Njenga & another v Bank of Africa Kenya Limited [2022] KEHC 10565 (KLR)

Njenga & another v Bank of Africa Kenya Limited (Civil Suit 577 of 2015) [2022] KEHC 10565 (KLR) (Commercial and Tax) (10 June 2022) (Judgment)

Neutral citation: [2022] KEHC 10565 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Commercial and Tax

Civil Suit 577 of 2015

A Mshila, J

June 10, 2022

Between

John Karanja Njenga

1st Plaintiff

Paul Boro Njenga

2nd Plaintiff

and

Bank of Africa Kenya Limited

Defendant

Judgment

Background 1. The Plaintiffs filed a Plaint dated 17th November 2015 and averred that on 6th November 2013, the Plaintiffs sought a loan facility from the Defendant for Kshs.30, 000, 000 in the name of Evenmatt Supermarket and Totally Wholemark Distributors using the same security LRN. Dagoretti/Riruta/S.348.

2. The aforesaid property was charged by the bank but Kshs.30, 000, 000 was never credited to the Plaintiff’s respective accounts but it enjoyed credit facilities to the tune of Kshs.5, 000, 000.

3. Further, the Plaintiffs stated that on diverse dates in the month of November 2015, the property was advertised for sale in the newspaper. The Plaintiffs were never served with the 45 days’ mandatory statutory notice as is required and the property was undervalued as per the copy of Notification of Sale.

4. The Plaintiffs contention is that if the property is sold they will suffer irreparable loss and damage for it is a family property and they have attachment to it. Unless proper accounts are furnished the Defendant will take advantage of the undervalue that has been quoted by the auctioneers.

5. The Plaintiffs prayed for judgment against the Defendant for;a.A permanent order do issue restraining the Defendant, its agents, servants and/or employees from selling and/or disposing off LR. NO. Dagoretti/Riruta/S.348. b.An order directing the Defendant to furnish accounts and bank statements in respect to Account No.s 070xxxxx and 070xxxxxx.c.A declaration that the Plaintiffs are not in arrears of loan and should be discharged from liability whatsoever.d.An order do issue allowing the Plaintiffs to dispose of the property by private treaty and repay off the outstanding loan if any.

6. The Defendant filed Defence and Counterclaim dated 3rd April 2017 and stated that by a facility dated 6th November 2013, the Defendant agreed to restructure the existing facility amounting to Kshs.15, 461, 101. 52. the Plaintiffs defaulted in repayment of the loan facility and at the same time continued drawing down from the current account.

7. In addition, by a ruling dated 14th March 2016, this Court allowed the Defendant to proceed with the sale of the charged property which was eventually sold on 13th May 2016 for Kshs.13, 500, 000. The Plaintiffs’ claim has therefore been overtaken by events. The sum realized from the sale of the property reduced the arrears in the current account.

8. As at 7th February 2017 the balances due from the Plaintiffs to the Defendant were as follows;a.Current account overdrawn by Kshs.1, 198, 213. 32 which continues to accrue interest at the rate of 14% per annum until payment in full.b.Loan arrears account Kshs.15, 892,353. 83 which account continues to accrue interest at the rate of 14% per annum until payment in full.

9. The Defendant is therefore demanding payment of the above balances from the Plaintiffs.

10. The Plaintiffs do not have a cause of action against the Defendant and the Plaint is an abuse of the court process meant to frustrate the Defendant from recovering the debt.

11. The Defendant sought judgment against the Plaintiff on the Counterclaim for;a.Kshs.1, 198,213. 32 due from the overdrawn current account together with interest at the rate of 14% per annum from 7th February 2017 until payment in full.b.Kshs.15, 892,353. 83 due from the loan account together with interest at the rate of 14% per annum from 7th February 2017 until payment in full.c.Costs of this suit on an advocate-client basis and interest thereon at court rates.

Defendant’s case 12. By a facility letter dated 6th November, 2013 duly and freely executed by the Plaintiffs trading as Evenmatt Supermarket the Defendant agreed to restructure existing facility (financial accommodation) in form of a term loan to the Plaintiffs amounting to Kshs. 15,461 101. 52 whose purpose was to term out the exposure in the Plaintiffs current account.

