The 1st Respondent vide Plaint dated 25th February 2021 sued the Appellant and the 2nd Respondent seeking judgment for:
a. A declaration that the 2nd Respondent did not have property in the sum of Kshs 3,000,000/= which was deposited by the 1st Respondent into its bank account No. 01120016549401 as the same was deposited pursuant to a fraudulent land sale agreement dated 13th February 2018 which was illegal, null and void ab initio.
b. A declaration that the debit by the Appellant of the 1st Respondent’s bank account N0. 01120016549401 with the sum of Kshs.3,000,000/= and application of the same towards offsetting liabilities owed to it by the 2nd Respondent is unlawful.
c. Refund of Kshs. 3,000,000/= together with interest thereon at court rates effective 5th March 2018.
d. Costs of and incidental to the suit.
The suit was opposed by the respective statements of the Appellant and the 2nd Respondent.
Upon consideration of the claim and defense by the Appellant and the 2nd Respondent, the Trial Magistrate found that the funds utilized by the Appellant to offset the 2nd Respondent’s loan when the said funds were obtained fraudulently infringed upon the rights of the 1st Respondent did not confer any entitlement. That since the sale of land was nullified as being fraudulent the 1st Respondent was entitled to restitution and having learnt of the fraud the Appellant was obliged to intervene to remedy the wrong.
Judgment was therefore entered for the 1st Respondent as prayed.
From the evidence on record in the trial court it was not in dispute that Kenya Shillings Three Million (Kshs. 3,000,000/=) was deposited by the 1st Respondent in the 2nd Respondent's Account number 01120016549401 which account was domiciled at the Appellant's Kisii Branch.
The deposit was made pursuant to a land transaction where the 1st Respondent purchased properly from individuals who alleged to be officials of the 2nd Respondent. It was alleged that the 1st Respondent only discovered it had been defrauded after its representatives went to fence the property.
The 2nd Respondent held another account number 017N7016549402 with the Appellant Bank, which was a loan account that was in arrears at the material time.
On 23rd May 2019, a sum of Kshs. 2,981,877.11 of the amounts deposited was debited to pay the 2nd Respondent's loan arrears leaving a nil balance in account No. 01120016549401.
It was the Appellant’s argument that the 1st Respondent never issued instructions to the Appellant Bank to suspend the payments made, and even if it did which was denied, the contractual relationship that existed was strictly between the Bank and the 2nd Respondent. The said relationship between the Appellant and the 2nd Respondent mandated the Appellant to debit the amount deposited in the 2nd Respondent's account to regularize the loan account.
The Appellant Bank received a Court Ruling dated 11th October 2019 with respect to Ogembo Criminal Case No. 722 of 2018 which ordered the Appellant Bank to refund the Kshs. 3,000,000 to the 1st Respondent.
The Appellant Bank responded to the Court Order vide a letter on 28th October 2019 explaining that the funds had already been debited to the 2nd Respondent's loan account. 1.9 The Appellant Bank followed the due process before debiting Kshs. 2,981,877.11 to the 2nd Respondent's loan account and it was done within the realm of the contract between the Appellant Bank and the 2nd Respondent.
From the facts established during trial in the subordinate court, it is clear that the money deposited by the 1st Respondent to the 2nd Respondent's account was used to discharge the loan owed to the Appellant Bank.
The Loan Agreement between the Appellant Bank and the 2nd Respondent provided for a salient term that any money in the 2nd Respondent's account would be used in discharging the loan.
The judgment was delivered on 10th July 2024. Upon perusal of the judgment, the Appellant realized that its written submissions were not considered in reaching the said judgment.
Consequently, the Appellant lodged an application dated 17th of July 2024 where it sought for orders among others to stay execution, admission of its submissions on record and to set aside the judgment but the same was declined vide e ruling of the Lower Court dated 9th of August 2024.
Upon decline of the aforementioned application the Appellant lodged the appeal herein vide Memorandum of Appeal dated 9th August, 2024 on the following grounds: -
1. THAT the Honourable Trial Magistrate erred in law and fact by failing 10 consider the nature and import of the Documentary evidence tendered by the Appellant as tiled in its List of Documents in Chief Magistrate's Civil Suit No. Civil Suit no. 349 of 2021 in arriving at the impugned judgment.
2. THAT the Honourable Trial Magistrate erred in law and fact in failing to hold that Liability did not attach to the Appellant Bank as it did not play any part in the fraud said to have been orchestrated by Third Parties against the 1st Respondent and further was not Party in Ogembo Criminal
Case 772 of 2018.
3. THAT the learned Trial Magistrate erred in law and in fact in failing to hold and find that the Appellant and the 2nd Respondent had and maintained a Banker-Customer Relationship and that as a consequence, line Appellant Bank was bound by statutory and contractual strictures in the manner and mode it handled monies held for and on account of the 2nd Respondent
4. THAT the Trial Court fell in error when it failed to determine that the Appellant Bank was entitled to debit the sums deposited in Account No 01 120016549401 pursuant to the enabling provisions of the Loan Agreement executed by the Parties, the Mandates in place and such additional substantive and ancillary Documents as executed between the Appellant and 2nd Respondent.
5. THAT further to Grounds (3) and (4) above the learned Trial Magistrate erred in law and fact in failing to hold and find that any and/all amounts deposited in the aforesaid Account were subject to Direct Debits to settle the the Loan advanced to the 2nd Respondent,
6. THAT the Trial Magistrate erred in failing to hold and find at the time the Order in Ogembo Criminal Case No 772 of 2018 was served upon the Appellant Bank a sum of Kshs. 2981877.1 1 had already been debited and used to settle Loan Account No. 01 7N701 6549402. The Debit aforesaid having been done in satisfaction of the amounts due to the Appellant Bank and as contracted vide a Loan Agreement executed between the Appellant and 2nd Respondent the said Order was overtaken by events and was incapable of compliance.
7. THAT the Learned Trial Magistrate further erred when she failed to consider in her judgement that the Plaintiff's Witness admitted in his own filed Statement that he was aware of the Loan taken by the 2nd Respondent,
This admission taken in totality of the other evidence adduced and documents tendered by the Appellant should have the Appellant discharged from liability.
8. THAT the Honorable Magistrate erred in law and fact consider the Appellant's written submissions filed in the Civil Suit no. 349 of 2021
9. THAT the Honorable Magistrate erred in law and fact by allowing the Soil against the Appellant contrary to the weight of the evidence submitted in the lower court.
The Appellant craved to seek leave if need be, to file a Supplementary Memorandum of Appeal upon receipt of the typed proceedings in this matter.
