NCBA Bank has received court approval to recover a 13-year-old debt of Sh25.5 million from Aberdair Aviation Limited, and its director, Adrian Peter Wilcox.
In his ruling, Justice Benjamin Musyoki allowed the lender to recover $197,426 (Sh25 million at current exchange rates) from the company and Mr Wilcox jointly, as well as a further Sh37,000 from the company alone.
The bank, in its claim, had sought recovery of $236,986 (Sh30.6 million), but the court said there was no explanation on how the figure was arrived at.
“The loan account shows a balance of $197,426.19, and the plaintiff (bank) has not explained how it arrived at the pleaded figure of $236,986.44. There is no basis for the award of the said sum, and in my view the plaintiff has proved $197,426.19,” said Justice Musyoki.
The cause of action arose from alleged failure by the aviation firm and its CEO to settle a construction loan facility advanced to the company in October 2010 and September 2011 by NIC Bank Limited. Years later, NIC Bank and CBA Bank amalgamated to form NCBA.
Through its legal counsel, Carol Chepkoech, NCBA told the court that the company was given a construction loan of $275,000 (Sh35.51 million) in October 2010, which was subsequently increased to $325,000 (Sh41.97 million) in September 2011.
At the time of borrowing, the foreign exchange rate of the US dollar against the Kenyan currency was Sh96. Besides the failure to repay on time, the loan also increased due to the Kenyan currency depreciating against the dollar.
The loan facilities were secured by a charge over the company’s property and a corporate guarantee given by Mr Wilcox in November 2011.
The defendants (Aberdair and Mr Wilcox) admitted that the loans were advanced but argued that Equity Bank had taken them over in 2015, after which the securities had been discharged when the NCBA had acknowledged receipt of the full settlement of the liabilities.
They stated that they understood that Equity Bank to have paid all the loan facilities given by the NCBA, and that they had continued to service the loan at Equity Bank.
They also argued that NCBA was precluded from asking for repayment, having delayed for five years before demanding settlement of the loan facilities.
However, the court ruled that the bank’s failure to demand payment of the debt during this period did not mean that the debt had been extinguished.
The court also found that the undertakings by Equity did not mention the construction loans.
“The defendants claimed that they continued paying for the facilities taken over by Equity Bank, but did not adduce evidence to that effect. Had the defendants produced a statement of their accounts with Equity Bank, this court would have easily ascertained the extent of the financial obligations taken over by the said bank,” said the judge.
The court held that a borrower does not get relieved of the debts by virtue of a discharge of collateral only. It said there must be an unequivocal demonstration that the debt was paid in full or settled.
Upon checking the statement of account for the loan, the court noted that the firm continued repaying the loan for almost a year after the takeover of the other loan facilities by Equity Bank.
“The last credit in the statement was on October 5, 2016. If indeed the defendants believed or were made to believe that the debt had been settled, they would not have continued repaying the loan, and the first defendant (Aberdair) would have made steps to close the current account, which is also shown to have been receiving credit transfers and reversals up to May 2017,” stated the judge.
He added that the Equity Bank undertaking made it clear that the purpose of the discharge of collateral it was calling for was to enable it to grant banking facilities to Mr Wilcox.
“I take judicial notice that discharging the property from loans granted to one of the defendants only would not have freed the property for use by the Equity Bank, which was taking over the facilities,” said Justice Musyoki.
