'1. The plaintiffs commenced this suit against the 1st – 4th defendants vide a plaint dated 7/6/2019 in which they sought the following orders: -
a) The sum of Kshs. 85,000,000/- together with interest thereon at commercial rates as follows: -
i) Interest on Kshs. 30,000,000/- from 12th June 2017 until payment in full and
ii) Interest on Kshs. 55,000,000/- from 22nd May 2018 until payment in full.
b) An order directing the defendants to return to the plaintiffs the originals of the Guarantee dated 18th July 2018 for payment of Kshs. 40,000,000/- AND the Guarantee dated 18th July 2018 for payment of Kshs. 3,000,000/- both issued by the 3rd Plaintiff in favour of the 2nd Defendant.
c) A permanent injunction restraining the defendants from calling in or demanding any payment whatsoever from the Plaintiffs arising from the Guarantee dated 18th July 2018 for payment of Kshs. 40,000,000/- AND the Guarantee dated 18th July 2018 for payment of Kshs. 3,000,000/- both issued by the 3rd Plaintiff in favour of the 2nd Defendant.
d) Alternatively, to b) above, a declaration that the Guarantee dated 18th July 2018 for payment of Kshs. 40,000,000/- AND the Guarantee dated 18th July 2018 for payment of Kshs. 3,000,000/-, both issued by the 3rd Plaintiff in favour of the 2nd Defendant, are both void and unenforceable for failure of consideration.
e) Damages for misrepresentation together with interest thereon at commercial rates from the date of filing suit until payment in full;
f) Costs of this suit on full indemnity Advocate/Client basis together with interest thereon at commercial rates from the date of filing this suit until payment in full.
g) Any other remedy that this Honourable Court may deem fit to grant.
2. The plaintiffs’ case was that sometimes in June 2017, they entered into an arrangement with the 1st to 4th defendant(“the said defendants”) to discharge land parcels Kisumu/Municipality Block/12/406, 407 & 408 (hereinafter known as “the Kisumu Properties”) by the 2nd defendant and have them transferred to the 1st plaintiff’s nominated Special Purpose Vehicle, to discharge the 2nd defendant’s charge over land parcel Kajiado/EwuasoKedong/3180 (hereinafter known as “the Kajiado Property”) and Apartment Number 507 in Block 5 of Nairobi Game Park Apartments on Land Reference Number 209/166786 Langata Nairobi (hereinafter known as “the Langata Apartment”) by way of simple deposit of title and subsequent surrender those titles to the 3rd plaintiff all for a consideration of Kshs. 128,000,000/-.
3. That prior to the said agreement or arrangement, the 3rd defendant had charged the Kisumu and Kajiado Properties as well as the Langata Apartment to the 2nd defendant to secure certain banking facilities.
4. That the plaintiffs entered into the said arrangement on condition that save for the 2nd defendant’s respective charges over the aforesaid properties, all the said titles were clean and free from any encumbrance and/or adverse claims as represented to them by the 1st defendant.
5. That consequently, in good faith and believing the said titles to be clean, the 1st and 2nd plaintiff paid to the 1st defendant, a total sum of Kshs. 85,000,000/- in two instalments of Kshs. 30,000,000/- and Kshs. 55,000,000/- on 12/6/2017 and 22/5/2018, respectively. Thereafter, the 3rd plaintiff issued two guarantees dated 18/7/2018 in favour of the 2nd defendant for the aggregate balance of Kshs. 43,000,000/-.
6. Subsequently however, the plaintiffs discovered that the Kajiado Property was not clean and free from adverse claims as represented by the said defendants but that it was subject to criminal proceedings and required to be submitted in evidence to the authorities. That the mode of transfer of the Kisumu Properties as proposed and put into effect by the 1st defendant was aimed at evading payment of stamp duty and was therefore illegal.
7. That in view of the foregoing, the plaintiffs withdrew from and cancelled the arrangement with the said defendants and demanded the refund of the Kshs. 85,000,000/- paid to the 1st and 2nd defendant and the return of the original Guarantees for cancelation but they refused.
8. The 1st defendant filed an amended defence dated 16/6/2022 in which it contended that, the 1st plaintiff and 3rd defendant entered into an arrangement between themselves whereby, the 1st plaintiff was to partner with the 3rd defendant’s construction and development projects business and the two approached him to effect their instructions.
9. That the 1st plaintiff subsequently disclosed that under the proposed joint venture with the 3rd defendant, the 1st plaintiff would be the financier while the 3rd defendant would provide the land where the proposed development would be erected. That this was the Kisumu Properties and Kisumu/Municipality/Block/406 both of which were to be purchased by the 1st plaintiff or a nominated company for Kshs. 125,000,000/-.
10. That the 4th defendant was proposed as the nominated company to whom the Kisumu Properties were to be eventually transferred to. That at the time, the Kisumu Properties were registered in the name of the 3rd defendant and charged to the 2nd defendant for facilities advanced to the 3rd defendant by the 2nd defendant and thus, the purchase of the Kisumu Properties was to off-set part of the debt owed to the 2nd defendant.
11. That he disclosed to the 1st plaintiff that he had been retained by the 2nd defendant to secure its interest in the financing arrangement between the 2nd and 3rd defendant and thus, to avoid a possibility of conflict of interest he would neither advise nor act for the plaintiffs in the proposed transaction and the plaintiffs were at liberty to seek independent legal advice on how the transaction would be structured.
12. That with the full knowledge of his limited role, the 1st plaintiff paid to the 2nd defendant an initial sum of Kshs. 30,000,000/- with the balance of Kshs. 95,000,000/- to be paid within 60 days. That on the 22/5/2018, a payment of Kshs. 55,000,000/- was received from the 1st plaintiff upon ascertaining that the Kisumu Properties were non-encumbered and he subsequently advised that as a condition for the release of the balance of Kshs. 40,000,000/-, the 3rd plaintiff would require additional securities as collateral and would thus release Kshs. 43,000,000/- instead of the originally agreed Kshs. 40,000,000/- to finance the 3rd defendant’s working capital requirements.
13. He further claimed that the 3rd defendant proposed to offer additional securities in the form of the Langata and Kajiado Properties and that it was subsequently agreed that, an undertaking for Kshs. 43,000,000/- be issued to facilitate release of the titles of the Kisumu and Langata Properties. That the Kajiado Property was never part of the original arrangement between the parties and that the same was brought into the transaction at the behest of the plaintiffs despite their knowledge that the title was not free from encumbrances.