REASONS WHEREFORE, the Appellant prays that:
a. The Judgment of The Hon. Caroline A. Ocharo (Chief Magistrate) delivered on the 10th July, 2024 in Chief Magistrate's Civil Soil no. 3119 of 2021 be set aside in its entirely;
b. The 1st Respondent's Suit in the Trial Court be dismissed as against the Appellant.
c. The costs of the Appeal and those in the Lower Court be awarded to the Appellant.
The appeal herein was heard by way of written submissions.
The Appellant’s submissions are dated 16th day of October 2024, The Appellant submitted that the 2nd Respondent indeed had accounts with the Bank and that it had a Loan Facility with unsettled arrears summing up to Kshs. 3,000,000. This was corroborated by the 2nd Respondent's Loan and Account statements produced in evidence as Exhibits 6 and 7 as found at Pages 210 to 214 of the Record of Appeal.
It was also submitted that furthermore, in the Statement by the 1st Respondent's witness, Kennedy Mogeni (PW1), at Paragraph 3 statement he acknowledges that the 1st Respondent acknowledged to have deposited Kshs. 3,000,000 to the 2nd Respondent's account.
The Appellant submitted that the reason the 1st Respondent paid the 2nd Respondent partly in cash and partly by a bank deposit was for reasons stated clearly in the statement at paragraph 3 as follows:-
"They had indicated that the 1st Defendant (now the 2nd Respondent) had debts with its banker and if all the entire purchase price was to be deposited into the 1st Defendant's bank account, the same would all be applied towards settlement of the debt"
The Appellant argued that in the circumstances it is clear that PW1 lied to court while he was under oath, a fact this court should not take lightly because the same has dire consequences in law.
It was argued that the trial court failed to appreciate the glaring evidence in the witness statement by the 1st Respondent's witness, Mogeni where he indicated that he knew about the pending loan that the 2nd Respondent had with the Appellant.
It was submitted that apart from the fact that the 1st Respondent was aware of the 2nd Respondent’s indebtedness. the trial Court did not consider that the Appellant Bank was not party to the alleged fraudulent sale agreement and was totally unaware of how the 2nd Respondent sourced for the money that was deposited in its account.
The Appellant also submitted that the trial Court should have appreciated the banker/customer relationship between the Appellant and the 2nd Respondent had vide the letter of offer.
On the issue of fraud, it was submitted that the Trial Magistrate erred in fact and law in failing to appreciate that the Appellant did not participate in the fraud that was orchestrated by the third parties against the 1st Respondent and that the said Bank was not part of the criminal proceedings in Ogembo.
PW1 testified that the agreed purchase price for the allegedly sold property whose proceeds are in contention was Kenya Shillings Five Million (Kshs. 5, 000,000/=), which was paid out as follows:
a. Kshs. 1,000,000 in cash to Samuel Ongosi Moturi, James Iteba Nyangau and Jason Onwonga Nyakenanda
b. Kshs. 1,000,000/- by deposit into Bank Account No. 01109671149100 held by James Iteba Nyangau
c. Kshs. 3,000,000/= into the 2nd Respondent's Bank Account No.01120016549401.
The Appellant submitted that this breakdown raises eyebrows because the 1st Respondent’s, admits that when he was approached for the purchase of the said parcel, he stated that he was shown a title deed which confirmed that the parcel was duly registered in the name of the 2nd Respondent. PW1 did not explain if indeed the sale was genuinely dealing with 2nd Respondent, why he proceeded to deposit some of the purchase price in the personal accounts of the 'officials' to the 2nd Respondent and also disburse some of the funds in cash.
It was argued that this transaction should have created doubt in the mind of the court as evidently the purchase price of the suit property was being sold way below the market price. That the 1st Respondent and the purported officials of the 2nd Respondent must have been aware of the current market prices of property around Kisii and its environs. The fact that the offer was for a meager amount of Kshs. 5,000,000 for a property worth over Kshs. 87,978,000/- should have prompted the 1st Respondent's directors to do thorough due diligence including formally writing to the 2nd Respondent to affirm the offer.
The Appellant’s counsel cited and relied on the decision of the Supreme Court of Kenya in Dina Management Company vs County Government of Mombasa (2023) eKLR which places the burden of investigating title of a property on a purchaser before proceeding with a land transaction. It was submitted that the courts will ordinarily not grant protection to a bona-fide purchaser who did not conduct thorough due diligence preceding completion of a sale agreement.
The Black's Law Dictionary 9th Edition defines a bona fide purchaser as:
"One who buys something for value without notice of another's claim to the property and without actual or constructive notice of any defects in or infirmities, claims, or equities against the seller's title; one who has in good faith paid valuable consideration for property without notice of prior adverse claims."
The decision of the Court of Appeal in Uganda in Katende v Haridar & Company Ltd [2008] 2 EA 173, as cited by the Supreme Court of Kenya in Dina Management Company vs The County Government of Mombasa (2023) eKLR was relied on where a bona fide purchaser for value was defined as follows:
"For the purposes of this appeal, it suffices to describe a bona fide purchaser as a person who honestly intends to purchase the property offered for sale and does not intend to acquire it wrongly. For a purchaser 3.18 3.19 3.21 3.22 purchased the properly in good faith, he had no knowledge of the fraud, he purchased for valuable consideration, the vendors had apparent valid title, he purchased without notice of any fraud, he was not party to the fraud."
In the same vein, the Court of Appeal in Samuel Kamere v Lands Registrar, Kajiado Civil Appeal No 28 of 2005 [2015] eKLR stated as follows:
"...in order to be considered a bona fide purchaser for value, they must prove; that they acquired a valid and legal title, secondly, they carried out the necessary due diligence to determine the lawful owner from whom they acquired a legitimate title and thirdly that they paid valuable consideration for the purchase of the suit property..."
The Appellant submitted that 1st Respondent did not carry out due diligence and its mistake to engage 'purported officials' of the 2nd Respondent, who turned out to be fraudsters, should not be visited on the Appellant Bank. That moreover, the foregoing demonstrates that the 1st Respondent had an ulterior motive to defraud the 2nd Respondent for its own benefit and selfish interest.
Does that make the Appellant Bank liable in any way? We submit not.
The Appellant further submitted that the Appellant Bank was not aware of the purported land transactions and the 1st Respondent is stranger to it despite depositing Kshs. 3,000,000 in the 2nd Respondent's account. It was argued that the Kshs. 3,000,000 was used to legally regularize the loan account of the 2nd Respondent owed to the Appellant Bank and it was oblivious of the source of funds but only exercised its contractual right to debit the funds to regularize the 2nd Respondent's loan account.
