Madhupaper International Ltd & another v Kenya

Commercial Bank Ltd & 2 others

High Court, at Nairobi January 23, 2003

Kuloba J

Civil Case No 1263 of 1992

Equity – unjust enrichment – basic elements of the doctrine – duress – what amounts to duress - economic duress.

The first plaintiff company, Madhupaper International Ltd, in order to effectively run the business for which it was formed, borrowed certain monies from Kenya Commercial Bank, the first defendant, on debenture security charging all the company’s undertakings, goodwill assets, books debts and property. Repayments by the 1st plaintiff were not forthcoming, whereby the defendants through receiver managers took over the company. Negotiations were undertaken between the plaintiffs and defendants and it was agreed that the plaintiffs were to pay the defendants Shs 54 million as the agreed amount owing. Upon settlement the plaintiffs carried out their undertaking and paid to the defendants the agreed sum of 54 million.

The defendants after receiving this money returned it to the plaintiffs without reason. The defendant made a turn-around and demanded from the plaintiffs the enhanced sum of 110 Million. The plaintiffs further paid the sum of 110 Million in a bid to recover their company.

The plaintiffs brought this suit claiming a sum of Kshs 54 Million on the ground that the defendant had unjustly enriched itself at the undeserved expense of the plaintiff by means of duress and coercive pressure.

Held:

1. The basic elements presupposed by the doctrine of unjust enrichment are that the defendant has been enriched by the receipt; that he has been so enriched at the expense of the plaintiff and that it would be unjust to allow the defendant to retain the benefit in the circumstances of the case.

2. On the part of the plaintiff there must be found in truth, factors which negative the voluntary character of the transfer of benefit to the defendant.

3. On the side of the defendant, there must have been free acceptance of the transfer in the sense that the defendant had a choice whether to accept or reject and had sufficient knowledge of the facts to make that choice a real one.

4. Any pressure which the law does not regard as legitimate is wrongful and amounts to duress; for the law under the influence of equity has developed from the old common law conception of duress by threat to life and limb, and has arrived at the modern generalisation of simply inquiring whether the plaintiff was subjected to an improper motive for the action.

Judgment for the plaintiff.

Cases

1. Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32; [1942] 2 All ER 122; 111 LJKB 433; 167 LT 101

2. Ghaleb v Al Quaiti [1957] EA 55

3. Chase International Investment Corporation v Laxman Keshra [1978] KLR 143

4. Alec Lobb (Garages) Ltd v Total Oil GB Ltd [1983] 1 WLR 87; [1983] 1 All ER 944

5. Woolwich Building Society v IRC (No 2) [1992] 3 All ER 737; [1993] AC 70; [1992] 3 WLR 366

6. Alev, The [1989] 1 Lloyd’s Rep 138

7. B & S Contracts and Design Ltd v Victor Green Publications Ltd [1984] 1 CR 419

8. Barton v Armstrong [1976] AC 104; [1975] 2 WLR 1050; [1975] 2 All ER 465

9. Norweb plc v Dixon [1995] 3 All ER 952

10. Wolf v Marlton Corporation (1959) 154 A 2d 25

11. Thorne v Motor Trade Association [1937] AC 797

12. Universe Tankships Inc of Monrovia v International Transport Workers’ Federation [1983] 1 AC 366; [1982] 2 All ER 67

13. Astely v Reynolds (1731) 2 Str 915

14. Ashmole v Wainwright (1842) 2 QB 837

15. Owen & Co v Cronk (1895) 1 QB 265

16. Snowdon v Davis (1808) 1 Taun 359

17. Maskell v Horner [1915] 3 KB 106; [1914-15] All ER Rep 595

18. Valpy v Manley (1845) 1 CB 594

19. Closs v Phipps (1844) 7 Man & G 586

20. Dooli Chand v Ram Kishen Singh (1881) 8 Ind App 93

21. Kanhaya Lal v National Bank of India (1913) 29 TLR 314

22. Mason v New South Wales (1959) 102 CLR 108

23. Sargood Bros v Commonwealth (1920-11) 11 CLR 258

24. Bell Bros Pty Ltd v Shire of Serpentine-Jarrahdale (1969) 121 CLR

25. Barton v Armstrong & others [1976] AC 104; [1975] 2 WLR 1050; [1975] 2 All ER 465

26. Crescendo Management Pty Ltd v Westpac Banking Corporation (1989-1990) 19 NSWLR 40

27. Smith v Weldon (1924) 34 CLR 29

28. Riddoch Motors Ltd v Coast Region Co-op [1971] EA 438

29. Broadways Construction Co v Kasule & others [1972] EA 76

30. Zakayo v Naomi [1970] EA 607

Texts

1. Chievely, G., Jones, G (1998) The Law of Restitution London: Sweet & Maxwell 5th Edn p11-12

2. Birks, P (1985) An Introduction to the Law of Restitution Oxford: Oxford University Press

3. Burrows, A (1993) The Law of Restitution London: Butterworths Chapter XV p420

4. Burrows, A (Ed) (1991) Essays on the Law of Restitution Oxford: Oxford University Press p49

Statutes

Judicature Act (cap 8) section 3(c)

Advocates

Messrs Hamilton Harrison & Matthews for the 3rd Defendant.