Republic v Receiver Manager, Imperial Bank Limited (In Receivership) Ex parte Amool Jivraj Nathwani [2019] KEHC 10917 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

MILIMANI LAW COURTS

JUDICIAL REVIEW DIVISION

MISC. APPLICATION  NO. 84 OF 2017

IN THE MATTER OF AN APPLICATION BY AMOOL JIVRAJ NATHWANI FOR ORDERS OF MANDAMUS

AND

IN THE MATTER OF ARTICLE 47 OF THE CONSTITUTION & THE FAIR ADMINISTRATION ACT

AND

IN THE MATTER OF ORDER 53 OF THE CIVIL PROCEDURE RULES, 2010

AND

IN THE MATTER SECTIONS 33 AND 50 OF THE KENYA DEPOSIT INSURANCE ACT, CHAPTER 487C

BETWEEN

REPUBLIC..................................................................................APPLICANT

-VERSUS-

THE RECEIVER MANAGER,

IMPERIAL BANK LIMITED (IN  RECEIVERSHIP).....RESPONDENT

AND

AMOOL JIVRAJ NATHWANI...........................EX PARTE APPLICANT

JUDGMENT

The parties.

1. The ex parte applicant is the holder of a savings account  No. 5011070002 with  Imperial Bank Limited (In Receivership). The Respondent is the Receiver Manager of Imperial Bank Limited (In Receivership).

The Orders sought.

2. By way of a Notice of Motion  dated 3rd March 2017, the ex parte applicant  seeks  the following Orders:-

a. Thatan order of Mandamus  compelling and directing the Respondent to make payment to the applicant in the sum of Kshs. 4,174,796. 4  from the sums held in his savings and fixed deposit accounts  with Imperial Bank Limited (In Receivership) within seven (7) days, which sum is made out as follows:-

i.   Kshs. 437,047. 82 on savings account No. 501107002;

ii.  Ksh. 737,748. 32 on fixed deposit account FDR No. 003DEP3151350004; and

iii.  Ksh. 1,500,000. 00 each on fixed deposit accounts FDR No. 00sDEP3143220004 and FDR No. 003DEP3142440002.

b.   That an order of Mandamus do issue compelling and directing the Respondent to make payment to the applicant in the sum of Kshs. 797,948. 22 being 10% of the deposits of the remaining sums held in his fixed deposit account FDR No. 003DEP3143220004and FDR No. 003DEP3142440002 with Imperial Bank Limited (In Receivership) within seven (7) days, which sum is made out as follows:-

i.   Kshs. 236,272. 22 on fixed deposit account FDR No. 003DEP3143220004; and

ii.  Kshs. 561,676. 00 on fixed deposit account FDR No. 003DEP3142440002.

c. That the costs of and incidental to this suit be awarded to the ex parte applicant.

Factual Background.

3. The   ex parte states that he is a holder of savings account No. 501070002 with  Imperial Bank Limited (In receivership) with a credit balance of Kshs. 437,047,82 as at 13th October 2015 and fixed deposit account  for which he was issued with Fixed Deposit Receipts as follows:-

i. FDR No. 003DEP3151350004 issued on 14th August 2015 maturing on 13 November 2015 in the sum of  Ksh. 737,748. 32.

ii.  FDR No. 003DEP3143220004issued on 18th August 2015 maturing on 17th November 2015 in the sum of   Ksh. 3,862,722. 29; and;

iii.  FDR No. 0033DEP3142440002issued on 1st September 2015 maturing on 1 December 2015 in the sum of Ksh. 7,116,760. 00.

4.  The ex parte applicant also avers that  following the declaration of the initial phase of payouts for amounts not exceeding Kshs. 1,000,000. 00, he applied for the payment of the amounts  in his above accounts through DTB Limited and submitted all the required documents and  the Respondent approved the payment.

5. He further avers that during the second phase of  payouts to depositors for amounts not exceeding Ksh. 1,500,000. 00 which commenced on or about 27th July 2016, he once again submitted his request for payment on deposits in his  above  accounts through NIC Bank Limited on 10th August 2016. He also avers that the Respondent did not make the payment  but instead gave the reason that he was a guarantor for an overdraft facility advanced to African Retail Trade (2005) Limited, by virtue of him signing the letter of offer dated 24thDecember 2009 on behalf of the said company. The ex parte applicant avers that he never guaranteed the said company.