14. That on 18/7/2018, the 1st and 2nd plaintiffs’ advocates, Messrs. Ashitiva Advocates undertook that the balance of Kshs. 40,000,000/- was payable within 14 days of registration of the Transfer and the Charges. The 3rd plaintiff issued an interbank Guarantee of the same date in favour of the 2nd defendant for the sum of Kshs. 40,000,000/- in respect of the Kisumu Properties and another interbank undertaking to the 2nd defendant for Kshs. 3,000,000/- upon release of the Kajiado and Langata titles.
15. That the objective of the transaction was not to evade paying stamp duty but was structured in that manner for the plaintiffs’ benefit with the said proposal having come from the 1st plaintiff. That subsequently, exemptions for stamp duty were issued and therefore there was no impropriety in the transaction itself.
16. That the plaintiffs conduct of unilaterally withdrawing from the agreement was unconscionable and undeserving of the equitable reliefs sought.
17. The 3rd defendant filed an amended statement of defence and counterclaim dated 8/6/2022. It admitted that it charged the Kisumu properties to the 2nd defendant and that the 1st and 2nd plaintiff paid to the 1st defendant a total of Kshs. 85,000,000/-. The plaintiffs later discovered that the Kajiado Property was not clean and free from adverse claims as represented by the said defendants.
18. That the mode of transfer of the Kisumu properties as proposed and put into effect by the 1st defendant was aimed specifically at evading payment of stamp duty and was therefore illegal.
19. The 3rd defendant denied receiving Kshs. 85,000,000/- or any Guarantees from the plaintiffs and put them to strict proof of the same. It prayed that the plaintiffs’ suit be dismissed.
20. In its Counterclaim, the 3rd defendant contended that it entered into a joint construction contract with the 6th defendant for the construction of eight (8) houses on the Kisumu properties. That it was agreed that the 6th defendant was to provide titles for the Kisumu properties and mobilize Kshs. 30,000,000/- which the 3rd defendant was to utilize to begin the said construction.
21. That in consideration for the completion of the construction, the 6th defendant was to transfer to it two (2) of the eight (8) houses that were to be constructed on the Kisumu properties. That the 6th defendant concealed material facts pertaining to the size of the land available for the construction and also the ability of the 1st plaintiff to complete the construction hence breaching the joint construction contract between it and the 3rd defendant.
22. That to mitigate the aforementioned breaches, the 6th defendant proposed to it to purchase the Kisumu properties including the eight (8) houses to be constructed but it declined the proposal.
23. That in further effort to mitigate its breaches under the joint construction contract, the 6th defendant, under the guidance of the 1st – 5th defendant, proposed the registration of a charge over the Kisumu properties. It accepted and an agreement for the sale was executed for the Kisumu properties for Kshs. 130,000,000/- with the 2nd defendant financing the sale to the tune of Kshs. 110,000,000/- and the balance being offset from the debt that the 6th defendant owed to it.
24. That the 1st defendant acted for both itself and the 2nd & 6th defendant in the conveyance transaction in the pre-contract and contractual negotiations and it was therefore under a fiduciary duty and obligation to exercise reasonable professional skill which it breached. That the agreement for sale of the Kisumu properties was illegal, null and void for being tainted by unconscionable bargain antics and undue influence from the joint collusion of the defendants.
25. That in advancing to it the loan of Kshs. 110,000,000/-, the 2nd defendant breached the lending policies from commercial banks thus not entitled to recover the said sum and interest charged thereupon.
26. That the 1st, 2nd & 5th defendant perpetrated a fraud upon it by completing a payment in excess of the sum authorized by it as legal fees to the 1st defendant and further that the said defendants fraudulently and illegally orchestrated a corrupt scheme and colluded to convert a non-performing loan to a performing loan to the benefit of the 2nd, 5th and 6th defendant.
27. That it relied upon the unprofessional legal advice by the 1st defendant to enter into the agreement for sale of the Kisumu properties which advice occasioned it economic loss of Kshs. 130,000,000/-, being the loan advanced by the 2nd defendant and the money the 6th defendant owed it.
28. The 3rd defendant therefore sought the following reliefs: -
a) A declaration that the loan facility provided to the 3rd Defendant/Counterclaimant is unlawful, illegal and constitutes unjust enrichment of the 2nd, 5th & 6th Defendants and illegal interference with the economic interests of the 3rd Defendant/Counterclaimant, and the 3rd Defendant/Counterclaimant is entitled to restitution intergrum.
b) A declaration that the sale agreement between the 3rd Defendant/Counterclaimant and the 6th Defendant is unlawful, illegal, invalid, null and void for being tainted by undue influence and unconscionable bargain.
c) A declaration that the 1st Defendant is in breach of his fiduciary duty and obligation of exercising reasonable professional skill, attention and care owed to the 3rd Defendant/Counterclaimant.
d) An order for the Defendants jointly and severally relieve the 3rd Defendant/Counterclaimant of all obligations under loan reference No. 004TLAA140840001.
e) An order or the Defendants jointly and severally, to make good and pay to the 3rd Defendant/Counterclaimant the sum of Kshs. 69,712,913.36 being the sums paid by the 3rd Defendant/Counterclaimant to the 2nd Defendant, in relation to the payment of the loan reference No. 004tlaa140840001.
f) An order for the 2nd Defendant to release title document over the charged property back to the 3rd Defendant/Counterclaimant.
g) An order of specific performance compelling the 2nd Defendant to execute a Discharge of Charge in respect of the Charge registered in its favour over the charged property.
29. In defence to the 3rd defendant’s counterclaim, the 1st defendant relied on his amended defence dated 16/6/2022. He contended that the claim was fatally defective for noncompliance with the provisions of section 4 (1) (a) and 28 of the Limitation of Actions Act. That the 3rd defendant lacked the locus standi to institute the proceedings as against him for want of privity of contract.
30. That it had no instructions, express or otherwise, to act for any party other than the 2nd defendant in the creation of charges and as such, it owed no fiduciary or any duty of care to any other party other than the 2nd defendant. That it was a stranger to the 3rd defendant’s allegations of undue influence, collusion, unconscionable bargain, breach and fraud.
31. The 2nd and 5th defendant filed a joint statement of defence to the 3rd defendant’s counterclaim dated 10/3/2021. They contended that they were not parties to the agreement between the 3rd and 6th defendant and were thus not bound by the terms thereof.
32. That the 5th defendant never guided the 6th defendant to have the 3rd defendant purchase the Kisumu properties through financing by the 2nd defendant. That the 3rd defendant was at all times aware of the right to retain an advocate of its choice to act for it in the transaction and it was therefore estopped from alleging unconscionable bargain and bad legal representation.
