https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/9705

Prime Bank Ltd v Midland Emporium Ltd (Commercial Case 001 of 2023) [2026] KEHC 9705 (KLR) (18 June 2026) (Judgment) Neutral citation: [2026] KEHC 9705 (KLR) Republic of Kenya In the High Court at Kisumu Commercial Case 001 of 2023 JM Omido, J June 18, 2026 Between Prime Bank Limited Plaintiff and Midland Emporium Limited Defendant Judgment A. The Pleadings 1.The Plaintiff herein, by a plaint dated 20th January, 2023, instituted the present suit against the Defendant seeking, inter alia, an order of inhibition over Title No. Kisumu Municipality/Block 13/76 (hereinafter “the suit property”), a declaration that an informal charge exists over the said property in its favour, leave to exercise its statutory power of sale thereover, an order for vacant possession to facilitate realization of the security, costs of the suit and such further relief as the court may deem fit. 2.The Plaintiff pleaded that it is a banking institution duly incorporated and licensed to carry on banking business in Kenya, while the Defendant is a limited liability company and the registered lessee of the suit property. 3.The Plaintiff's claim is founded on financial facilities advanced to third-party borrowers and allegedly secured, among other securities, by the suit property. It was pleaded that in the year 2010, the Defendant approached the Plaintiff for financial accommodation on behalf of Midcom Limited, following which the Plaintiff issued a letter of offer dated 15th September, 2010 for a loan facility of USD 1,000,000. 4.The Plaintiff averred that a legal charge was duly created and registered over the suit property to secure the facility and that the said loan was subsequently repaid in full. 5.The Plaintiff further pleaded that Midland Hauliers Limited, which is presently under administration, was thereafter granted various credit facilities pursuant to letters of offer dated 9th December, 2014, 23rd January, 2016 and 18th May, 2017. 6.According to the Plaintiff, the facilities were extended on the strength of several securities, including the suit property, and both the borrower and the Defendant approved the arrangement through duly executed board resolutions and a corporate guarantee. 7.The Plaintiff averred that although a formal charge instrument over the suit property was prepared and forwarded to the Defendant and the borrower for execution, the Defendant failed, refused and/or neglected to execute and return the same for registration despite the facilities having been disbursed and despite repeated requests and reminders from the Plaintiff. 8.It was the Plaintiff’s contention that the Defendant’s refusal to execute the charge instrument was unjustified, given that its directors had already passed resolutions authorizing the borrowing and the provision of the suit property as security. The Plaintiff further asserted that one Jayesh Kotecha, a common director of both the Defendant and Midland Hauliers Limited, had executed the relevant letters of offer and board resolutions acknowledging the suit property as security, thereby rendering the subsequent refusal to execute the charge documents inconsistent with the parties’ prior agreements. 9.The Plaintiff further pleaded that, pending perfection of the intended legal charge, the Defendant deposited with it the original Certificate of Lease relating to the suit property. It was on this basis that the Plaintiff contended that an informal charge had been created over the property and that the same was capable of judicial recognition and enforcement. 10.The Plaintiff averred that, in order to safeguard its interests, it lodged a caution against the title and thereafter sought a declaration from the court affirming the existence of the alleged informal charge. 11.The Plaintiff further pleaded that both the Defendant and Midland Hauliers Limited defaulted in servicing the facilities advanced. It was averred that the borrower’s accounts became non-performing, leading to the appointment of an administrator in the year 2019, and that the Plaintiff consequently remained exposed to substantial financial risk arising from the outstanding indebtedness. 12.The Plaintiff also pleaded that the Defendant had executed a corporate guarantee securing facilities amounting to Ksh.2,000,000 and USD 6,097,500 and was therefore liable, upon default, either to satisfy the indebtedness or permit realization of the securities held by the Plaintiff. 13.According to the Plaintiff, the outstanding indebtedness had risen to USD 6,677,609.89 and Ksh.6,826,253.74, exclusive of continuing contractual interest. The Plaintiff contended that unless permitted to realize the suit property, the debt would continue to accrue and potentially exceed the value of the available securities, thereby occasioning it substantial prejudice. 14.The Plaintiff further averred that despite demand and notice of intention to institute legal proceedings having been issued, the Defendant failed to settle the outstanding indebtedness. 15.On the foregoing basis, the Plaintiff prayed for, among other reliefs, a declaration that an informal charge exists over the suit property, leave to issue statutory notices and exercise its statutory power of sale, an order for vacant possession to facilitate realization of the security and costs of the suit. 16.The Defendant filed a statement of defence and counterclaim dated 15th February, 2023 in which it denied the Plaintiff’s claim save for matters expressly admitted. In particular, the Defendant admitted the descriptions of the parties and the existence of the suit property but denied any liability to the Plaintiff and challenged the legal basis of the suit. 17.The Defendant pleaded that there existed a previously instituted suit, namely Kisumu High Court Commercial Case No. E004 of 2022 (O.S), between the same parties concerning Title No. Kisumu Municipality/Block 13/76 and contended that the issues raised therein were substantially similar to those raised in the present proceedings. It therefore maintained that the suit was sub judice and constituted an abuse of the court process. 18.The Defendant denied the Plaintiff’s assertion that an informal charge existed over the suit property and averred that it was neither aware of nor a party to any such arrangement securing a debt of Ksh.300,000,000 or any other sum. It further contended that any purported informal charge would, in any event, be unlawful, null and void for want of compliance with Section 3(3) of the Law of Contract Act. 19.The Defendant denied having approached the Plaintiff for the advancement of financial facilities to Midcom Limited as alleged and put the Plaintiff to strict proof thereof. It however acknowledged that a loan facility of USD 1,000,000 had been advanced to Midcom Limited and averred that, to its knowledge, the said facility had been fully repaid. 20.The Defendant further denied any knowledge of, or involvement in, the financial facilities allegedly advanced by the Plaintiff to Midland Hauliers Limited and maintained that no banker-customer relationship ever existed between itself and Midland Hauliers Limited. It consequently denied any liability arising from the facilities allegedly extended to that company. 21.The Defendant also disputed the authenticity and validity of the board resolutions relied upon by the Plaintiff, contending that the same were not resolutions of the Defendant company. It maintained that no lawful or valid charge could have arisen over the suit property in the absence of compliance with the statutory requirements governing contracts relating to interests in land. 22.The Defendant denied having received any disbursement of Ksh.300,000,000 from the Plaintiff and further contended that the Plaintiff’s claim was an attempt to circumvent the provisions of Section 3(3) of the Law of Contract Act through the litigation process and thereby defeat public policy. 23.The Defendant denied that it was under any obligation to repay the sums allegedly advanced to Midland Hauliers Limited, namely USD 6,677,609.89 and Ksh.6,826,257.74 and maintained that no financial accommodation had ever been extended to it by the Plaintiff. 24.By way of counterclaim, the Defendant pleaded that it had only agreed to provide the title to the suit property as collateral security for financial facilities advanced to Midcom Limited and that, upon full repayment of those facilities, the Plaintiff failed and/or refused to release the title documents back to the Defendant. 25.The Defendant alleged that the Plaintiff subsequently fabricated the claim that the title was being held as security for a separate indebtedness allegedly owed by Midland Hauliers Limited. 26.The Defendant further contended that the Plaintiff’s claim of an informal charge over the suit property was unenforceable, invalid and contrary to the express provisions of Section 3(3) of the Law of Contract Act. It therefore sought a declaration to that effect. 27.On the basis of the foregoing, the Defendant prayed for the striking out or dismissal of the Plaintiff’s suit, a declaration that the Plaintiff was unlawfully holding the title to Title No. Kisumu Municipality/Block 13/76 and an order compelling the Plaintiff to surrender the same to the Defendant forthwith. The Defendant also sought the costs of the suit and the counterclaim. 