Abdulkadir Shariff Abdirahim & Abdinarsir Abdirahim Mohammed T/A. S. Abdirahim Enterprises v Awo Shariff Mohammed T/A A. S. Mohammed Investments (Civil Appeal 1 of 2008) [2013] KECA 59 (KLR) (Civ) (20 December 2013) (Judgment)

IN THE COURT OF APPEAL

AT NAIROBI

CORAM: WAKI, G.B.M. KARIUKI, & M’INOTI, JJ.A.

CIVIL APPEAL NO. 1 OF 2008

BETWEEN

ABDULKADIR SHARIFF ABDIRAHIM ….…….……….................……. 1^ST APPELLANT

ABDINARSIR ABDIRAHIM MOHAMMED

T/A. S. ABDIRAHIM ENTERPRISES …………………….................……. 2^ND APPELLANT

AND

AWO SHARIFF MOHAMMED

T/A A. S. MOHAMMED INVESTMENTS …………….............…………….. RESPONDENT

(Appeal from the judgment and decree of the High Court of Kenya at Nairobi Milimani Commercial Courts (Kasango, J) dated 16^th February, 2006

in

HCCC NO. 329 OF 2003)

************

JUDGMENT OF THE COURT

This is a first appeal from the original jurisdiction of the High Court.  The appeal was provoked by the judgment of Kasango, J dated 16^th February, 2006, in which the learned judge ordered the ABDULKADIR SHARIFF ABDIRAHIM “the 1^st appellant”, to pay to the respondent US$ 200,000 and KShs.800,000/= with interest from 5^th June, 2005, till payment in full, and costs of the suit.  Although the suit was dismissed against the 2^nd appellant, ABDINARSIR ABDIRAHIM MOHAMMED and this appeal is effectively by the 1^st appellant only, we shall purely for convenience, continue to refer to Abdinarsir Abdirahim Mohammed as “the 2^nd appellant” for ease of reference to the parties.  Similarly and for the same reason, we shall continue to refer to the 1^st respondent, although he is now deceased and substituted in this appeal by his legal representatives, Mehbuba Gelan Kelil, Towhida Awo Shariff and Isha Awo Shariff.

The parties in this appeal are relatives and businessmen with a history of business dealings and financial transactions amongst themselves.  They all hail from Moyale, Marsabit County and at all material times were neighbours in South C, Nairobi.  The 1^st appellant is the elder brother of the 2^nd appellant while the 2^nd appellant is married to the respondent’s niece.

The respondent’s claim against the appellants as set out in a plaint filed in the High Court on 5^th June, 1997, was that at all material times the appellants held themselves out as partners in a business or firm known as A.S. Abdirahim Enterprises, with the 2^nd appellant as the managing partner or director of the firm.  It was further pleaded that the appellants were also the promoters and sole shareholders and directors of a company known as Al-Jazeera Investments Ltd.

To induce the respondent to part with US$ 200,000, it was pleaded, the 1^st appellant represented to the respondent that upon transfer of the said amount to the account specified below, the 1^st appellant would repay the respondent the US$ 200,000 together with Kshs 800,000 as maturity profit within two weeks of the transfer.  The particulars of the account to which the respondent was to transfer the money were:

“M/s D. K. Tosh Ltd

Account No. 55839600

Barclays Bank PLC

P.O. Box 19 355, Station Road

Harrow, Middlesex Hai 21 AN

UK SORT Code 203716.”

On 20^th August, 1997, the respondent, acting on the representation, remitted by telegraphic transfer US$ 200,000 from his account in Standard Chartered Bank Kenya Ltd, Industrial Area branch, to the said account in the UK.  On or about 23^rd August, 1997, the 2^nd appellant, on instructions from the 1^st appellant or as a partner or agent of the 1^st appellant in the firm of A S Abdirahim Enterprises acknowledged in writing receipt of the US$ 200,000 and undertook to repay the same by 6^th September, 1997, together with a maturity profit of KShs.800,000.  In addition, the appellants gave the respondent the documents of title for LR No. 22823 Muthaiga, Nairobi, (registered in the name of Al-Jazeera Investments Ltd) to hold as security and to use the same to borrow from his bankers pending repayment of his money.

The respondent further pleaded that the appellants had fraudulently induced him to pay the US$ 200,000 to M/s D. K. Tosh and thereafter had reneged on the agreement to repay the said amount and the maturity profit.  The particulars of fraud were set out in paragraph 12 of the plaint and the respondent prayed for judgment against the appellants for US$ 200,000; KShs.800,000; interest thereon at the rate of 18% per annum from 6^th September, 1997; damages for fraudulent misrepresentation; interest thereon from the date of judgment till payment in full, and costs of the suit.

