JUDGMENT
1. The Petitioners filed a petition dated 15/03/2018 seeking various orders against the respondents. The respondents filed a response and a cross-petition. The petition was eventually withdrawn on 16/11/2022, with costs to the respondents. The cross-petition by the respondents was set down for hearing.
2. The cross petition was essentially a claim by the respondents seeking to compel the petitioners to surrender property belonging to the 1st respondent. This included the original title deed for L/R NO. Bungoma/Kimilili/1942, the land purchase agreement, the company/s minute book, financial records in both hard and soft copy, and the cheque books. The cross-petitioner alleged that despite resigning and ceasing to be members of the 1st respondent, the petitioners refused to hand over these assets and continued to retain them against the interests of the company.
3. They further contended that the petitioners had converted to their personal benefit the sum of USD 8,102, which had not been refunded to date, and that they failed to sign the resignation letters to enable the current officers of the 1st respondent to remove their names from the company register and bank signatories. The cross petitioners urged that the petitioners conduct amounted to a breach of fiduciary duty owed to the company, and sought orders compelling them to surrender the company’s property, render accounts for queries raised in the audit report, and in default the sum of USD 8102 be refunded. They also prayed for costs of the counter claim /cross petition together with interests.
4. The petitioners, in reply to the cross petition, maintain that they never ceased to be members of the 1st respondent as alleged and that their withdrawal was only from the merry go round scheme and not from the company itself. They argue that the issues relating to the accounts of the 1st respondent were ventilated in civil proceedings in the county of Arapahoe, Colorado, specifically in case no. 1790 in West Littleton, which addressed the questions of shares in merry go round scheme leaving the issue of the Bungoma land parcel.
5. The petitioners further contend and insist that they hold no property belonging to the respondents. In their view, the cross petition is an attempt to re-litigate issues already determined in earlier proceedings, and to mischaracterize their role in the company. Accordingly, the petitioners deny the allegations of retaining company assets or converting funds to their personal use. They assert that they remain shareholders and members of the 1st respondent, and that the cross petition is unfounded.
6. CPW1, Kennedy Mukhwana Ambundo, testified that he resides in Colorado, USA, and was the director and chair of Bidii International Investments and Mile High Enterprises, the respondents herein. He stated that Catherine Ayuma Malika and Hezekiah Francis Malika, the petitioners herein were former members of Bidii international. He adopted his statement dated 22/07/2022 and produced documents 1-11 save for the auditor’s report which was marked for identification.
7. In cross examination, CPW1 confirmed that Bidii International was registered and also incorporated in the USA, and that the claim in the cross-petition covered both entities. He acknowledged that the petitioners contributed to the purchase of 10 acres of land in Kenya among 13 other members, but did not know the purchase price. He stated that at the time of the acquisition, the petitioners were shareholders in the investment group, but they were not bought out, instead, they appropriated payments to themselves.
8. CPW1 admitted limited knowledge of the Housing Finance account in Kenya and the Wells Fargo account in the USA which he stated had since been closed. He confirmed that when members exit, they are paid back their shares. That each petitioner held shares valued at USD 2,065.63, which were off set against loans. He produced cheques in favour of the 2nd petitioner amounting to USD 4,359.1, but had no document showing that Catherine, the 1st petitioner, was paid. He acknowledged that the Colorado court dismissed their (Respondents) counterclaim for want of jurisdiction and confirmed that the monies sought for refund were held in the USA bank account.
9. CPW1 further testified that the petitioners cashed cheques amounting to USD 6,359.10. These cheques were not part of the audit query, which concerned USD 8,102, and the figures in the audit query may in fact have been higher. He added that the petitioners’ shares valued at USD 2,065.63, had not been remitted to them to date. He emphasized that the petitioners were not members of Mile High Enterprises Ltd as they had never surrendered the requisite documents relating to Bidii international company. Membership, he explained was to be perfected upon receipt of all such documents.
10. This witness confirmed that the audit report was prepared contemporaneously with the land purchase in Kenya. The chairperson of the investment group and the merry-go-round initiative signed the cheques and communicated directly with the vendor, while the petitioners themselves had custody of all records.
11. The court observed that the witness wo testified virtually from USA, appeared to be guided by a third party in the room
12. The respondents who are also the cross petitioners submitted that their cross petition sought specific reliefs against the petitioners. Chief among them was an order compelling the petitioners to surrender property belonging to the 1st respondent, including the original title deed and purchase agreement in respect of L/R No. Bungoma/Kiminini/1942, together with the company’s minute book, financial records in both hard copy and soft copy, and the cheque books. The cross-petitioners further sought that the petitioners render a full account in respect of the queries raised in the audit report, and in default refund the sum of USD 8,102, together with costs of the counterclaim and interest.
13. The respondents urged that although the petitioners filed a reply to the cross-petition, they did not tender any evidence in support of their assertions. The burden therefore shifted to them to demonstrate that they had indeed surrendered the company’s property and accounted for the monies that came into their possession during their leadership. In the absence of such evidence, the claims advanced in their reply remain bare allegations.
14. They urged that the law is clear. Section 107 to 109 of the Evidence act place the burden upon the party who makes an assertion. It was incumbent upon the petitioners to prove that they had discharged their obligations by handing over the company’s property and properly accounting for funds. Having failed to do so, they cannot rely on mere pleadings to defeat the respondent’s case.