13. It was a term of the facility letter that:a.Clause 8. 1 of the facility letter provided that the facility is to be repayable in 36 monthly installments.b.Clause 9 of the facility letter expressly provided that the facility would be secured by among others existing Charge under perfection over Title Number Dagoretti/Riruta/S.348 in the name of Evensong Investment Company Limited.

14. The said Charge over Title Number Dagoretti/Riruta/S.348 provided as follows:a.Clause 4: The charge is a continuing security.b.Clause 7: all money would become due and payable if the Chargor and/or the Borrowers fail to pay, discharge any obligation or liability of the Chargor and/or Borrowers to the Bank.c.Clause 8: Bank remedies upon default to include exercise of power to sell under the Land Actupon service of the statutory notices.d.The Plaintiffs defaulted in the repayment of the loan facility and at the same time continued drawing from the current account. Thereafter, the Plaintiffs were issued with various demand letter and notices informing them of the default.

15. As at 19th April 2016 the balances of the loan and current account was as follows:

EvenmattSupermarket Balance in KES, Interest Rate Over LimitInterest Total AmountPIUS Interest

CurrentAccount

106218. 93 9,087,878. 31

Loan

49,064. 94 4,407,486. 62

Loan Arrears

(1 75,997. 34) 12, 482, 324. 62

Total Amount as at 1 9th April 2016. 25, 646, 408. 34 49,064. 94 282,216. 27 25, 977, 689. 55 16. The Defendant as the Plaintiff in the counterclaim submitted that it has produced documentary evidence to support its claim. On the other hand, the Defendants in the counterclaim have failed to file a defence to the counterclaim. Further, it submitted that it has proved its counterclaim on the required standards and prayed that the Court do enter judgment as prayed in the counterclaim.

Issues for determination 17. After considering the pleadings filed by the respective parties and the Defendant’s written submissions; the court has framed the following issues for determination;a.Whether the Plaintiffs’ case has been overtaken by events;b.Whether the Counterclaim has been proved to the desired threshold;

AnalysisWhether the Plaintiffs’ case has been overtaken by events; 18. The Plaintiffs prayed for judgment against the Defendant for;a.A permanent order do issue restraining the Defendant, its agents, servants and/or employees from selling and/or disposing off LR. NO. Dagoretti/Riruta/S.348. b.An order directing the Defendant to furnish accounts and bank statements in respect to Account No.s 070xxxxxx and 070xxxxxx.c.A declaration that the Plaintiffs are not in arrears of loan and should be discharged from liability whatsoever.d.An order do issue allowing the Plaintiffs to dispose of the property by private treaty and repay off the outstanding loan if any.

19. The Plaintiffs also filed a Notice of Motion dated 17th November 2015 seeking the above mentioned orders and the same was dismissed vide the court’s Ruling by Justice Ogola dated 14th March 2016 which said ruling allowed the Defendant to realize its security. Consequently, the Court allowed the Defendant to proceed with the sale of the charged property which was eventually sold on 13th May 2016 for Kshs.13, 500, 000. The Plaintiffs’ claim has therefore been overtaken by events.

20. At the hearing of the main suit the Plaintiffs were not in attendance to prosecute their case even though they had been duly served with the requisite notice; therefore, there being no evidence to support the allegations in the Plaint these allegations remain unproved; also the dismissal of the application and the subsequent sale of the subject property renders the Plaintiffs suit obsolete and this court is satisfied that it has been overtaken by events;

Whether the Counterclaim has been proved to the desired threshold; 21. The Defendant herein filed a Defence and a Counterclaim dated 3rd April 2017. The Plaintiffs in the main suit did not file a defence to the counterclaim and therefore the same is not opposed. The Defendant prayed for judgment against the Plaintiffs for;a.Kshs.1, 198,213. 32 due from the overdrawn current account together with interest at the rate of 14% per annum from 7th February 2017 until payment in full.b.Kshs.15, 892,353. 83 due from the loan account together with interest at the rate of 14% per annum from 7th February 2017 until payment in full.c.Costs of this suit on an advocate-client basis and ineptest thereon at court rates.

