A foreign-currency loan issued in 1982 has become one of the most extraordinary commercial disputes in Kenyan history.
What began as a routine facility between garment manufacturing company Manchester Outfitters and Standard Chartered Financial Services grew into a legal war that spanned more than four decades, generated conflicting judgments, and forced the courts to confront fundamental questions within Kenya’s lending framework.
The dispute outlived judges, advocates, corporate boards, and legal regimes. It passed through pre-1990s commercial courts, the old Court of Appeal, and finally into the Supreme Court created by the 2010 Constitution.
After a 35-year legal battle that began in 1990, the Supreme Court delivered a final judgment that reinstated the earliest substantive decision: the 1999 High Court judgment that had been overshadowed for more than two decades.
THE ORIGINS: A 1982 LOAN THAT GREW INTO A LEGAL EPIC
In April 1982, Manchester Outfitters took a Eurocurrency loan guaranteed by Standard Chartered Financial Services. To protect itself, the lender secured its guarantee with a debenture, comprising a specific charge over its immovable property and a floating charge over its other assets. The document was standard for its time, broad in scope, and contained clauses stating it was a "continuing security" for all sums owed.
Four years later, global currency pressures pushed the parties to restructure the debt into a KSh 9 million shilling facility. That shift appeared simple, yet it introduced the question that would dominate the litigation: did the original 1982 debenture continue to secure the restructured loan, or did the bank need fresh documentation under Kenyan law?
Manchester Outfitters defaulted in 1989. Standard Chartered responded by appointing receivers under the powers in the 1982 debenture. The linen maker went to court immediately, insisting the security had “fallen away” after the restructuring and that the receivership was unlawful. The bank counterclaimed for the outstanding balance, maintaining the debenture was a continuing security. With that, the dispute entered the High Court.
THE FIRST CYCLE OF LITIGATION: HIGH COURT VERSUS COURT OF APPEAL
In 1999, after a retrial and procedural friction, the High Court ruled unambiguously for Standard Chartered. Justice Githinji affirmed that the 1982 debenture remained valid, the receivership was lawful, and Manchester Outfitters owed the bank more than KSh 24.8 million plus interest. It was a complete victory for the lender.
But within three years, the Court of Appeal dramatically overturned the outcome. In 2002, the appellate court held that the 1986 loan was a new facility requiring fresh security, declared the receivership unlawful, and awarded Manchester approximately Kshs 251 million in damages.
For over a decade, this was the final word, and the decision became the authoritative precedent on security registration.
Yet the case refused to rest. In an unprecedented move, the Court of Appeal agreed in 2014 to reopen its own 2002 judgment under the rare doctrine of residual jurisdiction. The court cited the profound public importance of the issues and a critical procedural flaw: a key volume of the trial record was missing. In 2016, it formally vacated its earlier ruling.
When reheard in 2022, the Court of Appeal sided with Manchester Outfitters again. But in doing so, it certified the matter for appeal to the Supreme Court, setting the stage for the final chapter.
THE FINAL RESOLUTION: SUPREME COURT RESTORES THE 1999 DECISION
The Supreme Court framed its judgment around two questions central to Kenyan lending.
First, whether a financier must register fresh securities for a new advance. The Court held it does not, provided the original security is a 'continuing security', like the 1982 debenture, with its clear clauses covering 'all sums due', and remains formally undischarged. The 1986 facility letter did not void this security.
Second, the Court affirmed that even if the security had failed, the underlying debt obligation remained. A borrower cannot escape repayment simply because a security is defective.
Applying these principles, the Court ruled the 1982 debenture always secured the loan, the receivers were lawfully appointed, and Manchester Outfitters remained liable for the KSh 24.8 million debt.
In its November 2025 ruling, the Apex Court struck out the KSh 251 million damages award and reinstated the 1999 High Court decision. In a final ruling reflecting the case's unique nature, each party was ordered to bear its own costs.