6. The  ex parte applicant also avers that vide   his advocates letter dated  19th December 2016, he  requested the Respondent  to discharge its statutory mandate  and pay the said sum, but, despite the said request, the Respondent has failed, and/or refused to discharge its statutory mandate thereby denying him the said funds.

7. He also avers that on 28th December 2016, the Kenya Deposit Insurance Corporation announced a further payment of sums up to 10% of the current deposit of verified depositors of the Respondent subject to a minimum of Kshs. 200,000/= but the Respondent failed and or refused to disburse 10% of the deposits in the ex parte applicants deposits amounting to Kshs. 797,948. 22without giving reasons.

Legal  foundation of the application.

8. The ex parte applicant's case is that the Respondent  is under a statutory duty under section 50 of the Kenya Deposit Insurance Act[1](herein after referred to as the Act) to make payments in respect of any insured deposits with the bank where it is appointed as a receiver.

9.  The ex parte applicant also states that the Respondent has failed to discharge its statutory mandate under sections 46 and 50 of the act thereby denying him his funds.

10. Further, the ex parte applicant states that the refusal to pay premised on the grounds that the ex parte applicant was a guarantor for an overdraft  facility advanced to  African Retail Trader (2005) Limited when no Deed of Guarantee exists and failure to pay 10% of the remaining deposits  in  his fixed deposit accounts is irrational, unreasonable and ultra vires its  statutory mandate under section 50of the act, and, as a consequence, he has been denied a portion of his funds which he is entitled to as a matter of right.

Respondent's  Replying Affidavit.

11. Andrew Wamicwe, the Respondent's Legal counsel swore the Replying Affidavit dated 4thNovember 2017. He averred that exhibit AJN 2 at pages 3 to 7annexed to the ex parte applicant's application is a signed letter of offer dated 24th December 2009 undertaking to give a personal guarantee for  Ksh. 60,000,0000/= in favour of the Respondent. He further averred that under clause 10of the said letter, the  securities to be held were the personal guarantees and indemnity (joint and several)  to the tune of Ksh. 60,000,000/= guaranteeing the directors of African Retail Traders, namely, Mohamed Farid, Sultan Karim, Abdulla Amny, Atul R. Shahand Amool J.K Nathwani.  He further averred that despite the directors undertaking to sign personal guarantees in favour of the  Respondent, they declined, and, that, the  undertaking given on 24thDecember 2009 by the said directors still stands.

12. Mr. Wamicwe also averred that African Retail Traders owes the Respondent over Ksh. 140,000,000/=, hence, it will be unjust and unfair to the other depositors if the ex parte applicant is paid the sums claimed herein unless the issue of the ex parte applicant and the dishonored guarantee to African Retail Traders for Ksh. 60,000,000/= is explained. He also averred that Judicial Review orders are discretionary and that the ex parte applicant does not deserve  this courts discretion.

Ex parteApplicant's further Affidavit.

13. Mr. Amooj Juivraj Nathwani swore the further Affidavit dated  15thDecember 2017. He averred that he did not sign nor did he undertake to give a personal guarantee for Ksh. 60,000,000/=  in favour of the Respondent for the loan advanced to African Retail Traders Limited. He averred that the  Respondent has not produced evidence of any signed and or registered Deed of Guarantee. Further, he averred that such undertakings must be in writing. He also averred that  clause 10 of the said document is not and was not intended to be a personal guarantee by himself or any of the persons listed therein. He averred that a Deed of Guarantee had to be executed to bind him as a guarantor.

14. Additionally, he also averred that without prejudice to the above, he is not personally liable to repay any monies owed to the Respondent  by the said company since he did not execute a personal guarantee to secure the loan  to the company from the Respondent.

15. Mr. Nathwani further averred that in absence of  a Deed of Guarantee executed by himself, the allegation of a dishonored  guarantee has no basis. Also, he averred that a guarantee cannot be enforced by way of Judicial Review proceedings and that the Bank's claim (if any) has been extinguished by dint of section 4(a) of the  Limitation of Actions Act.[2]

Issues for determination.

16. I find that only one issue falls for determination,  namely:- whether the ex parte applicant has established  any grounds for this court to grant the orders of Mandamus sought.

