Rafiki Microfinance Bank Ltd v John & another [2023] KEHC 24089 (KLR)

Rafiki Microfinance Bank Ltd v John & another (Civil Suit E049 of 2022) [2023] KEHC 24089 (KLR) (24 October 2023) (Judgment)

Neutral citation: [2023] KEHC 24089 (KLR)

Republic of Kenya

In the High Court at Mombasa

Civil Suit E049 of 2022

DKN Magare, J

October 24, 2023

IN THE MATTER OF THE INTENDED SALE OF PLOT NUMBER MN 576 PURSUANT TO AN INFORMAL CHARGE DATED 22ND JANUARY 2021 TO SECURE A LOAN FACILITY OF KSHS. 1,202,941/= ADVANCED BY RAFIKI MICROFIANCE BANK LTD TO LILIAN AKINYI T/A GEOLALY ENTERPRISE AND IN THE MATTER OF APLICATIONJ FOR LEAVE TO SELL THE PROPERTY KNOWN AS PLOT NUMBER M.N. 576

Between

Rafiki Microfinance Bank Ltd

Applicant

and

Oucho Abura John

1st Respondent

Lilian Akinyi t/a Geolaly Enterprise

2nd Respondent

Judgment

1. When strange things happen in the matrimonial home, even stranger ones turn up. The two defendants are husband and estranged wife. during happier times, the 2nd defendant appear you have taken a loan from the Applicant.

2. The 1st respondent was later loped in to guarantee a loan for the wife’s business. As it always happens in these kind of cases, there was asymmetry of information. The 1st Respondents was adamant that he guaranteed 402, 941 while the Applicant was of a different view. They had 1,202,941. The difference of 800,000=.

3. The 1st Respondent indicated that he was willing to pay the money under guarantee for a specific amount. With that dispute in mind, the Plaintiff sought through an originating summons dated 7/7/22 for: -a.That property known as Plot M.N 576 changed to the defendant herein Rafiki Microfinance Bank Ltd. to secure a loan adduced to the 2nd Respondent herein Lilian Akinyi T/A Geolay Enterprises and Gnaruled by Oucho Abura John the charger/1st Respondent herein under as information charge dated 22/1/2021 be sold to receiver the outstanding loan sum of Kshs. 1,694,276. 10 as at 4/7/2022 together with interest and continued accrued interest and penalties .b.An order of vacant passion does issue over the property known as M.N. 576 to enable the applicant sell the propertyc.Costs be provided for.

4. This was supported by the affidavit of Jane Warau where they stated that a loan facility was given to the 2nd Respondent vide a letter of offer dated 16/12/2020. The same was served indicated to be arising out of an informal change for Ksh 1,202, 941. The deed of assignment for plot No. 576 was to be in place.

5. The loan was said to be for 30 months. They annexed a letter of offer for 1,202,941 addressed to the 2nd Respondent. That letter of offer was signed by the 2nd Respondent. A charge was drawn on 22/1/2021 for a principle sum of 800,000/=, securing 402,941 making a total of 1,209,941. There appear to be verification by an advocate at page 87. However, such advocate is not named. There is no affidavit by the advocate verifying that the parties appeared before him.

6. In contrast, the bank’s signature is verified by Edward Kwamboka who stamped that the bank attorneys appeared before her. However, she has not signed the said charge. Consequently, there is no charge to talk about whether formal or informal Section 2 of the Land Act defines an informal charge as doth: -“charge” means an interest in land securing the payment of money or money’s worth or the fulfillment of any condition, and includes a subcharge and the instrument creating a charge, including— (a) (b) an informal charge, which is a written and witnessed undertaking, the clear intention of which is to charge the chargor’s land with the repayment of money or money’s worth obtained from the chargee; and a customary charge which is a type of informal charge whose undertaking has been observed by a group of people over an indefinite period of time and considered as legal and binding to such people;

7. There is also a document dated 22/1/2021 assigning a principal of Kshs. 402,941 to the bank, as the principal charge amount. The same is not reinforced and the person purporting to sign as a witness does not appear or indicate their names and designation. In contrast Ednina Kwamboka sign a page. Surprisingly the said page was registered on 29/1/2021 at 10:00 hours.

8. There is a purported deed of assignment dated 15/5/2020 purported to be signed by the Defendant. However, the defendant has not signed the same. There is a schedule limiting liability of the plaintiff to 402,941. The same is at page 89. It is indicated to be drawn by the firm of Ngetich, Chira Associates Advocates. There is annexed to it a sale agreement for 2009 for purchase of the land by the Defendant.

