The Court of Appeal has rejected an appeal by I&M Bank to halt the sale of a building housing the Dusit D2 Hotel due to a failed transaction. The appellate court concluded its ruling on Friday, affirming that Synergy Industrial Credit Limited, as the decree-holder, had lawfully executed the attachment, rendering I&M Bank’s and Cape Holdings Limited’s appeals irrelevant.
Justices Patrick Kiage, Lydia Achode, and Mwaniki Gachoka dismissed the appeals in full and awarded costs to Synergy Industrial Credit Limited. This decision echoed a previous ruling by Justices Kathurima M’Inoti, Fatuma Sichale, and Mohamed, who deemed Cape’s review application moot.
Justice Kiage highlighted that placing Cape Holdings under administration by the bank appeared strategic and coincided suspiciously with legal defeats in higher courts. He criticized the bank’s actions against a financially stable company and noted that Cape Holdings used surplus funds for personal property construction, despite being solvent and meeting loan obligations with rental income.
“I am thus persuaded, on a balance of probabilities, in fact more, that the statutory management was executed for the sole purpose of aiding Cape Holdings to escape execution,” the judge said.
Justice Kiage further stated that it was a rather ingenious and cynical exploitation of statute to perpetuate an injustice against a decree holder.
Justices Achode and Gachoka concurred with Justice Kiage’s finding.
“My inevitable answer on the question whether the Bank did sufficiently establish its legal interest in the suit property is in the negative,” Justice Kiage added.
Justice Alfred Mabeya was affirmed not at fault in his findings that Cape Holdings and I&M Bank acted in collusion to shield Cape Holdings from meeting its lawful obligations under a court-confirmed decree. This decree had been upheld by superior courts and conclusively by the Supreme Court.
The judge noted, “Given the legal impediments and the lack of good faith in its creation, I do not believe the debenture was capable of establishing rights and priority in favor of the Bank that could supersede the rights of the judgment creditor, Synergy.”
Synergy Industrial Credit Limited, seeking approximately Sh5.5 billion from Cape Holdings following a failed sale, had advertised the property last year. However, I&M Bank had obtained a court order blocking the sale, citing its charge over the property due to a Sh2.82 billion loan.
Cape Holdings was placed under administration on October 12, 2021, but the administration was terminated on June 9, 2023, due to non-performance by the administrator.
William Kabaiku, representing the bank, argued that the registered debenture granted the bank a legal interest in the property, establishing a priority right over Cape Holdings’ assets, including the disputed property. Kabaiku contended that this priority should prevent the property from being sold.
Senior counsel Allen Gichuhi, representing Cape Holdings, supported the bank’s position, asserting that as a secured creditor under the debenture, I&M Bank held superior legal rights over Cape Holdings’ properties.
Ahmednasir Abdullahi, representing Synergy Credit, opposed Cape Holdings’ efforts to halt the execution proceedings, stating that Cape Holdings had attempted multiple times to obstruct the sale.
Justice Kiage noted discrepancies, including that the suit property was not listed in the debenture schedule.
“The effect is that it has no bearing whatsoever to the suit property over which no legal charge was ever created by the Bank. The said property remained free of encumbrances. Absent such charge, I would think there is substance in Synergy’s contention that it is false and misleading for the Bank to refer to the suit property as the charged property in its submissions,” the Judge said.