The Appellant invited the court to find that the learned Trial Magistrate erred in law and fact in failing to hold that liability did not attach to the Appellant Bank as it did not play any part in the fraud said to have been orchestrated by Third Parties against the 1st Respondent and further was not Party in Ogembo Criminal Case 772 of 2018 and the Court Order subject to Ogembo Criminal Case 772 of 2018 issued on 11th October, 2019 to refund the money to the 1st Respondent was served upon the Bank after Kshs. 3,000,000 had been debited to settle the outstanding loan amount on 23rd May 2019. This was served on the Bank a whole 5 months after the Debit was done and there were no funds in the account. That the Debit aforesaid having been done in satisfaction of the amounts due to the Appellant Bank, and as contracted vide a Loan Agreement executed between the Appellant and 2nd Respondent, the said order was not only overtaken by events and was incapable of compliance but that the letter of offer mandated the Appellant to debit the 2nd Respondent's account at all times to regularize the pending loan account.
The said relationship was demonstrated by Mr. Ombui, the Bank's Witness whereby he explained that the relationship was governed by the Letter of Offer and the Loan Agreement. 1t was submitted that the debit on the 2nd Respondent's account was lawfully and regularly made by virtue of the Letter of Offer tendered in evidence as Exhibit 1. The said Letter of Offer at page 176 to 183 in the ROA was duly executed by the 2nd Respondent and is thus binding agreement upon the parties.
The Appellant invited the court to consider the Court of Appeal case of Barclays Bank of Kenya Lid vs Kepha Nyabera & 191 Others, Civil Appeal No. 169 of 2007 cited with approval in Nicholas Mahihu Muriithi vs Bank of Kenya [2018] eKLR where the Court of Appeal explained a Bank's right to set off a debt owed to it by a customer who maintains more than one account with it as follows;
"At paragraph 29.16 of Paget's Law of Banking, 13th Edition, it is stated that the banker may combine two current accounts at any time without notice to the customer even though the accounts are maintained at different branches. We are also guided by the passage in Paget's Law of Banking, supra, paragraph 29.13 where it is stated thus: "
The Appellant submitted that the bankers right of set-off, is one which is a combination or of consolidation of accounts is but the manifestation of a right analogous to the exercise of the right of lien, a right which is of general application and not in principle limited to account or other similar accounts. Thus, in circumstances where a bank has a loan account and also a current account in credit with the same customer, and holds security for the ultimate balance, the banker is at liberty to combine and consolidate the accounts and set off the accounts.
That in the instant case, it is very clear that the 2nd Respondent had given the mandate to the Appellant Bank to consolidate and set off any sum standing to the credit of any one or more of those accounts in or towards the satisfaction of any liabilities due to it.
It was submitted that the Court of Appeal in Barclays Bank of Kenya Lid vs Kepha Nyabera & 191 others, Civil Appeal No. 169 of 2007 case is on all fours with instant case. The Loan Agreement in place, read with the Letter of Offer gave the right to the Bank to set off the sums deposited with the Loan Sums due. That in the circumstances the trial court fell in error when it failed to determine that the Appellant Bank was entitled to debit the sums deposited in Account No. 01120016547401 pursuant to the enabling provisions of the Loan Agreement executed by the Parties. The Appellant invited the court to hold that the Bank is not culpable to refund the Kshs. 3,000,000 deposited by the 1st Respondent to the 2nd Respondent Account. That on this basis alone, the appeal herein should be sustained and appeal herein be allowed as prayed with costs to the Appellant.
The 1st Respondent’s submissions are dated 3rd December, 2024. The 1st Respondent submitted that the plaintiff was desirous of purchasing a parcel of land, namely, L.R. No. Bassi/Boitangare/995 (hereinafter referred to as “the suit premises”).
That the plaintiff entered into agreement dated 13th February, 2018 for purchase of the suit premises at a consideration of Kshs.5,000,000.00.
That the plaintiff paid Kshs.1,000,000/= in cash to one Samuel Ongosi Moturi, James Iteba Nyagau and Jason Onwonga Nyakenanda. The plaintiff further paid Kshs.1,000,000.00 into bank account no.01109671149100 in the name of James Iteba Nyangau. Finally, the plaintiff paid Kshs.3,000,000.00 into bank account number 01120016549401 in the name of the 1st defendant.
That after obtaining title to the suit premises the plaintiff sought to fence the same but was repulsed. It later transpired that the sale had been conducted by persons who were former officials of the 1st defendant who had left office with original copies of documents which facilitated the sale, namely, PIN certificate, title deed etc.
That after the plaintiff realized that it had been duped it made a report to the police and proceeded to lodge a request with the 2nd defendant asking it not to release the sum of Kshs.3,000,000.00 which had been deposited into the 1st defendant’s bank account.
That notwithstanding instructions to it, the 2nd defendant went ahead to apply the sum of Kshs.3,000,000.00 towards offsetting a loan owed by the 1st defendant to it.
That the plaintiff’s authorized director adopted its filed statement and testified and produced documents listed in support of its case.
That in turn, the 1st Respondent’s case was that:-
1.1 The sale of the suit premises by former officials of the 1st defendant was fraudulent:
1.2 Its deposit of the sum of Kshs.3,000,000.00 in the 1st defendant’s account was wrongful;
1.3 The title to the suit premises which had been fraudulently conveyed to it
was in the course of time cancelled – the 1st respondent did not have value for the money it had paid pursuant to the fraudulent sale,
1.4 The appellant herein had disposed of the sum of Kshs.3,000,000.00 by
crediting the same into the 2nd respondent’s loan account to offset liabilities owed by the 2nd respondent to the appellant.
1.5 Neither the Appellant nor the 2nd respondent had a right to the sum of Kshs.3,000,000.00, which the 1st Respondent had wrongfully deposited into the 2nd Respondent’s account.
1.6 There was need by the Appellant to refund the sum of Kshs.3,000,000.00
It was the Respondent’s submissions that the Appellant admitted in its Defence that the suit premises belonged to the 2nd Respondent. That it further admitted that the 1st Respondent deposited Kshs.3,000,000.00 into the 2nd Respondent’s account but asserted that since the 2nd Respondent was indebted to it, on 25th March, 2019 it applied the said funds towards discharging the loan arrears on bank account No. 01120016549401 which belonged to the 1st defendant.
