Cytonn Investment Partners Twenty LLP t/a Cysuites Apartment Hotel v Kenya Commercial Bank Ltd & 2 others (Commercial Civil Suit E352 of 2024) [2026] KEHC 11660 (KLR) (Commercial and Tax) (24 July 2026) (Ruling)

REPUBLIC OF KENYA IN THE HIGH COURT OF KENYA AT NAIROBI COMMERCIAL AND TAX DIVISION CORAM: F. MUGAMBI, J CIVIL SUIT NO. E352 OF 2024 COMM BETWEEN CYTONN INVESTMENT PARTNERS TWENTY LLP T/A CYSUITES APARTMENT HOTEL …………………… APPLICANT VERSUS KENYA COMMERCIAL BANK LTD ……..……… 1ST RESPONDENT WASINI RESORTS LTD ………………..……..…… 2ND RESPONDENT THE OFFICIAL RECEIVER ………….……….. INTERESTED PARTY RULING Background and introduction 1. The dispute before this Court arises from a suit instituted by the applicant, through a Plaint dated 1st July 2024. Subsequent thereto, the applicant filed the Notice of Motion application dated 15th July 2024, which is the subject of this Ruling. The HCCC E352 OF 2024 RULING Page 1 applicant seeks injunctive relief restraining the 1st respondent (hereinafter ‘the Bank’), from disposing of or otherwise interfering with the parcel of land known as L.R. No. 1870/IV/14, situate along Church Road, Westlands, Nairobi (hereinafter ‘the suit property’). The suit property was charged to the Bank by the 2nd respondent, (hereinafter ‘WRL’) as security for financial facilities advanced to it. 2. The applicant’s case is premised on its assertion that it is the beneficial owner of the suit property, having acquired shares in WRL, thereby assuming both the assets and liabilities of the said company. The applicant further contends that it engaged the Bank in negotiations for the restructuring of the loan facilities secured by the suit property, has since made certain repayments towards the same, and remains willing to continue servicing the facilities on a restructured basis. 3. In support of its position, the applicant relies on the affidavits sworn by PETER KAGWI, its General Manager. The application is opposed by the Bank through the Replying Affidavit of Mr. KENNETH KIURAH, Senior Manager of Corporate Recoveries, HCCC E352 OF 2024 RULING Page 2 and by the Official Receiver through the Replying Affidavit of Mr. MARK GAKURU. I have equally considered the written submissions filed by the parties in support of their respective cases. HCCC E352 OF 2024 RULING Page 3 Analysis and Determination 4. The first issue that arises for determination is whether the applicant has any legal standing or true interest in the subject property. As previously stated, the applicant maintains that it holds a beneficial interest in the suit property by virtue of its acquisition of 1,000,000 ordinary shares in WRL, purchased from TinkerBird Securities Limited, Tribe Estate Limited, and Proactive Enterprises Limited. 5. The applicant further relies on Clause 3.1.8 of the Share Purchase Agreement, which expressly provided that the applicant would assume responsibility for the repayment of the outstanding liabilities owed to the Bank. It is the applicant’s contention that, pursuant to the said contractual arrangement, it has undertaken repayments towards the loan facilities secured by the suit property. In addition, the applicant avers that it has made substantial improvements upon the suit property. On this basis, the applicant maintains that it is the beneficial owner of the suit property and is entitled to the injunctive relief sought. 6. The Bank’s position is that the applicant lacks locus standi to seek such injunctive relief. The Bank HCCC E352 OF 2024 RULING Page 4 argues that Section 103 of the Land Act limits the right to apply for relief against a Chargee’s remedies under Section 90(3) to specific persons being the Chargor, a joint Chargor, a spouse whose consent was required but not given, or a bankruptcy trustee. The applicant does not fall within any of these categories and that the Chargor in this matter is WRL. 7. The Bank further argues that the applicant is a separate legal entity from WRL and its claim of beneficial ownership based on shareholding contravenes the principle of separate legal personality, under which a company’s property belongs to the company itself and not to its shareholders. Accordingly, the applicant has no proprietary or equitable interest in the suit property and cannot restrain the Bank from exercising its statutory remedies. 