'1. The plaintiffs vide a plaint dated 21st November 2011 and amended on 29th January 2015 instituted this suit against the defendants seeking judgment for an order compelling Equity Bank Limited, Equity Centre Branch, Nairobi to supply the true statement of account for account No. 081295942195 in the name of Bethany Vineyards Limited, for the period from 4th June 2011 to date, an order that the 1st defendant credits Kshs.150,000,000/= being the sale proceeds from the sale of the 3,000,000 Transcentury Limited shares by the 2nd plaintiff to the 3rd defendant, into the 1st plaintiff’s account for their own use and in the manner they may so wish, and an order for interest on the claimed amount at a commercial rate of 18% per annum, compounded monthly, from the date of filing this suit until payment in full.
2. The plaintiffs’ case is that on 29th September 2010, the 1st plaintiff entered into a loan agreement with the 1st defendant for Kshs.40,000,000/= to be repaid within six (6) months or upon receipt of proceeds of the sale of Transcentury Limited shares. The plaintiffs averred that the said Agreement was varied on 30th June 2011 setting the outstanding amount at Kshs.33,307,700.00 plus interest, repayable by 31st August 2011 or upon receipt of the sale of 3,000,000 Transcentury Limited shares owned by the 2nd plaintiff and pledged as security. The plaintiffs further averred that the 2nd plaintiff pledged his 3,000,000 Transcentury Limited shares as collateral, to be held in a nominee account by the 2nd defendant.
3. They stated that additional securities that were to be held by the 1st defendant as lien included a personal guarantee by Mr. George Charles Mburu Kariithi, supported by a legal charge of Kshs.40,000,000/=, parcels of land Nos. Ngong/Ngong 48152 & 48171 and corporate guarantees from related entities. The plaintiffs stated that on or around 4th June 2011, the 2nd plaintiff with the 1st defendant’s consent entered into an agreement with the 3rd defendant to sell the 3,000,000 shares at Kshs.50/= per share, totaling Kshs.150,000,000/=, which sum was to be used to repay the loan, with the balance credited to the 1st plaintiff’s account No. 081295942195.
4. The plaintiffs further stated that the 3rd defendant vide his letter dated 20th June 2011 confirmed the purchase of the Transcentury Limited shares and undertook to deposit Kshs.50,000,000/= into the 1st plaintiff’s account by 31st July 2011, but failed to do so and has since refused to pay despite repeated demands. They contended that the said sale was also confirmed by the 1st defendant in its letter dated 3rd June 2011. In addition, that the 1st & 2nd defendants failed to credit the sale proceeds into the 1st plaintiff’s account, despite transferring the shares to the 3rd defendant and acknowledging the sale.
5. The plaintiffs stated that a letter dated 19th December 2011 from the 1st defendant indicated that the loan advanced to them had been repaid and securities discharged, but failed to explain the source of the repayment.
6. In opposition to the suit herein, the 1st & 2nd defendants filed a statement of defence dated 21st December 2012 which was subsequently amended on 4th March 2015. In their defence, the 1st & 2nd defendants denied all the averments in the plaintiffs’ plaint and averred that the further Loan Agreement dated 30th June 2011 did not vary the Loan Agreement of 29th September 2010 but rescheduled the plaintiff’s outstanding facility making Kshs.33,307,700/= the drawdown limit. They further denied knowledge of the agreement between the 2nd plaintiff and the 3rd defendant to the extent that the 3,000,000 Transcentury shares were to be sold at a reserve price of Kshs.50/= each.
7. The 1st & 2nd defendants stated that as at 19th December 2011, the loan advanced to the plaintiffs had been fully settled via two payments totaling Kshs.33,274,768.50, made by the 3rd defendant between October and December 2011, which led to the securities held by the 1st defendant to be discharged and be available for collection.
8. The 1st & 2nd defendants stated that their obligations ended upon settlement of the loan and transfer of shares and they are not liable for any amounts beyond the loan repayment. They further stated that since they were not parties to the Share Sale Agreement, any remaining amounts from the share sale fall under the 3rd defendant’s responsibility. They asserted that the plaintiffs agreed to a partial payment plan with the 3rd defendant without setting time limits, which led to the shares being transferred to the 3rd defendant. The 1st & 2nd defendants averred that acknowledgement of a Kshs.2,405,709/= part payment by the 1st plaintiff further confirms the said agreement. They contended that since the plaintiffs failed to fully disclose their agreement with the 3rd defendant and acknowledged accepting the repayment structure, they are estopped from claiming further amounts from them afterwards.
9. The 3rd defendant in opposition to this suit filed a statement of defence dated 26th June 2012 which was subsequently amended on 6th June 2013, 16th July 2015 & on 22nd September 2020 to include a counterclaim/set-off. The 3rd defendant denied all the averments in the plaintiff’s plaint and averred that on 4th June 2011, he agreed to buy 3,000,000 Transcentury Limited shares from the 2nd plaintiff. He stated that the agreement involved no specific payment timeline and was based on an arrangement for staggered payments, some made to meet the 2nd plaintiff’s urgent needs.
10. The 3rd defendant asserted that he has paid a total of approximately Kshs.42,905,790/=, with Kshs.2,405,790/= being paid directly to the 2nd plaintiff, Kshs.33,500,000/= being paid under duress to accounts held with the 1st defendant for the 2nd plaintiff’s benefit and Kshs.7,000,000/= which was paid in the course of 2012. It was stated by the 3rd defendant that the said payments were made on a without prejudice basis, not admission of liability and were intended to facilitate release of securities, not to confirm final contractual obligations. He further stated that his letter dated 20th June 2011 was a non-binding letter of comfort, issued at the plaintiffs'' request and not an enforceable undertaking.
11. The 3rd defendant in his counterclaim/set-off averred that the 2nd plaintiff misrepresented that the shares were freely tradable and unencumbered, their market value was no less than Kshs.50/- per share and that the shares were not at the risk of dilution, though bond holder conversions later devalued them to 50 cents. He contended that the 2nd plaintiff knew or should have known that he (3rd defendant) lacked due diligence, but still misled him into believing in flexible payment terms. The 3rd defendant stated that upon discovering the aforesaid misrepresentations, he sought to rescind the sale of the said shares through letters dated 14th August 2014 & 18th July 2017, demanding a refund. He averred that the 2nd plaintiff responded conditionally demanding share value to be pegged at Kshs.22.25 per share plus 18% compound interest, effectively imposing unilateral terms for rescission. The 3rd defendant asserted that the agreement between him and the 2nd plaintiff was vague on critical terms like price and timelines, thus the Kshs.42,905,790.00 paid has wholly failed. For this reason, he claimed that he is entitled to a refund of the full amount paid.