33. That they obtained all the requisite information required and carried out the necessary due diligence before advancing any facilities to the 3rd defendant. That they were strangers to the particulars of loss counterclaimed by the 3rd defendant. That the advance of a loan of Kshs. 100 million to the 3rd defendant by the 2nd defendant could not be deemed to have occasioned economic prejudice.
34. That the Counterclaim was statute barred by the mandatory terms of section 4 (1) (a) and section 28 of the Limitation of Actions Act.
35. The 6th defendant filed a statement of defence dated 23/3/2022 to the 3rd defendant’s Counterclaim. It denied the allegations therein and contended that the counterclaim was statute barred under section 4 (1) (a) and 28 of the Limitation of Actions Act as the purported cause of action against it related to events that occurred in 2013.
36. It stated that it executed in 2013, an agreement for sale of the Kisumu properties to the 3rd defendant for a total sale price of Kshs. 130,000,000/-. The 3rd defendant only paid Kshs. 110,000,000/- with Kshs. 10,000,000/- being offset from an earlier debt. There was a balance of Kshs. 10,000,000/- that the 3rd defendant had not settled despite the 6th defendant performing its part of the agreement and transferring the said properties.
37. At the trial, the plaintiff called one witness, Yogesh Pattni who testified as Pw1. He adopted his witness statement dated 7/6/2019 as his evidence in chief in which he reiterated the averments in the plaint. He produced the bundle of documents dated 10/5/2022 as PExh1.
38. In cross-examination, he stated that he was informed by the 6th defendant in October, 2028 that there was a restrictive encumbrance on the Kisumu properties. That it is the 1st defendant who suggested the 4th defendant to act as the Special Purpose Vehicle and in which he, the plaintiff was made a director. That following the incorporation of the 4th defendant, the properties were transferred to it.
39. That prior to the issuance of the Guarantees by the 3rd plaintiff, the 1st defendant effected transfers for him and the 2nd plaintiff to become shareholders in the 4th defendant. That he did not instruct the firm of Ashitiva & Company Advocates but rather the same was done by the 3rd plaintiff.
40. That the plaintiffs had an issue with the Langata and Kajiado properties and that had a search been carried out, the defect in the title for the Kajiado property could have been detected. That it was the firm of Ashitiva Advocates who pointed out the said defect.
41. In re-examination, he clarified that the firm of Ashitiva Advocates never acted for him but for the 3rd plaintiff. That the Kisumu properties had been transferred to the 4th defendant wherein the 3rd defendant was the majority shareholder.
42. On his part, the 1st defendant called two witnesses in support of its defence against the plaintiffs’ case as well as the Counterclaim of the 3rd defendant. D1W1, Mohamed Ali Kasamali Madhani adopted his statement dated 29/3/2022 as his evidence in chief and produced the 1st defendant’s list and bundle of documents of even date as DExh1. The evidence mirrored its defence.
43. In cross-examination, he told the Court that the 1st and 2nd plaintiff approached him and informed him that they wanted to enter into a construction project with the 3rd defendant. That the transaction was to have a transfer of properties to a subsidiary of the 3rd defendant free of stamp duty and that is the model he took which was not illegal as he applied for stamp duty exemption and got the same. That the parties were free to carry out independent searches on the properties.
44. That to facilitate the transfer and discharge of the properties, there were undertakings given to pay the sum of Kshs. 43,000,000/-. That however, despite the properties being transferred and charged to Victoria Commercial Bank, the Bank did not honour its undertaking to pay the sum of Kshs. 43,000,000/-.
45. That the Langata property was not part of the initial purchase of the Kisumu properties for Kshs. 125,000,000/-. That he had known the 1st plaintiff as a friend for a long time prior to the transaction. That when the 1st plaintiff approached him, he advised him to open a Special Purpose Vehicle (SPV) and did not charge any fees. That his interest was to ensure that the 2nd defendant was paid.
46. That he offered the 1st plaintiff the 4th defendant, which was a shell company he had incorporated and whose shareholders were himself and his wife. That he and his wife subsequently transferred the shares in that company to the 1st and 2nd plaintiff and the 3rd defendant.
47. That he was not aware of the caution on the Kajiado property prior to being informed of the same by Ashitiva Advocates. That his representation was only limited role limited to undertaking discharges on behalf of the 2nd defendant and further that he advised on how the tax exemption was to be obtained.
48. In re-examination, Mr. Madhani stated that the 1st plaintiff must have been aware of the restrictions over the Kisumu properties prior to giving the Guarantees and that as at the date of the Guarantees, the restrictions did not exist having been lifted on the 7/3/2018.
49. In cross-examination on the 3rd defendant’s Counterclaim, Mr. Madhani testified that the 2nd defendant instructed him to prepare both the charge and transfer. That he did not do any due diligence as the instructions came from the bank and thus there was no duty on his part to do it. He denied unduly influencing the 5th defendant to take the facility.
50. D1W2 Nelson Ihachi Ashitiva an advocate at Ashitiva Advocates LLP testified that the plaintiffs were his clients and that the 1st plaintiff was the C.E.O of the 3rd plaintiff. That his firm represented the 1st and 2nd plaintiff as directors of the 3rd defendant in the transaction subject of this suit.
51. That his firm gave an undertaking of Kshs. 40million on the 18/1/2018 but that this undertaking did not cover the Langata and Kajiado properties. That the 3rd plaintiff did not remit the Kshs. 40 million. That the transaction has not been completed as the Kshs. 40 million has not been paid.
52. That after discovering that the Kajiado property was a subject in a criminal case, his firm returned the title to the 1st defendant. That it was agreed between the parties that the matter be held in abeyance. Subsequently however, the 1st defendant recalled the titles to the Langata and Kajiado properties and as such the guarantee for Kshs. 3 million was not payable.
53. The 2nd Defendant called one witness in support of its case. D2W1, Francis Kariuki adopted his witness statement dated 1/4/2022 as his evidence in chief and produced the bundle of documents dated 31/8/2021, 1/4/2022 and 1/7/2022 as D2Exh1, 2 & 3, respectively.
54. He testified that the Guarantees issued by the plaintiffs were issued whilst they were well aware of the issues involving the Kajiado property. That a search over the Kisumu properties by the firm of Ashitiva Advocates showed that a restriction had been placed over the said properties.
55. That the securities were registered in favour of the 4th defendant and charged in favour of the 2nd defendant. That the intention of the transaction was the purchase of the Kisumu properties only. That D1W1 only acted for the 2nd defendant in handling documents. That the bank undertook due diligence before loaning the 3rd defendant Kshs. 110,000,000/-.
