Equity, CBA lose Sh490m in title deed fraud racket

Commercial Bank of Africa, now known as NCBA #ticker:NIC, and Equity Bank #ticker:EQTY stand to lose nearly Sh500 million through a title deed fraud racket after the Court of Appeal ruled that Co-operative Bank of Kenya #ticker:COOP has the right to a property used to acquire loans from the three banks.

Equity Bank, Commercial Bank of Africa (CBA) and Co-operative Bank of Kenya have been laying claim on the single property in Riruta, which is registered in different names and was used to secure over Sh450 million in loans.

Three Court of Appeal judges ruled that CBA — which has been fighting for the title deed after Equity gave up the fight — had failed to prove that it had a right to the property when it sought orders stopping its auction by Co-operative Bank. The court noted that the banks appear to have been caught up in an intricate web spun by a fraudulent syndicate and hatched by the lenders’ mutual customers.

“Similarly, in the absence of relevant documents, it cannot be said that the appellant (CBA) demonstrated on prima facie basis that the titles held by Wardpa and Kinjunje was parallel to the title held by Patrick Njuguna Kang’ethe,” Justices Erastus Githinji, Fatuma Sichale and Otieno Odek said.

This now clears the way for Co-operative Bank to sell the property with Equity and CBA (now NCBA) left with losses that currently stand at Sh490 million inclusive of interest. Equity lost the fight for the property at the High Court and opted not to pursue the appeal, which was shepherded by CBA.

The suit brought to the fore a title deed racket that has seen lenders lose billions of shillings on non-existent security.

Judges said that the circumstances surrounding the dispute between the three banks were fraught with fraud, which neither lender may be strictly responsible for as they all believed they held a first charge on the Riruta plot that measures approximately 0.2 hectares.

CBA moved to the Court of Appeal after High Court judge Samson Okong’o allowed Co-operative Bank to sell the land to recover its money.

Evidence presented in court showed that on April 8, 2010, Patrick Njuguna Kang’ethe, Edward Njuguna and George James Kireru Kang’ethe, all trading as Patrick Kang’ethe & Sons, went to Co-op Bank and borrowed about Sh166 million. As 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.

However, 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; Edward, George and Gladys Njeri Kang’ethe. They went with it to CBA on March 24, 2013 and borrowed about Sh100 million and a legal charge was also registered against the document. The loan has since grown to Sh172.48 million. Through its lawyer William Kabaiku, CBA said appropriate searches were carried out and there was no evidence of any other previous charge on the title. The bank, he said, still retains the original documents.

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 Kang’ethe. They went to Equity on December 9, 2014 and took a Sh200 million loan. A legal charge was registered against the title on January 23, 2015. The loan has since risen to Sh318.8 million. Like CBA, Equity said it had carried out searches and found no evidence of prior issues with the title deed. It is also in possession of the original documents.

The court 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 court added that it was also apparent that without the complicity of the office of the Chief Land Registrar, the transactions on Plot No 2289 would not have taken the trajectory they did.

In May 20, 2016, Co-op Bank instructed Leaky Auctioneers to advertise the plot for sale to recover the amount due in excess of Sh195 million. The family tried to block the sale by seeking an injunction in a case filed in Mombasa, but the matter was dismissed.

The sale was readvertised and that is when Equity and CBA realised that it was the same security that had been given to them separately that was being sold.