12. The 3rd defendant prays for the plaintiffs’ suit be dismissed with costs. He also prays for judgment against the 2nd plaintiff, including a declaration that the share sale agreement is null and void, an order for its rescission and/or, in the alternative, an award of damages in lieu thereof. The 3rd defendant also prays for an order compelling the 1st & 2nd defendants to execute the share re-transfer documents. Additionally, the 3rd defendant seeks an order for refund of the full purchase price of Kshs.42,905,790/- paid for the shares, damages for misrepresentation, the costs of the counterclaim/set-off with interest, and interest on the refund amount at the rate of 16% per annum from the date of filing this suit until payment in full.
13. The plaintiffs filed a defence to the 3rd defendant’s counterclaim/set-off dated 29th September 2020. In the said defence, the plaintiffs denied all the averments contained in the 3rd defendant’s counterclaim/set-off and averred that the 3rd defendant’s claims of misrepresentation are an afterthought. They acknowledged that the letters cited by the 3rd defendant were written without prejudice, but claimed that the 3rd defendant waived negotiation privilege by referring to the said letters, thus they would rely on them for their full tenor and effect. The plaintiffs denied the 3rd defendant’s entitlement to rescind the Share Sale Agreement and claim for refund and/or set off, and stated that the 3rd defendant’s claim against them is time-barred.
14. This matter proceeded to hearing where the plaintiffs called one witness in support of their case, the 1st & 2nd defendants called one witness, while the 3rd defendant testified and called a witness to testify in his defence.
PLAINTIFFS’ CASE.
15. Mr. Joseph Muturi Kamau testified as PW1. He adopted his witness statement dated 9th September 2015 as his evidence in chief. He stated that the 1st defendant advanced a loan facility of Kshs.40,000,000/= to the 1st plaintiff on 29th September 2010, to be repaid within six (6) months or upon the sale of 3,000,000 Transcentury Limited shares, whichever came first. He stated that the said facility was secured by inter alia, a personal guarantee and legal charge over multiple properties, a lien over the 3,000,000 Transcentury Limited shares held by Equity Bank, corporate guarantees from Fatima Holdings Limited, Consolidated Securities Limited and Nimex Ltd. Mr. Muturi also stated that the aforesaid facility was later rescheduled via a further Loan Agreement dated 30th June 2011 for Kshs.33,307,700/=, secured on similar terms.
16. Mr. Muturi contended that vide a letter dated 23rd August 2010, Dyer & Blair Investment Bank confirmed that he had offered the 3,000,000 shares for sale at Kshs.50 per share, totaling to Kshs.150,000,000/=, with sale proceeds to be deposited into the 1st plaintiff’s account, and on 3rd June 2011, the 2nd defendant prepared a sale transfer form showing that the said shares were sold for Kshs.150,000,000/=. Mr. Muturi testified that on 20th June 2011, the 3rd defendant confirmed in writing that he had purchased the shares and committed to pay part of the proceeds by 31st July 2011. He stated that the sale was also confirmed by the 1st defendant in a letter dated 5th June 2011, but the 3rd defendant did not remit payment for the shares as agreed, hence on 10th October 2011, he inquired from the 1st defendant why the Kshs.150,000,000/= had not been deposited into the agreed account.
17. Mr. Muturi contended that in as much as the 1st defendant responded to his inquiry on 8th November 2011, it did not provide clarity on the crediting of the sale proceeds. He stated that the 2nd defendant facilitated the transfer of the shares from him to the 3rd defendant. He maintained that the 1st & 2nd defendants were obligated to credit the full sale amount to the 1st plaintiff’s account, deduct the balance of the loan amount and avail the balance for the 1st plaintiff’s use, which was not done. He further stated that after instituting this case, the 1st defendant informed them that the loan advanced to them had been fully repaid and securities released, but failed to disclose who paid the loan and/or whether the proceeds from the share sale were used. He testified that the defendants are guilty of breach of contract as a result of which the plaintiffs have suffered loss and damage.
18. On being cross-examined by Mr. Munyalo, Mr. Muturi stated that the loan terms of the financial facility advanced to the 1st plaintiff were varied in June 2011, reducing the loan amount to Kshs.33,000,000/=, payable by August 2011. He further stated that as at the repayment date, the aforesaid loan had not been cleared. He indicated that he had engaged Dyer & Blair in 2010 to sell the Transcentury Limited shares over-the-counter, but no buyer was found then, and in 2011 he offered the said shares to the 3rd defendant, the then Chairman of the 1st defendant.
19. Mr. Muturi asserted that he and the 3rd defendant entered into an oral agreement for the sale of the aforesaid shares at Kshs.50 per share, totaling Kshs.150,000,000/=, with the understanding that part of the proceeds would go towards settling the subject loan. He contended that in as much as the aforesaid agreement was not in writing, Dyer & Blair confirmed the offer price in writing. Mr. Muturi asserted that the nominal share value of the Transcentury Limited shares was Kshs.1,800,000/=, but their market value was Kshs.150,000,000/=.
20. It was his evidence that the said shares were transferred to the 2nd defendant who held them as a nominee/custodian on behalf of the 1st defendant and thereafter transferred them to the 3rd defendant. He further testified that in as much as he expected that the 3rd defendant would deposit the full purchase sum into the 1st plaintiff’s account held by the 1st defendant and the latter would recover the loan and release the balance to the 1st plaintiff, only Kshs.33,307,700/=, sufficient to settle the loan amount, was received by the 1st defendant.
21. Mr. Muturi stated that the 1st & 2nd defendants were not informed of the agreement between him and the 3rd defendant. He admitted that the agreement between him and the 3rd defendant did not have any definite time. He confirmed that it was the 3rd defendant who bore the responsibility of paying any balance for the shares sold. Mr. Muturi denied claims that the sale of the shares was purely private and stated that Dyer & Blair, and the 1st & 2nd defendants all played roles in facilitating the transaction and transferring the shares.
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23. During cross-examination by Mr. C.N. Kihara, Mr. Muturi admitted that in his witness statement, he did not mention of having met with the 3rd defendant. He confirmed that the plaintiffs do not seek any specific reliefs against the 3rd defendant. He acknowledged that there is no formal Board resolution from the 1st plaintiff authorizing the filing of this suit. He however claimed that there was a verbal resolution by the 1st plaintiff’s Board as per its Articles of Association, made in the presence of Charles Kariithi. Mr. Muturi stated that the 1st plaintiff has three shareholder companies being Fatima Holdings Ltd, Consolidated Securities Ltd and Nimex Ltd, none of which nominated a representative to represent them in Court as per the 1st plaintiff’s Articles of Association. He confirmed that he personally knows the 3rd defendant and stated that he should have paid the full purchase price for the 3,000,000 Transcentury Limited shares after settling the loan due to the 1st defendant.