15. They further urged that the evidence adduced by the cross-petitioners stands uncontroverted. Reliance was placed on the authority of Jennifer Nyambura Kamau –v- Humphrey Mbaka Nandi (2013) Eklr. and Motex Knitwear Limited –v- Gopitex Knitwear Mills Limited (Milimani) Hccc No. 834 of 2022, where the court held that unchallenged evidence must be accepted as true. In the present matter, the petitioner’s failure to rebut the Respondents testimony leaves the claims against them unsubstantiated and the Respondents case intact.
16. In conclusion, the respondent’s/cross petitioners submitted that the petitioners had failed to discharge the burden placed upon them by law. The cross-petitioners evidence remained unchallenged, and the reliefs’ sought in cross-petition ought to be granted in full, together with costs and interests.
17. The petitioners on the other hand submitted that, on a balance of probabilities, the cross petitioners had failed to prove their case. The reliefs sought in the cross –petition are unsupported by evidence and the petitioners are entitled to costs of the petition.
18. The petitioners relied on the authority of Ajay Shah –v- Deposit Protection Fund Board as Liquidator of Trust Bank, which affirms that directors of companies remain bound by fiduciary obligations even beyond the tenure in office, as provided under Section 104(2) (b) of the Companies Act.
19. They submitted that while it is true that the directors and officials are obliged to hand over company assets and account for property and funds that come into their possession during their tenure, the cross-petitioners had failed to demonstrate that the petitioners failed in this duty. The allegations that the petitioners retained crucial assets such as the title deed for LR No. Bungoma/ kiminini/1924, the land purchase agreement, minute books, financial records and the cheque books remain unsubstantiated. No evidence had been adduced to show that these assets are in the petitioner’s possession.
20. The petitioners contend that the burden of proof lies squarely on the cross petitioners. Sections 107 -109 of the Evidence Act place the burden of proof upon the party asserting the existence of facts. It was incumbent upon the cross-petitioners to prove that the petitioners retained company property and failed to account for financial transactions.
21. They urged that no such proof has been tendered. PW1 had produced no evidence that he is a director or chairman of the Respondents, neither the memorandum nor articles of association nor the certificate of incorporation were produced to establish membership or shareholding. The relationship between PW1 and the Respondents could only be established through such documents, which were deliberately omitted. In the absence of such evidence, the claims advanced in the cross petition remained bare allegations.
22. The petitioners further submitted that Exhibit 8 clearly reveals who was in possession of the title deed and land sale agreement, and that person is not the petitioners herein. The respondents have always known since 2014, who held those documents. The petitioners cannot therefore be compelled to surrender property that is not in their possession.
23. They further urged that Exhibit 3, being a ruling in ELC No. 123 of 2014, confirmed that the petitioners became shareholders of the 1st respondent, but there is no corroboration of the allegations that they retained company assets. No testimony was offered from the treasurer or secretary of the 1st respondents to support the claims. In the absence of corroboration, the burden has not shifted and cannot shift to the petitioners. It remains upon the respondents to prove their assertions, which they have failed to do so.
24. In conclusion, the petitioner submitted that the respondents failed to establish and prove their case against them on a balance of probabilities. The respondents deliberately omitted crucial documents and failed to substantiate their allegations. The petitioners therefore urge the court to find that the cross-petition is without merit and to dismiss it accordingly.
25. On the issue of costs, the petitioners submit that this suit would not have been necessary, had the respondents properly established their claims. Given that costs ordinarily follow the event, and with the apparent failure by the respondents to prove their case on a preponderance of evidence, they ought to bear the costs of the cross-petition. The petitioners further note that costs were previously awarded against themselves in related proceedings for withdrawal of a petition occasioned by late filing of documents. The petitioners thus urge this court to adopt the same principle in this instance, wherefore costs should be awarded to them.
Analysis and determination
26. Upon consideration of the evidence tendered by the Respondents/ Cross Petitioners, the following undisputed issues emerge; it is not in dispute that the petitioners contributed to the acquisition of the land in Bungoma, registered in the name of the 1st respondent. It is also common ground that the petitioners were at one time officials of the 1st respondent and, in that capacity, had access to company records and financial instruments. Both parties acknowledge that the petitioners subsequently withdrew from the merry go round scheme, though the effect of that withdrawal on their membership in the company remains contested.
27. There is no dispute that the company was incorporated, and that its affairs were conducted through formal structures requiring directors and officials to account for property and funds. It is further uncontested that an audit report was prepared during the period land acquisition was happening, raising queries about financial transactions. The existence of cheques cashed and sums received is not denied, though the characterization of those transactions and their relation to the audit query is disputed.
28. Finally, both parties accept that certain company documents exist-including the title deed for LR No. Bungoma/Kiminini/1942, the land purchase agreement, the minute book, financial records, cheque books-and that these documents are central to the dispute. The question of who currently hold them, and whether they were properly handed over upon resignation, remains the subject of contestation.
29. Issues for determination are therefore:
a) Whether the cross-petitioners have established who was and is in Possession of the title deed LR NO. Bungoma/Kiminini/1942
b) Whether it has been established who were the directors and Chairperson of the 1st respondent at the material period?
c) Whether it has been shown with clarity which accounts the alleged misappropriated funds were drawn from?
d) Whether the cross-petitioners have discharged their burden of proof to required standards
e) Whether the burden of proof had shifted to the petitioners to show that they handed over company property and accounted for funds?
f) Costs?
ANALYSIS AND DETERMINATION
30. I have carefully considered the pleadings, the evidence of CPW1, the exhibits produced, and the rival submissions of both parties. The law on the burden of proof in civil proceedings is settled.
31. Sections 107 and 108 of the Evidence Act state as follows:
107(1) whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.
