Reprieve for ex-governor Laboso's sister as court stops sale of family land over bank loan

A High Court in Bomet has handed a major reprieve to the younger sister of former Bomet Governor Joyce Laboso after stopping the sale of family land by Stanbic Bank.

The sale was to help secure a multi-million-shilling loan.

In a judgment delivered two weeks ago, the court ruled that the land cannot be sold to recover the commercial loan, saying it was obtained without the knowledge and consent of all the beneficiaries.

The land in question, Kericho/Kapletundo/Chemagel Block 1/28, 1/44 and 1/45, was held in trust for the beneficiaries of the estate of their mother Rebecca Laboso ­– now deceased.

Judy Laboso, who sued her sisters, Joyce Laboso and Mary Laboso, together with businessman Kaleen Mohamed, accused them of fraudulently using the family’s trust land to secure a loan of more than Sh440 million for their company Itibo Limited. 

Edwin Abonyo, Laboso's husband was named as the first defendant in the case in his capacity as the administrator of late governor's estate.

Judy claimed that the loan was obtained without a shareholders’ meeting or any formal company resolution and that she only learnt of the transaction after Stanbic Bank began moves to auction the family property following default on the loan repayment.

“The bank ought to have verified the ownership and legal capacity of the persons presenting the titles for charge,” she told the court.

“They did not hold the land as absolute owners but as trustees. I was never consulted, nor did I sign any resolution authorising the borrowing.”

Through her lawyers, she told the court she never gave her consent for the land to be charged, arguing that the parcels in dispute were part of the estate of their late mother, Rebecca, who had bequeathed the land to her children through a succession process concluded in 2017. 

The properties, she said, were to be held in trust for all the beneficiaries and not to be used for private business loans.

She accused Stanbic Bank of negligence, saying the lender failed to conduct due diligence before advancing the loan.

The bank, she argued, should have established that the land was trust property and there were other beneficiaries whose interests were likely to be affected by the transaction.

“The bank ought to have verified the ownership and legal capacity of the persons presenting the titles for charge. They did not hold the land as absolute owners but as trustees,” she told the court.

Court documents show that Itibo Limited applied for a $3,524,000 facility, the equivalent of Sh440 million at the time, backed by a legal charge over the three family parcels. 

However, only $ 322,395 (about Sh40 million) was disbursed.

According to the bank’s facility letter dated March 14, 2017, the credit comprised two components, an overdraft facility of Sh40 million and an asset finance loan of $ 3,113,000 (Sh452 million)

The security included a corporate debenture and first-ranking legal charges over the three properties.

In its defence, the bank maintained that it acted in good faith and within the law. 

It told the court official searches at the Lands Registry confirmed that the properties were registered in the names of Joyce Laboso and Mary Laboso as absolute proprietors. 

The bank said there was no encumbrance or caveat on the titles to indicate that the land was part of a trust.

The bank’s legal officer told the court that the institution had no way of knowing there were underlying family disputes or succession issues when it granted the loan to Itibo Limited, a company that had been in business for years and whose directors were known public figures.

“Stanbic Bank acted as any prudent lender would. We had clean title documents, a proper valuation and resolutions signed by registered directors. There was nothing on record suggesting the land was trust property,” the court heard. 

However, Judge Julius Ng'arng'ar ruled that the Certificate of Confirmation of Grant issued in respect of the Rebecca Laboso’s estate clearly indicated that the land in question was to be held in trust for all beneficiaries. 

The court found that the two sisters, as administrators of the estate, had acted beyond their powers by charging the land without consulting the other beneficiaries.

“The first and second defendants, being administrators of the deceased’s estate, stood in a fiduciary position in relation to the property. They had a duty of utmost good faith and could not alienate or encumber the estate property without the consent of all the beneficiaries,” the October 8 judgment said.

The court alsosaid Itibo Limited was distinct from the estate and that its financial obligations could not be transferred to trust property. 

"The fact that some administrators were directors of the company does not entitle them to use estate assets for commercial ventures,” the judge observed.

Consequently, the court issued a permanent injunction restraining Stanbic Bank, its agents, servants or assigns from selling, transferring or otherwise dealing with the three parcels of land. 

It further ordered the Chief Land Registrar to remove the encumbrances and charges registered against the titles as a result of the loan transaction.

The ruling was a significant victory for Judy Laboso, who told the court that she has lived on the family property since childhood and would be rendered homeless if the land was sold. 

“I was not aware of any resolution to borrow the money or to charge the said properties… I have lived on the land since childhood and if sale is allowed I will have nowhere to go," she submitted.

The judgment now serves as a warning to financial institutions on the need for heightened due diligence when dealing with property that may have trust or succession implications.

The court’s decision effectively freezes the bank’s recovery efforts until the family resolves the estate’s internal disputes or alternative arrangements are made for loan settlement.