Commercial Bank of Africa Ltd v Copal Limited [1985] KECA 8 (KLR)
The bottom line
#Kenya's Court of Appeal ruled that a bank customer's oral phone instructions can be a triable defence, so disputes like this must go to full trial, not be decided on paper.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the defence disclosed a reasonable defence and could properly be struck out under Order VI rule 13(1)(a) and (d) of the Civil Procedure Rules
- 2.Whether the bank was bound to act only on written instructions before debiting a customer's account and transferring funds
- 3.Whether oral (telephone) instructions from the customer's managing director could be a sufficient warrant for the transfer
- 4.Whether the claims in the plaint were known to law and whether they were time-barred under section 4 of the Limitation of Actions Act (cap 22)
- 5.Whether the costs should be certified for two advocates
Key legal issues
#Whether a defence raising an alleged oral authority for a bank transfer discloses a reasonable defence
Yes. Whether the bank could lawfully act on the oral instructions of the customer's managing director was a triable issue requiring evidence and cross-examination; the defence should not have been struck out.
The learned judge decided the suit on affidavits, holding the bank had to have written instructions, relying on his own prior decision and textbook passages which the Court of Appeal found did not cover the point. The central question was whether the defence disclosed a reasonable defence, and the issues of authority, instructions and the identity of the directors required a full trial with examination and cross-examination of Kamau, Panchmatia and the bank's witnesses.
The proper approach to striking out pleadings under Order VI rule 13
The application should be treated like summary judgment; the court should be slow to shut a party out, and amendment preferred to striking out where there is a triable issue.
The court adopted the summary judgment analogy, stressing that striking out is the last step a court can take. Since the suit had not gone beyond a stage where amendment would change the nature of the action, the parties could apply to amend their pleadings to embrace all matters in issue between them rather than being barred from being heard.
The ingredients of a customer's cause of action against a banker for money on current account
Absent a special agreement, a demand by the customer is a necessary ingredient of the cause of action; whether the demand must be in writing was left open at the interlocutory stage.
The court applied Atkin LJ's classic formulation from Joachimson v Swiss Bank Corporation. Counsel could find no direct authority in any jurisdiction on whether a bank may act only on written instructions to transfer between accounts, and the court declined to resolve that question without evidence from the parties and local banking law and practice witnesses.
The effect of omnibus denials and the availability of amendment
A general or omnibus denial may be valid and effectual where there is no suggestion of evasion, and leave to amend should be given at an early stage unless the applicant acts mala fide.
Nyarangi Ag JA, citing East African Court of Appeal authority, held that the learned judge was wrong to treat the omnibus denials in the defence as not good enough. Although the defence was not a model - and neither was the plaint - there were weighty matters requiring investigation, and the defence disclosed a reasonable defence.
Legal principles established
#- An application to strike out a defence under Order VI rule 13 must be approached like summary judgment: the court should not decide the suit on affidavits and should be slow to shut a party out of court.
- Where a triable issue exists, leave to amend pleadings is to be preferred to striking them out.
- A defence does not disclose a reasonable defence only if there is no question or issue on it for a judge to determine; the issue on such an application is whether a reasonable defence is disclosed, not the merits of the customer-bank relationship.
- Where money stands to a customer's credit on current account, absent a special agreement, demand by the customer is a necessary ingredient of the cause of action against the banker; whether the demand must be in writing was left open at interlocutory stage.
- A party alleging oral instructions bearing on a bank transfer must be allowed to prove them at trial; the bank must establish on a balance of probabilities that the oral instructions warranted the transfer.
- A general or omnibus denial in a defence may be valid and effectual.
- Leave to amend pleadings ought not to be refused unless the applicant is acting mala fide, and should be given where sought at an early stage.
