CHARLES GITONGA KARIUKI v AKUSI FARMERS COMPANY LIMITED [2010] KEHC 3566 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAKURU

Civil Suit 97 of 2007

CHARLES GITONGA KARIUKI……............………….PLAINTIFF

VERSUS

AKUSI FARMERS COMPANY LIMITED……..….DEFENDANTS

RULING

This Ruling relates to Chamber Summons dated 1st August 2007 in which the Plaintiff/Applicant seeks two orders:-

(1)    that the Respondents defence and counterclaim dated 20th June  2007 be struck out and judgment be entered for the         Applicant in the sum of Kshs 3,000,000/- plus costs and      interest as prayed in the plaint;

(2)    that the costs of this application be borne by the Respondent.

The application is supported by the affidavit of the Applicant Charles Gitonga Kariuki sworn on 1st August 2007, and is premised upon the grounds on the face thereof.

In the Replying Affidavit of John Kagai Mwangi the Director and Chairman of the Defendant/Respondent, the Respondent alleges that it is a stranger to the agreement dated 2nd March 2003 (paragraph 3), and that the purported loan agreement did not comply with the provisions of Article 111 of the Defendant’s Articles of Association and is therefore not binding upon the Respondent.  The Respondent further avers on oath that the Plaintiff/Applicant has contradicted and perjured himself by purporting to say that he was never a Director of the company while he actually was.   The Respondent further avers that the Plaintiff as the company’s treasurer had custody of the company’s financial records and that he had not accounted for the same and it was impossible for him to sustain a monetary claim against the company as he is currently attempting to do.   And finally that failure to join the Defendant in Nakuru HCCC No. 241 of 2006 though regrettable, was not fatal to the Defendant/Respondent’s counterclaim in this suit.

When this application was argued before me on the 18th January 2010 Mr. Karanja Mbuguaclosely followed the averments in the supporting affidavit of the plaintiff and laid emphasis on the agreement cited as exhibit 3 and the Annual General Meeting held on 18th June 2005 in which the loan was purportedly approved. He concluded that the defence by the Defendant/Respondent was sham and frivolous and should therefore be struck out and judgment entered for the Plaintiff in the sum of Kshs 3,000,000/= together with interest at court rates and that the Plaintiff/Applicant should also have the costs of the application.

On his part Mr. Okeke for the Defendant/Respondent opposed the application and referred the court to Articles 110 and 111 of the company's Articles of Association which establish respectively the office of company secretary and the procedure for execution of documents by the company.     He submitted that there was no evidence showing that the Secretary of the company was not available to execute the agreement in the manner laid down in Article 111 of the company’s articles of association. Consequently the agreement cannot be said to be binding upon the company unless executed in the manner provided under the said article.

Mr. Okeke referred the court to the English case of ROYAL BRITISH BANK v TURQUAND [1843-60] All E.R. Rep 435. I think learned counsel misunderstood or misinterpreted the ratio decidendi  in that suit.   The holding in that case is not merely that the company shall comply with its own constitution or regulation as to execution of documents, but rather a third party dealing with the company has a right to infer as a fact that the company has complied with its rules of internal management. For example as in the instant case a third party would be right to infer the fact of a resolution authorizing that which on the face of the document appears to legitimately done and therefore the company would be liable whether or not a resolution had in fact been passed.

I have examined both the plaint, the defence and the reply to the defence by the Plaintiff.   I have also considered arguments by counsel of both parties and I am of the view that this application cannot succeed.   The defence raises several triable issues. For example one major issue is whether there was a borrowing by the company or by individuals named.   There is also the question of execution of the loan agreement which under Article 111 of the Companies Articles of Association ought to be executed by a director and secretary. The loan agreement in this case is made between the Plaintiff and nine persons who the agreement describes as all directors of the defendant company.   That may be so, but who in law would be the borrower of the loan? That is a question that would be determined at the trial of the case.

For those reasons I am constrained to dismiss with costs the Plaintiff’s Chamber Summons dated and filed 1st August 2007.

Dated, delivered and signed at Nakuru this 29th day of January 2010

M. J. ANYARA EMUKULE

JUDGE