Development Finance Company of Kenya Limited & 2 others v Wino Industries Limited [1995] KECA 122 (KLR)
The bottom line
#Kenya's Court of Appeal ruled that loans clearly written as Kenya shillings in the contract stay shilling loans, even if the lender later claimed otherwise.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether, on a true construction of article 2.01 of the two loan agreements, the money of account was Kenya shillings or a convertible foreign currency determined by DFCK
- 2.Whether compliance with article 2.11 (notification of the specified currency) was a condition precedent, and whether DFCK could determine the money of account after disbursement
- 3.Whether, in the alternative, the respondent was estopped by conduct or had waived DFCK's non-compliance with article 2.11 by retaining the statements of currency and paying invoices expressed in foreign currencies
Key legal issues
#Construction of article 2.01(a): currency of account of the loans
The majority held that the money of account was Kenya shillings; the loans were given and disbursed in Kenya shillings and were repayable in Kenya shillings.
Article 2.01(a) expressed the loan as an amount 'equivalent to the sum of shillings Two million'. Applying the ordinary meaning of the words, and reading the article with articles 2.10 and 2.11, the obligation was measured in Kenya shillings. DFCK never gave prior notice of a specified currency as article 2.11 required, and its determination after disbursement could not apply to events already past. The security documents and correspondence also referred only to a loan of Shs 2,000,000.
Whether DFCK could specify the money of account after disbursement under article 2.11
No - the determination contemplated by article 2.11 had to relate to a future event and could not be made after disbursement; the statement of currencies delivered afterwards could not convert a shilling loan into a foreign currency loan.
Article 2.11 required DFCK, if it determined to advance the loan in currencies other than shillings, to inform WIL of the currencies 'in which DFCK wishes to make such an advance'. That decision had to precede disbursement. Since the loan was in fact disbursed in Kenya shillings, the notification machinery never came into play, and the post-disbursement statements of currency were of no contractual effect.
Admissibility of prior negotiations and surrounding circumstances
Prior negotiations and rejected drafts are inadmissible to construe a written agreement; only surrounding factual background known to the parties at or before the contract may be considered, and here it was unnecessary because the agreement was clear.
Following Damodar Jinabhai v Eustace Estates and Prenn v Simmonds, the court reaffirmed that evidence of prior negotiations can never be used to vary a written contract. Since the agreements were clear on their face, there was no need to fall back on surrounding circumstances at all.
Estoppel and waiver by retention of statements of currency and payment of invoices
The majority held no estoppel or waiver arose: the loan being a shilling loan, the respondent was never obliged to pay in foreign currency and had made no representation inducing the appellants to act to their detriment.
The unconscionability test displaced the narrow Willmott v Barber probanda, but on the facts the respondent made no representation by silence or payment; both parties were ignorant of the true effect of the contract; and since article 2.11 never came into operation there was nothing to waive. The trial judge's findings on estoppel were endorsed in full.
Legal principles established
#- Where a contract is in writing and its terms are clear and unambiguous, no extrinsic evidence may be called to add to or detract from it, and evidence of prior negotiations is never admissible to vary the terms of a written contract.
- The money of account is the currency in which an obligation is measured; the money of payment is the currency in which the obligation is discharged.
- Where a lender stipulates machinery (prior notification of a specified currency) for converting a shilling loan into a foreign currency loan, failure to operate that machinery before disbursement leaves the loan a shilling loan.
- The modern test for estoppel by acquiescence is unconscionability rather than the five probanda in Willmott v Barber.
Court orders
#- 1.Appeal dismissed with costs
- 2.Counterclaim of the first appellant dismissed with costs
- 3.Decree of the High Court varied by including an order dismissing the counterclaim
The bench
#Judges wrote separately. A dissent does not bind; a concurrence may narrow the ratio.
