[2004] KEHC 91 (KLR)

IN THE HIGH COURT OF KENYA

AT NAIROBI (MILIMANI COMMERCIAL COURTS)

Civil Case 1104 of 2004

GUARDIAN BANK LIMITED..................................................... PLAINTIFF

VERSUS

SKYFLYERS TRAVEL AND TOURS LIMITED…………..DEFENDANT

RULING

This is an application by the Plaintiff, a commercial Bank, byway of a Notice of Motion dated 7th May 2004. It is made underOrders VIII, Rule 1 (2), XXXV, Rule 1 and the Evidence Act, Cap80, Laws of Kenya. The application seeks the following orders: -

1. That the Defence dated 4th November 2002 and filed inthis Honorable Court on 7th November 2002 be struckout pursuant to the Mandatory Provisions of Order VIII,Rule 1 (2) of the Civil Procedure Rules.

2. That in the alternative and without prejudice to prayer 1hereinabove the defence herein be dismissed andSummary Judgment be entered for the Plaintiff againstthe Defendant as prayed in the Plaint.

3. That the costs of this application be provided.

The application is supported by an affidavit sworn by oneCarroll W. Kabiru who is a legal officer with the Plaintiff Bankon 7th May 2003. The grounds given for the application are asfollows: -

1. That the Defence dated November 2002 and filed in thisHonourable Court on 7th November 2002 was filed out oftime by the rules in pursuance of entering anappearance.

2. No formal order or leave of the court was sought to filethe aforestated defence in clear contravention of theMandatory Provisions of Order VIII, Rule 1 (2).

3. The Defendant is truly and justly indebted to thePlaintiff and paragraph 3 of the Defence alludes to thecircumstances surrounding the indebtedness.

4. The defence is a mere sham and bare denial, whichattempts to shift the Defendant's liability/indebtedness topersons not parties to this suit and is thus vexatious andfrivolous.

5. The Defendant admits demand and Notice of Intention tosue yet does not state that the Defences hereinconstituted a reply to demand and notice to sue.

6. The custom and trade in Banking in this Court'sjurisdiction and the reasonableness or otherwise ofinterest rates charged by the Banks in this Court'sjurisdiction is a matter this Honourable court can take judicial notice of and especially on a running overdraftcurrent account.

The application is opposed by the Defendant Company, whichfiled a Replying Affidavit sworn on 5th June 2004 by its director,Mr. Naval Kishore Bhalla. The Plaintiff in return filed a furtheraffidavit pursuant to leave of this Court. It is made by the BranchManager, Mr. Pallvi Gudka on 18th June 2003. Before the hearingof the application, the parties recorded a consent on 3. 10. 2003 inwhich the issue of filing of Defence out of time was amicablyresolved. Prayer 1 of the application was therefore spent leavingPrayers 2 and 3 for the Court's determination.

I have carefully considered the Plaintiffs application,supporting and further affidavit, the Replying Affidavit, thepleadings and counsel's submission. The relationship of bankerand customer between the parties is common ground andundisputed. The Defendant in its defence admits that it hadmaintained a current account with the Plaintiff but avers that theaccount should not have been overdrawn under any circumstances.

That if the Plaintiff allowed it to overdraw its account, then it was a private arrangement, made without the Defendant's authority, between the Plaintiff and the Defendant's manager.

The Defendant denies owing a sum of kshs. 1, 532, 658. 55 together with interest at the rate of 36% p.m. as claimed in the plaint. Lastly, the Defendant in its defence contends that if any monies are owing, it is as a result of illegal debits from the account and was used by the Plaintiff to cover shortfalls in 3rd parties accounts and in particular two customers, Minar Restaurants and Afrigas Limited.

The aforesaid position is explained and elaborated by the Defendant in its Replying Affidavit. After due consideration of all the foregoing, I find that the letter dated 10th December, 2001 is quite crucial in this matter and it may be necessary to fully set out its content herein: -

December 10,2001

"The ManagerGuardian Bank LimitedBrick Court House Westlands NAIROBI

ATTENTION: MRS PALVIGUDKA

RE; ACCOUNT NUMBER 015504-0100

I refer to your letter dated November 26, 2001 and of Referencenumber GBL/P.G/0152 and have noted its contents.

You are fully aware that the debt has remained unpaid because ofyour taking unreasonable abrupt decision not to allow us thehitherto allowed facilities of credit against uncleared effects. Tillthe time this was allowed we made an average payment to thisaccount of kshs.50, 000/- to Kshs.60, 000/- on daily basis andreduced the debt from kshs. 3,400,000/- to the present outstandingamount. You are fully aware of this fact.