(2) When a person is bound to prove the existence of any fact it is said that the burden of proof lies on that person.
108. The burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side.
109. The burden of proof as to any particular fact lies on the person who wishes the court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person.
32. Sections 107, 108 and 109 of the Evidence Act (Cap 80) place the burden of proving the existence of any fact upon the party who asserts it, and this burden does not shift until the party upon whom it lies has adduced sufficient evidence to raise a presumption that what is sought to be proved is true.
33. This is known as the legal burden. The Halsbury’s Laws of England, 4th Edition, Volume 17, at paras 13 and 14: describes it thus:
“The legal burden is the burden of proof which remains constant throughout a trial; it is the burden of establishing the facts and contentions which will support a party’s case. If at the conclusion of the trial he has failed to establish these to the appropriate standard, he will lose.
34. In Mbuthia Macharia v Annah Mutua Ndwiga & another [2017] KECA 290 (KLR) the learned judges of the Court of Appeal rendered themselves as follows:
“The legal burden is discharged by way of evidence, with the opposing party having a corresponding duty of adducing evidence in rebuttal. This constitutes evidential burden. Therefore, while both the legal and evidential burdens initially rested upon the appellant, the evidential burden may shift in the course of trial, depending on the evidence adduced. As the weight of evidence given by either side during the trial varies, so will the evidential burden shift to the party who would fail without further evidence?”
35. The cross-petitioners sought orders compelling the petitioners to surrender the original title deed for L/R No. Bungoma/Kiminini/1942, the land sale agreement, the minute book, financial records and the cheque books. It was incumbent upon the cross-petitioners to adduce the evidence that the said documents were held by the petitioners.
36. It is not disputed that there exists L/R No. Bungoma/ Kiminini/1942 and that the title is not held by the current directors of the 1st respondent. Despite PW1 having not availed a copy of the Title deed, his “exhibit 3” being the ruling of Justice S.K Mukunya as he then was, confirms the existence of the title having been issued in August,2011.
37. CPW1 stated that the property was purchased when the petitioners were the directors of the 1st respondent. However, no evidence was led by CPW1 to show that any of these specific items were in the physical or constructive possession of the petitioners as at the date of hearing.
38. To the contrary, the petitioners drew attention to “Exhibit 8”, produced in these proceedings by the respondents, which reveals that the title deed and land sale agreement were held by a person other than the petitioners, a fact known to the respondents since 2014.
39. I have looked at the letter. I note that it is drafted by CPW1 as Chairman of the 1st Respondent and addressed to no one in particular. The brief content of the said letter is that it seeks to appoint one “Robert Lomosi” who is introduced as a member of the 1st respondent be a recipient of the Original Title deed, sale agreement, copies of monies paid and cheques drawn from Bidii HFCK account and all other correspondences between “a firm” and the 1st respondent.
40. Exhibit 3, confirms the existence of the title and that the petitioners were shareholders of the 1st respondent. Exhibit 4 on the other hand is requesting for release of the said title to one Robert Lomosi. None of the exhibits corroborate any assertion that the petitioners retained the company's documents.
41. The legal burden of proof normally rests upon the party desiring the court to take action; thus the cross petitioner ought to have led evidence to satisfy the court that the documents alluded to were in possession of the petitioners or they ought to be in their possession.
42. In the absence of evidence placing these specific items in the petitioners' possession, and in the face of unchallenged documentary evidence to the contrary, I find that the cross-petitioners have not established this limb of their claim.
43. Turning on the issue of Shareholding of the 1st respondent at the time of the alleged resignation. It is common ground, as recorded at above, that the petitioners contributed toward the acquisition of the suit land and were at one time officials of the 1st respondent. What remains contested is the legal effect of their subsequent withdrawal from the merry-go-round scheme on their membership and shareholding in the 1st respondent itself.
44. CPW1's evidence on this point was equivocal: he testified that the petitioners were shareholders whose shares, valued at USD 2,065.63 each, were set off against loans, yet in the same breath maintained that the petitioners had not been bought out and that their membership in the 2nd respondent was only to be perfected upon surrender of documents. This shifting characterisation, unsupported by any share register or resolution, falls short of establishing with clarity when, or whether, the petitioners' shareholding was extinguished.
45. The Companies Act, 2015 is clear on this point. Section 138 provides that:
“A company shall notify the Registrar of any change among its directors within thirty days of the change.”
46. On the question of resignation, Section 143 of the Companies Act stipulates:
“A director may resign by giving written notice to the company, and the resignation takes effect upon receipt of the notice or on a date specified therein.”
47. Exhibit 7 as produced by CPW1 was an email from the 2nd Petitioner to the 1st respondent with the reference “withdrawal Notice”. Partially the letter states and I quote:
“ ……… I hereby cease to be member effective the end of MGR cycle. I will remain an investment member until I GET my share of land and thereafter, my relationship with Bidii as an Organization will have ceased in totality.”
48. It is evident that from the above statement, the 2nd petitioner was quitting as a member of the MGR group and not as shareholder of the 1st respondent. Further no notification or registry extract was produced in evidence to the effect that he quit as a director. The respondents alleged that the petitioners failed to sign resignation letters, but no such letters were produced, nor was there evidence of filing with the Registrar.
49. CPW1 admitted limited knowledge and failed to tender incorporation documents, resolutions, or minutes establishing directorship or chairmanship. In the absence of such evidence, the court cannot conclusively determine that the petitioners resigned or ceased to be members of the 1st respondent. I find that without compliance with statutory requirements, resignation remains unproven.
