REPUBLIC OF KENYA
IN THE HIGH COURT AT MAKUENI
CIVIL CASE NO. 14 OF 2018
(Title in Original Claim)
FRANCIS MUTUNGA KIMANTHI…………………….………1 ST PLAINTIFF
CHRISTINE MUMBUA MUTUNGA………………….……... 2 ND PLAINTIFF
-VERSUS-
KENYA WOMEN MICRO-FINANCE BANK LTD…….…..…DEFENDANT
(Title in Counter- Claim)
KENYA WOMEN MICRO-FINANCE BANK LTD………..……PLAINTIFF
-VERSUS-
FRANCIS MUTUNGA KIMANTHI……………….…………1 ST DEFENDANT
CHRISTINE MUMBUA MUTUNGA……………….……...2 ND DEFENDANT
JUDGMENT
Introduction
1. The Plaintiffs Francis Mutunga Kimanthi and Christine Mumbua Mutunga instituted the original claim via amended plaint dated 12/03/2018. The cause of action arose from alleged fraudulent transactions in respect of accounts held in the Defendant Kenya Women Micro Finance Bank by the Plaintiffs where it is alleged that huge amounts of money have illegally, unlawfully been withdrawn, transferred and/or misappropriated by and/or through the Defendant.
The Plaint
2. The Plaintiffs averred as follows;
⮚ They operated two p ersonal bank accounts with the Defendant namely; account No 1003575213 opened sometime on 10/09/ 2013 in the name of Christine Mumbua Mutunga (2 nd Plaintiff) and account No.1003575371 and 1003191963 opened on 15/10/2012 in the name of the Monica Kimanthi and Francis Mutunga 1 st Plaintiff .
⮚ The 1 st Plaintiff was a signatory and the sole operator of the said bank accounts.
⮚ Account no. 1003575371 was used as the loan drawdown account. Later the Defendant opened another joint Current Account of the Plaintiffs A/C No.1004523055 in the name of Miale Centre.
⮚ They opened account No.1003575213 on 10/09/2013 with Kshs. 40,000/=. On 19/09/2013 a sum of Kshs. 20,000/= was transferred by the Defendant from the said account No.1003575213 to unknown account. On the 31/10/2013, the Plaintiff withdrew cash Kshs.18,000/= from the said account.
⮚ Sometime in September 2013, the plaintiffs applied for a loan of Kshs.3,000,000/=. It was deposited in the Plaintiffs’ Account No. 1003575213 on the same date of 12/11/2013 . This was repayable by monthly installments for a period of 40 months on a reducing balance
⮚ On the same 12/11/2013, the plaintiffs made a cash deposit of Kshs.380,000/= in the same account the Defendant deducted a sum of Kshs.79,180/= as charges for valuation of Plot No. Emali Township Block 1/150 Emali.
⮚ On that 12/11/2013, the plaintiffs withdrew Kshs.450,000/= from the said account, and the Defendant unlawfully and illegally transferred a sum of Kshs.400,000/= from the said account to an unknown account.
⮚ That the Defendant had informed them that there was an offer to the effect that any loan from 3 million and above was to be repaid at an interest rate of 18%, per annum and that there was no payment of the loan application fee and that the Risk management fund (RMF) was 1.25%.
⮚ That despite giving the said offer, the Defendant prepared a letter of offer for the loan with interest rate at 20% instead of 18% and deducted all the charges the Defendant had offered not to deduct. The Defendant later confirmed the rate of interest was 18 % vide their loan schedule issued on 21/09/2015.
⮚ That in advancing the loan of Kshs.3,000,000/=, the Defendant deposited in the Plaintiffs’ account the sum of Kshs.2,221,542.50/= and debited K shs.778,457.5/= which was allegedly owed to the Defendant by the Plaintiffs before the loan was advanced. They contended that they had no earlier loan and/or overdraft facility with the Defendant and the said sum of Kshs. 778,457.5 was wrongfully, unlawfully and illegally deducted from their loan.
⮚ That as regards charges for the Risk Management Fund (RMF) and excise duty, the lawful charges were Kshs.37,500/= for RMF (being 1.25%) of the loan and Kshs.3,750/= for excise duty (being 10% of the above RMF) but the Defendant unlawfully and unjustifiably deducted Kshs.67,600/= for RMF and 6,760/= for excise duty respectively. Consequently, a sum of Kshs.33,110/= was unlawfully deducted by the defendant for those charges.
⮚ That the loan of Kshs.3,000,000/= was repayable at an interest rate of 18% instead of 20% for a period of 40 months on a reducing balance. Thus, the monthly installment was supposed to be Kshs.100,281.3/= but the Defendant deducted Kshs.103,339.08/= per month for a period of 8 months.
⮚ That on the 13/11/2013 and 14/11/2013, withdrawals of Kshs.50, 000= and Kshs.218,400/= respectively were illegally, unlawfully and wrongfully carried out in Account No.1003575213 without their knowledge, authority and/or consent and/or through the Defendant’s authority, knowledge and/or consent.
⮚ That on 03/12/2013 and 17/12/2013, the sum of Kshs.135,800/= and 140,800/= Account No.1003575213 respectively were unlawfully transferred from the Account No.1003575213 to unknown destinations. The said purported transfers were not known, authorized and/or sanctioned by the Plaintiffs.
⮚ That the Defendant created an illegal, unlawful and unauthorized Standing Order where a sum of Kshs.5,022/= was being deducted from account No.1003575213 monthly from 13/01/ 2014 up to 12/01/ 2015. A total of Kshs.65,286/= was deducted from the said account. They had no overdraft or any other loan facility and the said deductions were unlawful, unjustified and misappropriation of their money.
⮚ That the Defendant made unjustified and unlawful charges on the top up loan transaction to Kshs.6,000,000/= . Instead of applying the 1.25% RMF on the top up sum of Kshs.3,394,127.55/= (i.e. being Kshs.42.426.06/=), the Defendant applied the 1.25% RMF on the total loan of Kshs.6,000,000/= amounting to Kshs.210,006.56/=. The defendant charged 10% of 21,000.66/= on the excise duty instead of Kshs.4,242.66/= being 10% of Kshs.42,426.06/= . The defendant therefore unlawfully deducted Kshs.231,007.22/= as a charge for RMF and the excise duty for the top up transaction instead of Kshs.46,668.72/=. The defendant later reversed Kshs.83,844.68/= leaving a balance of Kshs.100,493.82/=.
⮚ On 28/07/2014, a sum of Kshs.480,000/= was illegally and unlawfully withdrawn from account No.1003575213. On the 04/08/2014 and on 08/09/2013, sums of Kshs.150,000/= and Kshs.276,360/= respectively were transferred from the account to unknown destinations without the Plaintiffs’ knowledge, consent and/or authority. All the above sums of money unlawfully and illegally withdrawn and/or transferred were never refunded to the Plaintiffs Account No.1003575213.
⮚ They used to repay their loans through loan drawdown Account No.1331601144 until 21/09/2015 when the Defendant without the knowledge and/or consent of the Plaintiffs changed the loan drawdown account to loan drawdown Account No.1528800842. They contend that they had not applied for any new loan to warrant the creation of the loan drawdown Account No.1528800842 by the Defendant. That, in creating a new loan drawdown Account No.152880842, the Defendant wrongfully and/or unlawfully indicated the outstanding loan balance as at 21/09/2015 to be Kshs.4,042,832.91/= while the actual outstanding loan balance was Kshs.3,854,660.18/=. The Defendant also changed the monthly installments and started deducting Kshs.223,481.18/= instead of the Kshs.221,053.66/= which they did for a period of seven (7) months from October 2015 to April 2016.
