Njoroge v Ngugi & another (Civil Case 337 of 2010) [2024] KEHC 17277 (KLR) (16 February 2024) (Judgment)
Neutral citation:
[2024] KEHC 17277 (KLR)
Republic of Kenya
Civil Case 337 of 2010
HI Ong'udi, J
February 16, 2024
Between
Ngugi Gichure Njoroge
Plaintiff
and
Loice Gathoni Ngugi
1st Defendant
Equity Bank Limited
2nd Defendant
Judgment
1.The plaintiff’s plaint dated 6th December, 2010 prays for judgement against the defendants for several orders including;i.A declaration that there was no contract between the plaintiff and the defendants for advancement of any loan or for repayment of any money whether as a principal debtor or a guarantor and no liability attaches upon the plaintiff to repay any money.ii.A declaration that the proposed sale of the plaintiff's land known as Lari/Kirenga/1072 in purported exercise of the charge’s power of sale is fraudulent, illegal and irregular for non-compliance with the law.iii.An order of prohibitory injunction, both in the interim and at the final stage to restrain the defendant, their employees, agents or anyone acting under their instructions from selling the parcel of land known as Lari/Kirenga/1072 whether by public auction or by private treaty.
2.The plaintiff who is the 1st defendant’s father averred that on or around 10th March, 2010 at the 2nd defendant's branch in Nakuru, the 2nd defendant entered into a loan advancement agreement with the 1st defendant for a sum of Kshs. 8,200,000/=. The said loan was to be utilized for conversion of an overdrawn account into a term loan. Further, the said facility was to be secured by personal guarantees of one Mary Nduta Njau and the plaintiff.
3.He averred that the 1st defendant acted fraudulently in collusion with officers of the 2nd defendant and prepared a charge document. That the 1st defendant detached one leaf of the said document and took it to him who is elderly and misrepresented that she wanted to start a business and thus fraudulently procured execution of the said leaf from him. Thereafter the said charge document was witnessed by the firm of M/s Gakinya & Co. Advocates in his absence which was contrary to the provisions of the Registered Land Act.
4.The plaintiff averred further that the said charge was later fraudulently registered on his parcel of land known as Lari/Kirenga/1072. He reported the matter to the police and the 1st defendant was arrested and charged with criminal charges. Pursuant to the fraudulent charge, the 2nd defendant advertised his property for sale scheduled for 8th December 2010. The said sale was neither preceded by the 3 months redemption notice nor a 45 days’ notice required under the Auctioneers Act. He prayed for protection from the wrongful sale of his property.
5.The 1st defendant filed her statement of defence dated 3rd August 2015 where she denied in toto the contents of paragraphs 4 and 5 of the plaint. She stated that sometime in May 2009, she had opened an account with the 2nd defendant and 4 months later she discovered several debt transfers being transacted in her account amounting to Kshs. 9,000,000/=. She raised concerns with the 2nd defendant’s credit manager Mr. Amos Ndungu who assured her that the matter would be handled but asked her to provide security for the said amount in the meantime.
6.She stated further that the officials of the 2nd defendant pressurized her to provide security over the debt and later on coerced her into an agreement over the said funds. Due to the said pressure she used the Plaintiff’s title to property number Lari/Kirenga/1072 to create a fake title which was registered as security for the debt. She stated that the plaintiff did not act as a guarantor to the agreement nor sign any document in relation to the said transaction and that his signature was forged by a third party.
7.The 1st defendant went on to state that she only executed the charge document in favour of the 2nd defendant due to pressure and she was never told of its contents. She averred that there was no loan agreement between her and the 2nd defendant without security and that the plaintiff’s property was never used to secure any loan in her favour. She admitted the contents of paragraphs 7 and 8 of the plaint save for the particulars of fraud on her part. She went on to admit the contents of paragraphs 9, 10, 11, 12, 13 and 14 of the plaint. She prayed that the prayers sought by the plaintiff in the plaint be granted save for the costs of the suit which should be borne by the 2nd defendant. She further urged the court to dismiss the plaintiff’s suit against her with costs.
8.The 2nd defendant filed its statement of defence dated 1st September 2014. The contents of paragraph 2,3,4 and 14 of the plaint were admitted while those of paragraphs 5,6,7,8.11,12 and 13 were denied by it. It further admitted the contents of paragraph 9 on having advertised the subject property for sale. The bank issued the requisite 3 months statutory notice as well as the auctioneers 45 days notification of sale contrary to the plaintiff’s claim and was therefore put to strict proof.
9.The 2nd defendant admitted to having a charge relating to one Mary Nduta Njau but denied the other claims made under paragraph 10 of the plaint and the plaintiff was put to strict proof thereof. It urged the court to dismiss the plaint with costs.
