[2022] KEHC 9861 (KLR)

Wanyama (Suing on behalf of the Estate of Henry Wanyama Khaemba - Deceased) v Standard Charted Bank (K) Limited & another (Commercial Case 335 of 2013) [2022] KEHC 9861 (KLR) (Commercial and Tax) (14 July 2022) (Judgment)

Neutral citation: [2022] KEHC 9861 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Commercial Case 335 of 2013

DAS Majanja, J

July 14, 2022

Between

Edgar Chilande Wanyama

Plaintiff

Suing on behalf of the Estate of Henry Wanyama Khaemba - Deceased

and

Standard Charted Bank (K) Limited

1st Defendant

Edwars Otieno T/A Dosawii Enterprises

2nd Defendant

Judgment

1. The Plaintiff died on March 17, 2016. On June 26, 2017, the court allowed him to be substituted with his legal representative, Edgar Chilande Wanyama, the administrator appointed by a grant of Letters of Administration ad litem dated February 27, 2017 issued in HC KTL Ad Litem No. 29 of 2016. I shall refer to the deceased as the Plaintiff unless the context otherwise admits.

Plaintiff’s Case 2. Sometime in November 2002, the 2nd Defendant applied for and was granted a loan facility of KES. 4,500,000. 00 by the 1st Defendant (“the Bank”). The loan facility was secured by a charge dated November 5, 2002 over the property LR 209/3890 I.R 32478 (“the suit property”) owned by the Plaintiff and a personal Guarantee and Indemnity by the Plaintiff dated November 1, 2002.

3. Over time, the 2nd Defendant’s Loan Account No. 101********814 fell into arrears. This prompted the Bank to commence exercising its statutory power of sale against the Plaintiff to recover the outstanding debt. When it served the Plaintiff with a Redemption Notice on November 1, 2004 through its instructed auctioneers, the Plaintiff filed a suit, ML HCCC No. 45 of 2005, to forestall the sale. Together with the suit, the Plaintiff filed an application for an injunction seeking to restrain the Bank from selling the suit property. The court dismissed the application on July 19, 2005 on the ground that the Plaintiff did not dispute that he had executed the charge, that the 2nd Plaintiff was indebted to the Bank and that the statutory notice was served upon the Plaintiff. The Plaintiff discontinued the suit on October 4, 2006.

4. Two days later, the Plaintiff filed another suit, ML HCCC No. 560 of 2006, together with an application seeking to restrain the Bank from exercising its statutory power of sale. The application was heard ex parte and allowed by the court on October 17, 2006. The Bank challenged the suit on the ground that it was res judicata in light of the previous suit, ML HCCC No. 45 of 2005. On April 9, 2008, the court accepted the Bank’s argument and accordingly struck it out and discharged the ex parte orders. The Plaintiff preferred an appeal against the decision to the Court of Appeal. He also filed an application for an injunction pending the appeal; NRB CA Civil Application No. 67 of 2008. By a ruling dated July 4, 2008, the court granted the application pending appeal.

5. On 31st July 2013, the Plaintiff filed this suit by the Plaint dated July 30, 2013. He claimed that in 2009, after he had discontinued ML HCCC No. 45 of 2005, he was dismayed when the Bank advertised the suit property for sale by public auction. He wrote to the Bank tabulating all the payments he had paid whereupon the Bank halted the auction but refused to discharge the charge. He further stated that the Bank wrote to him on July 24, 2012 demanding KES. 5,345,527. 00.

6. The Plaintiff avers that he has been demanding the statement of account for the Loan Account No. 101********814 including but not limited to the amounts paid by the 2nd Defendant but that the Bank has failed to render the same to him. The Plaintiff further claims that the 2nd Defendant is financially sound and had only failed, refused and/or neglected to repay the loan whose proceeds the 2nd Defendant enjoyed to the exclusion of the Plaintiff.