Court orders
#- 1.Appeal allowed with costs of the appeal to the appellant bank
- 2.The rulings of Masime J of September 14 and November 11, 1983 and the decree of November 10, 1983 set aside
- 3.The action remitted to the High Court to settle the issues and proceed to trial according to law
- 4.No certificate for two advocates granted
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
Delivered the leading judgment. Traced the corporate and banking history of the parties, set out the pleadings and the issues, and held that the learned judge erred in deciding on affidavits that the bank was bound to act only on written instructions. The question was whether the defence disclosed a reasonable defence, not whether the bank had authority; there was a triable issue on whether oral instructions from the managing director were a sufficient warrant for the transfer. Appeal allowed with costs, rulings set aside, action remitted.
it was for the bank in this case before the High Court, in Nakuru, to establish on the balance of probabilities that, among other things, Panchmatia’s oral instructions on the telephone were a sufficient warrant for Muriu’s transfer of that sump. 7
Wrote the judgment
Concurring judgment. Held the issues of Kamau's status, Panchmatia's instructions and the authority for the transfer could only be determined at a full trial with cross-examination. An application under Order VI rule 13 should be treated like summary judgment: courts should be slow to shut a party out and prefer amendment to striking out where a triable issue exists. Agreed the appeal should be allowed and the suit remitted.
the court should be careful not to purport to decide a suit upon the parties’ affidavits and the court should be slow to shut any party out of court. That is the last step a court can take and if there is a triable issue leave to amend the pleadings should be preferred to striking out the pleadingsp. 9
Wrote the judgment
Concurring judgment adding that a general or omnibus denial may be valid and effectual, and that leave to amend pleadings should not be refused unless the applicant is acting mala fide. Found there were weighty matters requiring investigation and the defence disclosed a reasonable defence; also agreed no certificate for two advocates was justified.
as a general rule, leave to amend pleadings ought not to be refused unless the court is satisfied that the party applying is acting mala fidep. 9
- On appeal from
- High Court at Nakuru
- Not stated in the judgment (filed as plaint April 9, 1983)
- Jurisdiction invoked
- Appellate jurisdiction of the Court of Appeal against a ruling of the High Court; the specific constitutional or statutory provision is not stated in the judgment.
Relief refused
#Certificate for two advocates
The appeal was not a difficult one and the respondent should not pay for the luxury of the bank having two advocates
A definitive holding that a customer must demand repayment in writing
Whether a written demand is necessary was not necessary to determine at the interlocutory stage
Costs
Appeal allowed with costs of the appeal to the bank; costs to follow the event. Certificate for two advocates not justified, so only one counsel's costs certified.
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
For these reasons, I propose that the appeal be allowed with costs, the rulings of Mr Justice Masime of September 14 and of November 11, 1983 and the decree of November 10, 1983 be set aside and the action be remitted to the High Court to settle the issues and proceed to trial according to law.
Consequently in my opinion the learned judge erred in striking out the defence and giving judgment for the respondent/plaintiff. He should have ordered the parties to set down the suit for hearing.
the court should be careful not to purport to decide a suit upon the parties’ affidavits and the court should be slow to shut any party out of court
if there is a triable issue leave to amend the pleadings should be preferred to striking out the pleadings and thus barring the parties from being heard
A defence does not disclose a reasonable defence if there is no question or issue in it for a judge to determine.
Where money is standing to the credit of a customer on current account with a a banker, in absence of a special agreement, a demand by a customer is a necessary ingredient in the cause of action against the banker for the money
I am not persuaded that the respondent should be made to pay for the luxury enjoyed by the bank in having two advocates to present its case so I would not conclude that a certificate for two is justified.
Issues in the judgment
#Nyarangi Ag JA's concurring judgment concludes with a statement that the appeal be dismissed, which contradicts his earlier agreement with Kneller JA and the unanimous orders allowing the appeal
The judgment contains internal inconsistencies in dates: the letter recording the alleged agreement is dated March 22, 1979 but is elsewhere rendered 'March 212,1979', and the plaint pleads the transfer as occurring 'on or about the 2nd day of March 1979' while the defence narrative and Chesoni Ag JA place it on March 26, 1979
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Commercial Bank of Africa Ltd v Copal Limited [1985] KECA 8 (KLR)", Case Analysis (1985). Civil Appeal No 6 of 1984. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1985/8/eng@1985-02-20
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.