By a defence dated 2^nd July, 2003 and subsequently amended on 23^rd March, 2004, the appellants denied any knowledge or involvement in the transaction between the respondent and M/s D.K. Tosh Ltd.  They pleaded that the 1^st respondent was the sole proprietor of Abdulkadir Shariff Abdirahim Enterprises and that the 2^nd respondent was neither a proprietor nor an employee of the said firm and had not received any instructions to acknowledge and had not acknowledged receipt of the money paid by the respondent to the account of M/s D. K. Tosh Ltd.  Regarding the documents of title to LR No. 22823, the appellants pleaded that they had given the same to the respondent for the purposes only, of getting a buyer for the property.  Otherwise the appellants denied all the other averments in the plaint.

The suit was tried by Kasango, J, before whom the respondent and the two appellants testified.  The appellants also called one more witness in support of their case.  As already noted the learned judge found for the respondent and entered judgment in the terms set out above.  Aggrieved by the judgment, the appellants lodged the present appeal in which they proffered twenty eight [28] largely duplicitous, repetitive and overlapping grounds of appeal.  In our view, all 28 grounds of appeal, properly organized, raise only the following six [6] issues, although still the entire appeal could have been determined on the basis of two issues only, namely whether sufficient evidence was adduced to sustain the findings by the trial court and whether the agreement upon which the plaintiff’s suit was founded was tainted by illegality and was therefore unenforceable.  The six [6] issues are:

1. Whether the decision of the High Court was against the weight of evidence;

2. Whether the oral agreement on which the respondent’s case was founded was enforceable under the Law of Contract Act;

3. Whether the said agreement was in law an illegal and unenforceable wager and game of chance;

4. Whether the said agreement was illegal and in violation of the Banking Act to the extent that the respondent was not a bank or financial institution licensed to lend money and charge interest;

5. Whether the High Court wrongfully excluded the evidence of the appellant’s hand-writing expert; and

6. Whether the learned judge was biased against the appellants.

We shall first address the grounds of appeal premised on the illegality or unenforceability of the agreement, the subject of this appeal.  However, it is opportune at this early stage to dispose of the issue raised by Mr S. Musalia Mwenesi, learned counsel for the appellants regarding the relevance and application of Islamic law to the agreement in issue in this appeal.

Mr Mwenesi quoted extensively from the Holy Quran, particularly Surah Al Baqarah (the 2^nd Surah of the Holy Quran, 275 to 283) to make the point that under Islamic Shariah, it is a cardinal requirement that Muslims should keep their agreements in writing, have witnesses to those agreements and completely avoid usury or the taking of interest.  Mr Mwenesi submitted that under the Constitution of Kenya and the Judicature Act, cap 8 Laws of Kenya, Islamic law was applicable, that all the parties to this dispute are Muslims who had sworn on the Holy Quran and that the respondent had pleaded that the appellants had abused the Islamic code of trust.  Learned counsel submitted that the respondent’s claim, based upon an unwritten and unwitnessed agreement, was not sustainable under Islamic law.  Mr Wamalwa, learned counsel for the respondent, on the other hand, took the view that there was simply no basis for application of Islamic Shariah law in this dispute.

The pleadings leave no doubt in our minds that the dispute before us involves alleged breach of an agreement in which one party is said to have borrowed money from another party in consideration of the borrower repaying the principle sum and a specified maturity profit within a stipulated time.  That the parties are all Muslims or that one or some of them have been accused of breaching the Islamic code of trust by failing to keep the bargain is purely ancillary and cannot oust the application of the laws of Kenya or subject the agreement before us to Sharia law.  Section 3 of the Judicature Act which stipulates the mode of exercise of jurisdiction by the courts, and which gives priority to the Constitution and statute law does not support the appellants’ submission that the transaction in question was subject to Islamic law.  Indeed, Mr Mwenesi’s subsequent submissions, based extensively on provisions of statutes such as the Banking Act, cap 488 Laws of Kenya, the Bills of Exchange Act, cap 27 Laws of Kenya and the Law of Contract Act, cap 23 Laws of Kenya put paid to the appellants’ case for application of Islamic Sharia law.  For if the agreement was subject to Islamic Sharia law, on what basis would the appellants be invoking in their aid provisions of those statutes?

On illegality and unenforceability of the agreement, Mr Mwenesi submitted that under section 3(1) of the Law of Contract Act, the respondent’s suit could only have been sustained if, and only if, the agreement upon which it was founded or some memorandum or note thereof was in writing and signed by the 1^st appellant who had allegedly entered into the agreement with the respondent. 

Section 3(1) of the Law of Contract Act provides as follows:

“3. (1)        No suit shall be brought whereby to charge the defendant upon any special promise to answer for the debt, default or miscarriages of another person unless the agreement upon which such suit is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged therewith or some other person thereunto by him lawfully authorized.”