10.During the hearing, the plaintiff testified as PW1 and adopted his statement as evidence. He testified that the 1st defendant stole the title for his land known as Lari/Kirenga/1072 and made a fake one. He later saw in the newspaper that the said land was to be auctioned and yet he had not signed any document to get a loan. On being referred to the defendants list of documents he acknowledged seeing his name and signature which he said did not belong to him.
11.The plaintiff testified further that he had his original title in court and the same was produced as PExhibit 1. He denied having taken any loan or having gone to advocate Gakinya or knowing him. He added that he did not know where the 1st defendant had gone to. In cross examination, he admitted that he had not shown an alternative specimen signature and he had not enjoined the registrar in nor reported the matter to the police. Additionally, in re-examination he testified that the bank had not shown him the fake title.
12.DW1 Peter Waititu the 2nd defendant’s credit manager, adopted his statement dated 1st September 2014 as his evidence. He testified that the 1st defendant borrowed their money in 2010 after following due process but the said loan was not repaid. He added that the 1st defendant provided security and the land registry had not complained of the title being fake. According to him the bank had never been summoned by the police and he was surprised that there was another similar title deed.
13.In cross examination he confirmed that he dealt with the plaintiff when he appeared before him and that the charge document did not have his signature. He also confirmed the plaintiff’s not appearing before advocate Gakinya when page 46 of the charge was signed. He stated that he was familiar with the procedure of charging a title and that the original charge was presented to the Lands registry where it is charged and flanked. He confirmed that neither the original title nor copy that was charged was in court.
14.In re-examination he testified that advocate Gakinya witnessed the charge on behalf of the plaintiff and that the bank was not aware of any other title deed as it was holding the original one.
15.Parties were directed to file their written submissions which they did save for, the 1st defendant.
The Plaintiff’s submissions
16.The plaintiff’s submissions were filed on 22nd August 2023 by the firm of Githui & Company Advocates. The issue raised for determination by counsel was whether there was a valid contract for indemnity and guarantee between the plaintiff and the 2nd respondent. Counsel submitted that the one leaf document plucked from the charge was witnessed by Gakinya & Company Advocate in the absence of the plaintiff.
17.According to him the same had been indicated under paragraph 10 of the 1st defendant’s statement of defence. Additionally, that under paragraph 6 of the said statement of defence the 1st defendant admitted having used the plaintiff’s title to property number Lari/Kirenga/1072 to create a fake title which was registered as security for the debt.
18.Counsel submitted that the averments in the 1st defendant’s defence and the deposition in her affidavit were admission of issues raised by the plaintiff. She added that the said admission of facts acted as a waiver of proof of facts in issue. She placed reliance on section 61 of the Evidence Act and Sarkar’s Law of Evidence 16th Edition 2007.
19.Counsel submitted further that the 2nd defendant had the evidential burden to prove that the plaintiff’s title was charged but chose to withhold the same. Counsel invited the court to find that there was no charge which was registered against the genuine title and the certificate of title purportedly charged by the 2nd defendant was a forgery.
20.The courts attention was drawn to section 112 of Evidence Act and the case of Nesco Services Limited v CM Construction [EA] Limited [2021] eKLR where the court cited with approval the case of Kenya Akiba Micro Financing Limited v Ezekiel Chebii & 14 others [2012] eKLR, where the court held as follows:
21.Lastly, counsel submitted that the evidence adduced was that the 1st defendant was an outright fraudster and she admitted the same. Further, that the guarantee and indemnity were never executed by the plaintiff in the presence of an advocate. She added that the 2nd defendant was either a participant in the fraudulent scheme or a beneficiary of a fraudulent process.
The 2nd Defendant’s submissions
22.The submissions by the 2nd defendant were filed on 26th November 2023 by the firm of Muturi Kamande Advocates. Counsel submitted that the borrower (plaintiff) and the 1st defendant breached the terms upon which the subject loan was granted. Therefore, the 2nd defendant was within its statutory rights to realize the subject land in recovery of the loan. Further, it was counsel’s submission that the plaintiff had not denied signing the charge documents.
23.Counsel further submitted that the 2nd defendant was holding the original title to the subject property since the property was charged in March 2010. According to counsel, the plaintiff’s claim in the plaint did not exhibit any cause of action against the 2nd defendant.
24.In conclusion, he submitted that the plaintiff’s claim of fraud was an afterthought aimed at blocking the 2nd defendant from realizing the subject security and no evidence had been adduced on the same. Additionally, that the plaintiff had not produced any evidence to show that he was not the one who signed the charge document and the deed of guarantee and indemnity.
25.Counsel urged the court to find that the documents executed by the plaintiff were done regularly and legally, thus creating a binding and valid contract between the plaintiff and the 2nd defendant. He prayed for dismissal of the plaintiff’s suit with costs.
26.Besides filing a defence the 1st defendant did not participate in the rest of the proceedings.
Analysis and Determination
27.Upon analyzing the facts, evidence and the submissions tendered by the parties in this case, it is my view that one issue arises for determination by this court which is whether the plaintiff is entitled to the orders sought in the plaint.
