Tropicana Hotels Limited v SBM Bank (Kenya) Limited (Formerly Known as Fidelity Commercial Bank Ltd (Civil Appeal 9 of 2019) [2023] KECA 1186 (KLR)
The bottom line
#Kenya's Court of Appeal dismissed Sai Eden Roc Hotel's challenge against SBM Bank, confirming borrowers cannot dodge loan debts by citing technical defects in charges they signed and benefited from.
What this practically means
#Executive summary
#Key legal issues
#Contents of the record of appeal and striking out for incompleteness or late filing
The Motion to strike out the record failed; certified copies of judgment and proceedings are not required, omitted documents may be added by supplementary record, and an incomplete record does not render the appeal out of time.
Rule 89(1)(h) of the Court of Appeal Rules, 2022 requires a certified decree or order, but not certified copies of the proceedings and judgment. Rule 90 permits omitted documents to be included in a supplementary record, with leave where necessary. The pre-2012 distinction between primary and secondary documents no longer exists, and a record incompetent for omitting Rule 89 documents may be perfected by a supplementary record.
Enforceability of the charge for want of sealing in the presence of directors
The charge and further charge are enforceable; the Appellant was estopped from denying the liabilities it assumed and benefited from.
Both directors signed the charge documents; the common advocate was the Appellant's agent and the Appellant was bound by his acts; the directors admitted the debt and asked that PW2's Euro facility be transferred to the Appellant. Having benefited from the credit facilities, the Appellant could not rely on its own mistake or the agent's non-compliance to invalidate the charge. The Court adopted the Supreme Court's reasoning in National Bank of Kenya v Anaj Warehousing that courts should not sanction unjust enrichment of unscrupulous borrowers.
Alleged excessive and unlawful interest
The Appellant failed to prove the allegation, having adduced no evidence, including no report from the Interest Rate Advisory Centre.
The burden lay on the Appellant to prove excessive interest on a balance of probabilities. Its intention to instruct the Interest Rate Advisory Centre never materialised, and financial constraint does not lighten the legal burden. Submissions could not substitute for the missing evidence, and documents produced at trial but never explained by witnesses could not be expounded on appeal.
Statutory notice under the Land Act
The trial judge's finding that no proper statutory notice was served, and his remedy of barring reliance on the defective notice while permitting fresh notices, were affirmed.
The Respondent's own officer conceded that the statutory letters of demand were sent to a Malindi address rather than the Mombasa address in the charge, and that the amount demanded exceeded the sum due by about Kshs 9 Million. Under section 90(2)(b) of the Land Act, 2011 a three months' notice to the chargor is required; the equity of redemption had not matured. The trial judge, in a lawful exercise of discretion, restrained sale on that notice but left the Respondent free to start the recovery process afresh.
Mandate of a first appellate court
A first appellate court re-evaluates the evidence but should not substitute its own factual findings for those of the trial court unless there is no evidence to support them or the judge is plainly wrong.
Citing its own precedents and English authority, the Court restated that an appellate court has jurisdiction to review the evidence but must exercise it with caution, given the trial judge's advantage of seeing and hearing the witnesses. Having re-evaluated the evidence, the Court found no reason to depart from the trial judge's findings.
Legal principles established
#- A record of appeal need not contain certified copies of the proceedings and judgment; it cannot be struck out on that ground so long as copies of the proceedings and judgment are incorporated and their authenticity is not challenged.
- Under the current Court of Appeal Rules the distinction between primary and secondary documents no longer exists, and an incomplete record of appeal may be perfected by a supplementary record, so such an appeal cannot be deemed filed out of time.
- Submissions cannot take the place of evidence and cannot be used to introduce facts or explain vague documentary evidence not explained by witnesses at trial.
- A party who has benefited from a transaction may not invoke non-compliance with legal formalities, attributable to its own agent, to evade its contractual liabilities.
- An appellate court only interferes with findings of fact where the trial judge took into account matters he should not have, failed to take into account matters he should have, misapprehended the evidence, or demonstrably acted on wrong principles.
Court orders
#- 1.The Notice of Motion dated 15th March 2019 seeking to strike out the record of appeal is dismissed with costs
- 2.The appeal is dismissed with costs
- On appeal from
- High Court of Kenya (Malindi)
- Not stated in the judgment
- Jurisdiction invoked
- First appellate jurisdiction of the Court of Appeal under the Court of Appeal Rules (Rules 42, 77, 83, 84, 87, 88, 89, 90 and 94 of the Court of Appeal Rules, 2010 and Rules 88, 89 and 90 of the Court of Appeal Rules, 2022); no constitutional provision invoked for the appeal itself.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Tropicana Hotels Limited v SBM Bank (Kenya) Limited (Formerly Known as Fidelity Commercial Bank Ltd (Civil Appeal 9 of 2019) [2023] KECA 1186 (KLR)", Case Analysis (2023). Civil Appeal (Mombasa). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2023/1186/eng@2023-10-06
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.