⮚ That, in the year 2015, the Defendant again advanced a soft loan in the sum of Kshs.500, 000/= through Account No.1003575371 1003575213 for business. The said loan was to be repaid separately through account No.1003575371 1003575213 under LD1515901497 in monthly installment of Kshs.50,0000/=. The said soft loan was paid in full by June 2016.
⮚ That, account No.1003191963/= was opened on 15/10/ 2012 and was closed by the defendant on 16/01/ 2017 and that the 1 st Plaintiff obtained only four soft loans of Kshs.400,000/= on 16/10/ 2012 , Kshs.400,000/= on 17/01/2013 , Kshs.500,000/= on 17/04/2013 and Kshs.500,000/= on 24/09/ 2013 through the said account. That all the stated loans were repaid in full through the said account.
⮚ That, there were savings amounting to Kshs.89,510/= which were never refunded to the Plaintiffs at the time of the closure of the said Account no. 1003191963. That, the Defendant made extra unlawful and unjustified charges on the said account and created an unlawful standing order on the said account through which the defendant unlawfully deducted funds.
⮚ The claim against Defendant in respect of Account No. 1003191963/= is for a sum of Kshs.185,347.91/=
⮚ They were repaying the loans as required in both accounts until January 2016 when they decided to consolidate both accounts by paying the outstanding loan of Kshs 500,000/= in A/c No. 1003575371 by offsetting the said balance with the savings in the said account. The balance of the savings was to be utilized together with the savings in A/c No.1003575213 to offset part of the loan in that account. A/c No. 1003575371 was to be closed after the offsetting transactions.
⮚ That, at the time of consolidation, Account No 1003575371 had savings amounting to Kshs.375,145.25/= and Account No.1003575213 had savings amounting to Kshs.20,729.81/= while the outstanding loan on the loan of Kshs.500,000/= was Kshs 229,490.65 . The outstanding loan was offset from the said savings on 26/01/ 2016 and Account No.1003575371 was closed.
⮚ The balance of savings was utilized to pay part of the loan installments of the loan in A/c no 1003575213 and the total loan balance after the set-off on 26/01/ 2016 was Kshs.3, 252,559.75.
⮚ That despite the loan of Kshs.500,000 /= having been paid in full and Account No.1003575371 closed, the Defendant unlawfully and illegally continued to deduct money in Account No.1003575213 purportedly to repay the said loan.
⮚ That sometime in May 2016, they requested for a top up loan to make the total aggregate loan advanced at the sum of Kshs. Twenty Million (Kshs.20,000,000/= ). The top up loans were advanced in two installments of Kshs Four Million (Kshs.4, 000,000/=) on 30/05/ 2016 and Kshs. Ten Million (Kshs.10, 000,000 /=) advanced on 07/06/ 2016 respectively.
⮚ That on 20/02/2016, they applied for a loan of Kshs 35,000,000 /= but the Defendant offered to top up the Plaintiffs’ existing loan to make an aggregate sum of Kshs 20,000,000 /=. The plaintiffs were given a letter of offer to top up their existing loan to Kshs 20,000,000/-. The aggregate sum top up to Kshs 20,000,000/= was to be given as one lump sum amount after deduction of the outstanding balance of the existing loan. The term for the said loan was 65 months .
⮚ The said loan top up difference was not advanced as a lump sum. The bank advanced Kshs 4,000,000/= on 30/05/ 2016 and by that date, the outstanding loan balance was Kshs 2,565,648.48. However according to the bank, the balance was Kshs, 5,762,321.50 . This balance seemed to take into account the sum of Kshs 2,856,918/= which appeared in the bank statement and which was not given to the Plaintiffs as a loan but was deposited in the account without any approval or terms.
⮚ That, sometime in August 2016, the Defendant offered to advance the Plaintiffs another top up loan to make the aggregate loan to Kshs 30,000,000/=. The said top up to Kshs 30,000,000/= was never advanced. Instead, the Defendant deposited in the Plaintiffs’ account a sum of Kshs 10,327,983.78/= on the 14/10/ 2016.
⮚ That, after the sum of Kshs.10,327,983.78/= was deposited in the account, the outstanding loan balance now became Kshs.15,679,740.64/=.
⮚ That, the Defendant unlawfully, unjustifiably wrongfully deducted the sum of Kshs.1,072,500/= purported as charge for the sum of Kshs.10,327,983.78/= advanced on loan but subsequently reversed a sum of Kshs.412,500/= leaving a sum of Kshs.517,990.24/= unrefunded or reversed. The Plaintiff treated the transferred sum of Kshs.517,990.24/= as principal decrease, in respect of the above outstanding balance of Kshs.15,679,740.64/= leaving the outstanding loan balance as Kshs.15,161 ,750.4/=.
⮚ That, immediately after the sum of Kshs.10,327,983.78/= was deposited in the Account No.1003575213, the Defendant deducted or debited the sum of Kshs.800,208.18 from the account which sum was never accounted for and the Plaintiffs treated the said sum as principal decrease payment for the loan. The balance of the outstanding loan as from December 2016 was therefore Kshs.14,361,542.22/=. Since December 2016 up to October 2018, the Defendant deducted monthly installments amounting to Kshs.7,417,511.96/= from the Plaintiffs’ account in repayment of the loan. The loan statement account from Defendant confirmed a total sum of Kshs.7,897,146.78/= was paid.
⮚ All the stated loans were secured by Charges registered on Plot No. Emali Township Block 1/ 150 situate in Emali Township in Makueni County.
⮚ That, on 14/10/2016 , 07/06/ 2016 the Defendants transferred the sum of Kshs. 10,327,983.78, 10,108,778.98 into the Plaintiffs Account No.1003575213. The said transfer was made from loan Account No. 1003575371 where a sum of Kshs 10,221,658.22 was purportedly deposited as a further top loan and registered a further charge on the same over the suit premises. The Plaintiffs contend that the said sum was not a loan but was a mere transfer of funds from the loan account to the Plaintiffs’ Account No.1003575213 and cannot be treated as a loan repayable under loan terms.
