[2022] KEHC 3009 (KLR)

Architects v Barclays Bank Of Kenya (Civil Case 324 of 2012) [2022] KEHC 3009 (KLR) (10 June 2022) (Judgment)

Neutral citation: [2022] KEHC 3009 (KLR)

Republic of Kenya

In the High Court at Kakamega

Civil Case 324 of 2012

WM Musyoka, J

June 10, 2022

Between

Busuru Richard Mark t/a Busuru Rm Partners, Architects

Plaintiff

and

Barclays Bank of Kenya

Defendant

Judgment

1. By a plaint, dated 13th November 2012, as amended on 25th September 2013, the plaintiff sued the defendant for a refund of a sum of Kshs. 300, 000. 00, a declaration that the defendant was estopped from reopening a closed account and from claiming any money from the plaintiff with respect to the said account. A mandatory injunction to compel the defendant to unconditionally discharge and release of the securities given to secure the funds advanced through the account in question, interests and costs.

2. The case by the plaintiff is that it obtained loan and overdraft facilities from the defendant through account number xxxxx, ranging between Kshs. 800, 000. 00 and 2, 800, 000. 00. The said loans and overdrafts were secured by Busia/Bukhayo/Lupida/1135, East Bukusu/South Kanduyi/3335 and Standard Chartered Bank Limited shares (certificate No. xxxx). The plaintiff run into financial difficulties in the period 1996-1998, and he fell into arrears in his monthly obligations to the defendant. In June 2003 the defendant announced a general waiver of bad debts in respect of non-performing loans, and the plaintiff benefitted from that waiver, and he received written communication of the same dated 2nd March 2004, through his bank statement of 10th March 2004. The outstanding loan then stood at Kshs. 3, 580, 525. 55, and on 18th June 2003, the defendant closed the account and duly issued the plaintiff with a statement dated 29th December 2003, showing a nil balance. However, despite the waiver, the defendant did not discharge the securities. Subsequently, the plaintiff wrote to the defendant asking for discharge of the securities and release of the original title documents. The defendant reacted to that letter by issuing a demand notice for Kshs. 3, 580, 524. 85, being what he allegedly still owed the defendant. He avers that he was telephoned by an official of the defendant, a Mr. Mutai, for the purpose of discharge of the securities and release of the title documents. He avers that when he met Mr. Mutai, he was instructed to pay a sum of Kshs. 300, 000. 00 to cover legal fees for preparation of the discharges and their registration. He paid the same, but the discharges were not done, nor were the titles released to him, hence the filing of the suit.

3. The suit is opposed by the defendant, vide its defence which is, undated, but filed herein on 29th September 2020. It denies that it issued a general waiver on bad debts in respect of non-performing loans in June 2003. It further denies that the plaintiff benefitted from that waiver, and that the plaintiff received a statement from the defendant in tandem with that waiver. It is further denied that the defendant closed the plaintiff’s account and issued him with a statement dated 29th December 2003, showing a nil balance. In the alternative, it is averred that once a customer defaults on a loan, standard practice is that the loan account is closed at the branch level and referred to the recoveries unit for the purpose of the recovery of the loan. It is averred that the closure of the plaintiff’s account was not by reason of the waiver of the loan. It is further denied that a sum of Kshs. 300, 000. 00 was paid to Mr. Mutai, and in the alternative, that any communication with Mr. Mutai was only with respect to negotiations. It is further averred that the realization of the debt was not statute-barred.

4. The matter was disposed of orally, in proceedings that were conducted on 23rd June 2021 and 1st November 2021.

5. The plaintiff testified on 23rd June 2021. He stated that the banker’s cheque for Kshs. 300, 000. 0 dated 1st August 2012 was not debited into his account as the said account had been closed by then. He said that he was told that the money was for processing the discharge, as the account had been closed by then. During cross-examination, he asserted that he was not a debtor of the bank, as he had been informed that he had been cleared by the bank, vide a letter that the bank wrote in 2004. He stated that the statement dated 25th June 2003 showed that the account had been closed. He averred that the bank announced a general waiver, after which he got the statement showing that the account had been closed on 25th June 2003. He stated that there were no documents on the general waiver. He stated that the defendant did not write to him stating that the loan had been forgiven.

6. The witness for the defendant, Castro Mutai, testified on 1st November 2021. He stated that as at 1st May 1999, the debt stood at Kshs. 4, 887, 442. 25, and as at 8th May 2000, it stood at Kshs. 3, 580, 554. 55, which balance had not been settled as at the date he was testifying. He stated that on 2nd August 2012, an offer was made to the plaintiff to pay the balance of Kshs. 3, 580, 524. 00, out of which he only paid the sum of Kshs. 300, 000. 00. He stated that there was a waiver, which was not full, but partial, and was on a without prejudice basis. It was time-based, and had since lapsed. During cross-examination, he stated that the balance was the same for the period 2000 and 2012. He conceded receipt of the banker’s cheque for Kshs. 300, 000. 00, and said that their ledger showed where the money went, even though he did not have a statement that reflected receipt of the same. He said that although the statement issued on 25th June 2003 showed that the account had been closed, the ledger books still showed that the account was still open. He said that he had no statements for the period 2000 to 2021. He said that he was not aware of a waiver in 2003, and the one he knew about was in 2012. He stated that the banker’s cheque for Kshs. 300, 000. 00 was in response to the waiver of 2012. He stated that the loan account was closed after the loan became non-performing for ninety days. The account was closed as non-performing, and was transferred to a loss account. He said that he was not aware of the offer to deposit Kshs. 300, 000. 00 for release of securities.