56. The 3rd defendant called two witness in support of its case. D3W1, Harish Patel adopted his amended witness statement dated 29/6/2022 as his evidence in chief and produced the 3rd defendant’s bundle and supplementary bundle of documents of the even date as D3Exh1 and 2, respectively. He was a director of the 3rd defendant.
57. He first met the 6th defendant in 2012 and they got into a project where he was to pump in Kshs. 70 million and the 6th defendant Kshs. 30 million. However, they fell into financial problem in 2013 by which time, Mr. Madhani (D1W1) was not yet in the picture.
58. That there was an encroachment on the Kisumu properties but the 6th defendant kept telling him that everything was alright. That he did not do any due diligence as being a contractor, he followed the 6th defendant’s instructions. That by the time he went to see D1W1, he had finalized with the 6th defendant on the project to be undertaken on the Kisumu properties.
59. That he had no option but to purchase the Kisumu properties as he had already pumped money into the project. For that reason, he had no option but to do whatever the 6th defendant proposed. That D1W1 came into the picture when they approached the 2nd defendant where they were informed he, D1W1, was the bank’s lawyer.
60. He testified that he met the 1st plaintiff in 2018 and introduced him to the Kisumu properties. That the 1st plaintiff pumped in Kshs. 127 – 128 million but he, 1st plaintiff did not visit the properties but rather relied on the documents produced. That he and the 1st plaintiff became joint partners in the Kisumu properties.
61. That D1W1 was professionally negligent in his dealings and thus accused him of fraud. That both D1W1 and the 2nd defendant were supposed to undertake due diligence. That the 2nd defendant knew about the encroachment on the Kisumu properties. That he did not have the financial ability for the bank to advance a loan of Kshs. 100 million. That the Kajiado property was registered in his wife’s name however there was no agreement between his wife and the 3rd plaintiff over the said property.
62. In re-examination, D3W1 told the Court that he met Mr. Madhani prior to entering into agreement with the 6th defendant but that he realized that there was encroachment on the Kisumu properties after purchasing them from the 6th defendant.
63. The 6th defendant called one witness in support of its case. D6W1, Kiran Shah. He adopted his witness statement dated 22/4/2022 as his evidence in chief and produced the 6th defendant’s bundle of documents dated 31/3/2022 as D6Exh1. It was his testimony that as at 13/3/2013, the 6th defendant knew of the encroachment on the Kisumu properties and that they informed the 3rd defendant of the same.
64. That it bought the Kisumu properties on or about 2011 or 2012 but that at the time they did not know of the encroachment until after the purchase though they did not do any survey prior to the purchase.
65. That as at 23/10/2018, the 6th defendant still maintained its claim on the Kisumu properties and that the caveat was removed without the consent of the 6th defendant. He admitted that by the letter dated 19/12/2018, the 6th Defendant stated that it had no claim over titles of the Kisumu properties. It was his testimony that he did not know if D1W1 was the lawyer when all these dealings were taking place.
66. In re-examination, D6W1 testified that the restriction over the Kisumu properties was because the 3rd defendant had not fully paid the purchase price. That as at the time of lifting the restriction in 2018, the 6th defendant had sold the properties to the 3rd defendant.
67. The 4th defendant did not file any pleadings nor did it participate in these proceedings.
68. The Court has carefully considered the pleadings, the evidence and the parties’ respective submissions on record and the authorities relied on. The issues for the determinations are: -
i) Whether the arrangement between the plaintiffs and the 1st to 4th defendant is enforceable?
ii) Whether the plaintiffs were entitled to repudiate that arrangement?
iii) Whether the 3rd defendant’s Counterclaim is sustainable;
iv) What reliefs, if any should be granted; and
v) Costs.
69. The general rule is that, he who alleges must prove. Section 107(1) of the Evidence Act provides that: -
“Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.”
70. In Palace Investment Ltd v Geoffrey Kariuki Mwenda & Another [2015] eKLR, the Court stated that: -
“The burden of proof is placed upon the appellant and is to be discharged on a balance of probabilities. Denning J. in Miller –vs Minister of Pensions [1947] 2 ALL ER 372 discussing the burden of proof had this to say: - “That degree is well settled. It must carry a reasonable degree of probability, but not so high as is required in a criminal case. If the evidence is such that the tribunal can say: ‘We think it more probable than not’, the burden is discharged, but, if the probabilities are equal, it is not. Thus, proof on a balance or preponderance of probabilities means a win, however narrow. A draw is not enough. So, in any case in which the tribunal cannot decide one way or the other which evidence to accept, where both parties’ explanations are equally (un)convincing, the party bearing the burden of proof will lose, because the requisite standard will not have been attained.”
71. On the first issue, the plaintiffs’ case was that, in or about 2017, they entered into a transaction by which the 3rd plaintiff was to take over the liabilities of the 3rd defendant with the 2nd defendant. That the 1st and 2nd plaintiffs were to purchase from the 3rd defendant certain properties that had been charged by the 2nd defendant for a consideration of Kshs.128,000,000/-. They paid a total sum of Kshs.85,000,000/- to the 1st and 2nd defendant but later realized that the subject properties were not clean. The Kisumu properties had restrictions and had an encroachment whilst the Kajiado property had a criminal angle to it. That they were entitled to rescind the transactions and have the guarantees issued for Kshs.40m and 3m, respectively cancelled.
72. The defendants denied the claim in total and contended that, the transaction was clean. The transaction was for the transfer of the Kisumu properties to the 4th defendant and that the guarantees were given with the full knowledge of the imperfections in the titles. That the restrictions in the Kisumu property had been removed and the titles transferred to the 4th defendant.
73. At the center of all this is the 1st defendant. He is an advocate of the High Court of long standing. He told the Court that he was involved all the way from 2012 to when the arrangement the subject of the suit was entered into. I think that it would be prudent to set out the chain of events before determining the issues set out above.
74. It would seem that the 6th defendant was the owner of the Kisumu properties which it had charged to the 2nd defendant for a substantial amount. It was not able to service the same and in order to bail itself out, it got into an arrangement some reason, it was agreed that the Kisumu properties be transferred to the 3rd defendant for Kshs.130,000,000/-.
75. Since the 6th defendant had no money, the 2nd defendant which held a charge over the properties ‘advanced’ the 3rd defendant Kshs.110,000,000/-, Kshs.10m was offset with a debt the 3rd 4th defendant had with the 3rd defendant. A sum of Kshs.10m remained unpaid which led to the 6th defendant to lodge a restriction on the properties in 2014 which would later raise issues.
