In a long-awaited ruling, the High Court has ordered a bank to pay Sh284 million to the estate of the late powerful politician Peter Mbiyu Koinange.

This is after the lender mysteriously allowed unknown persons to withdraw the money in defiance of a court order.

Justice Eric Ogolla found Ecobank Kenya Ltd guilty of negligence, willful misconduct, and breach of fiduciary duty.

The Milimani High Court ruling comes after years of complex litigation among the late minister’s numerous heirs and administrators, who accused Ecobank of illegally disbursing funds contrary to a standing court order issued on July 26, 2011, by High Court judge David Maraga (now retired Chief Justice).

“(The bank) stood in a fiduciary relationship to the estate and must therefore be held fully accountable to the beneficiaries. The casual manner in which the bank treated the said account and disbursed the money could only have been done by way of willful negligence, if not willful fraud.

“This court has noted with disturbing concern the negligent manner in which Eco Bank treated the estate's account. The estate of a deceased person is a special estate protected by the law and administered under court supervision. The bank had a duty to ensure that no money was released without express judicial authorisation.” 

The application against Ecobank was filed by Eddah Wanjiru, one of the court-appointed administrators and a widow of the late minister, who died intestate on September 3, 1981.

She told the court that proceeds from the sale of Close Burn Estate, a prime 100-acre property in Runda valued at Sh1.16 billion.

“A portion of the proceeds was distributed to beneficiaries and service providers pursuant to various court orders. However, the remaining balance of Sh284 million was to be strictly held in trust by Ecobank and was not to be disbursed without further court directions,” she said in her affidavit.

To her shock, Wanjiru told the court, the entire sum was later withdrawn by unknown persons without the court’s knowledge or approval.

“As a beneficiary of the estate, I am entitled to my share of the Sh284 million plus interest. As an administrator, I have a duty to ensure all beneficiaries receive their due."

Her lawyer, through senior counsel Paul Muite argued that per the Succession Act, the bank was required to exercise due diligence, especially since it was aware that the account related to an estate under court supervision.

“Even if the bank had not been served with the 2011 order, due diligence made it imperative for them to demand a court order as a condition for any disbursement. Instead, they allowed large sums to leave the account, in total disregard of their legal duty,” he submitted.

The estate also sought a court order compelling Ecobank to disclose full details of all transactions, beneficiaries, and recipients of the withdrawn money.

Other widows supported the application. 

In its defense, the bank, through the branch manager, Violet Monari, claimed ignorance of the court order issued. 

The bank argued that the last disbursement was made in June, 2014, and that all transactions were made in accordance with the account holders’ instructions.

“There is no evidence that the 2011 court order was ever served on the bank,” Monari claimed.

However, the court dismissed the arguments, stating that the bank should have known the account related to a deceased person’s estate and acted accordingly.

“Where an account is opened in a bank in the name of the estate, the bank must take constructive knowledge of the special category of customer. The amount involved was not trivial; it demanded managerial oversight,” said Justice Ogolla.

Koinange left behind a vast estate and a bitter inheritance battle that has spanned over four decades.

One of the early key moments in the distribution of the estate came in May, 2010, when Justice Roselyn Nambuye directed the sale of 100 acres of the Close Burn Estate. 

This order was seen as a step toward unlocking parts of the estate’s value for distribution among the numerous beneficiaries.

In July 26, 2011, Justice Maraga issued another ruling and provided directions for the distribution of proceeds from the sale.

Maraga first authorised payments to be made to the beneficiaries. In recognition of their roles in facilitating the transaction, the conveyancing counsels were each awarded Sh15 million. Additionally, the court ordered that the law firms involved in managing the estate receive legal fees. The four administrators of the estate were also granted administration fees.

Furthermore, the counsels who had defended the estate in the Muthera Farm suit were to receive partial legal fees.  Advocates representing the beneficiaries were likewise to be compensated.

Importantly, the court directed Sh284 million be held by counsel in trust.

Nearly a decade later, in May, 2020, progress was made when Justice Aggrey Muchelule apportioned the estate among the rightful beneficiaries.