National Bank of Kenya Ltd & 2 others v Asam-con Limited
The bottom line
#Kenya's Court of Appeal found KCB overcharged a borrower Kshs.23 million in interest but threw out a large damages award for poor pleading and proof.
What this practically means
#Executive summary
#Key legal issues
#Interest rates chargeable under the debentures during the regulated regime
Although the bank could set rates subject to the minimum in the debentures, it was bound by the statutory maximum during the regulation period; deregulation only followed the 1997 repeal of Section 39 of the Central Bank of Kenya Act.
The debentures did not state exact rates, only minimums, because they were prepared when rates were capped at 19%. Gazette Notices 1617 of 1990 and 3348 of 1991, read with Sections 39 of the Central Bank of Kenya Act and 44 of the Banking Act, governed the maximum rate. Following Margaret Njeri Muiruri v Bank of Baroda, the bank had to adhere to the prescribed maximum, and its failure caused overcharging.
Admissibility of bank statements under the Evidence Act
The statements offended the statutory requirement that bank records be proved by a bank officer, but the respondent waived the objection by relying on them for the IRAC recalculation.
Bank records must be verified by a bank officer. The 1st appellant never called an officer to verify the statements. However, the respondent itself used the same statements to prepare the IRAC report and did not challenge their contents, relying on the figures to prove overcharging. The court held that this partial reliance waived the objection to admissibility, and the IRAC report, unchallenged, proved overcharging of Kshs.23,047,731.28.
Contractual right to consolidate securities
The debenture's right of set-off gave the 1st appellant a contractual right to consolidate securities up to the secured sum of Kshs.30,000,000.
Consolidation depends on the terms of the loan or debenture documents. A secured creditor may set off or combine accounts as a remedy. The debenture here expressly contained a right of set-off allowing the bank to consolidate accounts to cover the borrower's liabilities, capped at Kshs.30,000,000 all inclusive.
Special damages
The award of special damages was set aside because the damages were neither specifically pleaded with figures nor strictly proved.
Applying Bangue Indosuez v DJ Lowe, special damages must be claimed specially and proved strictly. Although the amended plaint declared loss and damage, no specific figures were pleaded. The bank's own valuation of the book value at Kshs.314,900,000 could not substitute for strict proof of the loss claimed.
Liability for the receivers' conduct
The 1st appellant was not liable for the receivers' mismanagement; the receivers would have been personally liable, but they were not party to the suit.
Receivers are agents of the borrower, but a receiver acting under an instrument contracts as a principal and is personally liable. Although the appointment of the bank's own officer raised independence concerns, there was no evidence the bank gave improper instructions, and the receivers were not parties, so no liability could attach to the bank for their conduct.
Cross-appeal on interest and multiplier
Interest, if any, runs from the date of judgment and the 10-year multiplier was left undisturbed; the cross-appeal was dismissed.
Having set aside the special damages for want of pleading and proof, the court held interest should be calculated from the date of judgment. The respondent failed to lay any basis for increasing the multiplier from 10 to 25 years, so the trial court's finding stood.
Legal principles established
#- During the regulated interest rate regime (before repeal of Section 39 of the Central Bank of Kenya Act in 1997), banks were bound by the prescribed maximum interest rate notwithstanding the terms of their debentures.
- Special damages must be specifically pleaded and strictly proved to be recoverable.
- A party who relies on an otherwise inadmissible document waives its right to object to its admissibility.
- A receiver or manager appointed under an instrument is personally liable on contracts entered into in the performance of his functions, acting as a principal, unless the contract provides otherwise.
- Where a debenture contains a right of set-off, the bank has a contractual right to consolidate loan accounts and securities.
Court orders
#- 1.The 1st appellant was obligated to adhere to the prescribed maximum rate during the regulation period, when setting the maximum interest rate chargeable
- 2.The 1st appellant overcharged the respondent interest in the sum of Kshs.23,047,731.28
- 3.The bank statements relied upon by the appellants offended Section 177 of the Evidence Act, but the respondent waived its right to object to their admissibility having relied on the same statements to prepare the IRAC report
- 4.The 1st appellant had the right to consolidate the respondent's loan accounts
- 5.The award for special damages is set aside as the same was not specifically pleaded, nor strictly proved
- 6.The 1st appellant could not be held liable for the acts of mismanagement, if any, by the 2nd and 3rd appellants
- 7.Interest, if any, to be calculated from the date of the judgment at court rates
- 8.The cross-appeal is dismissed
- 9.Each party will bear its own costs
- On appeal from
- High Court
- Jurisdiction invoked
- First appeal to the Court of Appeal under Rule 31(1)(a) of the Court of Appeal Rules
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (1)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
Cite this brief
#Cite this brief
Caselaw, "National Bank of Kenya Ltd & 2 others v Asam-con Limited", Case Analysis (2025). Not stated in the judgment extract. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2025/504/eng@2025-03-21
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.