Court Orders Bank to Pay a Kenyan Couple Sh234 Million for Fraudulently Selling Their Shares

The High Court in Nairobi has ordered Absa Bank to pay a couple Sh234 million as compensation for fraudulently selling their shares.

Justice Alfred Mabeya directed the bank to pay Stanley Mwangi Gachugu and his wife Bilha Waruguru Mwangi Sh234,188,156 being the current market value of the 127,797 shares held in 11 companies, Nation reports.

The judge issued the order in enforcing a judgment dated October 4th, 2019, where the court determined that the lender, formerly Barclays Bank of Kenya, sold the shares and directed for valuation of the same.

The court heard that Mwangi and his wife deposited their share certificates for various companies in the bank in 1991 as security for loans.

In 1990 and 1991, they used a current business account with the lender at its Moi Avenue branch to obtain overdraft facilities.  They deposited with the lender share certificates and title deeds as security.

With respect to the share certificates, the couple signed blank transfer forms which were left in the custody of the bank.

The share certificate were indicated s 1926 + 385 Kenya Breweries Ltd, 373 Brooke Bond Kenya Ltd, 532 +63 E.A.P. & L. Company Ltd, 4,2834 +31257 ICDC Investments Co.Ltd, 700 Standard Chartered Bank, 5,500 Kenya Finance Corporation, 4,410 Rift Valley Bottlers Ltd (unquoted) and 700 ICDC shares, according to court documents.

Others were 1,560 shares for B.A.T (K) Ltd, 1,250 shares, 1,150 Barclays Bank, 100 Barclays Bank, 2,500 KFC, 4,000 KFC shares, and 28,557 shares for ICDC.

The couple said they fully paid off the overdraft facility but they did not request the release of their share certificates or titles because the same were safe at the bank. They also planned to use the securities later to obtain further facility from the bank.

In 1998, they realized they were no longer receiving dividends for their shares, prompting them to visit the bank where they were shocked to discover that the lender only had in its custody one share certificate of NIC Bank and two title deeds.

“Thereafter for about four years, the bank tossed me left, right and center and I did not make any headway regarding our shares,” Mwangi said.

Mwangi later discovered the bank had fraudulently sold their shares and managed to obtain share transfer forms in respect to their shares of ICDC Bank and Diamond Trust Bank.

On requesting for bank statements, the bank only supplied statements for January to September 1993.  

In a letter dated April 3rd, 2013, the bank confirmed that the couple did not have outstanding liability with them.

Mwangi also obtained a letter from Diamond Trust Bank dated March 30th, 2015 showing his shares which had been deposited with Barclays Bank had been sold.

He lodged a complaint with the Capital Market Authority, which then communicated with the defendant. In its response, the bank said it did not have records of the couple’s shares as they had been destroyed after the lapse of seven years’ period.

On his part, Mwangi said he did not go for his shares after the facility was paid off, adding that the shares were an investment for their old age.

He explained that he and his wife started their businesses in 1958 when they raised their capital of Sh10.  They started by selling roasted and boiled meat at a verandah in Kisumu and their other businesses grew from that humble beginning. 

He narrated how the fraudulent act of the defendant left them destitute and he was unable to pay medical bills for his wife, who was ailing. The court ruled in favor of the couple.