(b) Whether the cross-petitioners have established who the directors and chairperson of the 1st respondent were at the material period
50. PW1, Kennedy Ambumba, testified as the sole witness for the cross-petitioners and described himself as chairperson of both the 1st and 2nd respondents. However, as rightly pointed out by the petitioners, no memorandum and articles of association, certificate of incorporation, register of directors, or minutes of appointment were produced to substantiate this claim.
51. Company records of this nature are ordinarily the primary and most reliable means of proving the constitution, membership and leadership of a corporate entity, and their absence is significant, particularly where PW1's authority to depose to the affairs of both companies was squarely put in issue by the petitioners.
52. I find that the cross-petitioners did not discharge the burden of establishing, to the required standard, that PW1 held the office he claimed at the material time, nor the composition of the 1st respondent's directorship generally.
Fiduciary duties of the directors after resignation
53. The principle that directors and officers of a company remain accountable for property and funds that came into their possession, and for decisions taken, during their tenure, notwithstanding subsequent resignation, is well established both under the general law and under Part IX of the Companies Act, 2015, which codifies the general duties of directors.
54. A version of this principle, in the context of former executive directors held liable for conduct engaged in during their tenure notwithstanding the subsequent liquidation of the company, was affirmed in Ajay Shah --v- Deposit Protection Fund Board as Liquidator of Trust Bank Limited (In Liquidation) [2016] eKLR.
55. I accept, as a matter of law, that a person does not escape accountability for property or funds handled during their tenure merely by ceasing to hold office. This principle, however, only becomes material once it is first shown, on the evidence, that specific property or funds did in fact pass through, or remain in, the hands of the person alleged to be in default. It is to that question that I now turn.
(c) Whether it has been shown with clarity which accounts the alleged misappropriated funds were drawn from
56. CPW1's evidence on the financial aspect of the cross-petition was confused and internally inconsistent. He testified to an audit query of USD 8,102, to cheques cashed by the petitioners amounting to USD 6,359.10 which he said were separate from the audit query, to cheques of USD 4,359.10 paid specifically to the 2nd petitioner, and to shares valued at USD 2,065.63 per petitioner said to remain unremitted.
57. CPW1 was however unable to reconcile these figures, admitted only limited knowledge of the Housing Finance account in Kenya and the Wells Fargo account in the United States, the latter since closed, and volunteered, without supporting basis, that the true figure may in fact have been higher than pleaded. He confirmed, further, that the funds said to be owing were in any event held in a bank account in the United States, in respect of which a counterclaim by the respondents had already been dismissed by a Colorado court for want of jurisdiction.
58. Clarity as to the specific account or transaction from which the alleged misappropriation is said to arise is a threshold requirement before any liability, default sum, or order to account can properly be made against a party, and that clarity was not provided.
(d) Whether the cross-petitioners discharged their burden of proof to the required standard
59. The respondents urged, relying on Jennifer Nyambura Kamau --v- Humphrey Mbaka Nandi [2013] eKLR and Motex Knitwear Limited --v- Gopitex Knitwear Mills Limited, Nairobi (Milimani) HCCC No. 834 of 2002, that their evidence stood unchallenged and must therefore be accepted as true, the petitioners having tendered no evidence of their own.
60. I am unable to accept this submission on the facts of this case. The rule that unchallenged evidence is to be accepted as true presupposes that the evidence in question is, on its own terms, credible, consistent and sufficient to establish the fact for which it is led. It is not a rule that cures evidence which is internally contradictory, unsupported by the primary documents that would ordinarily be available to a company, or affected by the court's own contemporaneous observation, made during the hearing, that the witness appeared to be receiving guidance from a third party present in the room while testifying.
61. The absence of any evidence from the treasurer or secretary of the 1st respondent, who would ordinarily be best placed to speak to the company's financial records and the whereabouts of its documents, further compounds these difficulties. Having regard to the cumulative gaps identified above, I find that the cross-petitioners did not, on a balance of probabilities, discharge the burden placed upon them by sections 107 to 109 of the Evidence Act.
(d(a) whether the burden of proof had shifted to the petitioners to show that they handed over company property and accounted for funds
62. It follows from the foregoing findings that the evidential burden never shifted to the petitioners to demonstrate that they had surrendered company property or accounted for funds. That burden only arises once the party bearing the legal burden has, in the first instance, established a prima facie case.
63. Being the cross-petitioners, the respondents bore the primary burden of establishing, on a balance of probabilities, the essential elements of their cross-petition before any evidential burden could shift to the petitioners to demonstrate that they had surrendered company property or accounted for company funds.
64. The cross-petitioners having failed to do so, the petitioners were under no obligation to lead evidence in rebuttal, and no adverse inference arises from their decision not to do so.
(e) Costs
65. Costs follow the event, save where the court, for good reason, orders otherwise. The cross-petition having failed in its entirety, the petitioners, as the successful parties in respect of the cross-petition, are entitled to the costs thereof.
DISPOSITION
66. Premised upon the foregoing reasons, the orders that commend themselves to this court are as follows:
a) The cross-petition dated 16/11/2022 be and is hereby dismissed in its entirety.
b) The costs of the cross-petition shall be borne by the respondents/cross-petitioners, to be paid to the petitioners.
c) For the avoidance of doubt, the earlier order on the costs of the withdrawn petition, awarded to the respondents on 16/11/2022, remains undisturbed.
It is so ordered.
DELIVERED, SIGNED AND DATED AT MILIMANI THIS 16th DAY OF July 2026.
