- Justices Patrick Kiage, Lydia Achode and Mwaniki Gachoka dismissed the appeals in their entirety, with costs to Synergy Industrial Credit Limited.
- The Court of Appeal had previously come to the same conclusion when Justice Kathurima M’Inoti, Fatuma Sichale and Mohamed had ruled that the review application by Cape was moot.
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The Court of Appeal has dismissed an appeal by the I&M bank seeking to stop the sale of a building where the Dusit D2 Hotel sits, over a botched deal.
The appellate court concluded on Friday, ruling that the execution by the decree-holder, Synergy Industrial Credit Limited, was completed upon attachment resulting in the appeals by I&M Bank and Cape Holdings Limited being moot.
Justices Patrick Kiage, Lydia Achode and Mwaniki Gachoka dismissed the appeals in their entirety, with costs to Synergy Industrial Credit Limited.
The Court of Appeal had previously come to the same conclusion when Justice Kathurima M’Inoti, Fatuma Sichale and Mohamed had ruled that the review application by Cape was moot.
The Court ruled the placing of Cape Holdings under administration by the lender was a well-calculated move resorted to by the bank "in thinly veiled collusion as one last ditch attempt to aid Cape Holdings in its spirited quest to evade execution of the long-outstanding decree, once all room for legal stratagems had been exhausted."
Justice Kiage noted that the administration was activated under the most suspicious timing, immediately the Supreme Court dismissed yet another appeal and placed "the final nail on the coffin of legal maneuvering".
He said the bank took drastic action against a company that was not in default and whose accounts indicated that it was so solvent that rental income exceeded monthly loan repayments.
He added that the bank was aware that the company used its surplus funds for the construction of their personal properties.
"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.
He stated that Justice Alfred Mabeya was not at fault in making findings that Cape Holdings and the Bank acted in bad faith, in concert and collusion with the sole purpose of shielding the former from meeting its lawful obligations under a lawful decree repeatedly confirmed by superior courts of the country and with finality by Supreme Court.
The Judge stated that "in light of the legal impediments and fatal infirmity and given the want of good faith in its creation, I do not think that the debenture was capable of creating rights and priority in favour of the Bank that could defeat the rights of the judgment creditor that Synergy was."
Synergy, which is demanding about Sh5.5 billion from Cape Holdings after a botched sale, had advertised the complex last year but I&M Bank blocked the sale through a court order arguing that the building is charged to the lender over a loan of Sh2.82 billion.
Cape Holdings Limited had been put under administration on October 12, 2021, but was terminated on June 9, 2023, due to non-performance by the administrator.
The bank through lawyer William Kabaiku submitted that from the duly registered debenture, it acquired a legal interest in the subject property.
Consequently, a first priority right was created in favor of the Bank over the company's assets, overriding any other party’s rights, including those of Synergy.
He said the bank lawfully placed Cape Holdings under administration and in view of the fact that when the debenture crystallised the subject property had not been sold, the Bank had priority over the said property and was entitled to prevent it from being sold.
Kabaiku said that by allowing Synergy to continue with execution proceedings defeated the essence of administration and distracted the administrator's attention from his statutory duties.
Senior counsel Allen Gichuhi for Cape Holdings supported the bank's argument submitting that as a secured creditor by virtue of the debenture, I&M had a superseding legal interest in Cape Holdings properties, including the suit property.
Synergy Credit through senior counsel Ahmednasir Abdullahi opposed the application saying it yet another attempt by Cape Holdings to stop the execution.
Ahmednasir pointed out that Synergy gave instructions to Moran Auctioneers who advertised the suit property for sale by public auction, on February 8, 2022.
He said Cape Holdings filed an appeal in the High Court against the deputy registrar’s action but by then, the execution was complete.
Justice Kiage said a schedule to the debenture does not list the suit property.
"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.