Every prisoner has an opportunity to participate in the prison earning scheme.
Constitutional Law – fundamental rights and freedoms – economic and social rights - rights of prisoners - entitlement to basic necessities including toiletries - whether prisoners were entitled to basic necessities including toiletries while in prison
Aloise Onyango Odhiambo & 2 others v Attorney General & another  eKLR
Constitutional Petition No. 101 of 2015
High Court at Nairobi
E C Mwita,J
November 14, 2019.
Reported by Kakai Toili
Download the Decision
Constitutional Law – fundamental rights and freedoms – enforcement of fundamental rights and freedoms – right to fair labour practices – fair remuneration – where prisoners worked while serving their prison sentences - whether prisoners were entitled to payment for work they did while serving their prison sentences - whether it was mandatory for all prisoners to participate in the payment scheme for work done while in prison - whether working while serving prison sentences amounted to forced labour and servitude – Constitution of Kenya, 2010, articles 29(f) and 51; Prison Act, section 74; Persons Deprived of Liberty Act, 2014 section 5(1); Prison Rules, rules 10, 13 and 17
The petitioners were at the time of filing the petition prisoners serving life sentences for robbery with violence. They had been sentenced to death but their sentences were commuted to life imprisonment by the President in exercise of prerogative power of mercy. The petitioners filed the petition contending that the Power of Mercy Committee (the Committee) was not functional and that that they applied to the Committee while it was visiting various parts of the country but the Committee had not presented its report to the President for action. They also claimed that as convicts, they should benefit from earning scheme under the Prisons Act and thus be free from slavery and/or servitude which was prohibited by the Constitution.
The petitioners further averred that they were entitled to basic necessities including toiletries namely; soap, tooth brush and tooth paste, toilet papers among others which prison authorities did not provide. They contended that pardon and immunity should be beneficial to prisoners and should be granted freely or conditionally by the President while exercising his prerogative power of mercy.
Relevant Provisions of the law
- Whether prisoners were entitled to basic necessities including toiletries while in prison.
- Whether prisoners were entitled to payment for work they did while serving their prison sentences.
- Whether it was mandatory for all prisoners to participate in the payment scheme for work done while in prison.
- Whether working while serving prison sentences amounted to forced labour and servitude.
Persons Deprived of Liberty Act, 2014
(a) a written statement of the measures taken to address the complaint;
(b) the recommendations made in settlement of the complaint.
(1) Any person deprived of liberty who considers that his or her right under this Act has been denied or violated may lodge a complaint either orally or in writing to the administrative officer in charge of the facility in which the person is detained.
(2) In addition to the provisions of subsection (1), complaints may be instituted by a person acting on behalf of a person deprived of liberty who cannot act in their own name.
(3) Where the complaint is made orally, the officer in charge shall cause it to be recorded in writing.
(4) Upon receipt of the complaint, the officer in charge shall investigate and take reasonable measures to address the complaint and report the complaint and furnish the complainant with-
Application dismissed with no order as to costs.
- Prisoners were human beings. They were entitled to their basic rights except the fact that their rights were limited by virtue of being prisoners as persons of restricted liberty. What was limited were those rights that they could not exercise or enjoy as human beings because their liberty was restricted. They were however entitled to all other human rights and fundamental freedoms.
- The petitioners though prisoners serving sentences were entitled to such basic needs as soap, tooth paste, tooth brush and tissues to enable them to lead prison life with dignity. That was because the Constitution granted every person the right to live in dignity, a critical human right. Where one was denied that right, he/she was subjected to lead a life that was short of dignity because the right to dignity was a critical human right that could not be curtailed.
- Provisions items such as soap tooth paste, and tooth brush depended on budgetary allocations. Only those items budgeted for could be provided by prison authorities. It would be difficult for the prison authorities to provide items not budgeted for and money not allocated by the National Assembly. Provision of those services if it were to be passed on to the prison authorities would depend on budgetary allocations and could require amendment of the law to state who was to benefit whether the convicts or even those in remand.
- The instant matter required finances and the court could not direct that those items be provided for without financial allocation by the National Assembly and clarification in the law who should benefit which was a matter for Legislation but not for the court.
- Section 43(2) the Prisons Act (the Act) provided that every person under sentence of imprisonment could be required to engage in such type of employment approved by the Commissioner-General of Prisons (the Commissioner) as the officer in charge could direct. That meant prisoners could be called upon to perform such labour as the officer in charge could deem fit and appropriate. The labour and employment was therefore a legal requirement under the Act.