7. The Plaintiff states that the Bank ought to have exhausted all means to recover the loan facility and/or any interest thereon from the 2nd Defendant before purporting to exercise its power of sale over the suit property. For these reasons, the Plaintiff seeks the following prayers jointly and severally against the Defendants:a.To have a full and true accounts of all the moneys as received by the 1st Defendant from any source in relation to Loan Account number 101********814b.A Declaration that the Plaintiff has paid all the principal loan amount and any interest thereon in Loan Account number 101********814 that the 1st Defendant is and/or was entitled to and that the 1st Defendant has no further claim against the Plaintiffc.The 1st Defendant to issue a discharge of the Charge on the Plaintiff’s parcel of Land known as I.R 209/3890 situated in Industrial Area, Nanyuki Road, Nairobid.A Declaration that the 1st Defendant did not exhaust all means available to it to recover the money owed to the 1st Defendant in Loan Account number 101********814 by the 2nd Defendant and that the Plaintiff is entitled to a refund thereto with the interest thereon at current Bank rates and that the money owed to the 1st Defendant by the 2nd Defendant in Loan Account number 101xxxx814 is recoverable from the 2nd Defendant to the exclusion of the Plaintiffe.In the Alternative to Prayerd) Above, A Declaration that the Plaintiff is entitled to a refund by the Defendants jointly and severally, of all the monies he has paid to the 1st Defendant in Loan Account number 101xxxx814 with the interest thereon at current Bank ratesf.In the Alternativeto Prayere) Above, A Declaration that the Plaintiff is entitled to a refund by the 2nd Defendant of all the monies he has paid to the 1st Defendant in Loan Account number 101xxxx814 with the interest thereon at current Bank ratesg.Special Damages of Kshs. 6,5000,000/ =h.Interest on g) above at the current bank ratesi.General Damages in compensationj.Costs of this suitk.Interest on h) and i) above

The 1st Defendant’s Case 8. The Bank responded to the suit by filing a Statement of Defence dated August 30, 2013. It avers that it was an express term of the charge that the suit property was charged to secure payment to the Bank of such sums as would be owed by the 2nd Defendant as the borrower on the current account or other account together with interest thereon. Further that it was an express term that the Plaintiff, as Chargor, shall on written demand pay to the Bank such sum as may be due and owing to it as Chargee in respect of the monies advanced to the 2nd Defendant as the borrower and in default, the Bank would exercise its statutory power of sale over the suit property.

9. The Bank contended that the 2nd Defendant has not paid the outstanding balance owed to it and as such the Bank is not precluded by law from demanding the entire outstanding balance from the 2nd Defendant as the borrower and/or the Plaintiff as a guarantor who has offered the title to the suit property as security. The Bank denies that the Plaintiff has repaid the full debt owed to it. It further states that it is a stranger to the Plaintiff’s averment that he sold 100 acres of his ancestral land in Kitale to repay the debt.

10. The Bank reiterates that this suit offends the doctrine of res judicata as the Plaintiff has filed similar suits in ML HCCC No.45 of 2005, ML HCCC No. 560 of 2006 and that of the appeal in the Court of Appeal arising from the injunction therefrom, Civil Application No. 67 of 2008 that is still pending determination, as the Plaintiff has never taken any steps to prosecute that appeal. The Bank contends that the Plaintiff has not come to court with clean hands as he has knowingly concealed material facts by failing to disclose to the Court that he has filed the three previous actions thereby contradicting the provisions of the Oaths and Statutory Declarations Act (Chapter 15 of the Laws of Kenya). It states that in light of the pending proceedings, no court can proceed with the trial of any suit in which the matter in issue is directly and substantially in issue in a previously instituted suit or proceeding between the same parties hence the suit should be struck out.

11. The Bank states that the suit property cannot be discharged when the Plaintiff is still indebted to it. The Bank claims that sometime in 2012, the Plaintiff approached it requesting to settle the debt. Following various meetings between the Bank and the Plaintiff, the Bank wrote a letter dated July 24, 2012 to the Plaintiff informing the Plaintiff that it was ready to discuss options to settle the debt. That the Plaintiff’s wife, Mrs. Emily Mulaya wrote a letter to the Bank dated April 23, 2013 requesting for a discount so as to enable them settle the debt. The Bank responded to the letter stating it was willing to accept a sum of KES. 3,000,000. 00 in full and final settlement on or before May 20, 2013 and the Plaintiff together with his wife signed an acceptance wherein they agreed that if the Plaintiff failed to honour the said agreement, it would stand cancelled and the Bank would proceed to recover the full debt of KES. 5,345,527. 70.

12. The Bank maintains that the Plaintiff is still indebted to the extent of KES. 5,345,527. 70 and since the debt has not been repaid, the suit property cannot be discharged. The Bank therefore urges the court to dismiss the claim against it.

