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The High Court in Nairobi has ruled that banks can still pursue borrowers to recover any outstanding debts even after auctioning them. This ruling was made in a court case in which a borrower was seeking to stop a commercial bank from demanding outstanding loan balance amounting to millions.
According to the customer, the borrowed amount had been settled through the sale of securities that were valued at Sh27 million. The customer in this case was identified as N.T Express Laundromat Ltd and its director Mourine Wanjiku. The bank involved was identified as the Mayfair Bank.
In the High Court ruling, Justice Linus Poghon Kassan determined that the the customer did not prove allegations of misrepresentation or procedural irregularities in a 2020 consent agreement on the repayment of the debt.
“It is difficult to fathom that either the appellants did not read what they were consenting to or failed to understand the same… The terms were clear and unambiguous,” Justice Kassan ruled.
The appeal followed the decision of a lower court that gone in favour of the bank. That decision had come after the bank sued N.T Express Laundromat Ltd and its director Mourine Wanjiku in March 2020 over a Sh9.8 million defaulted loan plus interest.
The bank had presented the court with a consent that had detailed the terms of the loan and the repayments. This consent was ratified by the lower court in January 2021.
In their appeal, though, N.T Express Laundromat Ltd and Wanjiku had claimed that they were never served with court papers. They further alleged that the bank had sold off their collateral which included assets that they valued at Sh27 million in May 2021.
According to the N.T Express Laundromat Ltd and Wanjiku, the sale had left a surplus of Sh17 million, which they claimed was adequate enough to payoff the outstanding debt. As such, they claimed that they did not owe the bank any money.
At the same time, N.T Express Laundromat Ltd and Wanjiku claimed that the consent between them and the bank had been entered into under misrepresentation because they had assumed and believed that it was a bank variation form and not a binding court order.
Justice Kassan in the court ruling dismissed all the claims by the appellant, ruling in favour of the bank, and entrenching commercial lenders ability to go after borrowers for outstanding amounts even after an auction has taken place to recover debt.
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