Mr Mwenesi further submitted that in the absence of an agreement or some memorandum or note in writing signed by the 1^st appellant, the alleged agreement was unenforceable against any of the appellants.  Learned counsel urged that the agreement between the respondent and the 1^st appellant, being oral, was contrary to statute and thus unenforceable.  He cited PATEL VS SINGH, (No 2) (1987) KLR 585, for the proposition that a contract entered into contrary to the provisions of a statute is void ab initio and unenforceable.  The holding in NAPIER VS NATIONAL BUSINESS AGENCY LTD, (1951) 2 ALL ER 264 that an agreement that is contrary to public policy is equally unenforceable was also relied upon.  Learned counsel also relied on the judgment of this Court in MACHAKOS DISTRICT CO-OPERATIVE UNION LIMITED VS PHILIP NZUKI KIILU, Civil Appeal No. 122 of 1997 where, relying on section 3(3) of the Law of Contract Act, the Court declined to enforce an unwritten contract by declaration or specific performance.  PARAMOUNT BANK LTD VS QUREISHI & ANOTHER, (2005) 1 KLR 730 was cited as authority for the proposition that a court of law will not sanction an illegality. 

Next, Mr Mwenesi submitted that the respondent’s case was not sustainable because the respondent was not licensed or otherwise authorized to carry on the business of a money lender in Kenya.  In the view of counsel, the oral agreement between the respondent and the 1^st defendant was, at best, a wager and a game of chance, which was illegal, unlawful and unenforceable under the laws of Kenya.  On the same vein, learned counsel submitted that the respondent was not a bank or a financial institution licensed under the Banking Act and thereby entitled to charge or receive interest.

Lastly counsel submitted that the alleged acknowledgement of the debt by the 2^nd appellant could not constitute a promissory note under section 26 of the Bills of Exchange Act, because it was neither an unequivocal admission of debt nor a specific promise to pay the respondent.

 Mr F. N. Wamalwa learned counsel for the respondent did not see any substance in the above submissions by the appellants.  His short and pity answer was that the alleged illegalities did not affect the agreement in this appeal and that the agreement was lawful and enforceable.  Counsel submitted that S. 3(1) of the Law of Contract Act did not bar the respondent from enforcing the oral agreement against the 1^st appellant with whom the agreement had been made and that the agreement between the respondent and the 1^st appellant was outside the purview of the Banking Act in so far as the respondent was not in the business of taking deposits from and lending money to the public at large at a rate of interest.  Similarly counsel submitted that the agreement between the respondent and the 1^st appellant could not, even in the loosest of terms be described as a game of chance or a wager.

Lastly, Mr Wamalwa submitted that, in any event, the appellants were precluded from raising the alleged illegalities because the same had not been pleaded in the appellants’ defence and that the appellants had never raised those issues before the trial court.  These matters, he added, were being raised for the first time at the appeal stage and ought not to be entertained.

There is no general rule of law that all agreements must be in writing.  The numerous advantages of a written agreement notwithstanding, all that the law requires is that certain specific agreements must be in writing or witnessed by some written note or memorandum.  Section 3(1) of the Law of Contract Act is one such provision.  The origin of this provision has been traced to section 4 of the Statute of Frauds, 1677, whose object was to prevent fraudulent claims based on perjured evidence and to protect guarantors, (See G. H. TREITEL, LAW OF CONTRACT, 10^th edition, Sweet & Maxwell, Page 161-170).  Section 3(1), therefore, applies where the defendant has guaranteed the creditor that he shall answer for the debtor’s debt should the debtor fail to pay.  In such a situation, the guarantee agreement between the creditor and the defendant must be in writing or witnessed by some note or memorandum in writing and signed by the parties.  (See also AGRICULTURAL FINANCE CORPORATION & ANOTHER VS KENYA ALLIANCE INSURANCE CO LTD & ANOTHER, (2002) 1 KLR 231 where the High Court held that S 3(1) of the Law of Contract Act applies to suits founded on contracts of guarantee or surety).

In the present appeal, the 2^nd appellant was not strictly speaking a guarantor to the debt of the 1^st appellant.  Consequently section 3(1) of the Law of Contract Act cannot be invoked, let alone be read as the appellants invite us to do, to create a universal requirement that to be enforceable all agreements must be in writing or evidenced by some written note or memorandum signed by the parties to the agreement.  There is nothing in section 3(1) to require that for the agreement between the respondent and the 1^st appellant to be enforced as against the 1^st appellant, the same must be in writing or witnessed by a note or memorandum signed by the parties.

