The plaintiff, a limited liability company duly licensed to transact business under the Banking Act Chapter 488 of the Laws of Kenya sued the defendants for recovery financial facility granted to the 1sr defendant and guaranteed by the 2 nd and 3 rd defendant. The plaintiff sought the following orders;
Ksh. 25,341,103.22.
Default damages thereon on (a) above at the rate of 20 per cent per annum from 12 th June 2020 until payment in full.
Costs of the suit on Advocate-Client full indemnity basis.
The defendants filed a joint defence and denied literally everything pleaded by the plaintiff. They denied having taken or guaranteed the alleged loan or entering into negotiations with the plaintiff in respect of the said loan facilities. The matter went for trial with the plaintiff calling one witness and the defendant calling none.
The plaintiff called one Lawi Sato who told the court that he was an advocate employed by the plaintiff as its legal officer. He made reference to his witness statement dated 9-07-2020 and bundle of documents dated the same date and produced them as plaintiff’s exhibits 1 to 14. He added that through a letter dated 27 th April 2018, the plaintiff offered a finance facility to the 1 st defendant by extending what he referred to as Tawarruq local purchase order financial facility to a maximum of Kshs 20,000,000.00 which was to service a contract from Technical and Vocational Education and Training Authority at profit rate of 13.5 per cent and which was to be repaid over a period of four months. In the event of failure to pay, the 1 st defendant was to pay 20 per cent per annum on the amount due which they referred to as the default damages.
There were further negotiations where the plaintiff and the 1 st defendant restructured the outstanding debt vide facility restructure letter dated 19-09-2019 which the defendant executed at which time the outstanding balance was Kshs 20,892,918.01. The restructured facility was to be paid in two months and attracted profit of 13 per cent with other terms remaining as per the letter dated 27 th April 2018.
The parties engaged in further negotiations and came up with another restructure arrangements vide letter dated 29 th March 2019 which was to be paid in four months and which at the time stood at Kshs 21,327,438.56 plus a profit of 13 per cent with other terms remaining as per the previous letters of offer.
The witness added that the defendants issued the plaintiff with an irrevocable undertaking to proceeds from a contract with the Kenya International Conference Centre to service the facility. He added that the 2 nd and 3 rd defendants executed personal guarantees dated 2-05-2019 to pay the amount borrowed by the 1 st defendant up to the principal sum of Kshs 20,000,000.00 together with profit, fees, commissions, costs, charges and expences on demand and to indemnify the plaintiff of any damage, loss, costs and expences arising from failure by the 1 st defendant to carry out or discharge any obligation.
The witness averred further that the plaintiff held charge over North Nyoka/Kolwili/1932 (hereinafter referred to as ‘the property’) but the property’s value was insufficient to settle the debt which as at the time of filing suit stood at Kshs 25,341,103.22.
In cross-examination, the witness stated that the plaintiff did not advance any money to the 2 nd and 3 rd defendants and that the money advanced to the 1 st defendant was not initially secured but it was later secured by charge over the property which was worth Kshs 545,000.00 although it was charged for Kshsh 20,000,000.00. He added that they do not necessarily evaluate the suitability of the guarantors but the ability of the borrower. He insisted that the 1 st defendant has not paid the loan and that the security was not sufficient to satisfy the debt and for that reason, they chose to sue instead of realizing the security.
He denied that the process was a conspiracy by the plaintiff’s employees to fleece the bank. He added that some organization paid 15 million to the 1 st defendant on 19-06-2018 but the defendant opted not to pay the loan. He clarified that when the 15 million was paid to the account, the loan had not matured and the plaintiff did not withhold the money because the facility had not fallen due. He added that the 1 st defendant was given four months to pay the loan and if it was genuine, it should have used the 15 million to pay the loan.
When he was re-examined, the witness said that there was no material in court to show that the bank was reckless and added that the responsibility to repay the loan was on the borrower.
