Prafulchand Bharmal Shah & another v Shurish Chandra Bharmal Shah & 2 others [2017] KECA 92 (KLR)
The bottom line
#The Court of Appeal confirmed that a signed family arbitration award fully settled all financial disputes between two brothers, and courts will not enforce claims arising from illegal business dealings.
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 arbitration award of 9th December 1999 resolved all financial disputes between the parties
- 2.The legality or lack of it of the business that precipitated the dispute and the ensuing consequences
Key legal issues
#Whether the arbitration award of 9th December 1999 was a full and final settlement of all financial disputes between the parties
Yes. All claims, including the 60,000 Sterling Pounds and USD 373,311 claims, pre-dated the arbitration and were covered by it; the appellants accepted the award of 140,000 Sterling Pounds and signed it without preconditions.
The fax of 14th November 1999 set out the appellants' claims, expressly including the 60,000 Sterling Pounds claim, as matters intended to be raised at the arbitration. The parties laid out all claims before nine family arbitrators, who awarded 140,000 Sterling Pounds, and both sides signed the award. Claims predating the award were therefore resolved with finality; no post-award claim was proved.
Whether the claims were enforceable given their origin in an illegal foreign exchange business
No. The claims arose from an unlicensed, illegal currency exchange business; courts cannot be made the instrument of enforcing obligations arising out of illegal transactions.
It was an admitted fact that the brothers carried on a foreign currency exchange business without licences under the Exchange Control Act and Banking Act. Both parties agreed the dispute arose from illicit trade in foreign currencies. Applying the ex turpi causa doctrine as expounded in Cott v Brown and Mapis Investment, entertaining the claim would be inimical to the rule of law.
Whether the trial judge failed in his duty to evaluate the evidence and address all issues, warranting appellate interference
No. The trial judge properly found the appellants had failed to prove their post-award claims on a balance of probabilities; findings of fact were not shown to rest on no evidence, misapprehension, or wrong principles.
The appellate jurisdiction under rule 29(1) requires re-evaluation of the evidence, but interference is only warranted where findings are baseless or reached on wrong principles. The forensic examiner admitted he lacked adequate material for a definitive conclusion; originals of the claimed debt acknowledgements were lost. The trial judge's conclusion that the arbitration settled everything was correct.
Legal principles established
#- A first appeal requires the Court of Appeal to reappraise, reanalyse and evaluate the evidence tendered before the trial court and draw its own conclusions, but it will not ordinarily interfere with findings of fact unless they are based on no evidence, on a misapprehension of it, or on wrong principles.
- Where parties voluntarily submit their disputes to arbitration, accept the award and sign it, the award operates as a full and final settlement of all business and financial matters between them, barring subsequent litigation on claims covered by it.
- Courts will not enforce obligations founded on an illegal transaction, whether or not the defendant pleads the illegality, if the illegality appears from the plaintiff's own evidence (ex turpi causa non oritur causa).
Court orders
#- 1.Appeal dismissed
- 2.Costs of the appeal awarded to the respondents
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. 422 of 2002
- Jurisdiction invoked
- First appeal under rule 29(1) of the Court of Appeal Rules
Relief refused
#Appellants' claims to half of the fixed deposits (Kshs. 5,860,165.50 and Kshs. 31,026,385.50), USD 373,311 and 60,000 Sterling Pounds
All business and financial claims between the parties were settled with finality by the arbitration of 9th December 1999; the claims arose from an illegal foreign exchange business which the court will not enforce; and the post-award claims were not proved to the required standard.
Costs
Appeal dismissed with costs to the respondents.
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.
The upshot is that the arbitration must be taken to have settled all the business and/or financial matters between the parties.
No court ought to enforce an illegal contract or allow itself to be made the instrument of enforcing obligations alleged to arise out of a contract or transaction which is illegal, if the illegality is duly brought to the notice of the court, and if the person invoking the aid of the court is himself implicated in the illegality.
The upshot is that this appeal fails and is dismissed with costs to the respondents.
Issues in the judgment
#The judgment renders the ex turpi causa maxim inconsistently ('ex turpicausa non oriturcausa' at one point, 'ex turpi causa' implied elsewhere) and there are minor typographical errors, e.g. the pleaded half of Kshs. 11,360,233 stated as Kshs. 5,860,165.50 rather than 5,680,116.50.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Prafulchand Bharmal Shah & another v Shurish Chandra Bharmal Shah & 2 others [2017] KECA 92 (KLR)", Case Analysis (2017). Civil Appeal No. 256 of 2011. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2017/92/eng@2017-12-15
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.