For that reason, the authorities of Patel Vs Singh, (supra) and Machakos District Co-Operative Union Limited Vs Philip Nzuki Kiilu, (supra) have no application in the present case.  In the former case the contract in issue was found to have been entered into contrary to the provisions of the Exchange Control Act, and, therefore, to have been illegal ab initio and unenforceable.  The latter case involved interpretation of Section 3(3) of the Law of Contract Act which makes it mandatory that to be enforceable, agreements for the disposition of an interest in land, must among other things, be in writing.  The MACHAKOS DISTRICT CO-OPERTAIVE UNION case is good authority on the interpretation of section 3(3) of the Law of Contract Act relating to agreements touching on disposition of interests on land, but not section 3(1), which relates to agreements for guarantee. 

Nor do we find anything in the Banking Act, on the facts of this case, which would have required the respondent to first register himself as a banking or financial institution before he could enter into the kind of agreement pleaded between himself and the 1^st appellant.  Under the Banking Act, an entity must be registered under that Act before it can engage in “banking business”, which is defined to mean:

1. the accepting from members of the public of money on deposit repayable on demand or at the expiry of a fixed period or after notice;

2. the accepting from members of the public of money on current account and payment on and acceptance of cheques; and

3. the employing of money held on deposit or on current account, or any part of the money, by lending, investment or in any other manner for the account and at the risk of the person so employing the money.

Under the same Act, “financial business” is defined in terms very similar to “banking business”, excluding only clause (b) above.

There was no evidence that the respondent was in the business of accepting deposits from the members of the general public and rending or investing the same at his risk.  On the contrary, on the pleadings and the evidence adduced, this was a specific agreement between the respondent and the 1^st appellant in which, in consideration of the respondent parting with his US$ 200,000 for a period of two weeks, the 1^st appellant had agreed to pay him that amount together with an additional KShs.800,000.  On the same basis, we do not find that that agreement was an illegal wager or a game of chance as submitted on behalf of the appellants.

Even if we assume that that was not the case, we would agree with the respondent that the grounds in this appeal that are founded on the alleged illegality and unenforceability of the agreement between the respondent and the first appellant must fail because those issues were not pleaded as required by the Civil Procedure Rules and were never canvassed before or considered by the trial court.

The rationale behind the rules of pleadings has never been in doubt. In THORP VS HOLDSWORTH, (1876) 3 Ch. D, 637 at 639, Jessel M.R. expressed himself as follows:

“The whole object of pleadings is to bring the parties to an issue and the meaning of the rules…was to prevent the issue being enlarged, which would prevent either party from knowing when the cause came on for trial, what the real point to be discussed and decided was. In fact, the whole meaning of the system is to narrow the parties to the definite issues, and thereby to diminish expense and delay, especially as regards to the amount of testimony required on either side at the hearing.”

And in PALMER VS GUADAGNI, (1906) 2 Ch 494, at 497, it was stated:

“The pleadings must contain fair and proper notice of the issues intended to be raised. This is essential to prevent the other party being taken by surprise.”

In more recent times, the learned authors of BULLEN AND LEAKE AND JACOB’S PRECEDENTS OF PLEADINGS, Sweet & Maxwell, 12^th Edition, page 6-7have emphasized the fair-trial basis of the rules of pleadings in the following terms:

“The system of pleading is thus primarily designed to bring the parties to an issue or issues on which alone the court can adjudicate between them, but it is also designed to fulfil some fundamental principles of natural justice, such as that each party should have fair and due notice of what case he has to meet, that each party should have reasonable opportunity of answering the claim or defence of his opponent, and that each party should have a reasonable opportunity of preparing and presenting his case on the basis of the issues disclosed in the pleadings and no others. On this basis, the fundamental right of each party to a fair trial is founded.”

The former Order VI Rule 4 (present Order 2 Rule 4) of the Civil Procedure Rules provided for special grounds of defence in the following terms:

“4. (1)        A party shall in any pleading subsequent to a plaint plead specifically any matter, for example performance, release, payment, fraud, inevitable accident, act of God, any relevant Statute of limitation or any fact showing illegality—

(a)     which he alleges makes any claim or defence of the opposite party not maintainable;

(b)     which, if not specifically pleaded, might take the opposite party by surprise; or

(c)     which raises issues of fact not arising out of the preceding pleading.”

On the special grounds of defence that are required to be specifically pleaded, the learned authors of Bullen And Leake And Jacob’s Precedents Of Pleadings, (supra) state as follows:

“These requirements operate to compel the defendant, who intended to raise a special ground of defence or to raise an affirmative case to destroy any claim of the plaintiff, to plead specifically the matter he relies on for such purpose. The effect of the rule is for reasons of practice and justice and convenience, to require the defendant to tell his opponent what he is going to the court to prove. Thus, when a contract, promise, or agreement is alleged in the statement of claim, a bare denial by the defendant will be construed only as a denial in fact of the express contract, promise or agreement alleged or of the matters of fact from which the same may be implied by law, and not as a denial of the legality or sufficiency in law of such contract, promise or agreement. It is, therefore, often not enough for the defendant to deny an allegation in the statement of claim; he must go further and dispute its validity in law or set up some affirmative case of his own in answer to it. Accordingly, the defendant has the duty to state any special defence or any new fact on which he will rely at the trial, as otherwise a plaintiff may legitimately complain that he has been taken by surprise.”