3. The particulars of fraud were stated to be;
a. On or about October 2013, the plaintiffs Account No. 1003575213 was debited with a sum of Kshs.800,000/= described as a transfer, which sum was unknown to the Plaintiffs and which sum was deducted as a loan advanced to the Plaintiffs. The Plaintiffs contend that they had no loan and/or over draft facility with the Defendant prior to the loan of Kshs.3,000,000/= advanced on 12/11/ 2013.
b. In November 2016 , the Plaintiffs offset their loan of Kshs.500, 000/= in account No. 10035753371 through its savings and closed the said account but the Defendant continued to deduct monthly installments of Kshs.50,000/= from account No.1003575213 purportedly in repayment of the said loan which had already been repaid in full. A total of Kshs 250,000/ = was unlawfully and illegally deducted. The Defendant was also carrying out double repayment of the above loan from both accounts 1003575371 and 1003575213.
c. The Defendant executed numerous transfers of funds from the Plaintiffs’ account which transfers were unknown, not authorized and /or consented by the Plaintiffs and some of which were false for instance; the Defendant purported to have transferred Kshs 930,000/= in October 2016 to one Peter Mathenge Waihwa which purported transfer was false.
d. The Defendant has indicated in its Bank Statement that there was a cash withdrawal of Kshs 575,000/- by One Christine (2 nd Plaintiff) on 02/06/2016, a fact which is false and another cash withdrawal of Kshs 185,000/ by one Ann o n 15/11/2016. The said Ann is unknown to the Plaintiffs.
e. The Defendant has been charging the Plaintiffs unknown charges which the Plaintiffs contend are unlawful and illegal. For instance, on 14/10/2016, the Defendant charged in the Plaintiffs’ bank statement Kshs 1,072,500 /= alleged to be top up charge for the sum of Kshs.10,327,983.78/= withdrawal. The Defendant however reversed Kshs 412,500/ - and a balance of Kshs.517, 990.24/= was not refunded/reversed.
f. The Defendant unlawfully and without the Plaintiffs’ consent or authority transferred funds from A/c No. 1004523055 to A/c No.1003575213 of Kshs 68,000 /, Kshs. 30,200/- and Kshs 15,000/= and showed the said sums of money to have been withdrawn as part of the loan funds in account 1003575213.
g. Overcharge of Kshs 52,434.54 as the charges for the loan of Kshs 4,000,000/= granted on 30/05 2016.
h. The Plaintiffs contend that the Defendant has refused, despite numerous requests to provide the Plaintiffs with bank statements showing the outstanding loan balances before any top up loan was advanced and the loan repayment statement.
i. The Plaintiffs contend that the Defendant has misappropriated the Plaintiffs’ funds through unlawful and illegal transfers, withdrawals and charges from which the Plaintiffs have lost their money amounting to Kshs.10,847,893.37/= in account No.1003575213 and Kshs.185,347.91/= in account No.1003191963.
4. The Plaintiffs averred that they have all along been repaying the loans and the Defendant has not given an account of the repayments. That, the Defendant has wrongfully, unprocedurally and unlawfully advertised for sale, by public auction, the Plaintiffs’ suit property claiming an unjustified sum of Kshs 32, 855,211.82 as loan balance.
5. The 2 nd Plaintiff avers that she bought 500 shares units from the Defendant sometime in March 2015 but has never been paid any dividends and claims dividends on the said units from the year 2015.
6. The Plaintiffs pray for judgment against the Defendant for;
(i) A statement of accounts in respect of the Plaintiffs Bank account No.1003575213 and account No.1003575371 1003191963 from the date the accounts were opened on 10/09/ 2013 and 15/10/ 2012 respectively.
(ii) A permanent injunction against the Defendant from advertising, selling, transferring, interfering, alienating the suit property and/or exercising its statutory power of sale on the unlawful claim of outstanding loan balance.
(iii) A declaration that the Defendant’s demand of the sum of Kshs.32, 855,211.82 as loan outstanding is unlawful, illegal and based on unjustified figures and calculations. The Plaintiff seeks for an order for refund of all the Plaintiffs’ misappropriated funds and for dividends on the share units from the year 2015.
(iv) The sum of 11,033,241.28/= being the total amount unlawfully misappropriated in both Accounts No.1003575213 and 1003191963 through unjustified charges, unknown and an unauthorized transfers and illegal cash withdrawals. The Plaintiffs demand for the refund of the above sum and /or payment of the balance after offset any outstanding loan balance .
(v) Any other or for further relief this honourable court deems fit to grant.
(vi) Costs and interests of the suit.
The Defence
7. The Defendant filed an amended statement of defence and counter claim on 12/04/2023 where it denied each and every allegation in the plaint as if they were set out verbatim and traversed seriatim.
8. The Defendant averred as follows;
⮚ That, Account No.1003575371 is a loan draw down account where the principal is kept and cannot be closed down while Account No.1003575213 is the transactional account where most of the transactions are done such as deposits, withdrawals and other banking activities . This is a normal acknowledged practice in the banking sector.
⮚ According to the defendant it extended various financial facilities to the Plaintiffs to the maximum principal of Kenya Shillings Thirty Million (Kshs. 30,000,000.00) upon, inter alia, various conditions which were accepted by the Plaintiffs.
⮚ That these were made pursuant to Letters of Offer dated 08/10/2013, 01/07/2014, 14/04/2016 and 25/08/ 2016, (together “the Letters of Offer”).
⮚ That the Plaintiffs executed the letters of offer of their own their own free will and are bound by the terms therein: To repay the facility at the stated interest rate and failure thereof, default interest: to pay Risk Management Fund; Commission and Facility fees; life insurance; legal charges and costs; valuer’s fees; architects and surveyors’ fees among others.
⮚ That the financial facilities were secured by the following:
a) Legal Charge dated 07/11/2013 over property known as TITLE NO. EMALI TOWNSHIP BLOCK 1/150 for Kshs. 3,000,000.00
b) Further Legal Charge dated 24/07/ 2014 over property known as TITLE NO. EMALI TOWNSHIP BLOCK 1/150 for Kshs. 6,000,000.00
c) Second Further Legal Charge dated 13/05/2016 over property known as TITLE NO. EMALI TOWNSHIP BLOCK 1/150 for Kshs. 20,000,000.00
d) Third Further Legal Charge dated 10/10/2016 over property known as TITLE NO. EMALI TOWNSHIP BLOCK 1/150 for Kshs. 30,000,000.00
⮚ That the 2 nd Plaintiff further executed Deeds of Rental Assignment dated 15/05/2016 and 10/10/2016 wherein she admitted to being indebted to the Defendant of the amounts disbursed by the various Letters of Offer. By the Deed of Rental Assignment dated 10/10/ 2016, the 2 nd Plaintiff admitted that that the Plaintiffs were indebted to the Defendant in the principal sum of Kshs. 30,000,000.00 and assigned the rent income received from the properties to the Defendant.
⮚ Notwithstanding the clear terms of the Special Conditions contained in the Letters of Offer dated 08/10/ 2013, 01/07/ 2014, 14/04/2016 and 25/08/2016 and Deeds of Rental Assignment dated 15/05/2016 and 10/10/2016, the Plaintiffs breached the said terms.
9. The particulars of breach of the special conditions of the Letters of Offer and Deeds of Rental Assignment were stated to be;
a) Failure to remit the rental income received from the property to the Bank.
b) Failure to provide a detailed listing of all assets owned .
10. The Defendant averred that it commenced the realization process when the Plaintiffs defaulted in making monthly repayments in breach of the terms of the Letters of Offer. The particulars of the realization process were stated to be;
a) A demand letter was issued on 17/07/2018 .
b) The 90 days statutory notices were issued on 18/12/2017, At the time, the outstanding arrears were Kshs. 1,645,058.16 which they were supposed to clear.
c) The 2 nd Statutory Notice to wit , the 40 Days’ Notice was issued vide a letter dated 09/04/2018 after non response to the foregoing from the Plaintiffs. At the said date, the outstanding arrears were Kshs. 2,773,717.33 which the Plaintiffs were to clear to avert the Bank selling the charged property.
d) There being no response the Defendant instructed Crater View Auctioneers to issue the 45 Days Redemption Notice and recover the entire outstanding amount which was Kshs. 32,855,211.82 as at 17/09/2018. The Plaintiffs were informed that the said outstanding amount attracted interest at the rate of 18% p.a.
e) The Redemption Notice was served upon the Plaintiffs by the Auctioneers on 27/09/ 2018.
f) Prior to the issuance of the notice, the Defendant had instructed Orion Valuers to undertake a valuation of the charged property. The Valuer submitted its report dated 18/09/ 2018 which indicated that the market value of the property was Kshs. 95,000,000.00 and forced sale value would be Kshs.75,000,000.00.
g) There was no response to the Redemption Notice. The defendant instructed the Auctioneer to proceed and advertise the property for sale as per the provisions of the Auctioneer’s Act. The advertisement was carried in the Daily Nation Newspaper on 12/11/2018 .