2. The Appellant denied receipt of instructions by the 1st Respondent to refund the sum of Kshs.3,000,000.00 and that at the time the court ordered refund of the said sum through the criminal case, the Appellant had applied the said funds towards offsetting the loan.
The Appellant contended that its act to debit the said amount was informed by the contract it had with the 2nd Respondent – it therefore insisted that its action was lawful.
The Appellant produced documents listed in its list of documents in support of its case.
The 2nd Respondent admitted being the lawful proprietor of the suit premises.
The 2nd Respondent contended that it did not sell the suit premises to the 1st Respondent as the persons who sold the same were not its officials and the agreement was null and void in its opinion
In its quest to show that the sale of the suit premises was not sanctioned, the 1st defendant contended that its management committee had never met to sanction the sale.
It is in evidence in court the 2nd Respondent admitted, that it held the account into which the plaintiff paid Kshs.3,000,000.00.
The 2nd Respondent told the trial court that when it learnt of the sale and deposit of the sum of Kshs.3,000,000.00 its officials visited the 2nd Defendant’s Nyamira branch and had a meeting with the branch manager of the 2nd defendant and requested him not to release the sum of Kshs.3,000,000.00 deposited in its account - as it had not sanctioned the sale of the suit premises.
The 2nd Respondent in its submissions identified the germane and singular issue for determination to be whether the Appellant had a right to apply the sum of Kshs.3,000,000.00 which the 1st Respondent had deposited in the 2nd Respondent’s account pursuant to a fraudulent sale of the suit premises by former officials of the 2nd Respondent towards offsetting a loan facility issued by the Appellant to the 2nd Respondent.
The 2nd Respondent restated the extent of the jurisdiction of this court sitting as an appellate court as stated in the case of Mursal & Another v Manese (suing as the legal administrator of Dalphine Kanini Manesa) (Civil Appeal E20 of 2021) [2022] KEHC 282 (KLR) (6 April 2022) (Judgment) where the court had this to say:
A first appellate court is mandated to re-evaluate the evidence before the trial court as well as the judgment and arrive at its own independent judgment on whether or not to allow the appeal. A first appellate court is empowered to subject the whole of the evidence to a fresh and exhaustive scrutiny and make conclusions about it, bearing in mind that it did not have the opportunity of seeing and hearing the witnesses first hand. This duty was stated in Selle & another v Associated Motor Boat Co. Ltd.& others1 and in Peters v Sunday Post Limited.21{1968} EA 123.2{1958} E.A. page 424.
A first appellate court has jurisdiction to reverse or affirm the findings of the trial court. A first appeal is a valuable right of the parties and unless restricted by law, the whole case is therein open for rehearing both on questions of fact and law. The judgment of the appellate court, must, therefore, reflect its conscious application of mind and record findings supported by reasons, on all the issues arising along with the contentions put forth, and pressed by the parties for decision of the appellate court. While reversing a finding of fact the appellate court must come into close quarters with the reasoning assigned by the trial court and then assign its own reasons for arriving at a different finding. This would satisfy the court hearing a further appeal that the first appellate court had discharged the duty expected of it.33See Santosh Hazari vs. Purushottam Tiwari (Deceased) by L.Rs {2001} 3 SCC 179.
A first appellate court is the final court of fact ordinarily and therefore a litigant is entitled to a full, fair, and independent consideration of the evidence at the appellate stage. Anything less is unjust.4 The first appeal has to be decided on facts as well as on law. In the first appeal parties have the right to be heard on both questions of law as also on facts and the first appellate court is required to address itself to all issues and decide the case by giving reasons. While considering the scope of Section 78 of Civil Procedure Act,5 a court of first appeal can appreciate the entire evidence and come to a different conclusion.4See Kurian Chacko vs. Varkey Ouseph AIR 1969 Kerala 316.5Cap 21, Laws of Kenya.
On the issue of whether the trial court erred to the Appellant to refund Kshs.3,000,000.00 to the 1st Respondent, it was submitted that the trial court did not err, that the judgement of the trial court is sound and should be left undisturbed:
It was submitted that the 1st respondent did not bear privity of contract with regards to the loan repayment which the Appellant had extended to the 2nd respondent. That not being a party to the loan agreement, the 1st Respondent was not bound by the terms of the agreement. The obligation to repay the loan belonged, exclusively to the 2nd Respondent.
That the 1st Respondent did not have any legal obligation to repay the loan on behalf of the 2nd respondent and no single document was produced by the Appellant to prove that the 1st Respondent had an obligation in law to repay the loan on behalf of the 2nd Respondent whether or not the purported sale to it of the suit premises was tainted with fraud.
It was also submitted that neither the Appellant nor the 2nd Respondent had right to Kshs.3,000,000.00 which the 1st Respondent deposited into the 2nd Respondent’s account by virtue of the fraudulent sale of the suit premises.
It was submitted that the Appellant had timely notice of the fact that the sum of Kshs.3,000,000.00 should not have been utilized to offset the 2nd Respondent’s loan facility – the 2nd Respondent told the trial court that when it learnt of the sale and deposit of the sum of Kshs.3,000,000.00 into its account, its officials visited the Appellant’s Nyamira branch in April, 2018 and had a meeting with the branch manager of the Appellant in the presence of a co-operatives commissioner and requested him not to release the sum of Kshs.3,000,000.00 deposited in its account - as it had not sanctioned the sale of the said premises. That the funds remained in the 2nd Respondent’s account until 26th May, 2018 when the Appellant decided to apply the same towards loan repayment.
The 2nd Respondent submitted that court exists to do justice and it would not be just for the 1st Respondent to lose its money notwithstanding that it innocently paid the same into the 2nd Respondent’s account only for it to be consumed by a loan it had nothing to do with.
It was also submitted that it would be against public policy that the 1st Respondent should lose its money when the same is traceable to the Appellant especially in this case where the Appellant acquired the money pursuant to a fraudulent scheme perpetrated against the 1st Respondent.
It was further submitted that no shred of evidence was led that the 1st Respondent colluded with former officials of the 2nd Respondent in the fraudulent sale of the suit premises – the 1st Respondent was at all times an innocent purchaser which believed that it was acquiring land for valuable consideration.
It was submitted that the respondents were agreed in their evidence that persons with whom the 1st Respondent entered into the sale agreement dated 13th February, 2018 were not bonafide officials of the 2nd Respondent and that the management committee of the 2nd Respondent had not met to sanction sale of the suit premises.
It was also submitted that the persons with whom the 1st Respondent transacted did not have capacity on law to transact on behalf of the 2nd Respondent and evidence shows that the Appellant was aware that funds deposited by the 1st Respondent “were disputed”.