17. The crux of the ex parte applicant's  advocates' submissions as I understood it is that the Respondent acted ultra vires section 50 of the Act by refusing to pay the ex parte applicant on grounds that the ex parte applicant was a guarantor for an overdraft facility advanced to African Retail Trader (2005) Limited, yet no Deed of Guarantee exists. Citing the definition of a guarantee in Volume 20 of the Halsbury's Laws of England[3] and  Kolaba Enterprises Limited v Shanshudin Hussein Varvani & Another[4] in which the court defined a guarantee as a separate contract,  he submitted that a guarantee must as of necessity be in writing.[5] Further, he argued that clause 10 of the said document is not and was not intended to be  a guarantee. Also,  he argued that the  Respondent never provided evidence of the existence of the said guarantee. Counsel further submitted  that a guarantee cannot be enforced by way of Judicial Review proceedings, hence, the Respondent's refusal to pay is ultra vires its statutory mandate and a violation of section 4of the Fair Administrative Action Act.[6]

18. The Respondent's counsel submitted that Mandamus lies when officials have a public duty to perform, and have refused to perform.[7] He submitted that the proviso to section 50(2) of the act allows  the Respondent to offset deposits against loans and debts owed by the depositor to the institution, hence, the ex parte applicant's application is based on the misapprehension of the law.

19. Counsel referred to Rule 37 (3) of Act which provides that "No action shall be taken against the Corporation in respect of the obligation of the Corporation  to make payment in relation to an insured deposit unless the action is commenced within six years after the date of appointment of the corporation as liquidator of the institution in which the deposit is held"and argued that this suit is pre-mature. He argued that the Respondent is an institution  under receivership  and not liquidation, and, that, the statutory duty to pay insured deposits is yet to accrue. Also, he argued that these proceedings are a  misapprehension of the law.

20. He also argued that under section 36 of the Act, the Receiver may, where it deems it necessary, withhold payment to a third party in respect of any deposit with an institution  until it has received an assignment in writing of all the rights and interests of the depositor in relation to the deposit. Additionally, he argued that  in the event insured deposits are due, section 33(7) of the Act provides that the corporation shall offset and withhold payment of  such portion of the insured deposit of any depositor in any institution against any loans or debts due and owing by that depositor to the institution or against any claims for injuries or losses through negligence or other wrongdoing against any depositor who may be liable to the institution or the corporation as a director, shareholder, officer, employee, agent or other person. Lastly, he submitted that  the ex parte applicant together with his fellow directors listed above are guarantors to the Ksh. 140,000,000owed to the  Respondent.

21. It is common ground that an order of Mandamus will issue to compel a person or body of persons who has failed to perform  the duty to the detriment of a party who has a legal right to expect the duty to be performed.[8]Mandamus is a judicial command requiring the performance of a specified duty which has not been performed. Originally a common law writ, Mandamus has been used by courts to review administrative action.[9]

22. Mandamusis employed to compel the performance, when refused, of a Ministerial duty, this being its chief use. It is also employed to compel action, when refused, in matters involving judgment and discretion, but not to direct the exercise of judgment or discretion in a particular way, nor to direct the retraction or reversal of action already taken in the exercise of either.[10]

23. Mandamusis a discretionary remedy, which a court may refuse to grant even when the requisite grounds for it exist. The court has to weigh one thing against another to see whether or not the remedy is the most efficacious in the circumstances obtaining. The discretion of the court being a judicial one must be exercised on the basis of evidence and sound legal principles.

24. Mandamus is an equitable remedy that serves to compel a public authority to perform its public legal duty and it is a remedy that controls procedural delays. The  test for Mandamus is set out in Apotex Inc. vs. Canada (Attorney General),[11] and, was also discussed in Dragan vs. Canada (Minister of Citizenship and Immigration).[12]  The eight factors that must be present for the writ to issue are:-

(i)There must be a public legal duty to act;

(ii)   The duty must be owed to the Applicants;

(iii)  There must be a clear right to the performance of that duty, meaning that:

a.  The Applicants have satisfied all conditions precedent; and

b.  There must have been:

I.   A prior demand for performance;

II.   A reasonable time to comply with the demand, unless there was outright refusal; and

III.  An express refusal, or an implied refusal through unreasonable delay;

(iv)    No other adequate remedy is available to the Applicants;

(v)   The Order sought must be of some practical value or effect;

(vi)    There is no equitable bar to the relief sought;

(vii)    On a balance of convenience, mandamus should lie.

25. It is imperative that the above tests must be satisfied before an order of mandamus can issue.  For Mandamus to issue, there must be a public legal duty to act and the duty must be owed to the Applicant. There must be a clear right to the performance of that duty, meaning that the Applicant has satisfied all conditions precedent. There must have been a prior demand for performance; a reasonable time to comply with the demand, unless there was outright refusal; and an express refusal, or an implied refusal through unreasonable delay.

