By WAHOME THUKU

When entering into a business deal with a company, carefully watch your steps. As retired civil servant Shem Obondi can attest, pain and losses are never very far away from such dealings.

Mr Obondi resided in a Government house on a three-quarter acre plot in the leafy up-market suburb of Kileleshwa, Nairobi. Before he retired in 1994, he was allocated the land.

On February 7, 1996 Obondi entered into an agreement with Seemfod Holdings Ltd to sell it the land for Sh5 million. Seemfod Holdings was a family business owned by Mr and Mrs Dan Songa, with the two as its only directors.

Obondi transferred the land registered in his name to Seemfod Holdings Ltd on May 6, 1996. That transfer showed that the land was sold at Sh3 million.

Throughout the transaction, Obondi dealt with Mr Songa , Seemfod Holdings managing director.

Under the agreement, the company was to construct flats on the land and allocate Obondi one three-bedroomed flat. Lawyer Richard Omwela witnessed the signing of the agreement. Unfortunately the company’s common seal was not affixed.

Seemfod Holdings used the land to secure a Sh10 million loan and constructed 18 flats between May 1996 and March 1997. Some were sold and transferred or let to third parties.

From May 1996 to 2003, everything was quiet and there was no correspondence between Obondi and Seemfod. On March 5, 2003 Songa died and that is when trouble began.

In April of same year, Obondi wrote to the company demanding his flat. Nothing came of it. In May 2003, he placed a caveat on the property and in November same year, he sued the company demanding it be compelled to transfer the flat to him.

He also sought an injunction restraining Seemfod Holdings from dealing in the land in any way pending the hearing of the suit. The case went before the then High Court Judge David Osiemo.

It happened that in the signing of the agreement, Mrs Songa was kept in the dark. Mrs Songa told the court that she was not aware of the existence of the agreement or its contents. All she knew was that the land was sold to their company for Sh3 million.

On February 27, 2007 Justice Osiemo dismissed the case. He noted that there was no attempt to make Mrs Songa aware of the transactions yet she was a co-director of the company. The judge also questioned why Obondi took seven years to file the suit and only after Mr Songa’s death.

"It is impossible to imagine that Mr Dan Songa could keep it to himself and that for about seven years, the plaintiff (Obondi) did not even know Mrs Songa until after Songa’s death," the judge said.

Osiemo held that the company Memorandum and Articles of Association required execution by two directors. This agreement was, therefore, invalid for want of proper execution as incapable of enforcement.

Obondi filed an appeal arguing that the judge had erred in law and in fact in finding that the agreement was invalid for want of proper execution.

Meanwhile, he also applied for an injunction restraining the company from dealing in the property. That application was heard by another High Court judge, Justice Kihara Kariuki and was dismissed.

Seemfod Holdings’ lawyer Anthony Lubulellah submitted that the validity of the agreement was critical. "As dead men tell no tales, the court should be convinced that the appellant (Obondi) was not merely trying to take advantage of the late Songa’s death," Lubulellah submitted.

Paid in full

The lawyer said Obondi was only entitled to the Sh3 million for the land, which had been paid in full, and there was nothing more for him.

The judges appeared to be in agreement. First, the agreement, though witnessed by lawyer Omwela, had no common seal of the company. Omwela had testified that he witnessed the signing but stated candidly that he neither prepared it nor was he familiar with its contents.

"No one for sure knows who drew the Agreement of Sale," the court held. "Above all, it could not be connected with the respondent in the absence of the common seal."

Obondi could not prove the agreement was the one signed by Mr Songa. Moreover, his evidence was contradictory and unreliable. He had claimed the purchase price was Sh10 million, that is Sh5 million in cash and one flat but the transfer papers showed Sh3 million. He had not explained the delay in filing the claim and only doing so after Songa’s death.

"He had never visited the construction site during that period nor even contacted the company during the lifetime of the late Songa," the judges added. "Logic and prudence dictates that if he had a genuine claim, he would have pressed it while the person he alleges to have dealt with was still alive or without undue delay. He has to pay dearly for his indolence," the court ruled.

The judges concluded the sale agreement lacked authenticity, was invalid and incapable of being enforced. Seemfod was not in breach of an invalid contract.

On October 21, this year the appeal was dismissed on that one reason and Obondi was ordered to pay all the costs of the case to Seemfod Holdings.

The writer is a court reporter with the Standard Group

Email: wthuku@standardmedia.co.ke