- Section 74 of the Act gave the Minister power to make rules for the better carrying into effect the provisions and the purposes of the Act. To that extent, the Minister made the Prisons Rules (the Rules). Some of the rules made by the Minister were on payment of prisoners for the work done while in prison. That meant prisoners could be entitled to payment for work they did while serving their prison sentences. The Rules stated that short sentence prisoners (first stage) could be allowed to participate in earning scheme depending on their industry and character:
- Long sentence prisoners (6 months and above (second stage) could participate in the earning scheme if of good character and industry.
- Those in the third stage if of good conduct and industry could participate in the earning scheme.
- Those in the fourth stage could participate in the earning scheme under similar considerations.
- Those in the special category if of good conduct and industry could also participate in the earning scheme.
Therefore, every prisoner had an opportunity to participate in the earning scheme but that was not mandatory and was pegged on certain conditions.
- Rule 17 of the Rules gave the Commissioner mandate to create privileges and prisoners to whom such privileges had been extended could lose them as a punishment. Rule 19 of the Rules provided that prisoners eligible to participate in the earning scheme should be classified into either grade A; B or C. Category A consisted of prisoners who in the opinion of the Commissioner were of exemplary conduct and were skilled in their trade, and all special stage prisoners; category B consisted of prisoners who in the opinion of the officer in charge were of good conduct and were semi-skilled in their trade and category C which consisted of all prisoners eligible to participate in the earnings scheme who were not grade A or grade B. It therefore meant that all grade C prisoners were eligible to participate in the earning scheme but not those in grade A or B. The operating word here was “eligible” and eligibility was based on the opinion of the Commissioner or the officer in charge. It did not mean that all prisoners had to participate in the payment scheme except those who meet the set criteria.
- Participation by a prisoner in the earning scheme was at the discretion of the Commissioner or the officer in charge. Other than prisoners in the first and second categories all other prisoners were entitled to spend up to two-thirds of their monthly earnings to purchase items that were necessary and allowed by the officers in charge as the Commissioner could direct. In that regard, spending of earnings by prisoners in the promoted category was not in question. The petitioners were legible to participate in the earning scheme subject to certain conditions. Although the petitioners testified in court, none of them showed that he was in the categories that were eligible to participate in the earning scheme and that in fact they were actually participating in the scheme and were therefore entitled to payment.
- The question of participation in the payment scheme was one of fact and the petitioners could not state in general terms that they were not being paid money for the work done. That was so given that participation in the scheme was a privilege, and as a matter of discretion, it was one that could be withdrawn by the Commissioner if those participating were found to be on the wrong side of disciplinary procedures. The petitioners gave an example of a prisoner that had been released after 32 years in prison only to be paid Kshs 50, they did not table evidence that the alleged prisoner was participating in the payment scheme.
- Whereas the Rules made all prisoners legible to participate in the payment scheme it was not mandatory that everyone participated. For that reason, it was not all prisoners who could argue without proof that they were participating in the scheme and were therefore not being paid their money. Furthermore, the rules were clear that only in some categories were prisoners entitled to use a fraction of their earning to buy certain items while the balance was kept for them to be paid on release. The other category was not entitled to use the money at all. The petitioners failed to demonstrate that they were participating in the earning scheme and that they belonged to the category that was allowed to use a fraction of their earnings and had not been allowed to do so.
- The law allowed prisoners to work while serving sentences, that way, prisoners gained knowledge and skills and indeed found that valuable when they finally found themselves out of prison. The spirit of the Rules was captured in rule 3(c) of the Rules to the effect that at all times the treatment of convicted prisoners should be to encourage their self-respect and sense of personal responsibility, so as to rebuild their morale, to inculcate in them the habit of good citizenship and hard work and encourage them to lead a good and useful life on discharge.
- It could not be said that working while serving sentence was unhelpful to prisoners or was forced labour and servitude. That was because the Constitution and the Prisons Act did not permit forced labour or servitude. Article 51(1) of the Constitution provided that a person who was detained, held in custody or imprisoned under the law, retained all the rights and fundamental freedoms in the bill of rights, except to the extent that any particular right or freedom was clearly incompatible with the fact that the person was detained, held in custody or imprisoned.The petitioners were not subjected to conduct that amounted to forced labour or servitude.