76. The 3rd defendant was unable to service the facilities advanced for the acquisition of the Kisumu properties. It therefore entered into an arrangement for the sale and purchase
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a) The sum of Kshs. 85,000,000/- together with interest thereon at commercial rates as follows: -
i) Interest on Kshs. 30,000,000/- from 12th June 2017 until payment in full and
ii) Interest on Kshs. 55,000,000/- from 22nd May 2018 until payment in full.
b) An order directing the defendants to return to the plaintiffs the originals of the Guarantee dated 18th July 2018 for payment of Kshs. 40,000,000/- AND the Guarantee dated 18th July 2018 for payment of Kshs. 3,000,000/- both issued by the 3rd Plaintiff in favour of the 2nd Defendant.
c) A permanent injunction restraining the defendants from calling in or demanding any payment whatsoever from the Plaintiffs arising from the Guarantee dated 18th July 2018 for payment of Kshs. 40,000,000/- AND the Guarantee dated 18th July 2018 for payment of Kshs. 3,000,000/- both issued by the 3rd Plaintiff in favour of the 2nd Defendant.
d) Alternatively, to b) above, a declaration that the Guarantee dated 18th July 2018 for payment of Kshs. 40,000,000/- AND the Guarantee dated 18th July 2018 for payment of Kshs. 3,000,000/-, both issued by the 3rd Plaintiff in favour of the 2nd Defendant, are both void and unenforceable for failure of consideration.
e) Damages for misrepresentation together with interest thereon at commercial rates from the date of filing suit until payment in full;
f) Costs of this suit on full indemnity Advocate/Client basis together with interest thereon at commercial rates from the date of filing this suit until payment in full.
g) Any other remedy that this Honourable Court may deem fit to grant.
2. The plaintiffs’ case was that sometimes in June 2017, they entered into an arrangement with the 1st to 4th defendant(“the said defendants”) to discharge land parcels Kisumu/Municipality Block/12/406, 407 & 408 (hereinafter known as “the Kisumu Properties”) by the 2nd defendant and have them transferred to the 1st plaintiff’s nominated Special Purpose Vehicle, to discharge the 2nd defendant’s charge over land parcel Kajiado/EwuasoKedong/3180 (hereinafter known as “the Kajiado Property”) and Apartment Number 507 in Block 5 of Nairobi Game Park Apartments on Land Reference Number 209/166786 Langata Nairobi (hereinafter known as “the Langata Apartment”) by way of simple deposit of title and subsequent surrender those titles to the 3rd plaintiff all for a consideration of Kshs. 128,000,000/-.
3. That prior to the said agreement or arrangement, the 3rd defendant had charged the Kisumu and Kajiado Properties as well as the Langata Apartment to the 2nd defendant to secure certain banking facilities.
4. That the plaintiffs entered into the said arrangement on condition that save for the 2nd defendant’s respective charges over the aforesaid properties, all the said titles were clean and free from any encumbrance and/or adverse claims as represented to them by the 1st defendant.
5. That consequently, in good faith and believing the said titles to be clean, the 1st and 2nd plaintiff paid to the 1st defendant, a total sum of Kshs. 85,000,000/- in two instalments of Kshs. 30,000,000/- and Kshs. 55,000,000/- on 12/6/2017 and 22/5/2018, respectively. Thereafter, the 3rd plaintiff issued two guarantees dated 18/7/2018 in favour of the 2nd defendant for the aggregate balance of Kshs. 43,000,000/-.
6. Subsequently however, the plaintiffs discovered that the Kajiado Property was not clean and free from adverse claims as represented by the said defendants but that it was subject to criminal proceedings and required to be submitted in evidence to the authorities. That the mode of transfer of the Kisumu Properties as proposed and put into effect by the 1st defendant was aimed at evading payment of stamp duty and was therefore illegal.
7. That in view of the foregoing, the plaintiffs withdrew from and cancelled the arrangement with the said defendants and demanded the refund of the Kshs. 85,000,000/- paid to the 1st and 2nd defendant and the return of the original Guarantees for cancelation but they refused.
8. The 1st defendant filed an amended defence dated 16/6/2022 in which it contended that, the 1st plaintiff and 3rd defendant entered into an arrangement between themselves whereby, the 1st plaintiff was to partner with the 3rd defendant’s construction and development projects business and the two approached him to effect their instructions.
9. That the 1st plaintiff subsequently disclosed that under the proposed joint venture with the 3rd defendant, the 1st plaintiff would be the financier while the 3rd defendant would provide the land where the proposed development would be erected. That this was the Kisumu Properties and Kisumu/Municipality/Block/406 both of which were to be purchased by the 1st plaintiff or a nominated company for Kshs. 125,000,000/-.
10. That the 4th defendant was proposed as the nominated company to whom the Kisumu Properties were to be eventually transferred to. That at the time, the Kisumu Properties were registered in the name of the 3rd defendant and charged to the 2nd defendant for facilities advanced to the 3rd defendant by the 2nd defendant and thus, the purchase of the Kisumu Properties was to off-set part of the debt owed to the 2nd defendant.
11. That he disclosed to the 1st plaintiff that he had been retained by the 2nd defendant to secure its interest in the financing arrangement between the 2nd and 3rd defendant and thus, to avoid a possibility of conflict of interest he would neither advise nor act for the plaintiffs in the proposed transaction and the plaintiffs were at liberty to seek independent legal advice on how the transaction would be structured.
12. That with the full knowledge of his limited role, the 1st plaintiff paid to the 2nd defendant an initial sum of Kshs. 30,000,000/- with the balance of Kshs. 95,000,000/- to be paid within 60 days. That on the 22/5/2018, a payment of Kshs. 55,000,000/- was received from the 1st plaintiff upon ascertaining that the Kisumu Properties were non-encumbered and he subsequently advised that as a condition for the release of the balance of Kshs. 40,000,000/-, the 3rd plaintiff would require additional securities as collateral and would thus release Kshs. 43,000,000/- instead of the originally agreed Kshs. 40,000,000/- to finance the 3rd defendant’s working capital requirements.
13. He further claimed that the 3rd defendant proposed to offer additional securities in the form of the Langata and Kajiado Properties and that it was subsequently agreed that, an undertaking for Kshs. 43,000,000/- be issued to facilitate release of the titles of the Kisumu and Langata Properties. That the Kajiado Property was never part of the original arrangement between the parties and that the same was brought into the transaction at the behest of the plaintiffs despite their knowledge that the title was not free from encumbrances.