24. Mr. Muturi contended that Transcentury Limited shares were initially valued at 50 cents nominally, but Dyer & Blair indicated a market value of Kshs.50 per share. He however confirmed that he did not have any valuation reports of the 1st defendant’s valuation of the shares despite the fact that it was responsible for asset valuation as per the Loan Agreement. He was not aware if the said shares had been valued by the 1st defendant.
25. He reiterated that no formal written agreement existed between him and the 3rd defendant as the transaction was oral and without a fixed completion date. He stated that he met the 3rd defendant at his office to discuss the sale of the shares and that the 3rd defendant knew that the proceeds of the said sale were intended to repay the 1st plaintiff’s loan advanced to it by the 1st defendant. He confirmed that he did not show the 3rd defendant any loan documents during the said meeting and he relied on trust.
26. Mr. Muturi stated that Transcentury Limited shares were listed in the Nairobi Stock Exchange on 14th July 2011, and before that, for purposes of public listing, the company prepared a Memorandum of Information. He further stated that Regulations required existing shareholders to meet certain requirements, and that 50% of issued ordinary shares were not to be sold for a period of 24 months. He explained that the said shareholders were not to offload 50% of their shareholding for 24 months in order to safeguard potential investors in the company’s shares, and they had to agree with the foregoing in writing as individual shareholders. He also explained that the foregoing was to apply to a specific category of shareholders depending on their shareholding number of shares. He indicated that prior to the listing, all the shares were immobilized.
27. It was his evidence that the company (Transcentury Limited) introduced additional 150,920,616 of unissued shares. He added that the company also gave shares with a value of 0.50 cents each for correctible bonds, for bond holders. He stated that after public listing, the share prices started fluctuating and the share price declined within 3 weeks to around Kshs.25/= to 30/=, down from Kshs.50/=.
28. Mr. Muturi stated that he could not recall how much he paid for the Transcentury Limited shares as a founding investor. He acknowledged that the sale of the shares would attract regulatory attention whether sold over the counter or at the Nairobi Stock Exchange. He acknowledged that the 3rd defendant has since paid Kshs.33,500,000/= directly to the bank, effectively settling the loan. He admitted being aware that the 3rd defendant agreed to pay the loan for the 1st plaintiff on a without a prejudice basis. He confirmed that the 3rd defendant offered to return the shares, and his Advocates on record even made further proposals on 4th August 2014, but no final agreement was reached.
29. In regard to the share transfer documents, he said that the documents had his name and one signature, but it did not have the signature of the transferee.
30. In re-examination, Mr. Muturi maintained that the 1st & 2nd defendants are necessary parties to this case since the 3,000,000 Transcentury Limited shares were pledged to the 1st defendant as part of a loan facility, and the shares were held in the 2nd defendant’s account No. A0011, a subsidiary of the 1st defendant. He denied that the signature on the purchase transfer form for the shares was his and stated that the said form was signed by the Manager Equity Nominees (2nd defendant) on behalf of the transferee. Mr. Muturi testified that by the time this suit was filed, the loan advanced to the 1st plaintiff by the 1st defendant had not yet been repaid, and that repayment by the 3rd defendant only occurred after this suit was filed.
1ST & 2ND DEFENDANTS’ CASE.
31. Mr. George Kamau Mwangi testified as DWI. He adopted his witness statement dated 1st March 2015 as his evidence in chief and produced the 1st & 2nd defendants’ bundle of documents dated 19th September 2016 as defence exhibits No. 1 to 7. Mr. Kamau testified that on 3rd November 2010, the 2nd plaintiff transferred 3,000,000 Transcentury Limited shares to the 2nd defendant as security for a loan advanced to the 1st plaintiff by the 1st defendant. That on 3rd June 2011, the 1st defendant informed the 2nd defendant that the 2nd plaintiff intended to sell the said shares at Kshs.50/- each in one lot, via a private arrangement with the 3rd defendant, which sale arrangement was confirmed by the 2nd plaintiff. He testified that since the shares were not listed in the Nairobi Stock Exchange, they were to be sold over the counter. He further testified that the 1st & 2nd defendants were not parties to the private sale, but the 1st defendant agreed to this arrangement on condition that the balance of the loan amount in the sum of Kshs.33,307,700/= being paid first.
32. Mr. Kamau stated that at that time, the market price for the shares was approximately Kshs.38/-. He contended that the 2nd defendant transferred the shares to the 3rd defendant in June 2011 and by August 2011, the 1st defendant advised the 2nd defendant that the 2nd plaintiff had acknowledged a direct partial payment of Kshs.2,405,709.00 made to him, and the 3rd defendant also paid and settled the 1st plaintiff’s outstanding loan amount. Mr. Kamau testified that the 2nd defendant could not verify if the full sale price for the shares was paid to the 2nd plaintiff as the sale agreement excluded them.
33. He further testified that the 2nd plaintiff had no objection to the transfer of the shares and that the private agreement between the 2nd plaintiff and the 3rd defendant did not specify timelines for full payment. He contended that the claim against the 1st & 2nd defendants to account for the full sale price is unfounded and that they cannot be held liable for any excess amount claimed beyond Kshs.33,307,700/=.
34. During cross-examination by Mr. Kahura, Mr. Kamau (DW1) confirmed that the 2nd defendant offers custodial services to the public and it holds securities on behalf of the 1st defendant and it is a subsidiary of the said defendant. He testified that securities are only released upon full receipt of the purchase price, and not before, even at the request of a client. He further testified that on offering the 3,000,000 Transcentury Limited shares as security, the 2nd plaintiff signed a share transfer form. He stated that the signature of the seller and the buyer on the same form appeared to be the same. He also stated that the person who signed the said share transfer form by the name of Peterson Mwangi was once an employee of the 1st defendant.
35. Mr. Kamau explained that when shares are not sold in the open market, the sale terms are agreed privately between the parties, and in this case, the share transfer form showed a sale value of the shares to be Kshs.150,000,000/=, which value was used for computing stamp duty. He stated that in spite of the foregoing, the 1st & 2nd defendants’ documents reflected a nominal value of 50 cents per share, totaling Kshs.1,500,000/=. He could not confirm whether any valuation of the shares was conducted by the 1st defendant which was responsible for valuing securities. He asserted that the 2nd defendant released the shares after the 1st plaintiff’s loan was fully settled on 8th December 2011.
