Equity, Co-op and CBA caught up in title deed theft racket

The Court of Appeal is set to hear a title deed theft racket case that has left three banks fighting over a single property in Riruta that is registered in different names and was used to secure over Sh450 million loans.

In the case described by judges as interesting but also perplexing, Equity Bank #ticker:EQTY, Commercial Bank of Africa (CBA) and Cooperative Bank of Kenya #ticker:COOP, are laying claim on the land.

The judges noted that the banks appear to have been caught up in an intricate web of a fraudulent syndicate, hatched by their mutual customers.

“In the process, the banks are staring at a possibility of losing hundreds of millions of shillings of customer funds. The syndicate, we are told, has also hit other banks in the country, and it is perplexing that none of the perpetrators has been subjected to the criminal process. Perhaps it is a measure of how high the country has soared in the corruption index,”said justices Philip Waki, Mohamed Warsame and Patrick Kiage.

They said the circumstances surrounding the dispute between the three banks are fraught with fraud, which neither lender may be strictly responsible for because they all believed they held a first charge on the plot in Riruta measuring approximately 0.2 hectares.

CBA moved to the Court of Appeal after High Court judge Samson Okong’o allowed Cooperative to sell the land to recover its money. The judges granted Co-op the injunction pending the hearing of the case.

Evidence presented to court showed that on April 8, 2010, Mr Patrick Njuguna, Mr Edward Njuguna and Mr George James Kireru Kangethe, all trading as Patrick Kangethe & Sons, went to Co-op and borrowed about Sh166 million. As a security, they deposited an original title, which was registered in the name of Patrick on August 29, 1997.

A legal first charge was duly registered against the title on September 10, 2010, and there were no other obstacles. The bank still has in its possession, the original documents.

On October 23, 2012, another original title with the same plot number registered in the name of Wardpa Holdings Ltd (WHL) was obtained by its directors. They are Mr Edward, George and Ms Gladys Njeri Kangethe.

They went to CBA on March 24, 2013 and borrowed about Sh100 million on the security of that title and a legal charge was also registered against the document.

CBA through its lawyer William Kabaiku, said appropriate searches were carried out and there was no evidence of any other previous charge on the title. The bank, he said, retains the original documents.

About a year later, in May, 2014, yet another original title was obtained in the name of Kinjunje Gardens Ltd (KGL) whose directors are Patrick and his wife Margaret Wambui Kangethe.

They went to Equity on December 9, 2014 and borrowed a Sh200 million loan, a legal charge was registered against the title on January 23, 2015. Like CBA, Equity said it carried out searches and found no evidence of prior issues with the title. They also retain the original documents.

Justice Okongo noted that all the loans that were advanced on the security of plot no.2289 were advanced to people who knew each other or were related and were working together in pursuit of the loans.

The judge added that it was also apparent that without the complicity of the office of the Chief Land Registrar, the transactions on plot 2289 would not have taken the trajectory they did.

In May 20, 2016, Co-op bank instructed Leaky Auctioneers to advertise plot 2289 for sale, to recover the amount due in excess of Sh195 million.

READ: INDEPTH: Land fraudsters wreak havoc on Kenyan families

The family tried to block the sale by seeking an injunction in case filed in Mombasa, but the matter was dismissed. The sale was re-advertised and that is when Equity and CBA realized that it was the security given to them that was being sold.

Equity filed suit in the Environment and Land Court against KGL and its two directors, Co-op bank, Leakey's auctioneers, and the Chief Land Registrar.

CBA also filed a different case against WHL, and one of the directors (Patrick), Co-op bank, Leakey's auctioneers and the Chief Land Registrar. They both asserted that the intention by Co- op bank to sell the property was illegal, null and void since they never gave their consent for creation of any charge on the property besides theirs.

The two banks also claimed that the charge held by Co-op bank was on a fake and parallel Title. After hearing the case, Justice Okongo found no reason to stop Co-op bank from exercising its statutory power of sale and set it free to proceed with the auction.

The Judge reasoned that if any charges were created on fraudulent fake titles, then those were the charges created by CBA and Equity since the charge in favour of Co-op bank was first in time. The other titles, he said, did not exist when Co-op bank registered the Charge and it could not therefore be parallel to the other Charges.

The decision forced CBA to move to the Court of Appeal arguing that the intended appeal raised serious issues on the exercise of the trial court's discretion.

Mr Kabaiku said CBA will argue that the finding that the Charge of Co-op bank was "first in time" was erroneous since all the three charges were on different original Titles on the same parcel of land which were fraudulently obtained.

The lawyer said CBA was as much a victim of the syndicate as Co-op bank and Equity and all should have an equal opportunity of mitigating the possible loss.

The court said there is no clarity on how the three original titles were obtained or how consents were obtained from the local Land Control Board for validation of the charges.

According to the judges, the principle of “first in time” may well be called to question in the circumstances. “Furthermore, the huge amount of money given out in loans does not belong to the banks but to their customers. There is, in our view, considerable interest by a large bank customer base, if not general public interest, and therefore the need for circumspection,” they added.