- The Prisons Act had a mechanism for treatment of inmates. Furthermore, the Persons Deprived of Liberty Act, 2014 which was enacted to give effect to articles 29(f) and 51 of the Constitution, provided other ways of dealing with complaints by persons deprived of liberty like prisoners. Section 3(1) of the Act underscored the fact that every person deprived of liberty was entitled to the protection of all fundamental rights and freedoms subject to such limitations as could be permitted under the Constitution and that nothing in that Act could be construed as limiting the rights and freedoms of persons deprived of liberty otherwise than in accordance with articles 29(f) and 5l of the Constitution.
- The petitioners’ complaints including one that they did not get proper medical care was not supported by any evidence. That was so because section 15 of the Persons Deprived of Liberty Act was clear that a person detained, held in custody or imprisoned was, on the recommendation of a medical officer of health, entitled to medical examination, treatment and healthcare, including preventive healthcare. If any prisoners had any issues they should lodge complaints for investigations and appropriate action by relevant authorities. It was in that regard that section 27 of the Act provided for the manner of dealing with complaints by persons deprived of liberty.
- If any of the petitioners had a complaint, the mechanism for addressing such a complaint was well spelt in the law and there would be no reason to allege in the petition without proof that their rights were violated. Section 5(1) of the Persons Deprived of Liberty Act provided that a person deprived of liberty should at all times be treated in a humane manner and with respect for their inherent human dignity; while section 5(2) stated that any person who subjected a person deprived of liberty to cruel, inhuman or degrading treatment committed an offence and should be liable upon conviction to a fine or imprisonment or both. The law had provided sufficient mechanism for dealing with complaints by persons deprived of liberty such as the petitioners. For that reason, those issues should have been addressed through that mechanism for resolution as appropriate.
Case Updates Issue 008/2020
|CIVIL PRACTICE AND PROCEDURE
Supreme Court allows application for the striking out of a notice of appointment, notice of change of advocates and certain pleadings.
Stephen Maina Githiga & 5 others v Kiru Tea Factory Company Ltd
Petition (Application) No 13 of 2019
Supreme Court of Kenya at Nairobi
D K Maraga, CJ & P, M K Ibrahim, J B Ojwang, S C Wanjala & Njoki Ndungu, SCJJ
November 29, 2019
Reported by Beryl Ikamari
Civil Practice and Procedure – legal representation - appointment of advocates and change of advocates - pleadings filed by advocates who were not properly on record - whether pleadings filed by advocates who were not properly on record would be struck out.
There were two applications before the court. The first application was filed by the firm of Kithinji Marete & Company advocates and it sought orders for the striking out of a notice of appointment of advocates, a notice of change of advocates and all pleadings filed by the firm of Ochieng, Onyango, Kibet & Ohaga Advocates (Triple OK Law.) The second application was filed by the respondents and it sought the striking out of the notice of appeal and the petition filed by the firm of M/s. Millimo Muthomi & Company Advocates.
The grounds for the second application were that the appeal related to a matter in which the 3rd, 4th, 5th and 6th appellants could not be parties. The 3rd, 4th, 5th and 6th appellants had withdrawn their review application against the orders of the Court of Appeal of December 6, 2017 which held them to be in contempt of court. The decision of March 28, 2019 which was the subject of the Supreme Court appeal was a decision relating to an application for the review of the earlier decision on contempt of court.
- Whether a firm of advocates was properly on record.
- Whether parties who had withdrawn their review applications but a review decision had been made on the basis of other applications could be parties to a Supreme Court challenge relating to the review decision.Read More..
- The firm of M/s. Ochieng, Onyango, Kibet & Ohaga Advocates filed affidavits to show that they were duly appointed by the respondent. The affidavits and submissions that they proffered were also presented in Stephen Maina Githiga and 5 others v Kiru Tea Factory Company Limited, Application No 12 of 2019, Supreme Court of Kenya at Nairobi, and the court ruled that the firm of Kithinji Marete & Company Advocates was properly on record.
- Since the firm of Kithinji Marete & Company Advocates was properly on record, the impugned notice of appointment, notice of change of advocates and all pleadings filed by the firm of Triple OK Law were struck out.
- The appellants had not responded to the second application. They were granted 21 days from the date of the ruling to file the reply.
- The notice of appointment of advocates dated April 4, 2019, and filed on an even date by M/s. Ochieng’, Onyango, Kibet & Ohaga Advocates, was struck out.
- The notice of change of advocates dated April 15, 2019, and filed on April 17, 2019 by M/s. Ochieng’, Onyango, Kibet & Ohaga Advocates was struck out.
- All pleadings filed by M/s. Ochieng’, Onyango, Kibet & Ohaga Advocates on behalf of Kiru Tea Factory Company Limited, in relation to the matter, were struck out.