11. That it was upon the advertisement of the property, that the Plaintiffs filed this instant suit and application alleging that some amounts were debited in their account illegally and unlawfully when any debit was pursuant to the provisions of the Letters of Offer. Further, the Plaintiffs alleged illegal withdrawal when said withdrawals were supported by withdrawal instructions.
12. The Defendant averred that the Plaintiffs were granted injunctive orders stopping the sale of the charged property but the said orders did not bar the Plaintiffs from making monthly instalement. That, the Plaintiffs have without any colour or right failed and defaulted in payment of the installments and have fallen into arrears. That, the last payment was on 02/02/2023 of Kshs.4,980 and the oustanding balance as at 31/03/2023 was Kshs.56,934,752.14 and continues to attract interest.
13. With regard to the top-up amounts, the Defendant averred as follows;
a) A top-up of Kshs.3,394,127.55 was credited into the Plaintiffs’ account on 25/07/2014 bringing the principal loan balance to Kshs. 5,939,497.18.
b) A top-up of Kshs. 2,856,918.00 was credited into the Plaintiffs’ account on 22/04/2016 bringing the principal loan balance to Kshs.5,778,341.78.
c) A top-up of Kshs. 4,000,000.00 was credited into the Plaintiffs’ account on 30/05/2016 bringing the principal loan balance to Kshs.9,868,632.32.
d) A top up of Kshs. 10,221,658.22 was taken on 06/06/2016 , bringing the principal loan balance to Kshs.19,983,179.72.
e) The final top up of Kshs.10,327,983.76 was taken on 14/10/2016 bringing the principal loan balance to Kshs.29,999,200.00
14. Further, the Defendant averred that;
⮚ At no time did the Plaintiffs complain about the running of the accounts or any fraudulent activity on their accounts. That they were turning the court into an Accountant without even seeking for an order of accounts to be undertaken.
⮚ The amount stated in paragraph 3A of the Amended Plaint was valuation fees deposit for the property provided as security. This was in line with Clause 14(i) highlighted in the Letter of Offer dated 08/10/ 2013.
⮚ Kshs 400,000/= mentioned in paragraph 3C of the Amended Plaint was an authorised transfer to his nephew.
⮚ In answer to paragraph 4, the Defendant denied the allegation that its interest rate was 18% and maintained that it was 20% and put the Plaintiffs to strict proof. That, the said interest of 20% was contractually agreed by parties as per the Clause 5.1 of the Letter of Offer dated 08/10/ 2013.
⮚ In answer to paragraph 4A, the defendant denied that it wrongfully, unlawfully and illegally deducted Ksh.778,457.5 from the account and further averred that the only deductions were a loan charge of Ksh. 6,760.00 and excise duty of 6,760,000.00. That these amounts were contractually agreed by parties as per the terms of the Letter of Offer dated 8 th October 2013.
⮚ In answer to paragraph 4B, the defendant denied that the Risk Management Fund and excise duty were Ksh.37,500 and Kshs. 3,750 respectively and further averred that there was no waiver on the mentioned charges. The charges remained Kshs.67,600 which were Risk Management Fund, Liquidity Adjustment Facility and processing fees and excise duty of Kshs. 6,760. These amounts were contractually agreed by parties as per the terms of the Letter of Offer dated 08/10/ 2013.
⮚ In answer to paragraph 4C, the defendant denied that the interest was 18% and averred that the Bank’s interest was 20% reducing to be paid in a period of 40 months. The Defendant reiterated that the interest of 20% was contractually agreed by parties as per the Clause 5.1 of the Letter of Offer dated 08/10/2013.
⮚ In answer to paragraph 4D, the defendant denied that it illegally, unlawfully and wrongfully withdrew Kshs. 50,000.00 and Kshs. 218,400.00 and averred that the Plaintiff withdrew the amounts. That the Defendant could not be blamed for poor book keeping by the Plaintiffs.
⮚ The Defendant denied that it transferred Kshs. 135,800.00 and Kshs. 140,800.00 unlawfully and averred that the Plaintiffs paid their suppliers via RTGS.
⮚ The Defendant denied the contents of paragraph 4E and averred that the 1 st Plaintiff authorised the Kshs.5,022.00 and funds were transferred to his Loan Guarantee Deposit account.
⮚ In response to paragraph 5, the Defendant denied that the Plaintiff lost a sum of Kshs. 97,836.53 and averred that the Plaintiffs received an amount less by 60,502.82 which was as a result of the top up amount being late and the principal already charged of Kshs.60,502.82.
⮚ In response to paragraph 5A, the Defendant denied that the Bank was to apply 1.25% of the top up amount only and averred that the charges were to be calculated from the loan of Kshs.6,000,000 because the top up amount did not change, what changed was the outstanding balance.
⮚ The Defendant denied paragraph 5B and in particular the allegation that it illegally transferred sums of money from the Plaintiffs’ account and that it was the plaintiffs who withdrew/transferred the amounts.
⮚ The Defendant denied paragraph 5C and in particular the allegation that the Bank changed the loan drawdown account, that the drawdown accounts mentioned were non-existent as there was a system migration in August, 2015.
⮚ The Defendant denied paragraph 6A and in particular the allegation that the Plaintiffs cleared the loan advanced to account Number 1003191963.
⮚ The Defendant denied paragraph 6B and in particular the allegation that the Defendant made extra unlawful and unjustified charges on Account No. 1003191963. The Defendant averred that the Plaintiffs did not clear the last loan in full therefore the balance was cleared using the loan guarantee deposit the Plaintiff had of Kshs. 89,510.00
⮚ The Defendant admitted Paragraph 8 and in particular the allegation that the Defendant did not advance the loan of Kshs.30,000,000 . The Defendant averred that the balance before the top up was Kshs.19,672,016.22, therefore the top amount was Kshs.10,327,983.78 to make an aggregate of Kshs. 30,000,000.
⮚ The Defendant denied the particulars of fraud and averred that they are untrue and unfounded as exhibited from the bank statement of the Plaintiffs. It averred that there is a record of Real Time Funds Transfer from the Defendant’s bankers, Kenya Commercial Bank to Co-operative Bank of Kenya Ltd Account No.01148283787800 of a transfer that was authorised by the Defendant on behalf of Plaintiffs for payment of material supplied to Tejo Steel Hardware amounting to Ksh.930,000/= on 17/10/ 2016.
⮚ The Defendant denied paragraph 12 and averred that they had provided the bank statements to the Plaintiffs on several occasions.
⮚ The Defendant denied paragraph 13 and averred that a court cannot be made to be an accountant without a specific prayer for taking accounts.