The 1st Respondent submitted further that
[...truncated]
a. A declaration that the 2nd Respondent did not have property in the sum of Kshs 3,000,000/= which was deposited by the 1st Respondent into its bank account No. 01120016549401 as the same was deposited pursuant to a fraudulent land sale agreement dated 13th February 2018 which was illegal, null and void ab initio.
b. A declaration that the debit by the Appellant of the 1st Respondent’s bank account N0. 01120016549401 with the sum of Kshs.3,000,000/= and application of the same towards offsetting liabilities owed to it by the 2nd Respondent is unlawful.
c. Refund of Kshs. 3,000,000/= together with interest thereon at court rates effective 5th March 2018.
d. Costs of and incidental to the suit.
The suit was opposed by the respective statements of the Appellant and the 2nd Respondent.
Upon consideration of the claim and defense by the Appellant and the 2nd Respondent, the Trial Magistrate found that the funds utilized by the Appellant to offset the 2nd Respondent’s loan when the said funds were obtained fraudulently infringed upon the rights of the 1st Respondent did not confer any entitlement. That since the sale of land was nullified as being fraudulent the 1st Respondent was entitled to restitution and having learnt of the fraud the Appellant was obliged to intervene to remedy the wrong.
Judgment was therefore entered for the 1st Respondent as prayed.
From the evidence on record in the trial court it was not in dispute that Kenya Shillings Three Million (Kshs. 3,000,000/=) was deposited by the 1st Respondent in the 2nd Respondent's Account number 01120016549401 which account was domiciled at the Appellant's Kisii Branch.
The deposit was made pursuant to a land transaction where the 1st Respondent purchased properly from individuals who alleged to be officials of the 2nd Respondent. It was alleged that the 1st Respondent only discovered it had been defrauded after its representatives went to fence the property.
The 2nd Respondent held another account number 017N7016549402 with the Appellant Bank, which was a loan account that was in arrears at the material time.
On 23rd May 2019, a sum of Kshs. 2,981,877.11 of the amounts deposited was debited to pay the 2nd Respondent's loan arrears leaving a nil balance in account No. 01120016549401.
It was the Appellant’s argument that the 1st Respondent never issued instructions to the Appellant Bank to suspend the payments made, and even if it did which was denied, the contractual relationship that existed was strictly between the Bank and the 2nd Respondent. The said relationship between the Appellant and the 2nd Respondent mandated the Appellant to debit the amount deposited in the 2nd Respondent's account to regularize the loan account.
The Appellant Bank received a Court Ruling dated 11th October 2019 with respect to Ogembo Criminal Case No. 722 of 2018 which ordered the Appellant Bank to refund the Kshs. 3,000,000 to the 1st Respondent.
The Appellant Bank responded to the Court Order vide a letter on 28th October 2019 explaining that the funds had already been debited to the 2nd Respondent's loan account. 1.9 The Appellant Bank followed the due process before debiting Kshs. 2,981,877.11 to the 2nd Respondent's loan account and it was done within the realm of the contract between the Appellant Bank and the 2nd Respondent.
From the facts established during trial in the subordinate court, it is clear that the money deposited by the 1st Respondent to the 2nd Respondent's account was used to discharge the loan owed to the Appellant Bank.
The Loan Agreement between the Appellant Bank and the 2nd Respondent provided for a salient term that any money in the 2nd Respondent's account would be used in discharging the loan.
The judgment was delivered on 10th July 2024. Upon perusal of the judgment, the Appellant realized that its written submissions were not considered in reaching the said judgment.
Consequently, the Appellant lodged an application dated 17th of July 2024 where it sought for orders among others to stay execution, admission of its submissions on record and to set aside the judgment but the same was declined vide e ruling of the Lower Court dated 9th of August 2024.
Upon decline of the aforementioned application the Appellant lodged the appeal herein vide Memorandum of Appeal dated 9th August, 2024 on the following grounds: -
1. THAT the Honourable Trial Magistrate erred in law and fact by failing 10 consider the nature and import of the Documentary evidence tendered by the Appellant as tiled in its List of Documents in Chief Magistrate's Civil Suit No. Civil Suit no. 349 of 2021 in arriving at the impugned judgment.
2. THAT the Honourable Trial Magistrate erred in law and fact in failing to hold that Liability did not attach to the Appellant Bank as it did not play any part in the fraud said to have been orchestrated by Third Parties against the 1st Respondent and further was not Party in Ogembo Criminal
Case 772 of 2018.
3. THAT the learned Trial Magistrate erred in law and in fact in failing to hold and find that the Appellant and the 2nd Respondent had and maintained a Banker-Customer Relationship and that as a consequence, line Appellant Bank was bound by statutory and contractual strictures in the manner and mode it handled monies held for and on account of the 2nd Respondent
4. THAT the Trial Court fell in error when it failed to determine that the Appellant Bank was entitled to debit the sums deposited in Account No 01 120016549401 pursuant to the enabling provisions of the Loan Agreement executed by the Parties, the Mandates in place and such additional substantive and ancillary Documents as executed between the Appellant and 2nd Respondent.
5. THAT further to Grounds (3) and (4) above the learned Trial Magistrate erred in law and fact in failing to hold and find that any and/all amounts deposited in the aforesaid Account were subject to Direct Debits to settle the the Loan advanced to the 2nd Respondent,
6. THAT the Trial Magistrate erred in failing to hold and find at the time the Order in Ogembo Criminal Case No 772 of 2018 was served upon the Appellant Bank a sum of Kshs. 2981877.1 1 had already been debited and used to settle Loan Account No. 01 7N701 6549402. The Debit aforesaid having been done in satisfaction of the amounts due to the Appellant Bank and as contracted vide a Loan Agreement executed between the Appellant and 2nd Respondent the said Order was overtaken by events and was incapable of compliance.
7. THAT the Learned Trial Magistrate further erred when she failed to consider in her judgement that the Plaintiff's Witness admitted in his own filed Statement that he was aware of the Loan taken by the 2nd Respondent,
This admission taken in totality of the other evidence adduced and documents tendered by the Appellant should have the Appellant discharged from liability.
8. THAT the Honorable Magistrate erred in law and fact consider the Appellant's written submissions filed in the Civil Suit no. 349 of 2021
9. THAT the Honorable Magistrate erred in law and fact by allowing the Soil against the Appellant contrary to the weight of the evidence submitted in the lower court.
The Appellant craved to seek leave if need be, to file a Supplementary Memorandum of Appeal upon receipt of the typed proceedings in this matter.
