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Court of AppealDismissedCivil Appeal 42 of 1998

Bullion Bank Limited v Fulchandmanek & Brothers [1999] KECA 9 (KLR)

Court of Appeal of Kenya
18 February 1999
RKR.O. KwachPhilip Kiptoo TunoiP.K. TunoiALA.A. Lakha
410 words in judgment
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The bottom line

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Kenya's Court of Appeal confirmed that a bank cannot charge a customer's account for forged cheques, and a fake defence won't stop quick judgment.

What this practically means

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Executive summary

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This was an appeal by Bullion Bank Limited, the unsuccessful defendant, against the ruling and order of the High Court at Nairobi (Ringera, J.) dated 1 July 1996 in H.C.C.C. No. 101 of 1996, whereby the judge allowed the plaintiff's application for summary judgment under Order XXXV rules 2 and 3 of the Civil Procedure Rules and entered judgment for the plaintiff in the sum of K.Shs.789,649 plus costs and interest. The respondent firm was a customer of the appellant bank. In June 1995 the bank debited the respondent's account with sums totalling K.Shs.789,649, comprising amounts on two cheques that were unknown to the respondent, plus charges for cheque books and interest. It was not denied that the cheques did not belong to the respondent, and counsel for the appellant frankly conceded that there was a forgery. The High Court judge had held that the defence filed was a hollow sham in the nature of a red herring. The Court of Appeal, in a judgment of the court delivered by a bench of Kwach, Tunoi and Lakha, JJA, was in full agreement with the learned judge, holding that as the cheques were forged the appellant had no authority or mandate from the respondent to pay the amounts of the cheques or to debit them and other charges to the respondent's account. The learned judge was held to have been plainly right. The appeal failed and was dismissed with costs. The judgment binds lower courts on the propositions that a bank has no mandate to debit a customer's account on forged cheques and that a sham defence does not resist summary judgment.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the High Court judge was right in granting the plaintiff summary judgment under Order XXXV rules 2 and 3 of the Civil Procedure Rules
  2. 2.Whether the appellant bank had authority or mandate to debit the respondent's account with the forged cheques and associated charges
  3. 3.Whether the defence filed disclosed a triable issue or was a sham

Key legal issues

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01

Bank's liability for debits on forged cheques

Holding

A bank that pays on a forged cheque acts without its customer's authority and cannot debit the customer's account with the amount or related charges

Reasoning

The cheques on which the respondent's account was debited were forged and did not belong to the respondent. The appellant's counsel frankly conceded the forgery. The court agreed with the High Court judge that without any mandate from the customer, the bank had no authority to pay the amounts or debit the account, including the cheque book and interest charges.

p. 1
02

Summary judgment where the defence is a sham

Holding

Where a defendant's defence is a hollow sham or red herring, summary judgment under Order XXXV rules 2 and 3 is properly granted

Reasoning

The High Court judge had allowed the plaintiff's application for summary judgment, holding the defence a hollow sham in the nature of a red herring. There was no denial by the appellant that the cheques did not belong to the respondent, and counsel conceded the forgery. The Court of Appeal was in full agreement with the learned judge's conclusion.

p. 1

Legal principles established

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  • A bank has no authority or mandate to pay on a forged cheque or to debit a customer's account with the amount of a forged cheque or associated charges
  • A defence that is a hollow sham or red herring does not preclude summary judgment against a defendant

Court orders

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  1. 1.Appeal dismissed with costs

The bench

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One judgment of the whole court — no separate or dissenting opinions.

RK
majority
Philip Kiptoo Tunoi
majority
AL
majority
On appeal from
High Court of Kenya at Nairobi
H.C.C.C. No. 101 of 1996
Jurisdiction invoked
First appeal to the Court of Appeal against a ruling and order of the High Court (Civil Appeal jurisdiction under the Constitution and Appellate Jurisdiction Act, as invoked by the appeal itself)

Relief refused

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The appellant's appeal against the summary judgment of K.Shs.789,649 plus costs and interest

The cheques were forged and the bank had no authority or mandate to debit the respondent's account; the defence was a sham

p. 1

Costs

Appeal dismissed with costs (costs of the appeal to the respondent)

Quotable passages

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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 circumstances of this case and as the cheques in question were forged we are satisfied that the appellant had no authority or mandate from the respondent to pay the amount of the said cheques or debit the amount of the said cheques and other charges to the account of the respondent.
p. 1Bank's lack of mandate on forged cheques
The learned judge was plainly right in the conclusion he reached. For this reason the appeal fails. It is accordingly dismissed with costs.
p. 1Disposition - appeal dismissed

Issues in the judgment

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minor

The judgment states the cheques were 'dated 8 and 13 June 1998' although the debits occurred on 8 and 13 June 1995 and the ruling below was dated 1 July 1996; the year 1998 appears to be a typographical error for 1995

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Bullion Bank Limited v Fulchandmanek & Brothers [1999] KECA 9 (KLR)", Case Analysis (1999). Civil Appeal 42 of 1998. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1999/9/eng@1999-02-18

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.