Bank of Africa Limited v Juja Coffe Exporters Limited & 4 others [2018] KECA 11 (KLR)
The bottom line
#Kenya's Court of Appeal allowed Bank of Africa's appeal, lifting an injunction that had blocked the bank from selling charged Mombasa properties.
What this practically means
#Executive summary
#Key legal issues
#Natural justice in striking out an affidavit sua sponte
The trial court breached the rules of natural justice by striking out the bank's affidavit and annexures without objection from any party, without an application, and without inviting submissions, entitling the appellate court to interfere with the discretion exercised
No party objected to the affidavit, no application was made to strike it out, and no party was heard before the decision. The court agreed this breached Article 50 natural justice. The Fredrick Mwangi Nyaga case followed by the trial court was distinguishable on the facts. The trial court therefore misdirected itself and acted on matters it should not have acted upon.
Mandatory or directory character of Rule 9 of the Oaths and Statutory Declarations Rules
Rule 9 is not peremptory despite the word 'shall'; sealing and stamping a bundle of exhibits as one is sufficient compliance, and Article 159(2)(d) does not license disregard of procedural rules but does not make every shortfall fatal
The court noted conflicting High Court authority, endorsed the view that procedural rules are handmaidens of justice, and recalled Supreme Court dicta that Article 159(2)(d) is not a panacea for procedural shortfalls. On the facts, the exhibits were produced as one bundle stamped and sealed by the Commissioner of Oaths, so even a mandatory reading would have been satisfied.
Application of the Giella principles and adequacy of damages
The trial court ignored the second Giella principle (irreparable injury); since damages were adequate and the bank was capable of paying, the injunction could not stand, subject only to cases of contumacious breach of the law
On its own evaluation the court found considerable doubt that the applicants had established a prima facie case with probability of success. Even assuming one existed, the second Giella principle was totally ignored. The properties were commercial securities, their value quantifiable, and no evidence showed the bank could not pay damages. The exception applies only where a party seeks to preserve an advantage gained by flouting the law.
Disputed indebtedness as a bar to exercising statutory power of sale
A dispute as to the amount due under a charge does not, by itself, justify restraining the chargee's statutory power of sale
The court reiterated its earlier holding in John Nduati Kariuki adopting Kwach JA's statement in J.L. Lavuna, drawing on Halsbury's Laws, that a mortgagee will not be restrained merely because the amount due is disputed, unless the mortgagor pays the amount claimed into court. The respondents' arguments rested on impropriety of security documents rather than non-disbursement of the loans.
Alleged bias of the trial judge
The bias allegation failed; the applicable test is whether a fair-minded and informed observer, considering the facts, would conclude there was a real possibility of bias
The submission lacked proper specificity and was mere suspicion. Applying the Porter v Magill test as adopted in Philip K. Tunoi v Judicial Service Commission, the fair-minded and informed observer takes a balanced approach, neither complacent nor unduly sensitive or suspicious. The allegation did not meet that threshold.
Legal principles established
#- An appellate court may interfere with a trial court's exercise of discretion only on established grounds of misdirection, misapprehension of facts, wrong considerations, omitted considerations, or a plainly wrong decision
- Rule 9 of the Oaths and Statutory Declarations Rules is not peremptory; where exhibits are produced as one bundle duly stamped and sealed by the Commissioner of Oaths, and no objection is taken, striking out the affidavit without hearing the parties breaches natural justice
- Where damages recoverable in law are an adequate remedy and the respondent is capable of paying, no interlocutory injunction should normally be granted, however strong the applicant's claim may appear at that stage
- A court should not grant an injunction restraining a chargee or mortgagee from exercising its statutory power of sale solely on the ground that there is a dispute as to the amount due under the mortgage
- Where property is offered as security in a commercial transaction, the consequence of alienation upon default is anticipated, its value is quantifiable, and damages are normally an adequate remedy against a bank
Court orders
#- 1.Civil Appeal No. 99 of 2016 allowed
- 2.Civil Appeal No. 109 of 2016 dismissed for want of prosecution/submissions
- 3.The order of the High Court issued on 21st July 2016 (temporary injunction on terms) set aside
- 4.In substitution therefor, an order dismissing the application dated 6th June 2016
- 5.Costs of the appeals borne by respondents 1, 2 and 3 only in CA 99 of 2016 (appeal against the 4th respondent having been withdrawn), and by the 1st and 2nd appellants in Civil Appeal No. 106 of 2016
- On appeal from
- High Court of Kenya at Mombasa
- Mombasa HCCC No. 57 of 2016
- Jurisdiction invoked
- First appellate jurisdiction over an interlocutory decision of the High Court (appeal as of right against an interim injunction ruling)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Bank of Africa Limited v Juja Coffe Exporters Limited & 4 others [2018] KECA 11 (KLR)", Case Analysis (2018). Civil Appeal No. 99 of 2016 (consolidated with Civil Appeal No. 109 of 2016). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2018/11/eng@2018-01-25
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.