It has been a grueling 25-year legal battle between President Uhuru Kenyatta’s two cousins, on the one hand and the Kenya Commercial Bank (KCB), on the other, that was finally extinguished by the Court of Appeal two weeks ago.
Politician Ngengi Muigai and his younger brother, a former Kenya Army Captain Kung’u Muigai, through their firm Benjoh Amalgamated Ltd, had applied for a loan of Sh18,6 million in 1989 through KCB to start a flower export business.
The United States of America International Development (USAid) had offered funds by way of loans to Kenyans under the Rural Projects Enterprise Programme to be administered by KCB and other financial institutions.
Benjoh secured the loan facility by legal charges over two properties in Nyandarua county but upon request by KCB for further security and guarantee, a fresh charge was created on the family’s 443-acre Muiri Coffee Estate situated in Ruiru, Kiambu county.
However, the proposed horticulture project flopped and the bank threatened to auction the properties in 1992. Benjoh and Muiri sued KCB seeking to stop the auction and claiming Sh13.125 million which it alleged it had lost in the process.
The parties reportedly compromised the suit through a consent order recorded before Justice Erastus Githinji on May 4, 1992 which Benjoh admitted its indebtedness to KCB and undertook to repay the loan by July 31,1992. In the disputed agreement, KCB was at liberty to sell off the property in case of further default and the legal battle started in earnest when it advertised the property for sale scheduled for January 23, 1993.
In the latest duel handled by Appellate Judges Roselyne Nambuye, Asike Makhandia and Kathurima M’Inoti, Benjoh protested that the bank unlawfully auctioned the family asset instead of two pieces of land in Nyandarua county that was initially offered as security.
The firm, through lawyers Kyalo Mbobu and Marete Kithinji, argued that former High Court Judge Joyce Khaminwa, was justified to direct KCB on July 6, 2009 to furnish a final statement of accounts before enforcing its statutory power of sale to recover the loan.
Similarly, the firm disowned a purported consent between the parties dated May 4, 1992, which allowed the bank to sell off the properties upon failure by the borrower to repay the money on the basis that the documents relating to the alleged mutual agreement were non-existent.
Lawyer Philip Nyachoti, for KCB said the commercial dispute involving more than 14 suits had been concluded in favour of the financial institutions and there were no special circumstances to justify any further judicial intervention.
Lawyer Issa Mansour, for Bidii Kenya Ltd, which bought Muiri Coffee Estate for Sh70 million in September 2007, argued that its legal rights as an innocent third-party purchaser were likely to be prejudiced and compromised.
In its decision, the three-judge bench said the late Justice Khaminwa should have allowed the applications by KCB and Bidii Kenya to strike out the suit since the contentious matters had been the subject of previous litigation. “Benjoh cannot, therefore, argue that KCB exercised its right of sale over the wrong property.
The property had been charged to secure the loan and was sold upon default. In our view, it was within KCB’s right to choose upon which property to exercise its rights over,” the court held. The appellate Judges said Benjoh could no longer be allowed to continue its onslaught against KCB and Bidii Kenya over issues that had already been conclusively determined.
This amounted to a travesty of justice against the two parties, they said. The Supreme Court, in May last year, shut the doors for both Benjoh and Muiri Coffee Estate to reverse the decision made on March 10, 1998, by retired Appellate judges Richard Otieno Kwach, Philip Tunoi and Samuel Bosire giving the greenlight to a contentious court-sanctioned consent with KCB allowing the sale of the property following failure by the two firms to settle their indebtedness.
The five-member Supreme Court, presided over by retired Chief Justice Willy Mutunga, ruled that it could not re-open the case that was concluded by the final court before the enactment of the new Constitution Further, the legality of the contentious “consent” could no longer be entertained, Justices Mutunga, Kalpana Rawal, Mohamed Ibrahim, Jackton Ojwang’ and Njoki Ndung’u said in their 47-page ruling.
Appeal judge Erastus Githinji, while sitting in the High Court on October 31, 1997, had set aside the purported consent between Benjoh and Muiri on one hand and KCB on the other, dated May 4, 1992, giving them a leeway to settle the outstanding balance by July 31, 1992 or negotiate sale of the expansive coffee estate through private treaty.
Benjoh’s stand was that the “consent” was fraudulent since the two firms had not sanctioned the formal agreement and never instructed their advocate, the late DM Kinyua, to appoint another advocate to act for them. KCB, through the late lawyer John Ougo, had insisted that the disputed loan had never been settled to the bank’s satisfaction and the auction of the property was inevitable.
Court of Appeal judges GBM Kariuki, Daniel Musinga and William Ouko said the second-highest court in the land had no power to re-open cases that were concluded before the promulgation of the 2010 Constitution. However, Appeal Judges Patrick Kiage, Agnes Murgor and Jamila Mohamed had allowed the aggrieved firms to petition the Supreme Court on November 7, 2014.