8. The Official Receiver additionally submits that it is not in dispute that CHYS LLP (In Liquidation) advanced to the applicant a loan facility of Kshs. 1,000,000,000.00 pursuant to a financing agreement dated 11th April 2018. The express HCCC E352 OF 2024 RULING Page 5 purpose of the facility was to finance the purchase of shares in WRL under the terms of the Share Purchase Agreement. It is therefore the Official Receiver’s position that the applicant acted merely as a conduit through which the funds of CHYS LLP (In Liquidation) were channeled to WRL. The Special Purpose Vehicle (SPV) does not therefore hold any proprietary or beneficial interest of its own in the suit property, and its role was limited to facilitating the transaction on behalf of CHYS LLP (In Liquidation). 9. The law on the doctrine of separate legal personality, as firmly established in Salomon V Salomon & Company Limited, [1895–1899] All ER 33, is settled. Upon incorporation, a company assumes a distinct legal identity separate from its members, with rights and obligations of its own. The Companies Act codifies these attributes, including the capacity of a company to contract in its own name, to own property, and to sue or be sued independently of its shareholders. 10. The evidence before this Court shows that WRL, as a duly incorporated entity, entered into facility agreements with the Bank, as evidenced by the HCCC E352 OF 2024 RULING Page 6 letters of offer on record. Pursuant to those agreements, WRL was advanced financial facilities, and in consideration thereof, it charged the suit property to the Bank as security. Under the terms of the Charge and Further Charge, WRL remained solely liable to meet its obligations to the Bank, and all statutory notices were accordingly issued to WRL as the Chargor. 11. The applicant, by its own admission, acquired shares in WRL, thereby assuming the position of a shareholder in the company. The critical question that arises is the legal position of a shareholder vis- à-vis the rights and liabilities of the company. Even if the applicant were the sole or majority shareholder in WRL, which fact has not been pleaded, and notwithstanding any negotiations that may have occurred between the applicant and the Bank, such circumstances do not alter the fundamental principle that WRL is a separate legal entity, distinct from its shareholders and directors. 12. The WRL’s property therefore belongs exclusively to the company, and its liabilities are borne by the company itself. Shareholders are entitled only to a HCCC E352 OF 2024 RULING Page 7 share in the profits while the company is a going concern, and to a distribution of surplus assets upon winding up. They cannot arrogate to themselves ownership rights over the company’s assets during its subsistence. 13. This principle was emphatically restated in Macaura V Northern Assurance Company Limited & Others, [1925] AC 610 , where the Court laid the principle that: “No shareholder has any right to any item of property owned by the company, for he has no legal or equitable interest therein. He is entitled to a share in the profits while the company continues to carry on business and a share in the distribution of the surplus assets when the company is wound up…The corporator, even if he holds all shares, is not the corporation, and neither he nor any creditor of the company has any property, legal or equitable, in the assets of the corporation.” HCCC E352 OF 2024 RULING Page 8 14. Further, the terms of the Charge and Further Charge executed between WRL and the Bank were unequivocal in delineating the obligations of the chargor. Clause 6(j) expressly prohibited WRL from creating, attempting to create, or permitting to subsist any charge, mortgage, lien, or encumbrance upon the suit property without the prior written consent of the Bank. Clause 6(k) imposed a further obligation upon WRL not to undertake any act that might depreciate, jeopardize, or otherwise prejudice the value of the security, nor permit any person other than the Bank to acquire any proprietary right or interest in the suit property. For the avoidance of doubt, the relevant clauses provided as follows: “(j) … not without the prior written consent of the Bank create or attempt to create or permit to subsist any charge or mortgage upon or permit any lien or other encumbrance whatsoever to arise on or affect any part of the Premises; HCCC E352 OF 2024 RULING Page 9 (k) not do or cause or permit to be done anything which may in any way