REASONS WHEREFORE, the Appellant prays that:
a. The Judgment of The Hon. Caroline A. Ocharo (Chief Magistrate) delivered on the 10th July, 2024 in Chief Magistrate's Civil Soil no. 3119 of 2021 be set aside in its entirely;
b. The 1st Respondent's Suit in the Trial Court be dismissed as against the Appellant.
c. The costs of the Appeal and those in the Lower Court be awarded to the Appellant.
The appeal herein was heard by way of written submissions.
The Appellant’s submissions are dated 16th day of October 2024, The Appellant submitted that the 2nd Respondent indeed had accounts with the Bank and that it had a Loan Facility with unsettled arrears summing up to Kshs. 3,000,000. This was corroborated by the 2nd Respondent's Loan and Account statements produced in evidence as Exhibits 6 and 7 as found at Pages 210 to 214 of the Record of Appeal.
It was also submitted that furthermore, in the Statement by the 1st Respondent's witness, Kennedy Mogeni (PW1), at Paragraph 3 statement he acknowledges that the 1st Respondent acknowledged to have deposited Kshs. 3,000,000 to the 2nd Respondent's account.
The Appellant submitted that the reason the 1st Respondent paid the 2nd Respondent partly in cash and partly by a bank deposit was for reasons stated clearly in the statement at paragraph 3 as follows:-
"They had indicated that the 1st Defendant (now the 2nd Respondent) had debts with its banker and if all the entire purchase price was to be deposited into the 1st Defendant's bank account, the same would all be applied towards settlement of the debt"
The Appellant argued that in the circumstances it is clear that PW1 lied to court while he was under oath, a fact this court should not take lightly because the same has dire consequences in law.
It was argued that the trial court failed to appreciate the glaring evidence in the witness statement by the 1st Respondent's witness, Mogeni where he indicated that he knew about the pending loan that the 2nd Respondent had with the Appellant.
It was submitted that apart from the fact that the 1st Respondent was aware of the 2nd Respondent’s indebtedness. the trial Court did not consider that the Appellant Bank was not party to the alleged fraudulent sale agreement and was totally unaware of how the 2nd Respondent sourced for the money that was deposited in its account.
The Appellant also submitted that the trial Court should have appreciated the banker/customer relationship between the Appellant and the 2nd Respondent had vide the letter of offer.
On the issue of fraud, it was submitted that the Trial Magistrate erred in fact and law in failing to appreciate that the Appellant did not participate in the fraud that was orchestrated by the third parties against the 1st Respondent and that the said Bank was not part of the criminal proceedings in Ogembo.
PW1 testified that the agreed purchase price for the allegedly sold property whose proceeds are in contention was Kenya Shillings Five Million (Kshs. 5, 000,000/=), which was paid out as follows:
a. Kshs. 1,000,000 in cash to Samuel Ongosi Moturi, James Iteba Nyangau and Jason Onwonga Nyakenanda
b. Kshs. 1,000,000/- by deposit into Bank Account No. 01109671149100 held by James Iteba Nyangau
c. Kshs. 3,000,000/= into the 2nd Respondent's Bank Account No.01120016549401.
The Appellant submitted that this breakdown raises eyebrows because the 1st Respondent’s, admits that when he was approached for the purchase of the said parcel, he stated that he was shown a title deed which confirmed that the parcel was duly registered in the name of the 2nd Respondent. PW1 did not explain if indeed the sale was genuinely dealing with 2nd Respondent, why he proceeded to deposit some of the purchase price in the personal accounts of the 'officials' to the 2nd Respondent and also disburse some of the funds in cash.
It was argued that this transaction should have created doubt in the mind of the court as evidently the purchase price of the suit property was being sold way below the market price. That the 1st Respondent and the purported officials of the 2nd Respondent must have been aware of the current market prices of property around Kisii and its environs. The fact that the offer was for a meager amount of Kshs. 5,000,000 for a property worth over Kshs. 87,978,000/- should have prompted the 1st Respondent's directors to do thorough due diligence including formally writing to the 2nd Respondent to affirm the offer.
The Appellant’s counsel cited and relied on the decision of the Supreme Court of Kenya in Dina Management Company vs County Government of Mombasa (2023) eKLR which places the burden of investigating title of a property on a purchaser before proceeding with a land transaction. It was submitted that the courts will ordinarily not grant protection to a bona-fide purchaser who did not conduct thorough due diligence preceding completion of a sale agreement.
The Black's Law Dictionary 9th Edition defines a bona fide purchaser as:
"One who buys something for value without notice of another's claim to the property and without actual or constructive notice of any defects in or infirmities, claims, or equities against the seller's title; one who has in good faith paid valuable consideration for property without notice of prior adverse claims."
The decision of the Court of Appeal in Uganda in Katende v Haridar & Company Ltd [2008] 2 EA 173, as cited by the Supreme Court of Kenya in Dina Management Company vs The County Government of Mombasa (2023) eKLR was relied on where a bona fide purchaser for value was defined as follows:
"For the purposes of this appeal, it suffices to describe a bona fide purchaser as a person who honestly intends to purchase the property offered for sale and does not intend to acquire it wrongly. For a purchaser 3.18 3.19 3.21 3.22 purchased the properly in good faith, he had no knowledge of the fraud, he purchased for valuable consideration, the vendors had apparent valid title, he purchased without notice of any fraud, he was not party to the fraud."
In the same vein, the Court of Appeal in Samuel Kamere v Lands Registrar, Kajiado Civil Appeal No 28 of 2005 [2015] eKLR stated as follows:
"...in order to be considered a bona fide purchaser for value, they must prove; that they acquired a valid and legal title, secondly, they carried out the necessary due diligence to determine the lawful owner from whom they acquired a legitimate title and thirdly that they paid valuable consideration for the purchase of the suit property..."
The Appellant submitted that 1st Respondent did not carry out due diligence and its mistake to engage 'purported officials' of the 2nd Respondent, who turned out to be fraudsters, should not be visited on the Appellant Bank. That moreover, the foregoing demonstrates that the 1st Respondent had an ulterior motive to defraud the 2nd Respondent for its own benefit and selfish interest.
Does that make the Appellant Bank liable in any way? We submit not.
The Appellant further submitted that the Appellant Bank was not aware of the purported land transactions and the 1st Respondent is stranger to it despite depositing Kshs. 3,000,000 in the 2nd Respondent's account. It was argued that the Kshs. 3,000,000 was used to legally regularize the loan account of the 2nd Respondent owed to the Appellant Bank and it was oblivious of the source of funds but only exercised its contractual right to debit the funds to regularize the 2nd Respondent's loan account.