13. The 2nd Defendant, who is the principal debtor, did not defend the matter. The matter was set down for hearing. Edgar Chilande Wanyama (PW1), an administrator of the Plaintiff’s estate, testified on behalf of the Plaintiff. Boniface Machuki (DW 1) testified on the Bank’s behalf. At the hearing, the parties adopted their witness statements and bundles of documents. The parties also filed written submissions in support of their respective positions.

14. The witnesses in their testimony largely adopted what was stated in their respective pleadings hence I shall not rehash their testimony but will refer to material parts where necessary. As will become apparent, the basic facts regarding the relationship between the parties are not disputed.

Analysis and Determination 15. From the pleadings, evidence and submissions of the parties, I find that the following issues fall for the court’s determination:a.Whether the suit is res judicata in light of the following suits; ML HCCC No. 45 of 2005, ML HCCC No. 560 of 2006 and Civil Application No. 67 of 2008. b.Whether the Plaintiff is indebted to the Bank.c.Whether the court should order accounts.d.Whether the suit property should be discharged

Res Judicata 16. The Bank impeached the competence of this suit claiming that it is res judicata in light of ML HCCC No.45 of 2005, ML HCCC No. 560 of 2006 and Civil Application No. 67 of 2008. The Bank previously raised the issue as a preliminary objection but on June 4, 2014, Gikonyo J., stated that the issue required probing of evidence hence it should be determined at the trial.

17. Having heard the suit, I find that the issue is now ripe for determination. The doctrine of res judicata is to be found in section 7 of the Civil Procedure Act which states:7. No Court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a Court competent to try such subsequent suit or the suit in which such issue has been subsequently raised, and has been heard and finally decided by such Court.

18. While the Plaintiff disclosed in the Plaint that the suit ML HCCC No.45 of 2005 were proceedings between the same parties herein over the same subject matter, he failed to disclose the existence of ML HCCC No. 560 of 2006 and the pending appeal Civil Application No. 67 of 2008 in his Plaint. The requirement of disclosure of previous suits is anchored in mandatory terms under Order 4 rule 1(1)(f) of the Civil Procedure Ruleswhich provide that a Plaint must contain, “(f) an averment that there is no other suit pending, and that there have been no previous proceedings, in any court between the plaintiff and the defendant over the same subject matter and that the cause of action relates to the plaintiff named in the plaint.” It is clear that the Plaintiff has failed to comply with mandatory provisions of the law by failing to disclose the previous suits ML HCCC No. 560 of 2006 and the pending appeal Civil Application No. 67 of 2008. Though not fatal, a party who fails to disclose the existence of a previous suit or a suit pending between the same parties over the same subject matter is deprived of any benefit including any favourable orders or costs accruing to it (see Timothy Mwangi NjugunavNational Bank of Kenya & 2 Others NRB HCCC No. 455 of 2008 [2008] eKLR and Aviation & Airport Services Workers Union (K) v Kenya Airport Authority & anotherNRB ELRCCNo. 638 ‘B’ of 2014 [2014] eKLR).

19. I also agree with the Bank that the swearing of a verifying affidavit by the Plaintiff averring that, “there is no suit pending in any court neither has there been any previous proceedings regarding the subject matter herein between myself and the Defendants apart from the disclosed Nairobi High Court Civil Suit No. 45 of 2005 …” was misleading and an affront to the Oaths and Statutory Declarations Act. Again the consequences of such non-disclosure may lead to striking out of the suit and denial of favourable orders or costs.

20. Turning to the issue whether the suit is res judicata in light of ML HCCC No.45 of 2005, ML HCCC No. 560 of 2006 and Civil Application No. 67 of 2008, the Plaintiff admitted that he had filed these three suits against the Bank but that none of them had been heard and determined on their merits by the court. The Plaintiff’s advocate further submitted that the suits have automatically abated since the Plaintiff’s death.

21. I agree with the Plaintiff’s position that since the other suits have automatically abated due to the Plaintiff’s death, there are no other parallel suits pending between the parties over the subject matter. Further that even before his demise, none of them had been conclusively determined on merit but were still pending determination before this Court and the Court of Appeal. However, the situation would have been different had those suits not abated as this suit would have offended the doctrine of res sub judice. For these reasons, I agree with the Plaintiff that this suit is not res judicata ML HCCC No.45 of 2005, ML HCCC No. 560 of 2006 and Civil Application No. 67 of 2008.