⮚ In response to the particular
[...truncated]
IN THE HIGH COURT AT MAKUENI
CIVIL CASE NO. 14 OF 2018
(Title in Original Claim)
FRANCIS MUTUNGA KIMANTHI…………………….………1 ST PLAINTIFF
CHRISTINE MUMBUA MUTUNGA………………….……... 2 ND PLAINTIFF
-VERSUS-
KENYA WOMEN MICRO-FINANCE BANK LTD…….…..…DEFENDANT
(Title in Counter- Claim)
KENYA WOMEN MICRO-FINANCE BANK LTD………..……PLAINTIFF
-VERSUS-
FRANCIS MUTUNGA KIMANTHI……………….…………1 ST DEFENDANT
CHRISTINE MUMBUA MUTUNGA……………….……...2 ND DEFENDANT
JUDGMENT
Introduction
1. The Plaintiffs Francis Mutunga Kimanthi and Christine Mumbua Mutunga instituted the original claim via amended plaint dated 12/03/2018. The cause of action arose from alleged fraudulent transactions in respect of accounts held in the Defendant Kenya Women Micro Finance Bank by the Plaintiffs where it is alleged that huge amounts of money have illegally, unlawfully been withdrawn, transferred and/or misappropriated by and/or through the Defendant.
The Plaint
2. The Plaintiffs averred as follows;
⮚ They operated two p ersonal bank accounts with the Defendant namely; account No 1003575213 opened sometime on 10/09/ 2013 in the name of Christine Mumbua Mutunga (2 nd Plaintiff) and account No.1003575371 and 1003191963 opened on 15/10/2012 in the name of the Monica Kimanthi and Francis Mutunga 1 st Plaintiff .
⮚ The 1 st Plaintiff was a signatory and the sole operator of the said bank accounts.
⮚ Account no. 1003575371 was used as the loan drawdown account. Later the Defendant opened another joint Current Account of the Plaintiffs A/C No.1004523055 in the name of Miale Centre.
⮚ They opened account No.1003575213 on 10/09/2013 with Kshs. 40,000/=. On 19/09/2013 a sum of Kshs. 20,000/= was transferred by the Defendant from the said account No.1003575213 to unknown account. On the 31/10/2013, the Plaintiff withdrew cash Kshs.18,000/= from the said account.
⮚ Sometime in September 2013, the plaintiffs applied for a loan of Kshs.3,000,000/=. It was deposited in the Plaintiffs’ Account No. 1003575213 on the same date of 12/11/2013 . This was repayable by monthly installments for a period of 40 months on a reducing balance
⮚ On the same 12/11/2013, the plaintiffs made a cash deposit of Kshs.380,000/= in the same account the Defendant deducted a sum of Kshs.79,180/= as charges for valuation of Plot No. Emali Township Block 1/150 Emali.
⮚ On that 12/11/2013, the plaintiffs withdrew Kshs.450,000/= from the said account, and the Defendant unlawfully and illegally transferred a sum of Kshs.400,000/= from the said account to an unknown account.
⮚ That the Defendant had informed them that there was an offer to the effect that any loan from 3 million and above was to be repaid at an interest rate of 18%, per annum and that there was no payment of the loan application fee and that the Risk management fund (RMF) was 1.25%.
⮚ That despite giving the said offer, the Defendant prepared a letter of offer for the loan with interest rate at 20% instead of 18% and deducted all the charges the Defendant had offered not to deduct. The Defendant later confirmed the rate of interest was 18 % vide their loan schedule issued on 21/09/2015.
⮚ That in advancing the loan of Kshs.3,000,000/=, the Defendant deposited in the Plaintiffs’ account the sum of Kshs.2,221,542.50/= and debited K shs.778,457.5/= which was allegedly owed to the Defendant by the Plaintiffs before the loan was advanced. They contended that they had no earlier loan and/or overdraft facility with the Defendant and the said sum of Kshs. 778,457.5 was wrongfully, unlawfully and illegally deducted from their loan.
⮚ That as regards charges for the Risk Management Fund (RMF) and excise duty, the lawful charges were Kshs.37,500/= for RMF (being 1.25%) of the loan and Kshs.3,750/= for excise duty (being 10% of the above RMF) but the Defendant unlawfully and unjustifiably deducted Kshs.67,600/= for RMF and 6,760/= for excise duty respectively. Consequently, a sum of Kshs.33,110/= was unlawfully deducted by the defendant for those charges.
⮚ That the loan of Kshs.3,000,000/= was repayable at an interest rate of 18% instead of 20% for a period of 40 months on a reducing balance. Thus, the monthly installment was supposed to be Kshs.100,281.3/= but the Defendant deducted Kshs.103,339.08/= per month for a period of 8 months.
⮚ That on the 13/11/2013 and 14/11/2013, withdrawals of Kshs.50, 000= and Kshs.218,400/= respectively were illegally, unlawfully and wrongfully carried out in Account No.1003575213 without their knowledge, authority and/or consent and/or through the Defendant’s authority, knowledge and/or consent.
⮚ That on 03/12/2013 and 17/12/2013, the sum of Kshs.135,800/= and 140,800/= Account No.1003575213 respectively were unlawfully transferred from the Account No.1003575213 to unknown destinations. The said purported transfers were not known, authorized and/or sanctioned by the Plaintiffs.
⮚ That the Defendant created an illegal, unlawful and unauthorized Standing Order where a sum of Kshs.5,022/= was being deducted from account No.1003575213 monthly from 13/01/ 2014 up to 12/01/ 2015. A total of Kshs.65,286/= was deducted from the said account. They had no overdraft or any other loan facility and the said deductions were unlawful, unjustified and misappropriation of their money.
⮚ That the Defendant made unjustified and unlawful charges on the top up loan transaction to Kshs.6,000,000/= . Instead of applying the 1.25% RMF on the top up sum of Kshs.3,394,127.55/= (i.e. being Kshs.42.426.06/=), the Defendant applied the 1.25% RMF on the total loan of Kshs.6,000,000/= amounting to Kshs.210,006.56/=. The defendant charged 10% of 21,000.66/= on the excise duty instead of Kshs.4,242.66/= being 10% of Kshs.42,426.06/= . The defendant therefore unlawfully deducted Kshs.231,007.22/= as a charge for RMF and the excise duty for the top up transaction instead of Kshs.46,668.72/=. The defendant later reversed Kshs.83,844.68/= leaving a balance of Kshs.100,493.82/=.
⮚ On 28/07/2014, a sum of Kshs.480,000/= was illegally and unlawfully withdrawn from account No.1003575213. On the 04/08/2014 and on 08/09/2013, sums of Kshs.150,000/= and Kshs.276,360/= respectively were transferred from the account to unknown destinations without the Plaintiffs’ knowledge, consent and/or authority. All the above sums of money unlawfully and illegally withdrawn and/or transferred were never refunded to the Plaintiffs Account No.1003575213.
⮚ They used to repay their loans through loan drawdown Account No.1331601144 until 21/09/2015 when the Defendant without the knowledge and/or consent of the Plaintiffs changed the loan drawdown account to loan drawdown Account No.1528800842. They contend that they had not applied for any new loan to warrant the creation of the loan drawdown Account No.1528800842 by the Defendant. That, in creating a new loan drawdown Account No.152880842, the Defendant wrongfully and/or unlawfully indicated the outstanding loan balance as at 21/09/2015 to be Kshs.4,042,832.91/= while the actual outstanding loan balance was Kshs.3,854,660.18/=. The Defendant also changed the monthly installments and started deducting Kshs.223,481.18/= instead of the Kshs.221,053.66/= which they did for a period of seven (7) months from October 2015 to April 2016.
