Court backs HF in Tigoni asset loan row with developer

In its decision, the court dismissed Echuka’s argument that the bank, listed on the Nairobi Securities Exchange, had recovered more than Sh174 million—far exceeding the original Sh76 million facility—through auctions, private sales, and cash payments.

The borrower claimed that the bank had recouped Sh93.8 million through the public auction of 17 units and a further Sh80 million through the sale of six units by private treaty and other cash payments, totalling Sh174 million.

However, the court found most of these alleged payments lacked supporting evidence.

“The plaintiff has failed to prove the payment of Sh174 million,” the court stated, acknowledging only Sh93.8 million recovered from a public auction of 17 units as verified.

The judge ruled that without proof of full repayment or double recovery, the bank’s statutory power of sale remained valid and could not be blocked merely because the borrower disputed the loan balance.

The dispute stemmed from a 2013 construction loan meant to finance a residential development in Tigoni, Limuru.

Secured by charges on three parcels of land, the project—marketed as ‘Echuka Country Estates’—faced financial difficulties, rendering the facility non-performing by 2016.

A subsequent restructuring agreement recognised an outstanding balance of Sh104 million with an annual interest rate of 17 percent. Echuka is committed to subdividing the land into 42 plots to facilitate individual sales.

However, Echuka later accused the bank and its lawyers of delaying the subdivision, stalling sales, and unfairly inflating interest rates.

The company insisted the lender had recovered over Sh174 million—enough to extinguish the debt—through auctions, private sales, and direct payments.

The bank disputed this claim, citing a pivotal 2020 settlement deed that halted an earlier auction.

Under this agreement, adopted as a court order, Echuka admitted an outstanding debt of Sh180.9 million. The bank offered to accept Sh123.8 million if Echuka adhered to a strict repayment schedule—a condition the borrower failed to meet.

When Echuka defaulted again and sought court protection against another sale attempt, the court upheld the 2020 settlement’s validity.

The judge emphasised that consent orders carry contractual weight and can only be overturned due to fraud or mistake—neither of which Echuka proved.

“Having benefited from suspending the auction by admitting the debt, it would be unconscionable to now claim the amount was lower,” the court ruled.

Regarding alleged overpayments, the court found Echuka’s Sh80 million claim unsupported.

While the bank confirmed receiving Sh93.8 million from auctioning 17 units in April 2021, Echuka could not provide documentation for additional payments.

During cross-examination, Echuka’s witness admitted to a lack of proof. “In a commercial dispute of this magnitude, the court cannot rely on mere assertions,” the judges noted.

The court also rejected Echuka’s bid to cancel Sh59 million in accrued interest, stating that the restructuring agreement clearly placed subdivision responsibilities on the borrower.

“A court cannot rewrite contracts,” the judge affirmed, ruling the 17 per cent interest rate lawful and fair.

Echuka’s challenge to the bank’s sale rights under the Land Act also failed. The court clarified that disputes over exact amounts owed do not prevent sales once default is confirmed. Claims of potential undervaluation were deemed speculative.

“He who seeks equity must come with clean hands,” the court concluded, criticizing Echuka’s repeated litigation tactics to delay repayment without settling uncontested debts.

The case was dismissed with costs awarded to Housing Finance, freeing the bank to proceed with selling the remaining charged properties.

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