Rose Wairimu Mwaura & 15 others v Michael Nzuki Nzau

JUDGMENT 1. By way of a plaint dated 7th December 2020, the Plaintiffs, Rose Wairimu Mwaura and 15 others, instituted this suit against the Defendant, Michael Nzuki Nzau, seeking the following orders: a. An order for a sum of Kenya Shillings Thirty-Eight Million and Sixty One Thousand Only (Kshs 38,061,000/=) to be paid to the Plaintiffs. b. Interest on Kshs 18,061,000/=at the commercial rates of 12% per annum from 1st January 2020 until payment in full (for first to fourteenth Plaintiff) and interest on Kshs 20,000,000/=at the commercial rates of 12% per annum from 1st January 2020 until payment in full (for fifteenth and sixteenth Plaintiffs). c. Any other relief that the court will deem fit. d. Costs of the suit The Plaintiff ’s case 2. The Plaintiffs’ case is that sometime in March 2018, the Defendant approached them with an investment proposal in a blue economy project. He advised them to pool funds, which would be invested in the purchase of ring nets (deep-sea fishing boats) with the promise of substantial dividends. 3. The Plaintiffs, who were either friends with the Defendant or were introduced to him through mutual acquaintances, averred that between 2018 and 2019, they collectively raised and handed over to the Defendant various sums of money amounting to Kshs. 19,636,000 for the investment. 4. It was further averred that on 31st December 2019, the Defendant had in writing confirmed that the total investment and accrued dividends due to the 1st to 14th Plaintiffs was Kshs. 18,061,000, and that sums due to the 15th and 16th Plaintiffs, Mbogo Venture Capital Limited and Johari wa Haki Limited, who had entered into written management contracts with the Defendant in respect of fishing boats, stood at Kshs. 20,000,000, as of May 2020. 5. The Plaintiffs stated that despite issuing several requests and demand letters, the Defendant did not remit dividends or refund their capital investment, even though the Defendant had acknowledged the debt and proposed a payment plan. 6. The Plaintiffs also averred that the Defendant fundamentally breached the contracts entered into with them. In particular, he failed to transfer ownership of the fishing vessels as agreed, failed to account for the revenue generated from the boats, and failed to pay the minimum guaranteed monthly revenue of Kshs. 500,000 and Kshs. 1,500,000, respectively, under the contracts with the 15th and 16th Plaintiffs. 7. With respect to the 1st to 14th Plaintiffs, it was alleged that the Defendant failed to pay their dividends as promised or to refund the sums invested. He also failed to avail evidence of the purchase and registration of the boats, failed to disclose material information on the project, and failed to prepare and remit books of account. 8. The Plaintiffs contended that the Defendant’s conduct amounted to fraudulent misrepresentation, in that he falsely held himself out as an expert in the fishing business capable of running a profitable venture, thereby inducing them to invest their money to their detriment. https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16526/eng@2025-10-16 2

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9. The Defendant failed to enter appearance or file a defence within the prescribed timelines. Upon the Plaintiff’s request, interlocutory judgment was entered against the Defendant on 6th July 2023. The matter thereafter proceeded for formal proof on 24th September 2024. 10. The sole witness at the trial, Ms. Rose Wairimu Mwaura, the 1st Plaintiff herein, testified and adopted her undated witness statement but filed in Court on 7th January 2021 as evidence in chief and produced the list of documents dated 1st March 2024 and the documents attached thereto as exhibits. The witness testified on behalf of all the other Plaintiffs and urged the court to grant the prayers sought in the plaint as well as costs and interest thereon. With this, the Plaintiffs closed their case. Written Submissions 11. Directions were therefore given for the Plaintiffs to put in written submissions. Their Counsel, Macharia Githu Advocates, filed submissions dated 10th January 2025 and argued that the Defendant’s actions constituted a breach of contract as defined in Black’s Law Dictionary. Reliance was placed on Choitram v Nazari for the proposition that an admission may be express or implied, including through correspondence. It was contended that the Defendant’s written acknowledgments of indebtedness and proposal of a settlement plan amounted to binding admissions. 12. On damages, Counsel cited Robinson v Harman (1848) for the principle that an innocent party to a contract should be placed in the position he would have been in had the contract been performed. Reliance was further placed on Nicholas R.O. Ombija v Kenya Commercial Bank Limited HCCC No. 75 of 2012, Photo Production Ltd v Securicor Transport Ltd [1980] AC 827, and Dormakaba Limited v Architectural Supplies Kenya Limited [2021] KEHC 210, to argue that damages are compensatory in nature and are meant to substitute for performance. 13. Counsel urged the Court to find that the Plaintiffs had proved their case and to enter judgment in their favour for Kshs. 38,061,000 together with interest at commercial rates of 12% per annum from January 2020 (for the 1st–14th Plaintiffs) and from June 2020 (for the 15th and 16th Plaintiffs). 14. The Plaintiffs also sought damages for breach of contract in the sum of Kshs. 15,000,000, and costs of the suit. They further urged the Court to consider applying compound interest on the sums owed given the fraudulent conduct of the Defendant. Analysis & Determination 15. I have carefully considered the pleadings, the evidence tendered at the formal proof hearing, and the submissions filed on behalf of the Plaintiffs. The issues that arise for determination are: i. Whether the Plaintiffs have established that the Defendant was in breach of the contracts entered into with them. ii. Whether the Defendant made misrepresentations to the Plaintiffs. iii. What reliefs, if any, are the Plaintiffs entitled to Whether the Plaintiffs proved breach 16. The Defendant neither entered appearance nor filed a defence, and the evidence adduced by the Plaintiffs therefore stands uncontroverted. This notwithstanding, the Plaintiffs are still bound to prove their case even where no evidence was tendered. The duty to prove even in formal proof was stated by https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16526/eng@2025-10-16 3

