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Court of AppealPartially AllowedCivil Appeal No. 91 of 2014· [2016] KECA 113 (KLR)

Equity Bank Limited v Westlink MBO Limited [2016] KECA 113 (KLR)

Court of Appeal of Kenya
4 November 2016
ASAsike-MakhandiaWilliam OukoW. OukoKMK. M'inoti
3,312 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 confirmed that a defence with even one genuine triable issue cannot be struck out, especially where fraud is alleged.

What this practically means

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Executive summary

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The respondent, Westlink MBO Limited, sued Equity Bank and two of its cashiers, Njuguna and Ngochi, for Kshs.39,720,000, alleging the employees fraudulently issued fake deposit slips to a customer, Tai, failed to credit deposits to Westlink's account, failed to credit a Kshs.7,500,000 transfer, and wrongfully debited Kshs.4,485,000. Equity Bank filed a 30-paragraph defence denying the fraud, denying the employees were tellers at the material time, particularizing fraud by the respondent and Tai, and contesting the effect of deposit slips. Westlink applied under Order VI Rule 13 to strike out the defence as a sham. Apondi, J. struck out the defence, held the bank vicariously liable, and entered judgment. The Court of Appeal allowed the appeal. It restated the settled principles: the striking-out power is draconian, to be exercised sparingly in plain and clear cases; even one bona fide triable issue earns unconditional leave to defend; and a court may not conduct a mini-trial on affidavits. Notably, Westlink's own counsel had conceded there was one issue to try - vicarious liability - yet the judge proceeded to determine it conclusively on affidavit evidence without cross-examination. Given the serious allegations of fraud, summary determination was impermissible; the defence raised genuine disputes on the employees' status, the sufficiency of funds for the transfer, the nature of the debit, and the loss allegedly suffered. The Court set aside the ruling and dismissed the striking-out application, with costs to the appellant.

Key legal issues

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01

Whether the High Court erred in striking out the appellant's defence

Holding

The appeal was allowed; the defence raised multiple triable issues and the judge erred by purportedly trying the sole admitted issue on affidavits without oral evidence tested by cross-examination.

Reasoning

The defence pleaded and particularized fraud against the respondent, Tai and the two cashiers; contested whether Njuguna and Ngochi were tellers at the material time; questioned sufficiency of funds for the Kshs.7,500,000 transfer; contested the Kshs.4,485,000 debit as a justified reversal; and challenged whether deposit slips were conclusive proof of deposit. Respondent's counsel himself admitted only one issue required determination. Conclusively determining vicarious liability and fraud on affidavit evidence denied the appellant a fair trial of weighty disputed facts.

p. 4
02

The principles governing striking out pleadings

Holding

The power is draconian, exercised sparingly in plain and clear cases; a single bona fide triable issue earns unconditional leave to defend; improvable defences should not be struck out.

Reasoning

The court distilled the main threads of the authorities: the procedure exists to defeat sham defences meant merely to delay; it must be used sparingly in plain and clear cases; amendment should be preferred where a defence can be saved; a triable issue is a prima facie defence not one that must succeed; and the court must not conduct a mini-trial on affidavits nor strike out a defence merely because its story seems improbable.

p. 4

Legal principles established

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  • The power to strike out a pleading must be exercised sparingly and only in plain and clear cases.
  • Even a single bona fide triable issue entitles a defendant to unconditional leave to defend.
  • A triable issue need not succeed at trial; it is a prima facie defence deserving adjudication at trial.
  • Where a defence can be saved or improved by amendment, the court is not entitled to strike it out.
  • Summary judgment or striking out should not be used to resolve serious allegations of fraud; such issues must be decided at trial.
  • A court cannot conduct a mini-trial by way of affidavits where a party assumes the burden of showing there is no bona fide defence.

Court orders

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  1. 1.Appeal allowed
  2. 2.Order of the High Court dated 4th February 2010 set aside
  3. 3.Substituted order dismissing with costs the respondent's application dated 21st August 2009
  4. 4.Appellant to have costs of this appeal

Authorities

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Legislation

  • Banking ActCap 488
  • Civil Procedure RulesOrder VI Rule 13(1)(a), (b), (c) and (d)

Cases cited (13)

  • DT Dobie & Co (Kenya Ltd) v. Muchina
    [1982] KLR 1
  • Coast Projects Ltd v. MR Shah Construction (K) Ltd
    [2004] 2 KLR 119
  • Ramji Megji Gudka Ltd v. Alfred Morfat Omundi Muchira & 2 Others
    CA. No. 335 of 2001 (Kisumu)
  • Job Kilach v. Nation Media Group Ltd.
    CA. No. 94 of 2006
  • Muwonge v. Attorney General of Uganda
    [1967] EA 17
  • Bazley v. Curry
    [1999] 2 SCR 534
  • Continental Butchery Ltd v Nthiwa
    CA. No. 35 of 1977
  • Postal Corporation of Kenya v. Inamdar & 2 Others
    [2004] 1 KLR 359
  • Patel v. East Africa Cargo Handling Services Ltd
    [1974] EA 75
  • Giciem Construction Co v. Amalgamated Trade Services
    [1983] KLR 156
  • Yaha Towers v. Trade Bank Ltd (in Liquidation)
    CA. No. 35 of 2000
  • Yaya Towers v. Trade Bank (In Liquidation)
  • Westmont Power Kenya Ltd v. Frederick & Another t/a Continental Traders & Marketing
    [2003] KLR 357
On appeal from
High Court of Kenya at Nairobi
HCCC No. 142 of 2009
Jurisdiction invoked
First appeal to the Court of Appeal against an interlocutory ruling of the High Court (Constitution of Kenya, Article 164; Court of Appeal Act)

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Equity Bank Limited v Westlink MBO Limited [2016] KECA 113 (KLR)", Case Analysis (2016). Civil Appeal No. 91 of 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2016/113/eng@2016-11-04

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