28.The Plaintiff filed a reply to defence and defence to counterclaim dated 2nd March, 2023 in which it joined issue with the Defendant’s statement of defence and denied the allegations contained therein save for those expressly admitted. 29.In response to the Defendant’s plea that the suit was sub judice by reason of the existence of Kisumu High Court Commercial Case No. E004 of 2022 (O.S), the Plaintiff admitted the existence of the said proceedings and averred that the present suit arose after unsuccessful attempts to convert the originating summons proceedings into a plaint as had been directed by the court on 19th October, 2022. The Plaintiff further indicated its intention to seek directions for the consolidation of the two suits. 30.The Plaintiff reiterated the averments contained in its plaint and maintained that the Defendant had agreed to provide the suit property as security for facilities advanced by the Plaintiff. It denied the Defendant’s assertions that no valid security arrangement existed and put the Defendant to strict proof of all allegations to the contrary. 31.In answer to the counterclaim, the Plaintiff denied the Defendant’s allegation that it was unlawfully withholding the title documents relating to Title No. Kisumu Municipality/Block 13/76. The Plaintiff maintained that its possession of the title was lawful and connected to the security arrangements between the parties. 32.The Plaintiff further averred that although the suit property had initially been charged to secure borrowing by Midcom Limited, it was subsequently agreed between the Plaintiff, the Defendant and Midland Hauliers Limited that a further charge securing facilities amounting to Ksh.300,000,000 would be created and registered over the property. 33.Consequently, the Plaintiff denied the Defendant’s counterclaim in its entirety and prayed for its dismissal with costs. B. The Plaintiff’s Case. 34.The Plaintiff called George Wachira Mathui (PW1) as its witness. The witness adopted the contents of his statement dated 20th January, 2023 in which he stated that he was the Plaintiff Bank’s Senior Manager, Legal, and was conversant with the matters in dispute by virtue of his position and his perusal of the Bank’s records. He testified that the Plaintiff’s claim against the Defendant related to the recovery of Ksh.300,000,000 together with interest, commission and recovery costs, which sum was secured by an informal charge over Title No. Kisumu Municipality/Block 13/76 registered in the Defendant’s name. 35.PW1 stated that the dispute arose from various credit facilities extended by the Plaintiff to Midland Hauliers Limited (under Administration), the principal borrower. According to him, the facilities were secured by, among other securities, an informal charge over the suit property belonging to the Defendant. 36.The witness explained that the borrower had applied for the review, renewal, revision and enhancement of its facilities, following which the Plaintiff issued letters of offer dated 9th December, 2014 and 23rd January, 2016. He testified that the borrower accepted the said offers and that the Defendant also participated in the transaction by passing the requisite board resolutions in support of the perfection of the securities contemplated therein. 37.The witness further testified that in the year 2017, at the borrower’s request, the Plaintiff reviewed and restructured the existing credit facilities and issued a further letter of offer dated 18th May, 2017. He stated that one of the securities stipulated therein was a legal charge for Ksh.300,000,000 over Title No. Kisumu Municipality/Block 13/76 registered in the Defendant’s name. He added that the Defendant executed the said letter of offer and passed a board resolution approving the provision of the security. 38.PW1 testified that the Plaintiff duly fulfilled its obligations under the various letters of offer by disbursing, reviewing, renewing and restructuring the facilities advanced to the borrower. He stated that the Plaintiff thereafter prepared and forwarded the charge instrument together with the accompanying documentation for execution by both the borrower and the Defendant. However, although the borrower executed the charge document and returned it to the Plaintiff, the Defendant did not execute the same. 39.The witness further stated that in an effort to perfect the intended security, the Plaintiff re-forwarded the legal charge and the accompanying documents to the borrower on 13th December, 2017 for execution by both the borrower and the Defendant. He testified that the documents were never returned to the Plaintiff and that the Defendant did not provide any explanation for its failure or refusal to execute and return the charge documents. 40.PW1 stated that, in order to safeguard its interests in the property, the Plaintiff lodged a caution against the title to the suit property. He maintained that the Plaintiff’s claim against the Defendant was founded on the informal charge securing the sum of Ksh.300,000,000 together with interest, commission and recovery costs. He further testified that the Plaintiff sought leave of the Court to realize the security by selling the suit property so as to recover part of the monies advanced to the borrower. 41.The witness testified that the Plaintiff served the borrower and all guarantors, including the Defendant, with a recall notice dated 9th April, 2019 demanding payment of the outstanding debt. He stated that the recall notice was not complied with and that the borrower neglected and/or failed to repay the facilities. According to him, the recall notice was issued before the borrower was placed under administration. 42.PW1 further testified that the borrower’s accounts remained non-performing and that an administrator was subsequently appointed in the year 2019 to manage the affairs of the borrower company. He stated that the borrower remained under administration and that the outstanding indebtedness continued to increase due to non-payment by either the borrower or the Defendant. 43.The witness stated that the Plaintiff was desirous of disposing of the suit property, either by public auction or private treaty, to recover part of the outstanding debt. He testified that the suit property could only be sold with the leave of the Court and that, upon obtaining such leave, the Plaintiff would issue the requisite statutory notices before proceeding with the realization of the security. 44.In conclusion, PW1 stated that the Plaintiff sought orders for inhibition against dealings with Title No. Kisumu Municipality/Block 13/76, a declaration that an informal charge securing Ksh.300,000,000 existed over the property, leave to sell the property in recovery of the debt, vacant possession of the property, costs of the suit, interest and such further relief as the Court might deem fit and just to grant. 45.The witness produced the following documents in support of the Plaintiff’s case: Copy of certificate of lease for the suit property. Copy of legal charge dated 7th January, 2011 by Midland Emporium Limited to Prime Bank Limited. Copy of certificate of registration of a mortgage by the Registrar of Companies dated 21st January, 2011. Copy of post charge certificate of official search over the suit property dated 14th March, 2013. Copy of letter of offer dated 9th December, 2014 to Midland Hauliers Limited. Copy of board resolution by Midland Hauliers Limited – meeting held on 6th February, 2015. Copy of letter of offer dated 23rd January, 2016 to Midland Hauliers Limited. Copy of board resolution by Midland Emporium Limited – meeting held on 25th January, 2016. Copy of letter of offer dated 18th May, 2017 to Midland Hauliers Limited. Copy of board resolution by Midland Hauliers Limited – meeting held on 9th June, 2017. Copy of board resolution by Midland Emporium Limited – meeting held on 9th June, 2017. Copy of undated and unregistered legal charge by Midland Emporium to Prime Bank Limited for the borrowing of Midland Hauliers Limited. Copy of letter dated 21st September, 2017 by Prime Bank Limited forwarding legal charge to Midland Hauliers Limited. Copy of acknowledgment note by Midland Hauliers Limited. Copy of inter office memo dated 13th December, 2017. Copy of caution by Prime Bank Limited registered on 20th April, 2018. Copy of statements of account numbers 300313 and 300**224 in the name of Midland Hauliers Limited in respect of the Kenya Shillings denominated facilities. Copies of statements of account numbers 700**462, 700471, 300935 and 300**605 for Midland Hauliers Limited in respect of the United States Dollars denominated accounts. Copy of demand notice dated 9th April, 2019 to Midland Hauliers Limited and copied to Midland Investments (Ksm) Limited and Midland Emporium Limited. Copy of guarantee and indemnity by Midland Emporium Limited dated 9th June, 2017. Copy of public notice on Midland Hauliers Limited (under Administration) in The Standard Newspaper of 30th April, 2019. Copy of authority to testify dated 19th January, 2023. 46.On cross-examination, PW1 testified that the Plaintiff had advanced the facility in question but conceded that there was no statement of account demonstrating that the sum of Ksh.300,000,000 had been deposited into the Defendant’s account. He maintained, however, that the Defendant had passed a board resolution authorizing the charging of the suit property as security. 