Abubakar Zain Ahmed v Premier Savings & Finance Limited & 4 others [2007] KECA 476 (KLR)

IN THE COURT OF APPEAL OF KENYA

AT MOMBASA

Civil Appeal 109 of 2004

ABUBAKAR ZAIN AHMED…………............……APPELLANT

AND

PREMIER SAVINGS AND FINANCE LIMITED (formerly known AsMOMBASA SAVINGS AND FINANCE LIMITED)..........1ST RESPONDENT

ZAIN AHMED ZAIN…………..2NDRESPONDENT

KAYAILAL MOHANLAL PANDYA T/A PANDYA AND TALATI ADVOCATES…………..…....…….3RD RESPONDENT

DIAMOND TRUST BANK KENYA     LIMITED……....……..4TH RESPONDENT

THE CHIEF LAND REGISTRAR (through the

District Land Registrar, Mombasa)……….......……...…...5TH RESPONDENT

(Appeal from the Ruling and Order of the High Court of Kenya

Mombasa (Onyancha, J) dated 4th March, 2004

in

H.C.C.C. NO. 327 OF 2001)

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JUDGEMENT OF THE COURT

This is an appeal by the plaintiff, ABUBAKAR ZAIN AHMED, the appellant herein, from the ruling and order of the High Court of Kenya at Mombasa, (Onyancha, J.) made on 4th March, 2004 whereby the learned Judge struck out and dismissed the appellant’s suit against the 1st, 3rd, 4th and 5th respondents as disclosing no reasonable cause of action and being frivolous and vexatious and an abuse of process of the court.

The facts giving rise to the dispute the subject matter of this appeal are briefly as follows.  By a General Power of Attorney dated 15th April, 1981, Latifa Said Ahmed, (Latifa) appointed her natural father Zain Ahmed Zain, the 2nd respondent herein, to manage and transact all her affairs in Kenya, including the power to mortgage and charge her properties.  At the time Latifa was mostly resident in the United Arab Emirates.  She was a proprietor in common in equal shares of certain properties known as Mombasa/Block X/14 and Mombasa/Block XX/156 with Fathiya Zain Ahmed, Mohamed Zain Mohamed, Abdul Hafidh, Ahmed Zain Ahmed and the 2nd respondent.  It is common ground that Latifa died at Mombasa on 7th March, 1992.

It is on record that between 1987 and 1999, the 2nd respondent using the said Power of Attorney and other similar Powers of Attorney donated by the other proprietors of the two properties raised various loans under a Charge and Further Charges from the 1st respondent, a financial institution carrying on money lending at Mombasa.

The appellant is the Administrator of the Estate of the late Latifa.  It is his case that the Further Charges were contracted between the 2nd respondent and the 4th respondent, a banking institution, after the demise of Latifa, a fact they well knew and that the said respondents by drawing Further Charges, had conspired with each other to interfere with the interest of as well as the estate of Latifa and in particular her interest in the properties aforementioned.  It is on record that the appellant and the other co-owners of the said properties had filed Mombasa HCCC No. 512 of 1998, seeking some reliefs inclusive of an injunction to restrain the 1st respondent from foreclosing the said properties upon default of repayment of the loans advanced to the 2nd respondent.  The suit was however, withdrawn and a new suit being Mombasa HCCC No. 327 of 2001 was lodged on 6th June, 2001.  This is the subject matter of the appeal now before us.

The appellant avers in the plaint that the validity of the General Power of Attorney ceased not only by virtue of the demise of Latifa but also by lapse and or passage of time the same not having been an irrevocable and or special Power of Attorney.  He contends that the 3rd respondent, an Advocate of the High Court of Kenya, illegally drew the Second Further Charge and that the 1st, 2nd and 3rd respondents illegally procured and induced the 5th respondent, the Chief Land Registrar to register the Charges over the properties.

The appellant further pleaded:-

“15.  The said purported Charge, Further Charge, Second Further Charge and   Charge over the suit properties encumbered, inter alia, the interest of the deceased in the said properties   thereby unlawfully interfering with the interest  and estate of the deceased.

