Development Finance Company of Kenya Limited & 2 others v Wino Industries Limited

Court of Appeal, at Nairobi December 20, 1995

Gachuhi, Kwach & Lakha JJ A

Civil Appeal No 112 of 1989

(Appeal from the judgment and decree of the High Court of Kenya at Nairobi (Mr Justice J F Shields) dated 20th April, 1989 in HCCC No 3220 of 1988)

Commercial Law - agreement for loan - parties entering into a loan agreement - dispute arising as to the currency into which the loan should be repaid - money of account - meaning of.

Commercial Law - contract terms-construction of terms of a contract-

whether court can take into account surrounding facts to construe a written contract.

Commercial Law - estoppel by conduct - mode of determination circumstances when may be invoked.

The respondents sued the appellant and its appointed receivers in the superior court seeking a number of reliefs including a declaration that the respondent had fully repaid all monies legally due from it under two loan agreements entered into between the appellant and the respondent; revocation of the appointment of the receivers and the discharge of charges, debenture and guarantees given as security for the repayment of the loans.

The respondent’s case as pleaded in its plaint was that the loan had been given in Kenya shillings and that it had repaid in Kenya shillings the amount legally due and owing to the appellant.

The appellant however in its defence contended that the first loan of Shs 2,000,000/- was given in Kenya shilling equivalent of Swiss Francs and Pounds Sterling and that the second loan was an amount of Dutch Guilders equivalent of Kshs 600,000/-. The appellant further raised a counterclaim for a declaration that the respondent was obliged under the loan agreement to repay the loans made to it by the appellant and interest thereon in the Kenya shilling equivalent of the foreign currencies specified in the statements of currencies issued by the appellant on 7th April, 1981 and 6th February, 1984.

The High Court after hearing the parties, gave judgment for the respondent and made no order on the counter-claim. The judge held that the loans had been given in Kenya shillings, were repayable in Kenya shillings and had been fully repaid in Kenya shillings.

On appeal the appellant attacked the learned judges findings on grounds inter alia that he erred in finding that, on a true construction of article 2.01, appearing in both loan agreements, the first appellant’s obligation to lend was an obligation to lend a total of Kenya shillings 2.6 million, Kenya shillings being the currency of account, whereas the parties in fact agreed in article 2.01 that the currency of account was to be one or more convertible currencies to be determined by the first appellant.

The appellant further contended that the learned trial judge erred in failing to hold, in the further alternative, that the respondents were estopped by the facts pleaded in the defence from denying that the loans were made in the foreign currencies set out in the statements of currency and that the loans and interest are repayable in the Kenya shilling equivalent of the said foreign currencies at the rate of exchange prevailing at the date when payment became due as pleaded in paragraph 13 of the defence.

Held:

1. The original intentions of the parties during the course of negotiations and the understanding of the appellant as to the efficacy of the agreement, the loan ultimately given to respondent by appellant was a Kenya shilling loan.

2. If the intention was that the money of account was to be one of the 3 convertible currencies as contended, this would have been inserted in article 12.01 of the agreement

3. Although in construing a written agreement the Court is entitled to take account of the surrounding circumstance with reference to which the words of the agreement were used and the object, appearing from those circumstances, which the person using them had in view, the Court ought not to look at the prior negotiations of the parties as an aid to the construction of the written contract resulting from those negotiations.

4. The Agreements are clear and the need to fall back on surrounding circumstances in interpreting the relevant provisions does not arise

5. In more recent cases a very much broader approach has been adopted which is directed rather at ascertaining whether, in particular individual circumstances, it would be unconscionable for a party to be permitted to deny that which knowingly, or unknowingly, he has allowed or encouraged another to assume to his detriment than to inquiring whether the circumstances can be fitted within the confines of some preconceived formula.