⮚ That, in the year 2015, the Defendant again advanced a soft loan in the sum of Kshs.500, 000/= through Account No.1003575371 1003575213 for business. The said loan was to be repaid separately through account No.1003575371 1003575213 under LD1515901497 in monthly installment of Kshs.50,0000/=. The said soft loan was paid in full by June 2016.
⮚ That, account No.1003191963/= was opened on 15/10/ 2012 and was closed by the defendant on 16/01/ 2017 and that the 1 st Plaintiff obtained only four soft loans of Kshs.400,000/= on 16/10/ 2012 , Kshs.400,000/= on 17/01/2013 , Kshs.500,000/= on 17/04/2013 and Kshs.500,000/= on 24/09/ 2013 through the said account. That all the stated loans were repaid in full through the said account.
⮚ That, there were savings amounting to Kshs.89,510/= which were never refunded to the Plaintiffs at the time of the closure of the said Account no. 1003191963. That, the Defendant made extra unlawful and unjustified charges on the said account and created an unlawful standing order on the said account through which the defendant unlawfully deducted funds.
⮚ The claim against Defendant in respect of Account No. 1003191963/= is for a sum of Kshs.185,347.91/=
⮚ They were repaying the loans as required in both accounts until January 2016 when they decided to consolidate both accounts by paying the outstanding loan of Kshs 500,000/= in A/c No. 1003575371 by offsetting the said balance with the savings in the said account. The balance of the savings was to be utilized together with the savings in A/c No.1003575213 to offset part of the loan in that account. A/c No. 1003575371 was to be closed after the offsetting transactions.
⮚ That, at the time of consolidation, Account No 1003575371 had savings amounting to Kshs.375,145.25/= and Account No.1003575213 had savings amounting to Kshs.20,729.81/= while the outstanding loan on the loan of Kshs.500,000/= was Kshs 229,490.65 . The outstanding loan was offset from the said savings on 26/01/ 2016 and Account No.1003575371 was closed.
⮚ The balance of savings was utilized to pay part of the loan installments of the loan in A/c no 1003575213 and the total loan balance after the set-off on 26/01/ 2016 was Kshs.3, 252,559.75.
⮚ That despite the loan of Kshs.500,000 /= having been paid in full and Account No.1003575371 closed, the Defendant unlawfully and illegally continued to deduct money in Account No.1003575213 purportedly to repay the said loan.
⮚ That sometime in May 2016, they requested for a top up loan to make the total aggregate loan advanced at the sum of Kshs. Twenty Million (Kshs.20,000,000/= ). The top up loans were advanced in two installments of Kshs Four Million (Kshs.4, 000,000/=) on 30/05/ 2016 and Kshs. Ten Million (Kshs.10, 000,000 /=) advanced on 07/06/ 2016 respectively.
⮚ That on 20/02/2016, they applied for a loan of Kshs 35,000,000 /= but the Defendant offered to top up the Plaintiffs’ existing loan to make an aggregate sum of Kshs 20,000,000 /=. The plaintiffs were given a letter of offer to top up their existing loan to Kshs 20,000,000/-. The aggregate sum top up to Kshs 20,000,000/= was to be given as one lump sum amount after deduction of the outstanding balance of the existing loan. The term for the said loan was 65 months .
⮚ The said loan top up difference was not advanced as a lump sum. The bank advanced Kshs 4,000,000/= on 30/05/ 2016 and by that date, the outstanding loan balance was Kshs 2,565,648.48. However according to the bank, the balance was Kshs, 5,762,321.50 . This balance seemed to take into account the sum of Kshs 2,856,918/= which appeared in the bank statement and which was not given to the Plaintiffs as a loan but was deposited in the account without any approval or terms.
⮚ That, sometime in August 2016, the Defendant offered to advance the Plaintiffs another top up loan to make the aggregate loan to Kshs 30,000,000/=. The said top up to Kshs 30,000,000/= was never advanced. Instead, the Defendant deposited in the Plaintiffs’ account a sum of Kshs 10,327,983.78/= on the 14/10/ 2016.
⮚ That, after the sum of Kshs.10,327,983.78/= was deposited in the account, the outstanding loan balance now became Kshs.15,679,740.64/=.
⮚ That, the Defendant unlawfully, unjustifiably wrongfully deducted the sum of Kshs.1,072,500/= purported as charge for the sum of Kshs.10,327,983.78/= advanced on loan but subsequently reversed a sum of Kshs.412,500/= leaving a sum of Kshs.517,990.24/= unrefunded or reversed. The Plaintiff treated the transferred sum of Kshs.517,990.24/= as principal decrease, in respect of the above outstanding balance of Kshs.15,679,740.64/= leaving the outstanding loan balance as Kshs.15,161 ,750.4/=.
⮚ That, immediately after the sum of Kshs.10,327,983.78/= was deposited in the Account No.1003575213, the Defendant deducted or debited the sum of Kshs.800,208.18 from the account which sum was never accounted for and the Plaintiffs treated the said sum as principal decrease payment for the loan. The balance of the outstanding loan as from December 2016 was therefore Kshs.14,361,542.22/=. Since December 2016 up to October 2018, the Defendant deducted monthly installments amounting to Kshs.7,417,511.96/= from the Plaintiffs’ account in repayment of the loan. The loan statement account from Defendant confirmed a total sum of Kshs.7,897,146.78/= was paid.
⮚ All the stated loans were secured by Charges registered on Plot No. Emali Township Block 1/ 150 situate in Emali Township in Makueni County.
⮚ That, on 14/10/2016 , 07/06/ 2016 the Defendants transferred the sum of Kshs. 10,327,983.78, 10,108,778.98 into the Plaintiffs Account No.1003575213. The said transfer was made from loan Account No. 1003575371 where a sum of Kshs 10,221,658.22 was purportedly deposited as a further top loan and registered a further charge on the same over the suit premises. The Plaintiffs contend that the said sum was not a loan but was a mere transfer of funds from the loan account to the Plaintiffs’ Account No.1003575213 and cannot be treated as a loan repayable under loan terms.