The Appellant invited the court to find that the learned Trial Magistrate erred in law and fact in failing to hold that liability did not attach to the Appellant Bank as it did not play any part in the fraud said to have been orchestrated by Third Parties against the 1st Respondent and further was not Party in Ogembo Criminal Case 772 of 2018 and the Court Order subject to Ogembo Criminal Case 772 of 2018 issued on 11th October, 2019 to refund the money to the 1st Respondent was served upon the Bank after Kshs. 3,000,000 had been debited to settle the outstanding loan amount on 23rd May 2019. This was served on the Bank a whole 5 months after the Debit was done and there were no funds in the account. That the Debit aforesaid having been done in satisfaction of the amounts due to the Appellant Bank, and as contracted vide a Loan Agreement executed between the Appellant and 2nd Respondent, the said order was not only overtaken by events and was incapable of compliance but that the letter of offer mandated the Appellant to debit the 2nd Respondent's account at all times to regularize the pending loan account.
The said relationship was demonstrated by Mr. Ombui, the Bank's Witness whereby he explained that the relationship was governed by the Letter of Offer and the Loan Agreement. 1t was submitted that the debit on the 2nd Respondent's account was lawfully and regularly made by virtue of the Letter of Offer tendered in evidence as Exhibit 1. The said Letter of Offer at page 176 to 183 in the ROA was duly executed by the 2nd Respondent and is thus binding agreement upon the parties.
The Appellant invited the court to consider the Court of Appeal case of Barclays Bank of Kenya Lid vs Kepha Nyabera & 191 Others, Civil Appeal No. 169 of 2007 cited with approval in Nicholas Mahihu Muriithi vs Bank of Kenya [2018] eKLR where the Court of Appeal explained a Bank's right to set off a debt owed to it by a customer who maintains more than one account with it as follows;
"At paragraph 29.16 of Paget's Law of Banking, 13th Edition, it is stated that the banker may combine two current accounts at any time without notice to the customer even though the accounts are maintained at different branches. We are also guided by the passage in Paget's Law of Banking, supra, paragraph 29.13 where it is stated thus: "
The Appellant submitted that the bankers right of set-off, is one which is a combination or of consolidation of accounts is but the manifestation of a right analogous to the exercise of the right of lien, a right which is of general application and not in principle limited to account or other similar accounts. Thus, in circumstances where a bank has a loan account and also a current account in credit with the same customer, and holds security for the ultimate balance, the banker is at liberty to combine and consolidate the accounts and set off the accounts.
That in the instant case, it is very clear that the 2nd Respondent had given the mandate to the Appellant Bank to consolidate and set off any sum standing to the credit of any one or more of those accounts in or towards the satisfaction of any liabilities due to it.
It was submitted that the Court of Appeal in Barclays Bank of Kenya Lid vs Kepha Nyabera & 191 others, Civil Appeal No. 169 of 2007 case is on all fours with instant case. The Loan Agreement in place, read with the Letter of Offer gave the right to the Bank to set off the sums deposited with the Loan Sums due. That in the circumstances the trial court fell in error when it failed to determine that the Appellant Bank was entitled to debit the sums deposited in Account No. 01120016547401 pursuant to the enabling provisions of the Loan Agreement executed by the Parties. The Appellant invited the court to hold that the Bank is not culpable to refund the Kshs. 3,000,000 deposited by the 1st Respondent to the 2nd Respondent Account. That on this basis alone, the appeal herein should be sustained and appeal herein be allowed as prayed with costs to the Appellant.
The 1st Respondent’s submissions are dated 3rd December, 2024. The 1st Respondent submitted that the plaintiff was desirous of purchasing a parcel of land, namely, L.R. No. Bassi/Boitangare/995 (hereinafter referred to as “the suit premises”).
That the plaintiff entered into agreement dated 13th February, 2018 for purchase of the suit premises at a consideration of Kshs.5,000,000.00.
That the plaintiff paid Kshs.1,000,000/= in cash to one Samuel Ongosi Moturi, James Iteba Nyagau and Jason Onwonga Nyakenanda. The plaintiff further paid Kshs.1,000,000.00 into bank account no.01109671149100 in the name of James Iteba Nyangau. Finally, the plaintiff paid Kshs.3,000,000.00 into bank account number 01120016549401 in the name of the 1st defendant.
That after obtaining title to the suit premises the plaintiff sought to fence the same but was repulsed. It later transpired that the sale had been conducted by persons who were former officials of the 1st defendant who had left office with original copies of documents which facilitated the sale, namely, PIN certificate, title deed etc.
That after the plaintiff realized that it had been duped it made a report to the police and proceeded to lodge a request with the 2nd defendant asking it not to release the sum of Kshs.3,000,000.00 which had been deposited into the 1st defendant’s bank account.
That notwithstanding instructions to it, the 2nd defendant went ahead to apply the sum of Kshs.3,000,000.00 towards offsetting a loan owed by the 1st defendant to it.
That the plaintiff’s authorized director adopted its filed statement and testified and produced documents listed in support of its case.
That in turn, the 1st Respondent’s case was that:-
1.1 The sale of the suit premises by former officials of the 1st defendant was fraudulent:
1.2 Its deposit of the sum of Kshs.3,000,000.00 in the 1st defendant’s account was wrongful;
1.3 The title to the suit premises which had been fraudulently conveyed to it
was in the course of time cancelled – the 1st respondent did not have value for the money it had paid pursuant to the fraudulent sale,
1.4 The appellant herein had disposed of the sum of Kshs.3,000,000.00 by
crediting the same into the 2nd respondent’s loan account to offset liabilities owed by the 2nd respondent to the appellant.
1.5 Neither the Appellant nor the 2nd respondent had a right to the sum of Kshs.3,000,000.00, which the 1st Respondent had wrongfully deposited into the 2nd Respondent’s account.
1.6 There was need by the Appellant to refund the sum of Kshs.3,000,000.00
It was the Respondent’s submissions that the Appellant admitted in its Defence that the suit premises belonged to the 2nd Respondent. That it further admitted that the 1st Respondent deposited Kshs.3,000,000.00 into the 2nd Respondent’s account but asserted that since the 2nd Respondent was indebted to it, on 25th March, 2019 it applied the said funds towards discharging the loan arrears on bank account No. 01120016549401 which belonged to the 1st defendant.
2. The Appellant denied receipt of instructions by the 1st Respondent to refund the sum of Kshs.3,000,000.00 and that at the time the court ordered refund of the said sum through the criminal case, the Appellant had applied the said funds towards offsetting the loan.