The parties filed their respective submissions with the defendant’s being dated 24 th April 2025 and the plaintiff’s 20 th January 2025. The defendants have not in their submissions made any representations on the merits of the case and the evidence of the parties but has raised the following issues of law which I propose to begin with;
That there is a misjoinder of parties.
That the plaintiff has not exhausted remedies available to it under Section 90 of the Land Act.
That the court should postpone these proceedings under Section 91(2) of the Land Act.
On the first issue, the defendants submit that the 2 nd and 3 rd defendants are not right parties to the suit because it was the 1 st defendant who borrowed the loan and there being no application to lift the veil, the suit is incompetent as against the 2 nd and 3 rd defendants who are directors of the 1 st defendant. According to the defendants, the 2 nd and 3 rd defendants do not owe the plaintiff in their personal capacities. They have cited Order 1 Rules 3, 7 and 9 of the Civil Procedure Rules and Section 17 of the Companies Act.
I do not see how the cited Rules come to the aid of the defendants’ case and I find the submissions thereof at variance with the defendants’ quest to have the court find that the 2 nd and 3 rd defendants were wrongly joined in the suit. I say so because those Rules generally provide for sustaining of the suit even where there is doubt that the persons against whom reliefs are sought are the right parties. I am guided by the holding of the Court of Appeal in William Kiprono Towett & 1597 Others v Farmland Aviation Ltd, Marcos Dunn & Toby Dunn (2016) KECA 302 (KLR) thus;
‘Most critically Order 1 Rule 9 of the Civil Procedure Rules (2010) makes it abundantly clear that misjoinder or non-joinder of parties cannot be a ground to defeat a suit.’
In respect of Section 17 of the Companies Act, the defendants urge that the 2 nd and 3 rd defendants are entities separate from the 1 st defendant who borrowed the loan. Reading through the plaint and going by the evidence adduced by the parties, the plaintiff has not sued the 2 nd and 3 rd defendants as directors but in their capacities as guarantors to the loan. It is trite law that guarantors remain indebted to the lender until the debt is fully settled and the lender has the liberty to sue the guarantors for the full or remainder of the debt. In this case I find the argument by the defendants on misjoinder baseless and I dismiss it. Honourable Justice F. Gikonyo held in Kolaba Enterprises Limited v Shamshudin Hussein Varvani & another (2014) KEHC 7728 (KLR) that;
‘A guarantee is a separate and distinct contract from the lease herein and should be so separated for all purposes and intents. The covenants and the obligations in the guarantee are binding on the guarantor until they have been discharged or varied between the parties, i.e. the guarantor and the guarantee.’
The defendants have also submitted that Section 90 of the Land Act gives the remedies available to the chargee where there is default. The relevant Subsection 3 provides as follows;
‘If the chargor does not comply within ninety days after the date of service of the notice under, subsection (1), the chargee may;
sue the chargor for any money due and owing under the charge;
appoint a receiver of the income of the charged land;
lease the charged land, or if the charge is of a lease, sublease the land;
enter into possession of the charged land; or
(e) sell the charged land.’
The defendant’s’ argument on the above position seems to me to be that the plaintiff had not given them the requisite statutory notice under Subsection 90(1). I have looked at the demand notices produced by the plaintiff as its exhibit 9 and 11. The said notices give the amount due and the option of redemption the 1st defendant had. It also gives the 1 st defendant ninety days within which it should pay the amount indicated in the notice. The said notices are dated 2 nd January 2019 and 17 th January 2019 whereas this suit was not filed until 10-07-2020 which period is more than one and half years. In my view, these demands substantially complied with Section 90(1) of the Land Act and as such the suit was maturely filed and I proceed to dismiss this argument.