Appeal dismissed

Cases

1. United Bus Services Ltd v New India Insurance Co Ltd [1969] EA 242

2. Woodhouse AC Israel Cocoa Ltd S A v Nigerian Produce Marking Co Ltd [1972] 2 All ER 271; [1972] AC 741; [1972] 2 WLR 1090

3. Clifton v Hawley [1966] EA 44

4. Houghton & Co v Nothard, Lowe & Wills Ltd [1928] AC 1; [1928] 1 KB 246;

5. Re Eaves, Eaves v Eaves (1940) Ch D 109; [1939] 4 All ER

6. Porter (William) & Co Ltd, Re [1937] 2 All ER 361

7. Damodar Jihabhai & Co Ltd & another v Eustace Sisal Estates Ltd [1967] EA 153

8. Prenn v Simmonds [1971] 3 All ER 237; [1971] 1 WLR 1381

9. Kukal Properties Development Ltd v Tafazzal Hatimali Maloo & others [1993] KLR?

10. Taylors Fashions Ltd v Liverpool Victoria Trustees Co [1982] 1 QB 133; [1981] 1 All ER 897; (1979) 25 1 EG 159

11. Willmott v Barber (1880) 15 Ch D 96; 43 LT 95

12. Inwards v Baker [1965] 2 QB 29; [1965] 2 WLR 212; [1965] 1 All ER 446

13. ER Ives Investment Ltd v High [1967] 2 QB 379

14. Shaw v Applegate [1977] 1 WLR 970; [1978] 1 WLR 123

Statutes

No statutes referred.

Advocates

Mr Deverell for the Appellants

Mr Inamdar for the Respondent

Criminal Practice and Procedure - appeal - second appeal - appeal against sentence - whether the second appellate court was debarred from hearing the appeal - Criminal Procedure Code section 361(1)(b)

Uhuru Highway Development Limited v Central Bank of Kenya & 2 others

Court of Appeal, at Nairobi December 1, 1995

Akiwumi, Tunoi & Shah JJ A

Civil Appeal No 126 of 1995

(Appeal from the ruling of the High Court of Kenya at Nairobi (Justice M Ole Keiwua) dated 24th May, 1995 in HCCC No 29 of 1995)

Injunctions – ex-parte injunctions – jurisdiction of court to grant – Court to record reasons for granting.

Injunction – ex-parte application for – Courts to record reasons for hearing ex-parte – order 39 rule 3 (1).

Ex-parte orders – party seeking to come clean and candid.

Judgment – overturning previous decision of court – circumstances in which a Court may overrule its own previous decision.

English mortgage – charge containing certificate by advocate that effects Of section 69(1)and 100 A of Transfer of property Act has been explained to chargers – whether charge is an English mortgage.

Company Law – directors – contract in writing entered into on behalf of the company – directors disputing contract claiming they lacked authority to contract – whether directors who enter such contract can rely upon lack of competence to repudiate the contract.

Company Law – fraudulent preference – what constitutes fraudulent preference.

Charges and mortgages – registration of – commencement date of charge or mortgage.

Charges and mortgages – mortgagor defaulting in payment of mortgage money or interest – notice to mortgagor to pay – whether mortgagee must state in the notice that payment must be received within three months – section 69 A(1) Transfer of Property Act.

Court of Appeal – when can interfere with discretionary decision of the superior court.

The appellant filed a suit against the respondents in the High Court and concurrently with the suit sought and obtain an interlocutory ex-parte injunction against the respondents restraining especially the first respondent from selling, alienating or otherwise disposing of the suit premises known as the Grand Regency Hotel.

At interpartes hearing and upon listening to submissions, the trial judge discharged the injunction on two main grounds. First, the learned judge was of the view that the applicant was guilty of non-disclosure of material facts and second, on the merits of the application the appellant had failed to show that it was deserving of the injunction sought.

The appellant consequently appealed against the High Court’s decision and sought in the interim a stay of execution of the trial court’s order until the appeal was disposed of.

In support of the appeal counsel for the appellant contended that the learned High Court judge erred in finding that the appellant was guilty of non-disclosure of material facts. Further it was submitted on the appellants behalf that in deciding whether or not to grant an injunction, the Courts have been guided by the principle of balance of convenience as was the case in American Cyanamid Co vs Ethicon Ltd. The reasoning in this case, counsel contended was more superior to Giella’s case which the Courts have been applying for a long time.

To demonstrate that the appellant had a prima facie case with probability of success, counsel submitted that the charge over the suit property did not comply with section 100A and 69 (1) of Transfer of Property Act in that the effect of the charge was never explained to the appellant’s directors. Counsel further submitted that the charge having been registered after the 2nd respondent had gone into voluntary liquidation amounted to fraudulent preference to the 1st respondent over other creditors.

