Samuel Mureithi Murioki &another; v Kamahuha Limited [2018] KECA 38 (KLR)
The bottom line
#Kenya's Court of Appeal confirmed that companies can't deny contracts their directors signed, even without a board resolution.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the appellants' amended defence raised bona fide triable issues warranting a full trial
- 2.Whether the trial judge misapplied the principles in Stores v Pepco Distributors Ltd on striking out pleadings
- 3.Whether an appellate court should interfere with the trial court's exercise of discretion in striking out a pleading
Key legal issues
#Whether the defence raised triable issues
The defence was contradictory, a bare denial and a sham; it raised no triable issues and was properly struck out.
The 1st appellant admitted a sale agreement yet claimed a second agreement with the respondent for the same property; the 2nd appellant denied the sale agreement its own directors signed and sealed, and claimed lack of board resolution while also denying ownership. Under Stores v Pepco, mere denial without reasons is not a defence. The contradictory pleas rendered the defence unmaintainable, frivolous, vexatious and scandalous, and a candidate for striking out.
Effect of lack of board resolution on a company's contract with a third party
The 2nd appellant could not disown the 1st appellant's authority to bind it after taking advantage of the sale agreement and receiving the purchase price; the Turquand rule protects third parties.
The directors of the 2nd appellant signed and witnessed the sale agreement and transfer and the company accepted the purchase price. Pleading lack of board resolution was a convenient explanation of fraudulent conduct. A company cannot approbate and reprobate, and cannot benefit from its own wrongdoing, citing Nebro Properties and Royal British Bank v Turquand.
Appellate interference with discretionary orders
Striking out a pleading is discretionary and an appellate court will not interfere absent misdirection or a clearly wrong decision.
Applying Mbogo v Shah, the court found no misdirection in the trial court's exercise of discretion; the trial court paid due regard to the principles governing striking out of pleadings, including Stores v Pepco, and was not clearly wrong. The appellants' fraudulent and brazen conduct also barred discretionary relief in their favour.
Legal principles established
#- A defence containing bare denials devoid of material particulars and failing to raise bona fide triable issues is liable to be struck out as frivolous, vexatious and scandalous.
- A company cannot defend a claim against a third party by pleading non-compliance with its internal procedures for executing contracts; the rule in Turquand's case protects outsiders dealing with the company in good faith.
- An appellate court will not interfere with the exercise of discretion by a trial court unless satisfied the judge misdirected himself or was clearly wrong, resulting in misjustice.
- A party guilty of fraud and misconduct in the transaction will be denied equitable relief, including discretionary orders.
Court orders
#- 1.The appeal is dismissed with costs to the respondent
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya at Nairobi
- H.C.C.C. No. 286 of 2001
- Jurisdiction invoked
- First appeal to the Court of Appeal against the ruling of the High Court (striking out the appellants' defence)
Relief refused
#The appellants' prayer to set aside the striking out of their defence and allow the matter to proceed to full trial
The defence was contradictory, a sham, and raised no bona fide triable issues; the trial court's discretion was properly exercised
Costs
The appeal is dismissed with costs to the respondent
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
The appeal accordingly fails and is dismissed with costs to the respondent.
Notwithstanding the maxim that striking out a pleading is a drastic remedy to be exercised with caution and only in plain and obvious cases, (see D.T. Dobie vs Muchina, [1982] KLR 2) this was to our mind, an appropriate case deserving of such remedy.
whether a company has or has not complied with its internal procedures as to execution of contracts is an internal management issue and cannot afford a defence to a third party dealing with the company.
It cannot be allowed to blow both hot and cold, to approbate and reprobate both in the defence and in the replying affidavits.
A court of appeal should not interfere with exercise of discretion of a judge unless it is satisfied that the judge in exercising his discretion has misdirected himself in some matter and as a result had arrived at a wrong decision or unless it is manifest from the case as a whole that the judge had been clearly wrong in the exercise of his discretion and that as a result there has been misjustice...
for a defence to be sustainable, it must disclose bona fide triable issues; that if a defence is hollow and contains bare denials devoid of sufficient material particulars, it should be struck out.
Issues in the judgment
#The judgment refers to '2nd and 3rd defendants' in the trial court's ruling quoted verbatim, whereas only two appellants appear before this Court, suggesting the bank may have been the 3rd defendant at trial; the exact mapping of parties is not fully explained in the judgment.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Samuel Mureithi Murioki &another; v Kamahuha Limited [2018] KECA 38 (KLR)", Case Analysis (2018). Civil Appeal No. 49 of 2012. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2018/38/eng@2018-12-20
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.