47.The witness was referred to a board resolution dated 5th February, 2015 and acknowledged that the document had been made by Midland Hauliers Limited and not by the Defendant, Midland Emporium Limited. He further conceded that he was not aware of any other board resolution relating to the transaction. He stated that although the resolution referred to the suit property, the property did not belong to Midland Hauliers Limited but belonged to the Defendant company. He also acknowledged that the resolution did not indicate the names of the directors who attended the meeting, contained only one signature, and did not specify the members who had attended the meeting. 48.PW1 was referred to a charge dated 7th January, 2011 and confirmed that the chargor therein was the Defendant while the borrower was Midcom Limited and the chargee was the Plaintiff Bank. He stated that the charge secured a facility of USD 1,000,000 and that the facility was subsequently repaid. He further conceded that although the title had been charged to the Plaintiff in respect of that earlier transaction, the charge had not been discharged. 49.The witness admitted that the Defendant never executed the charge document that had been forwarded to it by the Plaintiff. He testified that only the borrower executed the charge instrument. He nevertheless maintained that the Plaintiff had already released the facilities and that the intended charge was to serve as security for monies advanced to the borrower under the common credit arrangement. 50.PW1 further confirmed that the letter of offer dated 9th December, 2014 was addressed to Midland Hauliers Limited as the borrower and that the Defendant did not execute the document as a guarantor. He acknowledged that the document was signed by two bank officials but that the dates of execution were not indicated. He further conceded that the advocate’s certificate appearing in the document had not been signed and that the company seal did not appear on the relevant execution pages. 51.The witness also confirmed that an official search dated 14th March, 2013 showed that the suit property was charged to the Plaintiff in relation to the earlier facility advanced to Midcom Limited. He stated that although the earlier loan had been repaid, the title had not been discharged. He further conceded that there was no executed charge document demonstrating that the sum of Ksh.300,000,000 had been secured by the suit property and that the Plaintiff principally relied on the various letters of offer. 52.The witness was referred to the letter of offer dated 23rd January, 2016 and acknowledged that one of the conditions therein provided that disbursement of the facility was subject to the completion of all formalities and execution of the requisite security documents. He nevertheless stated that the clause formed part of the Plaintiff’s standard terms and conditions. 53.On re-examination, PW1 clarified that under the letters of offer dated 9th December, 2014 and 23rd January, 2016, Midland Hauliers Limited was the borrower while the Defendant was listed among the guarantors. He maintained that the Defendant had participated in the transactions as a guarantor and that its involvement was reflected in the relevant contractual documents. 54.The witness further testified that the minutes and board resolutions produced as exhibits demonstrated that the Defendant had approved the terms and conditions contained in the letters of offer. In particular, he referred to resolutions and extracts of minutes dated 25th January, 2016 and 9th June, 2017, which, according to him, evidenced the Defendant’s approval of the facilities and the proposed security arrangements. 55.PW1 reiterated that the letters of offer had been duly executed and that the charge document had subsequently been forwarded for execution. He testified that the borrower executed the charge instrument but that the Defendant declined to execute it and returned the incomplete documents to the Plaintiff. 56.The witness further maintained that the statements of account produced in evidence demonstrated the indebtedness of the borrower and that the contractual relationship between the Plaintiff, the borrower and the Defendant was evidenced by the various letters of offer and supporting corporate resolutions. He concluded by reiterating that it was the Defendant, as chargor, that declined to execute the formal charge document. 57.The Defendant called Jayesh Kotecha (DW1) who testified and adopted the contents of his statement recorded on 19th December, 2024. He introduced himself as the Managing Director of the Defendant company, Midland Emporium Limited. 58.DW1 testified that the Defendant had previously offered its property known as Title No. Kisumu Municipality/Block 13/76 as collateral security for financial facilities amounting to USD 1,000,000 that had been advanced by the Plaintiff to Midcom Limited. He stated that the arrangement related solely to the facility granted to Midcom Limited and not to any other borrower. 59.The witness further testified that the facility advanced to Midcom Limited was fully repaid and that the repayment was acknowledged by Midcom Limited through a letter dated 8th October, 2018 addressed to the Plaintiff confirming closure of the account. According to him, despite the full settlement of the indebtedness, the Plaintiff failed to discharge the security or release the original title document to the Defendant. 60.DW1 stated that the Defendant was surprised when the Plaintiff subsequently asserted that an informal charge had been created over the suit property in relation to the facilities advanced to Midland Hauliers Limited. He maintained that the Defendant had never entered into any agreement with the Plaintiff, whether formal or informal, creating such a charge over the property. 61.The witness denied the existence of any contractual arrangement capable of creating an informal charge in favour of the Plaintiff over the suit property and contended that the Plaintiff's claim was therefore unfounded. He maintained that the Defendant never agreed to secure the liabilities forming the subject of the present suit. 62.In conclusion, DW1 urged the Court to dismiss the Plaintiff's suit with costs. He further prayed for an order compelling the Plaintiff to return the original title deed for Title No. Kisumu Municipality/Block 13/76 to the Defendant, contending that the security previously created in respect of the Midcom Limited facility had been fully redeemed. 63.The witness produced the following documents in support of the Defendant’s case: Copy of certificate of lease. Copy of charge document dated 7th January, 2011. Copy of certificate of registration of mortgage. Copy of letter dated 8th October, 2018. 64.On cross-examination, DW1 confirmed that the title to the suit property had never been discharged or released to the Defendant despite the repayment of the facility for which it had initially been provided as security. He maintained that it was the Plaintiff’s responsibility to discharge the title and return the same to the Defendant upon full settlement of the debt. 65.The witness acknowledged that he was familiar with Midland Hauliers Limited and stated that he was a director of that company. He further confirmed that he was aware that Midland Hauliers Limited had approached the Plaintiff seeking a review and restructuring of its credit facilities and that such restructuring was embodied in a Letter of Offer dated 18th May, 2017. 66.DW1 conceded that the Defendant had not produced any evidence to demonstrate fraud, illegality or impropriety in relation to the Letter of Offer dated 18th May, 2017. He further acknowledged that the Defendant had issued a board resolution in support of the borrowing by Midland Hauliers Limited. 67.The witness was referred to paragraphs 8, 9 and 10 of the defence and counterclaim and acknowledged that the Defendant had denied liability in respect of the facilities advanced to Midland Hauliers Limited. He nevertheless maintained that, as a director, he was under a duty to be aware of the affairs of the companies involved in the transaction. 68.DW1 further confirmed that the Plaintiff had issued a default notice to Midland Hauliers Limited following the borrower’s failure to service the facilities. He also acknowledged that the Defendant had guaranteed the facilities advanced to Midland Hauliers Limited, although he maintained that the guarantee did not extend to the entire amount claimed by the Plaintiff. 69.The witness stated that he was aware that the Plaintiff sought orders declaring that it held an informal charge over the suit property and permitting realization of the security. He, however, maintained the Defendant’s position that no enforceable informal charge had been created over the property. 70.On re-examination, DW1 clarified that the denials contained in the defence and counterclaim related to the allegation that Ksh.300,000,000 had been disbursed to either Midland Emporium Limited or Midland Hauliers Limited in the manner alleged by the Plaintiff. He reiterated that Midland Emporium Limited had not received any such disbursement. 