Held:

1. Though the Court had jurisdiction to grant an ex-parte interim injunction even though it is ultimately discovered that the application may not be meritorious such grant is mandated by order 39 rule 3(1) to be based on reasons to be recorded by the judge otherwise the object of granting the relief of injunction would be defeated.

2. In deciding upon the need to overlie previous decisions the Court always bears in mind the need for certainty in the law and the element of reliance.

3. No strong and substantial case has been made out against the correctness of the decision in Giella’s case but also against its continued application in Kenyan Courts.

4. The last three pages of the charge contain certification by advocate that he had explained to directors of the appellant the effect of sections 69 (1) and 100 A(1) of the Transfer of Property Act and he was satisfied that each of them understood the same. What was being explained to the two directors was an English mortgage whose salient features were that a mortgage shall have power when the mortgage money has become due and payable to sell by public auction or by private contract, the mortgagee property as the mortgagee thinks fit.

5. It is clear form order 39 r 3 (1) that in order that a Court may hear an application ex parte, it must satisfy itself, and the reasons for doing so must be recorded.

6. The recording of reasons by the learned judge why he should hear the application ex parte is mandatory and the learned judge having failed to record his reasons as required by order 39 r 3 (1) should not have gone to hear the application ex parte and to grant temporary injunction.

7. The fact that the appellant well knew the position on the ground at the time and did not produce any evidence to support this, but hoped that it might be overlooked by not setting out frankly and fully the true position, made him guilty of concealing a very material fact.

8. There is no doubt about the proposition that any party seeking an ex-parte order must come clean, candid and with all facts to Court. This is because the other side is not there and the Court has to go by what is before it.

9. Where any written law authorizes or requires a document to be served by post, then unless a contrary intention appears, the service shall be deemed to be effected by properly addressing to the last known postal address of the person to be served, prepaying and posting by registered letter, a letter containing the document.

10. A contract which if made between private persons would by law be required to be in writing, signed by the parties to be charged therewith, may be made on behalf of the company in writing signed by any person acting under its authority, express or implied.

11. The directors who enter into such contracts cannot rely upon their alleged non competency to enter into such contracts including contracts which need to be in writing.

12. For a transaction to constitute a fraudulent preference, it must appear that the transaction took place within six months of the commencement of the winding up, and that the dominant motive in the mind of the company, acting by its directors, was to prefer the creditor.

13. Although the charge was not registered until 31st December, 1993 the charge once registered takes effect from the date of registration.

14. subsection 1 of section 69A of the Transfer of Property Act does not provide that the chargor or mortgagor must be told “unless you pay within three months the property will be sold.” It simply means that after giving of notice the mortgagee or chargee must wait for three months before proceeding to sell.

15. When interest (which is not compounded into principal sum as is the case here) is payable by the chargor and not paid for two months the need to give notice to sell does not arise.

16. The Court of Appeal will not interfere with exercise of discretion of a learned judge in the superior court unless it is satisfied that the learned judge misdirected himself in some matter and as a result arrived at a wrong decision, or unless it is manifest from the case as a whole that the judge was clearly wrong in the exercise of his discretion and as a result there has been injustice.

Appeal dismissed.