Under the former Order VI Rule 4 the appellants were obliged in their defence, which was a pleading subsequent to the plaint, to plead specifically all matters showing illegality which they allege made the respondent’s claim unmaintainable.  In their initial defence, the appellants did not plead the alleged irregularities.  Even when they were granted leave to amend their defence 8 months down the line, they did not plead specifically or at all any of the illegalities that they have raised before us.  In the circumstances, due to the failure by the appellants to specifically plead the alleged illegalities as required by the rules, the respondent did not have the opportunity to respond or answer the allegations and neither did the trial court have an opportunity to pronounce itself on those issues.

In our view, it would be totally remiss to allow the appellants to raise those issues so late in the day in Court.  As this Court stated in OPENDA VS AHN, (1983) KLR, 165, it cannot consider or deal with issues that were not canvassed, pleaded and/or raised in the lower court and that for a matter to be a ground of appeal it has to have been sufficiently raised and succinctly made an issue at the trial.

On pleadings and illegality, the predecessor of this Court, in MISTRY AMAR SINGH VS KULUBYA, (1963) EA 408, quoted with approval SCOTT VS BROWN, DOERING, MCNAB & CO, (3) (1892) 2 QB, 724,  in which Lindley LJ stated as follows on page 728:

“No Court ought to enforce illegal contract or allow itself to be made the instrument of enforcing obligations alleged to arise out of a contract or transaction which is illegal, if illegality is duly brought to the notice of the court, and if the person invoking the aid of the court is himself implicated in the illegality.  It matters not whether the defendant has pleaded the illegality or whether he has not. If the evidence adduced by the plaintiff proves the illegality, the court ought not to assist him.”

The decision of this Court in STANDARD CHARTERED BANK LTD VS INTERCOM SERVICES LTD & 4 OTHERS, (2004) 2 KLR 183, is largely along the same lines, but does not establish a rule that illegality does not have to be pleaded.  It is authority for the proposition that where the transaction upon which a claim is founded is ex facie illegal, a court may deal with the question of illegality whether it is raised in the defence or not.  In this appeal, we have found that not only was illegality not pleaded, it was not apparent on the face of the claim; it was never raised at the trial; the parties never canvassed the issue and the trial court never had an opportunity to pronounce itself on it.

The other ground of appeal assailed the judgment of the High Court as one which was against the weight of evidence.  Mr Mwenesi submitted that there was no evidence adduced by the respondent:

1. to connect the appellants with D. K. Tosh Ltd to which the respondent had allegedly remitted the money;

2. to prove that A.S Abdirahim Enterprises, in whose letterhead the agreement between the 1^st appellant and the respondent was allegedly acknowledged by the 2^nd appellant, existed in law;

3. to connect the appellants with A. S. Abdirahim Enterprises;

4. to prove that A.S. Abdirahim Enterprises was one and the same as Abdulkadir Shariff Abdirahim Enterprises; and

5. to prove that the 2^nd appellant was an agent of the 1st appellant or that the 1^st appellant had asked the 2^nd appellant to write the acknowledgement letter.

Learned counsel submitted that to the extent that the respondent had founded his claim against the appellants on alleged fraud, he was bound to prove it beyond reasonable doubt and that the High Court had erred in basing its judgment on evidence that did not attain that required standard of proof. Mr Mwenesi criticized the learned judge, on the authority of R. G. PATEL VS LALJI MAKANJI,(1957) EA 314, for failing to direct herself on the burden and the standard of proof required to prove the respondent’s case.  Counsel also relied on URMILA VS BARCLAYS BANK & ANOTHER, (1979) KLR, 76 for the proposition that a higher standard of proof is required to establish a finding of fraud, proportionate to the gravity of the offence.

Mr Mwenesi concluded by arguing that having dismissed the respondent’s claim against the 2^nd appellant who was said to have acknowledged the agreement, the court had no choice to similarly dismiss the claim against the 1^st appellant.

It is now settled that an appeal to this Court from a trial by the High Court is by way of a retrial and that this Court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect.  In particular this Court is not bound necessarily to follow the trial judge’s findings of fact if it appears either that the judge has clearly failed on some point to take account of particular circumstances or probabilities, materially to estimate the evidence or if the impression based on the demeanor of a witness is inconsistent with the evidence in the case generally.  See SELLE AND ANOTHER V ASSOCIATED MOTOR BOAT COMPANY LTD & OTHERS, [1968] EA 123 and SEASCAPES LTD VS. DEVELOPMENT FINANCE COMPANY OF KENYA LTD (2009) KLR, 384, 396.