26. The  question that begs for an answer is whether the ex parte applicant has demonstrated the existence of the legal duty to act. The Respondent's counsel has invoked the provisions of the proviso to section 50 (2)(a) of the Act. The Respondent has stated clearly that there exists a debt and cited the guarantee. As argued later in this determination, this is a contested issue of fact which cannot be determined in a Judicial Review proceeding. The proviso  to the above section raises serious doubts as to whether a legal right exits to be enforced by way of Mandamus. The proviso reads that:- "Provided that the Corporation may offset the deposits or other liabilities owed by the institution to any depositor or other creditor against any loans or other debts owed by that depositor or creditor to the institution."

27. Also relevant is the Respondent's counsel's submission that this suit is pre-mature and/or the ex parte applicant's  right is yet to accrue anchored this submission on the provisions of section 37(3)of the Act.  Determining this question is involves a merit review which is outside the scope of Judicial Review. It is sufficient to point out that it casts a serious doubt on whether the ex parte applicant has demonstrated that the Respondent has a legal duty to act under such circumstances.

28. The provisions of section 36 of the Act will have to be brought into view and its relevancy to this case determined.  This section casts a thick cloud on the question whether the test of the existence of a legal right has been satisfied. The section provides that "the Corporation may, where it deems it necessary, withhold payment to a third party in respect of any deposit with an institution until it has received an assignment in writing of all the rights and interests of the depositor in relation to the deposit."

29. Also relevant is section 33(7) of the Act which provides that "the Corporation shall offset and withhold payment of such portion of the insured deposit of any depositor in an institution against any loans or debts due and owing by that depositor to the institution or against any claims for injuries or losses through negligence or other wrongdoing against any depositor who may be liable to the institution or the Corporation as a director, shareholder, officer, employee, agent or other person." The implication of this section is a matter that warrants interrogation by the court.

30. It is evident that one cannot talk of refusal to pay when such legal issues are yet to be settled. It was a serious error for the  ex parte applicant to  ignore the above provisions  and invoke Judicial Review jurisdiction, and, pray for orders or Mandamus without  ensuring that the conditions laid down in the above authorities are satisfied.

31. The other test is "an express refusal, or an implied refusal through unreasonable delay." I am un able to conclude that there was an express or implied  refusal in view of the above provisions. Differently stated, none of the above conditions has been satisfied for Mandamus to issue. Mandamus can only issue where it is clear that there is wilfulrefusal or implied and or unreasonable delay. Applying the above tests to the facts and circumstances of  this case, I find and hold that the ex parte applicant has not satisfied  any of the above conditions. It follows that there is no basis at all for the Court to grant the order of Mandamus.

32. More fundamental is the fact that the issues discussed above touch on the merits of the ex parte applicant's case and require the court to take evidence before it can decide. This is outside the province of Judicial Review jurisdiction.  For example whether  or not the ex parte  applicant signed the  guarantee in question is an issue that requires the court  to hear evidence from both parties.  If the document in question was not a guarantee, what is its legal effect if any? Again, this will require interrogating evidence and   cross-examination of witnesses.  Determining such issues will involve a merit review, a function which is outside the purview of Judicial Review jurisdiction. Whether  a Deed of Guarantee existed or not in whatever form calls for evidence to be resolved.

33. This court is being invited to determine the question that if  at all the said document was not a guarantee,  then what was the intention of the parties?. The court cannot determine the parties  intention without venturing into evidence, hence, delving into merits. The ex parte applicant's counsel correctly submitted that the question of whether the document was a guarantee  cannot be determined in this Judicial Review application. The reverse is true. The ex parteapplicant's case cannot be determined  by way of Judicial Review. He ought to have filed it at the Commercial Division.  On this ground, this case collapses.

34. Also worth noting is the ex parte applicant's counsel's submission that the Respondents claim hinged on the guarantee is statute barred. To me this issue if contested requires interrogation.  It will require evidence to demonstrate when time began to run and when it lapsed.

35. I must also point out that the order(s) sought in this application amounts to inviting this court to enter judgment in a  contested liquidated claim without hearing evidence. This court cannot do so. It is a dangerous invitation to this court to determine a strictly civil dispute without hearing evidence. It involves determining the Respondent's liability and make a finding whether the amounts are payable and effectively enter judgment for the amount. The case falls totally outside the province of Judicial Review. It is simply a misconceived shortcut designed to obtain a judgment in an otherwise civil dispute of commercial nature.