9. The defendant opposed the suit and stated that he only guaranteed 402,941. The rest of the document are forgeries. This was said to be done by the bank and the 2nd defendant who is the principal debtor and the estranged wife of the defendant. He denied indebtedness.

Evidence 10. The plaintiff made an application to adduce more evidence which they indicated to be new. The same was evidence available to then at the firm of testimony. They stated that the same was in their Mombasa branch. Really? This account was domiciled in Mombasa, it does not take rocket science of Voodoo magic to know that the plaintiff ought to have gotten documents from Mombasa branch. A story is told of an old woman who lost her coin in the house. She did not go to sweep the neighbours house. She swept her house till she found it. Then she called for celebration.

11. Going to sweep in the neighbours house or your father’s house, to look for a coin you lost is your house, is the Nadir of wisdom. I dismissed the application yesterday and embarked on this judgment. The evidence remained as per hearings.

12. The plaintiff had a male adult testify having written a statement. The author of the affidavit, did not testify. She is indicated to have left. They produced a consent bank statement that as not sign in the manner anticipated by Section 176 of the Evidence, which provides as doth: -“Mode of proof of entries in bankers’ books Subject to the provisions of this Chapter of this Act, a copy of any entry in a banker’s book shall in all legal proceedings be received as prima facie evidence of such entry, and of the matters, transaction and accounts therein recorded.”

13. On cross examination he admitted that the guarantee was for up 400,000/=. He admitted that the documents are not witnessed. He noted that what was assigned was rental income and there was no evidence of change for 1,200,000/=.

14. The defendant testified that he stays in Mombasa. He was and served. The microfinance is asking for 1. 6 M. He only knew of the Loan of 402,941, he stated that 403,941 was disbursed on 22/1/2021. He has never received any demand for the amount. He denied the signatures on the change. Saying he only signed in 2021 for 402,941. There was a disbursement of 1,202,941 which he is not involved and did not sign. He is not involved and did not sign. He agreed he was using the title for MN 576 to guarantee 402 941 to his estranged wife.

15. He stated that the amount seen in informal charge includes 1,020,941 which the debt of 402,941 is also involved. He does not know whether 1. 2 Million was received. He stated that if there was an existing charge he was not told. They closed their case. I gave directions for submissions.

Analysis 16. This is a state of affairs not contemplated affairs not contemplated by the Land Act. The sensitization by banks must be honest. The advocates and Land Registrars have been given a note to ensure fidelity of the land. I recall the words of the Chief Justice emiritius in Presidential Petition No. 1 of 2017 – Raila Odinga =vs= Uhuru Kenya & Others 2017 eKLR where he stated as doth: -“(394)It is also our view that the greatness of a nation lies not in the might of its armies important as that is, not in the largeness of its economy, important as that is also. The greatness of a nation lies in its fidelity to the Constitution and strict adherence to the rule of law, and above all, the fear of God. The Rule of law ensures that society is governed on the basis of rules and not the might of force. It provides a framework for orderly and objective relationships between citizens in a country. In the Kenyan context, this is underpinned by the Constitution.(395)And as Soli J Sorabjee, a former Attorney General of India once wrote, the rule of law ―is the heritage of all mankind‖ and ―a salutary reminder that ‗wherever law ends, tyranny begins‖.[122] Cast the rule of law to the dogs, Lutisone Salevao once observed ―and government becomes a euphemistic government of men…‖ He adds: ―History has shown (sadly, I might add) that even the best rulers have fallen prey to the cruel desires of naked power, and that reliance on the goodwill of politicians is often a risky act of good faith.‖[123] The moment we ignore our Constitution the Kenyans fought for decades, we lose it.”

17. The reason why the provisions of Section 56 of the Land Registration Act are germaine to the understanding of Section 90 of the Land Act as read with Section 82 and 83 and restrictions under Section 87 of the Land act, is to ensure that parties keep straight and the narrow. The introduction of the requirement that under Section 45 of the Land Registration Act is to avoid fraud by the banks and micro finances.

