The appellate court upheld the sellers’ right to receive KSh 196 million but removed the interest award that the High Court had previously granted.
The case involved Guardian Bank Limited, individuals and companies linked to the Chandaria family, against Shivali Investments Limited and other investment firms.
Court reviews KSh 196 million share sale dispute
The dispute began after a 1999 agreement where the respondents sold 200,000 shares in Guilders International Bank to the appellants for KSh 196 million.
The parties first signed a Memorandum of Understanding (MoU) on October 13, 1999, before entering into a formal Sale Agreement on December 30, 1999.
The sellers later accused the buyers of failing to pay the agreed purchase price and meet other contractual obligations.
The buyers responded with a counterclaim, arguing that the sellers misrepresented the bank’s loan portfolio and caused them financial losses.
Court rejects MoU as binding contract
The Court of Appeal found that the MoU did not create a binding agreement because it stated that it was “subject to contract.”
The judges ruled that the later Sale Agreement became the main contract between the parties.
The court also noted that the Sale Agreement contained an “entire agreement” clause, which excluded earlier terms unless the parties specifically included them.
As a result, the judges overturned the High Court’s finding that the MoU formed part of the final agreement.
Sellers entitled to payment but interest reduced
The appellate court agreed that the sellers deserved the KSh 196 million purchase price.
However, the judges ruled that the buyers would not pay the 12 percent interest rate contained in the MoU.
Instead, the court ordered interest at court rates from the date the lawsuit was filed.
The court also ruled that Guardian Bank Limited would not directly pay the purchase price because the obligation fell on the other appellants identified as obligors in the Sale Agreement.
Court addresses undisclosed liabilities
The buyers argued that unrecovered loans and undisclosed liabilities should reduce the amount payable to the sellers.
The Court of Appeal rejected most of these claims, finding that the buyers failed to prove they had exhausted recovery efforts.
The judges noted that some loans were recovered after the agreed cut-off date.
However, the court identified KSh 6.07 million in undisclosed liabilities and ordered the sellers to bear that amount.
Guardian Bank ordered to return securities
The court ruled that Guardian Bank must return securities provided by the sellers.
The order excludes four properties that the sellers had already agreed to sell.
The judges maintained that Guardian Bank had no obligation to pay the share purchase price because the Sale Agreement assigned that responsibility to other parties.
Court dismisses KSh 827 million counterclaim
The Court of Appeal also dismissed the buyers’ counterclaim seeking KSh 827 million.
The judges found that the appellants failed to provide enough evidence to support their financial claims.
The court awarded costs, with Guardian Bank responsible for one-quarter of the respondents’ costs and the obligors responsible for the remaining three-quarters.
The ruling provides clarity in the Guilders Bank share dispute and highlights the importance of clear contractual terms in commercial transactions.