- The appellants had to, within 21 days of the date of the ruling, file a response to the second notice of motion, dated May 3, 2019.
- The determination of the application to strike out the notice of appeal dated March 29, 2019, and filed April 1, 2019, and Supreme Court Petition No. 13 of 2019 (i.e., the second application), would await further directions of the court.
- Costs to be in the cause.
Supreme Court dismisses an application seeking to introduce additional evidence for failure to demonstrate usefulness of that additional evidence in the determination of the appeal
Minister for Health & another v Uasin Gishu Memorial Hospital Limited & another; Attorney General & another (Interested Parties)  eKLR
Petition 20 of 2019
Supreme Court of Kenya
D K Maraga, CJ & P; J B Ojwang, S C Wanjala, S N Njoki, & I Lenaola, SCJJ
November 29, 2019
Reported by Moses Rotich
Evidence Law – adducing additional evidence – introduction of additional evidence in appellate courts – principles applicable in allowing additional evidence – whether failure to demonstrate usefulness of additional evidence and diligence on the part of an applicant could render that additional evidence inadmissible before an appellate court.
The application, premised upon the provisions of articles 159(3)(d), 164(3) of the Constitution of Kenya 2010, sections 3(e) and 31 of the Supreme Court Act, 2011, rules 3(2), (4), 5, 18(1) and 53 of the Supreme Court Rules, 2012, sought leave to adduce additional evidence prior to the hearing of the petition. The applicant argued that the evidence it sought to adduce could not be obtained with reasonable diligence for use at the trial; was not within its knowledge nor could it be produced at the time of filing the original suit at the High Court and the appeal at the Court of Appeal; and that the additional evidence in any event raised issues of great public interest and of law which could reverse the outcome of the appeal.
- What were the principles governing introduction of additional evidence before the Supreme Court?
- Whether failure to demonstrate usefulness of additional evidence and diligence on the part of an applicant could render that additional evidence inadmissible before an appellate court.Read More..
- The additional evidence sought to be adduced related to letters, some dating to the 1930s, loan applications, resolutions of meetings, reports and Board Minutes all intended to boost the applicant’s case in the appeal. Save for the assertion that the applicant discovered late that the documents could be found at its archive, the applicant gave no other explanation for the non-production of the documents at the courts below or why it took more than 10 years to introduce them as evidence.
- The governing principles on allowing additional evidence in appellate courts in Kenya were;
- the additional evidence should be directly relevant to the matter before the court and be in the interest of justice;
- it should be such that, if given, it would influence or impact upon the result of the verdict, although it need not be decisive;
- it was shown that it would not have been obtained with reasonable diligence for use at the trial, was not within the knowledge of, or could not have been produced at the time of the suit or petition by the party seeking to adduce the additional evidence;
- where the additional evidence sought to be adduced removed any vagueness or doubt over the case and had a direct bearing on the main issue in the suit;
- the evidence ought to be credible in the sense that it was capable of belief;
- the additional evidence should not be so voluminous making it difficult or impossible for the other party to respond effectively;
- whether a party would reasonably have been made aware of and procured the further evidence in the course of the trial was an essential consideration to ensure fairness and due process;
- where the additional evidence disclosed a strong prima facie case of wilful deception of the court;
- the court ought to be satisfied that the additional evidence was not utilized for the purpose of removing the lacunae and filling gaps in evidence. The court ought to find the further evidence needful;
- a party who had been unsuccessful at the trial should not seek to adduce additional evidence to make a fresh case in the appeal, fill up omissions or patch up the weak points in his/her case;
- the court would consider the proportionality and prejudice of allowing the additional evidence. That required the court to assess the balance between the significance of the additional evidence, on the one hand, and the need for the swift conduct of litigation together with any prejudice that might arise from the additional evidence on the other.
- There was no evidence that the applicant’s hospital archive had useful and relevant information. No other evidence was given as to how, over the last 7 years when the appeal before the Court of Appeal was pending and prior to that, while the matter was before the High Court, the applicant’s officers acted to secure its case to the highest possible level. There was no evidence of diligence on the part of the applicant.
- The evidence sought to be adduced was certainly meant to fill gaps in evidence and remove lacunae in the applicant’s case in a second appeal where the issues to be addressed were matters of law and not of fact. There was doubt that that evidence would be of any use to the court in reaching a fair and final decision on the dispute between the parties.
Application dismissed; each party to bear own costs.
Requirements relating to a university degree for candidates seeking election as Member of Parliament are constitutional.