16.   The plaintiff states that the intention of the 1st,2nd,3rd and 4th defendants in doing the acts stated hereinabove was both to benefit and further their own interests and to injure the interest and estate of the deceased by encumbering the deceased’s interest in the suit properties.

18.  Further, the plaintiff states that the act of the 1st defendant of transferring its alleged interest and the 4th defendants act of purchasing the 1st defendant’s alleged interest in the said Charge, Further Charge, Second Further Charge and Charge as pleaded in paragraph 14(1) and (m) hereof, was conspiratorial, unlawful, malicious, high handed, capricious, dishonest and was meant to defeat the interest of the deceased in the suit properties.

PARTICULARS

(a)   Creating a Charge dated 28th September, 1987, over Plot No. Mombasa/Block X/14 in favour of the 1st defendant without excluding the deceased’s share therein.

(b)   Creating a Further Charge dated 28th August, 1992 over plot No. Mombasa/Block X/14 in favour of the 1st defendant without excluding the deceased’s share therein;

(c)   Creating a Second Further Charge dated 4th October, 1994 over Plot No. Mombasa/Block X/14 in favour of the 1st defendant without excluding the deceased’s share herein;

(d)   Creating a Charge dated 22nd March, 1996 over plot No. Mombasa/Block XX/156 without excluding the deceased’s share herein;

19.  The plaintiff states that all and each one of the matters set out in paragraph 19 hereof were committed by the 1st, 2nd, 3rd and 4th defendant without the knowledge, authority and/or consent of the deceased and the Personal Representative of the deceased’s estate.

23.   The plaintiff further states that the said Charge, Further Charge, Second Further Charge and the Charge dated 28th September,, 1987, 28th August, 1992, 4th October, 1994 and 22nd March, 1996, respectively are unlawful, irregular, defective and have no effect whatsoever.  Further, the plaintiff states that the Notification of Sale dated 15th October, 1998 is irregular and unlawful.”

The appellant has further averred that the 1st, 3rd and 4th respondents knowing of the 2nd respondent’s fiduciary duties and the 2nd respondent’s dishonest design assisted him in the design by accepting his use of the Power of Attorney despite knowing about the demise of Latifa.  He asserted that they had shut their eyes to the obvious and had acted wilfully and recklessly in failing to make such enquiries as an honest and reasonable man would make.  The main reliefs sought in the plaint are an injunction restraining the respondents from advertising for sale, alienating or interfering with Latifa’s share in the titles Mombasa/Block X/14 and Block XX/156; declarations that the Power of Attorney in favour of the 2nd respondent is null and void incapable of effecting any interest in the land registered under the Registered Land Act Cap 300 (the Act) and that the borrowing thereto was unlawful and amounted to intermeddling of Latifa’s estate; that the Charges entered into by the 2nd respondent with the 1st respondent were ultra vires the powers and authority donated in the Power of Attorney and that the 5th respondent’s action in allowing the Charges to be registered was unlawful.

The respondents as defendants in the suit filed detailed statements of defence.  In essence, the 1st and 4th respondents aver that at all material times they were not aware of the death of Latifa until in or about May, 1998 and that their relationship with the 2nd respondent was strictly that of a banker and customer.  They denied being engaged in a conspiracy to defraud the estate of Latifa.  All Charges executed by them were proper, lawful and were done in good faith for valuable consideration and without any notice whatsoever of any alleged defects in the Charges.  As at 30th April, 2001 a sum of Shs.57,458,677/50 was due and payable by the 2nd respondent to the 4th respondent and it was within its rights to dispose of the properties by public auction in the exercise of its Statutory Power of Sale.

The 3rd respondent, in particular, averred that he never knew and was not aware nor did anyone ever notify him or the 5th respondent that Latifa had died and therefore, the General Power of Attorney had subsisted at all material times under section 117(1) of the Registered Land Act and in absence of knowledge of her death or notice of revocation of the General Power of Attorney given by anyone, all the respondents had acted properly and in good faith.  They condemn the 2nd respondent for wrongfully suppressing the fact of the death of Latifa.