This Court has also emphasized overtime that it proceeds with caution and will not light interfere with the findings of fact by a trial court.  In PETERS VS SUNDAY POST, (1958) EA 424, the predecessor of this Court stated as follows at page 429 (Kenneth O’Connor P):

“It is a strong thing for an appellate court to differ from the finding, on a question of fact, of a judge who tried the case, and who has had the advantage of seeing and  hearing the witnesses. An appellate court has, indeed jurisdiction to review the evidence in order to determine whether the conclusion originally reached upon evidence should stand. But it is a jurisdiction which should be exercised with caution: it is not enough that the appellate court might have come to a different conclusion.”

More recently in SUSAN MUNYI V. KESHAR SHIANI, CIVIL APPEAL NO. 38 OF 2002 (Unreported) this Court expressed the same view as follows:

“As a first appellate court our duty of course is to approach the whole of the evidence on record from a fresh perspective and with an open mind. We are to analyze, evaluate, assess, weigh, interrogate and scrutinize all of the evidence and arrive at our own independent conclusions. In undertaking this task, however, we always bear in mind that unlike the trial court which had the advantage of hearing and observing the witnesses, we make our conclusions from the evidence as captured in the cold letter of the record. We therefore operate under a decided handicap as there is much to be gleaned from the demeanor and nuanced communication of a live witness that is inevitably unavailable, indeed lost, on the record. For precisely this common sense reason, an appeal court must accord due respect to the factual findings of the trial court and will be circumspect and slow to disturb them.”

The relevant evidence before the trial court was given by the respondent and the two appellants.  The respondent’s evidence was that about a week before 20^th August, 1997, the 1^st appellant, who was running the business of importing goods from the UK with his brother, the 2^nd appellant, visited the respondent at his office in Likoni Road, Industrial Area Nairobi.  He wanted to borrow US$ 200,000 urgently, which he could refund between a fortnight and a month with a profit of KShs.80,000.  Upon agreeing to the request, the 1^st appellant gave the respondent the particulars of the bank account (that of D. K. Tosh Ltd in the UK) to which he wanted the money remitted.  On 20^th August, 1997, the respondent transferred the US$ 200,000 from his Standard Chartered Bank Account to the account of D. K. Tosh Ltd with Barclays Bank PLC, UK.  He produced as exhibit the telegraphic transfer form by which the money was sent.  He then advised the 1^st appellant that the money had been remitted, who promised to give the respondent a written confirmation of the above terms of the agreement upon confirmation of receipt of the money in London.  Thereafter, the 2^nd appellant gave the respondent a letter dated 23^rd August, 1997 on the letterhead of A. S. ABDIRAHIM ENTERPRISES, P. O. Box 69044 Nairobi.  The letter read:

“M/S Awo Shariff Mohammed

P.O. Box 60271

NAIROBI

Dear Sir,

RE: ACKNOWLDEGEMENT OF CASH RECEIPT AND UNDERTAKING

I hereby confirm that I have received US$ 200,000 with effect from 22^nd August, 1997 and that it will have maturity of KShs.800,000/= on 6^th September, 1997.

I undertake to be fully responsible for all the amount stated above, and any other future transaction.

Yours faithfully,

Abdinasir Adbirahim

MANAGING DIRECTOR”

The authenticity of the above letter has been greatly disputed.  The appellants argued that they never entered the agreement relating to the US$200,000 and the KShs.800,000 with the respondent, that the above letter was neither written nor signed or given to the respondent by the 2^nd respondent, that the Abdinasir Abdirahim who allegedly signed that letter is not the 2^nd appellant and that the appellants do not know and are not connected with the alleged A. S. ABDIRAHIM ENTERPRISES.  According to the respondent, however, the acknowledgement was written by the 2^nd appellant because the 1^st appellant was then a senior civil servant, (in fact the Director of Land Adjudication) and had represented to the respondent that the code applicable to civil servants did not allow him to give the acknowledgement personally.

         There is no dispute that on 20^th August, 1997, the respondent remitted US$200,000 to the account of D.K. Tosh Ltd in the UK.  The authenticity of the telegraphic transfer which was produced as an exhibit was never doubted or challenged.  The trial judge, justifiably in our view, was less than impressed by the appellant’s denial of any knowledge of D. K. Tosh or connection with A. S. Adbirahim Enterprises.  Some facts stand out which leave no doubt that the appellants were not witnesses of truth.  Thus for example, before the suit was filed the respondent’s advocates wrote to the appellants on 17^th April, 2003, demanding payment of US$200,000 and KShs.800,000.  That letter of demand never mentioned D. K. Tosh Ltd.  However, the appellants replied on 25^th April, 2003 through Kibunja & Associates Advocates stating:

“The said monies were in fact remittances made by your client on account of D.K Tosh Ltd and which transaction was subsequently found to be fraudulent. This has been a matter of police investigations.”