3. The particulars of fraud were stated to be;
a. On or about October 2013, the plaintiffs Account No. 1003575213 was debited with a sum of Kshs.800,000/= described as a transfer, which sum was unknown to the Plaintiffs and which sum was deducted as a loan advanced to the Plaintiffs. The Plaintiffs contend that they had no loan and/or over draft facility with the Defendant prior to the loan of Kshs.3,000,000/= advanced on 12/11/ 2013.
b. In November 2016 , the Plaintiffs offset their loan of Kshs.500, 000/= in account No. 10035753371 through its savings and closed the said account but the Defendant continued to deduct monthly installments of Kshs.50,000/= from account No.1003575213 purportedly in repayment of the said loan which had already been repaid in full. A total of Kshs 250,000/ = was unlawfully and illegally deducted. The Defendant was also carrying out double repayment of the above loan from both accounts 1003575371 and 1003575213.
c. The Defendant executed numerous transfers of funds from the Plaintiffs’ account which transfers were unknown, not authorized and /or consented by the Plaintiffs and some of which were false for instance; the Defendant purported to have transferred Kshs 930,000/= in October 2016 to one Peter Mathenge Waihwa which purported transfer was false.
d. The Defendant has indicated in its Bank Statement that there was a cash withdrawal of Kshs 575,000/- by One Christine (2 nd Plaintiff) on 02/06/2016, a fact which is false and another cash withdrawal of Kshs 185,000/ by one Ann o n 15/11/2016. The said Ann is unknown to the Plaintiffs.
e. The Defendant has been charging the Plaintiffs unknown charges which the Plaintiffs contend are unlawful and illegal. For instance, on 14/10/2016, the Defendant charged in the Plaintiffs’ bank statement Kshs 1,072,500 /= alleged to be top up charge for the sum of Kshs.10,327,983.78/= withdrawal. The Defendant however reversed Kshs 412,500/ - and a balance of Kshs.517, 990.24/= was not refunded/reversed.
f. The Defendant unlawfully and without the Plaintiffs’ consent or authority transferred funds from A/c No. 1004523055 to A/c No.1003575213 of Kshs 68,000 /, Kshs. 30,200/- and Kshs 15,000/= and showed the said sums of money to have been withdrawn as part of the loan funds in account 1003575213.
g. Overcharge of Kshs 52,434.54 as the charges for the loan of Kshs 4,000,000/= granted on 30/05 2016.
h. The Plaintiffs contend that the Defendant has refused, despite numerous requests to provide the Plaintiffs with bank statements showing the outstanding loan balances before any top up loan was advanced and the loan repayment statement.
i. The Plaintiffs contend that the Defendant has misappropriated the Plaintiffs’ funds through unlawful and illegal transfers, withdrawals and charges from which the Plaintiffs have lost their money amounting to Kshs.10,847,893.37/= in account No.1003575213 and Kshs.185,347.91/= in account No.1003191963.
4. The Plaintiffs averred that they have all along been repaying the loans and the Defendant has not given an account of the repayments. That, the Defendant has wrongfully, unprocedurally and unlawfully advertised for sale, by public auction, the Plaintiffs’ suit property claiming an unjustified sum of Kshs 32, 855,211.82 as loan balance.
5. The 2 nd Plaintiff avers that she bought 500 shares units from the Defendant sometime in March 2015 but has never been paid any dividends and claims dividends on the said units from the year 2015.
6. The Plaintiffs pray for judgment against the Defendant for;
(i) A statement of accounts in respect of the Plaintiffs Bank account No.1003575213 and account No.1003575371 1003191963 from the date the accounts were opened on 10/09/ 2013 and 15/10/ 2012 respectively.
(ii) A permanent injunction against the Defendant from advertising, selling, transferring, interfering, alienating the suit property and/or exercising its statutory power of sale on the unlawful claim of outstanding loan balance.
(iii) A declaration that the Defendant’s demand of the sum of Kshs.32, 855,211.82 as loan outstanding is unlawful, illegal and based on unjustified figures and calculations. The Plaintiff seeks for an order for refund of all the Plaintiffs’ misappropriated funds and for dividends on the share units from the year 2015.
(iv) The sum of 11,033,241.28/= being the total amount unlawfully misappropriated in both Accounts No.1003575213 and 1003191963 through unjustified charges, unknown and an unauthorized transfers and illegal cash withdrawals. The Plaintiffs demand for the refund of the above sum and /or payment of the balance after offset any outstanding loan balance .
(v) Any other or for further relief this honourable court deems fit to grant.
(vi) Costs and interests of the suit.
The Defence
7. The Defendant filed an amended statement of defence and counter claim on 12/04/2023 where it denied each and every allegation in the plaint as if they were set out verbatim and traversed seriatim.
8. The Defendant averred as follows;
⮚ That, Account No.1003575371 is a loan draw down account where the principal is kept and cannot be closed down while Account No.1003575213 is the transactional account where most of the transactions are done such as deposits, withdrawals and other banking activities . This is a normal acknowledged practice in the banking sector.
⮚ According to the defendant it extended various financial facilities to the Plaintiffs to the maximum principal of Kenya Shillings Thirty Million (Kshs. 30,000,000.00) upon, inter alia, various conditions which were accepted by the Plaintiffs.
⮚ That these were made pursuant to Letters of Offer dated 08/10/2013, 01/07/2014, 14/04/2016 and 25/08/ 2016, (together “the Letters of Offer”).
⮚ That the Plaintiffs executed the letters of offer of their own their own free will and are bound by the terms therein: To repay the facility at the stated interest rate and failure thereof, default interest: to pay Risk Management Fund; Commission and Facility fees; life insurance; legal charges and costs; valuer’s fees; architects and surveyors’ fees among others.
⮚ That the financial facilities were secured by the following:
a) Legal Charge dated 07/11/2013 over property known as TITLE NO. EMALI TOWNSHIP BLOCK 1/150 for Kshs. 3,000,000.00
b) Further Legal Charge dated 24/07/ 2014 over property known as TITLE NO. EMALI TOWNSHIP BLOCK 1/150 for Kshs. 6,000,000.00
c) Second Further Legal Charge dated 13/05/2016 over property known as TITLE NO. EMALI TOWNSHIP BLOCK 1/150 for Kshs. 20,000,000.00
d) Third Further Legal Charge dated 10/10/2016 over property known as TITLE NO. EMALI TOWNSHIP BLOCK 1/150 for Kshs. 30,000,000.00
⮚ That the 2 nd Plaintiff further executed Deeds of Rental Assignment dated 15/05/2016 and 10/10/2016 wherein she admitted to being indebted to the Defendant of the amounts disbursed by the various Letters of Offer. By the Deed of Rental Assignment dated 10/10/ 2016, the 2 nd Plaintiff admitted that that the Plaintiffs were indebted to the Defendant in the principal sum of Kshs. 30,000,000.00 and assigned the rent income received from the properties to the Defendant.
⮚ Notwithstanding the clear terms of the Special Conditions contained in the Letters of Offer dated 08/10/ 2013, 01/07/ 2014, 14/04/2016 and 25/08/2016 and Deeds of Rental Assignment dated 15/05/2016 and 10/10/2016, the Plaintiffs breached the said terms.
9. The particulars of breach of the special conditions of the Letters of Offer and Deeds of Rental Assignment were stated to be;
a) Failure to remit the rental income received from the property to the Bank.
b) Failure to provide a detailed listing of all assets owned .
10. The Defendant averred that it commenced the realization process when the Plaintiffs defaulted in making monthly repayments in breach of the terms of the Letters of Offer. The particulars of the realization process were stated to be;
a) A demand letter was issued on 17/07/2018 .
b) The 90 days statutory notices were issued on 18/12/2017, At the time, the outstanding arrears were Kshs. 1,645,058.16 which they were supposed to clear.
c) The 2 nd Statutory Notice to wit , the 40 Days’ Notice was issued vide a letter dated 09/04/2018 after non response to the foregoing from the Plaintiffs. At the said date, the outstanding arrears were Kshs. 2,773,717.33 which the Plaintiffs were to clear to avert the Bank selling the charged property.
d) There being no response the Defendant instructed Crater View Auctioneers to issue the 45 Days Redemption Notice and recover the entire outstanding amount which was Kshs. 32,855,211.82 as at 17/09/2018. The Plaintiffs were informed that the said outstanding amount attracted interest at the rate of 18% p.a.
e) The Redemption Notice was served upon the Plaintiffs by the Auctioneers on 27/09/ 2018.
f) Prior to the issuance of the notice, the Defendant had instructed Orion Valuers to undertake a valuation of the charged property. The Valuer submitted its report dated 18/09/ 2018 which indicated that the market value of the property was Kshs. 95,000,000.00 and forced sale value would be Kshs.75,000,000.00.
g) There was no response to the Redemption Notice. The defendant instructed the Auctioneer to proceed and advertise the property for sale as per the provisions of the Auctioneer’s Act. The advertisement was carried in the Daily Nation Newspaper on 12/11/2018 .