John Harun Mwau v Independent Electoral & Boundaries Commission & another
Civil Appeal No 112 of 2014
Court of Appeal at Nairobi
MK Koome, H Okwengu, & S ole Kantai, JJA
November 22, 2019
Reported by Beryl Ikamari
Constitutional Law - constitutionality of the provisions of a statute - constitutionality of section 24(1) of the Elections Act which mirrored the provisions of article 99(1) of the Constitution - qualifications of candidates for the post of Member of Parliament - educational requirements - whether the requirement that candidates seeking to be elected as Members of Parliament had to have a university degree had the effect of locking out some suitable candidates and was discriminatory - Constitution of Kenya 2010, articles 27 and 99(1); Elections Act, No 24 of 2011, section 24(1).
Electoral Law – elections relating to Members of Parliament – qualifications of candidates for the post of Member of Parliament – educational requirements – university degree – whether the requirement that candidates seeking to be elected as Members of Parliament had to have a university degree had the effect of locking out some suitable candidates and was discriminatory - Constitution of Kenya 2010, articles 27 and 99(1); Elections Act, No 24 of 2011, section 24(1).
Constitutional Law - constitutionality of the provisions of subsidiary legislation - constitutionality of regulations 16, 17 and 18 of the Elections (General) Regulations 2012- requirements relating to collection of signatures from supporters for candidates vying for various elective posts-whether independent candidates had more burdensome obligations than candidates that were nominated by political parties-Elections (General) Regulations 2012, regulations 16, 17 and 18.
Constitutional Law - constitutionality of the provisions of a statute - constitutionality of sections 10 and 11 of the Political Parties Act - mergers and coalitions by political parties - whether mergers and coalitions by political parties had the potential to impede good governance and went beyond the contemplation of the Constitution - Political Parties Act, No 11 of 2011, sections 10 and 11.
At the High Court, the appellant challenged the constitutionality of sections 10 and 11 of the Political Parties Act, the constitutionality of section 24(1) of the Elections Act and regulations 16, 17 and 18 of the Elections (General) Regulations 2012 and the nature of the educational qualifications that would apply to a candidate’s nomination as a Member of Parliament.
The petitioner contended that the educational requirement of a university degree under section 24(1) of the Elections Act, for candidates for the post of Member of Parliament had the potential to lock out suitable leaders from vying and it was discriminatory. He further stated that the impugned regulations placed obligations on independent candidates to collect signatures from supporters that were more than the obligations of candidates nominated by political parties. He added that the mergers and coalitions by political parties provided for under sections 10 and 11 of the Political Parties Act went beyond the contemplation of the Constitution and they could impede good governance.
The petition was filed in the year 2013 when the appellant was the Member of Parliament for Kilome Constituency and an aspiring candidate for the Makueni senatorial seat. The High Court dismissed the petition. The appellant filed an appeal at the Court of Appeal against the High Court decision.
- Whether section 24(1) of the Elections Act, whose provisions included educational requirements for candidates vying for the post of Member of Parliament, was unconstitutional on grounds that it discriminated against some candidates.
- Whether regulations 16, 17 and 18 of the Elections (General) Regulations 2012 were unconstitutional, as they placed a heavier burden on independent candidates as compared to candidates that were nominated by political parties, when it came to obtaining signatures from supporters for purposes of qualifications for vying for various elective posts.
- Whether sections 10 and 11 of the Political Parties Act, which provided for mergers and coalitions by political parties, were unconstitutional on grounds that the Constitution did not contemplate such mergers and coalitions. Read More...
Relevant provisions of the law
Elections Act, No 24 of 2011
(1) Unless disqualified under subsection (2), a person qualifies for nomination as a Member of Parliament if the person-
(a) Is registered as a voter;
(b) Satisfies any educational, moral and ethical requirements prescribed by the Constitution and this Act; and
(c) Is nominated by a political party, or is an independent candidate who is supported
(i) in the case of election to the National Assembly, by at least one thousand registered voters in the constituency; or
(ii) in the case of election to the Senate, by at least two thousand registered voters in the county.
Elections (General) Regulations, 2012
(1)A political party candidate at a presidential election shall be nominated by a political party by and delivery to the commission on that day fixed for the nomination of candidates at that election, an application for nomination in Form 12 set out in the Schedule.
(2) An application for this nomination under this regulation shall be-
(a) signed by the candidate, and the authorised official of the party; and
(b) delivered to the Commission personally by the candidate or by an official of the party.”
(1) An independent candidate at a presidential election shall deliver to the Commission on the day fixed for the nomination of candidates at that election, an application for nomination in Form 12 set out in the Schedule.
