Diamond Trust Bank Kenya Ltd v Kajulu Holdings Ltd (In receivership) & another [2017] KECA 661 (KLR)
The bottom line
#Kenya's Court of Appeal ruled that a bank must face trial over Sh89.5 million in disputed withdrawals, confirming courts rarely strike out suits outright.
What this practically means
#Executive summary
#Key legal issues
#Exercise of discretion on an application to strike out pleadings under Order 2 rule 15 of the Civil Procedure Rules
The High Court properly exercised its discretion in refusing to strike out the suit; the appeal fails
The court restated the settled guidelines that striking out is discretionary, drastic, draconian and a last resort to be used sparingly. The single contested issue - the effect of the injunctive orders of 24th November and 9th December 2010 on the receivership and on the directors' authority over the accounts - was itself identified by the appellant and raises serious questions of law fit for determination at trial. The suit showed at least a semblance of a cause of action. The court found no error of principle in Ochieng, J.'s decision dismissing the striking-out application.
Distinction between summary judgment on a question of construction and striking out pleadings
Authorities on summary judgment where the only issue is construction of documents do not govern striking-out applications
The appellant relied on Cassam v Sachania and Tiverton Estates, which concerned summary judgment under RSC Order 14. The court held that those authorities and Kuloba's treatise did not deal with striking out. The present application was brought under Order 2 rule 15(1)(a),(b) and (d), whose language and jurisprudence differ; the court therefore declined to resolve the issue of construction itself at the interlocutory stage.
Whether the bank's compliance with a court order excused it from liability for the withdrawals
Whether the directors had authority to give instructions after crystallisation of the floating charge, and whether the bank is thereby liable, is a matter for full trial
The appellant argued it would have been in contempt had it blocked the directors, since Apondi, J.'s orders suspended the receivers. The respondents contended the receivership was never lifted and the charges crystallised into fixed charges. The court held these rival positions raise a live issue that cannot be described as hopeless, and that only a full trial can determine the consequences of the directors lacking authority and the bank's liability.
Legal principles established
#- An appellate court will not interfere with a trial judge's exercise of discretion to strike out pleadings unless there is an error on principle or the judge was plainly wrong
- Striking out is a drastic remedy to be used sparingly; no suit should be summarily dismissed unless it plainly and obviously discloses no reasonable cause of action and is incurable by amendment
Court orders
#- 1.The appeal is dismissed
- 2.Costs of the appeal awarded to the respondents
- On appeal from
- High Court of Kenya at Nairobi
- H.C.C.C. No. 497 of 2013
- Jurisdiction invoked
- First appeal to the Court of Appeal against a ruling of the High Court (appeal as of right under the Court's appellate jurisdiction); no specific constitutional or statutory provision is quoted in the judgment
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Diamond Trust Bank Kenya Ltd v Kajulu Holdings Ltd (In receivership) & another [2017] KECA 661 (KLR)", Case Analysis (2017). Civil Appeal No. 369 of 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2017/661/eng@2017-03-24
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.