36. Upon cross-examination by Mr. C. N. Kihara, Mr. Kamau confirmed that the loan advanced to the 1st plaintiff was secured by personal guarantees, land, and the 2nd plaintiff’s 3,000,000 Transcentury Limited shares. He stated the shares were valued at 50 cents per share, based on the 2nd plaintiff’s own share transfer form. He stated that if the shares had been sufficient security, no additional security would have been required. He testified that in a letter dated 20th June 2011 from the 3rd defendant to the 1st plaintiff, the 3rd defendant indicated that Kshs.50,000,000/= as part proceeds from the sale of the shares would be paid by 31st July 2011, but as at 10th October 2011, the proceeds from the sale of shares had not reached the 1st defendant. He noted that in a letter dated 30th November 2012, the 2nd plaintiff acknowledged having received Kshs.7,500,000/= from the 3rd defendant.
37. He testified that in July 2011, Transcentury Limited shares had a high of Kshs.60/=, a low of Kshs.40/=, and closed at Kshs.42/=, with 1,370,000 shares traded. Further, that in November 2011, the share price ranged from Kshs.25/= to Kshs.30/=, closing at Kshs.28.75. He stated that the 2nd plaintiff never demanded from the 1st defendant a specific balance for any unpaid shares. Mr. Kamau could not confirm if the share security was released on 6th June 2011, noting that there was an application to reschedule the loan on 30th June 2011.
38. In re-examination, Mr. Kamau confirmed that the request for release of the shares as security was made by the 2nd plaintiff. He testified that they had sufficient securities at the 1st defendant in the event that the shares were released.
3RD DEFENDANT’S CASE.
39. Mr. Alex Kieme Munga testified as DW2. He adopted his witness statement dated 22nd September 2020 as his evidence in chief. He stated that in the year 2011, he was a Director & shareholder of Nimex Limited, which was a shareholder of the 1st plaintiff company. Mr. Kieme denied knowledge of any meeting having been held by the 1st plaintiff on 18th November 2011 or on any other date, authorizing the filing of this suit. He also denied having signed the Board resolution filed on 27th March 2017 by the 1st plaintiff.
40. During cross-examination by Mr. Kahura, Mr. Kieme stated that he was not aware of the number of 1st plaintiff’s Directors who should sign a Board resolution in order for a seal of the 1st plaintiff to be affixed. On being referred to Clause 23 of the 1st plaintiff’s Articles & Memorandum of Association, he admitted that the 1st plaintiff’s seal is affixed on an instrument or on the resolution of two Directors and/or one Director and Secretary. He had no knowledge of any clause in the 1st plaintiff’s Articles of Association that provides that all three Directors must sign a resolution.
41. In re-examination, Mr. Kieme stated that Clause 12 of the 1st plaintiff’s Articles of Association is the only one that gives the 1st plaintiff’s Directors the power to act. He averred that before participating in a meeting, there must have been an invitation to attend, but in this case he was not invited to the meeting that passed the resolution filed on 27th March 2017 by the 1st plaintiff.
42. Dr. Peter Kahara Munga testified as DW3. He adopted his witness statement dated 22nd December 2020 as his evidence in chief and produced the 22 documents filed by him on 17th November 2020 and the second bundle of 3 documents. The documents he produced were marked as the 3rd defendant’s exhibits No. 1-25. He stated that he is a good friend of the 2nd plaintiff, who approached him for financial assistance due to hardship. He further stated that at the 2nd plaintiff’s request, he signed a comfort letter dated 20th June 2011 addressed to the 1st plaintiff. He confirmed that he bought Transcentury Limited shares privately, not via the Nairobi Stock Exchange. Dr. Munga referred to page 64 of his documents and stated that in July 2011, Transcentury Limited shares averaged Kshs.42.50 with 1,370,900 shares traded, and by September 2013, the average price had dropped to Kshs.30.25. He stated that he had offered to return the shares to the 2nd plaintiff on condition of refund of the money he had paid, but the offer was declined. He added that he has since realized that the shares that had been previously offered to him were pledged as loan security, with each share valued at Kshs.0.50. He also stated that bond holder conversions devalued some shares to 50 cents after being listed in the Nairobi Stock Exchange. He stated that he had not received any dividends from the Transcentury Limited shares, and that he was not aware that the shares were under lien to the 1st defendant in exchange for a loan.
43. During cross-examination by Mr. Kahura, Dr. Munga stated that he was the Chairman of the 1st defendant since 1984 and he held that position during his transaction with the 2nd plaintiff. He admitted that although he agreed to buy the shares, no price was agreed upon initially, as they intended to verify the market value first. He stated that he was not coerced into signing the letter dated 20th June 2011, he understood its contents and the said letter did not explicitly state it was a letter of comfort. Dr. Munga confirmed that he had no direct communication with Dyer & Blair, but he paid them Kshs.4,985,100/=. He also referred to a letter dated 29th August 2011 found at page 43 of his documents, where the 2nd plaintiff acknowledged that the 3rd defendant had paid the broker''s commission. Dr. Munga confirmed that he had agreed to buy the 2nd plaintiff’s 3,000,000 Transcentury Limited shares at Kshs.50 per share, but despite the 2nd plaintiff’s claim that the shares were transferred to him, he never signed transfer forms nor received a share certificate.
44. Dr. Munga testified that he believed that the shares had been transferred, but admitted that he had not paid the full purchase price, having only paid an additional Kshs.33,000,000 without prejudice, and expressed his intention to return the shares to the 2nd plaintiff. He stated that he was unaware that the shares were under a lien to the 1st defendant. He referred the Court to page 43 of his documents where the 2nd plaintiff acknowledged having received Kshs.2,405,790/=, and to page 44, where a letter dated 20th November 2012 shows that the 2nd plaintiff acknowledged receipt of Kshs.7,500,000/= from him during the pendency of this case. He denied that the letter dated 30th November 2012 was a forgery. Dr. Munga contended that he paid off the 1st plaintiff’s loan to the 1st defendant because the 2nd plaintiff linked him to it. He stated that he was not aware that the 2nd plaintiff was a customer of the 1st defendant before he approached him. He confirmed the transfer of shares was fraudulent, as it occurred before the loan was fully repaid.
45. On being cross-examined by Mr. Munyalo, Dr. Munga confirmed that the 1st defendant was not involved in his transaction with the 2nd plaintiff, except for the Kshs.33,000,000/= he paid directly to the 1st defendant. He stated that no further payments were made after 30th November 2011 due to the ongoing suit. He stated that in November 2012, he paid the 2nd plaintiff Kshs.7,500,000/= after being personally approached for assistance, but he has not made payments since.
