Standard Chartered Bank of Kenya Limited v Al-Amin & 9 others (Civil Appeal E029 of 2021) [2023] KECA 1059 (KLR)
The bottom line
#Kenya's Court of Appeal partly favoured Standard Chartered Bank but voided its charge because non-advocates drew the security documents.
What this practically means
#Executive summary
#Key legal issues
#Application of the Rule in Turquand's case to the Bank's reliance on the special resolution of May 10, 1995
The trial Judge erred: the internal irregularities alleged (notice, quorum, 75% special resolution) were matters internal to the Company of which the Bank, relying on the special resolution filed at the Companies Registry, was not bound to inquire. The Bank could not be faulted for failing to uphold the indoor management rule.
The court held that the factors the Judge relied on (notice to members, minutes of directors versus members, 75% shareholding requirement) related to the internal workings of the Company and were not matters a third party would be privy to. The Bank was entitled to proceed on the special resolution filed at the Companies Registry. The Judge also wrongly discredited the unchallenged evidence of the 8th respondent that the meeting was duly convened, thereby failing to consider relevant evidence.
Validity of the Charge and Further Charge under Sections 34 and 35 of the Advocates Act
The Charge and Further Charge, not having been drawn by an advocate, are void for all purposes; the Judge's nullification of them was upheld and the Bank did not challenge it on appeal.
Although the Bank stated it was appealing the whole decision, its grounds of appeal contained no challenge to the holding that the Charge and Further Charge were void for being drawn by unqualified persons. Following the Supreme Court's decision in National Bank of Kenya Limited vs Anaj Warehousing Limited, documents prepared by unqualified persons are void for all purposes, so that holding could not be faulted.
Consequences of the nullity of the Charge and Further Charge for subsequent transactions and restoration of title
Every step founded on the void Charge and Further Charge, including the Deed of Agreement, Purchase Agreement and subsequent transfers, was of no legal effect; rectification of the register to restore the property to the Company follows.
Applying Macfoy vs United Africa Co Ltd, a void act is incurably bad and every proceeding founded on it collapses. Consequently, the subsequent transfers to the 10th respondent and to the 6th respondent amounted to nothing in law. The natural order was rectification of the register to revert the property to the Company, as prayed in the amended plaint.
Orders for valuation and compensation that were not pleaded
The orders for valuation of the suit property and compensation by the Bank were set aside as they had no legal basis and no such reliefs had been pleaded or sought.
Once the Charge and Further Charge were nullified, the natural remedy was rectification of the register as prayed in the plaint. The valuation and compensation orders had no legal foundation and, in any event, there were no pleadings supporting them and the reliefs had not been sought. The court accordingly set them aside.
Award of punitive damages against the Bank
The award of Kshs 2,500,000.00 punitive damages was set aside; there was no evidence the Bank acted otherwise than in pursuit of its secured debt, so no justification existed to penalize it.
Restating the principles in Rookes vs Barnard and other authorities, punitive or exemplary damages are awardable where the defendant's conduct was calculated to procure a benefit at the plaintiff's expense or where there was oppressive, arbitrary or unconstitutional action by government servants. The evidence showed the Bank was simply recovering what it considered to be its secured debt; drawing instruments later found illegal, without more, did not justify punitive damages.
Legal principles established
#- A third party dealing with a company in good faith is entitled to rely on a special resolution filed at the Companies Registry and need not inquire into the regularity of the company's internal proceedings (indoor management rule / Rule in Turquand's case), absent knowledge to the contrary or suspicious circumstances putting it on inquiry.
- A void act is a nullity requiring no court order to set aside, and every proceeding or transaction founded on it is equally void and collapses.
- Documents prepared in violation of Sections 34 and 35 of the Advocates Act, not having been drawn by an advocate, are void for all purposes.
- Punitive or exemplary damages are awardable only where the defendant's action was calculated to procure some benefit at the plaintiff's expense or involved oppressive, arbitrary or unconstitutional action; mere pursuit of a secured debt does not justify such an award.
- A court cannot grant reliefs that were neither pleaded nor sought, such as orders for valuation and compensation founded on no pleadings.
Court orders
#- 1.The Declaration that the resolution to amend the Company's memorandum and articles of association to add a clause 11A was illegal, fraudulent, and null and void is set aside
- 2.The Declaration that the memorandum and articles of association of the Company be construed without inclusion of Clause 11A is set aside
- 3.The Declaration that the Guarantee instrument entered into by the Company to guarantee liabilities of Samaki Industries (Nairobi) Limited to the Bank is null and void is set aside
- 4.The order that the title of the 6th respondent cannot be adversely affected and cannot revert to the ownership of the Company is set aside
- 5.The orders that the suit property be valued and that the Bank do compensate the Company with the current value of the same are set aside
- 6.The award in favour of the Company against the Bank for punitive damages of Kshs 2,500,000.00 is set aside
- 7.The declarations by the ELC that the Charge dated May 17, 1995 and the Further Charge dated November 20, 1996 over the suit property and the Deed of Agreement and Purchase Agreement dated March 30, 2000, to the extent they are premised on the said Charge and Further Charge, are null and void are upheld
- 8.Rectification of the register to cancel all entries relating to the Charge and Further Charge over the suit property to the Bank and all subsequent transfers and entries so as to restore the title of the property to the Company
- 9.The Bank to have half the costs of the appeal; each party to bear own costs of the ELC
- On appeal from
- Environment and Land Court at Mombasa
- ELC Case No 434 of 2001
- Jurisdiction invoked
- First appellate jurisdiction over the Environment and Land Court (appeal as of right on the ELC judgment of November 10, 2020)
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.
- Kariuki v Ringsview Apartment Ltd & another (Environment and Land Case Civil Suit E140 of 2021) [2026] KEELC 3463 (KLR)[2026] KEELC 3463 (KLR)5 Jun 2026applied
- Waiguru & another v Kihingo Village (Waridi Gardens) Limited & 3 others; Kabiro & another (Interested Parties) (Environment and Land Case Civil Suit 256 of 2019 & Enviromental and Land Originating Summons 355 of 2012 (Consolidated)) [2026] KEELC 882 (KLR)[2026] KEELC 882 (KLR)19 Feb 2026applied
- Kayongo v Gikonyo & another (Environment & Land Case E291 of 2022) [2025] KEELC 3356 (KLR)[2025] KEELC 3356 (KLR)6 Mar 2025
Cite this brief
#Cite this brief
Caselaw, "Standard Chartered Bank of Kenya Limited v Al-Amin & 9 others (Civil Appeal E029 of 2021) [2023] KECA 1059 (KLR)", Case Analysis (2023). Civil Appeal at Mombasa (appeal against ELC Case No 434 of 2001, Munyao Sila, J, judgment of November 10, 2020). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2023/1059/eng@2023-09-22
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.