Bank ordered to pay client for unlawful auction threat

A High Court judge has ordered a bank to pay Sh1.5 million in damages to a lawyer who was confronted with an illegal auction threat to force him to repay his mortgage.

Mr Justice George Odunga on Monday ordered KCB to pay the sum to Mr Peter Mathenge Gitonga, a Nairobi-based lawyer, to settle a dispute emanating from a Sh2.9 million 10-year mortgage that he took in March 2000.

In his judgment that was published online on Friday by the Kenya Law Reports, Justice Odunga found KCB to have acted in “a high-handed manner and placed Mr Mathenge in jeopardy by its unlawful conduct” when it wanted him to complete paying the mortgage after he had defaulted.

The court had heard that after getting the mortgage, Mr Mathenge bought property in Nairobi’s South C. 

The bank said that he made regular repayments until 2004 when he showed tendencies of defaulting.

This prompted several demand letters that led to the bank sending him a statutory notice in 2005 demanding that he pays up the balance.

Mr Mathenge said he paid the money dutifully and only defaulted in November and December 2007 because he was running for a parliamentary seat.

Because of the default, a manager at the bank called him and he paid Sh245,000.

Shortly afterwards, Mr Mathenge said he was informed by a friend that the property had been put up for auction by private treaty.

He wrote a protest letter to KCB and was told to pay Sh167,000 to cater for repayments of January and February 2008.

To his shock, however, KCB told him to repay the remaining Sh1.4 million in full or the property be auctioned.

In 2008, KCB told Baseline Auctioneers to auction the property.

ILLEGAL MEANS

It was advertised for sale in January 2008 with the proposed date for sale being February 15, that year.

But before the auction happened, Mr Mathenge managed to pay the Sh1.4 million and settle the money he owed KCB.

Mr Mathenge would later escalate matters when he sought the advice of the Interest Rates Advisory Centre (Irac).

Irac told him he had been overcharged for the mortgage by Sh1.5 million.

He then filed a case in 2010, seeking a declaration that KCB had overcharged him and that he be repaid the amount plus general damages.

The lawyer, however, lost the argument of being overcharged. 

But the judge said that from the manner in which the threat to auction property was made, Mr Mathenge needed compensation.

He had not been given the legally stipulated required minimum of three months before he could pay up.

“It is clear that KCB arm-twisted the plaintiff into settling the sum in question by threatening the plaintiff with the unlawful exercise of statutory power. That action was clearly unlawful.”

He added: “The whole process of realisation of the charged property was unlawful and by insisting on the recovery thereof KCB acted with due disregard to the law hence improperly compelled Mr Mathenge to pay the outstanding amount.”