Cases

1. Giella v Cassman Brown & Co Ltd [1973] EA 358

2. American Cyanamid Co v Ethicon Ltd [1975] 1 All ER 504; [1975] AC 396; [1975] 2 WLR 316

3. Makokha & 4 others v Sagini & 2 others [1994] KLR

4. Mureithi v City Council of Nairobi [1981] KLR 332

5. Owners of Motor Vessel “Lillian S’’’ v Caltex Oil Kenya Ltd [1989] KLR 1

6. Harshad Ltd v Globe Cinema Ltd & others [1960] EA 1046

7. Githunguri, Stanley Muga v Jimba Credit Corporation Limited Civil Appeal No 144 of 1988

8. Lloyds Bowmaker v Brittania Arrow Holdings PLC (Larens, third party) [1988] 3 All ER 178

9. Amiya Prosad v Bejoy Krishna [1981] AIR 351

10. Noormohamed Janmohamed v Kassamali Virji Madhani [1953] 20 EACA 8

11. R v Kensington Income Tax Commissioners, Ex Parte Princess Edmond de Polignac [1917] 1 KB 486

12. Brink’s- MAT Ltd v Elcombe (1988) 3 All ER 188; [1988] 1 WLR 1350

13. Mbogo & another v Shah [1968] EA 93

14. Wallersteiner v Moir [1974] 3 All ER 217; [1974] 1 WLR 991

15. Re Jackson and Bassford Ltd [1906] 2 Ch 467

16. Re Eric Holmes (Property) Limited [1965] Ch 1052

17. Bhatt v Singh & another [1962] EA 54

18. Trouistik Union International & another v Mbeyu & another [1993] KLR

19. Hintz v Mwakima [1984] KLR 294; [1982 -88] 1 KAR 482

20. Income Tax v T [1974] EA 546

21. Dodhia v National & Gribdlay’s Bank Ltd & another [1970] EA 195

22. EA Industries Ltd v Trufoods Ltd [1972] EA 420

23. Abel Salim & others v Okong’o & others [1976] KLR 42

24. Donmar Productions Ltd v Bart (1964) [1967] 2 All ER 338;

25. Chandulal v Municipal Council of Delhi [1978] AIR 174

26. Narain v UP State Electricity Board [1982] AIR 14

27. Salomon v A Salomon & Co Limited (1897) AC 22

28. Damodar Jinabhai & Co Ltd v Eustace Sisal Estates Ltd [1967] EA 153

Texts

1. Shorter Oxford English Dictionary (1952) Oxford: Oxford University Press 3rd edition reprint.

2. Schmitthoff, C M et al (Eds) (1976) Palmers Company Law London: Stevens & Sons Ltd 22nd Edn p 929 para 81-79

Statutes

1. Court of Appeal Rules (cap 9 Sub Leg) rules 5(2)9b); 42

2. Transfer of Property Act, 1882 [INDIA] sections 58, 69(1)(a); 100A(1)

3. Civil Procedure Rules (cap 21 Sub Leg) order XXXIX rule 3(1)

4. Central Bank of Kenya Act (cap 491) sections 2, 28, 28(a),(f); 35; 47; 48; 49

5. Banking Act (cap 488) section 10(1)

6. Companies Act (cap 486) section 34

7. Registration of Titles Act (cap 281) section 32

8. Transfer of Property (Amendment) Act; 1959 [INDIA]

9. Interpretation & General Provisions Act (cap 2) section 3(5)

International instruments

International Arbitration Rules

Advocates

Mr Sharma for the Appellant

Mr Rebelo for the 3^rd Respondent

Mr Murgor for the 1^st Respondent

Estate agents - agent contracted by a vendor to sell land at a commission - agent agreeing with a sub-agent to share in the commission - sub-agent securing an able and willing purchaser - vendor seeking to reduce the commission payable to the agent - whether the sub-agent could claim commission from the vendor directly - whether there was privity of contract between the sub-agent and the vendor

Girbux Singh Suri & Purjit Kaur Suri v Royal Credit Limited

Court of Appeal, at Nairobi November 23, 1995

Gicheru, Omolo & Shah JJ A

Civil Application No NAI 281 of 1995

(Being an application for stay of execution of the order of the High Court of Kenya at Nairobi (Justice Hayanga) dated  28th September, 1995 in HCCC No 2546 of 1992)

Stay of execution - Court of Appeal - whether failure to apply for stay of execution in the superior court is fatal to an application for stay of in the Court of Appeal.

Stay of execution - Court of Appeal - whether the requirement that an application for stay of execution be made in the superior court in the first instance deprives the Court of Appeal of original jurisdiction to hear an application for stay of execution afresh.

Civil Procedure Rules - whether applicable to Court of Appeal

Applicants herein, applied to the Court under Rule 5(2) (b) of the Court of Appeal Rules, for an order that the order of Mr Justice Hayanga made on and dated 28th September, 1995 be stayed pending the hearing and determination of their intended appeal against that order. The appellants however did apply for stay of execution in the first instance in High Court as stipulated under order XLI of the Civil Procedure Rules. In response to the objection raised by the respondents counsel on this point, counsel for the applicant contended that under rule 5[2]b, the Court of Appeal is clothed with original jurisdiction to hear such application and the requirement that it be made first in the High Court, deprives the Court of Appeal of this jurisdiction. Counsel further submitted that the requirement under rule 41 of the Civil Procedure Rules cannot apply to the Court of Appeal since those rules are not applicable to it.