46. Dr. Munga reiterated that the 2nd plaintiff’s shares were under a lien to the 1st defendant at the time of sale and no specific payment timeline was agreed upon,
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2. The plaintiffs’ case is that on 29th September 2010, the 1st plaintiff entered into a loan agreement with the 1st defendant for Kshs.40,000,000/= to be repaid within six (6) months or upon receipt of proceeds of the sale of Transcentury Limited shares. The plaintiffs averred that the said Agreement was varied on 30th June 2011 setting the outstanding amount at Kshs.33,307,700.00 plus interest, repayable by 31st August 2011 or upon receipt of the sale of 3,000,000 Transcentury Limited shares owned by the 2nd plaintiff and pledged as security. The plaintiffs further averred that the 2nd plaintiff pledged his 3,000,000 Transcentury Limited shares as collateral, to be held in a nominee account by the 2nd defendant.
3. They stated that additional securities that were to be held by the 1st defendant as lien included a personal guarantee by Mr. George Charles Mburu Kariithi, supported by a legal charge of Kshs.40,000,000/=, parcels of land Nos. Ngong/Ngong 48152 & 48171 and corporate guarantees from related entities. The plaintiffs stated that on or around 4th June 2011, the 2nd plaintiff with the 1st defendant’s consent entered into an agreement with the 3rd defendant to sell the 3,000,000 shares at Kshs.50/= per share, totaling Kshs.150,000,000/=, which sum was to be used to repay the loan, with the balance credited to the 1st plaintiff’s account No. 081295942195.
4. The plaintiffs further stated that the 3rd defendant vide his letter dated 20th June 2011 confirmed the purchase of the Transcentury Limited shares and undertook to deposit Kshs.50,000,000/= into the 1st plaintiff’s account by 31st July 2011, but failed to do so and has since refused to pay despite repeated demands. They contended that the said sale was also confirmed by the 1st defendant in its letter dated 3rd June 2011. In addition, that the 1st & 2nd defendants failed to credit the sale proceeds into the 1st plaintiff’s account, despite transferring the shares to the 3rd defendant and acknowledging the sale.
5. The plaintiffs stated that a letter dated 19th December 2011 from the 1st defendant indicated that the loan advanced to them had been repaid and securities discharged, but failed to explain the source of the repayment.
6. In opposition to the suit herein, the 1st & 2nd defendants filed a statement of defence dated 21st December 2012 which was subsequently amended on 4th March 2015. In their defence, the 1st & 2nd defendants denied all the averments in the plaintiffs’ plaint and averred that the further Loan Agreement dated 30th June 2011 did not vary the Loan Agreement of 29th September 2010 but rescheduled the plaintiff’s outstanding facility making Kshs.33,307,700/= the drawdown limit. They further denied knowledge of the agreement between the 2nd plaintiff and the 3rd defendant to the extent that the 3,000,000 Transcentury shares were to be sold at a reserve price of Kshs.50/= each.
7. The 1st & 2nd defendants stated that as at 19th December 2011, the loan advanced to the plaintiffs had been fully settled via two payments totaling Kshs.33,274,768.50, made by the 3rd defendant between October and December 2011, which led to the securities held by the 1st defendant to be discharged and be available for collection.
8. The 1st & 2nd defendants stated that their obligations ended upon settlement of the loan and transfer of shares and they are not liable for any amounts beyond the loan repayment. They further stated that since they were not parties to the Share Sale Agreement, any remaining amounts from the share sale fall under the 3rd defendant’s responsibility. They asserted that the plaintiffs agreed to a partial payment plan with the 3rd defendant without setting time limits, which led to the shares being transferred to the 3rd defendant. The 1st & 2nd defendants averred that acknowledgement of a Kshs.2,405,709/= part payment by the 1st plaintiff further confirms the said agreement. They contended that since the plaintiffs failed to fully disclose their agreement with the 3rd defendant and acknowledged accepting the repayment structure, they are estopped from claiming further amounts from them afterwards.
9. The 3rd defendant in opposition to this suit filed a statement of defence dated 26th June 2012 which was subsequently amended on 6th June 2013, 16th July 2015 & on 22nd September 2020 to include a counterclaim/set-off. The 3rd defendant denied all the averments in the plaintiff’s plaint and averred that on 4th June 2011, he agreed to buy 3,000,000 Transcentury Limited shares from the 2nd plaintiff. He stated that the agreement involved no specific payment timeline and was based on an arrangement for staggered payments, some made to meet the 2nd plaintiff’s urgent needs.
10. The 3rd defendant asserted that he has paid a total of approximately Kshs.42,905,790/=, with Kshs.2,405,790/= being paid directly to the 2nd plaintiff, Kshs.33,500,000/= being paid under duress to accounts held with the 1st defendant for the 2nd plaintiff’s benefit and Kshs.7,000,000/= which was paid in the course of 2012. It was stated by the 3rd defendant that the said payments were made on a without prejudice basis, not admission of liability and were intended to facilitate release of securities, not to confirm final contractual obligations. He further stated that his letter dated 20th June 2011 was a non-binding letter of comfort, issued at the plaintiffs'' request and not an enforceable undertaking.
11. The 3rd defendant in his counterclaim/set-off averred that the 2nd plaintiff misrepresented that the shares were freely tradable and unencumbered, their market value was no less than Kshs.50/- per share and that the shares were not at the risk of dilution, though bond holder conversions later devalued them to 50 cents. He contended that the 2nd plaintiff knew or should have known that he (3rd defendant) lacked due diligence, but still misled him into believing in flexible payment terms. The 3rd defendant stated that upon discovering the aforesaid misrepresentations, he sought to rescind the sale of the said shares through letters dated 14th August 2014 & 18th July 2017, demanding a refund. He averred that the 2nd plaintiff responded conditionally demanding share value to be pegged at Kshs.22.25 per share plus 18% compound interest, effectively imposing unilateral terms for rescission. The 3rd defendant asserted that the agreement between him and the 2nd plaintiff was vague on critical terms like price and timelines, thus the Kshs.42,905,790.00 paid has wholly failed. For this reason, he claimed that he is entitled to a refund of the full amount paid.