Similarly, too, the 2nd respondent denied acting in collusion with any of the respondents.  He averred that the co-owners of the properties in issue are the children of the 2nd respondent and whatever he undertook with the Power of Attorney were for their benefit collectively and Latifa’s estate stood to benefit from the success of the business ventures for which the loans were borrowed.

By consolidated applications expressed to be brought under Order VI rules 13 and 16 and Section 3A of the Civil Procedure Rules and filed by the 1st, 2nd, 3rd and 4th respondents one main prayer is sought.  That is that the plaint (as amended) be struck out and that the suit be dismissed on the grounds that the plaint is scandalous, frivolous or vexatious and an abuse of the process of the court as the appellant’s action is time barred under the provisions of the Limitation of Actions Act cap 22 Laws of Kenya and unsustainable as the facts alleged as constituting the cause of action occurred between 1987 and 1996 and were well within the knowledge of the appellant; and further that the claim which is in tort should have been brought within three (3) years of the date of the cause of action or the date the appellant became aware of the facts constituting the cause of action.

Mr. Mabeya for the appellant opposed the application before the learned Judge in the superior court.  He argued that the relationship between Latifa and her father the 2nd respondent in the donated Power of Attorney was not only contractual but also fiduciary and lasts as long as the Power of Attorney lasted and that it is not limited in time under the Limitation of Actions Act and the respondents will forever be called upon to account without limitation.  Mr. Mabeya further contended that as the dispute concerned land twelve (12) years had not yet run out and therefore the applications to strike out the plaint were misconceived.

The learned Judge in a ruling he reserved for about twenty three (23) months, held, inter alia, firstly, that the Power of Attorney gave unlimited powers to the 2nd respondent and that any third party like the 1st respondent and indeed the other respondents reading the document would not easily find it deficient in any respect and the respondents save the 2nd respondent are not to blame; secondly, that the 3rd respondent having only carried out the instructions given to them to draw the Charges in their professional capacity cannot be faulted as there was no proof of fraud on their part; and thirdly, that the 1st respondent by transferring its banking or finance business to the 4th respondent did so in the ordinary course of business.  The learned Judge concluded:-

“The conclusion I have therefore, reached is that there is no probable evidence on the record supporting the respondent/plaintiff’s allegation of conspiracy among or between some of the defendants during the loan negotiations or during the process of drawing the charges or during the process of registering of the instruments.  Nor is conspiracy shown to have existed during the process of selling and/or transferring of the 1st defendant’s business to the 4th defendant.”

The learned Judge then considered the issue as to whether the plaint (as amended) discloses any reasonable cause of action and also if it was frivolous or vexatious.  He held that there was no evidence that the 1st, 3rd and 5th respondents did more or less than they were expected of them in their obligations.  He ruled out fraud or dishonesty on their part.  He was of the view that the respondents owed no legal duty of any kind to Latifa or her estate save the contractual obligations arising from the borrowing instruments to the 2nd respondent.  The learned Judge concluded:-

“It is my view, therefore, that the acts mentioned in the plaint by the plaintiff as resulting in the averred causes of action, are non starters.  They are neither here nor there.  On that score the amended plaint is hopeless and that it plainly and obviously discloses no reasonable cause of action.  The plaint is so weak as to be beyond redemption and incurable by amendment, especially since the plaint has just been amended with leave of this Court.  The plaint is extensive as amended …… to fit it with flesh to give it a semblance of a statement of claim showing a cause of action.  The attempt clearly did not succeed except probably as against the 2nd defendant”.

The learned Judge, also, held that all the acts upon which the appellant rested his claims were acts in tort which were actionable only within three years of their occurrence unless, of course, the period is extended under the Limitation of Actions Act.  As no evidence of such enlargement of time was placed before him, consequently the appellant’s claims were bound to fail and there would be no point in allowing the suit to go to trial.

