Golden Services Organization & 3 others v Sidian Bank Limited [2020] KEELC 2007 (KLR)
The bottom line
#A Kenyan court ruled that a bank's letters of offer did not guarantee a Kshs.50 million loan, so the borrowers lost their Kshs.142 million claim and must pay costs.
What this practically means
#Executive summary
#Key legal issues
#Whether the supplemental letters of offer dated 18/1/2016 and 25/1/2016 bound the defendant to lend Kshs.50 million
The letters did not constitute an offer or approval to advance a loan of Kshs.50 million; the charge over the Msambweni property merely secured existing facilities and possible future borrowing subject to approval
The court examined both letters. The letter of 18/1/2016 made no mention of Kshs.50 million. In the letter of 25/1/2016 the Kshs.50 million figure appeared only under the new security clause, not as a LIMIT like limits 1, 2 and 3. The accompanying guarantee and board resolution also made no mention of a Kshs.50 million loan. No document indicated that registration of the charge would trigger disbursement of any amount, and the court could not infer a promise to lend.
Whether estoppel could found the claim that the bank was bound to lend
Estoppel could not apply because the facts were contradictory - the plaintiffs admitted only about Kshs.29 million of the Kshs.50 million would have been available after offsetting existing debt
PW1 and PW2 admitted that had Kshs.50 million been advanced, part would have offset the existing debt of about Kshs.20-23 million, leaving only approximately Kshs.29 million available. The defendant also led evidence that requested amounts were not always approved, citing a request for Kshs.15 million where only Kshs.10 million was disbursed. This contradiction defeated the estoppel invoked by the plaintiffs.
Whether the claimed loss of Kshs.142,806,841 was proved
The loss was not proved; the auditor's computations were speculative, assumed a Kshs.50 million disbursement, lacked workings for the available Kshs.29 million, and some heads (loss of grants, uncredited deposit interest) were not pleaded
PW2's report assumed the full Kshs.50 million was available, provided no workings on interest for the approximately Kshs.29 million actually available, and admitted no evidence of intending buyers or refused grant applications. The Women Enterprise Fund letter showed a SACCO loan refusal, not a lost grant, and confirmed the plaintiffs' default. The default-rate loss and grant/donation claims were speculative; the uncredited banking interest claim was unpleased special damages.
Whether the overdraft of Kshs.2 million was unauthorised
The overdraft was utilised and later the plaintiffs requested its conversion into a term loan, thereby acquiescing; they are estopped from denying liability for the interest accrued
The plaintiffs' letter of 10/11/2015 requested conversion of the overdraft into a term loan without describing it as unauthorised, and PW1 admitted the bank never forced them to withdraw the money and that the funds were utilised. The denial of the board resolution was uncorroborated. By their conduct the plaintiffs acquiesced to the transaction and cannot escape responsibility to pay the accrued interest.
Whether the defendant sabotaged the plaintiff's business
The sabotage claim was speculative and contradicted the plaintiffs' own evidence of a good banking relationship since 2007
DW1 conceded the defendant did micro-lending to groups, but the plaintiffs never showed the defendant started micro-lending after them, nor identified any client diverted by the defendant. The allegation contradicted their evidence that the relationship was good and their portfolio grew from Kshs.500,000 to Kshs.15 million. No client was named as having been taken by the bank.
Legal principles established
#- Lending is a contract that must be supported by documents; courts cannot infer a promise to lend, as that would amount to rewriting the contract between the parties
- A claim for loss of anticipated interest on an unadvanced loan is a claim for special damages which must be specifically pleaded and specifically proved
- He who alleges must prove, per Section 107 of the Evidence Act
- Where the debt secured remains unpaid, a permanent injunction against realization of the securities cannot issue
Court orders
#- 1.Plaintiffs' case under prayers (a), (b) and (d) of the amended plaint dismissed
- 2.Prayer (c) succeeds partially - Kshs.31,140 awarded to the plaintiffs as uncredited deposits with interest at court rates from date of filing of the suit
- 3.Remainder of the claimed sum of Kshs.142,775,701 dismissed
- 4.Costs of the suit awarded to the defendant
- Jurisdiction invoked
- Original civil jurisdiction of the Environment and Land Court over charged land and securities
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (2)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Paul Jesse Mungatia v K-Rep Bank Limited (Rebranded) & 2 others [2021] KEELC 3002 (KLR)[2021] KEELC 3002 (KLR)24 May 2021
- Damaris Wanjiku Gitonga v Dorcas Wanjiru Kimani & 3 others [2017] KEELC 81 (KLR)[2017] KEELC 81 (KLR)9 Oct 2017followed
Cite this brief
#Cite this brief
Caselaw, "Golden Services Organization & 3 others v Sidian Bank Limited [2020] KEELC 2007 (KLR)", Case Analysis (2020). Civil Case No. 315 of 2017. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2020/2007/eng@2020-06-04
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.