SALONOW LIMITED VS OSI DIGITAL AFRICA LIMITED AND JOANNE MUKALANI LUSENO

1. Before the trial court was a claim by the Respondent against the Appellant in the sum of Kshs. 552,938/= plus costs of the suit and interests. The details on how the sum was calculated was given to include sums advance, agreed interest processing fees and Mpesa charges. It was pleaded that the Appellant had issued a cheque of Kshs. 200,000 toward part payment but the cheque was dishonored upon presentation.
2. The claim was resisted by the response to statement of claim by which it was asserted that no sums were owed, no agreement was ever entered into and that the person named to have entered into the agreement with the Respondent, one Joanne Luseno, was employed in the capacity of Solutions Manager with no authority to enter into any agreement with third parties on behalf of the Respondent. It was equally pleaded that the Respondent had only two employees and that Joanne Luseno was the only known employee on the list of salary payment while the rest listed were strangers who the Appellant should look upon for repayment. There was an additional pleading that the Appellant would make a third party claim against Joanne Luseno and that the claim be dismissed and judgment entered against the third party in favour of the Appellant for the sum claimed by the claimant.
3. As pleaded in the response to claim, a third party notice issued citing Joanne Mukalani Luseno and blaming her for entering into an unlawful contract with the claimant using the Respondent’s name without its authority. She was deemed personally liable for having received the disbursement of the advances into personal account and issued a cheque in an attempt to repay from personal account.
4. To the third party notice, a notice of appearance was entered as well as a response and a witness statement. In the documents, the third party took the position that she acted in her authority as the employee of the Respondent using her ostensible authority and that the Respondent was estopped from denying having been bound.
5. When parties attended court on 18/4/2023, it was directed that the matter proceeds to hearing pursuant to Section 30 of the Small Claims Court Act by which the documents filed were deemed duly produced without calling the makers with parties being directed to file and exchange submissions.
6. Pursuant to such directions, the claimant filed submissions dated 2/5/2023, the Respondent’s submissions are dated 12/5/2023, while those by the third party are dated 22/5/2023.
7. From a reading of the judgment by the trial court, the witness statements were declared evidence-in-chief and the submissions filed were apparently given with due regard and consideration. In that judgment, the trial court isolated the sole issue for determination to be whether there existed a contract between the parties and if there was, what were the terms.
8. The court then analyzed the evidence led and came to the conclusion that without the Respondent’s resolution to borrow and without evidence that such resolution indeed existed, the claimant had failed in its onus to prove the case against the Respondent to the requisite standards and ordered the suit dismissed. The court however found that the third party had received Kshs. 10,000/= from the claimant and entered judgment for the claimant against the third party for that sum.
9. That judgment and the ensuing decree aggrieved the claimant who has now challenged the judgment and faults the court on six grounds as disclosed in the Memorandum of Appeal dated 11/7/2023. Even when split into the six grounds, the court sees the grounds to raise only three issues as follows: -
10. Whether it was necessary for the 1^st Respondent to pass a resolution to enter into a binding contract (grounds 1, 2 and 4).
11. Whether the acts of the third party (2^nd Respondent) were sanctioned by the 1^st Respondent and was binding upon it (ground 3 and 5)
12. Whether the decision affront the law settled in the decisions cited to court.
13. In considering the appeal, the court reminds itself that it is a first appellate court bound to re-appraise and re-examine the entire record afresh and come to own conclusions^[1]. Even though there is always a latitude to be given to the trial court on account of having seen and heard the witnesses testify and thus enjoyed the advantage of observing their demeanor, in this matter, no viva voce evidence was taken and that latitude thus does not apply. The court will however remind itself that it requires a very strong case for an appellate court to interfere with findings of facts by the trier of such facts^[2].
14. It is now an established principle of company law that, being distinct and separate from its promoters, a company needs to speak to other parties by its instruments like the company seal and organs and in accordance with the Articles and Memorandum of Association, which the Appellant was deemed to have read and to be conversant with.  In East African Safari Air Limited vs. Anthony Ambaka Kegode & another CA No. 42 of 2007, the Court stated as follows:

“While persons dealing with a company are assumed to have read the public documents of the company and to have ascertained that the proposed transaction is not inconsistent therewith…”

1. In this appeal, the Appellant was presumed to have read the public constituting documents of the 1^st Respondent and established whether an employee of the 2^nd Respondent’s caliber was empowered to commit the 1^st Respondent in the manner the agreement sought to do. Having established such authority, the Appellant would then be entitled to site such authority to court as a way of proving that the 2^nd Respondent was so authorized.
2. It was expressly pleaded in the response to the claim that the transaction sued upon was never sanctioned by the company through its board by a resolution to borrow. It was equally pleaded that the 2^nd Respondent while an employee of the 1^st Respondent, as a solution manager and not human resources manager, was never authorized to enter into the agreement sued upon. The court views that defense to have fully met the dictates of order 2 Rule 4(1).
3. To such pleadings no response was filed. In accordance with Order 2 Rule 11 and 12 Civil Procedure Rules, such allegations needed to be traversed and in default of a traverse there is joinder of issues with the consequence that the same is denied. When so denied, the issue falls for proof by the party who would fail if no evidence is availed in the matter.
4. At trial, the 1^st Respondent specifically denied authority of the 2^nd Respondent to contract on its behalf with the Appellant. When faced with such pleading, the onus was placed upon the Appellant pursuant to Sections 107, 108 and 112 Evidence Act to prove that indeed the agreement it was grounding its claim upon was a valid and binding agreement upon the 1^st Respondent.
5. No evidence was laid before the trial court to displace the pleading and evidence by the 1^st Respondent that it did not authorize the transaction the Appellant sued upon. The totality of the material presented to court disclosed no authority given to the 2^nd Respondent to act for the 1^st Respondent as purported by her. In fact, the only cheque filed by the Appellant to prove that there was an attempt to pay the debt show that the cheque was issued by the 2^nd Respondent. With such evidence, the court entertains no doubt that the 2^nd Respondent knew and felt obligated to honor the agreement to pay. And, the court deems knowledge on the Appellant that in taking a personal cheque from the 2^nd Respondent, a stranger to the terms of the agreement on payment between it and the 1^st Respondent, it knew that the person with obligation to pay was the 2^nd Respondent.
6. It was also the pleading and evidence given by the 1^st Respondent that it only had 2 employees and that the rest of the persons said to have been paid salaries were strangers to it.
7. When 2^nd Respondent filed her witness statement, she opted to say nothing about that accusation. As an insider and the person said to have negotiated the agreement, she ought to have assisted the court by providing a payroll or letters of employment of those other employees. The position by the 1^st Respondent that persons not in its employment were the beneficiaries of the alleged advances was thus never controverted hence there was no proof that the sums shown to have been paid as salaries was paid to and for the benefit or on behalf of the 1^st Respondent.
8. In summary, the Appellant did not prove its case against the 1^st Respondent on a balance of probabilities. It could be possible that the 2^nd Respondent cheated the Appellant into a phony agreement, but that was not the Appellant’s case and the court has no mandate to render itself in this regard.
9. The upshot is that the appeal fails for lack of merits and is therefore dismissed with costs to the Respondents.

Dated signed and delivered at Nairobi this 22^nd day of March 2024

1. Selle v Associated Motor Boat Co. [1968] EA 123, ↑

2. Kiruga vs Kiruga & another [1988] KLR 348 ↑