African Banking Corporation Limited VS Landmerk International Properties Ltd AND Chief Land Registrar Nairobi AND 6 Others

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

COMMERCIAL & TAX DIVISION

HCCOMM NO. E864 OF 2021

AFRICAN BANKING CORPORATION LIMITED.............................PLAINTIFF

VERSUS

DIASPORA GLOBAL INVESTMENTS LIMITED……….…..lST DEFENDANT

LANDMERK INTERNATIONAL PROPERTIES

LIMITED……………………………………………………...2ND DEFENDANT

PATRICK MACHARIA NDERITU…………………………..3RD DEFENDANT

ANNA NJERI GITANYU…………………………………….4TH DEFENDANT

JOSHUA GITONGA WANGANGA…………………………5TH DEFENDANT

FREDRICK MUCHIRI KARIUKI…………………………….6TH DEFENDANT

CRYSTAL VALUERS LIMITED……………………………7TH DEFENDANT

CHIEF LANDS REGISTRAR…………………………………8TH DEFENDANT

RULING

1. Before this Court is the 7th defendant’s Notice of Motion application dated 20/4/2022 brought under Section 4 of the Limitation of Actions Act and Order 2 Rule 15 of the Civil Procedure Rules, 2010.
2. The 7th defendant seeks to have the claim against it struck out on the grounds that the plaintiff’s claim against it is time barred, is frivolous and does not disclose any reasonable cause of action having regard to what is pleaded in paragraph 24(b) of the plaint.
3. In opposition, the plaintiff filed a replying affidavit sworn on 23/11/2022 by Louis Omukhulu, its Legal Officer.
4. It was contended that the subject application is not supported by an affidavit as required by law and that the 7th defendant failed to disclose to this Court that the plaintiff’s claim is premised on fraud as captured in the plaint dated 6/10/2021.
5. That the correct provisions of the law is Section 26 of the Limitation of Actions Act and not Section 4 of the said Act, which stipulates that the period of limitation does not begin to run until the plaintiff has discovered the fraud/mistake or could not with reasonable diligence have discovered it.
6. It was the plaintiff’s case that the 7th defendant tendered to it a fraudulent Valuation Report dated 30/7/2015, which fraud the plaintiff became aware of on 13/3/2017 and that it subsequently filed a fraud claim against the 7th defendant vide its plaint filed on 15/10/2021. That a period of 3 years and 5 months had lapsed between the time when the plaintiff was informed about the fraud and when the instant suit was filed.
7. Based on the foregoing the plaintiff argued that the instant application is baseless and aimed at ensuring that the 7th defendant does not answer to the claim against it for tendering a fraudulent Valuation Report dated 30/7/2015.
8. The 7th defendant filed a further affidavit sworn on 22/6/2022 by its director. He averred that no evidence or an affidavit is required to support the instant application as the 7th defendant contends that the plaint does not disclose a reasonable cause of action.

ANALYSIS & DETERMINATION.

1. The 7th defendant filed its submissions dated 7/7/2023 and 25/7/2023, whereas the plaintiff filed its submissions on 30/6/2023. This Court has considered and analyzed the same.
2. The first issue for determination is whether the plaintiff’s claim against the 7th defendant is time barred.
3. The 7th defendant submitted that the plaintiff’s claim against it is grounded on fraud and professional negligence which are both tortious claims. That under Section 4(2) of the Limitation of Actions Act, such claims ought to be filed within 3 years from the date on which the cause of action accrues.
4. It was submitted by the 7th defendant that the plaintiff discovered the alleged professional negligence and fraud on 13/3/2017 therefore the claim ought to have been filed by 12/3/2020, thus the suit filed by the plaintiff is time barred.
5. On the other hand, the plaintiff submitted that the relationship between itself and the 7th defendant was contractual, whereby the 7th defendant was instructed by a letter dated 23/7/2015 to undertake a valuation of the suit property. That consequently, the 7th defendant produced a Valuation Report dated 30/7/2015 which the bank relied on in extending a loan facility to the 1st defendant which defaulted in payment. This led the plaintiff to exercise its statutory power of sale and during the said process, it discovered on 13/3/2017 that the defendants, including the 7th defendant had allegedly defrauded the plaintiff on the value and acreage of the charged property.
6. The plaintiff asserted that this amounted to a breach of contract by the 7th defendant which was discovered on 13/3/2017. It was submitted that a breach of contract claim has a limitation period of 6 years from that date when the conflict of interest arises.
7. The plaintiff set out its case against the defendants in its plaint dated 6/10/2021. The plaintiff’s case is that in the year 2015, it extended various facilities to the 1st defendant amounting to Ksh.60,000,000/- which were secured interalia by a legal charge over title number KJD/Kaputiei-North/73629. That the 7th defendant issued a Valuation Report dated 30/7/2015 over the suit property noting that it comprised 24.048 hectares and had a forced sale value of Ksh.70,000,000/-.
8. The plaintiff stated that when it was in the process of exercising its statutory power of sale, it discovered that the suit property was 4.048 hectares with a forced sale value of Ksh.6,000,000/-.
9. In the plaint, the plaintiff averred that the 7th defendant in carrying out the valuation, was fraudulent, professionally negligent and breached the contract of valuation between them.
10. Under Section 4 of the Limitations of Actions Act, an action founded on contract may not be brought after the expiry of 6 years from the date on which the cause of action accrued, while an action on tort may not be brought after the end of 3 years from the date on which the cause of action accrued.
11. Section 26 of the Limitations of Actions Act states as follows:

“Where, in the case of an action for which a period of limitation is prescribed, either—

(a) the action is based upon the fraud of the defendant or his agent, or of any person through whom he claims or his agent; or

(b) the right of action is concealed by the fraud of any such person as aforesaid; or

(c) the action is for relief from the consequences of a mistake, the period of limitation does not begin to run until the plaintiff has discovered the fraud or the mistake or could with reasonable diligence have discovered it:” (emphasis added).