M. SHARIIF
JUDGE
1. The Petitioners filed a petition dated 15/03/2018 seeking various orders against the respondents. The respondents filed a response and a cross-petition. The petition was eventually withdrawn on 16/11/2022, with costs to the respondents. The cross-petition by the respondents was set down for hearing.
2. The cross petition was essentially a claim by the respondents seeking to compel the petitioners to surrender property belonging to the 1st respondent. This included the original title deed for L/R NO. Bungoma/Kimilili/1942, the land purchase agreement, the company/s minute book, financial records in both hard and soft copy, and the cheque books. The cross-petitioner alleged that despite resigning and ceasing to be members of the 1st respondent, the petitioners refused to hand over these assets and continued to retain them against the interests of the company.
3. They further contended that the petitioners had converted to their personal benefit the sum of USD 8,102, which had not been refunded to date, and that they failed to sign the resignation letters to enable the current officers of the 1st respondent to remove their names from the company register and bank signatories. The cross petitioners urged that the petitioners conduct amounted to a breach of fiduciary duty owed to the company, and sought orders compelling them to surrender the company’s property, render accounts for queries raised in the audit report, and in default the sum of USD 8102 be refunded. They also prayed for costs of the counter claim /cross petition together with interests.
4. The petitioners, in reply to the cross petition, maintain that they never ceased to be members of the 1st respondent as alleged and that their withdrawal was only from the merry go round scheme and not from the company itself. They argue that the issues relating to the accounts of the 1st respondent were ventilated in civil proceedings in the county of Arapahoe, Colorado, specifically in case no. 1790 in West Littleton, which addressed the questions of shares in merry go round scheme leaving the issue of the Bungoma land parcel.
5. The petitioners further contend and insist that they hold no property belonging to the respondents. In their view, the cross petition is an attempt to re-litigate issues already determined in earlier proceedings, and to mischaracterize their role in the company. Accordingly, the petitioners deny the allegations of retaining company assets or converting funds to their personal use. They assert that they remain shareholders and members of the 1st respondent, and that the cross petition is unfounded.
6. CPW1, Kennedy Mukhwana Ambundo, testified that he resides in Colorado, USA, and was the director and chair of Bidii International Investments and Mile High Enterprises, the respondents herein. He stated that Catherine Ayuma Malika and Hezekiah Francis Malika, the petitioners herein were former members of Bidii international. He adopted his statement dated 22/07/2022 and produced documents 1-11 save for the auditor’s report which was marked for identification.
7. In cross examination, CPW1 confirmed that Bidii International was registered and also incorporated in the USA, and that the claim in the cross-petition covered both entities. He acknowledged that the petitioners contributed to the purchase of 10 acres of land in Kenya among 13 other members, but did not know the purchase price. He stated that at the time of the acquisition, the petitioners were shareholders in the investment group, but they were not bought out, instead, they appropriated payments to themselves.
8. CPW1 admitted limited knowledge of the Housing Finance account in Kenya and the Wells Fargo account in the USA which he stated had since been closed. He confirmed that when members exit, they are paid back their shares. That each petitioner held shares valued at USD 2,065.63, which were off set against loans. He produced cheques in favour of the 2nd petitioner amounting to USD 4,359.1, but had no document showing that Catherine, the 1st petitioner, was paid. He acknowledged that the Colorado court dismissed their (Respondents) counterclaim for want of jurisdiction and confirmed that the monies sought for refund were held in the USA bank account.
9. CPW1 further testified that the petitioners cashed cheques amounting to USD 6,359.10. These cheques were not part of the audit query, which concerned USD 8,102, and the figures in the audit query may in fact have been higher. He added that the petitioners’ shares valued at USD 2,065.63, had not been remitted to them to date. He emphasized that the petitioners were not members of Mile High Enterprises Ltd as they had never surrendered the requisite documents relating to Bidii international company. Membership, he explained was to be perfected upon receipt of all such documents.
10. This witness confirmed that the audit report was prepared contemporaneously with the land purchase in Kenya. The chairperson of the investment group and the merry-go-round initiative signed the cheques and communicated directly with the vendor, while the petitioners themselves had custody of all records.
11. The court observed that the witness wo testified virtually from USA, appeared to be guided by a third party in the room
12. The respondents who are also the cross petitioners submitted that their cross petition sought specific reliefs against the petitioners. Chief among them was an order compelling the petitioners to surrender property belonging to the 1st respondent, including the original title deed and purchase agreement in respect of L/R No. Bungoma/Kiminini/1942, together with the company’s minute book, financial records in both hard copy and soft copy, and the cheque books. The cross-petitioners further sought that the petitioners render a full account in respect of the queries raised in the audit report, and in default refund the sum of USD 8,102, together with costs of the counterclaim and interest.
13. The respondents urged that although the petitioners filed a reply to the cross-petition, they did not tender any evidence in support of their assertions. The burden therefore shifted to them to demonstrate that they had indeed surrendered the company’s property and accounted for the monies that came into their possession during their leadership. In the absence of such evidence, the claims advanced in their reply remain bare allegations.
14. They urged that the law is clear. Section 107 to 109 of the Evidence act place the burden upon the party who makes an assertion. It was incumbent upon the petitioners to prove that they had discharged their obligations by handing over the company’s property and properly accounting for funds. Having failed to do so, they cannot rely on mere pleadings to defeat the respondent’s case.
