Finerate Forex Bureau Ltd v National Bank of Kenya Ltd [2001] KECA 261 (KLR)
The bottom line
#Kenya's Court of Appeal ruled that a forex bureau can sue a bank for confirming a forged cheque, restoring its case for a full trial.
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 plaint disclosed a reasonable cause of action against the respondent bank
- 2.Whether the appellant's claim was extinguished by accord and satisfaction arising from the transformation of the debit into a loan
- 3.Whether the cause of action was properly pleaded
Key legal issues
#Whether the plaint disclosed a reasonable cause of action
The learned Judge erred in concluding there was no cause of action; on the pleaded facts, assuming them true, the appellant arguably had a cause of action against the bank for breach of contract in confirming a forged cheque as good.
The appellant pleaded that it asked the bank to verify a banker's cheque, that the bank confirmed it was good, and that acting on that confirmation it completed a transaction and withdrew funds before the cheque was dishonoured as a forgery. Whether a bank giving such an assurance, on which a customer acts to its detriment, is liable is arguable. Forgery and want of consideration could not be assumed at the striking-out stage; the presumption that the appellant was a holder in due course stood and could be rebutted only at trial.
Whether the claim was extinguished by accord and satisfaction
The plea of accord and satisfaction was premature; whether the transformation of the debit into a loan was agreed or the product of economic duress was a matter for the trial court.
Accord and satisfaction presupposes agreement between the parties (ad idem). At the striking-out stage the court had to accept the appellant's version that the conversion of the debit into a loan was economic duress exerted by the respondent. The Hirachand Punamchand case was distinguished as premature because the existence of agreement was a factual question for trial.
Whether the cause of action was properly pleaded
The prayer, though not mentioning damages, was properly pleaded when read with paragraph 13 of the plaint on which it was based.
The court held that a prayer must not be read in isolation but with reference to the facts pleaded in support. The prayer for a specific sum with interest was based on paragraph 13 of the plaint, which pleaded loss of the cheque value and interest charged on the converted loan facility, so the pleading was sufficient.
Legal principles established
#- Under Order VI rule 13(1)(a) of the Civil Procedure Rules a pleading may be struck out only where it discloses no reasonable cause of action or defence, and no evidence is admissible on such an application; the facts pleaded must be assumed true.
- On an application to strike out for want of a cause of action, a plea of accord and satisfaction cannot be sustained where the existence of agreement is a matter for trial.
- A forged cheque confers no title and is not a negotiable instrument, but forgery is a matter of evidence and cannot be assumed on a striking-out application.
Court orders
#- 1.Appeal allowed with costs
- 2.Set aside the striking out of the suit in the superior court
- 3.The suit restored to hearing
- 4.Appellant awarded costs of the application dated 24th July, 2000 filed in the superior court
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya at Nairobi
- H.C.C.C. No. 1071 of 2000
- Jurisdiction invoked
- First appeal to the Court of Appeal from the High Court under the Constitution and the Appellate Jurisdiction Act (appeal from the Ruling of the High Court of Kenya at Nairobi)
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.
It is clear beyond peradventure that Order VI rule 13(1)(a) of the Civil Procedure Rules permits striking out of a pleading only on the ground that it discloses no reasonable cause of action or defence, as the case may be. It is equally clear that no evidence is admissible under that sub-rule.
It is arguable whether if a bank gives a customer an assurance that a cheque deposited by him is good and the customer acts on that assurance to his detriment the customer has a cause of action against the banker.
For these reasons we think that the learned Judge erred in concluding that there was no cause of action shown by the appellant or that it stood extinguished by accord and satisfaction. We therefore allow this appeal, with costs and set aside the striking out of the suit in the superior court. That suit is restored to hearing.
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (2)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Kenya Railways Corporation v Atulkumar Ramanbhai Patel [2017] KEELC 1186 (KLR)[2017] KEELC 1186 (KLR)1 Nov 2017distinguished
- Elijah Kipn’geno Arap Bii v Peter Kipyegon Rotich & another [2015] KECA 484 (KLR)[2015] KECA 484 (KLR)31 Jul 2015
Cite this brief
#Cite this brief
Caselaw, "Finerate Forex Bureau Ltd v National Bank of Kenya Ltd [2001] KECA 261 (KLR)", Case Analysis (2001). Civil Appeal No. 324 of 2000. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2001/261/eng@2001-11-30
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.