12. The 3rd defendant prays for the plaintiffs’ suit be dismissed with costs. He also prays for judgment against the 2nd plaintiff, including a declaration that the share sale agreement is null and void, an order for its rescission and/or, in the alternative, an award of damages in lieu thereof. The 3rd defendant also prays for an order compelling the 1st & 2nd defendants to execute the share re-transfer documents. Additionally, the 3rd defendant seeks an order for refund of the full purchase price of Kshs.42,905,790/- paid for the shares, damages for misrepresentation, the costs of the counterclaim/set-off with interest, and interest on the refund amount at the rate of 16% per annum from the date of filing this suit until payment in full.
13. The plaintiffs filed a defence to the 3rd defendant’s counterclaim/set-off dated 29th September 2020. In the said defence, the plaintiffs denied all the averments contained in the 3rd defendant’s counterclaim/set-off and averred that the 3rd defendant’s claims of misrepresentation are an afterthought. They acknowledged that the letters cited by the 3rd defendant were written without prejudice, but claimed that the 3rd defendant waived negotiation privilege by referring to the said letters, thus they would rely on them for their full tenor and effect. The plaintiffs denied the 3rd defendant’s entitlement to rescind the Share Sale Agreement and claim for refund and/or set off, and stated that the 3rd defendant’s claim against them is time-barred.
14. This matter proceeded to hearing where the plaintiffs called one witness in support of their case, the 1st & 2nd defendants called one witness, while the 3rd defendant testified and called a witness to testify in his defence.
PLAINTIFFS’ CASE.
15. Mr. Joseph Muturi Kamau testified as PW1. He adopted his witness statement dated 9th September 2015 as his evidence in chief. He stated that the 1st defendant advanced a loan facility of Kshs.40,000,000/= to the 1st plaintiff on 29th September 2010, to be repaid within six (6) months or upon the sale of 3,000,000 Transcentury Limited shares, whichever came first. He stated that the said facility was secured by inter alia, a personal guarantee and legal charge over multiple properties, a lien over the 3,000,000 Transcentury Limited shares held by Equity Bank, corporate guarantees from Fatima Holdings Limited, Consolidated Securities Limited and Nimex Ltd. Mr. Muturi also stated that the aforesaid facility was later rescheduled via a further Loan Agreement dated 30th June 2011 for Kshs.33,307,700/=, secured on similar terms.
16. Mr. Muturi contended that vide a letter dated 23rd August 2010, Dyer & Blair Investment Bank confirmed that he had offered the 3,000,000 shares for sale at Kshs.50 per share, totaling to Kshs.150,000,000/=, with sale proceeds to be deposited into the 1st plaintiff’s account, and on 3rd June 2011, the 2nd defendant prepared a sale transfer form showing that the said shares were sold for Kshs.150,000,000/=. Mr. Muturi testified that on 20th June 2011, the 3rd defendant confirmed in writing that he had purchased the shares and committed to pay part of the proceeds by 31st July 2011. He stated that the sale was also confirmed by the 1st defendant in a letter dated 5th June 2011, but the 3rd defendant did not remit payment for the shares as agreed, hence on 10th October 2011, he inquired from the 1st defendant why the Kshs.150,000,000/= had not been deposited into the agreed account.
17. Mr. Muturi contended that in as much as the 1st defendant responded to his inquiry on 8th November 2011, it did not provide clarity on the crediting of the sale proceeds. He stated that the 2nd defendant facilitated the transfer of the shares from him to the 3rd defendant. He maintained that the 1st & 2nd defendants were obligated to credit the full sale amount to the 1st plaintiff’s account, deduct the balance of the loan amount and avail the balance for the 1st plaintiff’s use, which was not done. He further stated that after instituting this case, the 1st defendant informed them that the loan advanced to them had been fully repaid and securities released, but failed to disclose who paid the loan and/or whether the proceeds from the share sale were used. He testified that the defendants are guilty of breach of contract as a result of which the plaintiffs have suffered loss and damage.
18. On being cross-examined by Mr. Munyalo, Mr. Muturi stated that the loan terms of the financial facility advanced to the 1st plaintiff were varied in June 2011, reducing the loan amount to Kshs.33,000,000/=, payable by August 2011. He further stated that as at the repayment date, the aforesaid loan had not been cleared. He indicated that he had engaged Dyer & Blair in 2010 to sell the Transcentury Limited shares over-the-counter, but no buyer was found then, and in 2011 he offered the said shares to the 3rd defendant, the then Chairman of the 1st defendant.
19. Mr. Muturi asserted that he and the 3rd defendant entered into an oral agreement for the sale of the aforesaid shares at Kshs.50 per share, totaling Kshs.150,000,000/=, with the understanding that part of the proceeds would go towards settling the subject loan. He contended that in as much as the aforesaid agreement was not in writing, Dyer & Blair confirmed the offer price in writing. Mr. Muturi asserted that the nominal share value of the Transcentury Limited shares was Kshs.1,800,000/=, but their market value was Kshs.150,000,000/=.
20. It was his evidence that the said shares were transferred to the 2nd defendant who held them as a nominee/custodian on behalf of the 1st defendant and thereafter transferred them to the 3rd defendant. He further testified that in as much as he expected that the 3rd defendant would deposit the full purchase sum into the 1st plaintiff’s account held by the 1st defendant and the latter would recover the loan and release the balance to the 1st plaintiff, only Kshs.33,307,700/=, sufficient to settle the loan amount, was received by the 1st defendant.
21. Mr. Muturi stated that the 1st & 2nd defendants were not informed of the agreement between him and the 3rd defendant. He admitted that the agreement between him and the 3rd defendant did not have any definite time. He confirmed that it was the 3rd defendant who bore the responsibility of paying any balance for the shares sold. Mr. Muturi denied claims that the sale of the shares was purely private and stated that Dyer & Blair, and the 1st & 2nd defendants all played roles in facilitating the transaction and transferring the shares.
22.
23. During cross-examination by Mr. C.N. Kihara, Mr. Muturi admitted that in his witness statement, he did not mention of having met with the 3rd defendant. He confirmed that the plaintiffs do not seek any specific reliefs against the 3rd defendant. He acknowledged that there is no formal Board resolution from the 1st plaintiff authorizing the filing of this suit. He however claimed that there was a verbal resolution by the 1st plaintiff’s Board as per its Articles of Association, made in the presence of Charles Kariithi. Mr. Muturi stated that the 1st plaintiff has three shareholder companies being Fatima Holdings Ltd, Consolidated Securities Ltd and Nimex Ltd, none of which nominated a representative to represent them in Court as per the 1st plaintiff’s Articles of Association. He confirmed that he personally knows the 3rd defendant and stated that he should have paid the full purchase price for the 3,000,000 Transcentury Limited shares after settling the loan due to the 1st defendant.