Wrote the judgment
Held that on a true construction of article 2.01(a) the money of account and money of payment were Kenya shillings; DFCK never operated the machinery in article 2.11 before disbursement to convert the loan into a foreign currency loan; evidence of prior negotiations is inadmissible; and no estoppel or waiver arose since article 2.11 never came into operation. Would dismiss the appeal and dismiss the counterclaim with costs.
For all these reasons, I would dismiss the appeal with costs. I would also make an order dismissing the counterclaim filed by DFCK with costs.p. 7
Wrote the judgment
Took a different view: the transaction was tripartite with the European Investment Bank; the obligation to lend was in foreign currency as money of account and repayment was to be in Kenya shillings equivalent of the foreign currency. Found the respondent estopped by conduct from resiling after paying invoices in foreign currency equivalents for years. Would have allowed the appeal, set aside the High Court judgment and entered judgment on DFCK's counterclaim.
I would therefore allow this appeal with costs and set aside the judgment of the superior court and substitute therefore judgment dismissing the plaintiff 's suit with costs and giving judgment for the 1st defendant's counter-claim.p. 12
Wrote the judgment
Agreed with Kwach JA that on the natural and ordinary meaning of article 2.01(a) read with articles 2.10 and 2.11 the money of account was Kenya shillings; surrounding circumstances, the correspondence and the security documents confirmed this; and he agreed with the trial judge's rejection of the estoppel plea. Would dismiss the appeal but vary the decree to include dismissal of the counterclaim, which the trial judge had overlooked.
Accordingly and, for the reasons above stated, I would dismiss this appeal with costs and vary the decree appealed against by including an order dismissing the counter-claim with costs.p. 16
- On appeal from
- High Court of Kenya at Nairobi
- HCCC No 3220 of 1988
- Jurisdiction invoked
- First appellate jurisdiction under the Appellate Jurisdiction Act (appeal from the High Court)
Relief refused
#Setting aside of the High Court judgment and entry of judgment on DFCK's counterclaim for repayment in the Kenya shilling equivalent of specified foreign currencies
The majority held the loans were Kenya shilling loans as disbursed and repayable, so article 2.11 never came into operation and no estoppel arose
Costs
Appeal dismissed with costs to the respondent; counterclaim dismissed with costs to the respondent
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 all these reasons, I would dismiss the appeal with costs. I would also make an order dismissing the counterclaim filed by DFCK with costs.
Accordingly and, for the reasons above stated, I would dismiss this appeal with costs and vary the decree appealed against by including an order dismissing the counter-claim with costs.
As my brothers are of the view that the appeal should be dismissed with costs, there will be a judgment by the majority dismissing both the appeal and DFCK's counter-claim with costs.
The money of account is the currency in which an obligation is measured. It tells the debtor how much he has to pay. The money of payment is the currency in which the obligation is to be discharged.
I must accordingly hold that the two loan never became foreign currency loans by the failure of the defendants to operate the machinery devised by themselves
It is that in the construction of an agreement prior correspondence cannot be called in aid.
Issues in the judgment
#The judgments contain inconsistent internal date references for correspondence and second agreement (e.g. the second loan agreement is described as dated 1st December, 1988 in one passage and 1st December 1983 in another; letters are dated 2nd April, 1991 and 7th April, 1991 in the dissent but 1981 elsewhere), apparently typographical errors in the copy.
The coram and the parties' names differ between the cause title (Muiruri/Geita) and the body of the judgment (Mwiruri/Geita), and the judgment is styled as a single 'JUDGMENT OF KWACH JA' on the title although three separate judgments follow.
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.
- Shah & 3 others v I&M Bank (Civil Appeal 133 of 2019) [2025] KECA 298 (KLR)[2025] KECA 298 (KLR)21 Feb 2025applied
Cite this brief
#Cite this brief
Caselaw, "Development Finance Company of Kenya Limited & 2 others v Wino Industries Limited [1995] KECA 122 (KLR)", Case Analysis (1995). Civil Appeal No 112 of 1989. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1995/122/eng@1995-12-20
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.