36. Judicial review is concerned with the decision making process and not merits. In  Republic vs Registrar of Societies & 3 Others ex parte  Lydia Cherubet & 2 Others[13]  the court decried the practice of bringing claims through Judicial Review which require the court to embark on an exercise that calls for determinations to be made on merits which in turn requires evidence to be taken to decide issues of fact.[14] The issues raised this case  can only be determined  in a forum where the litigating parties have an opportunity to present  their evidence and also test the evidence of their opponents by way of cross examination.

37. Judicial review is about the decision making process, not the decision itself. The role of the court in Judicial Review is supervisory. Judicial Review is the review by a judge of the High Court of a  decision; proposed decision; or refusal to exercise a power of decision to determine whether that decision or action is unauthorized or invalid. It is referred to as supervisory jurisdiction - reflecting the role of the courts to supervise the exercise of power by those who hold it to ensure that it has been lawfully exercised. Judicial review is more concerned with the manner in which a decision is made than the merits or otherwise of the ultimate decision. As long as the processes followed by the decision-maker are proper, and the decision is within the confines of the law, a court will not interfere.

38. Broadly, in order to succeed in a Judicial Review proceeding, the applicant will need to show either:- the person or body is under a legal duty to act or make a decision in  certain  way and is unlawfully refusing or failing to do so; or a decision or action that has been taken is 'beyond the powers' (in latin, 'ultra vires') of the person or body responsible for it.These two tests have not been established in this case. In my view, this is not a Judicial Review case but a civil dispute which ought to have been filed in the  Commercial Division.

39. The discretionary nature of the Judicial Review remedy sought in this application means that even if a court finds a public body has acted wrongly, it does not have to grant any remedy. Examples of where discretion will be exercised against an applicant may include where the applicant’s own conduct has been unmeritorious or unreasonable, for example where the applicant has unreasonably delayed in applying for Judicial Review, where the applicant has not acted in good faith, or where a remedy would impede the authority’s ability to deliver fair administration,or where the judge considers that an alternative remedy could have been pursued.

40. In this case, compelling the Respondent to release deposits when the basic legal requirements are in doubt would in my view amount to impeding its mandate or directing it to act illegally.  Further, as stated above, the ex parte applicant had the option of  filing a civil suit instead of invoking Judicial Review jurisdiction of this Court.

41. In view of my analysis of the law and the determination of the questions raised herein above, the conclusion becomes irresistible that this is not a proper case for Judicial Review orders of Mandamus to issue. Accordingly,  I find and hold that the ex parte Applicant's Application dated 3rdAugust 2017 must fail. Consequently, I hereby dismiss the application dated 3rdMarch 2017 with costs to the Respondent.

Orders accordingly.

Signed, Delivered and Dated  at Nairobi this  17thday ofJanuary2019.

John M. Mativo

Judge.

[1] Act No. 10 of 2012.

[2]  Cap 22, Laws of Kenya.

[3]  4th Ed. 2001.

[4]  {2015}eKLR.

[5]  Citing Kenya Planters Co-operative  Union Limited v Stephen Nyaga Kimani {2005} eKLR.

[6] Act No. 4 of 2015.

[7]  Citing Republic v Attorney General & Another ex parte Ongata Works Limited {2016}eKLR.

[8] See Kenya National Examinations Council vs R ex parte Geoffrey Gathenji Njoroge & 9 Others {1997} eKLR.

[9]W. G. & C. Byse, Administrative & Review Law, Cases and comments 119-20 (5th ed. 1970). Originally, mandamus was a writ issued by judges of the King's Bench in England. American courts, as inheritors of the judicial power of the King's Bench, adopted the use of the writ.

[10] Wilbur vs. United States ex rel. Kadrie, 281 U.S. 206, 218 (1930). See also Jacoby, The Effect of Recent Changes in the Law of "Non-statutory" Judicial Review, 53 GEO. IJ. 19, 25-26 (1964).

[11] 1993 Can LII 3004 (F.C.A.), [1994] 1 F.C. 742 (C.A.), aff'd 1994 CanLII 47 (S.C.C.), [1994] 3 S.C.R. 1100.

[12] 2003 FCT 211 (CanLII), [2003] 4 F.C. 189 (T.D.), aff’d 2003 FCA 233 (CanLII), 2003 FCA 233).

[13] {2016}eKLR.

[14] Counsel also cited Seventh Day Adventist Church vs Nairobi Metropolitan  Development {2014} eKLR in which a similar position was held.