Abdulrasul Ahmed Lakha, Richard Otieno Kwach, John Mwangi Gachuhi
Development Finance Co. of Kenya Ltd, Joseph K. Muiruri & John K. Ceita v Wino Industries Ltd
Development Finance Company of Kenya Limited & 2 others v Wino Industries Limited  eKLR
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.
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.
1. United Bus Services Ltd v New India Insurance Co Ltd  EA 242
2. Woodhouse AC Israel Cocoa Ltd S A v Nigerian Produce Marking Co Ltd  2 All ER 271;  AC 741;  2 WLR 1090
3. Clifton v Hawley  EA 44
4. Houghton & Co v Nothard, Lowe & Wills Ltd  AC 1;  1 KB 246;
5. Re Eaves, Eaves v Eaves (1940) Ch D 109;  4 All ER
6. Porter (William) & Co Ltd, Re  2 All ER 361
7. Damodar Jihabhai & Co Ltd & another v Eustace Sisal Estates Ltd  EA 153
8. Prenn v Simmonds  3 All ER 237;  1 WLR 1381
9. Kukal Properties Development Ltd v Tafazzal Hatimali Maloo & others  KLR?
10. Taylors Fashions Ltd v Liverpool Victoria Trustees Co  1 QB 133;  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  2 QB 29;  2 WLR 212;  1 All ER 446
13. ER Ives Investment Ltd v High  2 QB 379
14. Shaw v Applegate  1 WLR 970;  1 WLR 123
No statutes referred.
Mr Deverell for the Appellants
Mr Inamdar for the Respondent