In his letter of demand, the respondent had merely demanded repayment of the US$200,000 as a loan to the appellants and the KShs.800,000 as “fruit thereof”.  How then did the appellants know (before the disclosure in the plaint) that the money had been remitted to D. K. Tosh Ltd, if they had no dealings with the respondent?  The 1^st appellant confirmed in examination in chief that he had instructed Kibunja & Associates Advocates to reply to the respondent’s demand letter.  However, on cross-examination, he maintained that he knew nothing of D. K Tosh Ltd and that his advocates could have come up with the details on D. K. Tosh Ltd on their own.  Alternatively, he suggested that the advocates could have obtained the details on D. K. Tosh Ltd from the 2^nd appellant.

The 2^nd appellant while equally denying knowledge of D. K. Tosh Ltd testified that he had merely “heard” that the remittance to D. K. Tosh Ltd was fraudulent.  From whom, he did not disclose.  It is also significant that at this stage of the proceedings, it is noted in the record that the court had observed the 1^st appellant making facial expressions to the 2^nd appellant as he testified, no doubt to try and influence his testimony.

Regarding A. S Abdirahim Enterprises, we do not think the criticism that the learned judge merely assumed that it stands for Abdikadir Shariff Abdirahim Enterprises is merited.  The evidence adduced was that, according to the registrar of companies, A. S Abdirahim Enterprises did not appear in the business names register, while according to the Post Master General the postal address given on the letterhead of A. S. Abdirahim Enterprises belonged to New Life Church.

The respondent had pleaded in paragraph 5 of the plaint, no doubt following receipt of the letter of 23^rd August, 1997, on the letterhead of A. S. Abdirahim Enterprises, that the appellants were promoters and held themselves out as partners in A. S. Abdirahim Enterprises, and that they had used that entity to defraud him. In their amended defence, the appellants neither denied knowledge of A. S. Abdirahim Enterprises, nor its existence. In answer to paragraph 5 of the plaint, they pleaded in paragraph 4 of the defence that the 1^st appellant was the sole proprietor of Abdikadir Shariff Abdirahim Enterprises and that the 2^nd appellant was neither a proprietor, director nor employee of Abdikadir Shariff Abdirahim Enterprises.  The respondent’s pleadings concerned A. S. Abdirahim Enterprises.  He had not pleaded anything regarding Abdikadir Shariff Abdirahim Enterprises.  However, in the defence, instead of responding to the issue of A. S. Abdirahim Enterprises, the appellants’ pleadings introduced Abdikadir Shariff Abdirahim Enterprises and denied that the 2^nd respondent was its proprietor, director or employee.  Of course the respondent had not pleaded that the 2^nd appellant had anything to do with Abdikadir Shariff Abdirahim Enterprises.  By their defence, the appellants suggested that Abdikadir Shariff Abdirahim Enterprises and A. S. Abdirahim Enterprises were one and the same thing, only that the 2^nd respondent was not its proprietor, director or employee.

At the hearing and contrary to what they had pleaded in the defence, the appellants stretched credulity to the utmost by denying knowledge of either A. S. Abdirahim Enterprises or Abdikadir Shariff Abdirahim Enterprises.  Once again, the appellants confirmed having given their advocates the information pleaded in paragraph 4 of the defence relating to Abdikadir Shariff Abdirahim Enterprises but on cross-examination, purported that it was all an error.

The learned trial judge was faced with two contradictory versions of the transaction between the appellants and the respondent.  The respondent’s version was that the 1^st appellant had  requested him to transfer the money to the account of D. K. Tosh Ltd in the UK on the promise to repay within two weeks or a month with a profit; the money was duly remitted to the account of D. K. Tosh Ltd ; the supporting evidence in the form of the telegraphic transfer form was produced; barely three days after remittal of the money came the letter of acknowledgement on a letterhead bearing a name closely resembling that of the 1^st appellant and signed by a person bearing a name closely resembling that of the 2^nd appellant; that letter of acknowledgement was delivered to the respondent by the 2^nd appellant; and ultimately the refusal to honour the agreement.  The appellant’s version was denial of the transaction; denial of knowledge of D. K. Tosh Ltd and denial of any knowledge of A. S. Abdirahim Enterprises on whose letterhead the acknowledgement was made.

