Shiraku v Commercial Bank of Africa [1988] KECA 99 (KLR)
The bottom line
#Kenya's Court of Appeal more than tripled damages for a customer whose bank wrongly dishonoured his cheques, confirming banks face real liability for careless dishonour.
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 appellant was a trader, and the effect of trader status on the measure of damages for wrongful dishonour of cheques
- 2.Whether the award of Shs 15,000 as damages was manifestly inadequate
- 3.Whether the words 'Account closed' on dishonoured cheques were more injurious than 'refer to drawer'
- 4.Whether the trial judge's award of only three-quarter costs should be disturbed
Key legal issues
#Status of the plaintiff as trader or non-trader
The appellant was not a trader
Applying Black's Law Dictionary's definition of a trader as a merchant or retailer buying and selling goods at a profit, the court found no evidence the appellant, an agent paid a fee and expenses, was a merchant or retailer. The cheques he issued were for personal services and rent, not commercial transactions. The submission that he was a trader was rejected as of astonishing breadth.
Measure of damages for a non-trader whose commercial credit is injured by wrongful dishonour
Injury to commercial credit permits an inference of pecuniary loss and a moderate award exceeding nominal damages
Following Gibbons v Westminster Bank, substantial damages require pleaded and proved special damage for a non-trader. But the words 'Account closed' on four cheques lowered the appellant's reputation among right-thinking people and injured his commercial credit, so pecuniary loss is inferred. A temperate award of Shs 40,000 was substituted.
Trial judge's discretion on costs
Full costs should have been awarded where no reason was given for reduction
Section 27 of the Civil Procedure Act gives the court discretion over costs, but the proviso provides that costs follow the event unless the court for good reason otherwise orders. The trial judge reduced costs to three-quarters without giving any reason, and in the absence of an explanation the appellate court was entitled to interfere and award full costs.
Reform of the trader/non-trader distinction in dishonoured-cheque damages
The distinction is obsolete; wrongful dishonour is an injury in fact for which modest damages lie without proof
Platt JA traced the doctrine from Marzetti v Williams through Rolin v Steward, Wilson v United Counties Bank and Gibbons, and held there is no real juridical difference between classes of persons whose cheques are dishonoured. Wrongful dishonour injures credit in fact; damages without proof will be modest, substantial damages only where injury is pleaded and proved.
Legal principles established
#- A person who is not a trader is not entitled to substantial damages for wrongful dishonour of his cheque unless special damage is alleged and proved, but injury to commercial credit raises an inference of pecuniary loss.
- Costs follow the event under section 27 of the Civil Procedure Act, and a trial judge who reduces costs without giving reasons risks interference on appeal.
- The distinction between trader and non-trader in dishonoured-cheque damages is obsolete; wrongful dishonour of any cheque is an injury in fact, though damages in the absence of proved loss will be modest.
Court orders
#- 1.Damages increased from Shs 15,000 to Shs 40,000, substituting that amount for the High Court award
- 2.Plaintiff awarded his full costs both on appeal and in the High Court (in place of three-quarter costs)
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
Lead judgment: the appellant was not a trader; a non-trader must allege and prove special damage for substantial damages, but injury to commercial credit raises an inference of pecuniary loss; substituted Shs 40,000 for the Shs 15,000 awarded by the High Court and agreed with the full-costs order proposed by Gachuhi JA.
In my judgment the trial Judge did not adequately consider the ill-effect of the bank’s wrongful acts on the reputation of the appellant.p. 2
Wrote the judgment
Agreed with Nyarangi JA's reasoning; separately addressed costs, holding that under section 27 of the Civil Procedure Act costs follow the event and, absent reasons, the trial judge erred in awarding only three-quarter costs.
In the absence of any explanation, we think the trial judge went wrong in not awarding the plaintiff his full costs.p. 3
Wrote the judgment
Separate concurrence tracing the history of dishonoured-cheque damages from Marzetti v Williams through Gibbons, Rolin v Steward and Wilson v United Counties Bank; proposed that the old trader/non-trader distinction is obsolete and that wrongful dishonour does some injury in fact without need to plead and prove damages.
There can be found no real juridical difference between any class of persons whose cheques are dishonoured.p. 5
- On appeal from
- High Court of Kenya
- Not stated in judgment
- Jurisdiction invoked
- First appellate appeal to the Court of Appeal (specific constitutional/statutory invocation not stated in the judgment)
Relief refused
#Damages assessed on the footing that the appellant was a trader
No evidence that the appellant was a merchant or retailer buying and selling goods at a profit; the cheques were for personal services, not commercial transactions
Costs
Plaintiff awarded his full costs both on appeal and in the High Court (costs following the event under section 27, Civil Procedure Act)
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.
In the result it seems to me that the Notice of Grounds for affirming the decision must fail.
I think that a temperate award would be shs 40,000/=. I would substitute that amount for the Shs.15,000/=.
It is on this basis that we allow this appeal on this ground and award the plaintiff his full costs both on appeal and in the High Court.
There can be found no real juridical difference between any class of persons whose cheques are dishonoured.
Because the appellant’s commercial credit was injured, the inference arises that pecuniary loss ensues.
Issues in the judgment
#The plaintiff/appellant's name does not appear in the judgment text; the case is identified only through the agency agreement with Kuehne and Nagel and the parties are referred to as 'the appellant' and 'the respondent'.
Marzetti v Williams is cited with the year 1880 although the reported decision is of 1830; the citation as printed appears internally inconsistent.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Shiraku v Commercial Bank of Africa [1988] KECA 99 (KLR)", Case Analysis (1988). Not stated in judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1988/99/eng@1988-07-19
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.