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ELCPartially AllowedEnvironment & Land Case 42 of 2018· [2023] KEELC 15721 (KLR)

Mbae (Suing as the legal representative of the Estate of Silas Judah Mbae - Deceased) & another v Mwamba & 5 others; M'Arimi & another (Interested Parties)

Environment and Land Court
22 February 2023
CNC.K. Nzili
1,343 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~5 min to read original · ~4 min brief

The bottom line

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You cannot sue a bank in liquidation in Kenya without first getting the court's permission, or your claim against it will be struck out.

What this practically means

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Executive summary

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Kenya Finance Bank Limited (in liquidation), the 2nd plaintiff, raised a preliminary objection dated 12.1.2023 seeking to strike out the 5th and 6th defendants' defence and counterclaim dated 2.11.2022 as amended on 14.11.2022, on the grounds that it joined a wrong party and was filed without leave. The 2nd plaintiff argued that Section 56 of the Kenya Deposit Insurance Act prohibits suing a bank in liquidation without prior leave of the court, and that the amended defence was filed without leave after the initial leave had expired. The 5th and 6th defendants countered that pleadings had not closed when they amended, that a counterclaim re-opens pleadings, and that under Order 7 Rule 8 of the Civil Procedure Rules a new party could be joined through a counterclaim without leave; they also submitted the objection was time-barred under Order 8 Rule 2(1). The court, citing Charity Wangui Ngumo v Chase Bank Ltd, Andrew Gikuni Muchai, George Mureithi, Rashik Kumar Punja Shah, Kwanza Estates, Kenyariri and Associates and Bisai v Kenya Commercial Bank, held that leave under Section 56 KDIA is mandatory and peremptory, that the leave granted to file a defence and counterclaim out of time did not extend to joining new parties, and that Section 56 KDIA is superior to Order 7 Rule 8. The court struck out the defence and counterclaim dated 14.11.2022 only to the extent it was brought against the bank, with costs to the 2nd plaintiff.

Key legal issues

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01

Whether joining a bank in liquidation as a party to a counterclaim required leave under Section 56 of the Kenya Deposit Insurance Act

Holding

Yes; the joinder of Kenya Finance Bank Limited (in liquidation) without leave rendered the counterclaim bad in law against it, and it was struck out

Reasoning

The court relied on authority holding that Section 56 of the KDIA in peremptory terms prohibits filing civil proceedings against a bank in liquidation without the sanction of the court. Leave granted to file a defence and counterclaim out of time did not cover joinder of new parties, and no specific leave was sought to sue the bank in the counterclaim.

p. 3
02

Whether the statutory leave requirement under Section 56 KDIA prevails over Order 7 Rule 8 of the Civil Procedure Rules permitting joinder of new parties by counterclaim

Holding

Section 56 of the KDIA is superior to Order 7 Rule 8 of the Civil Procedure Rules

Reasoning

Although Order 7 Rule 8 allows a defendant to bring a new party on board through a counterclaim, the party sought to be joined was a bank in liquidation whose protection under the KDIA could only be overridden by specific leave of the court. The statutory provision therefore prevails.

p. 3

Legal principles established

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  • A party to a bank in liquidation cannot be sued in a counterclaim without prior leave of the court under Section 56 of the Kenya Deposit Insurance Act, and that statutory requirement prevails over Order 7 Rule 8 of the Civil Procedure Rules
  • Leave to file a defence and counterclaim out of time does not extend to joining new parties; specific leave is required to sue a bank in liquidation

Court orders

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  1. 1.The defence and counterclaim dated 14.11.2022 is struck out to the extent that it is brought against the 2nd defendant (Kenya Finance Bank Limited) in the counterclaim
  2. 2.Costs of the preliminary objection to the 2nd plaintiff

Authorities

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Legislation

  • Kenya Deposit Insurance ActSection 56 (also Sections 43 and 56(1) & (3) as cited in authority)
  • Civil Procedure RulesOrder 7 Rules 1, 3, 8, 12, 17(1) & 17(3); Order 8 Rules 1(4), 2(1) and 14; Order 2 Rule 13; Order 11

Cases cited (8)

  • Kathiaka v Muraguri
    Civil Appeal 7 "B" of 2019 [2022] KEHC 506 (KLR)

    Supporting the preliminary objection

  • Charity Wangui Ngumo v Chase Bank Ltd (in receivership) & Antique Actions Agencies
    [2018] eKLR

    Essence of leave requirement under Sections 43 and 56 of the KDIA

  • Andrew Gikuni Muchai v Chase Bank Ltd & another
    [2019] eKLR

    Leave requirement under the KDIA

  • George Mureithi & others v Kentitio Taxis (under receivership)
    [2016] eKLR

    Leave requirement under the KDIA

  • Rashik Kumar Punja Shah & another v Chase Bank Ltd (in liquidation) & another
    (2021) eKLR

    Section 56(1) & (3) KDIA peremptorily prohibits civil proceedings without court sanction

  • Kwanza Estates v Dubai Bank of Kenya Ltd & another
    [2016] eKLR

    Approved on the leave requirement

  • Kenyariri and Associates Advocates v Salama Beach Hotel Ltd & 4 others

    Statutory provision superior to Civil Procedure Rules on joinder

  • Bisai & another v Kenya Commercial Bank Ltd & others
    [2002] 2 E.A 346

    Position that joinder of a bank in liquidation requires leave

Jurisdiction invoked
Environment and Land Court jurisdiction (Environment and Land Court Act); matter determined under Civil Procedure Rules and Kenya Deposit Insurance Act

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Mbae (Suing as the legal representative of the Estate of Silas Judah Mbae - Deceased) & another v Mwamba & 5 others; M'Arimi & another (Interested Parties)", Case Analysis (2023). Environment & Land Case 42 of 2018. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/15721/eng@2023-02-22

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.