The present situation has been created entirely by you. The figureshown by you is incorrect and the interest charged by you is not inline with the interest applied by the banks.

Our companies have made full efforts and have paid you in fulland because of the attitude of your bank we have moved out. Wewith your personal untiring efforts we were doing extremely welland meeting our daily commitments honorably and found theobstacles created by your bank as unreasonable and not conduciveto the banking ethics.

Kindly let us have the revised figure of the outstanding amount forour perusal and comments.

Yours faithfully

SKY FLYERS TRAVEL & TOURS LIMITED

J.K. Bhalla

FINANCIAL DIRECTOR"

I do agree with the Plaintiff's counsel that this letter amounts to an admission of a debt owing to the Plaintiff by the Defendant. The words in paragraph 2 speak for themselves. The Defendant says that it "reduced the debt from Kshs. 3, 400, 000/-. The date of this letter is 10th December 2001. According to the statement of Accounts of the Defendant produced by the Plaintiff, the amount outstanding was kshs 1, 402, 162. 70.

From the contents of the said letter, it would appear that the Defendant decided to stop payment of the debt because the Plaintiff stopped the credit facility it had given the Defendant wherein the Defendant was allowed to enjoy credit facilities against uncleared effects or cheques. The Defendant also questions the interest charged by the Plaintiff. In the said letter the Defendant claims that the debt had been paid in full but having perused all the documents there is no evidence of any such payment. True to its word, the Defendant stopped all transactionsand moved out of the Plaintiff bank from 10th December 2001. The Plaintiff as a Bank relies on the statements of Account - Ex."CWK 1" in support of its application for summary judgment. Theplaintiff has referred to various entries to show the withdrawals ofkshs 79, 140 and kshs 2, 492, 710/- on 19th April 2001, which wasthe genesis of the Defendant's indebtedness to the Plaintiff. TheDefendant's counsel in his submissions has taken issue with theStatements of Accounts which were produced in Court. Heinvoked the provisions of Section 177, of the Evidence Act, whichreads as follows: -

"177 (1) a copy of an entry in a banker's book shall not bereceived in evidence under section 176 unless it be first provedthat

(a) The book was, at the time of making the entry, one ofthe ordinary books of the bank; and

(b) The book is in the custody and control of the bank;and

(c) The entry was made in the usual and ordinarycourse of banking business; and

(d) The copy has been examined with the original entry,and is correct.

(2) Such proof may be given by an officer of the bank, or, in thecase of the proof required. Under subsection 1 (d), by the personwho has performed the examination, and may be given eitherorally or by an affidavit sworn before a commissioner for Oaths ora person authorized to take affidavits. "

I have perused the affidavit of Carroll W. Kabiru sworn on 7th May2004 through which the Statement of Accounts were produced.The said affidavit does not make any attempt to comply with theprovisions of section 177 of the Evidence Act. The said provisionsare mandatory. I do hold that the copies of the Statements ofAccounts herein have yet to be proved and verified in accordancewith the Law.

I do not agree that an admission of the debt can be used tocircumvent the express provision of the statute. While the Plaintiff in its letter did admit the debt, it did not specify or state theamount. The amount could have possibly be proven by theStatements of Accounts. However, the said statements and entriestherein can only be relied upon by this Court and admit them inevidence if the provisions of Section 177 of the Evidence Act arecomplied with.

In the premises, I hold that the authenticity and correctness ofthe accounts are in issue and to this extent are triable issues.

I do sympathise with the Plaintiff Bank since it presented an extremely strong case for summary judgment but for this flaw.

This situation is similar to that in H C C C No. 606 OF 1998 KENYA COMMERCIAL BANK LIMITED - V - JAMES KURIA NJINEin which Justice Ringera, said as follows: -

"To sum up, the Defendant appears to be a drowning man.However at the moment he is firmly holding onto the reedof inadmissibility of the Plaintiffs most crucial evidence.The force of the tide of full trial may or may not sweep himaway to certain death. Until then he is entitled to a respiteon the basis that he has one single triable issue, namely whether or not he is truly indebted to the Plaintiff in theamount claimed in the plaint."

The Plaintiffs application meets the same fate and the Defendants here have another retreat to face another battle.

As a result, there will be no use in going into the other issuesraised in this application. The application is dismissed but with noorder as to costs considering all the circumstances.

M K IBRAHIMJUDGECoram

M K Ibrahim - Judge

Cc Manoah

Mr. Masese for Mr. Muturi for PlaintiffNo appearance for DefendantDated and Delivered at Nairobi this 3rd day of June 2004.

M K IBRAHIM

JUDGE