CHARTERHOUSE BANK LIMITED v CENTRAL BANK OF KENYA & 2 OTHERS [2007] KECA 395 (KLR)

Interlocutory injunctions are equitable and discretionary remedies. An appeal from their refusal can only focus on whether the Judge exercised his discretion judicially - that is, whether he acted on wrong principles, took into account irrelevant matters or disregarded relevant ones. Counsel for the Bank argued the merits of the statutory management decision, which cannot be conclusively decided on such an application or in the intended appeal. Having adopted the wrong approach, the Bank failed to demonstrate that the Judge did not exercise his discretion judicially, so the arguability threshold was not met.

Relying on Mbogo vs. Shah, the Court reaffirmed that appellate interference with discretionary decisions is confined to instances where the decision is clearly wrong. The High Court had declined to exercise its discretion in the Bank's favour after applying the Giella principles; nothing was shown to be irrelevant or extraneous in what it considered or disregarded among relevant matters. The Court therefore treated the intended appeal as confined to the manner of exercise of discretion and declined to entertain the challenges to the legality of CBK's decision, reserving them for trial.

Rose Detho deponed that she assumed management, control and conduct of the Bank's affairs on 23 June 2006, the date of her appointment, and the Minister for Finance swore that he approved the action taken by CBK. Section 34 (4) of the Banking Act enjoins a manager to discharge her duties diligently and in accordance with sound banking principles with due regard to the institution, its depositors and creditors, and section 34 (5) specifies her responsibilities. No complaint was made of any breach of those duties, and restraining her would produce no efficacious result.

The Court noted that over nine months of the twelve-month term had elapsed and the substantive appeal had not yet been filed. Statutory management would therefore cease before the appeal was determined, and an injunction granted on a successful appeal would merely reproduce an order the trial court had refused, to no effect. The appointment had been made to protect the institution, its depositors and other creditors, and the statutory manager had discharged her duties without complaint. The second limb of the Rule 5 (2) (b) test accordingly failed.

The Bank's central contention was that the powers in section 34 (2) could be exercised only on the occurrence of all four circumstances in section 34 (1), whereas CBK maintained that the circumstance in section 34 (1) (d) sufficed; the High Court preferred CBK's construction. The Court of Appeal held that issues challenging the legality or lawfulness of CBK's decision to place the Bank under statutory management were matters for the trial of the suit and were unnecessary to the disposal of a Rule 5 (2) (b) application concerned with arguability and nugatory-ness.