14. That on 18/7/2018, the 1st and 2nd plaintiffs’ advocates, Messrs. Ashitiva Advocates undertook that the balance of Kshs. 40,000,000/- was payable within 14 days of registration of the Transfer and the Charges. The 3rd plaintiff issued an interbank Guarantee of the same date in favour of the 2nd defendant for the sum of Kshs. 40,000,000/- in respect of the Kisumu Properties and another interbank undertaking to the 2nd defendant for Kshs. 3,000,000/- upon release of the Kajiado and Langata titles.
15. That the objective of the transaction was not to evade paying stamp duty but was structured in that manner for the plaintiffs’ benefit with the said proposal having come from the 1st plaintiff. That subsequently, exemptions for stamp duty were issued and therefore there was no impropriety in the transaction itself.
16. That the plaintiffs conduct of unilaterally withdrawing from the agreement was unconscionable and undeserving of the equitable reliefs sought.
17. The 3rd defendant filed an amended statement of defence and counterclaim dated 8/6/2022. It admitted that it charged the Kisumu properties to the 2nd defendant and that the 1st and 2nd plaintiff paid to the 1st defendant a total of Kshs. 85,000,000/-. The plaintiffs later discovered that the Kajiado Property was not clean and free from adverse claims as represented by the said defendants.
18. That the mode of transfer of the Kisumu properties as proposed and put into effect by the 1st defendant was aimed specifically at evading payment of stamp duty and was therefore illegal.
19. The 3rd defendant denied receiving Kshs. 85,000,000/- or any Guarantees from the plaintiffs and put them to strict proof of the same. It prayed that the plaintiffs’ suit be dismissed.
20. In its Counterclaim, the 3rd defendant contended that it entered into a joint construction contract with the 6th defendant for the construction of eight (8) houses on the Kisumu properties. That it was agreed that the 6th defendant was to provide titles for the Kisumu properties and mobilize Kshs. 30,000,000/- which the 3rd defendant was to utilize to begin the said construction.
21. That in consideration for the completion of the construction, the 6th defendant was to transfer to it two (2) of the eight (8) houses that were to be constructed on the Kisumu properties. That the 6th defendant concealed material facts pertaining to the size of the land available for the construction and also the ability of the 1st plaintiff to complete the construction hence breaching the joint construction contract between it and the 3rd defendant.
22. That to mitigate the aforementioned breaches, the 6th defendant proposed to it to purchase the Kisumu properties including the eight (8) houses to be constructed but it declined the proposal.
23. That in further effort to mitigate its breaches under the joint construction contract, the 6th defendant, under the guidance of the 1st – 5th defendant, proposed the registration of a charge over the Kisumu properties. It accepted and an agreement for the sale was executed for the Kisumu properties for Kshs. 130,000,000/- with the 2nd defendant financing the sale to the tune of Kshs. 110,000,000/- and the balance being offset from the debt that the 6th defendant owed to it.
24. That the 1st defendant acted for both itself and the 2nd & 6th defendant in the conveyance transaction in the pre-contract and contractual negotiations and it was therefore under a fiduciary duty and obligation to exercise reasonable professional skill which it breached. That the agreement for sale of the Kisumu properties was illegal, null and void for being tainted by unconscionable bargain antics and undue influence from the joint collusion of the defendants.
25. That in advancing to it the loan of Kshs. 110,000,000/-, the 2nd defendant breached the lending policies from commercial banks thus not entitled to recover the said sum and interest charged thereupon.
26. That the 1st, 2nd & 5th defendant perpetrated a fraud upon it by completing a payment in excess of the sum authorized by it as legal fees to the 1st defendant and further that the said defendants fraudulently and illegally orchestrated a corrupt scheme and colluded to convert a non-performing loan to a performing loan to the benefit of the 2nd, 5th and 6th defendant.
27. That it relied upon the unprofessional legal advice by the 1st defendant to enter into the agreement for sale of the Kisumu properties which advice occasioned it economic loss of Kshs. 130,000,000/-, being the loan advanced by the 2nd defendant and the money the 6th defendant owed it.
28. The 3rd defendant therefore sought the following reliefs: -
a) A declaration that the loan facility provided to the 3rd Defendant/Counterclaimant is unlawful, illegal and constitutes unjust enrichment of the 2nd, 5th & 6th Defendants and illegal interference with the economic interests of the 3rd Defendant/Counterclaimant, and the 3rd Defendant/Counterclaimant is entitled to restitution intergrum.
b) A declaration that the sale agreement between the 3rd Defendant/Counterclaimant and the 6th Defendant is unlawful, illegal, invalid, null and void for being tainted by undue influence and unconscionable bargain.
c) A declaration that the 1st Defendant is in breach of his fiduciary duty and obligation of exercising reasonable professional skill, attention and care owed to the 3rd Defendant/Counterclaimant.
d) An order for the Defendants jointly and severally relieve the 3rd Defendant/Counterclaimant of all obligations under loan reference No. 004TLAA140840001.
e) An order or the Defendants jointly and severally, to make good and pay to the 3rd Defendant/Counterclaimant the sum of Kshs. 69,712,913.36 being the sums paid by the 3rd Defendant/Counterclaimant to the 2nd Defendant, in relation to the payment of the loan reference No. 004tlaa140840001.
f) An order for the 2nd Defendant to release title document over the charged property back to the 3rd Defendant/Counterclaimant.
g) An order of specific performance compelling the 2nd Defendant to execute a Discharge of Charge in respect of the Charge registered in its favour over the charged property.
29. In defence to the 3rd defendant’s counterclaim, the 1st defendant relied on his amended defence dated 16/6/2022. He contended that the claim was fatally defective for noncompliance with the provisions of section 4 (1) (a) and 28 of the Limitation of Actions Act. That the 3rd defendant lacked the locus standi to institute the proceedings as against him for want of privity of contract.
30. That it had no instructions, express or otherwise, to act for any party other than the 2nd defendant in the creation of charges and as such, it owed no fiduciary or any duty of care to any other party other than the 2nd defendant. That it was a stranger to the 3rd defendant’s allegations of undue influence, collusion, unconscionable bargain, breach and fraud.
31. The 2nd and 5th defendant filed a joint statement of defence to the 3rd defendant’s counterclaim dated 10/3/2021. They contended that they were not parties to the agreement between the 3rd and 6th defendant and were thus not bound by the terms thereof.
32. That the 5th defendant never guided the 6th defendant to have the 3rd defendant purchase the Kisumu properties through financing by the 2nd defendant. That the 3rd defendant was at all times aware of the right to retain an advocate of its choice to act for it in the transaction and it was therefore estopped from alleging unconscionable bargain and bad legal representation.
