Judges during a Court of Appeal hearing. FILE PHOTO | NMG
The Court of Appeal is set to hear a title deed theft racket
case that has left three banks fighting over a single property in Riruta
that is registered in different names and was used to secure over Sh450
million loans.
In the case described by judges as interesting but also perplexing, Equity Bank
, Commercial Bank of Africa (CBA) and Cooperative Bank of Kenya
, are laying claim on the land.
The
judges noted that the banks appear to have been caught up in an
intricate web of a fraudulent syndicate, hatched by their mutual
customers.
“In the process, the banks are staring at a
possibility of losing hundreds of millions of shillings of customer
funds. The syndicate, we are told, has also hit other banks in the
country, and it is perplexing that none of the perpetrators has been
subjected to the criminal process. Perhaps it is a measure of how high
the country has soared in the corruption index,”said justices Philip
Waki, Mohamed Warsame and Patrick Kiage.
They said the circumstances surrounding the dispute between the
three banks are fraught with fraud, which neither lender may be strictly
responsible for because they all believed they held a first charge on
the plot in Riruta measuring approximately 0.2 hectares.
CBA
moved to the Court of Appeal after High Court judge Samson Okong’o
allowed Cooperative to sell the land to recover its money. The judges
granted Co-op the injunction pending the hearing of the case.
Evidence
presented to court showed that on April 8, 2010, Mr Patrick Njuguna, Mr
Edward Njuguna and Mr George James Kireru Kangethe, all trading as
Patrick Kangethe & Sons, went to Co-op and borrowed about Sh166
million. As a security, they deposited an original title, which was
registered in the name of Patrick on August 29, 1997.
A
legal first charge was duly registered against the title on September
10, 2010, and there were no other obstacles. The bank still has in its
possession, the original documents.
On October 23,
2012, another original title with the same plot number registered in the
name of Wardpa Holdings Ltd (WHL) was obtained by its directors. They
are Mr Edward, George and Ms Gladys Njeri Kangethe.
They
went to CBA on March 24, 2013 and borrowed about Sh100 million on the
security of that title and a legal charge was also registered against
the document.
CBA through its lawyer William Kabaiku,
said appropriate searches were carried out and there was no evidence of
any other previous charge on the title. The bank, he said, retains the
original documents.
About a year later, in May, 2014,
yet another original title was obtained in the name of Kinjunje Gardens
Ltd (KGL) whose directors are Patrick and his wife Margaret Wambui
Kangethe.
They went to Equity on December 9, 2014 and
borrowed a Sh200 million loan, a legal charge was registered against the
title on January 23, 2015. Like CBA, Equity said it carried out
searches and found no evidence of prior issues with the title. They also
retain the original documents.
Justice Okongo noted
that all the loans that were advanced on the security of plot no.2289
were advanced to people who knew each other or were related and were
working together in pursuit of the loans.
The judge
added that it was also apparent that without the complicity of the
office of the Chief Land Registrar, the transactions on plot 2289 would
not have taken the trajectory they did.
In May 20,
2016, Co-op bank instructed Leaky Auctioneers to advertise plot 2289 for
sale, to recover the amount due in excess of Sh195 million.
The
family tried to block the sale by seeking an injunction in case filed
in Mombasa, but the matter was dismissed. The sale was re-advertised and
that is when Equity and CBA realized that it was the security given to
them that was being sold.
Equity filed suit in the
Environment and Land Court against KGL and its two directors, Co-op
bank, Leakey's auctioneers, and the Chief Land Registrar.
CBA
also filed a different case against WHL, and one of the directors
(Patrick), Co-op bank, Leakey's auctioneers and the Chief Land
Registrar. They both asserted that the intention by Co- op bank to sell
the property was illegal, null and void since they never gave their
consent for creation of any charge on the property besides theirs.
The
two banks also claimed that the charge held by Co-op bank was on a fake
and parallel Title. After hearing the case, Justice Okongo found no
reason to stop Co-op bank from exercising its statutory power of sale
and set it free to proceed with the auction.
The Judge
reasoned that if any charges were created on fraudulent fake titles,
then those were the charges created by CBA and Equity since the charge
in favour of Co-op bank was first in time. The other titles, he said,
did not exist when Co-op bank registered the Charge and it could not
therefore be parallel to the other Charges.
The
decision forced CBA to move to the Court of Appeal arguing that the
intended appeal raised serious issues on the exercise of the trial
court's discretion.
Mr Kabaiku said CBA will argue that
the finding that the Charge of Co-op bank was "first in time" was
erroneous since all the three charges were on different original Titles
on the same parcel of land which were fraudulently obtained.
The
lawyer said CBA was as much a victim of the syndicate as Co-op bank and
Equity and all should have an equal opportunity of mitigating the
possible loss.
The court said there is no clarity on
how the three original titles were obtained or how consents were
obtained from the local Land Control Board for validation of the
charges.
According to the judges, the principle of
“first in time” may well be called to question in the circumstances.
“Furthermore, the huge amount of money given out in loans does not
belong to the banks but to their customers. There is, in our view,
considerable interest by a large bank customer base, if not general
public interest, and therefore the need for circumspection,” they added.
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