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J. B. Havelock in the case of Rosaline Mary Kahumbu v National Bank of Kenya Ltd [2014] eKLR, as follows: “ In light of the absence of a Defence on the file, it follows logically, that the matter would proceed to formal proof. What therefore is hearing by formal proof? In the case of Samson S. Maitai & Another v African Safari Club Ltd & Another [2010] eKLR, Emukule, J observed thus; “.... I have not seen judicial definition of the phrase "Formal Proof". "Formal" in its ordinary Dictionary meanings - refers to being "methodical" according to rules (of evidence). On the other hand, according to Halsbury's Laws of England, Vol. 15, para, 260, "proof" is that which leads to a conviction as to the truth or falsity of alleged facts which are the subject of inquiry. Proof refers to evidence which satisfies the court as to the truth or falsity of a fact. Generally, as we well know, the burden of proof lies on the party who asserts the truth of the issue in dispute. If that party adduces sufficient evidence to raise a presumption that what is claimed is true, the burden passes to the other party who will fail unless sufficient evidence is adduced to rebut the presumption.” Can hearing, therefore, by formal proof, be similar to a full hearing? According to the observations of Emukule, J, in a formal hearing, all rules of evidence and procedure are observed and the party to a suit has to adduce evidence sufficient to sustain the suit. In adducing this evidence, the party has to raise a presumption that whatever is claimed is true and this therefore goes to the merits of the case. The Court considering a full hearing, to determine the matter based on the evidence that is presented before it by the parties. In contrast, at a formal proof hearing, if the party with the onus of adducing evidence fails to satisfy the truth threshold, the matter would stand to be dismissed on the basis that it was unmeritorious and did not raise sufficient proof of any issues of fact or law. It would be heard and determined on its merits.” 17. The applicable law as to the burden of proof is set out under Sections 107, 108 and 109 of the Evidence Act. The Court of Appeal in Mumbi M'Nabea v David M.Wachira [2016] eKLR, while discussing the standard of proof in civil liability claims, stated as follows: “ In our jurisdiction, the standard of proof in civil liability claims is that of the balance of probabilities. This means that the Court will assess the oral, documentary and real evidence advanced by each party and decide which case is more probable. To put it another way, on the evidence, which occurrence of the event was more likely to happen than not. Section 107(1) of the Evidence Act, Cap 80 Laws of Kenya provides as follows: “Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.” https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16526/eng@2025-10-16 4

