National Bank of Kenya Limited v Devji Bhimji Sanghani & another [1995] KECA 101 (KLR)
The bottom line
#Kenya's Court of Appeal confirmed that business letters and assurances can create binding legal obligations, and banks claiming otherwise carry a heavy burden of proof.
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 letters of 5th July 1978 and 20th July 1978, with or without the alleged assurance of Mr Nyammo, constituted guarantees given by the appellant to the respondents for good consideration
- 2.Whether the letters were no more than letters passing between two banks without intention to bind the appellant to pay the debts of Pentax to the respondents
- 3.Whether a legal relationship was created which the respondents intended to act upon and did act upon to their detriment
Key legal issues
#Intention to create legal relations in a commercial transaction
The construction contract and the surrounding letters and assurances were ordinary commercial matters; the respondents were not required to prove intention to create legal relations, and the appellant failed to displace the presumption.
Relying on Edwards v Skyways Ltd, Tunoi JA reasoned that where the subject matter is business rather than social or domestic, an intention to agree is readily inferred. The appellant bore the heavy onus of proving no legal effect was intended. It did not prosecute its defence, gave no evidence and called none of the principal actors, so it failed to discharge that onus. The respondents' unchallenged evidence showed they relied on the assurance before commencing work.
Whether the letters were guarantees or mere inter-bank letters of comfort
Tunoi JA declined to decide the privity and letters-of-comfort arguments because they had not been canvassed before the trial judge, treating the appeal instead on the ground of an intended and acted-upon legal relationship.
Although the principal ground urged that the letters were no more than letters passing between two banks without intention to bind a bank's customer, the judge held the issue of privity of contract and whether the letters were letters of comfort had not been raised at trial, and therefore he need not consider them in the appeal. He instead found an irresistible inference from all the circumstances that a binding assurance was given and relied upon.
Legal principles established
#- In ordinary commercial transactions there is a strong presumption that the parties intended to create legal relations, and the onus of proving that no legal effect was intended lies on the party asserting it, and that onus is a heavy one.
- A legal relationship may be found to exist where communications between parties were intended to be acted upon and were in fact acted upon to the other party's detriment.
Court orders
#- 1.Appeal dismissed with costs to the respondents
- 2.Respondents to pay back to the appellant the sum of Shs 6,081,292 being dividend from the Receiver of Pentax, with interest at court rates
The bench
#Judges wrote separately. A dissent does not bind; a concurrence may narrow the ratio.
Wrote the judgment
Tunoi JA respectfully disagreed with Kwach JA's conclusions but would have endorsed the trial judge's findings. He held that the letters of 5th and 20th July 1978, with the assurance of Mr Nyammo, created a legal relationship intended to be acted upon; that the burden of showing no intention to create legal relations lay on the appellant and was a heavy one, following Edwards v Skyways; and that the appellant, having not prosecuted its defence or called evidence, failed to discharge that onus. He would have dismissed the entire appeal with costs to the respondents, but ordered repayment of the Shs 6,081,292 dividend received from the Receiver of Pentax with interest at court rates.
However, I respectfully disagree with the conclusions reached by him. For these reasons I would endorse the findings of the learned judge and I would dismiss the entire appeal with costs to the respondents.p. 1
Wrote the judgment
- On appeal from
- High Court of Kenya at Nairobi
- H.C.C.C. No. 2004 of 1984
- Jurisdiction invoked
- First appellate jurisdiction under the Court of Appeal's statutory appellate powers over High Court civil appeals
Relief refused
#The appellant's appeal against the trial judge's finding that the two letters constituted a guarantee supported by consideration
The trial judge's findings were endorsed; the appellant failed to discharge the heavy onus of showing that no legal relations were intended
Costs
Appeal dismissed with costs to the respondents; respondents ordered to pay back the sum of Shs 6,081,292 dividend to the appellant with interest at court rates
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 would endorse the findings of the learned judge and I would dismiss the entire appeal with costs to the respondents.
As the sum of Shs.6,081,292/= as dividend from the Receiver of Pentax was paid to the respondents after having been paid the entire decretal amount I would order them to pay it back to the appellant with interest at Court rates.
in a case of this nature the onus is on the party who asserts that no legal effect was intended, and the onus is a heavy one.
A legal relationship was created and the same was intended to be acted upon and was acted on by the respondents to their detriment.
Issues in the judgment
#The text supplied contains only the judgment of Tunoi, JA, who expressly dissented; the majority judgment of Kwach, JA (which Shah, JA presumably joined) is not included, so the majority's reasoning, the authoritative disposition and the exact costs orders cannot be verified from the full bench.
The excerpt records Tunoi JA's individual proposed orders rather than the court's collective final orders; the orders and costs recorded here are those proposed in the dissenting judgment.
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (1)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Bajaber v Planning Systems Services Limited (Cause E871 of 2021) [2025] KEELRC 2846 (KLR)[2025] KEELRC 2846 (KLR)23 Oct 2025
Cite this brief
#Cite this brief
Caselaw, "National Bank of Kenya Limited v Devji Bhimji Sanghani & another [1995] KECA 101 (KLR)", Case Analysis (1995). Civil Appeal No. 13 of 1994. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1995/101/eng@1995-11-15
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.