- https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/18875/eng@2023-07-06 8

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“...We start by saying that it was the respondent who was alleging that the will was a forgery and the burden to prove that allegation lay squarely on him. Since the respondent was making a serious charge of forgery or fraud, the standard of proof required of him was obviously higher than that required in ordinary civil cases, namely proof upon a balance of probabilities; but the burden of proof on the respondent was certainly not one beyond a reasonable doubt as in criminal cases...” “In cases where fraud is alleged, it is not enough to simply infer fraud from the facts”. 48. In the instant case, the Plainti in its submissions dated 20th February 2023 submitted that the Plainti had tendered evidence before this court proving beyond reasonable doubt that the Defendant had fraudulently misrepresented to them that he was representing the owner of the land when in actual sense he knew that the vendor was deceased and he caused the Plainti to execute an agreement with a dead person and he received the proceeds of the purported sale and appropriated the same to himself. 49. James Njogu Njenga’s evidence indicated that pursuant to an agreement dated 29th October 2014, the Defendant caused the Plainti to execute the same upon which a sum of over Kshs 22,144,499 was remitted towards the purported purchase of L.R.No. 209/2238 measuring 0.0235 hectares which was being sold by Hunyo Njuguna and Peter Mbugua for Kshs 20,900,000/- 50. The Plainti also produced evidence vide a bank statement showing how the sum of Kshs 5,000,000/was paid to the Defendant. The Plainti also produced a letter dated 17th March 2015 from MMC Africa Law Advocates forwarding a copy of RTG’s conrming payment of Kshs 14,961,000/- which the Plainti had borrowed as a bank loan from Cooperative Bank to nance the purchase. 51. During cross-examination, the Plainti maintained that payment was made to the Defendant with a deposit of Kshs 5,000,000/- being paid at the rst instance and later about over Kshs 14,961,000/which was borrowed as a loan from the bank and paid to the Defendant. 52. From the evidence that was adduced ruing trial, the Defendant acknowledged receipt of Kshs 5,000,000/- and further sum of Kshs 14,961,000/- which was paid to his law rm. He however maintained that the sale agreement was forgery but did not adduce any evidence to support his allegations. 53. In the instant case, the Plainti was also able to produce evidence in court showing how the Defendant received the proceeds of sale and in the circumstances the Plainti has been able to prove the particulars of fraud as pleaded in its plaint as against the Defendant. Issue No. III Whether the Plainti is entitled to the reliefs sought. 54. Having made a nding that the Plainti has been able to prove the particulars of fraud as against the Defendant, the Plainti’s claim against the Defendant is proved and as such the Plainti is entitled to the reliefs sought. The Plainti pleaded for a declaration that the Defendant acted fraudulently with the sole intention of defrauding the Plainti. The Plainti also sought a refund of Kshs 30,605,404/together with interest and costs of the suit. The law on special damages is that the same must be specically pleaded and strictly proved. This position was also reiterated by the court in the decisions of National Social Security Fund Board of Trustees vs Sifa International Limited (2016) eKLR, Macharia & Waiguru vs Muranga Municipal Council & Another (2014) eKLR and Provincial Insurance Co. https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/18875/eng@2023-07-06 9

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EA Ltd vs Mordekai Mwanga Nandwa, KSM CACA 179 of 1995 (ur). In the latter case the Court was emphatic that: “ … It is now well settled that special damages need to be specically pleaded before they can be awarded. Accordingly, none can be awarded for failure to plead. “ 55. From the evidence that was presented before this court, the Plainti was only able to prove payment of Kshs 5,000,000/-, 14,961,000/- Kshs 900,999/- which were made to the Defendant and a further sum of Kshs 7,460,905/- which was expected as interest to be made in respect to the repayment of loan until payment in full. This amounts to a total of Kshs 28,322,904/- I will condemn the defendant to pay the said proved amount. 56. On the issue of costs, costs is at the discretion of the court and as a general rule, costs follow the event unless the court for good reason orders otherwise. In the present case, the Plainti has succeeded in its claim against the Defendant and is entitled to the costs of the suit. 57. On interest, I have considered the fact that the payment of Kshs 28,322,904/- had already factored a sum of Kshs 7,460,905 being interest that was to be paid in the repayment of the loan and as such I will not make any award on interest. Final orders. 58. In conclusion, the court nds that the Plainti has been able to prove its case against the Defendant to the required standard of balance of probabilities. Consequently, the court hereby enters Judgement for the Plainti against the Defendant as follows: a. A declaration that the Defendant acted fraudulently with the sole intention of defrauding the Plainti. b. Refund of Kshs 28,322,904/- c. Costs of the suit. DATED, SIGNED AND DELIVERED VIRTUALLY AT NAIROBI THIS 6TH DAY OF JULY 2023. E.K. WABWOTO JUDGE In the presence of: Mr. Mongeri for the Plainti. Mr. Sausi h/b for Musa Juma for the Defendant. Court Assistant – Caroline Nafuna. https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/18875/eng@2023-07-06 10

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