The learned Judge firmly concluded:-

“the upshot of the lengthy canvassing in this case is that the plaintiff’s amended plaint for the reasons discussed and accepted or refused hereinabove discloses no reasonable cause of action as much as it is frivolous and an abuse of the process of the court as against the 1st, 3rd, 4th and 5th defendants.  It is accordingly struck out as against them and dismissed with costs to them.  The plaintiff may if he wishes proceed against the second defendant only.  It is so ordered.”

Being aggrieved by this decision the appellant has preferred twelve grounds of appeal against it.  Further, the 1st, 3rd and 4th respondents have filed Notices of Cross Appeal.  Mr. Mabeya has in his usual style and character persuasively argued all grounds very vigorously. However with due respect to him, we think that the gravamen of the appeal is whether the learned Judge erred in striking out and dismissing the appellant’s suit against the 1st, 3rd, 4th and 5th respondents for allegedly disclosing no reasonable cause of action and for being frivolous, and an abuse of the process of the court; and whether in doing so, the learned Judge had applied correct principles of law and whether his decision was correct in law.  Our resolution on these issues would, in our view, dispose of grounds 2,3, 4 and 5 of the Memorandum of Appeal.

It is trite law that the power to strike out any pleading or any part of a pleading under Order 6 rule 13 is not mandatory, but permissive and confers a discretionary jurisdiction to be exercised having regard to the quality and all circumstances relating to the offending pleading.  See the speech of Madan JA (as he then was) in D.T. DOBIE & CO. (K) LTD V MUCHINA [1982] KLR page 1quoting from Sellers L.J.   In WENLOCK V HALONEY & OTHERS [1965] I WLR 1238 at page 1242.  And as per Halsbury’s Laws of England 4th Edn. Vol. 37, para 430, the discretion will be exercised by applying two fundamental, although complementary principles.  The first principle is that the parties will not lightly be driven from the seat of judgment, and for this reason the court will exercise its discretionary power with the greatest care and circumspection, and only in the clearest cases.  The second principle is that a stay or even dismissal of proceedings may “often be required by the very essence of justice to be done, so as to prevent the parties being harassed and put to expense by frivolous, vexatious or hopeless litigation”.

These principles have been incorporated in our jurisprudence and likewise our own courts have expressed similar sentiments.  In NITIN PROPERTIES V. JAGIR SINGH KALSI Nairobi C.A. NO. 132/89(unreported) this Court said:-

“Striking out is a drastic remedy and it has been held time and again that striking out procedure can be invoked only in plain and obvious cases and that such jurisdiction must be exercised with extreme caution”.

In SAMUEL KANYI GITONGA V. PETER MUGWERU Nairobi HCCC No. 3356/89 (unreported) Bosire J. (as he then was) referred to striking out as “a draconian measure” and held that it must and can only be done in the clearest of cases, where it is clear that the defence or plaint as the case may be is beyond resuscitation by amendment.

In TRADE BANK LTD. V. KERSAM  Nairobi HCCC No. 6662/91 (unreported ) Pall, J (as he then was) also held that “the exercise of this summary power to strike out a pleading is only in plain and obvious cases when the pleading in question is on the face of it unsustainable.”

In D.T. DOBIE & CO. LTD V. JOSEPH MUCHINA (ibid) it was further stated:

“No suit ought to be summarily dismissed unless it appears so hopeless that it plainly and obviously discloses no reasonable cause of action, and is so weak as to be beyond redemption and incurable by amendment.  If a suit shows a mere semblance of a cause of action, provided it can be injected with real life by amendment, it ought to be allowed to go forward for a court of justice ought not to act in darkness without the full facts of a case before it.”

We pose there: was this a clear and obvious case in which the learned Judge could invoke the so called “draconian” powers of striking out?