71.The witness further testified that Midland Emporium Limited had never received a demand requiring it to pay the sum of Ksh.300,000,000 claimed by the Plaintiff. He maintained that the Defendant's position remained that it was not liable for the debt sought to be recovered through the realization of the suit property. C. The Plaintiff’s Submissions. 72.In its submissions, the Plaintiff contended that it advanced various credit facilities to Midland Hauliers Limited (under Administration) pursuant to letters of offer dated 9th December, 2014, 23rd January, 2016 and 18th May, 2017. 73.It submitted that the facilities were secured by, among other securities, the suit property owned by the Defendant and that the Defendant executed board resolutions and corporate guarantees in support of .the facilities. 74.According to the Plaintiff, despite disbursing the facilities, the intended legal charge over the suit property was never perfected because the Defendant failed to execute the charge instrument. 75.The Plaintiff submitted that the Defendant’s defence was founded on the contention that no informal charge existed and that any such arrangement would be unenforceable under Section 3(3) of the Law of Contract Act. The Plaintiff further noted that the Defendant maintained that its only relationship with the Plaintiff concerned a previous facility of USD 1,000,000 advanced to Midcom Limited, which had allegedly been fully repaid, and that the Defendant had consequently counterclaimed for the release of the title document. 76.Referring to the evidence adduced at trial, the Plaintiff submitted that PW1 demonstrated that the suit property formed part of the common securities supporting the facilities advanced to Midland Hauliers Limited and that the Defendant had participated in the transaction through the execution of corporate resolutions and guarantees. 77.The Plaintiff emphasized that the Defendant’s director, Jayesh Kotecha, was a common director in both the borrower company and the Defendant company and had actively participated in the transactions giving rise to the dispute. 78.The Plaintiff identified four issues for determination, namely whether an order of inhibition should issue, whether an informal charge had been created over the suit property, whether leave should be granted to exercise the statutory power of sale and the question of remedies. 79.On the issue of inhibition, the Plaintiff submitted that the Court ought to preserve the suit property pending determination of the dispute. Reliance was placed on Section 68 of the Land Registration Act and the decisions in Mwambeja Ranching Company Limited & Another v Kenya National Capital Corporation Limited & 6 Others [2015] eKLR, Japhet Kaimenyi M’ndatho v M’ndatho M’mbwiria [2012] eKLR and Philip Mwangi Githinji v Grace Wakarima Githinji [2004] eKLR. The Plaintiff argued that an inhibition order would preserve the property and prevent dealings that might defeat its claim. 80.On whether an informal charge existed, the Plaintiff submitted that there was no dispute regarding the existence and execution of the letters of offer dated 9th December, 2014, 23rd January, 2016 and 18th May, 2017. It argued that the Defendant not only accepted the terms contained therein but also furnished board resolutions and corporate guarantees in support of the facilities. 81.The Plaintiff further submitted that the Defendant deposited the original title document with the Plaintiff and thereby manifested a clear intention that the property would secure the indebtedness of Midland Hauliers Limited. 82.The Plaintiff relied on Sections 79(6), (7) and (9) of the Land Act and submitted that the combination of the deposited title document, the letters of offer and the board resolutions satisfied the statutory requirements for the creation of an informal charge. It cited the cases of Jamii Bora Bank Limited v Wapak Developers [2018] eKLR and Tassia Coffee Estate Limited & Another v Milele Ventures Limited [2014] eKLR for the proposition that an informal charge may arise through the deposit of title documents coupled with evidence demonstrating an intention to create security over land. 83.The Plaintiff further submitted that the Defendant expressly agreed that its property would serve as collateral for the facilities advanced to Midland Hauliers Limited. It pointed to the forwarding of charge documents to the borrower and the Defendant for execution in September and December, 2017 as evidence that the parties intended to perfect the security, although the Defendant subsequently failed to execute the formal charge instrument. 84.The Plaintiff also relied on the decision in Khadar Development Limited v Diamond Trust Bank Limited [2014] eKLR and argued that, having deposited the title document as security, the Defendant could not seek the release of the title while the secured indebtedness remained unpaid. 85.In response to the Defendant’s contention that the facilities were never disbursed, the Plaintiff submitted that the letters of offer, board resolutions and statements of account produced in evidence demonstrated the existence of the facilities and the indebtedness of Midland Hauliers Limited. The Plaintiff emphasized that DW1 admitted being a director of both the borrower and the Defendant companies and acknowledged the existence of the restructuring arrangements embodied in the letter of offer dated 18th May, 2017. 86.The Plaintiff further invoked the rule in Royal British Bank v Turquand (1856) 6 E & B 327; 119 ER 886 (Exch Ch) and Section 34 of the Companies Act, 2015 for the proposition that aperson dealing with a company in good faith is entitled to assume that the company’s internal procedures and requirements have been properly complied with, and is not bound to investigate whether internal corporate formalities have in fact been observed. 87.It submitted that, having received board resolutions and other corporate approvals from the Defendant, it was entitled to assume that all internal corporate procedures had been properly complied with and was not obliged to investigate the regularity of the Defendant’s internal affairs. 88.The Plaintiff argued that the Defendant’s director could not rely on alleged deficiencies in the company’s internal processes to avoid obligations arising from transactions that the company had knowingly participated in and from which related entities had benefited. In that regard, reliance was also placed on the case of Morris v Kanssen [1946] 1 All ER 586 concerning the duties owed by company directors. 89.Regarding the prayer for leave to exercise the statutory power of sale, the Plaintiff submitted that Section 79(7) of the Land Act expressly permits a chargee holding an informal charge to take possession of or sell the charged property upon obtaining an order of the Court. It contended that Midland Hauliers Limited had defaulted in repayment despite service of demand and recall notices and that the indebtedness remained outstanding. 90.The Plaintiff relied on Jamii Bora Bank Limited v Wapak Developers (supra) and Ibrahim Seikei t/a Masco Enterprises v Delphis Bank Limited [2004] eKLR in support of its argument that courts should uphold commercial transactions and enforce securities given in support of borrowing facilities. It submitted that the Defendant ought not to be permitted to benefit from facilities advanced on the strength of the security while simultaneously denying the Plaintiff the right to realize the security. 91.In conclusion, the Plaintiff submitted that it had proved its case on a balance of probabilities and urged the Court to grant the reliefs sought in the Plaint, costs of the suit and interest. D. The Defendant’s Submissions. 92.The Defendant, however, denies any liability in respect of the sum of KsH.300,000,000.00 and contends that there exists no valid or enforceable security or guarantee binding it to the said indebtedness. 93.The Defendant submitted that no informal charge was ever created between the parties as contemplated under Section 79(6) – (9) of the Land Act, which provides that an informal charge may only arise where a chargee accepts a written and witnessed undertaking evidencing a clear intention to charge land for repayment of money or money’s worth, or where there is deposit of title documents as a lien by deposit of documents. It was argued that none of these statutory requirements were satisfied. 94.It was further submitted that under Section 2 of the Land Act, a charge includes an informal charge only where the statutory threshold is met, and that in the present case no written and witnessed undertaking showing clear intention to create a charge was produced. The Defendant therefore contended that the alleged deposit of title documents alone could not amount to a valid charge. 95.The Defendant relied on Section 3(3) of the Law of Contract Act, contending that any contract for the disposition of an interest in land must be in writing, signed by all parties and attested. It was submitted that the alleged letters of offer relied upon by the Plaintiff do not meet this statutory threshold. 96.The Defendant further submitted that the letters of offer were invalid and unenforceable for failure to comply with the applicable company execution requirements as they were undated, unsigned by all parties and not sealed by the Defendant, particularly in respect of transactions predating the Business Laws (Amendment) Act No. 1 of 2020, which previously required execution under company seal for binding effect. 