7. At the close of oral hearings, the parties filed written submissions. The plaintiff’s written submissions are dated 25th October 2021 and 26th November 2021; while those by the defendants are dated 1st November 2021. In his written submissions, the plaintiff has framed three issues: whether the defendant was estopped from claiming the monies alleged to be outstanding on the loan account; whether the plaintiff is entitled to a refund of Kshs. 300, 000. 00; and whether the realization of the security was statute-barred. The defendant did not, in its written submissions, frame its own issues, but went by those framed by the plaintiff.

8. The issues for determination, from my understanding of the facts, as pleaded in the plaint and defence, and from the oral testimonies, should be as follows:a.Whether the defendant waived the debt owed to it by the plaintiff, and if it did, whether the defendant was estopped from continuing to demand the monies the subject of the debt;b.What was the purpose for the payment of Kshs. 300, 000. 00; andc.Whether the realization of the debt was statute-barred.

9. Was the debt waived? That question should be answered first, before the issue of estoppel can arise. It is the plaintiff who alleges that there was a waiver, and the burden is then on him to prove that indeed there was a waiver, from which he benefitted. What he points at, as evidence of the waiver, is a statement on his account for the period 2003, which shows a balance on the loan of Kshs. 3, 580, 525. 55 as per 16th May 2000 and Kshs. 3, 580, 525. 00 as per 18th June 2003. The entry for 25th June 2003 shows the balance was 0. 00, and the account had been closed. The plaintiff did not produce any document, from the defendant, to show that there was waiver of the loan during that period. No letter from the defendant was produced on the same, nor a general document where such waiver was communicated. The plaintiff is relying on a statement which closed his account and showed is balance to be nil, and his interpretation of it is that the debt was waived. Next he relies on his own letter of 12th March 2004, referring to the statement of 25th June 2003, saying it confirmed the writing off of the loan. Yet, there is no evidence of the alleged waiver. Next he writes to the defendant asking for discharge of the charge and release of his documents. This was in 2010. Yet, there is still no evidence of any waiver by the defendant. DW1 did not concede that there was any waiver in 2003, saying the only waiver he was aware of was in 2012.

10. The conclusion that I draw from the above is that there was no waiver of the debt, or, at any rate, the plaintiff has not proved any such waiver, and the issue of the defendant being estopped from seeking to recover the debt should not arise.

11. The second issue is about the Kshs. 300, 000. 00. The plaintiff alleges that he was asked to pay that amount for the purpose of the defendant drawing the papers for discharge of the charge and release of the securities or title documents to him. It is not disputed that that amount of money was received by the defendant. The defendant, however, says it was not for the purpose that the plaintiff mentions, but it was part of the deposit that he was required to make towards settlement of the debt, and that was what reflected in the ledger books was. Of course, the defendant did not produce any books to support that contention. Neither did the plaintiff produce any documents to show that he was required to deposit the sum of Kshs. 300, 000. 00 for preparation of documentation to discharge the charge. He who alleges must prove. The original allegation came from the plaintiff, he produced no material to back his claims, and the explanation by the defendant would be reasonable in the circumstances. The debt was not cleared, and the receipt of Kshs. 300, 000. 00, which is acknowledged by the defendant, has been applied, according to DW1, to reduce the debt.

12. On whether the realization of the debt, should the court find that there was no waiver, was statute-barred, the plaintiff has cited section 9 (1)(4) of the Limitation of Actions Act, Cap 22 Laws of Kenya, about limitation periods for recovery amounts of money secured by mortgage . The two provisions are about suits filed to recover the debts. They are not about a bank exercising a statutory power of sale or issuing demands for payments. They do not stop exercise of such powers nor issuance of demand notices. They only stop filing of suits by banks to recover such amounts. The suit herein is not by the defendant, and the defendant has been careful not to raise a counterclaim, in the circumstances. The case cited by the plaintiff, Export Import Bank of America vs. Royal Media Services Limited & 4 others [2020] eKLR (Kasango J.), should be seen in that light. That was a suit by the bank, it was statute-barred by dint of section 9 (1) (4) of the Limitation of Actions Act.

13. Overall, it is my finding that the plaintiff herein has not established the case stated in his plaint, as amended, and I hereby dismiss the said suit. The defendant shall have the costs.

DELIVERED DATED AND SIGNED IN OPEN COURT AT KAKAKMEGA THIS 10th DAY OF JUNE 2022WM MUSYOKAJUDGEMr. Erick Zalo, Court Assistant.Mr. Otsiula, instructed by JB Otsiula & Company, Advocates for the plaintiff.Mr. Chege, instructed by Miller & Company, Advocates for the defendant.