The Appellant contended that its act to debit the said amount was informed by the contract it had with the 2nd Respondent – it therefore insisted that its action was lawful.
The Appellant produced documents listed in its list of documents in support of its case.
The 2nd Respondent admitted being the lawful proprietor of the suit premises.
The 2nd Respondent contended that it did not sell the suit premises to the 1st Respondent as the persons who sold the same were not its officials and the agreement was null and void in its opinion
In its quest to show that the sale of the suit premises was not sanctioned, the 1st defendant contended that its management committee had never met to sanction the sale.
It is in evidence in court the 2nd Respondent admitted, that it held the account into which the plaintiff paid Kshs.3,000,000.00.
The 2nd Respondent told the trial court that when it learnt of the sale and deposit of the sum of Kshs.3,000,000.00 its officials visited the 2nd Defendant’s Nyamira branch and had a meeting with the branch manager of the 2nd defendant and requested him not to release the sum of Kshs.3,000,000.00 deposited in its account - as it had not sanctioned the sale of the suit premises.
The 2nd Respondent in its submissions identified the germane and singular issue for determination to be whether the Appellant had a right to apply the sum of Kshs.3,000,000.00 which the 1st Respondent had deposited in the 2nd Respondent’s account pursuant to a fraudulent sale of the suit premises by former officials of the 2nd Respondent towards offsetting a loan facility issued by the Appellant to the 2nd Respondent.
The 2nd Respondent restated the extent of the jurisdiction of this court sitting as an appellate court as stated in the case of Mursal & Another v Manese (suing as the legal administrator of Dalphine Kanini Manesa) (Civil Appeal E20 of 2021) [2022] KEHC 282 (KLR) (6 April 2022) (Judgment) where the court had this to say:
A first appellate court is mandated to re-evaluate the evidence before the trial court as well as the judgment and arrive at its own independent judgment on whether or not to allow the appeal. A first appellate court is empowered to subject the whole of the evidence to a fresh and exhaustive scrutiny and make conclusions about it, bearing in mind that it did not have the opportunity of seeing and hearing the witnesses first hand. This duty was stated in Selle & another v Associated Motor Boat Co. Ltd.& others1 and in Peters v Sunday Post Limited.21{1968} EA 123.2{1958} E.A. page 424.
A first appellate court has jurisdiction to reverse or affirm the findings of the trial court. A first appeal is a valuable right of the parties and unless restricted by law, the whole case is therein open for rehearing both on questions of fact and law. The judgment of the appellate court, must, therefore, reflect its conscious application of mind and record findings supported by reasons, on all the issues arising along with the contentions put forth, and pressed by the parties for decision of the appellate court. While reversing a finding of fact the appellate court must come into close quarters with the reasoning assigned by the trial court and then assign its own reasons for arriving at a different finding. This would satisfy the court hearing a further appeal that the first appellate court had discharged the duty expected of it.33See Santosh Hazari vs. Purushottam Tiwari (Deceased) by L.Rs {2001} 3 SCC 179.
A first appellate court is the final court of fact ordinarily and therefore a litigant is entitled to a full, fair, and independent consideration of the evidence at the appellate stage. Anything less is unjust.4 The first appeal has to be decided on facts as well as on law. In the first appeal parties have the right to be heard on both questions of law as also on facts and the first appellate court is required to address itself to all issues and decide the case by giving reasons. While considering the scope of Section 78 of Civil Procedure Act,5 a court of first appeal can appreciate the entire evidence and come to a different conclusion.4See Kurian Chacko vs. Varkey Ouseph AIR 1969 Kerala 316.5Cap 21, Laws of Kenya.
On the issue of whether the trial court erred to the Appellant to refund Kshs.3,000,000.00 to the 1st Respondent, it was submitted that the trial court did not err, that the judgement of the trial court is sound and should be left undisturbed:
It was submitted that the 1st respondent did not bear privity of contract with regards to the loan repayment which the Appellant had extended to the 2nd respondent. That not being a party to the loan agreement, the 1st Respondent was not bound by the terms of the agreement. The obligation to repay the loan belonged, exclusively to the 2nd Respondent.
That the 1st Respondent did not have any legal obligation to repay the loan on behalf of the 2nd respondent and no single document was produced by the Appellant to prove that the 1st Respondent had an obligation in law to repay the loan on behalf of the 2nd Respondent whether or not the purported sale to it of the suit premises was tainted with fraud.
It was also submitted that neither the Appellant nor the 2nd Respondent had right to Kshs.3,000,000.00 which the 1st Respondent deposited into the 2nd Respondent’s account by virtue of the fraudulent sale of the suit premises.
It was submitted that the Appellant had timely notice of the fact that the sum of Kshs.3,000,000.00 should not have been utilized to offset the 2nd Respondent’s loan facility – the 2nd Respondent told the trial court that when it learnt of the sale and deposit of the sum of Kshs.3,000,000.00 into its account, its officials visited the Appellant’s Nyamira branch in April, 2018 and had a meeting with the branch manager of the Appellant in the presence of a co-operatives commissioner and requested him not to release the sum of Kshs.3,000,000.00 deposited in its account - as it had not sanctioned the sale of the said premises. That the funds remained in the 2nd Respondent’s account until 26th May, 2018 when the Appellant decided to apply the same towards loan repayment.
The 2nd Respondent submitted that court exists to do justice and it would not be just for the 1st Respondent to lose its money notwithstanding that it innocently paid the same into the 2nd Respondent’s account only for it to be consumed by a loan it had nothing to do with.
It was also submitted that it would be against public policy that the 1st Respondent should lose its money when the same is traceable to the Appellant especially in this case where the Appellant acquired the money pursuant to a fraudulent scheme perpetrated against the 1st Respondent.
It was further submitted that no shred of evidence was led that the 1st Respondent colluded with former officials of the 2nd Respondent in the fraudulent sale of the suit premises – the 1st Respondent was at all times an innocent purchaser which believed that it was acquiring land for valuable consideration.
It was submitted that the respondents were agreed in their evidence that persons with whom the 1st Respondent entered into the sale agreement dated 13th February, 2018 were not bonafide officials of the 2nd Respondent and that the management committee of the 2nd Respondent had not met to sanction sale of the suit premises.
It was also submitted that the persons with whom the 1st Respondent transacted did not have capacity on law to transact on behalf of the 2nd Respondent and evidence shows that the Appellant was aware that funds deposited by the 1st Respondent “were disputed”.
The 1st Respondent submitted further that
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