The defendants have also cited Section 91 of the Land Act and pleaded with this court to postpone the proceedings under Subsection 2. The said Section provides that;
The chargee may sue for the money secured by the charge only if-
the chargor is personally bound to repay the money;
by any cause other than the wrongful act of the chargor or chargee, the security is rendered insufficient and the chargee has given the chargor a reasonable opportunity to provide additional sufficient security and the chargor has failed to provide that additional security; or
the chargee is deprived of the whole or part of the security through or in consequence of, a wrongful act or default of the chargor.
The court may order the postponement of any proceedings brought under subsection (1)(c) until the chargee has exhausted all other remedies relating to the charged land, unless the chargee agrees to discharge the charge.
Reading of the above Section is clear that the options given in Subsection (1) are alternative and not conjunctive. There is no conjunction ‘and’ after the Subsection 1(a) which means that the said Subsection is an independent option which does not need to move together with the others. In this case, a chargor of the property was the 1 st defendant and at the same time the borrower and as such it is personally liable to pay the loan thereby placing it perfectly under Subsection 1(a). The Section in my view does not apply to the 2 nd and 3 rd defendants as they were not chargors but guarantors who are bound to the plaintiff until the debt is paid in full and can be sued in that capacity. This argument must therefore similarly fail.
Turning to the merits of the case, it is clear to this court that the debt has not been paid. The 2 nd and 3 rd defendant having been guarantors are bound to the same until it is fully settled. The plaintiff has produced the letters of offer as exhibits 2, 4 and 7, and the statement of account for the facilities and the current account as exhibit 12. I have looked at the two statements of accounts and the same show that the loan stood at Kshs 20,876, 164.38 as at 3-07-2019 and what was agreed as Qard Hassan at Kshs 1,327,438.56 making it a total of Kshs 22,203,602.94. The plaintiff has also exhibited statement of the current account where it is shown that the same was in debit of Kshs 94,560.00.
The defendants did not adduce evidence to contests or attack these statements and the evidence of the plaintiff. There is no evidence of outrageous or illegal interest, penalties or charges as claimed by the defendants. The averments in the defence have not been supported by any evidence and they remain mere averments which have no evidential value. In the circumstances, I find and hold that the plaintiff has proved on a balance of probabilities that it is owed the total of the sum totaling to Kshs 22,298,162.94 as stated above.
There is what the plaintiff referred to as default damage which was agreed at 20 per cent. Since the same was contractual, this court does not see any basis for denying the same as the defendants agreed to it and have not produced evidence to rebut the provisions in the several letters of offer produced by the plaintiff. I note that the plaintiff was suing for the damage to be paid from 12 th June 2020 obviously because it had made its calculations up to that date.
However, the statement of account produced by the plaintiff runs up to 3-11-2019. In view this, the court cannot state with certainty what the amount of Kshs 25,342.103.22 claimed by the plaintiff was based on. I will not engage in these calculations but in order to ensure the plaintiff is compensated as per the contract between the parties, I will order that the rate of the damage shall apply from 3-11-2019 which is the date the statements of accounts end.
However, the amount to be subjected to the percentage should be less Kshs 876,164.38 which in my understanding of the pleadings and the contract was not supposed to be subjected to this percentage. The duty of the court in matters of contract is to enforce the intention of the parties as it is as was held in Eldo City Limited v Corn Products Kenya Ltd & another (2013) KEHC 5916 (KLR) thus;
‘It is trite law that in deciding disputes, it is the court’s duty to give effect to the intention of the parties. The parties’ intention is discernible from the documents and conduct of the parties. However, onerous a document or contract may be, the court’s duty is to give effect to it.’
In the final analysis, I enter judgement for the plaintiff against the defendants jointly and severally as follows;
Kshs 22,203,602.94 being the oustanding principal loan.
Kshs 876,164.38 being outstanding agreed profit.
Kshs 94,560.00 being the debit balance in the current account.
20 per cent per annum of (1) above to be calculated from 3-11-2019 until payment of the same in full.
Cots of the suit.
Dated, signed and delivered at Nairobi this 11 th day of July 2025.
B.M. MUSYOKI
JUDGE OF THE HIGH COURT.
