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Court of Appeal rules a spouse cannot use matrimonial property to secure a loan without the consent of partner

By Kamau Muthoni | November 28th 2017
Elizabeth Wanjiru (Photo: Courtesy)

A TV actress has struck a major precedent in matrimonial property law after she rescued a house that her former husband had offered as security for a loan.

The Court of Appeal, in a landmark judgment in favour of Citizen TV actor Elizabeth Wanjiru, who is commonly known as ‘Shosh’ in the  ‘Mother-in-Law’ programme, ruled a spouse cannot use matrimonial property to secure a loan without the consent of his or her partner.

Null and void

Judges Wanjiru Karanja, GBM Kariuki and Jamila Mohamed, in the verdict which also sends a warning to financial lenders and third party buyers, ruled the whole transaction to recover unpaid loan was null and void.

The case involved Wanjiru’s former husband Shem Bageine, Housing Finance Corporation of Kenya (HFCK), and a third party buyer, Mugo Muriu Investments Ltd.

Mr Bageine is a Ugandan national.

HFCK’s failure to verify whether Bageine had sought Mrs Wanjiru’ go-ahead to take up the loan has cost it millions.

The Court of Appeal ordered the lender to return Sh1 million to Mugo Muriu Investments Ltd, which bought the prime property in Loresho in 1987.

Mugo Muriu Investments Ltd will get the money minus interest that could have accrued for the past 29 years.

In the case that has been in the corridors of justice for 29 years, the judges ruled the interest of a spouse to a property acquired jointly cannot be overridden by that of a lender to recover unpaid loan.

“Anyone who lends money on the security of a matrimonial home nowadays ought to realise that the wife may have a share in it... It seems utterly wrong that a lender should turn a blind eye to the wife’s interest or the possibility of it and afterwards seek to turn her and the family out on the pleas that he did not know she was in actual occupation,” the judges ruled.

On April 13, 1968,  Wanjiru, aged 24 years, wedded Bageine, then a University of Nairobi student, at PCEA St Andrew’s Church Nairobi.

As man and wife, they purchased the contested home in 1981 but it was registered under the man’s name. The house was bought through a mortgage given by HFCK.

In her case, she told the court she contributed in buying the property, for which they repaid the mortgage in full in 1984.

They lived together until the man left following domestic problems.

After moving out of the matrimonial home, Bageine took another loan of Sh600,000 from HFCK and offered their title as security.

He did not pay, forcing HFCK to auction the property in 1987. Wanjiru had offered to clear the debt but the bank refused to take the offer.

After the transfer of the property on June 10, 1988, Mugo Muriu started demanding rent from Wanjiru as she was still living in the house.

She immediately sued the firm, HFCK and her former husband, saying she was not aware of the loan and that the contested property equally belonged to her.

Loan default

In his defence, Bageine denied making any contribution towards the purchase of the matrimonial property.

HFCK on the other hand told the court it sold the property after Bageine defaulted on repaying the loan. 

Mugo Muriu Investments Ltd argued it was just an innocent buyer of the property.

But the judges found HFCK knew Bageine had a wife who was living in the contested house but ignored her.

The court ordered Mugo Muriu, HFCK and Bageine to pay ‘Shosh’ the cost of filing the case both in the High Court and Court of Appeal.

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