(2) An application for nomination under this regulation shall-
(a) Signed by the candidate, and by two persons who have nominated the candidate in accordance with section 29(2) of the Act;
(b) delivered to the Commission personally by the candidate or by any of the two persons referred to in paragraph (a).
(1) The person delivering an application for nomination under regulation 16 or 17 shall at least five days to the day fixed for nomination, deliver to the Commission a list bearing the names, respective signatures, identity card or passport numbers and voters card numbers of at least two thousand voters registered in each of a majority of the counties, in standard A4 sheets of paper and in an electronic form.
(2) The sheet of paper delivered under this regulation shall-
(a) be serially numbered;
(b) each have at the top, in typescript, the wording at the top of Form 12; and (c) be accompanied by copies of the voters cards of the voters referred to in sub-regulation(1)
(3). There shall be delivered to the returning officer together with the application for nomination, a statutory declaration in Form 13 set out in the schedule, made not earlier than one month before the nomination day.
Political Parties Act, No 11 of 2011
1. Two or more political parties may form a coalition before or after an election and shall deposit the coalition agreement with the registrar.
2. A coalition agreement entered into after an election shall be deposited with the registrar at least three months before that election.
3. A coalition agreement entered into after an election shall be deposited with the registrar within twenty one days of the signing of the coalition agreement.
4. A coalition agreement shall set out the matters specified in the third schedule
- The appellant's pleadings did not disclose any injuries suffered or likely to be suffered by him or the public with respect to the allegations he made. Also, he did not demonstrate how the respondents were responsible for the alleged breaches or violations of rights. The petition made general allegations which did not fulfil the duty to plead with particularity about the infringement of rights. Court orders could not be issued on the basis of an assumption or speculation.
- The Elections Act was enacted pursuant to article 82(1) of the Constitution which mandated Parliament to enact legislation on elections. Section 24(1) of the Elections Act provided for qualifications for nomination as Member of Parliament and the qualifications included the satisfaction of educational requirements. Section 24(1) of the Elections Act was a reflection of article 99(1) of the Constitution which also provided for qualifications for the election of a Member of Parliament.
- The requirement for post-secondary qualifications which related to having a university degree was necessary. The Legislature set educational standards for elective positions which were positions of power and immense responsibilities so that they could be held by persons who had the necessary knowledge, skill and training. It was not discriminatory as all political parties were required to adhere to the educational requirements. Those who did not meet those requirements had the opportunity to first seek to attain those qualifications before vying for office.
- Regulations 16, 17 and 18 of the Elections (General) Regulations 2012, did not place a heavier burden on independent candidates as compared to candidates from political parties. Signatures from supporters were required from independent candidates and from candidates nominated by political parties. Therefore, there was no discrimination.
- Article 92 provided for the making of legislation to regulate political parties and the Political Parties Act was thereby enacted. The appellant's allegations that political mergers and coalitions provided for under section 10 of the Political Parties Act impeded good governance and infringed on certain freedoms, were not proven. Had the framers of the Constitution intended to disallow such mergers and coalitions, they would have done so expressly.
Failure to exercise due diligence, reasonable care and skill in the opening and operation of an account is unlawful
Central Bank of Kenya v Giro Commercial Bank Limited and 3 others
Civil Case No. 204 of 2004
High Court at Nairobi
G V Odunga, J
December 18, 2019
Reported by Ian Kiptoo and Amina Yunus
Banking Law – duties of a banker – due diligence, skill and reasonable care - where activities of an account were suspicious - whether failure to take into consideration the requirements for opening and operating a new account in disregard of the Central bank of Kenya Prudential Guidelines was unlawful - whether a branch manager of a bank who did not exercise due diligence, reasonable care and skill in the opening and operation of an account was liable in case of an occurrence of fraud - Central Bank of Kenya Prudential Guidelines, regulations 2.2, 4.1 and 5
Suits - civil cases vis-a-vis criminal verdicts – effect of a criminal verdict on a civil case – where a defendant had been acquitted in a criminal trial and subsequently sued in a civil case on the same set of facts – what was the legal implication in civil cases when a defendant had been acquitted in a criminal case based on the same facts
The plaintiff in the instant case claimed the sum of Kshs. 205 million plus interest thereon on grounds that the 1st defendant knowingly received the payment in respect of the treasury bonds and dishonestly assisted the 3rd defendant and subsequently the 4th defendant to defraud the plaintiff. The plaintiff contended and that the manner in which the funds were received and dealt with by the 1st defendant through its Westlands Branch headed by the 2nd defendant left no doubt that the 1st defendant through its servants and/or agents and more particularly the 2nd defendant were involved in fraudulent assistance of the 3rd defendant.
