AMCEA Limited v Equity Bank Kenya Limited
The bottom line
#Banks are not automatically liable for cheque dishonour if they are given a reasonable time to process and credit funds.
What this practically means
#Executive summary
#Key legal issues
#Whether the bank was negligent/in breach for crediting cheque No. 353 on 18th October 2013, one day after presentment
No breach: the account had insufficient funds on 17th October 2013 and the bank was entitled to reasonable time to process the internal transfer
The court found as undisputed that account No. 011 lacked sufficient funds on 17th October 2013 when cheque No. 35 was issued and banked. Relying on Paget's Law of Banking, Halsbury's Laws and Union Bank of Nigeria v Nwoye, it held money is not available immediately on payment into an account and the bank must be allowed reasonable time for book-keeping. The respondent led no evidence of a same-day clearance practice, so the trade usage claim failed on burden of proof.
Whether the respondent proved the alleged trade usage of same-day clearance of internal cheques
Not proved; burden of proof rests on the party asserting the claim
The trial court had found a trade usage requiring same-day clearance, but the appellate court noted no evidence was presented to support it. Citing Samuel Ndiba Kihara v Housing Finance and China Wu Yi, the court reiterated that trade usage must be pleaded and proved by clear and convincing evidence, save where it is of such general notoriety that judicial notice may be taken.
Whether the award of Kshs 1.5 million general damages was merited
Not merited; had breach been established, only nominal damages would have been awarded as no loss was proved
The court agreed with the trial court's findings that the defamation claim was remote and time barred and that the closure of the business was not tenable as a head of compensation. Since the respondent adduced no evidence of actual loss flowing from the alleged breach, the court stated it would have awarded nominal damages had breach been proved.
Legal principles established
#- A bank is entitled to a reasonable time to clear and credit funds before they are available to honour cheques drawn on the account
- A customer must know the state of his accounts and cannot expect cheques to be cashed where the balance is insufficient
- Trade usage and custom must be pleaded and proved unless of such general notoriety as to require no proof
Court orders
#- 1.Appeal allowed
- 2.Judgment and orders of the trial court set aside
- 3.Respondent's case dismissed in its entirety
- 4.Costs to the appellant
- On appeal from
- Magistrates' Court (trial court)
- not stated
- Jurisdiction invoked
- First appellate jurisdiction under Section 78 of the Civil Procedure Act
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "AMCEA Limited v Equity Bank Kenya Limited", Case Analysis (2020). Appeal from the trial court (magistrate's court) - Memorandum of Appeal on dishonour of cheque No. 35. Source:
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.