depreciate, jeopardise or otherwise prejudice the value to the Bank of the ' security hereby created nor permit any person (other than the Bank) to become entitled to any proprietary right or interest (including without limitation the overriding interests set out in Section 28 (b) to (j) of the Land Registration Act which might affect the value of the Premises or any part thereof; The agreement between the applicant and Wasini Resort was not noted in the Charge document and neither was the Bank a party to the said Share Purchase Agreement.” HCCC E352 OF 2024 RULING Page 10 15. It is manifest that the Share Purchase Agreement between the applicant and WRL was neither noted in the Charge document nor was the Bank a party to it. No evidence has been adduced to demonstrate that the Bank consented to the creation of any interest in favour of the applicant, or that it was even aware of such agreement considering that by the applicant’s own admission, that transaction would affect the facility advanced by the Bank. 16. WRL remained the Chargor under the Charge, and as such, it alone possessed the legal standing to enforce rights or obligations arising therefrom. The applicant, being merely a shareholder, cannot arrogate to itself proprietary rights in the suit property or seek to restrain the Bank from exercising its statutory remedies. On this account alone, the application is for dismissal for lack of locus standi. 17. This conclusion is not merely a matter of principle but is, in fact, foreclosed by proceedings between the very entities at the heart of the present dispute. In Violet Mbeyu V Wasini Resorts Limited; Cytonn Investment Partners Twenty LLP HCCC E352 OF 2024 RULING Page 11 (Objector), [2021] KEELRC 1396 (KLR), the Applicant herein appeared before the Employment and Labour Relations Court (Mbaru, J.) as Objector, resisting execution against the 2nd Respondent's proclaimed movable assets on the strength of the same 2018 Share Purchase Agreement with Tinkerbird Securities Limited, Tribe Estate Limited and Proactive Enterprises Limited now pleaded before this Court. In dismissing the objection, the Court found the Agreement undated, unproven and held that: ‘an agreement on its own is not sufficient evidence of legal right and title’. 18. However, for the sake of finality, and notwithstanding the findings already made on locus standi and the doctrine of separate legal personality, the central issue that remains for determination is whether the applicant has satisfied the threshold for the grant of injunctive relief as sought in the Notice of Motion dated 15th July 2024.To succeed, the applicants must satisfy the conditions established in Giella V Cassman Brown & Co Ltd, [1973] EA 358 . These conditions require the them to demonstrate a prima facie case with a probability of success, show that they would HCCC E352 OF 2024 RULING Page 12 suffer irreparable harm that could not be adequately compensated by damages, and, if the court is in doubt, have the application determined on the balance of convenience. 19. The conditions are applied as distinct, sequential hurdles which the applicant is expected to surmount sequentially. This means that if the applicant fails to establish a prima facie case, there is no need to consider irreparable harm or the balance of convenience (see Nguruman Limited V Jan Bonde Nielsen & 2 Others, [2013] KECA 347 (KLR )). As to what constitutes a prima facie case, the Court of Appeal in Mrao Ltd V First American Bank of Kenya Ltd & 2 Others, [2003] KECA 175 (KLR) explained as follows: “A prima facie case in a civil application includes but is not confined to a “genuine and arguable case.” It is a case which, on the material presented to the court, a tribunal properly directing itself will conclude that there exists a right which has apparently been infringed by the HCCC E352 OF 2024 RULING Page 13 opposite party as to call for an explanation or rebuttal from the latter”. [Emphasis added] 20. Turning to the dispute at hand, it is not contested that financial facilities were duly extended to WRL by the Bank, nor is the fact of default in issue. On several occasions, WRL expressly acknowledged its default and sought indulgence from the Bank to regularize its position, as evidenced by the correspondence and documentation produced by the Bank and as admitted by the applicant. The Bank has further placed before this Court loan account statements in respect of the USD facility, which reflect that as at 24th September 2024, the outstanding amount stood at USD 3,299,781.18. 