Nationwide Electrical Industries Ltd v Prime Capital & Credit Ltd.
The bottom line
#Kenya's Court of Appeal cut a Shs.20 million promissory note judgment to Shs.10 million, holding that two Shs.5 million cheques had already been paid.
What this practically means
#Executive summary
#Key legal issues
#Lack of consideration as a defence to a suit on promissory notes
The defence of lack of consideration failed because the respondent was a holder in due course under section 29 of the Bills of Exchange Act, and the maker cannot dispute consideration against a holder in due course.
The respondent discounted the promissory notes endorsed by Shah Motors Ltd and advanced funds of Shs.18,460,000/= for value. Section 29 of the Bills of Exchange Act declares a holder for value to be a holder in due course. The appellant's submission that there was no consideration between it and Shah Motors could not defeat the respondent's claim as holder in due course of the notes endorsed to it.
Whether two post-dated cheques of Shs.5,000,000 each were paid in respect of two of the promissory notes
On re-evaluation of the evidence, the Court found that the two cheques were indeed paid out in respect of two of the promissory notes, so the appellant had paid only Shs.10,000,000/= of the Shs.20,000,000/= claimed under prayer b (i), and the judgment was varied accordingly.
Revisiting the record as required on a first appeal, the Court noted that PW1 initially refused to produce Shah Motors' accounts and only alluded to payment of the two cheques after recall. Despite the trial judge's finding that there was no proper evidence the cheques paid the promissory notes, the Court concluded on the evidence that the two cheques of Shs.5,000,000/= each were paid out in respect of the two promissory notes.
Whether the court could interfere with the agreed rate of interest
The rate of interest could not be reduced because it was contractually agreed; absent pleaded and proved coercion, fraud or undue influence, a court cannot re-write a contract.
Counsel urged the Court to reduce the interest rate charged. The Court applied its earlier decision in National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd, holding that parties are bound by their bargain and a court has no power to vary agreed contractual terms merely because they appear harsh or unjust.
Legal principles established
#- On a first appeal the Court of Appeal must reconsider and re-evaluate the evidence and draw its own conclusions, while making due allowance for the fact that it has neither seen nor heard the witnesses, and is not bound to follow the trial judge's findings of fact where he has failed to take account of material circumstances or probabilities.
- The maker of a promissory note cannot challenge the consideration where the payee is a holder in due course within section 29 of the Bills of Exchange Act.
- A court of law cannot re-write a contract between the parties; parties are bound by the terms of their contract unless coercion, fraud or undue influence are pleaded and proved.
Court orders
#- 1.Judgment of the superior court varied so that judgment is entered for Shs.10,000,000/= instead of Shs.20,000,000/= in prayer b (i) of the plaint
- 2.Appellant awarded half the costs of the appeal
- On appeal from
- High Court of Kenya at Nairobi, Milimani Commercial Courts
- H.C.C.C. No. 534 of 1998
- Jurisdiction invoked
- First appeal to the Court of Appeal under the Court of Appeal's appellate jurisdiction over the High Court (the judgment records: 'This being a first appeal we are obliged to reconsider the evidence, re-evaluate it and make our own conclusions')
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Nationwide Electrical Industries Ltd v Prime Capital & Credit Ltd.", Case Analysis (2008). Civil Appeal No. 50 of 2002. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2008/6/eng@2008-10-09
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.