1. In this case, the plaintiff discovered the alleged fraudulent and negligent actions of the 7th defendant on 13/3/2017. These being tortious claims, the plaintiff ought to have filed its cause of action in regard to the claim of fraud, within 3 years from the time it arose, which would fall on or before 13/3/2020. The plaintiff filed the tort claims vide its plaint dated 6/10/2021, therefore the said claim is statutory barred as stipulated under Section 4 of the Limitation of Actions Act.
2. In regard to the plaintiff’s breach of contract claim against the 7th defendant, this Court’s finding is that it is not time barred as it was brought before the expiry of 6 years from the date on which the cause of action accrued. Breach of contract therefore remains a triable issue.
3. The second issue for determination is whether the plaintiff’s claim against the 7th defendant is frivolous, vexatious and if it discloses any reasonable cause of action.
4. The 7th defendant submitted that the plaintiff’s claim against it does not disclose a reasonable cause of action while the plaintiff asserted that under paragraph 25 of its plaint, it has fully disclosed its cause of action against the 7th defendant.
5. Order 2 Rule 15(1)(a) of the Civil Procedure Rules, 2010 states that at any stage of the proceedings, the Court may order to be struck out or amended any pleading on the ground that it discloses no reasonable cause of action or defence in law, and may order the suit to be stayed or dismissed or judgment to be entered accordingly as the case may be.
6. A reasonable cause of action was described in the case of D.T Dobie & Co. Limited v Joseph Mbaria Muchina & another [1980] eKLR, where it was held that:

“No exact paraphrase can be given but I think a reasonable cause of action means a cause of action with some chance of success when (as required by paragraph (2) of the rule) only the allegations in the plaint are considered…A cause of action will not be considered reasonable if it does not state such facts as to support the claim prayer…A cause of action is an act on the part of the defendant which gives the Respondent his cause of complaint.”

1. In this instance, this Court has established that the plaintiff’s claim against the 7th defendant with regard to negligence and fraud are time barred and cannot proceed further. The claim for breach of contract against the 7th defendant was however filed within the time limit of 6 years as provided for in the Limitation of Actions Act.
2. In the plaint, in paragraph 25, the plaintiff discloses that it instructed the 7th defendant vide an instruction letter dated 23/7/2015 to prepare a Mortgage Valuation Report in respect of the suit property. The plaintiff alleges that the 7th defendant did not adhere to its terms and failed in its duty to the plaintiff to exercise reasonable care, skill, diligence in carrying out the assignment.
3. In my considered view, the plaintiff has established facts to support its claim of breach of contract, which is a triable issue, thus it has established a reasonable cause of action.
4. The 3rd issue for determination is whether it is a requirement for the instant application to have been supported by an affidavit.
5. In the instant application, the 7th defendant seeks to have the claim against it struck out on the grounds that the plaintiff’s claim against it is time barred, is frivolous and does not disclose any reasonable cause of action.  The present application was filed under the provisions of Order 2 Rule 15 of the Civil Procedure Rules, 2010 and that the said application is not supported by an affidavit, which is at odds with the usual practice for Notice of Motion applications.
6. Order 2 Rule 15(1)(a) and (2) of the Civil Procedure Rules, 2010 states as follows:

“(1)(a) At any stage of the proceedings the court may order to be struck out or amended any pleading on the ground that—

(a) it discloses no reasonable cause of action or defence in law;

……………….

(2) No evidence shall be admissible on an application under subrule (1)(a) but the application shall state concisely the grounds on which it is made.” (emphasis added).

1. In the Court of Appeal case of Taj Villas Management Limited v Taj Mall Limited [2018] eKLR it was held thus:

“Where a party opts to make an application for striking out a pleading solely under Order 2 rule 15(1)(a), Order 2 rule 15(2) denies him the right to rely on any evidence. All that such a party is required to do is state concisely the grounds on which the application is founded.”

1. Guided by the provisions of Order 2 Rule 15(1)(a) of the Civil Procedure Rules, 2010, and authority cited above, it is my finding that an application to strike out a pleadings/a claim grounded on the said provisions need not be accompanied by a supporting affidavit which would attach evidence. The 7th defendant which seeks to strike out the claim as against it only needed to bring out the grounds upon which that prayer is sought in accordance with Order 2 Rule 15(1)(a) of the Civil Procedure Rules, 2010. It is then the duty of this Court to look at the averments in the plaint to satisfy itself on whether or not a cause of action has been established against the 7th defendant. The upshot is that the instant application is competent as filed without a supporting affidavit.
2. The claim against the 7th defendant for professional negligence and fraud are time barred and are hereby struck out, whereas the claim for breach of contract is not struck out and will proceed to hearing. The plaint will be amended within 14 days from the date of this ruling. Corresponding leave is granted to the 7^th defendant to amend statement of defence.
3. Since the 7^th defendant has partially succeeded and partially lost in the application dated 20/4/2022. Each party shall bear its own costs of the application.  

DATED, SIGNED and DELIVERED at NAIROBI on this 9th day of February, 2024. Ruling delivered through Microsoft Teams Online

Platform.

NJOKI MWANGI

JUDGE

In the presence of:

Mr. Gakunga for the plaintiff

Mrs. Mwangi for the defendant

Ms B. Wokabi – Court Assistant.