Judgment delivered in presence of Mr Evans Ochieng for the plaintiff and Mr. Bibiu for the defendant.
Ksh. 25,341,103.22.
Default damages thereon on (a) above at the rate of 20 per cent per annum from 12 th June 2020 until payment in full.
Costs of the suit on Advocate-Client full indemnity basis.
The defendants filed a joint defence and denied literally everything pleaded by the plaintiff. They denied having taken or guaranteed the alleged loan or entering into negotiations with the plaintiff in respect of the said loan facilities. The matter went for trial with the plaintiff calling one witness and the defendant calling none.
The plaintiff called one Lawi Sato who told the court that he was an advocate employed by the plaintiff as its legal officer. He made reference to his witness statement dated 9-07-2020 and bundle of documents dated the same date and produced them as plaintiff’s exhibits 1 to 14. He added that through a letter dated 27 th April 2018, the plaintiff offered a finance facility to the 1 st defendant by extending what he referred to as Tawarruq local purchase order financial facility to a maximum of Kshs 20,000,000.00 which was to service a contract from Technical and Vocational Education and Training Authority at profit rate of 13.5 per cent and which was to be repaid over a period of four months. In the event of failure to pay, the 1 st defendant was to pay 20 per cent per annum on the amount due which they referred to as the default damages.
There were further negotiations where the plaintiff and the 1 st defendant restructured the outstanding debt vide facility restructure letter dated 19-09-2019 which the defendant executed at which time the outstanding balance was Kshs 20,892,918.01. The restructured facility was to be paid in two months and attracted profit of 13 per cent with other terms remaining as per the letter dated 27 th April 2018.
The parties engaged in further negotiations and came up with another restructure arrangements vide letter dated 29 th March 2019 which was to be paid in four months and which at the time stood at Kshs 21,327,438.56 plus a profit of 13 per cent with other terms remaining as per the previous letters of offer.
The witness added that the defendants issued the plaintiff with an irrevocable undertaking to proceeds from a contract with the Kenya International Conference Centre to service the facility. He added that the 2 nd and 3 rd defendants executed personal guarantees dated 2-05-2019 to pay the amount borrowed by the 1 st defendant up to the principal sum of Kshs 20,000,000.00 together with profit, fees, commissions, costs, charges and expences on demand and to indemnify the plaintiff of any damage, loss, costs and expences arising from failure by the 1 st defendant to carry out or discharge any obligation.
The witness averred further that the plaintiff held charge over North Nyoka/Kolwili/1932 (hereinafter referred to as ‘the property’) but the property’s value was insufficient to settle the debt which as at the time of filing suit stood at Kshs 25,341,103.22.
In cross-examination, the witness stated that the plaintiff did not advance any money to the 2 nd and 3 rd defendants and that the money advanced to the 1 st defendant was not initially secured but it was later secured by charge over the property which was worth Kshs 545,000.00 although it was charged for Kshsh 20,000,000.00. He added that they do not necessarily evaluate the suitability of the guarantors but the ability of the borrower. He insisted that the 1 st defendant has not paid the loan and that the security was not sufficient to satisfy the debt and for that reason, they chose to sue instead of realizing the security.
He denied that the process was a conspiracy by the plaintiff’s employees to fleece the bank. He added that some organization paid 15 million to the 1 st defendant on 19-06-2018 but the defendant opted not to pay the loan. He clarified that when the 15 million was paid to the account, the loan had not matured and the plaintiff did not withhold the money because the facility had not fallen due. He added that the 1 st defendant was given four months to pay the loan and if it was genuine, it should have used the 15 million to pay the loan.
When he was re-examined, the witness said that there was no material in court to show that the bank was reckless and added that the responsibility to repay the loan was on the borrower.
The parties filed their respective submissions with the defendant’s being dated 24 th April 2025 and the plaintiff’s 20 th January 2025. The defendants have not in their submissions made any representations on the merits of the case and the evidence of the parties but has raised the following issues of law which I propose to begin with;
That there is a misjoinder of parties.
