Equity Bank is set to auction 30 vehicles belonging to Nairobi businessman Patrick Nthiga Mvungu over a Sh302 million debt. This is after the lender received the greenlight from the High Court to auction the vehicles in a bid to recover the outstanding amount from the loan that was advanced to Mvungu’s company Paddy Kenya.
In the court hearing, a manager with the bank who was identified as Joel Mulumi Musyoka said that Equity had advanced various credit facilities to Mvungu’s company. These included asset finance loans, a term loan, guarantee loans, and an overdraft facility.
These loans were secured using various securities that included property, personal guarantees, indemnities, and chattels mortgage on motor vehicles. Musyoka informed the High Court that all facilities were amalgamated into a revolving uncleared effects facility, a revolving bank guarantees facility, and a term loan facility. They all amounted to a total of Sh395 million.
However, Mvungu’s company failed to honour its repayment obligations, and in June 2019, it sent a letter to the bank proposing to pay Sh2 million immediately followed by monthly payments of Sh1.5 million.
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Mvungu’s company further offered its property that is located along North Airport Road in Nairobi which was charged to Equity Bank as security. The company argued that it was facing business challenges.
During the hearing of the case, the company told the High Court that if got a buyer for the property through a private treaty. The sale was at Sh100 million and was approved by Equity. However, after conclusion of the sale, the bank still pursued Mvungu.
The company contested this saying that the agreement with the bank was that the sale of the property at Sh100 million would be in full settlement of the loan. Mvungu on his part argued that he would not have sold the property at a loss if it would not have cleared the loan in full.
However, Equity countered this by arguing that it went for the motor vehicles and trailers after the sale of the land failed to fully settle the outstanding debt. The bank told the court that the debt stood at SH398 million at the time of filing the counterclaim in July 2022, but the court ruled that the amount was much lower due to subsequent credits in the accounts.
In the ruling, High Court judge Justice Benjamin Musyoki ruled that Mvungu and his wife Joyce Wangui had guaranteed the repayment of the outstanding debt and were bound the terms and conditions.
“[Mvungu and Wangui] properly signed the guarantee and indemnity dated August 16, 2017 and they remain so bound. A guarantor remains bound to a debt they guarantee until the amount guaranteed is fully paid and settled,” Justice Musyoki ruled.
He further dismissed a claim by the couple that they had signed the loan documents as directors of Paddy Kenya and not as guarantors of the loan.
“They signed the guarantee and indemnity dated August 16, 2017, despite Paddy’s witness alleging that they signed as directors and not as guarantors. The guarantee and indemnity are drawn in English, a language the witness fluently used in his testimony and which he did not say that he did not understand. I do not buy the argument that they did not know that they were signing a guarantee,” Justice Musyoki ruled.
