Tulla Reserve Supplies Limited v National Bank of Kenya Limited, Musa A. Adan & Central Bank of Kenya [2017] KEHC 6694 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

COMMERCIAL & ADMIRALTY DIVISION

CIVIL SUIT NO. 276 of 2016

TULLA RESERVE SUPPLIES LIMITED.......PLAINTIFF/APPLICANT

VERSUS

NATIONAL BANK OF KENYA LIMITED...................1ND DEFENDANT

MUSA A. ADAN.........................................................2ND DEFENDANT

CENTRAL BANK OF KENYA....................................3RD DEFENDANT

RULING

1. The streams of Justice must be kept pure, assert the 1st and 2nd Defendant!

2. Invoking the long held Legal maxim ‘Ex turpicausa non orituractio’, National Bank of Kenya Ltd (the 1st Defendant or Bank) and Musa A. Adan (the 2nd Defendant) ask this Court to strike out this entire suit.  In a Notice of Preliminary Objection dated 17th August, 2016, this Court is urged, in limine, to bring this action to an early end.

3. This Objection is elaborated in the written submission dated 7th September 2016 and filed on the same day.  The basis of the objection is that the Plaintiff has in paragraphs 6C and 6D of the Amended Plaint, pleaded that he obtained a loan facility which is the subject matter in this suit by bribing officers of the 1st Defendant. It is submitted by the 1st and 2nd Defendants that under Section 39 of the Anti-corruption and Economic Crimes Act, Act No. 3 of 2003, it is a criminal offence to induce or reward the officers of the 1st Defendant including the 2nd Defendant to offer a Banking Facility or to disburse additional loans.  It is argued that the Plaintiff confesses to committing an economic crime.

4. Ex turpicausa non oritur actionis Latin for “from a dishonorable cause an action does not arise” and its rationale is not doubted.  And it is agreed that a Court of law will firmly and resolutely set its face against those who would breach, violate or defeat the law then turn to Court to seek their aid (see for example Kenya Pipeline Company Limited Vs. Glencore Energy (G.K) Limited [2015]eKLR).

5. So as to make its point the 1st and 2nd Defendant make extensive reference to the Amended Plaint of 12th August 2016.

6. The Plaintiffs claim is founded on facility for Kshs.245,000,000/-(Kenya Shillings two Hundred and forty five million) offered to it by the 1st Defendant under a scheme called ‘Investment Musharaka’.  It is explained that it is an Islamic Banking facility. As security therefor a charge for  Ksh. 175,000,000/ dated 2nd December 2014 was registered in favour of the 1st Defendant, joint and several guarantees of Kshs.245,000,000/= given by the Directors of the Plaintiff and assignments of receivables from Unga Holdings Limited and Kenya Prisons executed by the Plaintiff.  There were other securities as well. But nothing will turn on it even if I set them out. As would be typical of such schemes, a profit sharing ratio is said to have been agreed between the Plaintiff and the 1st Defendant.

7. At the end, it is alleged that the 1st Defendant disbursed Ksh.145,000,000 as opposed to Kshs.245,000,000/- agreed under the Contract and the Letter of Offer.

8. Paragraphs 6B, 6C and 6D of those Pleadings has attracted the current controversy and is reproduced hereunder:-

6B. The Plaintiff avers that the said contract was obtained by misrepresentation, coercion and undue influence through the 2nd defendant herein who is a director of National Amanah of the 1st Defendant.

6C. The Plaintiff avers that the 2nd Defendant extorted for funds using coercion and undue influence to a sum totaling Kshs.7,000,000. 00 that was made through cash and cheque deposits and USD.10,000 made by cash in  order to procure the said contract which is a total violation of the code of conduct as per the CBK prudential banking guidelines and the Banking Act.

6D. The Plaintiff avers that the said extortions were made through cash and cheque deposits by the Plaintiff to the 2nd Defendant in the 2nd Defendant’s Bank Account as follows:-

Date                    Amount                     cheque Number

9/08/2015          2,000,000                   000002

16/12/2014       3,000,000                    000120

17/12/2014       2,000,000                    000125

USD.10,000                  Cash

6D.  The Plaintiff avers that the 2nd Defendant used coercion and undue influence so as to obtain funds of the aforesaid sum of monies to procure the said contract in breach of the code of conduct.

The Court must necessarily return to these.

9. Ultimately, the Plaintiff seeks various Declarations including that the 1st Defendant is in breach of its duty and obligations under the facility letters and loan agreements.  Of interest is Prayer b(3) which reads:-

“Special damages against the 2nd defendant for the sum of Kshs.7,000,000 and USD 10,000 as per paragraph 6C and 6D of the Amended Plaint”.

10. This is the view of the Court.  It is true that  paragraphs 6B, 6C and 6D of the Amended Plaint alleges that the 2nd Defendant who is a Director of the 1st Defendant bank extorted Kshs.7,000,000/= and USD 10,000 from the 1st Defendant.  That this bribe was to enable the 1st Defendant use his influence to assist the Plaintiff obtain the facility which is now the subject of this suit.  The Plaintiff then seeks a refund of that sum from the 2nd Defendant.

11. Whilst the Plaintiff alleges that the 2nd Defendant may have assisted it to obtain the facility, the Plaintiff does not allege that the contract between it and the Bank is illegal and should be voided for that reason only.  As is apparent from the Plaint, the Plaintiff also attacks the contract as being unenforceable because of other reasons which include that it is:-

1) Contrary to Section 11 of The Banking Act as it purports to create a partnership and interest by the Bank in business of a customer.

2) Contrary to the Islamic Banking Practice.

12. The Plaintiff also complains of the manner in which the Contract was implemented.  It is averred on behalf of the Plaintiff that there was failure of consideration on the part of the 1st Defendant as it only disbursed a sum of Kshs.145,000,000/=  out of the contractual amount of Kshs.245,000,000/=.  The Plaintiff also avers that the 1st Defendant levied unlawful and unilateral debits in the Plaintiffs Account and overcharged it.

13. This Court has set out those allegations in an abridged form to demonstrate that the Plaintiff’s cause of action is founded on much more than the allegation of improper conduct of the 2nd Defendant.  A substantial part of the Plaintiffs cause does not seem to arise from the alleged dishonorable conduct and must survive the Defendants’ attack.

14. That said the contents of paragraphs 6B, 6C and 6D of the Amended Plaint is a bold statement by the Plaintiff that it bribed the 2nd Defendant so that the 2nd Defendant would assist it get the facility.  The Plaintiff seeks the intervention of Court to recover this bribe  money. If it is true that the Plaintiff indeed bribed the 2nd Defendant then it too is guilty of criminal conduct.  Both the giver and taker of a bribe are culpable.  The Court cannot lend assistance to a lawbreaker in the manner in which the Plaintiff seeks.

15. This Court does hereby hold that so as to set its face against the request by the Plaintiff and so as to save these proceedings from further impurity, it does hereby strike out that portion of the Plaint in which the Plaintiff seeks to recover money which it gave as a bribe.

16. Only to that extent does the Preliminary objection succeed.  As the 1st and 2nd Defendants have only succeeded partially, each party shall bear its own cost on the Preliminary objection.

Dated, Signed and Delivered in Court at Nairobi this 30th day of March,2017.

F. TUIYOTT

JUDGE

PRESENT;

Makokha for Plaintiff

Mugacha for Chege for 3rd Defendant

Makambo for Ojiambo for 1st & 2nd Defendant

Alex - Court Clerk