18. Section 56 of the land registration Act provides as doth: -“Form and effect of Charges. 56. (1) A proprietor may by an instrument, in the prescribed form, charge any land or lease to secure the payment of an existing, future or a contingent debt, other money or money’s worth, or the fulfillment of a condition and, unless the chargee’s remedies have been by instrument, expressly excluded, the instrument shall, contain a special acknowledgement that the chargor understands the effect of that section, and the acknowledgement shall be signed by the chargor or, where the chargor is a corporation, the persons attesting the affixation of the common seal.(2)A date for the repayment of the money secured by a charge may be specified in the charge instrument, and if no such date is specified or repayment is not demanded by the charge on the date specified, the money shall be deemed to be repayable three months after the service of a demand, a written, by the chargee.”(3)The charge shall be completed by its registration as an encumbrance and the registration of the person in whose favour it is created as its proprietor and by filing the instrument.(4)The Registrar shall not register a charge, unless a land rent clearance certificate and the consent to charge, certifying that no rent is owing to the Commission in respect of the land, or that the land is freehold, is produced to him or her.(5)A charge shall have effect as a security only and shall not operate as a transfer.(6)There shall be included, in an instrument of charge, securing the fulfillment of a condition or the payment of an annuity or other periodical payment not of the nature of interest on a capital sum, such provisions as the parties think fit for disposing, subject to application of purchase money by the charge, of the money which may arise on the exercise by the chargee of his or her power of sale, either by setting aside the proceeds of sale or part thereof and investing it to make the future periodical payments, or by payment to the chargee of such proceeds or part thereof to the extent of the estimated capital value of the chargee’s interest, or otherwise.

19. My understanding is that while people may speak for themselves and he is they so wish, documents speak for themselves. They do not require anyone to add extrinsic evidence to them. In Fidelity & Commercial Bank Ltd V Kenya Grange Vehicle Industries Ltd (2017) eKLR, the Court of Appeal, Ouko, Kiage and Murgor JJA held as doth;-“Courts adopt the objective theory of contract interpretation and profess to have overriding view sometimes called Four Corners of an Instrument, which insists that a documents meaning should be derived from the document itself, without reference to anything outside of the document, extrinsic reversed…”

20. None of the documents signed or filed comply with Section 45 of the Land Registration Act. There is no informal charge. What we have is a formal charge that was not registered. An informal charge is not a cure for failure to register a charge. Registration of a charge is required under Section 56(3) of the Land Registrar Act.

21. Therefore, by failing to register a formal charge it does not turn to an informal charge. An intention to create an informal charge must be clear. It is horrendous and stealing the match by banks to imagine that they call fail to register charges and then call it an informal charge. The informal charge must have a memorandum indicating that they intend to charge. For example, where a property is being bought, and cannot be charged before transfer, a surrender for purposes of transfer and charging will create an intention to charge.

22. However, where the bank has a title in the name of the charger, and they are supposed to register a change and they do not do so, they cannot be benefit from informal changes. A formal change remains that. It is either valid by registration or invalid for non-registration. In this case the deed signed was for Kshs. 402,941. The bank sneaked into the formal change prior indebtedness of Kshs. 1,202,941.

23. There is no change date 19/5/2020. The purposes further change is a firefighting bid to have them steal a match on the recovery of the Defendant land.

24. Fortunately, the same is inchoate. Having not been fully executed it is not a change formal or informal. Further an informal change does not stay there till infinity. There is need that registration interest be known. It is not prudent to burden the land with informal changes with a view of avoiding payment of stamp duty. There can be no further informal change. A change is either formal change or formal. Further change but not a further informal change. If we allow the trend to continue then the entire system of Sensitization of land will collapse.

25. I thus find and hold that the plaintiff did not have any kind of charge over the plaintiff’s property. There is an acknowledgement through a guarantee for Kshs. 402,941. The change was completed as such it is not a document within the meaning of the Land Act.

26. I therefore find and hold that The plaintiff did not have any kind of change over the plaintiff’s property. There is an acknowledgement through a guarantee for Kshs. 402,941. The change was completed as such it is not a document within the meaning of the Land Act. I therefore find and hold that the plaintiff does not have an informal charge over plot No. MN 576.

27. The plaintiff is not entitled now or even to sell the Defendants Property Mainland North 1576. The defendant does not owe Kshs. 1,694,276. Given the invalidity of the charge, the plaintiff can only claim 402,941 only through a civil suit under the guarantee.

28. The plaintiff is not entitled to vacant possession of plot No. 576. The said plot is free from any encumbrance from the plaintiff.

Determination 29. Pursuant to the foregoing findings I find as follows: -a.The Plaintiff’s suit Lack merit and is accordingly dismissed with costs of Kshs. 125,000/= to the defendant. The same can be paid within 30 days in default execution to issue.b.For avoidance of doubt, the defendant is entitled to have his title over plot No. MN 576 without argument or cavil from the plaintiff.c.The file is closed.

DELIVERED, DATED AND SIGNED AT MOMBASA ON THIS 24TH DAY OF OCTOBER, 2023. JUDGMENT DELIVERED THROUGH MICROSOFT TEAMS ONLINE PLATFORM.KIZITO MAGAREJUDGEIn the presence of:Ms Ndinda for the ApplicantNo appearance for the RespondentCourt Assistant - Brian