That the plaintiff has not exhausted remedies available to it under Section 90 of the Land Act.
That the court should postpone these proceedings under Section 91(2) of the Land Act.
On the first issue, the defendants submit that the 2 nd and 3 rd defendants are not right parties to the suit because it was the 1 st defendant who borrowed the loan and there being no application to lift the veil, the suit is incompetent as against the 2 nd and 3 rd defendants who are directors of the 1 st defendant. According to the defendants, the 2 nd and 3 rd defendants do not owe the plaintiff in their personal capacities. They have cited Order 1 Rules 3, 7 and 9 of the Civil Procedure Rules and Section 17 of the Companies Act.
I do not see how the cited Rules come to the aid of the defendants’ case and I find the submissions thereof at variance with the defendants’ quest to have the court find that the 2 nd and 3 rd defendants were wrongly joined in the suit. I say so because those Rules generally provide for sustaining of the suit even where there is doubt that the persons against whom reliefs are sought are the right parties. I am guided by the holding of the Court of Appeal in William Kiprono Towett & 1597 Others v Farmland Aviation Ltd, Marcos Dunn & Toby Dunn (2016) KECA 302 (KLR) thus;
‘Most critically Order 1 Rule 9 of the Civil Procedure Rules (2010) makes it abundantly clear that misjoinder or non-joinder of parties cannot be a ground to defeat a suit.’
In respect of Section 17 of the Companies Act, the defendants urge that the 2 nd and 3 rd defendants are entities separate from the 1 st defendant who borrowed the loan. Reading through the plaint and going by the evidence adduced by the parties, the plaintiff has not sued the 2 nd and 3 rd defendants as directors but in their capacities as guarantors to the loan. It is trite law that guarantors remain indebted to the lender until the debt is fully settled and the lender has the liberty to sue the guarantors for the full or remainder of the debt. In this case I find the argument by the defendants on misjoinder baseless and I dismiss it. Honourable Justice F. Gikonyo held in Kolaba Enterprises Limited v Shamshudin Hussein Varvani & another (2014) KEHC 7728 (KLR) that;
‘A guarantee is a separate and distinct contract from the lease herein and should be so separated for all purposes and intents. The covenants and the obligations in the guarantee are binding on the guarantor until they have been discharged or varied between the parties, i.e. the guarantor and the guarantee.’
The defendants have also submitted that Section 90 of the Land Act gives the remedies available to the chargee where there is default. The relevant Subsection 3 provides as follows;
‘If the chargor does not comply within ninety days after the date of service of the notice under, subsection (1), the chargee may;
sue the chargor for any money due and owing under the charge;
appoint a receiver of the income of the charged land;
lease the charged land, or if the charge is of a lease, sublease the land;
enter into possession of the charged land; or
(e) sell the charged land.’
The defendant’s’ argument on the above position seems to me to be that the plaintiff had not given them the requisite statutory notice under Subsection 90(1). I have looked at the demand notices produced by the plaintiff as its exhibit 9 and 11. The said notices give the amount due and the option of redemption the 1st defendant had. It also gives the 1 st defendant ninety days within which it should pay the amount indicated in the notice. The said notices are dated 2 nd January 2019 and 17 th January 2019 whereas this suit was not filed until 10-07-2020 which period is more than one and half years. In my view, these demands substantially complied with Section 90(1) of the Land Act and as such the suit was maturely filed and I proceed to dismiss this argument.
The defendants have also cited Section 91 of the Land Act and pleaded with this court to postpone the proceedings under Subsection 2. The said Section provides that;
The chargee may sue for the money secured by the charge only if-
the chargor is personally bound to repay the money;
by any cause other than the wrongful act of the chargor or chargee, the security is rendered insufficient and the chargee has given the chargor a reasonable opportunity to provide additional sufficient security and the chargor has failed to provide that additional security; or
the chargee is deprived of the whole or part of the security through or in consequence of, a wrongful act or default of the chargor.