28.The plaintiff in his plaint seeks among other orders, that there be a declaration by this court that there was no contract between him and the defendants for the advancement of any loan or for repayment of any money. This is neither as a principle debtor or guarantor and that no liability attaches upon him to repay any money.
29.The blacks law dictionary defines a contract as follows;
30.In the case of William Muthee Muthami vs Bank of Baroda [2014] eKLR the Court of Appeal observed as follows;
31.In the book “The Law of Kenya 3rd Edition” Tudor Jackson at page 149 observed as follows on the essentials of a valid contract;
32.It is the plaintiff’s case that there is no contract between him and the 2nd defendant for reasons that he never executed any deed or instrument of guarantee which would bind him to make good the loan advanced to the 1st defendant in the event of default. The plaintiff argued that there was no privity of contract between him and the 2nd defendant as there was no offer or acceptance and that no loan had ever been advanced to him as consideration to create a liability over his land.
33.He further argued that the charge registered upon his land parcel number Lari/Kirenga/1072 was procured by fraud and misrepresentation of facts and that the 1st defendant was facing criminal charges.
34.The 1st respondent contends that she had opened an account with the 2nd defendant and 4 months later she discovered that several debt transfers were being transacted in her account amounting to Kshs. 9,000,000/=. Due to pressure by the 2nd defendant she used the plaintiff’s title deed for property number Lari/Kiranga 1072 to create a fake title which was registered as security for debt.
35.The 2nd defendant contends that the 1st defendant had applied for a loan facility from it and as security for the said loan, she presented the plaintiff as her guarantor who in turn offered title number Lari/Kirenga/1072 as security. It was argued further that the plaintiff thereafter signed a guarantee and indemnity in favour of the 2nd defendant together with the charge.
36.In view of the provisions of the law and authority cited above it is clear that a contract is an agreement between two or more parties for obligations enforceable or recognizable in law. Further, for that contract to be valid there has to be an offer, acceptance, legal intention, consideration, capacity and legality.
37.In the instant case the 2nd defendant acknowledges that it is the 1st defendant who approached it for an advancement of a loan facility. During hearing its witness DW1 testified that they had followed due process and the 1st defendant had provided security for the said loan. In cross examination he confirmed that the charge documents did not have the plaintiff’s signature and he did not appear before advocate Mr. Gakinya when page 45 was being signed and that the deed of guarantee was not signed at the foot.
38.He also confirmed that the said page 45 of the charge had not been signed by the plaintiff and that he did not have the original title deed that was charged or its copy or the green card before court. He stated that an advocate by the name Thiongo had prepared the charge documents but he could not be called to testify at that time.
39.In view of the foregoing, it is this court’s view that the only contract that existed was one between the 1st defendant and the 2nd defendant. The 2nd defendant received security documents from the 1st defendant for purposes of securing the loan but what it did not realize was that she was a con-woman. She had forged the plaintiff’s title and what she presented was fake. This court has had the opportunity of perusing Nakuru Chief Magistrate’s Criminal Case No. 5538 of 2010, where the 1st defendant was charged and convicted of forgery of the bank charge. She was sentenced to two (2) years imprisonment on 18th January, 2017. There is no evidence of any appeal having been filed, against the judgment.
40.The plaintiff during hearing testified that he was in possession of the original title deed for land known as Lari/Kirenga/1072 which is the subject property of this suit. The same was produced as exhibit PExhibit 1. As it stands his title has not been challenged and the 2nd defendant did not adduce any documents to the contrary at the hearing. It did not avail the title deed in its possession.
41.In the case of Agricultural Finance Corporation v Lengetia Ltd [1985] KLR 765, quoting with approval Halsbury’s Laws of England, 3rd Edition, Volume 8, paragraph 110, Hancox, JA, reiterated that:
42.Consequently, this court finds that there was no contract between the plaintiff and the 2nd defendant for advancement of any loan or for repayment of any money, whether as a principal debtor or a guarantor and no liability attaches upon him to repay any money.
43.The upshot is that the plaintiff’s case has merit and is allowed. The following orders shall issue:i.The proposed sale of the plaintiff’s land known as Lari/Kirenga/1072 is declared null and void.ii.The 2nd defendant, its employees, agents or anyone acting under their instruction is prohibited from selling the parcel of land known as Lari/Kirenga/1072 whether by public auction or by private treaty.iii.The Land Registrar of Kiambu is directed to discharge any encumbrances whatsoever registered on the land L.R Lari/Kirenga/1072 with immediate effect.iv.PEXB.1 to be released to the Petitioner.v.Costs to the plaintiff.Orders accordingly.
DELIVERED VIRTUALLY, DATED AND SIGNED THIS 16TH DAY OF FEBRUARY, 2024 IN OPEN COURT AT NAKURUH. I. ONG'UDIJUDGE