1.By a Plaint dated July 25, 2016 sued thedefendants seeking the following prayers;
2.The gist of the plaintiff’s case was that sometime around April 2015, the 3rd and 4th defendants obtained a loan facility for the sum of Kshs. 20,000,000/- from the 2nd defendant in the name of the plaintiff. The Plaintiff’s parcel of land LR No. Kilifi/Mtondia/900/Mtondia was effectively charged as security.
3.According to the plaintiff, the board of directors, shareholders and members of the plaintiff were not aware of the said loan and that the 3rd defendant was not even a director at that time. The Plaintiff was apprehensive that the 1st defendant would realize the 2nd defendant’s rights by auction or alienating the suit property.
4.Notably, the case against the 1st and 2nd defendants was struck out vide the ruling dated December 5, 2019. The 3rd and 4th defendants despite being served, failed to enter appearance or file any defence.
5.The matter proceeded for hearing whereby theplaintiff called one witness Giussepe Boer who adopted his written statements dated July 25, 2016 and June 20, 2022 as evidence in chief. He also produced documents filed in the list of documents dated June 25, 2016.
6.Counsel for theplaintiff relied on section 155 of the Companies Act. He submitted that deeds by a body corporate must be exercised by persons authorized to do so by the body’s constitution or minutes and board resolutions. Failure of the 3rd and 4th defendants obtaining such authority nullified their actions.
7.Counsel further submitted that the effect of such action rendered the charge registered against the suit property fraudulent. Counsel also submitted that the 3rd defendant was not a director to purport to engage on behalf of the plaintiff with respect to the loan facility with the 2nd defendant. That such an action required the approval of all shareholders which was not done.
8.Mr. Gicharu submitted that the plaintiff has demonstrated that the 3rd and 4th defendants have never been given any authority by the plaintiff to take a facility from the 2nd defendant and in the absence of any such authority and or resolution then any action ensuing is a nullity.
9.Counsel relied on the case of Jamii Bora Bank Limited v Wapak Developers  eKLR where the court held that a court will not interfere with a contract that the parties have agreed to perform, unless that contract is tainted with illegalities, fraud, is against public policy, misrepresentation etcetera.
10.Counsel urged the court to grant the prayers in the plaint as the same was uncontroverted.
Analysis And Determination
11.The issue for determination is whether the 3rd and 4th defendants fraudulently obtained a loan in respect of the suit land without the knowledge of the plaintiff. It is important to give a brief background to this case.
12.The Plaintiff had filed this case contemporaneously with an application seeking injunctive orders against all the Defendants of which the 1st and 2nd defendants filed a preliminary objection that at the time of the institution the suit the 2nd defendant was already under Receivership and according to section 56(2) of the Kenya Deposit Insurance Act (No. 10 of 2012) which provides as follows:-
13.The court heard the preliminary objection and the 1st and 2nd defendants were stuck of the suit therefore the case was between the plaintiff and the 3rd and 4th defendants.
14.Vide a ruling dated November 1, 2017 in this case, Justice Olola stated as follows:
15.The above questions that the Judge asked were never responded to during the hearing. Justice Olola further stated as follows:
16.On the issue whether the plaintiff proved fraud allegations against the 3rd and 4th defendants in the case of Vijay Morjaria v Nansingh Madhusingh Darbar & another  eKLR:-
17.Further, in Central Bank of Kenya Limited v Trust bank Limited & 4 others  eKLR, the Court of Appeal expressed;
18.Fraud must be specifically pleaded and proved as the burden is on the person who alleges fraud. The Plaintiff did not attempt to prove how the defendants colluded to defraud him when they took a loan without involving him. From the record it shows the 3rd and 4th defendant were directors. It was not enough just to allege that the defendants had defrauded him without tangible proof.
19.Further the plaintiff did not deny the authenticity of the results of the search carried out at the Companies Registry on October 9, 2014 which indicated that the 3rd and 4th defendants were its sole shareholders and directors at the time of the transaction It is also on record that A copy of the offer letter from Imperial Bank Limited addressed to the plaintiff’s directors clearly mentions the plaintiff as the borrower and the 3rd and 4th defendants the guarantors. There was no evidence as to whom had authority to enter into such contracts or the company’s procedure to be conducted prior to taking such a facility.
20.This case was undefended but the Plaintiff was still under an obligation to prove its case as held in the case of Gichinga Kibutha v Caroline Nduku,  eKLR, that:
21.I have considered the pleadings, evidence, the submission by Counsel and the relevant authorities and find that the plaintiff has not proved its case on a balance of probabilities and is therefore dismissed with no orders as to costs.