15. They further urged that the evidence adduced by the cross-petitioners stands uncontroverted. Reliance was placed on the authority of Jennifer Nyambura Kamau –v- Humphrey Mbaka Nandi (2013) Eklr. and Motex Knitwear Limited –v- Gopitex Knitwear Mills Limited (Milimani) Hccc No. 834 of 2022, where the court held that unchallenged evidence must be accepted as true. In the present matter, the petitioner’s failure to rebut the Respondents testimony leaves the claims against them unsubstantiated and the Respondents case intact.
16. In conclusion, the respondent’s/cross petitioners submitted that the petitioners had failed to discharge the burden placed upon them by law. The cross-petitioners evidence remained unchallenged, and the reliefs’ sought in cross-petition ought to be granted in full, together with costs and interests.
17. The petitioners on the other hand submitted that, on a balance of probabilities, the cross petitioners had failed to prove their case. The reliefs sought in the cross –petition are unsupported by evidence and the petitioners are entitled to costs of the petition.
18. The petitioners relied on the authority of Ajay Shah –v- Deposit Protection Fund Board as Liquidator of Trust Bank, which affirms that directors of companies remain bound by fiduciary obligations even beyond the tenure in office, as provided under Section 104(2) (b) of the Companies Act.
19. They submitted that while it is true that the directors and officials are obliged to hand over company assets and account for property and funds that come into their possession during their tenure, the cross-petitioners had failed to demonstrate that the petitioners failed in this duty. The allegations that the petitioners retained crucial assets such as the title deed for LR No. Bungoma/ kiminini/1924, the land purchase agreement, minute books, financial records and the cheque books remain unsubstantiated. No evidence had been adduced to show that these assets are in the petitioner’s possession.
20. The petitioners contend that the burden of proof lies squarely on the cross petitioners. Sections 107 -109 of the Evidence Act place the burden of proof upon the party asserting the existence of facts. It was incumbent upon the cross-petitioners to prove that the petitioners retained company property and failed to account for financial transactions.
21. They urged that no such proof has been tendered. PW1 had produced no evidence that he is a director or chairman of the Respondents, neither the memorandum nor articles of association nor the certificate of incorporation were produced to establish membership or shareholding. The relationship between PW1 and the Respondents could only be established through such documents, which were deliberately omitted. In the absence of such evidence, the claims advanced in the cross petition remained bare allegations.
22. The petitioners further submitted that Exhibit 8 clearly reveals who was in possession of the title deed and land sale agreement, and that person is not the petitioners herein. The respondents have always known since 2014, who held those documents. The petitioners cannot therefore be compelled to surrender property that is not in their possession.
23. They further urged that Exhibit 3, being a ruling in ELC No. 123 of 2014, confirmed that the petitioners became shareholders of the 1st respondent, but there is no corroboration of the allegations that they retained company assets. No testimony was offered from the treasurer or secretary of the 1st respondents to support the claims. In the absence of corroboration, the burden has not shifted and cannot shift to the petitioners. It remains upon the respondents to prove their assertions, which they have failed to do so.
24. In conclusion, the petitioner submitted that the respondents failed to establish and prove their case against them on a balance of probabilities. The respondents deliberately omitted crucial documents and failed to substantiate their allegations. The petitioners therefore urge the court to find that the cross-petition is without merit and to dismiss it accordingly.
25. On the issue of costs, the petitioners submit that this suit would not have been necessary, had the respondents properly established their claims. Given that costs ordinarily follow the event, and with the apparent failure by the respondents to prove their case on a preponderance of evidence, they ought to bear the costs of the cross-petition. The petitioners further note that costs were previously awarded against themselves in related proceedings for withdrawal of a petition occasioned by late filing of documents. The petitioners thus urge this court to adopt the same principle in this instance, wherefore costs should be awarded to them.
Analysis and determination
26. Upon consideration of the evidence tendered by the Respondents/ Cross Petitioners, the following undisputed issues emerge; it is not in dispute that the petitioners contributed to the acquisition of the land in Bungoma, registered in the name of the 1st respondent. It is also common ground that the petitioners were at one time officials of the 1st respondent and, in that capacity, had access to company records and financial instruments. Both parties acknowledge that the petitioners subsequently withdrew from the merry go round scheme, though the effect of that withdrawal on their membership in the company remains contested.
27. There is no dispute that the company was incorporated, and that its affairs were conducted through formal structures requiring directors and officials to account for property and funds. It is further uncontested that an audit report was prepared during the period land acquisition was happening, raising queries about financial transactions. The existence of cheques cashed and sums received is not denied, though the characterization of those transactions and their relation to the audit query is disputed.
28. Finally, both parties accept that certain company documents exist-including the title deed for LR No. Bungoma/Kiminini/1942, the land purchase agreement, the minute book, financial records, cheque books-and that these documents are central to the dispute. The question of who currently hold them, and whether they were properly handed over upon resignation, remains the subject of contestation.
29. Issues for determination are therefore:
a) Whether the cross-petitioners have established who was and is in Possession of the title deed LR NO. Bungoma/Kiminini/1942
b) Whether it has been established who were the directors and Chairperson of the 1st respondent at the material period?
c) Whether it has been shown with clarity which accounts the alleged misappropriated funds were drawn from?
d) Whether the cross-petitioners have discharged their burden of proof to required standards
e) Whether the burden of proof had shifted to the petitioners to show that they handed over company property and accounted for funds?
f) Costs?
ANALYSIS AND DETERMINATION
30. I have carefully considered the pleadings, the evidence of CPW1, the exhibits produced, and the rival submissions of both parties. The law on the burden of proof in civil proceedings is settled.
31. Sections 107 and 108 of the Evidence Act state as follows:
107(1) whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.