It is manifest that the genesis of the dispute between the appellant and the respondents is the General Power of Attorney donated by Latifa to her father, the 2nd respondent.  The appellant avers that the 3rd respondent without the authority of Latifa illegally drew and registered the Charges and the other subsequent Charges at different times.  He further avers that the 1st, 2nd and 3rd respondents illegally presented to, procured and induced the 5th respondent to accept the Power of Attorney as a valid document.  It is significant that all the respondents have vehemently denied these complaints.  Above all, the 1st, 3rd, 4th and 5th respondents contend that at all material times, they were not aware of the death of Latifa who was alive when the first Charge dated 28th September, 1987 was executed.  They claim that they dealt with the 2nd respondent in good faith and the Charge and all Further Charges were executed in favour of the 1st respondent for valuable consideration.  They further aver that relationship between the 1st and 4th respondent on one side and the 2nd respondent on the other side was that of a banker and a customer and not otherwise; and that the relationship between the 1st respondent and that of the 3rd respondent was also that of client and an advocate.  It has not been pleaded nor has it been suggested by the appellant that anyone ever notified the 1st, 3rd, 4th and 5th respondents as is required under section 116(4) of the Registered Land Act that Latifa had died.  We think that in the absence of notification the Power of Attorney subsisted at all material times under section 117(1) of the said Act and the 1st, 3rd, 4th and 5th respondents properly relied on it and none of them erred in accepting it on its face value during the process of creating the Charge instruments in question.  Moreover, it has not been shown by the pleadings that the actions of the respondents were in any way out of the ordinary or out of their normal duties.  In such circumstances, therefore, there is no leg upon which the averment of conspiracy between them can stand based on the particular facts of this case.  We would agree with the learned Judge that there is no valid allegation of conspiracy among the respondents or between some of them during the loan negotiations or during the process of registering the Charge instruments.

We think also that the learned Judge cannot be faulted in holding that all the acts upon which the appellant has built his case against the 1st, 3rd, 4th and 5th respondents are in tort actions which occurred between 1987 and 1998 and were indisputably within the knowledge of the appellant as at 25th May, 1998 and must  of necessity follow that his claim against the said respondents is time barred by virtue of the provisions of the Limitation of Actions Act, for the reason that the torts were brought outside the cause of action or the date the appellant became aware of the facts constituting the cause of action.  This being the position, it would appear that there is no point to sustain an otherwise hopeless claim which obviously discloses no reasonable cause of action.  The claim as lodged does not show a mere semblance of a cause of action and should not be sustained.  Ground 2,3,4,5,7 and 8 of the grounds of appeal are, therefore, without merit.

The appellant has also complained that the learned Judge ought to have found that the suit was sustainable or curable through an amendment and that it should not have been struck out.  We do not think so.  The court will generally give leave to amend a defective pleading where there is reason to suppose that the case can be improved or served by a legitimate amendment, and indeed an amendment has been made in this case.  But the facts of this case militate against further leave to amend being granted.  The claim was hopelessly time barred and it would be an exercise in futility if left to go to trial.  In fact no useful purpose would be served in trying to sustain the suit by further amendment.  In our view, the learned Judge was right when he observed:

“There would be no point in allowing this claim to go to trial.  Doing so would be allowing the parties to waste large sums of their own or somebody else’s money in an attempt to pursue a cause of action which must eventually fail.”

We agree and must therefore reject the complaint.

Having reached these conclusions, the Notice of Cross-Appeal by the 1st, 3rd and 4th respondents is allowed on the ground that the proposed amendment was useless and of no substance as the same could not breathe any life to the appellant’s claim against them as it was incurably bad and beyond cure by an amendment.

Having reached these firm conclusions on the main grounds of appeal we are of the opinion that the entire appeal herein is without merit and must be rejected.  It is accordingly dismissed.  We need not decide on the other grounds of appeal canvassed by the appellant since we have made our determination on the substantive issues.

We dismiss the Notice of Cross-Appeal filed by the 2nd respondent with costs.

The 1st, 3rd, 4th and 5th respondents shall have the costs of the appeal and of the Notices of Cross-Appeal against the appellant.

These shall be our orders.

DATED and DELIVERED at Nairobi this 29th day of June, 2007.

P.K. TUNOI

……………………………….

JUDGE OF APPEAL

E.M. GITHINJI

……………………………

JUDGE OF APPEAL

P.N. WAKI…………………………..

JUDGE OF APPEAL

I certify that this is a true copy of the original.

DEPUTY REGISTRAR