Accordingly, the plaintiff prayed for the following orders:
- A declaration that the defendants were liable for the loss suffered by the plaintiff;
- The sum of Kshs. 205 million to be paid by the 1st defendant as a constructive trustee of the plaintiff; and
- Judgment be entered jointly and severally against the 1st , 2nd , 3rd and 4th defendants in the sum of Kshs. 205 million for their separate involvement in the fraudulent acquisition and transfer of the proceeds from Treasury Bonds rightfully belonging to the plaintiff.
- Whether failure to take into consideration the requirements for opening and operating a new account in disregard of the Central Bank of Kenya Prudential Guidelines was unlawful.
- Whether a branch manager of a bank who did not exercise due diligence, reasonable care and skill in the opening and operation of an account was liable in case of an occurrence of fraud.
- What was the legal implication in civil cases when a defendant had been acquitted in a criminal case based on the same facts?Read More...
Relevant Provisions of the law
CBK Prudential Regulations for Banking Institutions, 2000
a. Certified copy of Certificate of Registration, Certificate of Incorporation, Partnership Deed, Memorandum and Articles of Association or other similar documentation evidencing legal status;
b. Certified copy of Board Resolution stating authority to open accounts, transaction business, and borrow funds, and designating persons having signatory authority thereof;
c. Verified identity and address of the chairman of the board of directors, the managing director, and all principal shareholders for a corporation, or the general partner and at least one limited partner for partnerships, or the principal owner for sole traders, etc.;
d. Audited financial statements (last full year at minimum although, last three years preferred) for corporation; for partnerships, sole traders, unaudited statements may be substituted upon prior written approval of a senior management official of bank; formation statement and PIN registration;
e. Where applicable, written confirmation from the customer’s prior bank attesting to customer’s identity and history of account relationship.
- The manner in which the 3rd defendant’s account was opened was not in compliance with the law in particular the prudential guidelines issued by the plaintiff in its capacity as a regulator pursuant to the provisions of the Central Bank of Kenya Act. Regulation 2 of the CBK Prudential Regulations for Banking Institutions 2000, provided for the minimum information required for customer identification. For corporate, partnership, sole trader accounts or transactions, regulation 2.2 provided the requirements.
- In the instant case, the 2nd defendant testified that he did not ask for a written confirmation from the 3rd defendant’s prior bank until 6 months after the account was opened. Failure to answer the question why the 2nd defendant decided to seek for that information after receiving huge deposit in the 3rd defendant’s account if that information was not necessary for the purposes of opening the account put the 2nd defendant in a position where he had to be deemed to have been aware of the said Regulations but decided to ignore the same. In addition, the 2nd defendant together with the assistant manager of the 1st defendant certified on behalf of the 3rd defendant that the information provided in the application to open a CDS account were accurate and independently confirmed by the 2nd defendant.
- Apart from the discrepancies in the procedure for opening the account, following the receipts of the proceeds of the sale of the said treasury bonds, the 3rd defendant proceeded to operate his account in a rather unusual and suspicious manner. That the 2nd defendant’s eyebrows were never raised left a lot to be desired unless the 2nd defendant deliberately decided to turn a blind eye to patently unusual manner of operating the account. The manner in which the funds were received and dealt with by the 1st defendant bank through its Westlands Branch under the management of the 2nd defendant left no doubt that there was a conspiracy between the 2nd defendant and the 3rd defendant following the irregular opening of an account by the 3rd defendant at the 1st defendant’s Westlands Branch, which was under the management of the 2nd defendant.
- In opening the account, the 3rd defendant was described as being in horticulture business. However, the monies being credited into the account were not coming from the said horticultural business but were from stockbroking. While there was nothing unlawful about one being in business and also trading in stocks, the manner in which the subject account was being operated ought to have raised a red flag on the part of the 2nd defendant who, if prudent, ought to have made inquiries as to whether the said credits were genuine. By failing to do so, one could only conclude that the 2nd defendant was part of the conspiracy to launder the said fraudulently obtained sums of money and facilitate their being paid out to various avenues.