(2) When a person is bound to prove the existence of any fact it is said that the burden of proof lies on that person.
108. The burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side.
109. The burden of proof as to any particular fact lies on the person who wishes the court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person.
32. Sections 107, 108 and 109 of the Evidence Act (Cap 80) place the burden of proving the existence of any fact upon the party who asserts it, and this burden does not shift until the party upon whom it lies has adduced sufficient evidence to raise a presumption that what is sought to be proved is true.
33. This is known as the legal burden. The Halsbury’s Laws of England, 4th Edition, Volume 17, at paras 13 and 14: describes it thus:
“The legal burden is the burden of proof which remains constant throughout a trial; it is the burden of establishing the facts and contentions which will support a party’s case. If at the conclusion of the trial he has failed to establish these to the appropriate standard, he will lose.
34. In Mbuthia Macharia v Annah Mutua Ndwiga & another [2017] KECA 290 (KLR) the learned judges of the Court of Appeal rendered themselves as follows:
“The legal burden is discharged by way of evidence, with the opposing party having a corresponding duty of adducing evidence in rebuttal. This constitutes evidential burden. Therefore, while both the legal and evidential burdens initially rested upon the appellant, the evidential burden may shift in the course of trial, depending on the evidence adduced. As the weight of evidence given by either side during the trial varies, so will the evidential burden shift to the party who would fail without further evidence?”
35. The cross-petitioners sought orders compelling the petitioners to surrender the original title deed for L/R No. Bungoma/Kiminini/1942, the land sale agreement, the minute book, financial records and the cheque books. It was incumbent upon the cross-petitioners to adduce the evidence that the said documents were held by the petitioners.
36. It is not disputed that there exists L/R No. Bungoma/ Kiminini/1942 and that the title is not held by the current directors of the 1st respondent. Despite PW1 having not availed a copy of the Title deed, his “exhibit 3” being the ruling of Justice S.K Mukunya as he then was, confirms the existence of the title having been issued in August,2011.
37. CPW1 stated that the property was purchased when the petitioners were the directors of the 1st respondent. However, no evidence was led by CPW1 to show that any of these specific items were in the physical or constructive possession of the petitioners as at the date of hearing.
38. To the contrary, the petitioners drew attention to “Exhibit 8”, produced in these proceedings by the respondents, which reveals that the title deed and land sale agreement were held by a person other than the petitioners, a fact known to the respondents since 2014.
39. I have looked at the letter. I note that it is drafted by CPW1 as Chairman of the 1st Respondent and addressed to no one in particular. The brief content of the said letter is that it seeks to appoint one “Robert Lomosi” who is introduced as a member of the 1st respondent be a recipient of the Original Title deed, sale agreement, copies of monies paid and cheques drawn from Bidii HFCK account and all other correspondences between “a firm” and the 1st respondent.
40. Exhibit 3, confirms the existence of the title and that the petitioners were shareholders of the 1st respondent. Exhibit 4 on the other hand is requesting for release of the said title to one Robert Lomosi. None of the exhibits corroborate any assertion that the petitioners retained the company's documents.
41. The legal burden of proof normally rests upon the party desiring the court to take action; thus the cross petitioner ought to have led evidence to satisfy the court that the documents alluded to were in possession of the petitioners or they ought to be in their possession.
42. In the absence of evidence placing these specific items in the petitioners' possession, and in the face of unchallenged documentary evidence to the contrary, I find that the cross-petitioners have not established this limb of their claim.
43. Turning on the issue of Shareholding of the 1st respondent at the time of the alleged resignation. It is common ground, as recorded at above, that the petitioners contributed toward the acquisition of the suit land and were at one time officials of the 1st respondent. What remains contested is the legal effect of their subsequent withdrawal from the merry-go-round scheme on their membership and shareholding in the 1st respondent itself.
44. CPW1's evidence on this point was equivocal: he testified that the petitioners were shareholders whose shares, valued at USD 2,065.63 each, were set off against loans, yet in the same breath maintained that the petitioners had not been bought out and that their membership in the 2nd respondent was only to be perfected upon surrender of documents. This shifting characterisation, unsupported by any share register or resolution, falls short of establishing with clarity when, or whether, the petitioners' shareholding was extinguished.
45. The Companies Act, 2015 is clear on this point. Section 138 provides that:
“A company shall notify the Registrar of any change among its directors within thirty days of the change.”
46. On the question of resignation, Section 143 of the Companies Act stipulates:
“A director may resign by giving written notice to the company, and the resignation takes effect upon receipt of the notice or on a date specified therein.”
47. Exhibit 7 as produced by CPW1 was an email from the 2nd Petitioner to the 1st respondent with the reference “withdrawal Notice”. Partially the letter states and I quote:
“ ……… I hereby cease to be member effective the end of MGR cycle. I will remain an investment member until I GET my share of land and thereafter, my relationship with Bidii as an Organization will have ceased in totality.”
48. It is evident that from the above statement, the 2nd petitioner was quitting as a member of the MGR group and not as shareholder of the 1st respondent. Further no notification or registry extract was produced in evidence to the effect that he quit as a director. The respondents alleged that the petitioners failed to sign resignation letters, but no such letters were produced, nor was there evidence of filing with the Registrar.
49. CPW1 admitted limited knowledge and failed to tender incorporation documents, resolutions, or minutes establishing directorship or chairmanship. In the absence of such evidence, the court cannot conclusively determine that the petitioners resigned or ceased to be members of the 1st respondent. I find that without compliance with statutory requirements, resignation remains unproven.