Held:

1. In ordinary circumstances the Court has only appellate jurisdiction and in the absence of rule 5(2)(b) a party who has been refused a stay of execution or an injunction by the High Court would have been obliged to apply to the Court of Appeal to set aside the refusal and then having done so, to grant the stay or injunction. But because of the existence of rule 5(2)(b) one does not have to apply to the Court to first set aside the refusal by the High Court and then having set aside the High Court order to grant one itself.

2. Rule 41 supra, mandatorily requires that the application be first made to the superior court and in our view, this does not in any way derogate from the court’s independent and original jurisdiction.

3. There is nothing inconsistent or contradictory in this Court exercising its own independent original jurisdiction after the High Court has had a go at and refused whatever it was asked to grant.

4.The rules of procedure prescribed under the Civil Procedure Act do not apply to the Court of Appeal, which has got its own rules of procedure.

Application struck out.

Cases

1. Mukuma v Abuoga [1988] KLR 645

2. Githunguri v Jimba Credit Corporation Ltd (No 2) [1988] KLR 838

3. De-leu v Muteshi [1995] KLR?

Statutes

1. Court of Appeal Rules (cap 9 Sub Leg) rules 5(2)(b); 39; 41; 74

2. Appellate jurisdiction Act (cap 9) section 3(1)

3. Civil Procedure Rules (cap 21 Sub Leg) order XLI rule 4(1)

Advocates

Mr Rebelo for the Applicants

Mr Weda for the Respondents

Mohamed Shiraz Hussein v Republic

Court of Appeal, at Nairobi

November 16, 1995

Gachuhi, Omolo & Lakha, JJ A

Criminal Appeal No 70 of 1990

Criminal practice & procedure-confession-appellant showing police officer a knife allegedly used in killing the deceased-whether it is proper for a police officer below the rank of an inspector to testify to the fact that the knife was the murder weapon-section 31Evidence Act

Criminal practice & procedure- oral confession-whether admissible in evidence-circumstances in which trial court may admit oral confession

Criminal practice & procedure-evidence-corroboration-accused person making statements which are later proved or disbelieved-whether such statements amount to corroboration

Criminal practice & procedure-evidence-corroboration-circumstantial evidence-whether requires corroboration

Head-notes

The appellant who was convicted of murder and sentenced to death lodged an appeal against the conviction and sentence recorded against him by the High Court. The appellant’s main complaints against the trial judges finding were that the learned Judge erred in convicting him of the offence of murder in the absence of any evidence establishing malice aforethought on his part and further that his conviction having been based on retracted confession was flawed as such confession was not corroborated and that the learned trial judge in convicting him relied on circumstantial evidence which was not corroborated.

Counsel for the appellant submitted that while section 31 of the Evidence Act.Cap 80 Laws of Kenya, allowed the reception of evidence relating to facts discovered as a result of information given by an accused person, that section did not allow the reception of evidence which in effect amounts to a confession.

Held

1. some limitation must be placed on the provisions of section 31 of the Evidence Act so that if P.W.17 had, for instance, been a police constable he would have been allowed to say that the appellant had shown the knife to him, but he certainly would not have been allowed to add that the appellant had told him that he (appellant) had used the knife to cut off the breasts of the deceased. This would be so because confessions can only be taken by a police officer of or above the rank of, or a rank equivalent to an inspector.

2. Oral confession must be received in evidence with a lot of care and caution. But once a court is satisfied that an accused person did make an oral confession and that all the rules as to the voluntariness of any confession were complied with, then there cannot be any legal basis for excluding such evidence.

3. Though the appellant had been in unlawful police custody for a long time before making the statement in question, the court is satisfied that in the particular circumstances of this case, the Judge was right in admitting the statement

4. it is always unsafe to act upon a repudiated or retracted confession without corroboration but it is not illegal for a court to act upon it.

5. Where an accused person tells an obvious and deliberate lie which is disproved or disbelieved, then such a lie is capable of providing corroboration to other independent available evidence.

6. There is no requirement of law that circumstantial evidence needs to be corroborated.

Appeal dismissed

Civil Practice and Procedure - ex parte judgment - appeal against a refusal to set aside ex parte judgment - appellate court not to normally interfere with the exercise of discretion of a judge of the superior court - appellant objecting that service of court process was effected by post rather than at his physical address - appellant's plaint having given an address of service for the purpose of the suit - whether the appellant's objection had merit - whether there was any basis for interfering with the exercise of discretion by the superior court judge.