33. That they obtained all the requisite information required and carried out the necessary due diligence before advancing any facilities to the 3rd defendant. That they were strangers to the particulars of loss counterclaimed by the 3rd defendant. That the advance of a loan of Kshs. 100 million to the 3rd defendant by the 2nd defendant could not be deemed to have occasioned economic prejudice.
34. That the Counterclaim was statute barred by the mandatory terms of section 4 (1) (a) and section 28 of the Limitation of Actions Act.
35. The 6th defendant filed a statement of defence dated 23/3/2022 to the 3rd defendant’s Counterclaim. It denied the allegations therein and contended that the counterclaim was statute barred under section 4 (1) (a) and 28 of the Limitation of Actions Act as the purported cause of action against it related to events that occurred in 2013.
36. It stated that it executed in 2013, an agreement for sale of the Kisumu properties to the 3rd defendant for a total sale price of Kshs. 130,000,000/-. The 3rd defendant only paid Kshs. 110,000,000/- with Kshs. 10,000,000/- being offset from an earlier debt. There was a balance of Kshs. 10,000,000/- that the 3rd defendant had not settled despite the 6th defendant performing its part of the agreement and transferring the said properties.
37. At the trial, the plaintiff called one witness, Yogesh Pattni who testified as Pw1. He adopted his witness statement dated 7/6/2019 as his evidence in chief in which he reiterated the averments in the plaint. He produced the bundle of documents dated 10/5/2022 as PExh1.
38. In cross-examination, he stated that he was informed by the 6th defendant in October, 2028 that there was a restrictive encumbrance on the Kisumu properties. That it is the 1st defendant who suggested the 4th defendant to act as the Special Purpose Vehicle and in which he, the plaintiff was made a director. That following the incorporation of the 4th defendant, the properties were transferred to it.
39. That prior to the issuance of the Guarantees by the 3rd plaintiff, the 1st defendant effected transfers for him and the 2nd plaintiff to become shareholders in the 4th defendant. That he did not instruct the firm of Ashitiva & Company Advocates but rather the same was done by the 3rd plaintiff.
40. That the plaintiffs had an issue with the Langata and Kajiado properties and that had a search been carried out, the defect in the title for the Kajiado property could have been detected. That it was the firm of Ashitiva Advocates who pointed out the said defect.
41. In re-examination, he clarified that the firm of Ashitiva Advocates never acted for him but for the 3rd plaintiff. That the Kisumu properties had been transferred to the 4th defendant wherein the 3rd defendant was the majority shareholder.
42. On his part, the 1st defendant called two witnesses in support of its defence against the plaintiffs’ case as well as the Counterclaim of the 3rd defendant. D1W1, Mohamed Ali Kasamali Madhani adopted his statement dated 29/3/2022 as his evidence in chief and produced the 1st defendant’s list and bundle of documents of even date as DExh1. The evidence mirrored its defence.
43. In cross-examination, he told the Court that the 1st and 2nd plaintiff approached him and informed him that they wanted to enter into a construction project with the 3rd defendant. That the transaction was to have a transfer of properties to a subsidiary of the 3rd defendant free of stamp duty and that is the model he took which was not illegal as he applied for stamp duty exemption and got the same. That the parties were free to carry out independent searches on the properties.
44. That to facilitate the transfer and discharge of the properties, there were undertakings given to pay the sum of Kshs. 43,000,000/-. That however, despite the properties being transferred and charged to Victoria Commercial Bank, the Bank did not honour its undertaking to pay the sum of Kshs. 43,000,000/-.
45. That the Langata property was not part of the initial purchase of the Kisumu properties for Kshs. 125,000,000/-. That he had known the 1st plaintiff as a friend for a long time prior to the transaction. That when the 1st plaintiff approached him, he advised him to open a Special Purpose Vehicle (SPV) and did not charge any fees. That his interest was to ensure that the 2nd defendant was paid.
46. That he offered the 1st plaintiff the 4th defendant, which was a shell company he had incorporated and whose shareholders were himself and his wife. That he and his wife subsequently transferred the shares in that company to the 1st and 2nd plaintiff and the 3rd defendant.
47. That he was not aware of the caution on the Kajiado property prior to being informed of the same by Ashitiva Advocates. That his representation was only limited role limited to undertaking discharges on behalf of the 2nd defendant and further that he advised on how the tax exemption was to be obtained.
48. In re-examination, Mr. Madhani stated that the 1st plaintiff must have been aware of the restrictions over the Kisumu properties prior to giving the Guarantees and that as at the date of the Guarantees, the restrictions did not exist having been lifted on the 7/3/2018.
49. In cross-examination on the 3rd defendant’s Counterclaim, Mr. Madhani testified that the 2nd defendant instructed him to prepare both the charge and transfer. That he did not do any due diligence as the instructions came from the bank and thus there was no duty on his part to do it. He denied unduly influencing the 5th defendant to take the facility.
50. D1W2 Nelson Ihachi Ashitiva an advocate at Ashitiva Advocates LLP testified that the plaintiffs were his clients and that the 1st plaintiff was the C.E.O of the 3rd plaintiff. That his firm represented the 1st and 2nd plaintiff as directors of the 3rd defendant in the transaction subject of this suit.
51. That his firm gave an undertaking of Kshs. 40million on the 18/1/2018 but that this undertaking did not cover the Langata and Kajiado properties. That the 3rd plaintiff did not remit the Kshs. 40 million. That the transaction has not been completed as the Kshs. 40 million has not been paid.
52. That after discovering that the Kajiado property was a subject in a criminal case, his firm returned the title to the 1st defendant. That it was agreed between the parties that the matter be held in abeyance. Subsequently however, the 1st defendant recalled the titles to the Langata and Kajiado properties and as such the guarantee for Kshs. 3 million was not payable.
53. The 2nd Defendant called one witness in support of its case. D2W1, Francis Kariuki adopted his witness statement dated 1/4/2022 as his evidence in chief and produced the bundle of documents dated 31/8/2021, 1/4/2022 and 1/7/2022 as D2Exh1, 2 & 3, respectively.
54. He testified that the Guarantees issued by the plaintiffs were issued whilst they were well aware of the issues involving the Kajiado property. That a search over the Kisumu properties by the firm of Ashitiva Advocates showed that a restriction had been placed over the said properties.
55. That the securities were registered in favour of the 4th defendant and charged in favour of the 2nd defendant. That the intention of the transaction was the purchase of the Kisumu properties only. That D1W1 only acted for the 2nd defendant in handling documents. That the bank undertook due diligence before loaning the 3rd defendant Kshs. 110,000,000/-.