Whether the Plaintiff is indebted 22. The Plaintiff’s case is that he has settled the debt due to the Bank. He refers to several letters to support its contention. When the Bank threatened to sell the suit property as evidence by the Notification of Sale dated November 1, 2004, the outstanding debt was KES. 6,042,131. 65 due as at October 22, 2004.

23. The Plaintiff wrote to the Bank a letter dated December 15, 2005seeking indulgence. In another follow up letter dated December 16, 2005through Mwangi Wahome and Company Advocates, he once again sought indulgence on the ground that he was disposing of his land in the Kitale. He stated that he had made payments totalling KES 5,800,000. 00 and that there was an outstanding balance of KES 2,361,847. 55.

24. When the Bank threatened to sell the suit property again, the Plaintiff wrote another letter dated May 8, 2006. He informed the Bank that the sale of his property in Kitale was not complete. He however stated that he had paid at least KES. 5,000,000. 00 and requested that the outstanding balance of the loan be transferred to him and he be given two years to re-organise himself and clear the loan over that period.

25. The Plaintiff wrote another letter dated December 22, 2009 to the Bank. He stated that he had sold the Kitale land and had paid KES. 800,000. 00 on August 3, 2005while Bishop Kewasis of ACKKitale Diocese had paid two instalments of KES1,700,000. 00 and KES. 4,000,000. 00 on 17th November and November 24, 2005 respectively on his behalf. In his view, he had paid a total of KES. 6,500,000. 00 hence the full loan amount of KES 4,500,000. 00 plus KES. 2,0000,000. 00 interest. It is on the basis of these payments that the Plaintiff asserts that he has paid the full loan. He states that this amount is not reflected in the statements of account which if given credit, the full loan will be settled.

26. In response, the Bank averred that the Plaintiff owed it KES. 5,345,527. 70 and that while the Plaintiff paid KES. 5,800,000. 00 between August 2005 and November 2005, he left an outstanding balance of KES. 2,173,418. 95 as at 25th November 2005, which continued to accrue interest and which now stands KES. 5,345,527. 70.

27. The Bank states that the Plaintiff’s indebtedness is underpinned and evidenced by the Plaintiff’s wife’s letter dated April 23, 2013 and the Bank’s letter of April 24, 2013. In those letters, the Plaintiff’s wife requested for a discount in respect of the Loan Account No. 101xxxx814 in order to settle the account in full. In response to the request, the Bank stated on a, ‘without prejudice’ basis that it would accept KES. 3,000,000. 00 in full and final settlement of the debt on or before 20th May 2013, that the Plaintiff would sign an out of court settlement before the title can be released and that he was to settle the Bank’s legal fees amounting to KES. 585,800. 00. The Bank concluded that if the Plaintiff failed to honour the aforementioned conditions, it would cancel the agreement and recover the full debt which stood at KES. 5,345,527. 70. The letter also indicates that the Plaintiff and his wife affixed their signatures signalling acceptance and understanding of the terms contained therein.

28. The Plaintiff’s position is that Ms Emily Mulaya was not the Plaintiff’s wife and she did not have his authority to negotiate with the Bank. Despite challenging the position of Emily Mulaya, the Plaintiff did not contest his own signature appearing at the foot of the letter where he acknowledged and accepted the contents of the letter. And it is not like the Plaintiff died soon after signing that letter. He died on March 17, 2016, meaning that he had close to or more than three years to challenge the contents and authenticity of the Bank’s letter and or even deny that the Ms Emily Mulaya was his wife. However, there is no evidence to the effect that the Plaintiff ever responded to or otherwise challenged the authenticity, veracity and contents of that letter which I find and hold constitutes a binding agreement.

29. The Bank has also annexed a statement of account for the 2nd Defendant’s Loan Account No. 101xxxx814 which indicates that the said account has a debit balance of KES. 5,345,527. 70. Section 176 of the Evidence Act (Chapter 80 of the Laws of Kenya) creates a presumption in favour of the Bank on the terms that “A copy of any entry in a banker’s book shall in all legal proceedings be received as prima facie evidence of such entry, and of the matters, transactions and accounts therein recorded.” This statement of account was produced without objection, meaning that its contents reflect true and accurate entries unless demonstrated otherwise by the Plaintiff. The Plaintiff has not demonstrated any false or erroneous entry in the statement of account. Further, all the payments relied on by the Plaintiff were made in 2005 long before the parties’ agreement contained in the letter dated April 24, 2013. If the Plaintiff was aware that he had paid the loan, why then did he agree that he was indebted 8 years later?