- In the instant case, the circumstances were such that an ordinary banker would have had his antenna raised considering the manner in which the said account was being operated as the standard of care required was that to be derived from ordinary practice of bankers not individuals. Although the principle of confidentiality applied between a banker and his customer, not only was the 2nd defendant expected as a matter of prudence to raise a red flag on the manner in which the account was being operated, but the said Prudential Regulations required him to be on notice in such circumstances since under regulation 4.1, one of the occurrence of a suspicious activity was where account activity which was not consistent with or reasonably related to the customer’s normal business activities or financial standing. The account was clearly one such account.
- Regulation 5 of the Prudential Regulations provided that such suspicious activities or transactions should be reported. Therefore, taking into account that the 3rd defendant had declared while opening the account that he was in horticultural business, huge funds from a stockbroker should have raised a red flag. Further taking into account the history of the account, such a huge transfer should have raised suspicion. Despite that, the 2nd defendant as the manager who was in control of the account did not raise a red flag or make any report on the suspicious activity on the 3rd defendant’s account.
- A perusal of the email correspondence showed that the 2nd defendant was indeed involved in the fraudulent scheme. In his statement under inquiry recorded on July 5, 2003 which the criminal court ruled as admissible, the 2nd defendant admitted that he was involved in the fraudulent scheme that was orchestrated by the 3rd defendant. While he was acquitted, that did not necessarily mean that he could not be found liable in civil proceedings arising from the same transaction since the burden of proof in criminal proceedings was necessarily higher than in civil proceedings. While that statement could not necessarily be used against the 4th defendant, it was certainly admissible as against the 2nd defendant.
- It was clear that the 3rd defendant orchestrated, whether on his own or through the influence of others, a fraud sometime in 2003 whereby he falsely and fraudulently procured Treasury Bonds Issue No. FXT 2/2002/2 valued at Kshs. 175 million and FXD 1/2-02/4 valued at Kshs. 30 million in the names of CBA Capital Limited and Mumbu Holdings Limited respectively and transferred the same to a CDS account opened by himself. Thereafter, instructions were issued on his behalf to Dyer and Blair Investment Bank to sell the said treasury bonds and the funds received from the sale of the treasury bonds were paid through an account opened by him at the 1st defendant bank. Following the receipts of the proceeds of the sale of the treasury bonds aforesaid, in collusion with the 2nd defendant, the 3rd defendant operated his account in a manner which left no doubt that the 2nd defendant fraudulently assisted him in defrauding the plaintiff of the proceeds of the sale of the treasury bonds and eventual transfer of the said proceeds to various accounts and persons including himself.
- The 3rd defendant was charged alongside the 2nd defendant and the 4th defendant’s director in Criminal Case No. 1343 of 2003 with the offence of forgery contrary to section 349 of the Penal Code and stealing contrary to section 349 of the Penal Code and was found guilty on all counts and sentenced to a jail term of 3 years. Accordingly, the finding of guilt by the criminal court of the 3rd defendant was ipso facto evidence that the 3rd defendant was liable for the fraudulent acts which led to the loss of Kshs. 205 million by the plaintiff.
- The 4th defendant had explained the sources of his money deposited with the 1st defendant. Therefore, on a balance of probability the plaintiff’s case against him did not meet the threshold required to prove a case in civil proceedings. It would seem that the case against the 4th defendant was based merely on suspicion.
- In regards to the 4th defendant’s counterclaim for general damages, aggravated damage and loss of interest on the deposit from July 22, 2003. No evidence was led to prove that the plaintiff’s action was malicious or was arrogant. The plaintiff seemed to have acted on the statement made by the 2nd defendant which implicated the 4th defendant. It therefore acted reasonably though erroneously in the circumstances. As for the claim for loss of interest on the deposit, apart from a bare claim, no basis was set in the pleading for seeking the same. Apart from that, no evidence was led in evidence to support the claim that any interest was due, the applicable rate of such interest and how much it was.
- Loss of interest was a species of loss of income. That type of claim (loss of future earnings) could be a claim on its own and the figure need not be plucked from the air because the plaintiff would be expected to furnish the material on which a reasonable figure would be based. Therefore, the claim being unsupported by both pleadings and evidence could not succeed.
Claim allowed with costs to the plaintiff.
- A declaration that the 2nd and 3rd defendants were liable for the loss suffered by the plaintiff.
- Judgement entered jointly and severally against the 2nd and 3rd defendants in the sum of Kshs. 205 million for their separate involvement in the fraudulent acquisition and transfer of the proceeds from Treasury Bonds rightfully belonging to the plaintiff.
- Interest at bank rates from the date of payment of the said amount until payment in full awarded to the plaintiff.
Long'et Terer - CEO and Editor
The Kenya Law Team
Where Legal Information is Public Knowledge.
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