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Court of AppealPartially AllowedCivil Appeal (Nairobi)

National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & another (Civil Appeal 95 of 1999) [2001] KECA 362 (KLR)

Court of Appeal of Kenya
8 June 2001
Philip Kiptoo TunoiP.K. TunoiMKM.M.O. Keiwua
2,166 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Court of Appeal ruled that judges cannot rewrite loan agreements or reduce agreed interest unless a borrower proves fraud, coercion, or undue influence.

What this practically means

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Executive summary

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The Court of Appeal (Tunoi and Keiwua, JJ A) allowed an appeal by National Bank of Kenya against a ruling of O'Kubasu, J in a dispute arising from a Shs 25 million loan advanced in 1991/1992 to the first respondent, secured by a charge over the second respondent's property LR 209/9499 Dandora, Nairobi. The respondents had sought an injunction and, by an interlocutory application, an order for taking of accounts, although the plaint itself never pleaded taking of accounts. The learned judge, having correctly found that the bank was entitled to charge interest at rates above the 20% minimum agreed in the charge, nevertheless proceeded to assume the bank would waive part of the interest and ordered a waiver plus payment by instalments. The Court of Appeal held this was a serious misdirection: a court cannot re-write a contract between parties absent pleaded and proved coercion, fraud or undue influence, citing Fina Bank v Spares & Industries for the principle that equity does not ordinarily relieve a party from a bad bargain. The court further held that the judge lacked jurisdiction to take and settle accounts ad hoc where the plaint did not pray for an account, since Order XIX rule 1 and Order XX rule 16 of the Civil Procedure Rules govern accounts and it is not a judge's role to act as an accountant. The appeal was allowed with costs, the respondents' application of 3rd May 1997 was dismissed with costs, and the status quo preceding the suit was restored. The suit itself was left for the parties to decide their next course of action.

Questions the Court framed

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

  1. 1.Whether the learned judge erred in waiving part of the contractual interest payable under the charge
  2. 2.Whether the learned judge had jurisdiction to take and settle accounts when that relief was not pleaded in the plaint
  3. 3.Whether the instalment payment order could stand

Key legal issues

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01

Waiver of contractual interest

Holding

The learned judge's waiver of part of the interest was a serious misdirection; the bank was entitled to charge interest at the agreed and prevailing rates under the charge.

Reasoning

The charge provided for a minimum of 20% interest on reducing balances payable monthly. The judge had correctly analysed Harilal & Co v Standard Bank and found the bank entitled to charge higher rates, but then assumed, without basis, that the bank would waive interest and stepped into its shoes to order a waiver. No coercion, fraud or undue influence was pleaded or proved, so the parties remained bound by the contract.

p. 4
02

Jurisdiction to take accounts

Holding

The judge assumed jurisdiction to hear and rule on taking and settlement of accounts when that relief was not part of the plaintiffs' claim; this was unprocedural, erroneous and without jurisdiction.

Reasoning

The plaint sought declaration of the right to redeem, an injunction, damages and costs, but never sought taking of accounts. Order XIX rule 1 permits an order for accounts only where the plaint prays for or involves an account, and Order XX rule 16 gives special directions for taking accounts. It is not the job of a judge to be an accountant; the ad hoc method used was without jurisdiction.

p. 4

Legal principles established

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  • Courts cannot re-write contracts between parties; parties are bound by their agreed terms unless coercion, fraud or undue influence are pleaded and proved.
  • A judge has no jurisdiction to take and settle accounts ad hoc where the plaint does not plead or pray for an account; accounts are governed by the special directions in the Civil Procedure Rules.
  • Equity will not ordinarily relieve a party from a bad bargain.

Court orders

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  1. 1.Appeal allowed with costs
  2. 2.Plaintiffs' application in the superior court dated 3rd May, 1997 dismissed with costs
  3. 3.Status quo preceding the filing of the suit in the superior court to prevail

The bench

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

Philip Kiptoo Tunoi
majority
MK
majority
On appeal from
High Court of Kenya (superior court)
not stated
Jurisdiction invoked
First appellate jurisdiction over the superior court (ruling of O'Kubasu, J); specific constitutional provision not stated in the judgment

Relief refused

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Any variation of the contractual interest or instalment arrangement in favour of the respondents

The court could not re-write the parties' contract absent pleaded and proved coercion, fraud or undue influence

p. 4

Costs

Appeal allowed with costs; plaintiffs' application dated 3rd May, 1997 dismissed with costs (costs to the appellant/defendant).

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.

A Court of law cannot re-write a contract between the parties. The parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved.
p. 4Sanctity of contract
The ad hoc method in which the learned judge proceeded to take and settle accounts was not only unprocedural but erroneous and without jurisdiction.
p. 4Limits of judicial power in taking accounts
It is clear beyond peradventure that save for those special cases where equity might be prepared to relieve a party from a bad bargain, it is ordinarily no part of equity's function to allow a party to escape from a bad bargain
p. 4Equity and bad bargains (Fina Bank, Shah JA)
The result is that this appeal is allowed with costs and the plaintiffs' application before the superior court dated 3rd May, 1997 is dismissed with costs.
p. 4Final orders/disposition
For avoidance of any doubt we say that the status quo preceding the filing of the suit in the superior court now prevails.
p. 4Status quo restored

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (23)

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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, "National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & another (Civil Appeal 95 of 1999) [2001] KECA 362 (KLR)", Case Analysis (2001). Civil Appeal (Nairobi). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2001/362/eng@2001-06-08

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