21. A Chargor cannot compel a Chargee to accept a restructuring arrangement in lieu of repayment. The right to restructure is not a statutory entitlement but a matter of contractual negotiation, dependent entirely upon the consent of the secured creditor. In the absence of such consent, the Bank retains the unfettered right to enforce its remedies under the Charge and the Land Act. The applicant’s reliance on negotiations or partial repayments does not, HCCC E352 OF 2024 RULING Page 14 therefore, confer upon it any enforceable right to restrain the Bank from realizing its security. 22. The applicant’s contention that the appointment of a Receiver or the exercise of the Bank’s statutory power of sale would contravene the preservation orders issued in HCCOMMIP No. E063 of 2021 by Justice Mabeya on 6th January 2023 is also untenable. The preservation orders must be construed within their proper context and purpose. The Official Receiver has clarified that the said orders were issued to facilitate the tracing of assets linked to CHYS LLP (In Liquidation). 23. It is further confirmed by the Official Receiver that, by virtue of the Financing Agreement dated 11th April 2018, the funds advanced by CHYS LLP (In Liquidation) to the applicant were directly applied towards the purchase of shares in WRL. Consequently, the applicant, Cysuites, was merely a conduit through which the funds were channeled, and the property acquired forms part of the assets being claimed by CHYS LLP (In Liquidation). 24. In the circumstances, I do find that the preservation orders issued in HCCOMMIP No. E063 of 2021 HCCC E352 OF 2024 RULING Page 15 cannot operate to restrain the Bank from exercising its statutory remedies under the Charge. Jurisprudence is settled that liquidation proceedings, whether by administration or receivership, cannot be invoked to impede the rights of a secured creditor to enforce its security. A duly perfected security remains outside the general pool of assets available for distribution in liquidation, and the secured creditor is entitled to realize its security notwithstanding the pendency of insolvency proceedings. 25. This position was clearly articulated in East Africa Cables PLC V Ecobank Kenya Ltd, , [2020] eKLR where this Court (Majanja, J) held as follows: “I find that the law is settled that a secured creditor is entitled to exercise its rights under the security document or statute in the event of default by the company. That power is not subject to insolvency proceedings commenced against the company by any other creditor. Further, an administrator or liquidator cannot HCCC E352 OF 2024 RULING Page 16 interfere with the exercise of those rights.” 26. For all the foregoing reasons, I am not persuaded that the applicants have established a prima facie case with a probability of success. Their claim for injunctive relief therefore fails at the very first limb of the test, consistent with the principles enunciated in Nguruman Limited V Jan Bonde Nielsen & 2 Others, (supra). 27. Even if I were to proceed to consider the other conditions, the applicants have not demonstrated that they stand to suffer irreparable harm. Any loss occasioned by the realization of the security can be adequately compensated by an award of damages. The applicants have not placed before the Court any evidence to suggest that the Bank would be incapable of meeting such an award if granted. 28. Finally, the balance of convenience clearly tilts in favour of the Bank, as the secured creditor, realizing its security without further delay. This would not only arrest the escalation of interest on the facilities but also enable the Official Receiver, as HCCC E352 OF 2024 RULING Page 17 Liquidator of CHYS LLP (In Liquidation), to claim the residual value of the property for the benefit of the creditors in the liquidation proceedings. Disposition 29. Accordingly, the application dated 15th July 2024 is dismissed with costs. Any interim orders issued are hereby discharged. DATED, SIGNED AND DELIVERED AT NAIROBI THIS 24 TH DAY OF JULY 2026. F. MUGAMBI JUDGE Delivered in presence of: Ms Koile & Mr Ashioya for the plaintiff Kiche for 1st defendant Ms Mugo for OR Opok for Musyoki for 2nd defendant Court Assistant: Lillian HCCC E352 OF 2024 RULING Page 18