High Court Ruling on ABSA Bank Kenya PLC vs. Kenya Deposit Insurance Corporation

On March 15, 2024, Hon. Judge Dr. Nixon Sifuna of the High Court delivered a significant ruling in the case of ABSA Bank Kenya PLC (ABSA) vs. Kenya Deposit Insurance Corporation (KDIC). The judge declared Sections 13A and 21 of the Government Proceedings Act, along with Order 10 Rule 8 of the Civil Procedure Rules, unconstitutional. These provisions will remain inoperative unless upheld by a higher court or amended by Parliament to align with the Constitution of Kenya, 2010.

Overview of the Government Proceedings Act

Section 13A: Prohibits proceedings against the Government until 30 days after a written notice in the prescribed form has been served.

Section 21: Outlines the process for satisfying court orders against the Government, including the issuance of a certificate by the proper officer of the court after 21 days from the order date, or after costs have been taxed.

Section 21 (4): States that no execution or attachment shall be issued against the Government for enforcing payment of money or costs, and no individual shall be liable under any order for such payment by the Government.

Order 10 Rule 8 of the Civil Procedure Rules: Prohibits entry of judgment in default of appearance or pleading against the Government without the court’s leave, requiring applications for leave to be served at least seven days before the return day.

Key Points of the Ruling

The judge found these provisions discriminatory, hindering meaningful access to justice, and impeding the administration of justice, thus violating Article 48 of the Constitution of Kenya, 2010.

Case Summary: ABSA Bank vs. KDIC

Case Number: Commercial Case No. E411 of 2023

Background: ABSA Bank realized it had overpaid KDIC by Kshs. 215,346,841 in annual deposit contributions. On October 14, 2022, ABSA filed a suit seeking a refund of the overpaid amount plus interest at commercial rates from the date of each payment until full repayment.

Proceedings: ABSA obtained summons and served them to KDIC. KDIC entered an appearance but failed to file a defense within 14 days. Consequently, ABSA requested an interlocutory judgment. KDIC sought to stop the pending determination and requested more time to file its defense, citing its status as a government entity requiring a 30-day notice under Section 13A of the Government Proceedings Act.

Court’s Determination

1. Applicability of the Government Proceedings Act: The court held that the Government Proceedings Act does not apply to all government entities, excluding state corporations like KDIC.
2. Constitutionality of Sections 13A and 21: The court found these sections discriminatory and unconstitutional, as they give preferential treatment to the Government in litigation.
3. Order 10 Rule 8: Also declared unconstitutional for being discriminatory.

Outcome

The court awarded ABSA a refund of Kshs. 215,346,841 plus 14% interest per annum from the suit’s filing date to the judgment date. This ruling underscores the judiciary’s role in upholding the Constitution by reviewing and declaring outdated and discriminatory laws inoperative.

Implications and Future Actions

The judgment impacts enforcement actions against government entities. For example, City Lawyer Donald Kipkorir instructed auctioneers to seize Nairobi County Government assets over a Kshs. 1.69 billion debt in unpaid legal fees, following the court’s allowance of execution of orders against County and National Governments.

Legal Assistance

For further information or legal assistance on compliance or other legal matters, please contact us at:

• Email: info@wka.co.ke
• Website: www.wka.co.ke
• Phone: +254 798 03 580
• Address: Nairobi Hub, Parklands, Valley View Business Park, 6th Floor, City Park Drive, Off Limuru Road.

Please note that this newsletter provides a general guide and should not be relied upon without seeking specific legal advice.