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Court of AppealAllowedCivil Applications Nos. 258 & 315 of 1999

Trust Bank Limited & another v Investech Bank Ltd & 3 others (Civil Application 258 & 315 of 1999) [2000] KECA 11 (KLR)

Court of Appeal of Kenya
17 January 2000
AAA. M. AkiwumiSBS. E. O. BosireEOE. Owuor
3,147 words in judgment
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The bottom line

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Kenya's Court of Appeal stopped enforcement of a KShs 260 million judgment against Trust Bank, ruling the appeal raised serious questions and recovery from a foreign bank could be difficult.

What this practically means

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Executive summary

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This is a ruling of the Court of Appeal at Nairobi (Akiwumi, Bosire and Owuor JJA) on two consolidated applications under rule 5(2)(b) of the Court of Appeal Rules seeking stay of execution of a summary judgment decree of the High Court (Commissioner of Assize Hewett, 10 September 1999) in Investec Bank's suit against Trust Bank Limited, its statutory manager Michael Muhindi, and three of its directors. The suit arose from an oral foreign-exchange contract of 17 September 1998 under which Trust Bank was to sell 5.5 million Deutsche Marks to Investec for US$3,272,251.31. Before performance, Trust Bank was placed under statutory management; Investec transferred the dollars, which were wired onward to Desdner Bank in breach of a moratorium declared by the statutory manager, and Trust Bank never delivered the marks. The court restated the twin rule 5(2)(b) tests: an arguable appeal and nugatory-ness. It held the intended appeals arguable because serious questions remained whether the payment instructions were authorised, whether Trust Bank was a mere conduit, whether the payment breached the moratorium, whether a finding of negligence against the statutory manager could be made on affidavit evidence without an oral hearing, and whether the liquidated and unliquidated claims were severable, fraud ordinarily requiring oral evidence. On nugatory-ness, although Investec was financially sound, the balance of convenience favoured a stay given the difficulties of recovering about KShs 260 million from a foreign bank. Both applications were allowed and execution stayed pending the intended appeals, with costs in the intended appeals.

Questions the Court framed

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

  1. 1.Whether the intended appeals are arguable
  2. 2.Whether, unless a stay of execution is granted, the intended appeals will be rendered nugatory
  3. 3.Whether the balance of convenience favours the grant of a stay

Key legal issues

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01

Whether the intended appeals are arguable

Holding

The intended appeals are arguable because serious triable issues arise as to whether the payment instructions were authorised, whether Trust Bank was a mere conduit, breach of the moratorium, and whether the liquidated and unliquidated claims are severable.

Reasoning

The court found that whoever negotiated the deal and issued payment instructions may have done so to take the money beyond the statutory manager's reach; the payment breached the declared moratorium; the finding of negligence against the statutory manager was made on affidavit evidence without oral hearing; and fraud requires oral evidence unless facts are clearly obvious. These questions were at large and could not be resolved without hearing all players.

p. 5
02

Whether the intended appeals would be rendered nugatory absent a stay

Holding

Although the respondent was a bank with a sound financial base, the balance of convenience favoured a stay because the respondent was a foreign bank and recovery of about KShs 260 million might present considerable difficulties.

Reasoning

The decree was a money decree and the respondent was financially sound, so ordinarily no nugatory risk would arise. However, the jurisdiction being discretionary, the court weighed the respondent's foreign status and the magnitude of the decretal sum, concluding that difficulties in recovering the sum from a foreign bank tipped the balance of convenience in favour of a stay.

p. 5
03

Severability of liquidated and unliquidated claims for summary judgment

Holding

It is clearly arguable whether the liquidated and unliquidated claims in the suit are severable and whether the issue can be answered without oral testimony.

Reasoning

The plaint pleaded fraudulent and negligent misrepresentation, and the superior court itself gave unconditional leave to defend on the fraud and deceit issues, recognising that a higher standard of proof applies to fraud and that documents and cross-examination might impinge on it. Reading the plaint and the ruling together, severability could not be determined summarily.

p. 4

Legal principles established

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  • To succeed on an application under rule 5(2)(b), an applicant must show that the appeal or intended appeal is arguable and that, unless a stay is granted, it will be rendered nugatory.
  • In mixed claims where one claim is liquidated, the court may enter summary judgment only on the liquidated part, and only where that claim is severable from the other claims.

Court orders

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  1. 1.That the execution of the decision of the superior court given on 10th September 1999 in Civil Case No. 2411 of 1998 be stayed pending the final determination of the applicants' respective intended appeals
  2. 2.That the costs be in the intended appeals

The bench

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

AA
majority
SB
majority
EO
majority
On appeal from
High Court of Kenya at Milimani
H.C.C.C. No. 2411 of 1998
Jurisdiction invoked
Rule 5(2)(b) of the Court of Appeal Rules
Consolidated with
Civil Application No. 315 of 1999

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.

to succeed an applicant has to show firstly, that his appeal or intended appeal is arguable, or put another way, it is not frivolous; and secondly, that unless he is granted a stay the appeal or intended appeal, if successful, will be rendered nugatory
p. 2Rule 5(2)(b) principles
In the result we allow both the applications and order that the execution of the decision of the superior court given on 10th September, 1999, in its Civil Case No. 2411 of 1998, be stayed pending the final determination of the applicants' respective intended appeals. The costs to be in the intended appeals.
p. 5Final orders and costs
in mixed claims where one of those is liquidated, then the court has jurisdiction, upon application, to enter summary judgment only on that part of the claim which is liquidated. But, in our view, that is only possible where the liquidated claim is severable from the other claims and can be dealt with separately without doing any violence to the other claims
p. 2Summary judgment on liquidated claims
Fraud or negligence as the case may be, is a matter which, unless the facts and circumstances are clearly obvious, need oral evidence to establish
p. 4Proof of fraud

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (8)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Trust Bank Limited & another v Investech Bank Ltd & 3 others (Civil Application 258 & 315 of 1999) [2000] KECA 11 (KLR)", Case Analysis (2000). Civil Applications Nos. 258 & 315 of 1999. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2000/11/eng@2000-01-17

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