97.The Defendant relied on the decision in Mwaniki v Consolidated Bank of Kenya Limited (Commercial Case 435 of 2007) [2025] KEHC 12476 (KLR), where the Court emphasized that letters of offer are primary contractual instruments defining the lending relationship, including loan amount, repayment terms, securities and conditions precedent, and therefore must strictly comply with their terms to be enforceable. 98.The Defendant submitted that clause 28 of the letters of offer provided that acceptance and perfection of securities had to occur within 30 days, failing which the offer would lapse automatically. It was argued that the Plaintiff failed to demonstrate compliance with these conditions precedent, including execution, sealing and perfection of security within the stipulated period. 99.With regard to corporate authority, the Defendant submitted that the board resolutions produced by the Plaintiff were defective as they were undated, unsealed and failed to specify the nature, scope and amount of the alleged borrowing or guarantee. It was further contended that no resolution was produced in respect of the initial letter of offer dated 9th December, 2014. 100.The Defendant submitted that the purported resolutions of 25th January, 2016 and 9th June, 2017 did not authorise borrowing of Ksh.300,000,000 or creation of a charge over the suit property, and therefore could not be relied upon to establish liability. 101.The Defendant relied on the principle in Ebony Development Company Ltd v Standard Chartered Bank Ltd, submitting that a guarantor is only liable to the extent clearly defined in a valid guarantee instrument, and that liability cannot be implied beyond the express terms of a properly executed guarantee. 102.The Defendant further submitted that no charge instrument was ever executed between the parties, and that the Plaintiff’s case rests entirely on unperfected and defective documentation, thereby rendering the alleged security arrangement unenforceable. 103.On the duty of care owed by banks, the Defendant relied on Selangor United Rubber Estate Ltd v Cradock (No. 3) [1968] 1 WLR 1555, submitting that a bank owes a duty to exercise reasonable care and skill in the structuring and perfection of securities, including ensuring that appropriate security documentation is properly executed and perfected. 104.The Defendant further relied on Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465; [1963] 2 All ER 575, where it was held that a party possessing special skill who undertakes to apply it for another owes a duty of care where reliance is placed on that skill, and submitted that the Plaintiff owed such a duty to the Defendant in structuring the alleged facility. 105.The Defendant also relied on Wareham t/a A.F. Wareham & 2 others v Kenya Post Office Savings Bank [2004] 2 KLR 91, submitting that the burden of proof lies on the Plaintiff to prove its case on a balance of probabilities, and that evidence must strictly relate to pleaded facts, failing which the claim must fail. 106.It was further submitted that the Plaintiff failed to prove disbursement of the loan facilities to the principal borrower or demonstrate default by the borrower, and that without such proof, no liability can attach to the Defendant as guarantor. 107.The Defendant further submitted that the Plaintiff had not demonstrated satisfaction of the legal requirements for enforcement of a charge or informal charge, including proof of indebtedness, issuance of redemption notices and default by the chargor. 108.On the prayer for leave to exercise statutory power of sale, the Defendant submitted that such power can only arise where a valid security exists and where default has been properly established, none of which was proved in the present case. 109.The Defendant relied on Kingdom Bank Limited v Okotsi (Civil Suit E004 of 2021) [2022] KEHC 12771 (KLR), where the Court held that for an informal charge to be valid there must be a written instrument disclosing clear intention to charge land, acceptance by the chargee and deposit of documents evidencing ownership. 110.Finally, the Defendant submitted that in the absence of a valid informal charge, enforceable guarantee or proof of indebtedness, the Plaintiff has no legal basis to retain Title Number Kisumu Municipality Block 13/76, and urged the Court to order its immediate release to the Defendant together with costs. E. Issues For Determination. 111.Having considered the pleadings, evidence on record and the rival submissions of the parties, the issues for determination in this suit may be framed as follows:a.Whether the Plaintiff has established the existence of a valid and enforceable informal charge over Title Number Kisumu Municipality/Block 13/76 and whether the contractual and documentary material relied upon, including letters of offer and board resolutions, satisfies the legal threshold for creation of such a security interest over land.b.Whether the Plaintiff has proved, on a balance of probabilities that there exists a valid and binding guarantee and/or other security arrangement between the Plaintiff and the Defendant capable of rendering the Defendant liable for the alleged indebtedness arising from the credit facilities extended to Midland Hauliers Limited.c.Whether the Plaintiff has demonstrated compliance with the applicable legal and contractual requirements for enforcement of its alleged security.d.Whether, in the circumstances of this case, the Plaintiff is entitled to leave of the Court to exercise a statutory power of sale over the suit property.e.Whether the Defendant is entitled to the relief sought in its counterclaim.f.A determination as to which party is to bear the costs of the suit and the counterclaim. F. Analysis And Findings. 112.I shall now proceed to consider and determine the issues set out above in a sequential manner. 113.The first issue for determination is whether an informal charge was created over Title No. Kisumu Municipality/Block 13/76. The first and central issue is whether the Plaintiff has established, on a balance of probabilities, the existence of a valid and enforceable informal charge over the suit property within the meaning of Section 79(6) – (9) of the Land Act. 114.This provision is the statutory anchor upon which the Plaintiff’s entire claim for proprietary enforcement is founded, and it therefore requires strict proof of compliance, given that it creates an exception to the formal requirements of registered charges under the Land Act. 115.Section 79(6) of the Act provides that an informal charge may only arise where there is either a written and witnessed undertaking by a chargor demonstrating a clear intention to charge land for repayment of money or money’s worth, or where the chargor deposits a title document or equivalent instrument evidencing ownership as security for a debt. 116.The statutory language is deliberate and mandatory in substance. Section 79(6)(a) requires “a written and witnessed undertaking” whose “clear intention” is to charge land, while Section 79(6)(b) contemplates a deposit of title documents as security. Section 79(7) further circumscribes enforcement by providing that a chargee holding an informal charge “may only take possession of or sell the land… on obtaining an order of the court to that effect.” Section 2 of the Act reinforces the definition of a charge to include such informal arrangements, but only where the statutory conditions are met. 117.The combined effect of these provisions is that an informal charge is not presumed from a banking relationship or possession of title documents but must be affirmatively proved through clear documentary and intentional acts demonstrating creation of a proprietary security interest. 118.The Plaintiff’s case is that the informal charge arose from a combination of letters of offer dated 9th December, 2014, 23rd January, 2016 and 18th May, 2017, board resolutions allegedly passed by the Defendant, corporate guarantees and the deposit of the original Certificate of Lease. 119.The Plaintiff further contends that these documents collectively demonstrate a common intention that the suit property would secure facilities advanced to Midland Hauliers Limited, and reliance was placed on the decisions of Jamii Bora Bank Limited v Wapak Developers [2018] eKLR and Tassia Coffee Estate Limited & Another v Milele Ventures Limited [2014] eKLR, where the courts recognized that an informal charge may be inferred from a combination of deposit of title documents and documentary evidence showing intention to create security. The Court must however carefully interrogate whether those authorities are applicable to the evidentiary matrix before it. 120.In Jamii Bora Bank Limited v Wapak Developers, the Court was persuaded by a clear evidential chain demonstrating both intention and acceptance of security terms, including properly executed documents that left no ambiguity as to the creation of a security interest. 121.Similarly, in Tassia Coffee Estate Limited, the evidence before the court showed a clearer nexus between the deposit of title documents and an identifiable obligation supported by consistent documentary undertakings. 