(b) Whether the cross-petitioners have established who the directors and chairperson of the 1st respondent were at the material period
50. PW1, Kennedy Ambumba, testified as the sole witness for the cross-petitioners and described himself as chairperson of both the 1st and 2nd respondents. However, as rightly pointed out by the petitioners, no memorandum and articles of association, certificate of incorporation, register of directors, or minutes of appointment were produced to substantiate this claim.
51. Company records of this nature are ordinarily the primary and most reliable means of proving the constitution, membership and leadership of a corporate entity, and their absence is significant, particularly where PW1's authority to depose to the affairs of both companies was squarely put in issue by the petitioners.
52. I find that the cross-petitioners did not discharge the burden of establishing, to the required standard, that PW1 held the office he claimed at the material time, nor the composition of the 1st respondent's directorship generally.
Fiduciary duties of the directors after resignation
53. The principle that directors and officers of a company remain accountable for property and funds that came into their possession, and for decisions taken, during their tenure, notwithstanding subsequent resignation, is well established both under the general law and under Part IX of the Companies Act, 2015, which codifies the general duties of directors.
54. A version of this principle, in the context of former executive directors held liable for conduct engaged in during their tenure notwithstanding the subsequent liquidation of the company, was affirmed in Ajay Shah --v- Deposit Protection Fund Board as Liquidator of Trust Bank Limited (In Liquidation) [2016] eKLR.
55. I accept, as a matter of law, that a person does not escape accountability for property or funds handled during their tenure merely by ceasing to hold office. This principle, however, only becomes material once it is first shown, on the evidence, that specific property or funds did in fact pass through, or remain in, the hands of the person alleged to be in default. It is to that question that I now turn.
(c) Whether it has been shown with clarity which accounts the alleged misappropriated funds were drawn from
56. CPW1's evidence on the financial aspect of the cross-petition was confused and internally inconsistent. He testified to an audit query of USD 8,102, to cheques cashed by the petitioners amounting to USD 6,359.10 which he said were separate from the audit query, to cheques of USD 4,359.10 paid specifically to the 2nd petitioner, and to shares valued at USD 2,065.63 per petitioner said to remain unremitted.
57. CPW1 was however unable to reconcile these figures, admitted only limited knowledge of the Housing Finance account in Kenya and the Wells Fargo account in the United States, the latter since closed, and volunteered, without supporting basis, that the true figure may in fact have been higher than pleaded. He confirmed, further, that the funds said to be owing were in any event held in a bank account in the United States, in respect of which a counterclaim by the respondents had already been dismissed by a Colorado court for want of jurisdiction.
58. Clarity as to the specific account or transaction from which the alleged misappropriation is said to arise is a threshold requirement before any liability, default sum, or order to account can properly be made against a party, and that clarity was not provided.
(d) Whether the cross-petitioners discharged their burden of proof to the required standard
59. The respondents urged, relying on Jennifer Nyambura Kamau --v- Humphrey Mbaka Nandi [2013] eKLR and Motex Knitwear Limited --v- Gopitex Knitwear Mills Limited, Nairobi (Milimani) HCCC No. 834 of 2002, that their evidence stood unchallenged and must therefore be accepted as true, the petitioners having tendered no evidence of their own.
60. I am unable to accept this submission on the facts of this case. The rule that unchallenged evidence is to be accepted as true presupposes that the evidence in question is, on its own terms, credible, consistent and sufficient to establish the fact for which it is led. It is not a rule that cures evidence which is internally contradictory, unsupported by the primary documents that would ordinarily be available to a company, or affected by the court's own contemporaneous observation, made during the hearing, that the witness appeared to be receiving guidance from a third party present in the room while testifying.
61. The absence of any evidence from the treasurer or secretary of the 1st respondent, who would ordinarily be best placed to speak to the company's financial records and the whereabouts of its documents, further compounds these difficulties. Having regard to the cumulative gaps identified above, I find that the cross-petitioners did not, on a balance of probabilities, discharge the burden placed upon them by sections 107 to 109 of the Evidence Act.
(d(a) whether the burden of proof had shifted to the petitioners to show that they handed over company property and accounted for funds
62. It follows from the foregoing findings that the evidential burden never shifted to the petitioners to demonstrate that they had surrendered company property or accounted for funds. That burden only arises once the party bearing the legal burden has, in the first instance, established a prima facie case.
63. Being the cross-petitioners, the respondents bore the primary burden of establishing, on a balance of probabilities, the essential elements of their cross-petition before any evidential burden could shift to the petitioners to demonstrate that they had surrendered company property or accounted for company funds.
64. The cross-petitioners having failed to do so, the petitioners were under no obligation to lead evidence in rebuttal, and no adverse inference arises from their decision not to do so.
(e) Costs
65. Costs follow the event, save where the court, for good reason, orders otherwise. The cross-petition having failed in its entirety, the petitioners, as the successful parties in respect of the cross-petition, are entitled to the costs thereof.
DISPOSITION
66. Premised upon the foregoing reasons, the orders that commend themselves to this court are as follows:
a) The cross-petition dated 16/11/2022 be and is hereby dismissed in its entirety.
b) The costs of the cross-petition shall be borne by the respondents/cross-petitioners, to be paid to the petitioners.
c) For the avoidance of doubt, the earlier order on the costs of the withdrawn petition, awarded to the respondents on 16/11/2022, remains undisturbed.
It is so ordered.
DELIVERED, SIGNED AND DATED AT MILIMANI THIS 16th DAY OF July 2026.
M. SHARIIF
JUDGE