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The above provision provides for the legal burden of proof. However, Section 109 of the same Act provides for the evidentiary burden of proof and states as follows: “ The burden of proof as to any particular fact lies on the person who wishes the court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person.” The position was reaffirmed by the Court of Appeal in Maria Ciabaitaru M’mairanyi & Others v. Blue Shield Insurance Company Limited -Civil Appeal No. 101 of 2000 [2005] 1 EA 280 where it was held that: “Whereas under section 107 of the Evidence Act, (which deals with the legal evidentiary burden of proof), the burden of proof lies upon the party who invokes the aid of the law and substantially asserts the affirmative of the issue, section 109 of the same Act recognizes that the burden of proof as to any particular fact may be cast on the person who wishes the Court to believe in its existence.” 18. On the standard of proof, the Court of Appeal in Palace Investments Limited v Geoffrey Kariuki Mwenda & another [2015] KECA 616 (KLR) that the standard of proof on a balance of probabilities is attained where the tribunal or a court finds it more probable than not that the fact exists, and that if the probabilities are equal, the burden is not discharged. Put differently, a narrow win suffices, but a draw is inadequate, and the party bearing the burden must fail. Quoting Denning J. in Miller –vsMinister of Pensions [1947] 2 ALL ER 372, the Court stated that: “ That degree is well settled. It must carry a reasonable degree of probability, but not so high as is required in a criminal case. If the evidence is such that the tribunal can say: ‘We think it more probable than not’, the burden is discharged, but, if the probabilities are equal, it is not. Thus, proof on a balance or preponderance of probabilities means a win, however narrow. A draw is not enough. So, in any case in which the tribunal cannot decide one way or the other which evidence to accept, where both parties’ explanations are equally (un)convincing, the party bearing the burden of proof will lose, because the requisite standard will not have been attained.” 19. From the foregoing guiding authorities, it is evident that the duty of proving the averments in the plaint lay squarely with the Plaintiffs. The Court of Appeal in Karugi & Another v Kabiya & 3 Others (1987) KLR 347 underscored this point, holding that the burden on a plaintiff to prove a case remains constant throughout, even in formal proof proceedings. The Court stressed that before a trial court concludes that a plaintiff’s case is proved on a balance of probabilities by reason of the defendant’s failure to call evidence, the court must be satisfied that the plaintiff has tendered credible and believable evidence capable of standing on its own. In other words, the plaintiff must adduce evidence which, even in the absence of rebuttal, convinces the court that the claim has been established on a balance of probabilities. The Court (Hancox J) stated that: “ Neither can I agree with Mr Waweru that the burden of proof is in any way lessened because the case is heard by way of formal proof. The burden on the plaintiff to prove his case https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16526/eng@2025-10-16 5

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remains the same, though it is true that, where the matter is not defended, or, as here, validly defended that burden may become easier to discharge.” 20. In the present case, the Plaintiffs’ witness, Ms. Rose Wairimu Mwaura, who testified as PW1 on behalf of all the Plaintiffs, produced evidence showing that they invested substantial sums of money in the Defendant’s proposed fishing business, with the understanding that boats would be purchased and profits shared. It is uncontested that the Defendant failed to purchase the boats, failed to conduct the venture, and did not account for the funds received. 21. Ms Wairimu in her witness statement, stated that the 1st to the 14th Plaintiffs provided a capital of Kshs 9,651,000/- and that by December 2019, the defendant had confirmed in writing that their investment and accrued dividends amounted to Kshs 18,061,000. However, the defendant breached the contract by failing to pay these dividends and failing to refund the invested money plus accrued interest. 22. It was further the Plaintiffs’ testimony that the 15th Plaintiff (Mbogo Venture Capital Limited) provided a capital of Kshs 7,500,000 to the defendant under a management contract dated 21st December 2019, but defendant breached this contract by failing to transfer ownership of two boats, MV Upendo and MV Rafiki, and failing to account for or deposit the agreed-upon minimum guaranteed monthly revenue of Kshs 1,500,000. 23. As regards the 16th Plaintiff (Johari Wa Haki Limited), the Plaintiffs’ case was that it also provided a capital of Kshs 2,500,000 to the defendant under a management contract dated 21st December 2019, but the defendant breached this contract by failing to transfer ownership of the boat MV Rafiki and failing to account for or deposit the agreed-upon minimum guaranteed monthly revenue of Kshs 500,000. 24. I have carefully considered the evidence tendered by the Plaintiffs in support of their case. I am particularly drawn to the demand letter dated 25th May 2025 from the Plaintiffs’ Advocates, Macharia Githu Advocates, to the Defendant and the Defendant’s response thereto. The Plaintiff, in vide his e-mail correspondence of 1st June 2020, in response to the said demand letter from the Plaintiffs’ Advocates, stated as follows: “ I wish to conform receipt of a demand letter from Mbogo Ventures Ltd. I also wish to conform my willingness to refund the stated investment as soon as the economy can allow. Due to the collapse of the economy as a result of the Corona virus pandemic, I wish to plead for a period of three months in the hope that the economy will have improved. At the close of the three months, I will confirm my ability to do the refund, whereupon I will do a proposed schedule of refund for adoption by Mbogo Ventures Ltd, which I will follow through.” 25. Further, in his email of 13th July 2020 (produced at page 39 of the Plaintiffs’ Bundle of Documents), the Defendant in further response to the demand by the Plaintiffs’ Advocates, stated as follows: “ Dear Macharia Githu Advocates, Your demand letter of 10th July 2020, ref. TBA refers. I wish to acknowledge the mentioned individuals as investors in my Blue Economy business venture. I also wish to acknowledge that the listed respective investment amounts are correct. further I wish to state my willingness to refund the said investment. I however wish to inform you that I am not in a position to refund the said amounts immediately as per your demand. I wish to propose that I prepare a refund schedule for consideration by the concerned investors and upon agreement we follow through.” https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16526/eng@2025-10-16 6