122.In the present case, the evidence is materially different in that the alleged charge instrument was never executed by the Defendant, and PW1 expressly conceded that no formal charge or executed security document securing the sum of Ksh.300,000,000 exists on record. This distinction is critical because intention to create a charge must be clear, unequivocal and supported by documentary compliance rather than inference from incomplete or defective instruments. 123.The Court is guided by the decision in Kingdom Bank Limited v Okotsi (Civil Suit E004 of 2021) [2022] KEHC 12771 (KLR), where the High Court held that for an informal charge to be valid, there must be a written instrument disclosing a clear intention to charge land, acceptance of that intention by the chargee and deposit of documents evidencing ownership. The Court in that case emphasized that the statutory requirements under Section 79 are not cosmetic but substantive safeguards intended to prevent uncertainty in proprietary interests over land. 124.Applying that principle to the present case, the Court finds that while there is evidence of banking transactions and deposit of title documents, there is no cogent written and witnessed undertaking by the Defendant meeting the statutory threshold of a clear intention to create a charge over the suit property for the specific indebtedness of Ksh.300,000,000. 125.The Plaintiff also relied heavily on the alleged execution of letters of offer and corporate resolutions. The Court has considered these documents in light of Section 3(3) of the Law of Contract Act, which requires that contracts for the disposition of an interest in land must be in writing, signed by all parties and attested. 126.The Court notes that PW1 conceded under cross-examination that some of the letters of offer were not fully executed by all parties, lacked proper attestation and in some instances did not bear essential execution formalities such as company seals and proper dating. 127.While the Plaintiff sought to rely on pre-2020 company law requirements relating to execution under seal, the Court is not persuaded that the absence or irregularity of sealing alone is determinative. Rather, the fundamental question is whether there exists a valid written and executed undertaking satisfying Section 79 of the Land Act and Section 3(3) of the Law of Contract Act. On the evidence, such compliance has not been demonstrated. 128.The Plaintiff further argued that the deposit of the original title deed by the Defendant, coupled with ongoing financial arrangements, is sufficient to constitute an informal charge. While Section 79(6)(b) does recognize deposit of title documents as capable of creating a lien by deposit of documents, the statutory framework does not permit such deposit to operate in isolation without the accompanying intention to create a security interest. 129.The Court notes that possession of title documents by a lender, without more, may arise in multiple commercial contexts, including negotiation, custody or prior security arrangements and therefore cannot by itself crystallize into a charge unless supported by clear evidence of intention to secure a specific debt. This position is consistent with the reasoning in Kingdom Bank Limited v Okotsi (supra), where the Court warned against conflating possession of title documents with the creation of a legally enforceable security interest. 130.The Plaintiff also invoked the “indoor management rule” in Royal British Bank v Turquand (1856) and Section 34 of the Companies Act, 2015 to argue that it was entitled to assume regularity in the Defendant’s internal corporate approvals. 131.While the principle in Turquand protects third parties dealing in good faith with a company by allowing them to assume compliance with internal procedures, it does not operate to cure substantive defects in statutory requirements governing creation of proprietary interests in land. The rule cannot, in my view, be used to validate an otherwise non-compliant informal charge where the statutory prerequisites under Section 79 of the Land Act and Section 3(3) of the Law of Contract Act have not been satisfied. It is therefore distinguishable and inapplicable to the extent that the Plaintiff seeks to rely on it to substitute for missing execution of legally required instruments. 132.In light of the foregoing, the Court finds that the evidentiary foundation laid by the Plaintiff falls short of the statutory threshold required to establish an informal charge. 133.The Court therefore holds that the Plaintiff has failed to prove, on a balance of probabilities, the existence of an enforceable informal charge over Title No. Kisumu Municipality/Block 13/76 within the meaning of Section 79(6) – (9) of the Land Act. 134.The second issue for determination is whether, in the absence of a formal charge, the Defendant is nevertheless liable as a guarantor for the sum of Ksh.300,000,000 allegedly advanced to Midland Hauliers Limited. 135.The legal nature of a guarantee is well settled. A guarantee is a collateral contract by which a guarantor undertakes to answer for the debt or default of another and it must be strictly proved as an independent and binding obligation. 136.As already noted above, under Section 3(3) of the Law of Contract Act, a contract for the disposition of an interest in land or any guarantee affecting such interest must be in writing, signed by all parties and attested. The statutory requirement is not a matter of form alone but one of validity and enforceability. In the absence of compliance, no binding obligation can be inferred. 137.The Defendant’s position is that it never executed any enforceable guarantee in respect of Midland Hauliers Limited’s alleged indebtedness of Ksh.300,000,000, and that its only known engagement with the Plaintiff was in respect of a separate facility of USD 1,000,000 advanced to Midcom Limited, which was fully repaid. 138.The Plaintiff, on the other hand, contends that the Defendant participated in subsequent lending arrangements through letters of offer and board resolutions, thereby assuming liability as guarantor. The resolution of this issue therefore turns on whether the documentary evidence satisfies the strict requirements of a guarantee. 139.The Court notes at the outset that PW1 conceded during cross-examination that there was no executed guarantee instrument specifically securing the sum of Ksh.300,000,000. This concession is significant because a guarantee cannot be implied from conduct or inferred from general participation in corporate borrowing arrangements. Liability under a guarantee must arise from clear and express contractual documentation. 140.The Defendant relied on the principle in Ebony Development Company Ltd v Standard Chartered Bank Ltd [2008] KEHC 1363 (KLR), for the proposition that a guarantor’s liability is strictly limited to the express terms of a valid guarantee instrument and cannot be extended by implication. The legal principle is firmly grounded in our jurisprudence, that a guarantee is strictly construed and the Court cannot rewrite or enlarge its terms beyond what the parties expressly agreed. 141.In the present case, the absence of a clearly executed guarantee instrument for the disputed sum renders it impossible to define, with legal certainty the scope of any alleged liability. 142.The Plaintiff sought to rely on letters of offer and board resolutions as constituting or evidencing the guarantee arrangement. However, the Court has already observed in its analysis of the first issue that the letters of offer were materially defective in execution. More fundamentally, even where letters of offer set out proposed security structures, they are not themselves guarantees unless expressly executed as binding undertakings by the guarantor in accordance with Section 3(3) of the Law of Contract Act. 143.Letters of offer constitute the primary framework of a lending relationship but remain subject to conditions precedent, including execution of security documents and compliance with formal requirements. Until those conditions are fulfilled, no enforceable security or guarantee obligation crystallizes. Thus then, the letters of offer relied upon by the Plaintiff, even if accepted in principle, did not mature into enforceable guarantee obligations binding the Defendant for the disputed sum. 144.The Plaintiff further relied on board resolutions allegedly passed by the Defendant authorizing participation in the transactions. However, PW1 himself conceded that some of the resolutions were undated, lacked proper corporate formalities and did not clearly specify the extent of the alleged guarantee obligation, particularly in relation to the sum of Ksh.300,000,000. 145.The Court notes that a valid corporate resolution may evidence authority, but it cannot substitute for the absence of a duly executed guarantee instrument where the law expressly requires written and signed contractual commitment. Moreover, the resolutions do not demonstrate a clear undertaking by the Defendant to guarantee the specific indebtedness now claimed. 