The Court of Appeal has rejected a bid to stop Co-operative Bank from pursuing 10 disputed homes linked to a Sh1.39 billion debt owed by a real estate development company, Loneview Developers Ltd.
A three-judge bench dismissed Mathew Musau’s application for an injunction, saying his intended appeal would not be rendered worthless if protection was denied.
He moved to the Court of Appeal after the Environment and Land Court in July 2024 refused to protect the 10 units at Loneview Estate he claimed as his, and he wanted the appellate court to preserve those properties while he pursued an appeal.
The dispute centres on a parcel of land in Syokimau, LR No. 12916, registered to Loneview Developers and charged to Co-op Bank for Sh1 billion. The bank told the court that Sh1.39 billion was outstanding as at October 26, 2023.
Mr Musau claims Suraya Property Group Limited surrendered the 10 homes to him under a settlement deal after it failed to complete payment for land previously owned by his family.
The property was initially registered as LR No. 7149/24 in the name of Sebastian Kathilu, Mr Musau’s father. He told the court that Peter Muraya of Suraya approached him on July 24, 2008, with a proposal to develop maisonettes on the land through a joint venture.
The arrangement later changed from a joint venture into an outright sale, with Mr Musau and his father each expected to receive Sh45 million. After payment problems, the parties entered a September 12, 2015 settlement under which Mr Musau took 10 units. The housing project is located in Syokimau, Machakos County.
He says the units were to be discharged from the bank’s security so that he could assume full ownership. Co-op Bank rejected that position and issued notices to tenants occupying the homes.
Co-op Bank says it was not a party to the arrangements between Mr Musau and Suraya and that those agreements cannot defeat its rights as financier. It argued that the arrangements would in any event be a nullity in the face of the original and subsequent mortgage finance facilities it granted to Loneview, the developer.
“A copy of the Certificate of Title Grant No. I.R. 130518 in respect to land reference 12916 (the suit property) shows that it is registered in the name of Loneview Developers Limited,” the appellate judges said.
The legal dispute started in 2023 after Mr Musau moved to the Environment and Land Court in Machakos, seeking orders to restrain the bank from interfering with, dealing with or entering the 10 units he claimed belonged to him.
The bank’s security arose from financing provided to Loneview for the development. The earlier Environment and Land Court ruling records a Sh500 million further mortgage facility granted in January 2014 and an escrow agreement in the bank’s favour, with apartment sale proceeds intended to help redeem the mortgage.
In July 2024, the Environment and Land Court dismissed Mr Musau’s application, finding that he had not established a strong case. It also held that the bank could exercise its statutory powers after Loneview defaulted.
Mr Musau then sought protection from the Court of Appeal pending his intended appeal. The appellate judges said such an application required him to show that his appeal was arguable and would be rendered nugatory without an injunction.
“Even if we were to find that the intended appeal is arguable, still the motion is for refusal as it does not surmount the second limb. Yet at the core of Mr Musau’s case, as can be gleaned from the agreement of September 12, 2015, is that it entered into the arrangement so as to secure ‘compensation’ from Suraya,” the judges said.
They noted that his claim against Suraya was monetary in nature and, by extension, of similar character against the bank should it be adjudged that he has a legitimate claim against the bank.
Co-op Bank argued it could meet any award made against it if Mr Musau eventually succeeded. The court noted that he had not disputed the bank’s stated financial capacity.
“In the circumstances, the intended appeal by Mr Musau is unlikely to be rendered nugatory even if the injunction sought is not granted,” the judges ruled, dismissing his application.
