Fuji Auto Trading Company Limited v National Bank of Kenya Limited (Civil Appeal 383 of 2019) [2021] KECA 168 (KLR)
The bottom line
#Kenya's Court of Appeal dismissed a car importer's claim against National Bank of Kenya, confirming fraud and losses must be strictly pleaded and proved.
What this practically means
#Executive summary
#Key legal issues
#Whether payments under the letters of credit were made without proper documentation, causing the appellant loss
The appellant authorized payment under LC 27/21 and LC 27/22 despite incomplete documents and is estopped from blaming the respondent; under LC 27/14 payment was made prematurely without crucial documents, but only the specifically pleaded and proved inspection fees of Kshs.22,080 were recoverable as special damages.
The Court accepted the trial court's analysis that corrections on the letter reference were not forgery and that Ferari, a sister company acting as the appellant's agent, applied for LC 27/22. The appellant's letter accepting documents despite noted discrepancies amounted to express instructions and a waiver. Losses from the delayed clearance of four vehicles were attributable to the premature payment, but as special damages they had to be specifically pleaded and proved, and only the inspection fees were.
Whether the debit entries in the appellant's account were irregular and illegal
The debit of Kshs.1,526,911 was lawful, being an overdraft facility created on the appellant's request of 23rd August 1994 to buy bankers' cheques, and confirmed by the appellant's authentic letter of 12th September 1994.
The appellant alleged the letter of 23rd August 1994 was a forgery but adduced no concrete proof; meanwhile it admitted the authenticity of the letter of 12th September 1994 requesting that the sum be cleared as it was accruing interest. The alleged unpleaded debit of Kshs.1,140,973.55 could not be determined as it was never raised in the pleadings. The trial court's finding was therefore unimpeachable.
Whether the sale of the suit property was unlawful
The sale was lawful; the charge was validly created to secure the appellant's unpaid debt and the respondent followed due process, issuing a statutory notice before exercising its statutory power of sale.
The money secured by the charge had been incurred by the respondent on the appellant's authority and had not been repaid, as conceded in the letter of 12th September 1994. The respondent issued a statutory notice, due process was followed to the letter, and the property was sold to a third party with a transfer duly effected.
Whether the trial court was justified in allowing the respondent's counterclaim
The counterclaim was properly allowed; facilities were granted, default occurred, and the sale proceeds credited reduced the appellant's exposure to Kshs.8,120,763.40, which remained unpaid.
The authenticity of the bank statement showing the reduction of the appellant's exposure from Kshs.12,251,895.40 to Kshs.8,120,763.40 was not challenged, and the appellant produced no evidence of payment of the deficit. The trial court was therefore entitled to enter judgment as prayed in the counterclaim with interest at the contractual rate.
Legal principles established
#- Fraud must be specifically pleaded with particulars on the face of the pleading, and fraudulent conduct must be distinctly alleged and distinctly proved; it is not allowable to leave fraud to be inferred from the facts.
- Allegations of fraud require a standard of proof higher than that in ordinary civil cases and must be strictly proved.
- Special damages must be specifically pleaded and strictly proved, with as much certainty and particularity in pleading and proof as is reasonable in the circumstances.
- On a first appeal, the Court of Appeal has a primary duty to evaluate the evidence on the record and come to its own independent conclusion on the evidence and the law.
Court orders
#- 1.Appeal dismissed
- 2.Costs of the appeal awarded to the respondent
- On appeal from
- High Court of Kenya at Nairobi
- Not stated in the judgment
- Jurisdiction invoked
- First appeal to the Court of Appeal under the Court of Appeal Rules, Rule 29(1)(a)
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (3)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Wafula v Maru (Civil Appeal E094 of 2023) [2024] KECA 1435 (KLR)[2024] KECA 1435 (KLR)11 Oct 2024followed
- Menno Travel Services Ltd v Co-operative Bank of Kenya Limited[2006] KEHC 283 (KLR)27 Nov 2006applied
- Menno Travel Services Ltd v Co-operative Bank of Kenya Limited[2006] KEHC 320 (KLR)27 Nov 2006followed
Cite this brief
#Cite this brief
Caselaw, "Fuji Auto Trading Company Limited v National Bank of Kenya Limited (Civil Appeal 383 of 2019) [2021] KECA 168 (KLR)", Case Analysis (2021). Civil Appeal No 383 of 2019. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2021/168/eng@2021-11-19
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.