Embakasi Management Limited & 8 others v Imperial Bank Limited (In Receivership) & another (Civil Appeal 113 of 2019) [2022] KECA 7 (KLR)
The bottom line
#Kenya's Court of Appeal allowed a bank under receivership to use one company's deposits to repay a related company's debt because they shared directors and a signed set-off agreement.
What this practically means
#Executive summary
#Key legal issues
#Whether a respondent in a constitutional petition may raise the petitioner's legal and contractual obligations as a defence
Yes - a respondent may raise such a defence so long as its actions have a basis in law and the applicable procedure was followed
Article 40 protects property, but the Constitution permits interference with property rights where the interference is authorized by a law of general application and accords with law and due process. A respondent may therefore raise the petitioner's legal and contractual obligations to justify interference with property rights, provided it demonstrates that its actions had a basis in law and that it followed the applicable procedure.
Whether the Appellants were bound by the right of set-off agreement signed by their common director
Yes - through common directorship and shareholding the Appellants were part of the same group of companies and were bound by the set-off agreement
The signed right of set-off form permitted the Respondents to go behind the corporate veil of Farm Africa Mills Investments Limited to determine who controlled it and which other companies were controlled by the same shareholders and directors. That inquiry led to the Appellants, who were expressly committed to the agreement by their common director and shareholder, and who therefore could not rely on the corporate veil to escape the set-off.
Whether the set-off violated Article 47 right to fair administrative action
No - the Appellants were given notice and reasons, and statutory remedies under the Kenya Deposit Insurance Act and Fair Administrative Action Act had to be exhausted
The 2nd Respondent's correspondence, annexed to the Appellants' own petition, explained that the credit balances would be utilised to reduce Farm Africa's loan facility, satisfying the notice and reasons requirements. Further, section 46(2) of the Kenya Deposit Insurance Act provides for an action for damages, and section 9(2) of the Fair Administrative Action Act requires exhaustion of statutory remedies before judicial review remedies.
Role of the Court of Appeal on a first appeal
The Court re-evaluates the evidence and draws its own conclusions, departing from the trial court's findings only where they are not based on the evidence or rest on wrong principles
Citing Selle v Associated Motor Boat Co and Jabane v Olenja, the Court restated its duty on a first appeal: to reconsider and evaluate the evidence itself, bearing in mind it neither saw nor heard the witnesses, and to depart from trial findings only where they are unsupported by evidence or based on wrong principles of law.
Legal principles established
#- Interference with the right to property is constitutionally permitted where authorized by a law of general application and in accordance with law and due process
- The corporate veil may be lifted only in special circumstances involving improper conduct, fraud, sham, agency or tax evasion; where companies share common directorship and shareholding and a signed set-off agreement refers to the group, companies in the group cannot rely on the corporate veil to avoid set-off obligations
- Statutory remedies must be exhausted before engaging judicial review remedies
Court orders
#- 1.The Appellants' appeal is dismissed
- 2.Costs to the 2nd Respondent
- On appeal from
- High Court of Kenya
- Not stated
- Jurisdiction invoked
- First appellate jurisdiction over a High Court decision (the judgment describes the appeal as 'a first appeal from the decision of the trial Court'); no specific constitutional or statutory provision is cited
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Embakasi Management Limited & 8 others v Imperial Bank Limited (In Receivership) & another (Civil Appeal 113 of 2019) [2022] KECA 7 (KLR)", Case Analysis (2022). Civil Appeal No 113 of 2019. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2022/7/eng@2022-01-21
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.