11. That it was upon the advertisement of the property, that the Plaintiffs filed this instant suit and application alleging that some amounts were debited in their account illegally and unlawfully when any debit was pursuant to the provisions of the Letters of Offer. Further, the Plaintiffs alleged illegal withdrawal when said withdrawals were supported by withdrawal instructions.
12. The Defendant averred that the Plaintiffs were granted injunctive orders stopping the sale of the charged property but the said orders did not bar the Plaintiffs from making monthly instalement. That, the Plaintiffs have without any colour or right failed and defaulted in payment of the installments and have fallen into arrears. That, the last payment was on 02/02/2023 of Kshs.4,980 and the oustanding balance as at 31/03/2023 was Kshs.56,934,752.14 and continues to attract interest.
13. With regard to the top-up amounts, the Defendant averred as follows;
a) A top-up of Kshs.3,394,127.55 was credited into the Plaintiffs’ account on 25/07/2014 bringing the principal loan balance to Kshs. 5,939,497.18.
b) A top-up of Kshs. 2,856,918.00 was credited into the Plaintiffs’ account on 22/04/2016 bringing the principal loan balance to Kshs.5,778,341.78.
c) A top-up of Kshs. 4,000,000.00 was credited into the Plaintiffs’ account on 30/05/2016 bringing the principal loan balance to Kshs.9,868,632.32.
d) A top up of Kshs. 10,221,658.22 was taken on 06/06/2016 , bringing the principal loan balance to Kshs.19,983,179.72.
e) The final top up of Kshs.10,327,983.76 was taken on 14/10/2016 bringing the principal loan balance to Kshs.29,999,200.00
14. Further, the Defendant averred that;
⮚ At no time did the Plaintiffs complain about the running of the accounts or any fraudulent activity on their accounts. That they were turning the court into an Accountant without even seeking for an order of accounts to be undertaken.
⮚ The amount stated in paragraph 3A of the Amended Plaint was valuation fees deposit for the property provided as security. This was in line with Clause 14(i) highlighted in the Letter of Offer dated 08/10/ 2013.
⮚ Kshs 400,000/= mentioned in paragraph 3C of the Amended Plaint was an authorised transfer to his nephew.
⮚ In answer to paragraph 4, the Defendant denied the allegation that its interest rate was 18% and maintained that it was 20% and put the Plaintiffs to strict proof. That, the said interest of 20% was contractually agreed by parties as per the Clause 5.1 of the Letter of Offer dated 08/10/ 2013.
⮚ In answer to paragraph 4A, the defendant denied that it wrongfully, unlawfully and illegally deducted Ksh.778,457.5 from the account and further averred that the only deductions were a loan charge of Ksh. 6,760.00 and excise duty of 6,760,000.00. That these amounts were contractually agreed by parties as per the terms of the Letter of Offer dated 8 th October 2013.
⮚ In answer to paragraph 4B, the defendant denied that the Risk Management Fund and excise duty were Ksh.37,500 and Kshs. 3,750 respectively and further averred that there was no waiver on the mentioned charges. The charges remained Kshs.67,600 which were Risk Management Fund, Liquidity Adjustment Facility and processing fees and excise duty of Kshs. 6,760. These amounts were contractually agreed by parties as per the terms of the Letter of Offer dated 08/10/ 2013.
⮚ In answer to paragraph 4C, the defendant denied that the interest was 18% and averred that the Bank’s interest was 20% reducing to be paid in a period of 40 months. The Defendant reiterated that the interest of 20% was contractually agreed by parties as per the Clause 5.1 of the Letter of Offer dated 08/10/2013.
⮚ In answer to paragraph 4D, the defendant denied that it illegally, unlawfully and wrongfully withdrew Kshs. 50,000.00 and Kshs. 218,400.00 and averred that the Plaintiff withdrew the amounts. That the Defendant could not be blamed for poor book keeping by the Plaintiffs.
⮚ The Defendant denied that it transferred Kshs. 135,800.00 and Kshs. 140,800.00 unlawfully and averred that the Plaintiffs paid their suppliers via RTGS.
⮚ The Defendant denied the contents of paragraph 4E and averred that the 1 st Plaintiff authorised the Kshs.5,022.00 and funds were transferred to his Loan Guarantee Deposit account.
⮚ In response to paragraph 5, the Defendant denied that the Plaintiff lost a sum of Kshs. 97,836.53 and averred that the Plaintiffs received an amount less by 60,502.82 which was as a result of the top up amount being late and the principal already charged of Kshs.60,502.82.
⮚ In response to paragraph 5A, the Defendant denied that the Bank was to apply 1.25% of the top up amount only and averred that the charges were to be calculated from the loan of Kshs.6,000,000 because the top up amount did not change, what changed was the outstanding balance.
⮚ The Defendant denied paragraph 5B and in particular the allegation that it illegally transferred sums of money from the Plaintiffs’ account and that it was the plaintiffs who withdrew/transferred the amounts.
⮚ The Defendant denied paragraph 5C and in particular the allegation that the Bank changed the loan drawdown account, that the drawdown accounts mentioned were non-existent as there was a system migration in August, 2015.
⮚ The Defendant denied paragraph 6A and in particular the allegation that the Plaintiffs cleared the loan advanced to account Number 1003191963.
⮚ The Defendant denied paragraph 6B and in particular the allegation that the Defendant made extra unlawful and unjustified charges on Account No. 1003191963. The Defendant averred that the Plaintiffs did not clear the last loan in full therefore the balance was cleared using the loan guarantee deposit the Plaintiff had of Kshs. 89,510.00
⮚ The Defendant admitted Paragraph 8 and in particular the allegation that the Defendant did not advance the loan of Kshs.30,000,000 . The Defendant averred that the balance before the top up was Kshs.19,672,016.22, therefore the top amount was Kshs.10,327,983.78 to make an aggregate of Kshs. 30,000,000.
⮚ The Defendant denied the particulars of fraud and averred that they are untrue and unfounded as exhibited from the bank statement of the Plaintiffs. It averred that there is a record of Real Time Funds Transfer from the Defendant’s bankers, Kenya Commercial Bank to Co-operative Bank of Kenya Ltd Account No.01148283787800 of a transfer that was authorised by the Defendant on behalf of Plaintiffs for payment of material supplied to Tejo Steel Hardware amounting to Ksh.930,000/= on 17/10/ 2016.
⮚ The Defendant denied paragraph 12 and averred that they had provided the bank statements to the Plaintiffs on several occasions.
⮚ The Defendant denied paragraph 13 and averred that a court cannot be made to be an accountant without a specific prayer for taking accounts.
⮚ In response to the particular
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