Nuru Chemists Limited & another v National Bank of Kenya Limited [2002] KECA 135 (KLR)
The bottom line
#Kenya's Court of Appeal stopped a bank from collecting a debt because it never produced proof the debt had been legally transferred to it.
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 intended appeal against the summary judgment of Mbaluto J is arguable.
- 2.Whether National Bank, suing on a debt allegedly borrowed from Standard Chartered Bank, was required to prove that the debt had been lawfully assigned or transferred to it, and whether its failure to do so raised a valid point.
- 3.Whether the execution of the decree should be stayed pending the determination of the intended appeal, notwithstanding that the respondent is a financial institution which could refund the decretal amount if the appeal succeeds.
Key legal issues
#Whether the intended appeal is arguable under rule 5(2)(b) of the Court of Appeal Rules.
Yes. The applicants raised a valid point: National Bank sued on a debt allegedly borrowed from Standard Chartered but produced no evidence that the debt was lawfully assigned or transferred to it.
The plaint contained no averment explaining how a debt owed to Standard Chartered ended up being owed to National Bank; the only explanation was paragraph 6 of Samwel Odiyo's affidavit asserting a 1996 takeover of Standard Chartered's Kisii Branch debts, unsupported by any documentary evidence. Because the case was presented as if judgment were sought on the basis of an admission, the point eluded the learned judge. An arguable point of that kind satisfies the arguability limb of the rule 5(2)(b) test.
Whether a decree-holder suing on an assigned debt must prove the assignment.
Yes. Where a plaintiff's case is that a debt was transferred to it by the original lender, it must produce evidence of the instruments of assignment or transfer; a bare assertion in an affidavit is insufficient.
National Bank's claim was necessarily that the Standard Chartered debt had been transferred to it, yet it tendered no copies of the instruments of assignment or transfer and relied only on the branch manager's assertion of a takeover. The court held that borrowers are entitled to object to collection by a third party absent proof of lawful assignment, so a summary judgment obtained on an unproven assignment is vulnerable on appeal.
Whether the respondent's capacity as a financial institution to refund the decretal amount should defeat the application for stay.
No. The ability to refund is not conclusive; in the circumstances of this case the court would not allow National Bank to take immediate benefit of the decree.
The court acknowledged that in normal circumstances a financial institution would have no difficulty refunding the decretal amount if the appeal succeeded, but held that this was not a case in which the decree-holder should be allowed to take immediate benefit of the decree. The sufficiency-of-refund consideration under rule 5(2)(b) is discretionary and fact-sensitive rather than mechanical, and the merits of the intended appeal on the unproven assignment weighed in favour of granting the stay.
Legal principles established
#- A party who sues on a debt allegedly assigned or transferred to it must produce evidence of the instruments of assignment or transfer; a bare assertion in an affidavit does not discharge that burden, and summary judgment cannot rest on such an assertion.
- A borrower is entitled to insist that any third party seeking to collect the debt first prove that it was lawfully assigned or transferred to that third party by the original lender.
- On a rule 5(2)(b) application, the fact that the respondent is a financial institution capable of refunding the decretal amount does not compel refusal of a stay; the court may decline to let the decree-holder take immediate benefit of the decree where the appeal is arguable.
Court orders
#- 1.Stay of execution of the ruling and order of Mbaluto J given on 24th May, 2002 in H.C.C.C. No. 1343 of 2002 granted pending the determination of the intended appeal.
- 2.Costs of the application to be in the appeal.
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. 1343 of 2002
- Jurisdiction invoked
- Rule 5(2)(b) of the Court of Appeal Rules (stay of execution pending an intended appeal)
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.
Consequently, we allow the application and grant the stay sought pending the determination of the intended appeal. Costs of the application to be in the appeal.
There is however no averment in the plaint to explain how a debt owed to Standard Chartered ended up being a debt owed to National Bank.
No documentary evidence was placed before the learned Judge to back up this assertion.
If the applicants borrowed money from Standard Chartered they are perfectly entitled to object to any attempt by National Bank to collect the debt without any proof that it had been lawfully assigned or transferred to National Bank by Standard Chartered.
National Bank did not bother to tender in evidence copies of the instruments of assignment or transfer and chose to rely on a bare assertion in support of its claim.
Although the respondent is a financial institution and in normal circumstances would have no difficulty in refunding the decretal amount if the appeal succeeds, we do not think that this is the sort of case in which we should allow National Bank to take immediate benefit of the decree.
The applicants have a valid point which appears to have eluded the attention of the learned Judge.
Issues in the judgment
#The supplied text is corrupted by an interleaved scanning artefact at the passage which should read '...stayed pending the determination of their intended appeal. There is however no averment in the plaint...'; the holding on the absence of an averment in the plaint is recoverable from the surrounding clean text.
The supplied text is corrupted by an interleaved scanning artefact at the passage which should read '...as if judgment was sought on the basis of an admission. We are satisfied that the applicants have an arguable appeal.'; the court's satisfaction that the appeal is arguable is recoverable from the clean tail of the sentence.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Nuru Chemists Limited & another v National Bank of Kenya Limited [2002] KECA 135 (KLR)", Case Analysis (2002). Civil Application No. NAI. 226 of 2002. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2002/135/eng@2002-08-16
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.