146.The Plaintiff invoked the rule in Turquand and Section 34 of the Companies Act to argue that it was entitled to assume compliance with the Defendant’s internal corporate procedures. As we have seen above, while the rule in Turquand protects third parties dealing in good faith from being affected by internal irregularities, it does not dispense with statutory requirements for enforceable contracts. It cannot be used to infer the existence of a guarantee where none has been validly executed in accordance with Section 3(3) of the Law of Contract Act. 147.The Defendant also relied on Wareham t/a A.F. Wareham & 2 Others v Kenya Post Office Savings Bank [2004] 2 KLR 91, emphasizing that the burden of proof lies squarely on the Plaintiff to establish liability on a balance of probabilities, and that evidence must correspond with pleaded facts. In this case, while the Plaintiff pleaded that the Defendant guaranteed facilities amounting to Ksh.300,000,000, the evidential record falls short of demonstrating any executed guarantee instrument or unequivocal acceptance of liability by the Defendant for that specific sum. 148.The Court further notes that guarantee liability ordinarily arises upon default of the principal debtor. However, even before reaching the question of default, the Plaintiff must first establish the existence of a valid guarantee contract. Without proof of such a contract, the issue of default becomes legally irrelevant as against the Defendant. The Court therefore agrees with the Defendant’s submission that liability cannot attach in the absence of a valid underlying guarantee. 149.In light of the foregoing analysis, the Court finds that the Plaintiff has failed to establish the existence of a valid, enforceable guarantee binding the Defendant in respect of the alleged indebtedness of Ksh.300,000,000. 150.The third issue for determination is whether the Plaintiff has discharged the burden of proving, on a balance of probabilities, that the alleged credit facilities were in fact disbursed to Midland Hauliers Limited and that there was a consequent default capable of triggering any liability against the Defendant. 151.The applicable legal position is anchored in Sections 107, 109 and 112 of the Evidence Act, which place the burden of proof on the party who asserts the existence of a fact. 152.Section 107(1) provides that “whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.” 153.Section 109 further provides that the burden of proof as to any particular fact lies on the person who wishes the Court to believe in its existence. 154.The Court of Appeal in Wareham t/a A.F. Wareham & 2 Others v Kenya Post Office Savings Bank (supra) emphatically restated this principle, holding that:“We are impelled to state unequivocally that in our adversarial system of litigation, cases are tried and determined on the basis of the pleadings made and the issues of fact or law framed by the parties or the Court on the basis of those pleadings ... It follows from those principles that only evidence of facts pleaded is to be admitted and if the evidence does not support the facts pleaded, the party with the burden of proof should fail.” 155.In the present case, the Plaintiff’s case is that substantial sums were advanced to Midland Hauliers Limited under letters of offer dated 9th December, 2014, 23rd January, 2016 and 18th May, 2017, and that the Defendant is liable as guarantor and/or chargor in respect thereof. 156.However, the Court notes that PW1 conceded during cross-examination that there was no direct statement of account or documentary evidence demonstrating that the sum of Ksh.300,000,000 was actually disbursed to the borrower in the manner pleaded. 157.This admission is material because letters of offer, as observed above, constitute the contractual framework of a facility but do not by themselves prove actual drawdown or utilization of funds. 158.The Court further observes that the Plaintiff relied heavily on statements of account and internal banking records. While such documents are generally admissible as proof of banking transactions, they must clearly demonstrate a causal link between the approved facility and actual disbursement. 159.In this case, the evidential chain is weakened by the absence of clear reconciliation between the alleged facility amount of Ksh.300,000,000 and identifiable credited sums to the borrower’s account. The Court is therefore not satisfied that the Plaintiff has proved, with the required degree of certainty, that the full facility pleaded was actually advanced. 160.On the question of default, the Plaintiff contends that recall notices were issued on 9th April, 2019 and that the borrower subsequently fell into non-performing status, culminating in administration proceedings. While PW1 testified to the issuance of recall notices and the appointment of an administrator, the Court notes that default, in legal terms, presupposes a valid and enforceable obligation owed by a debtor. 161.Since the Court has already found that the Plaintiff failed to establish an enforceable informal charge or guarantee binding the Defendant for the sum claimed, the question of default cannot automatically translate into liability against the Defendant without proof that the underlying debt was validly due and owing in the first place. 162.The Plaintiff also sought to rely on the existence of corporate resolutions and letters of offer as proof that the facilities were disbursed and utilized. However, as already noted in the preceding issues, those documents establish, at best, a framework of intention to contract but not execution of the financial obligation in full. Without clear bank statements, loan drawdown documentation or repayment schedules showing utilization and outstanding balances attributable to the pleaded facility, the Court is unable to conclusively find that the alleged Ksh.300,000,000 was advanced in the manner pleaded. 163.The Court further notes that DW1 denied receiving any such disbursement and maintained that the Defendant had no liability in respect of the alleged facility. While a denial alone does not displace documentary evidence, in this case the Plaintiff’s evidential burden required more than general banking records and unperfected facility documents. It required precise proof of disbursement and linkage of such disbursement to a legally enforceable obligation against the Defendant. 164.In the circumstances, and guided by the principle in Wareham t/a A.F. Wareham & 2 Others v Kenya Post Office Savings Bank (supra), the Court finds that the Plaintiff has failed to prove, on a balance of probabilities, that the alleged facility of Ksh.300,000,000 was disbursed in a manner that creates enforceable liability, or that default has been established against the Defendant arising from such disbursement. 165.The fourth issue for determination is whether, in the circumstances of this case, the Plaintiff is entitled to an order granting it leave to exercise a statutory power of sale over Title No. Kisumu Municipality/Block 13/76. This issue flows directly from the statutory framework governing informal charges under the Land Act, and depends on whether the Plaintiff has satisfied the legal preconditions for realization of security over land. 166.The statutory foundation for the relief sought is Section 79(7) of the Land Act, which provides in mandatory terms that a chargee holding an informal charge “may only take possession of or sell the land which is the subject of an informal charge, on obtaining an order of the Court to that effect.” 167.This provision presupposes the existence of a valid informal charge and, by extension, a legally cognizable debtor-creditor relationship secured by land. It does not operate independently to create rights of sale, rather, it regulates the manner of enforcement where such rights have already been lawfully established. 168.The Plaintiff contends that it has satisfied the conditions for grant of leave by demonstrating the existence of an informal charge, issuance of demand and recall notices and default by the borrower. It further submits that courts should be slow to interfere with commercial bargains and should facilitate realization of securities where facilities remain unpaid, relying on Jamii Bora Bank Limited v Wapak Developers (supra) and Ibrahim Seikei t/a Masco Enterprises v Delphis Bank (supra) which emphasize support for enforcement of valid lending arrangements. 169.The Defendant, however, submits that the statutory power of sale is a consequential remedy that can only arise where there is a valid, enforceable security and a proved indebtedness. It relies on Kingdom Bank Limited v Okotsi (supra) where the Court held that realization of an informal charge is contingent upon strict compliance with Section 79 of the Land Act, including proof of a written instrument evidencing intention to charge land, acceptance by the chargee and deposit of documents evidencing ownership. 170.The Defendant therefore argues that in the absence of a valid informal charge, the Court lacks jurisdictional and legal basis to grant leave for sale. 171.The Court has already made findings on issues 1 to 3 that the Plaintiff has failed to prove the existence of an enforceable informal charge, has failed to establish a valid guarantee and has further failed to prove disbursement and default in respect of the alleged facility. Those findings are dispositive of this issue because the statutory power of sale under Section 79(7) cannot be invoked in a vacuum. It is a remedial mechanism, not a standalone right and must be anchored on a proven security interest and an enforceable debt. 172.Even assuming, for argument’s sake, that the Plaintiff’s reliance on letters of offer and corporate resolutions had some probative value, the Court notes that such documents are expressly conditional in nature and constitute the contractual framework of lending but remain subject to fulfilment of conditions precedent, including execution of security documents and perfection of charge instruments. 