National Bank of Kenya Limited v Juma Construction Company & 4 others [2022] KEHC 182 (KLR)

National Bank of Kenya Limited v Juma Construction Company & 4 others (Civil Case 48 of 2010) [2022] KEHC 182 (KLR) (Commercial and Tax) (14 March 2022) (Judgment)

Neutral citation: [2022] KEHC 182 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Civil Case 48 of 2010

A Mabeya, J

March 14, 2022

Between

National Bank of Kenya Limited

Plaintiff

and

Juma Construction Company

1st Defendant

Grace Serapayi Wakhungu

2nd Defendant

Jacob Juma

3rd Defendant

John Walukhe Koyi

4th Defendant

Agnetta Simuli

5th Defendant

Judgment

1. Vide a plaint dated 22/1/2010, the plaintiff brought this suit seeking judgment as follows: -a.As against the 1st defendant, Kshs. 8,283,612. 40 with interest at 19% per annum from August, 2007 until payment in full.b.As against the 3rd, 4th and 5th defendant jointly and severally, Kshs. 3,000,000/= plus interest at the rate of 19% per annum from 3/8/2007 until payment in full.c.As against the 2nd defendant Kshs. 3,000,000/= plus interest at the rate of 19% from 3/8/2007 until payment in full.d.Costs of the suit

2. The plaintiff’s case was that at the request of the 2nd to 4th defendant, it granted a banking facility to the 1st defendant on various dates between April, 2001 and June, 2006 amounting to Kshs. 10,000,000/=. for the 1st defendant’s construction business.

3. That the 2nd, 3rd, 4th and 5th defendants provided securities as follows:-i.A legal charge over L.R. No. 12610/26 by the 2nd defendant for Kshs. 7,000,000/-.ii.Joint and separate irrevocable and continuing personal guarantees issued by the 3rd, 4th and 5th defendant for kshs. 3,000,000/=.iii.Individual guarantee issued by the 2nd defendant for Kshs. 3,000,000/=.

4. That the principal borrower defaulted in repayment and a statutory notice was issued and the security sold to recover Kshs. 11,045,346/- but only realized Kshs. 2,850,000/=. That the outstanding balance was thus Kshs. 8,282,612. 40 as at 3/8/2007 plus interest at 19% until payment in full. That the plaintiff issued notices on 30/6/2009 and 10/9/2009, respectively notifying the 2nd to 5th defendant of the 1st defendant’s default and demanded payment of the guaranteed principal sum plus interest but the claim remained unsatisfied.

5. The 1st and 3rd defendant put in statements of defence dated 12/6/2010 which were similar in nature. It was their case that upon default, it was agreed between the plaintiff and defendants that L.R No. 12610/26 would be sold and the plaintiff would accept the proceeds therefrom in discharge of its claim. That in the said sale, the plaintiff owed the defendants a duty to take reasonable precaution and obtain the true market value for the property. That the property was sold at a gross undervalue hence the plaintiff acted negligently and breached its said duty.

6. That the parties orally agreed that after the sale, the plaintiff would not enforce payment for any outstanding debt, thus it was inequitable for the plaintiff to claim Kshs. 8,283,612. 40 from the defendants. That they were not served with any notice.

7. The 4th defendant put in a defence dated 3/6/2010. He denied ever executing a personal guarantee or being indebted to the plaintiff as claimed. He averred that he was never notified of any default.

8. The case against the 2nd defendant was withdrawn on 30/1/2012 after she paid her share of the guarantee. The 3rd defendant is deceased and the suit against him abated. The 5th defendant did not file any defence.

9. The matter was heard in open court on 8/11/2021. The plaintiff appeared but there was no appearance by the defendants. The plaintiff opened its case and called Paul Chelanga as Pw1. He was the plaintiff’s Accounts Manager. He adopted his witness statement dated 30/8/2013 and produced the plaintiff’s bundle and supplementary bundle of documents as PExh1 and 2, respectively.

10. His testimony was in line with the plaintiff’s claim in the plaint. He further told the Court that the property known as L.R. 12610/26 Machakos was valued on the plaintiff’s instructions. The valuation returned a market value of Kshs. 4,000,000/= and a forced sale of Kshs. 2,800,000/=.

11. He explained how the property was sold at an auction for Kshs. 2,850,000/- which total sum was received by the plaintiff. He denied the allegations that the property was purchased by any of the plaintiff’s officers but a Mr. Wahome Gitonga. He claimed that after the purchase price was credited to the 1st defendant’s account, the amount due was Kshs. 8,283,612/40 which the plaintiff was now claiming from the defendant’s in terms of their respective liabilities.

12. Since the defendants did not attend, the plaintiff closed its case and made submissions thereon.

13. I have considered the pleadings, the evidence and submissions on record. The issue for determination is whether the plaintiff has proved its case against the defendants as pleaded.

14. The lending to the 1st defendant was proved. The plaintiff produced personal guarantees executed by the 3rd to 5th defendant. It also produced letters of demand made to the respective defendants. Its evidence was not rebutted. To the Court’s mind, there was sufficient evidence adduced which proved the plaintiff’s case against the defendants.

15. The main defence put up by the defendants was that, upon the 1st defendant’s default, there was an oral agreement to the effect that the charged property would be sold to fully settle the debt. The defendants failed to attend the trial and offer evidence in support of their allegations in their respective defences. Having failed to call any evidence to rebut that of the plaintiff and support their defence, the plaintiff’s case had been proved to the required standard.

16. The defendants had also challenged the rate of interest claimed by the plaintiff. I have looked at the personal guarantees produced at pages 31 to 35 of PExh1. There was no provision of any interest on the principal sum guaranteed. Accordingly, the claim by the plaintiff for interest at the rate of 19% pa cannot stand.

17. One thing was clear. At the commencement of the suit, the amount due to the plaintiff and claimed from all the defendants was Kshs. 8,283,612/40. However, during the pendency of the suit, the 2nd defendant paid her share and had her property discharged. According to the plaint, the 2nd defendant’s liability to it was Kshs. 2,000,000/-. The plaintiff only stated that the 2nd defendant paid her share and the case against her was withdrawn.

18. Despite as aforesaid, there is nowhere on the record did the plaintiff show that the amount paid by the 2nd defendant was applied towards reducing the 1st defendant’s liability. In the view of this Court, the plaintiff having admitted that the defendant had paid her share of liability, which was admittedly Kshs. 2,000,000/-, the amount then outstanding should have been 6,283,612/40 and not the amount originally claimed. No statement of account was produced to show the status of the account of the 1st defendant as at the time of filing suit.

19. The upshot is that the plaintiff was able to prove its case against the defendants to the required standard. Accordingly, judgment is hereby entered against the 1st, 4th and 5th defendant as follows: -a)1st defendant, Kshs. 6,283,612/40 plus interest of 19% pa from the date of the suit.b)4th defendant, Kshs. 3,000,000/=.c)5th defendant, Kshs. 3,000,000/=.d)Costs of the suit.

It is so decreed.DATED AND DELIVERED AT NAIROBI THIS 14TH DAY OF MARCH, 2022. A. MABEYA, FCIArbJUDGE