The court may order the postponement of any proceedings brought under subsection (1)(c) until the chargee has exhausted all other remedies relating to the charged land, unless the chargee agrees to discharge the charge.
Reading of the above Section is clear that the options given in Subsection (1) are alternative and not conjunctive. There is no conjunction ‘and’ after the Subsection 1(a) which means that the said Subsection is an independent option which does not need to move together with the others. In this case, a chargor of the property was the 1 st defendant and at the same time the borrower and as such it is personally liable to pay the loan thereby placing it perfectly under Subsection 1(a). The Section in my view does not apply to the 2 nd and 3 rd defendants as they were not chargors but guarantors who are bound to the plaintiff until the debt is paid in full and can be sued in that capacity. This argument must therefore similarly fail.
Turning to the merits of the case, it is clear to this court that the debt has not been paid. The 2 nd and 3 rd defendant having been guarantors are bound to the same until it is fully settled. The plaintiff has produced the letters of offer as exhibits 2, 4 and 7, and the statement of account for the facilities and the current account as exhibit 12. I have looked at the two statements of accounts and the same show that the loan stood at Kshs 20,876, 164.38 as at 3-07-2019 and what was agreed as Qard Hassan at Kshs 1,327,438.56 making it a total of Kshs 22,203,602.94. The plaintiff has also exhibited statement of the current account where it is shown that the same was in debit of Kshs 94,560.00.
The defendants did not adduce evidence to contests or attack these statements and the evidence of the plaintiff. There is no evidence of outrageous or illegal interest, penalties or charges as claimed by the defendants. The averments in the defence have not been supported by any evidence and they remain mere averments which have no evidential value. In the circumstances, I find and hold that the plaintiff has proved on a balance of probabilities that it is owed the total of the sum totaling to Kshs 22,298,162.94 as stated above.
There is what the plaintiff referred to as default damage which was agreed at 20 per cent. Since the same was contractual, this court does not see any basis for denying the same as the defendants agreed to it and have not produced evidence to rebut the provisions in the several letters of offer produced by the plaintiff. I note that the plaintiff was suing for the damage to be paid from 12 th June 2020 obviously because it had made its calculations up to that date.
However, the statement of account produced by the plaintiff runs up to 3-11-2019. In view this, the court cannot state with certainty what the amount of Kshs 25,342.103.22 claimed by the plaintiff was based on. I will not engage in these calculations but in order to ensure the plaintiff is compensated as per the contract between the parties, I will order that the rate of the damage shall apply from 3-11-2019 which is the date the statements of accounts end.
However, the amount to be subjected to the percentage should be less Kshs 876,164.38 which in my understanding of the pleadings and the contract was not supposed to be subjected to this percentage. The duty of the court in matters of contract is to enforce the intention of the parties as it is as was held in Eldo City Limited v Corn Products Kenya Ltd & another (2013) KEHC 5916 (KLR) thus;
‘It is trite law that in deciding disputes, it is the court’s duty to give effect to the intention of the parties. The parties’ intention is discernible from the documents and conduct of the parties. However, onerous a document or contract may be, the court’s duty is to give effect to it.’
In the final analysis, I enter judgement for the plaintiff against the defendants jointly and severally as follows;
Kshs 22,203,602.94 being the oustanding principal loan.
Kshs 876,164.38 being outstanding agreed profit.
Kshs 94,560.00 being the debit balance in the current account.
20 per cent per annum of (1) above to be calculated from 3-11-2019 until payment of the same in full.
Cots of the suit.
Dated, signed and delivered at Nairobi this 11 th day of July 2025.
B.M. MUSYOKI
JUDGE OF THE HIGH COURT.
Judgment delivered in presence of Mr Evans Ochieng for the plaintiff and Mr. Bibiu for the defendant.