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26. The Defendant did not file any defense, nor did they call any evidence. The Plaintiff’s evidence, therefore, remains uncontroverted. In Acceler Global Logistics v Gladys Nasambu Waswa & another [2020] KEHC 9074 [KLR], the Court was clear that where a party fails to call evidence in support of his case, the adverse party’s evidence remains uncontroverted. The court stated as follows: “ The appellant opted not to adduce evidence at all. However, the appellant's counsel crossexamined the Respondent and her witness. Thus, the only evidence on record is the evidence tendered by the Respondent and his witnesses. In Interchemie E. A. Limited v Nakuru Veterinary Centre Limited [2001] eKLR, it was held that where no witness is called on behalf of the defendant, the evidence tendered on behalf of the plaintiff stands uncontroverted.” 27. The above position is buttressed by the decision of Jamlik Muchangi Miano v Attorney General [2017] KEHC 8422 [KLR], where Mativo J (as he then was), as held as follows:“ Where a party fails to call evidence in support of his case, that party’s pleadings remain mere statements of fact since in so doing the party fails to substantiate his pleadings. In the same vein the failure to adduce any evidence means that the evidence adduced by the Plaintiff against the defence is uncontroverted and therefore unchallenged.” 28. From the evidence adduced, the undisputed facts are that Plaintiffs in 2018 entered into various contracts with the Defendants, pursuant to which they invested money in a proposed deep-sea fishing venture. The Defendant was to purchase boats, run the fishing business, and remit profits to the Plaintiffs. The Defendant however, did not honour his part of the bargain. 29. I am satisfied on the evidence before me that the Defendant was in fundamental breach of the contracts entered into with the Plaintiffs Remedies 30. The Plaintiffs seek a total of Kshs. 38,061,000, being the aggregate of their investments and accrued dividends as at 31st May 2020. They also seek interest thereon at the commercial rate of 12% per annum from 1st January 2020 (in respect of the 1st–14th Plaintiffs) and from 1st June 2020 (in respect of the 15th and 16th Plaintiffs). 31. The sums claimed are supported by documentary evidence, including the Defendant’s own written confirmations and acknowledgments of indebtedness. In the absence of any rebuttal, I find the claim to be proved on a balance of probabilities. 32. As regards interest, the Plaintiffs urge the Court to apply compound interest. In the absence of an express contractual provision, courts generally apply simple interest. In this case, I find it appropriate to award interest at the commercial rate of 12% per annum on a simple interest basis from the dates pleaded until payment in full. 33. On costs, Section 27 of the Civil Procedure Act provides that costs follow the event. The Plaintiffs, having succeeded in their claim, are entitled to the costs of this suit. 34. Accordingly, judgment is entered in favour of the Plaintiffs against the Defendant in the following terms: i. The Defendant shall pay the Plaintiffs the sum of Kshs. 38,061,000/=. https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16526/eng@2025-10-16 7

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ii. Interest on Kshs. 18,061,000/= at the rate of 12% per annum from 1st January 2020 until payment in full (for the 1st–14th Plaintiffs). iii. Interest on Kshs. 20,000,000/= at the rate of 12% per annum from 1st June 2020 until payment in full (for the 15th and 16th Plaintiffs). 35. Costs of the suit is hereby awarded to the Plaintiffs. 36. It is so ordered. SIGNED, DATED, AND DELIVERED IN VIRTUAL COURT THIS 16TH OCTOBER 2025 ADO MOSES JUDGE In the presence of: C/A – Moses Ms. Macharia.......for the Plaintiff N/A............... for the Defendant https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16526/eng@2025-10-16 8

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