24. Mr. Muturi contended that Transcentury Limited shares were initially valued at 50 cents nominally, but Dyer & Blair indicated a market value of Kshs.50 per share. He however confirmed that he did not have any valuation reports of the 1st defendant’s valuation of the shares despite the fact that it was responsible for asset valuation as per the Loan Agreement. He was not aware if the said shares had been valued by the 1st defendant.
25. He reiterated that no formal written agreement existed between him and the 3rd defendant as the transaction was oral and without a fixed completion date. He stated that he met the 3rd defendant at his office to discuss the sale of the shares and that the 3rd defendant knew that the proceeds of the said sale were intended to repay the 1st plaintiff’s loan advanced to it by the 1st defendant. He confirmed that he did not show the 3rd defendant any loan documents during the said meeting and he relied on trust.
26. Mr. Muturi stated that Transcentury Limited shares were listed in the Nairobi Stock Exchange on 14th July 2011, and before that, for purposes of public listing, the company prepared a Memorandum of Information. He further stated that Regulations required existing shareholders to meet certain requirements, and that 50% of issued ordinary shares were not to be sold for a period of 24 months. He explained that the said shareholders were not to offload 50% of their shareholding for 24 months in order to safeguard potential investors in the company’s shares, and they had to agree with the foregoing in writing as individual shareholders. He also explained that the foregoing was to apply to a specific category of shareholders depending on their shareholding number of shares. He indicated that prior to the listing, all the shares were immobilized.
27. It was his evidence that the company (Transcentury Limited) introduced additional 150,920,616 of unissued shares. He added that the company also gave shares with a value of 0.50 cents each for correctible bonds, for bond holders. He stated that after public listing, the share prices started fluctuating and the share price declined within 3 weeks to around Kshs.25/= to 30/=, down from Kshs.50/=.
28. Mr. Muturi stated that he could not recall how much he paid for the Transcentury Limited shares as a founding investor. He acknowledged that the sale of the shares would attract regulatory attention whether sold over the counter or at the Nairobi Stock Exchange. He acknowledged that the 3rd defendant has since paid Kshs.33,500,000/= directly to the bank, effectively settling the loan. He admitted being aware that the 3rd defendant agreed to pay the loan for the 1st plaintiff on a without a prejudice basis. He confirmed that the 3rd defendant offered to return the shares, and his Advocates on record even made further proposals on 4th August 2014, but no final agreement was reached.
29. In regard to the share transfer documents, he said that the documents had his name and one signature, but it did not have the signature of the transferee.
30. In re-examination, Mr. Muturi maintained that the 1st & 2nd defendants are necessary parties to this case since the 3,000,000 Transcentury Limited shares were pledged to the 1st defendant as part of a loan facility, and the shares were held in the 2nd defendant’s account No. A0011, a subsidiary of the 1st defendant. He denied that the signature on the purchase transfer form for the shares was his and stated that the said form was signed by the Manager Equity Nominees (2nd defendant) on behalf of the transferee. Mr. Muturi testified that by the time this suit was filed, the loan advanced to the 1st plaintiff by the 1st defendant had not yet been repaid, and that repayment by the 3rd defendant only occurred after this suit was filed.
1ST & 2ND DEFENDANTS’ CASE.
31. Mr. George Kamau Mwangi testified as DWI. He adopted his witness statement dated 1st March 2015 as his evidence in chief and produced the 1st & 2nd defendants’ bundle of documents dated 19th September 2016 as defence exhibits No. 1 to 7. Mr. Kamau testified that on 3rd November 2010, the 2nd plaintiff transferred 3,000,000 Transcentury Limited shares to the 2nd defendant as security for a loan advanced to the 1st plaintiff by the 1st defendant. That on 3rd June 2011, the 1st defendant informed the 2nd defendant that the 2nd plaintiff intended to sell the said shares at Kshs.50/- each in one lot, via a private arrangement with the 3rd defendant, which sale arrangement was confirmed by the 2nd plaintiff. He testified that since the shares were not listed in the Nairobi Stock Exchange, they were to be sold over the counter. He further testified that the 1st & 2nd defendants were not parties to the private sale, but the 1st defendant agreed to this arrangement on condition that the balance of the loan amount in the sum of Kshs.33,307,700/= being paid first.
32. Mr. Kamau stated that at that time, the market price for the shares was approximately Kshs.38/-. He contended that the 2nd defendant transferred the shares to the 3rd defendant in June 2011 and by August 2011, the 1st defendant advised the 2nd defendant that the 2nd plaintiff had acknowledged a direct partial payment of Kshs.2,405,709.00 made to him, and the 3rd defendant also paid and settled the 1st plaintiff’s outstanding loan amount. Mr. Kamau testified that the 2nd defendant could not verify if the full sale price for the shares was paid to the 2nd plaintiff as the sale agreement excluded them.
33. He further testified that the 2nd plaintiff had no objection to the transfer of the shares and that the private agreement between the 2nd plaintiff and the 3rd defendant did not specify timelines for full payment. He contended that the claim against the 1st & 2nd defendants to account for the full sale price is unfounded and that they cannot be held liable for any excess amount claimed beyond Kshs.33,307,700/=.
34. During cross-examination by Mr. Kahura, Mr. Kamau (DW1) confirmed that the 2nd defendant offers custodial services to the public and it holds securities on behalf of the 1st defendant and it is a subsidiary of the said defendant. He testified that securities are only released upon full receipt of the purchase price, and not before, even at the request of a client. He further testified that on offering the 3,000,000 Transcentury Limited shares as security, the 2nd plaintiff signed a share transfer form. He stated that the signature of the seller and the buyer on the same form appeared to be the same. He also stated that the person who signed the said share transfer form by the name of Peterson Mwangi was once an employee of the 1st defendant.
35. Mr. Kamau explained that when shares are not sold in the open market, the sale terms are agreed privately between the parties, and in this case, the share transfer form showed a sale value of the shares to be Kshs.150,000,000/=, which value was used for computing stamp duty. He stated that in spite of the foregoing, the 1st & 2nd defendants’ documents reflected a nominal value of 50 cents per share, totaling Kshs.1,500,000/=. He could not confirm whether any valuation of the shares was conducted by the 1st defendant which was responsible for valuing securities. He asserted that the 2nd defendant released the shares after the 1st plaintiff’s loan was fully settled on 8th December 2011.
