High court.
A business and technology solutions firm has failed in its bid to quash a demand of over Sh730 million sought by Bank of Africa for loans borrowed over a decade ago.
High Court judge Alfred Mabeya dismissed the petition by Seven Seas Technology Limited saying the IT firm did not offer any explanation on the assumption that the lender increased interest rates without notifying the company.
Bank of Africa sought to attach the company after sending a demand of $5,647,128 (about Sh730,303,076 at the current exchange rates) in May last year.
The IT firm on its part argued that the lender had made fundamental mistakes in its calculations and there was a probability that it increased the interest rates without informing the borrower.
"Accordingly, from a review of the evidence on the whole, I am not persuaded that there were fundamental mistakes in the calculations of the interest before and after the consent which justify the setting aside of the consent. I am also not convinced that there were any variations of interest as alluded to," noted Justice Mabeya.
The judge also wondered why the customer had to wait for over four years from the date the parties filed the consent, to challenge the deal.
Seven Seas claimed its recalculation was prompted by a Supreme Court decision in 2023, which held that banks are required to seek the approval of the Treasury Cabinet Secretary, before increasing interest rates on loans advanced.
"As such, the defendants cannot be heard to say that they were prompted by the Supreme Court decision. That is not a satisfactory explanation for the delay," said justice Mabeya.
Further the court said the application may not have been brought in good faith since the judge noted the last payment made by the firm before the suit was filed was Sh100,000, on December 11, 2017 and $4,500 (Sh582,000) after the consent, which was paid on June 18, 2022.
The IT firm through its chief executive officer Michael Macharia sought to set aside the consent dated December 2, 2019 and all consequential orders, including the decree dated February 19, 2020.
To buttress his case, Mr Macharia sought the assistance of Mr Wilfred Onono, the managing director of Interest Rates Advisory Center (IRAC).
Mr Onono said the consent was entered on the basis of a fundamental mistake in the calculation of the outstanding balances claimed of $4,026,728.91 (Sh520 million) as at December 2, 2019 when the consent was entered, and $5,647,128.75 (Sh730 million) as at May 15, 2024 when the bank filed an application for attachment of debt.
Mr Macharia contended that they only discovered the mistakes recently after a review of the facility documents and computation of interest charged by the bank, following the Supreme Court decision.
He also claimed that a recalculation of the interest charged by IRAC revealed that interest charged on the current account as at December 2019 was $448,125 (Sh58 million) instead of $389,647 (Sh50 million).
Further, the outstanding cleared balance in the loan account on June 30, 2017 was not $0.00 as computed by the bank but $234,250.26 (Sh30 million).
Mr Onono stated that the amount ($234,250.26) should have been credited to the loan account.
He said the total interest accumulated from the date the consent was filed was $1,379,783.01 (Sh178 million) placing the total amount owed by the IT firm at $4,706,754.35 (Sh609 million), a difference of $940,374.40 (Sh122 million)
Mr Macharia maintained that it would be unconscionable for him to pay the substantial amounts arguing that the bank would suffer no prejudice if the orders sought were granted.
The bank opposed the application through its head of recoveries, Mr Idar Kasenge who said that despite the numerous admissions of the debt and payment proposals, the firm failed to settle leading to the filing of the consent.
The court heard that the proposed settlement which the IT firm accepted was simple interest as a replacement for its claim for interest at the bank’s commercial rates.