Upon evaluation of the entire evidence, we find it unbelievable, just as the trial judge did, that the appellants did not know of D. K Tosh Ltd, having referred to that company in their reply to pre-litigation letter of demand in which the respondent had not even mentioned D. K. Tosh Ltd. Then there were the two firms, A. S. Abdirahim Enterprises and Abdikadir Shariff Abdirahim Enterprises and the appellants’ barefaced denial of matters that they expressly pleaded in their defence pertaining to those entities.

The learned judge appreciated that she had to resolve these contradictions on the basis of the evidence adduced and her assessment of the credibility of the witnesses who she had the singular opportunity to see and hear.  She concluded:

“The court finds the plaintiff (the respondent) to have been a truthful witness whose evidence was not shaken by cross-examination. On the other hand the evidence of both defendants was a comedy of errors. AT times they denied knowing about D. K. Tosh Ltd, and when confronted with their lawyers (letter) which makes mention of D. K. Tosh, they made a retreat and the 1^st defendant blamed the 2^nd defendant of having instructed the lawyer in that regard. The finding of the court, having heard the evidence and seen the demeanour of the witnesses is that the 1^st defendant connived the defence presented before the court. The 1^st defendant is the elder brother of the 2^nd defendant. The 2^nd defendant gave evidence after the 1^st defendant and it is clear he was being instructed by the 1^st defendant to respond to questions in a way that was favourable to the 1^st defendant. When being questioned who instructed the advocate to respond to the plaintiff’s demand, as the 2^nd defendant began to answer the question, it was brought to the court’s attention that the 1^st defendant who was sitting in court was making facial remarks to the 2^nd defendant and as a result the 2^nd defendant said it was them who instructed their advocate to send money to D. K. Tosh.”

Having independently reviewed the evidence we are satisfied that the learned judge properly believed the respondent and disbelieved the appellants.  Her determination was not based merely on the impression, demeanor and credibility of the witnesses without consideration of the impressions against the entire evidence.  There were other circumstances, noted above, which confirmed the unreliability of the appellants.  As was stated in R. G. Patel Vs Lalji Makanji (Supra), while allegations of fraud must be strictly proved, the standard of proof may not be so heavy as to require proof beyond reasonable doubt; what is required is something more than a mere balance of probabilities.  In Patel’s case, the findings of the trial judge that were decried by the Court of Appeal were based on mere impression of witnesses without testing the impressions against the adduced evidence.  In our view, in the present case there was sufficient evidence on record to justify the conclusion arrived at by the learned trial judge.

The last two issues, namely bias on the part of the trial judge and wrongful exclusion of the evidence of the appellants’ hand writing expert witness can conveniently be taken together, because the exclusion of the hand writing expert’s evidence was cited as an instance of bias on the part of the trial judge.  We do not think there is any substance in these complaints.  From our evaluation of the entire evidence, contrary to being biased, the trial judge leaned over backwards to accommodate the appellants and their advocates who seemed determined to stall the hearing and conclusion of the case.

On the date when the hearing was scheduled to commence, the appellant’s advocate was not in court. Instead he sent another advocate to apply for adjournment on the grounds that the parties were negotiating an out of court settlement.  When the respondent denied such negotiations, the court directed that the hearing should proceed, at which point the appellant’s advocate appeared and informally applied to withdraw from representing the appellants.  No doubt perceiving this as a new attempt to adjourn the hearing, the court declined the application and the hearing commenced.

When the 1^st appellant completed giving his evidence on 2^nd March, 2005, the hearing was adjourned to 7^th April, 2005, for further hearing.  On the date scheduled for the resumed hearing, neither the appellants nor their advocate was in court, forcing the Court to adjourn the suit to 18^th April, 2005, for submissions.  In the meantime, the appellants applied by summons to vacate the order for taking submissions to enable them call further evidence.  Even that summons could not be determined promptly as the appellants applied for adjournment on the date it was scheduled for hearing, which application for adjournment the trial judge allowed.

Ultimately the learned judge allowed the summons, and as a result the evidence of the 2^nd appellant and DW 3, Mackenzie Mweu was taken.  The court declined, properly in our view, to allow DW3 to produce documentary evidence because the parties had completed discovery long before the hearing commenced and the exhibits that DW 3 sought to produce were not subject to discovery.  From the record, we do not find any basis for the charge that the trial judge was biased against the appellants or that she had wrongfully excluded production of evidence that was not subject to discovery.

In the end, we do not find any merit in this appeal and the same is dismissed with costs to the respondent.

Dated and delivered at Nairobi this 20^th day of December, 2013.

P. N. WAKI

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JUDGE OF APPEAL

G. B. M. KARIUKI

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JUDGE OF APPEAL

K. M’INOTI

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JUDGE OF APPEAL

    I certify that this is a

true copy of the original

DEPUTY REGISTRAR