BY SAM ALFAN.
Mauritius based lender Afrasia Bank Ltd will have to wait longer to receive more than Sh892 million it deposited in collapsed Chase Bank ltd in 2016.
The amount was to be paid by SBM Bank, which acquired Chase Bank. In a decision last year, the High Court ruled that SBM would take over the liabilities of the Chase Bank.
The Court of Appeal, however, suspended the decision pending the determination of an appeal filed by SBM Bank.
Justices Daniel Musinga, Hellen Omondi and Dr Imaana Laibuta suspended the execution of judgement delivered by Justice Wilfrida Okwany last year
“There be a stay of execution of Judgement and decree of the High Court of High Court at Nairobi (Wilfrida Okwany J) dated July 21st ,2022 pending hearing and determination of civil appeal which will be heard and determined on priority basis,” ruled the appellate judges in their ruling.
The judges said the appeal by SBM was arguable and deserving of the Court’s inquiry.
Moreover, the judges said, even if only one of the grounds was arguable, that would satisfy the first limb of the twin principle for grant of stay.
Although Afrasia Bank had argued that it is a reputable bank capable of paying back the money in the event that the appeal succeeded, the judges disagreed.
The Judges noted that the Bank’s lawyer submitted that the Afrasia Bank has been “out of pocket since it paid the deposit with the said Chase Bank (Kenya) Limited, which amount is quite substantial and as a result, Afrasia’s financial position has adversely been affected which has in turn affected its operations.
“To our mind, this statement casts doubt on the respondent’s liquidity and ability to refund the decretal amount, if paid, and the appeal succeeds. In effect, the appeal would be rendered nugatory. In our view, the SBM’s Motion satisfies the second limb of the twin principle for grant of orders under rule 5(2)(b) of this Court’s Rules. In conclusion, we find that the applicant’s Notice of Motion dated 8th September 2022 succeeds,” said the judges.
Justice Okwany had ordered SBM Kenya to pay Afrasia Bank over $7.5 million (Sh892 million), which it deposited at Chase Bank before it collapsed.
The judge ruled that SBM is culpable for all liabilities of Chase Bank –which it acquired in 2018— including the monies deposited by Afrasia Bank.
The judge said the Transfer of Business Act was applicable in the deal and since SBM did not publish the mandatory notice under the law, it is liable for all Chase Bank dues.
“I, therefore, find that the respondent is liable for all liabilities of Chase Bank including the appellant’s claim herein,” said the judge.
The money was placed in a one-month fixed deposit account earning interest of 2.35 percent per year but Chase Bank buckled and was placed under receivership on April 7, 2016.
This was before Afrasia’s short-term investment was due to mature on April 18, 2016.
SBM however moved to the Appellate court.
The Bank’s Director legal and company secretary George Odete said the lender was held liable to pay Afrasia Bank millions, which was not part of the assets or liabilities transferred to it by, or assumed in the takeover.
He said the money is being held at Chase Bank and if that, if it is removed from the country, there is real and present danger that, even if the applicant’s appeal is successful, such success will be purely academic.
It was argued that SBM Bank will be able to make provision for the decretal sum and pay any sums so adjudged should its intended appeal fail; that the respondent will suffer no prejudice if the orders sought are granted; that the applicant has an arguable appeal with a probability of success; and that the appeal, if successful, would be rendered nugatory if the stay sought is not granted.
Afrasia opposed the case in an affidavit of Veemul Ramdence, the Senior Relationship Manager of the bank.
Ramdence said the application raises no arguable points and that the court lacks jurisdiction to entertain the matter on the basis that it was res judicata.
“If the stay order is not granted; that no documentary evidence has been tendered by the applicant to prove that the respondent will not be able to refund the decretal sum in the event that the appeal is successful; and that they are a reputable bank capable of refunding the decretal amount should the appeal succeed. The respondent urged us to dismiss the application with costs,” said SBM Bank.
Last year Justice Wilfrida Okwany ruled that SBM was liable to all the liabilities of the Chase bank Kenya ltd, including the claim by Afrasia Bank claim.
The judge directed the lender to refund the USD 7,500,000, which the Mauritius lender had deposited in 2016 plus an interest rate of 2.35%.
“Judgement is hereby entered in favour of the appellant (Afrasia Bank ltd) in the sum of USD 7,500,000 equivalent to (Sh892, 650,000.00) together with interest and costs,” ruled Judge Okwany.
In the decision, Justice Okwany set aside the arbitral award dated April 23, issued by the arbitrator Mwaniki Gachoka.
The deposit was to mature on April 18, 2016 but Chase Bank was placed under receivership by the Central Bank of Kenya and the Kenya Deposit Insurance Corporation, appointed the receiver.
Afrasia argued that SBM took over the assets and liabilities of Chase bank including the deposit it made in 2016.
Gachoka had dismissed Afrasia claim saying it was against public policy, prompting the appeal.
Afrasia Bank argued that given the agreed position that they deposited USD 7.5 million with chase Bank and given the sale agreement of April 17,208 required the seller to indemnify the purchaser with the funds which it avers it holds, then the Arbitrator erred in law and fact in falling to interpret the applicable statutes in a purposive manner which would achieve the result where no parties would actually lose the funds.
“The Arbitrator erred in law and fact by stating that a conflict existed between the Transfer of business Act, the Banking Act and the Kenya Deposit Insurance Act despite finding that” in so far as the intention of the requisite notices, the Tribunal finds that there is not inconsistences or conflict between the three Acts of parliament is the transfer of business act, the Kenya Deposit Insurance Act and the Banking Act, ” said Afrasia Bank.
Afrasia Bank accused the Arbitrator of introducing and creating doubt as to the party responsible for publishing the notice under section 3(1) of the Transfer of business Act when the law itself and existing practice was clear on this position and the parties themselves were not in doubt.
The judge said SBM did not publish the mandatory notice under the Transfer of Business Act, hence liable for all the liabilities of Chase Bank including the claim by the Mauritius-based lender.