173.In this case, PW1 conceded that the formal charge instrument was never executed by the Defendant and therefore the contemplated security never crystallized into a legally enforceable proprietary interest capable of enforcement through sale. 174.The Plaintiff further relied on the equitable and commercial principle that courts should not permit borrowers or guarantors to enjoy the benefits of facilities while avoiding repayment obligations. 175.While that principle is sound in appropriate cases where liability has been established, it cannot override statutory requirements governing the creation and enforcement of interests in land. Commercial convenience cannot substitute for legal compliance, particularly in matters affecting proprietary rights in land, which are strictly regulated by statute. 176.The Court also notes the Defendant’s argument that granting leave to exercise the statutory power of sale in the absence of a valid security would amount to sanctioning enforcement of an unproven and disputed indebtedness. This concern is well founded, as the statutory power of sale is a drastic remedy that affects proprietary rights and must therefore be grounded on strict proof. Without such proof, its invocation would be legally untenable and inconsistent with the safeguards embedded in the Land Act. 177.In the present case, the absence of an enforceable informal charge, the failure to prove a valid guarantee and the failure to establish disbursement and default collectively mean that the foundational prerequisites for the exercise of the statutory power of sale have not been met. Consequently, the Plaintiff cannot invoke Section 79(7) of the Land Act to seek leave of the Court to sell the suit property. 178.Accordingly, the Court finds that the Plaintiff is not entitled to leave to exercise the statutory power of sale over Title No. Kisumu Municipality/Block 13/76, and the fourth issue is therefore resolved in favour of the Defendant. 179.The fifth issue for determination is whether, in light of the Court’s findings on the preceding issues, the Defendant is entitled to an order compelling the Plaintiff to release and surrender the original title documents in respect of Title No. Kisumu Municipality/Block 13/76. 180.The Defendant’s counterclaim is anchored on the assertion that the title was originally deposited with the Plaintiff as security for a specific loan facility of USD 1,000,000 advanced to Midcom Limited, which facility was subsequently fully repaid. 181.It is the Defendant’s position that upon repayment, the Plaintiff’s right to retain the title automatically lapsed, and that the continued withholding of the title is therefore unlawful and unjustified. 182.The Plaintiff, on the other hand, contends that the title is lawfully held as security for the alleged subsequent facilities advanced to Midland Hauliers Limited and secured by an informal charge and/or corporate guarantee. 183.The legal position on the right of a chargee or lender to retain title documents is grounded in the principle that such retention must be justified by a subsisting security interest or lawful lien. Section 79(9) of the Land Act expressly provides that a chargee shall not possess or sell land whose title documents have been deposited under an informal charge without an order of the Court, thereby implying that possession is only lawful where it is tied to a valid security arrangement. Once the underlying obligation is discharged, the legal basis for retention ceases. 184.In the present case, the Court has already made findings that the Plaintiff failed to prove the existence of a valid informal charge over the suit property, failed to establish an enforceable guarantee and failed to demonstrate disbursement and default in respect of the alleged indebtedness of Kshs.300,000,000. These findings are determinative of the counterclaim because they remove the only legal foundation upon which the Plaintiff could justify continued possession of the title documents. 185.The Court notes that PW1 acknowledged the existence of an earlier charge securing the USD 1,000,000 facility to Midcom Limited, and further conceded that the said facility had been fully repaid, although the charge had not been formally discharged. This admission is significant because it confirms that the original security arrangement, which justified the Plaintiff’s possession of the title, had been extinguished by repayment of the secured debt. 186.The continued retention of the title therefore requires independent legal justification arising from a subsequent valid security interest, which the Plaintiff has failed to establish. 187.The Plaintiff’s attempt to justify retention of the title on the basis of an alleged informal charge relating to Midland Hauliers Limited has already been rejected by this Court for want of compliance with Section 79(6) – (9) of the Land Act. As held in Kingdom Bank Limited v Okotsi (supra), possession of title documents under an informal arrangement must be anchored on a valid written instrument evidencing clear intention to create security and where such intention is not proved, continued retention becomes legally untenable. 188.Similarly, in Khadar Development Limited v Diamond Trust Bank Limited [2014] eKLR, the Court emphasized that once the secured obligation is discharged, the chargee is under a duty to release title documents and cannot hold them as leverage for unrelated or unproven claims. 189.The Plaintiff’s reliance on the existence of ongoing banking relations or alleged exposure arising from unproven facilities cannot, in law, justify indefinite retention of title documents, which would amount to unjustified interference with the Defendant’s proprietary rights. 190.The Defendant’s entitlement to the title is further strengthened by the equitable principle of redemption, which underpins the law of securities. Once a secured debt is discharged, the chargor is entitled as of right to the return of its title documents. 191.The Court has also considered the Plaintiff’s argument that the title is being held as part of a broader unresolved financial exposure. However, in the absence of a valid charge or guarantee, such generalized assertions cannot override the Defendant’s proprietary entitlement. The law does not permit a lender to retain security documents as a form of leverage for unproven or disputed claims. 192.In view of the Court’s findings that no enforceable informal charge, guarantee or indebtedness has been established in respect of Midland Hauliers Limited, the Court holds that the Plaintiff has no lawful basis to continue retaining Title No. Kisumu Municipality/Block 13/76. 193.The Defendant’s counterclaim therefore succeeds, and the Plaintiff is obliged to forthwith release and surrender the original title documents to the Defendant. 194.On costs, which is the last issue, the Court has considered the provisions of Section 27(1) of the Civil Procedure Act which provides that“Subject to such conditions and limitations as may be prescribed, and to the discretion of the court, costs of and incidental to all suits shall be in the discretion of the court, and the court shall have full power to determine by whom and to what extent such costs are to be paid.” 195.The general rule, as consistently applied, is that costs follow the event unless for good reason the Court directs otherwise. In the present case, the Defendant has substantially succeeded both in resisting the Plaintiff’s claim and in its counterclaim for release of the title documents, while the Plaintiff has failed in the pursuit of its claims. No circumstances have been demonstrated that would justify a departure from the general rule. Accordingly, the Court finds that the Plaintiff shall bear the costs of the suit and the counterclaim. G. Disposition And Orders. 196.In the final analysis, the appropriate consequential reliefs that flow from the determination of the above issues are as follows:a.The Plaintiff’s suit be and is hereby dismissed in its entirety.b.The Defendant’s Counterclaim be and is hereby allowed and to that end an order be and is hereby issued directing the Plaintiff to forthwith release and surrender to the Defendant the original title documents relating to Title No. Kisumu Municipality/Block 13/76 together with all documents incidental thereto in its possession, custody or control.c.The Plaintiff shall bear the costs of the suit and the counterclaim. 197.It is so ordered. 198.This file is hereby closed. DELIVERED (VIRTUALLY), DATED & SIGNED THIS 18TH DAY OF JUNE, 2026.JOE M. OMIDOJUDGEFor Plaintiff: Mr. Maganga.For Defendant: Mr. Ashioya For Mr. Havi.Court Assistants: Mr. Ngoge & Mr. Juma.Mr. Maganga: I Pray For A Copy Of The Judgement.Court: A copy of the judgement to be supplied to the parties upon payment of court charges.