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Court Rescues Pharmacist in Sh9.4 Million Suit
In May 2002, the High Court struck out a defence by Isaboke and Nuru Chemist Ltd and ordered the two to pay NBK Sh3.5 million and Sh5,937, 231.70 respectively. Isaboke was to pay Sh3.5 million being the limit of the amount he agreed to pay if Nuru failed to repay a loan.
They were to pay the amounts with interest at 26 per cent from May 31, 2001 until payment was completed. The two had filed a joint statement of defence in a suit against them by NBK, which had sued them for allegedly refusing to repay a Sh2million loan granted to Nuru Chemists Ltd by Standard Chartered Bank of Kenya, Kisii branch, on August 16, 1993.
In 1996, NBK took over all debts, obligations and duties of the bank. It is against this background that NBK was demanding repayment of loans advanced by the bank. The appellants allegedly failed to pay the debts and made various repayment proposals, which they did not honour. In their joint statement of defence, Isaboke and Nuru Chemist denied owing the bank any debts adding that they did not have knowledge of NBK taking over the debts, liabilities and duties of Standard Chartered Bank, Kisii Branch.
Defence
In reply to an application by NBK to have their defence struck out, Isaboke said all loans advanced to Stanchart had been fully paid through a loan advanced by Barclays Bank of Kenya. He annexed a copy of the letter of offer from Barclays Bank, Kisii branch and gave numbers of the cheques allegedly for payment of the loan amounting to Sh2,090,835.
At the hearing of the application to strike out the defence, the businessman's lawyer sought an adjournment to allow him time to prepare for the case. The application for adjournment was refused and the matter proceeded with the bank's lawyer making his submissions. In response, the businessman's lawyer said he had nothing to say.
In effect, the appellants were not heard in their response to the submission by the bank's lawyer. Having heard the application "in the presence of all parties," Justice Tom Mbaluto allowed it, struck out the defence and entered judgement in favour of the bank.
In his ruling of May 24, 2002, Justice Mbalu to had this to say: "I find that the defendants' defence is a sham which wholly fails to raise any triable issues". The businessman and his firm felt aggrieved by that decision, hence the appeal that culminated in the judgement delivered on Friday.
The appeal was premised on three grounds: High Court Judge erred in law and fact by not holding that there was a triable issue or issues; judge failed to appreciate that the defendants had a good defence - that there was no evidence of transfer or assignment of the defendants' alleged debt from Stanchart and; the judge erred in granting the bank what it asked for against them.
A three-judge bench set aside the order by Justice Mbaluto striking out a joint statement of defence by Isaboke and his Nuru Chemist Ltd. Appellate Judges Erastus Githinji, Philip Waki and Onyango Otieno substituted it with an order dismissing an application by NBK that sought the striking out of the joint statement of defence. The court ordered that the suit proceed to full hearing. The bank is to pay the costs of the appeal and the cost of the notice of motion in the superior court. The judges said they were not persuaded that the statement of defence by the appellants was a sham.
In their view, the statement of defence raised substantial issues that would only be determined at a full trial. The Judges said a claim by NBK that it was a party to the original contract between Stanchart and the appellants because it took over the debts, the appellants' contention that they were not aware of these developments, was an issue fit for a full trial.
The appellants also raised another triable issue as to whether NBK had locus standi (sufficient legal interest) to sue them on the basis of a contract entered into between them and Standard Bank. The other issue they raised was that even if there was a debt with Stanchart, Kisii branch, which they did not deny, the same had been paid. The question whether the alleged debt had been fully repaid as alleged in the replying affidavit is another triable issue.
Judgement
Said the Judges: "Allegations were made by NBK that it took over the debts of Stanchart, Kisii branch and that the subject debt was one of the debts and that it had not been repaid. These were denied. That called for a full trial where proof would be availed in respect of those claims. The way the claim was made and the judgement was entered would mean double payment in respect of a loan of Sh2million to Nuru Chemist Ltd and guaranteed by the businessman to the extent of Sh3.5million, required a full trial.
The judges faulted Justice Mbaluto for not directing his mind to the legal principle that requires the court to allow "a defendant to defend where he shows that he has a fair case for defence or reasonable grounds for setting up a defence or even a fair probability that he has a bonafide defence".
He did not consider for instance, that there was need to ventilate the question as to whether or not the bank indeed took over the alleged debt owed Standard Bank, Kisii branch by production of relevant documents, which could only be done at a full hearing. Again, having refused the adjournment which would have given the appellants a chance to produce the cheques they allegedly used in paying the debt as they stated in their replying affidavit, the judge did not consider that that allegation that the debt to Standard Bank, Kisii branch had to be proved at a full hearing where documents or exhibits proving payments would be availed.
The main suit has been resuscitated is now back at the High Court for hearing and determination on the merits. It would be heard de novo by any judge other than Justice Tom Mbaluto. Mbaluto has been on suspension since 2003 for reasons other than this case.