22. The matter came up for hearing of the Counterclaim on 2nd February 2022 and DW1 adopted his witness statement dated 21st July 2017 as his testimony. The list of Documents filed on 21st July 2017 was produced as part of his evidence and marked “DW Exhibit 1” (pages 26-183).

23. The bank statements produced give a breakdown of the money owed to the Bank by the Plaintiffs. As at 19th April 2016 the balances of the loan and current account was as follows:

EvenmattSupermarket Balance in KES, Interest Rate Over LimitInterest Total AmountPIUS Interest

CurrentAccount

106218. 93 9,087,878. 31

Loan

49,064. 94 4,407,486. 62

Loan Arrears

(1 75,997. 34) 12, 482, 324. 62

Total Amount as at 1 9th April 2016. 25, 646, 408. 34 49,064. 94 282,216. 27 25, 977, 689. 55 24. The sum realized from the sale of the property reduced the arrears in the current account. As at 7th February 2017 the balances due from the Plaintiffs to the Defendant were as follows;c.Current account overdrawn by Kshs.1, 198, 213. 32 which continues to accrue interest at the rate of 14% per annum until payment in full.d.Loan arrears account Kshs.15, 892,353. 83 which account continues to accrue interest at the rate of 14% per annum until payment in full.

25. In the case of Karuru Munyororo v Joseph Ndumia Murage & Another Nyeri HCCC No. 95 of 1988, the court held that:“The plaintiff proved on a balance of probability that she was entitled to the orders sought in the plaint and in the absence of the defendants and or their counsel to cross-examine her on the evidence, the plaintiff’s evidence remained unchallenged and uncontroverted. It was thus credible and it is the kind of evidence that a court of law should be able to act upon”.

26. The evidence by the Defendant was uncontroverted and the Court therefore finds that the Defendant has accordingly proved its case on a balance of probabilities.

27. As regards the claim for interest, the Court has perused the Defendant’s terms and conditions applicable to all Banking facilities (Pg. 196 of the bundle of documents) and the same provides for interest rate at 15%.; It is trite law that parties are bound by their pleadings; the interest prayed for in the Counterclaim is 14% and this court is thus obliged to grant interest as prayed in the Counterclaim.

Costs of the suit; 28. Regarding the issue of costs of this suit, it is the Court’s view that these proceedings arose due to the Plaintiff’s default in repaying the loan advanced to it. Section 27 of the Civil Procedure Act stipulates that costs follow the event and the same can be granted at the discretion of the court, which discretion should be exercised judiciously.

29. In the premises and noting that the Defendant is the successful party in its Counterclaim, this court is satisfied that the Plaintiff should bear the costs of the suit.

Findings and determination 30. For the foregoing reasons this court makes the following findings and determinations;i.This court finds that the Plaintiffs suit has been overtaken by events; the suit is found to be devoid of merit and it is hereby dismissed with costs to the defendant;ii.This court finds that Defendants Counterclaim has merit as it was proved to the desired threshold; the Counterclaim is hereby allowed;iii.Judgment is hereby entered against the Plaintiffs as prayed in the Counterclaim for;a.Kshs.1, 198,213. 32 due from the overdrawn current account together with interest at the rate of 14% per annum from 7th February 2017 until payment in full.b.Kshs.15, 892,353. 83 due from the loan account together with interest at the rate of 14% per annum from 7th February 2017 until payment in full.iv.The Plaintiff shall bear the costs suit and the Counterclaim.

Orders AccordinglyDATED, SIGNED AND DELIVERED ELECTRONICALLY AT NAIROBI THIS 10TH DAY OF JUNE, 2022. HON. A. MSHILAJUDGEIn the presence of;Mr. Kimani for the defendant/ plaintiff (in the counter claim)No appearance for the plaintiffLucy----------------------------Court Assistant