36. Upon cross-examination by Mr. C. N. Kihara, Mr. Kamau confirmed that the loan advanced to the 1st plaintiff was secured by personal guarantees, land, and the 2nd plaintiff’s 3,000,000 Transcentury Limited shares. He stated the shares were valued at 50 cents per share, based on the 2nd plaintiff’s own share transfer form. He stated that if the shares had been sufficient security, no additional security would have been required. He testified that in a letter dated 20th June 2011 from the 3rd defendant to the 1st plaintiff, the 3rd defendant indicated that Kshs.50,000,000/= as part proceeds from the sale of the shares would be paid by 31st July 2011, but as at 10th October 2011, the proceeds from the sale of shares had not reached the 1st defendant. He noted that in a letter dated 30th November 2012, the 2nd plaintiff acknowledged having received Kshs.7,500,000/= from the 3rd defendant.
37. He testified that in July 2011, Transcentury Limited shares had a high of Kshs.60/=, a low of Kshs.40/=, and closed at Kshs.42/=, with 1,370,000 shares traded. Further, that in November 2011, the share price ranged from Kshs.25/= to Kshs.30/=, closing at Kshs.28.75. He stated that the 2nd plaintiff never demanded from the 1st defendant a specific balance for any unpaid shares. Mr. Kamau could not confirm if the share security was released on 6th June 2011, noting that there was an application to reschedule the loan on 30th June 2011.
38. In re-examination, Mr. Kamau confirmed that the request for release of the shares as security was made by the 2nd plaintiff. He testified that they had sufficient securities at the 1st defendant in the event that the shares were released.
3RD DEFENDANT’S CASE.
39. Mr. Alex Kieme Munga testified as DW2. He adopted his witness statement dated 22nd September 2020 as his evidence in chief. He stated that in the year 2011, he was a Director & shareholder of Nimex Limited, which was a shareholder of the 1st plaintiff company. Mr. Kieme denied knowledge of any meeting having been held by the 1st plaintiff on 18th November 2011 or on any other date, authorizing the filing of this suit. He also denied having signed the Board resolution filed on 27th March 2017 by the 1st plaintiff.
40. During cross-examination by Mr. Kahura, Mr. Kieme stated that he was not aware of the number of 1st plaintiff’s Directors who should sign a Board resolution in order for a seal of the 1st plaintiff to be affixed. On being referred to Clause 23 of the 1st plaintiff’s Articles & Memorandum of Association, he admitted that the 1st plaintiff’s seal is affixed on an instrument or on the resolution of two Directors and/or one Director and Secretary. He had no knowledge of any clause in the 1st plaintiff’s Articles of Association that provides that all three Directors must sign a resolution.
41. In re-examination, Mr. Kieme stated that Clause 12 of the 1st plaintiff’s Articles of Association is the only one that gives the 1st plaintiff’s Directors the power to act. He averred that before participating in a meeting, there must have been an invitation to attend, but in this case he was not invited to the meeting that passed the resolution filed on 27th March 2017 by the 1st plaintiff.
42. Dr. Peter Kahara Munga testified as DW3. He adopted his witness statement dated 22nd December 2020 as his evidence in chief and produced the 22 documents filed by him on 17th November 2020 and the second bundle of 3 documents. The documents he produced were marked as the 3rd defendant’s exhibits No. 1-25. He stated that he is a good friend of the 2nd plaintiff, who approached him for financial assistance due to hardship. He further stated that at the 2nd plaintiff’s request, he signed a comfort letter dated 20th June 2011 addressed to the 1st plaintiff. He confirmed that he bought Transcentury Limited shares privately, not via the Nairobi Stock Exchange. Dr. Munga referred to page 64 of his documents and stated that in July 2011, Transcentury Limited shares averaged Kshs.42.50 with 1,370,900 shares traded, and by September 2013, the average price had dropped to Kshs.30.25. He stated that he had offered to return the shares to the 2nd plaintiff on condition of refund of the money he had paid, but the offer was declined. He added that he has since realized that the shares that had been previously offered to him were pledged as loan security, with each share valued at Kshs.0.50. He also stated that bond holder conversions devalued some shares to 50 cents after being listed in the Nairobi Stock Exchange. He stated that he had not received any dividends from the Transcentury Limited shares, and that he was not aware that the shares were under lien to the 1st defendant in exchange for a loan.
43. During cross-examination by Mr. Kahura, Dr. Munga stated that he was the Chairman of the 1st defendant since 1984 and he held that position during his transaction with the 2nd plaintiff. He admitted that although he agreed to buy the shares, no price was agreed upon initially, as they intended to verify the market value first. He stated that he was not coerced into signing the letter dated 20th June 2011, he understood its contents and the said letter did not explicitly state it was a letter of comfort. Dr. Munga confirmed that he had no direct communication with Dyer & Blair, but he paid them Kshs.4,985,100/=. He also referred to a letter dated 29th August 2011 found at page 43 of his documents, where the 2nd plaintiff acknowledged that the 3rd defendant had paid the broker''s commission. Dr. Munga confirmed that he had agreed to buy the 2nd plaintiff’s 3,000,000 Transcentury Limited shares at Kshs.50 per share, but despite the 2nd plaintiff’s claim that the shares were transferred to him, he never signed transfer forms nor received a share certificate.
44. Dr. Munga testified that he believed that the shares had been transferred, but admitted that he had not paid the full purchase price, having only paid an additional Kshs.33,000,000 without prejudice, and expressed his intention to return the shares to the 2nd plaintiff. He stated that he was unaware that the shares were under a lien to the 1st defendant. He referred the Court to page 43 of his documents where the 2nd plaintiff acknowledged having received Kshs.2,405,790/=, and to page 44, where a letter dated 20th November 2012 shows that the 2nd plaintiff acknowledged receipt of Kshs.7,500,000/= from him during the pendency of this case. He denied that the letter dated 30th November 2012 was a forgery. Dr. Munga contended that he paid off the 1st plaintiff’s loan to the 1st defendant because the 2nd plaintiff linked him to it. He stated that he was not aware that the 2nd plaintiff was a customer of the 1st defendant before he approached him. He confirmed the transfer of shares was fraudulent, as it occurred before the loan was fully repaid.
45. On being cross-examined by Mr. Munyalo, Dr. Munga confirmed that the 1st defendant was not involved in his transaction with the 2nd plaintiff, except for the Kshs.33,000,000/= he paid directly to the 1st defendant. He stated that no further payments were made after 30th November 2011 due to the ongoing suit. He stated that in November 2012, he paid the 2nd plaintiff Kshs.7,500,000/= after being personally approached for assistance, but he has not made payments since.
46. Dr. Munga reiterated that the 2nd plaintiff’s shares were under a lien to the 1st defendant at the time of sale and no specific payment timeline was agreed upon,
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