Court dismisses plea to stop Great Wall Garden units auction in Sh2b case
National
By
Kamau Muthoni
| Apr 27, 2024
Hundreds of families living in 100 houses sold by Erdemann Property Limited along Athi River are now at the mercy of Kenya Commercial Bank (KCB).
This is after the Court of Appeal dismissed an application by the developer seeking to stop the lender from auctioning the units in Great Wall Gardens to recover Sh1.9 billion unpaid loan.
Justices Gatembu Kairu, Jessie Lesiit and Ngenye Macharia unanimously found that Erdemann had not proved that KCB would be unable to repay it in the event it wins its case.
They were of the view that although the developer had claimed that third-party buyers had already occupied the units, none of them was a party to the case.
"We note, as the learned Judge of the High Court did, that the said third parties are not parties to this dispute. What is not in contention is that the suit property is charged to the respondent. There is no suggestion that the respondent would not be able to compensate the applicant, we are not persuaded that the appeal will be rendered nugatory," the bench headed by Justice Kairu ruled.
Erdemann had initially moved to the High Court. However, Justice Dola Chepkwony declined to stop the auction on December 15 last year.
Aggrieved, the developer escalated the case.
Before the Court of Appeal, its director Zeyun Yang explained that it offered KCB 100 units for a Sh 1.3 billion to construct Great Wall Gardens 1 houses.
He said that the impending auction would affect at least 100 purchasers and another 281 persons who also bought the units through off-plan arrangements.
Erdemann claimed that the contract was spoilt by a mistake as the units ought not to have been offered as security as they had already been sold.
In response, KCB stated that it offered Sh700 million to Erdemann to finance its working capital while Sh600 million was to facilitate the take-over of facilities from the Credit Bank Limited.
The lender said that in 2018, it gave Erdemann another Sh540 million loan on condition that the unsold 100 units would be used as security.
According to the bank, the rent collected would be used to recover the loan.
KCB stated that the sale was deliberate and was meant to beat the agreement.
The auction of the property has already been advertised in the dailies, making the owners jittery and prompting Erdemann to share an update of the case with them and the court proceedings so far.
Sometime in August 2017, when the developer was putting up the 2,190 units on L.R. No. 27317/1, it applied for a facility of Sh1.3 billion to aid the construction. KCB Bank responded positively on September 27, 2017, agreeing to offer the said amount.
Erdemann Property Limited offered River Estate project in Ngara, erected on title Non L.R. 202852 L.R. 209/22016, which is partially developed and now valued at Sh5 billion as security.
Additionally, the developer offered a Deed of Assignment of project receivables of the Great Wall Gardens arising from the sale of phase II, which involved 100 apartment units on L.R. 27317/2 in Athi River. Erdemann went ahead and constructed 600 units on the said land and had 100 attached as security as agreed.
According to the court documents, the rain started beating Erdemann Property Limited when the COVID-19 pandemic struck in 2020.
"The Appellant was forced to take radical measures, including closing down all its sites and reducing the presence of employees in various offices. The economy was heavily disrupted, and the uptake of the apartment units drastically slowed down," its lawyer Prof Tom Ojienda stated.
KCB in its case argued that Erdemann breached the terms of the Deed of Assignment by diverting all the money it received to another bank account.
It asserted that this was against the express terms of the contract.
The lender said that the loan has increased to Sh 2 billion.