After series of mediation, Stirling group of companies is still in legal binds with Standard Chartered Bank and Spencon services limited over withdrawal of property titles given to the bank for loan services.
In a civil suit jointly filed by Stirling Construction Uganda Limited, Stirling Civil Engineering Limited and Stirling Civil Engineering Limited in Kenya in 2015, against Standard Chartered Bank Uganda Limited and Spencon Services Limited at the commercial court, the plaintiffs accuse the bank of unlawful detention of their property titles that were used as guarantees to attain financial facilities for the second defendant (Spencon).
The Stirling companies, represented by Muwema and Company Advocates, are seeking for a declaration that their corporate guarantees are revoked, and void for lack of consideration by the bank.
The plaintiffs are also seeking for an order to discharge mortgages created over a property in Kiambu District in Kenya to secure financial facilities for Spencon deeming, it void and unenforceable.
“A declaration that the obligations under the said corporate guarantees have been extinguished and therefore stand discharged,” the suit read.
An amended plaint was filed in October last year, owing to the plaintiffs’ allegation of Spencon now being under receivership.
How it all started
According to the accusers, Spencon, a private limited building construction company, incorporated in Kenya and registered in Uganda, in 2006/7 had an investor, a South African equity investment fund called ECP Africa inject $15m with the option of turning them into shares.
In the intervening period after ECP’s investment, Spencon, having common share holding with the plaintiffs, entered talks of a merger to streamline and strengthen their business operations.
During that time, the plaintiffs availed their properties and corporate guarantees to Standard Chartered Bank to secure financial facilities for Spencon.
The plaintiffs allege that the bank knew of their talks of merging.
The plaintiff goes on to say that the bank took possession of their titles and registered legal mortgages which gave rise to $30m for projects in Tanzania, electrical installation in Kilimanjaro, Singida, Musoma and Kigoma water treatment plant.
However, in 2014, the merger fell apart and ECP, which had already started converting investment to shares took 98 per cent shareholding, thereby taking control of Spencon.
The plaintiff avers that since then, all efforts to have their properties discharged or withdrawn from both defendants have been in vain, which prompted a civil suit.
The plaintiffs claim that holding of the titles by the bank is stalling their search for financial assistance for their businesses.
The first defendant, Standard Chartered Bank, recognises receipt of a letter from the plaintiff requesting discharge of the titles but dismissed it as it lacked merit and contractual basis saying it was contradicting the various security documents.
In addition, the bank asks to be excluded from the plaintiffs and Spencon arguments and says the titles can only be given back the debt is cleared.
“The plaintiffs have an option to fully pay the first defendant the outstanding liabilities on the facilities which they guaranteed and provided securities for.
The Standard Chartered Bank defence dismisses any allegation Spencon and Stirling are making as being of no consequence to the monies they owe the bank.
Spencon Services, the second defendant, in its defence, denies any sister relation to the Stirling companies saying the mortgages were not awarded on that basis.
Spencon also denies being under receivership as purported by Stirling companies.
The Kenyan company goes on to say even if they were under receivership which they strongly deny, the plaintiffs would not be discharged from their obligations and duties as created by the securities, mortgages and guarantees.
It goes on to also allege that it gave the Stirling companies financial support that they benefitted from.
Spencon avers that the plaintiffs ought to have known that mortgaging their titles would mean they cannot retrieve them until all secured facilities have been paid to the bank.