30. The Plaintiff’s liability is founded on the Guarantee and Indemnity dated November 1, 2002. Under it, he undertook to pay not only the principal amount of KES. 4,500,000. 00 but to any accrued interest. I therefore reject the Plaintiff’s contention that since he had paid the principal sum then his obligations under the Guarantee and Charge were discharged and that he had repaid the outstanding debt.

31. By its very definition, in Black’s Law Dictionary (11thEd.), a guarantee means to assume a suretyship obligation; to agree to answer for a debt or default; to promise that a contract or legal act will be duly carried out; or to give security for. In Clause 1(a) of the Guarantee, the Plaintiff agrees to ‘……pay and satisfy to the Bank on demand all sums of money which are now or at any time after this date shall be owing to the Bank anywhere on any account whatsoever whether from the Customer….” The ‘customer’ under the Guarantee is the 2nd Defendant, his account has fallen due and the Bank has demanded payment from the Plaintiff as the guarantor and the Plaintiff has no option but to make payment.

32. The above, coupled with the Plaintiff’s own admission in the letters of April 23, 2013 and April 24, 2013 leads me to the inescapable conclusion that the Plaintiff is indeed indebted to the Bank.

33. The Plaintiff has also argued that the Bank ought to pursue the borrower and principal debtor, the 2nd Defendant first, before pursuing him. This issue was answered by Munyao J., in Rose Chepkirui Mibei v Jared Mokua Nyariki and Others KRC ELC No. 24 of 2015 [2015] eKLR where he observed as follows:The second argument of the Applicant is that the bank ought to have pursued the borrower before proceeding to offer the suit property for sale. The husband of the plaintiff acted as guarantor. There has been default. Once there is default and notice is given to the guarantor, his obligations under the guarantee must take effect immediately. Unless the parties have agreed through a contract, that the guarantor will not be called upon to make good money owed by the principal debtor, the creditor is under no obligation to first pursue the principal debtor and leave alone the guarantor. I have not seen any provision in the charge instrument, which obligates the bank to first pursue the principal debtor before proceeding to sell the suit property. The property herein is charged, and there is no provision in the law, that the charge cannot pursue her statutory power of sale, before first exhausting any remedies that he may have against the principal debtor. [Emphasis mine]

34. The argument that the Bank ought to have first pursued the 2nd Defendant has no basis and must fail. In any case, the Plaintiff in the agreement dated April 24, 2013, accepted that if he did not pay the amount agreed upon, the Bank was at liberty to sell the suit property.

Order for Accounts 35. Whereas the Plaintiff seeks an order for accounts in respect of the Loan Account No. 101xxxx814, I have already stated that the Bank has produced a statement of account which statement has not been substantively disputed. With the statement of account on record and its contents undisputed, I do not see any need to order for accounts.

Discharge of Charge 36. Having found that the Plaintiff is truly indebted to the Bank, I am in agreement with the Bank that it cannot discharge of the Charge until the outstanding debt is repaid in full. Since the Plaintiff has covenanted to pay the debt and he is still indebted, the court cannot grant this order when the Plaintiff remains indebted to the Bank.

Reliefs sought by the Plaintiff. 37. Following my findings above and going through the prayers sought by the Plaintiff, I find that none of them can be granted. A true and uncontroverted account of Loan Account No. 101xxxx814 has been produced, the Plaintiff has not paid the principal and interest and the Bank properly demanded payment of the outstanding debt and gave the Plaintiff an opportunity to redeem the suit property. In view of the indebtedness, the Plaintiff is not entitled to any refund from the Bank.

Disposition 38. For the reasons I have set out, the Plaintiff’s claim as set out in its Plaint dated July 30, 2013 lacks merit. It is dismissed with costs being awarded to the 1st Defendant.

39. Before I conclude this judgment, I wish to apologise to the parties for the delay. It has been a result of the work load due to other official assignments.

40. Since the Plaintiff concedes that ML HCCC No. 560 of 2006 has abated, the Deputy Registrar is directed to mark the file as abated and closed.

DATED and DELIVERED at NAIROBI this 14th day of JULY 2022. D. S. MAJANJAJUDGECourt Assistant: Mr. M. Onyango.Mr Nderitu with him Ms Gathua instructed by Khaminwa and Khaminwa Advocates for the PlaintiffMr Ndaiga instructed by Karanja, Njenga and Company Advocates for the 1st Defendant.