56. The 3rd defendant called two witness in support of its case. D3W1, Harish Patel adopted his amended witness statement dated 29/6/2022 as his evidence in chief and produced the 3rd defendant’s bundle and supplementary bundle of documents of the even date as D3Exh1 and 2, respectively. He was a director of the 3rd defendant.
57. He first met the 6th defendant in 2012 and they got into a project where he was to pump in Kshs. 70 million and the 6th defendant Kshs. 30 million. However, they fell into financial problem in 2013 by which time, Mr. Madhani (D1W1) was not yet in the picture.
58. That there was an encroachment on the Kisumu properties but the 6th defendant kept telling him that everything was alright. That he did not do any due diligence as being a contractor, he followed the 6th defendant’s instructions. That by the time he went to see D1W1, he had finalized with the 6th defendant on the project to be undertaken on the Kisumu properties.
59. That he had no option but to purchase the Kisumu properties as he had already pumped money into the project. For that reason, he had no option but to do whatever the 6th defendant proposed. That D1W1 came into the picture when they approached the 2nd defendant where they were informed he, D1W1, was the bank’s lawyer.
60. He testified that he met the 1st plaintiff in 2018 and introduced him to the Kisumu properties. That the 1st plaintiff pumped in Kshs. 127 – 128 million but he, 1st plaintiff did not visit the properties but rather relied on the documents produced. That he and the 1st plaintiff became joint partners in the Kisumu properties.
61. That D1W1 was professionally negligent in his dealings and thus accused him of fraud. That both D1W1 and the 2nd defendant were supposed to undertake due diligence. That the 2nd defendant knew about the encroachment on the Kisumu properties. That he did not have the financial ability for the bank to advance a loan of Kshs. 100 million. That the Kajiado property was registered in his wife’s name however there was no agreement between his wife and the 3rd plaintiff over the said property.
62. In re-examination, D3W1 told the Court that he met Mr. Madhani prior to entering into agreement with the 6th defendant but that he realized that there was encroachment on the Kisumu properties after purchasing them from the 6th defendant.
63. The 6th defendant called one witness in support of its case. D6W1, Kiran Shah. He adopted his witness statement dated 22/4/2022 as his evidence in chief and produced the 6th defendant’s bundle of documents dated 31/3/2022 as D6Exh1. It was his testimony that as at 13/3/2013, the 6th defendant knew of the encroachment on the Kisumu properties and that they informed the 3rd defendant of the same.
64. That it bought the Kisumu properties on or about 2011 or 2012 but that at the time they did not know of the encroachment until after the purchase though they did not do any survey prior to the purchase.
65. That as at 23/10/2018, the 6th defendant still maintained its claim on the Kisumu properties and that the caveat was removed without the consent of the 6th defendant. He admitted that by the letter dated 19/12/2018, the 6th Defendant stated that it had no claim over titles of the Kisumu properties. It was his testimony that he did not know if D1W1 was the lawyer when all these dealings were taking place.
66. In re-examination, D6W1 testified that the restriction over the Kisumu properties was because the 3rd defendant had not fully paid the purchase price. That as at the time of lifting the restriction in 2018, the 6th defendant had sold the properties to the 3rd defendant.
67. The 4th defendant did not file any pleadings nor did it participate in these proceedings.
68. The Court has carefully considered the pleadings, the evidence and the parties’ respective submissions on record and the authorities relied on. The issues for the determinations are: -
i) Whether the arrangement between the plaintiffs and the 1st to 4th defendant is enforceable?
ii) Whether the plaintiffs were entitled to repudiate that arrangement?
iii) Whether the 3rd defendant’s Counterclaim is sustainable;
iv) What reliefs, if any should be granted; and
v) Costs.
69. The general rule is that, he who alleges must prove. Section 107(1) of the Evidence Act provides that: -
“Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.”
70. In Palace Investment Ltd v Geoffrey Kariuki Mwenda & Another [2015] eKLR, the Court stated that: -
“The burden of proof is placed upon the appellant and is to be discharged on a balance of probabilities. Denning J. in Miller –vs Minister of Pensions [1947] 2 ALL ER 372 discussing the burden of proof had this to say: - “That degree is well settled. It must carry a reasonable degree of probability, but not so high as is required in a criminal case. If the evidence is such that the tribunal can say: ‘We think it more probable than not’, the burden is discharged, but, if the probabilities are equal, it is not. Thus, proof on a balance or preponderance of probabilities means a win, however narrow. A draw is not enough. So, in any case in which the tribunal cannot decide one way or the other which evidence to accept, where both parties’ explanations are equally (un)convincing, the party bearing the burden of proof will lose, because the requisite standard will not have been attained.”
71. On the first issue, the plaintiffs’ case was that, in or about 2017, they entered into a transaction by which the 3rd plaintiff was to take over the liabilities of the 3rd defendant with the 2nd defendant. That the 1st and 2nd plaintiffs were to purchase from the 3rd defendant certain properties that had been charged by the 2nd defendant for a consideration of Kshs.128,000,000/-. They paid a total sum of Kshs.85,000,000/- to the 1st and 2nd defendant but later realized that the subject properties were not clean. The Kisumu properties had restrictions and had an encroachment whilst the Kajiado property had a criminal angle to it. That they were entitled to rescind the transactions and have the guarantees issued for Kshs.40m and 3m, respectively cancelled.
72. The defendants denied the claim in total and contended that, the transaction was clean. The transaction was for the transfer of the Kisumu properties to the 4th defendant and that the guarantees were given with the full knowledge of the imperfections in the titles. That the restrictions in the Kisumu property had been removed and the titles transferred to the 4th defendant.
73. At the center of all this is the 1st defendant. He is an advocate of the High Court of long standing. He told the Court that he was involved all the way from 2012 to when the arrangement the subject of the suit was entered into. I think that it would be prudent to set out the chain of events before determining the issues set out above.
74. It would seem that the 6th defendant was the owner of the Kisumu properties which it had charged to the 2nd defendant for a substantial amount. It was not able to service the same and in order to bail itself out, it got into an arrangement some reason, it was agreed that the Kisumu properties be transferred to the 3rd defendant for Kshs.130,000,000/-.
75. Since the 6th defendant had no money, the 2nd defendant which held a charge over the properties ‘advanced’ the 3rd defendant Kshs.110,000,000/-, Kshs.10m was offset with a debt the 3rd 4th defendant had with the 3rd defendant. A sum of Kshs.10m remained unpaid which led to the 6th defendant to lodge a restriction on the properties in 2014 which would later raise issues.
76. The 3rd defendant was unable to service the facilities advanced for the acquisition of the Kisumu properties. It therefore entered into an arrangement for the sale and purchase
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