The Supreme Court of Kenya has settled a long-running commercial dispute between Standard Chartered Financial Services Limited and Manchester Outfitters, overturning a Court of Appeal verdict and restoring the original High Court decision.
The judgment, delivered on November 14, 2025, offers one of the clearest clarifications yet on how loan securities operate in Kenya’s financial sector.
The case dates back more than four decades to 1982, when Standard Chartered Merchant Bank in London issued Euro-denominated loans to Manchester Outfitters. The loans, 1,300,000 Deutsche Marks and 1,050,000 Swiss Francs were secured through an unlimited guarantee and a debenture registered on April 5, 1982.
Several years later, in 1987, Standard Chartered Financial Services took over the outstanding facility and converted it into a Sh9 million local currency loan.
When Manchester Outfitters later defaulted, the lender issued multiple demands before appointing joint receivers under the debenture. That appointment triggered years of litigation.
The High Court initially ruled in favour of the bank, affirming that the debenture and related legal charges remained valid and allowed the appointment of receivers.
However, the Court of Appeal disagreed, finding that because the localized loan had not been separately registered under the repealed land and companies laws, the bank lacked the legal basis to appoint receivers. It declared the receivership “invalid, illegal, null, and void.”
The Supreme Court has now reversed that position, stating that the appellate court misunderstood how securities function.
In its decision, the Court held that lenders are not required to register new securities for every subsequent loan, as long as the original securities remain in force.
"A bank or financier is not required, as a matter of law, to register fresh securities every time a new advance is made, where existing securities remain valid and undischarged,” the Court affirmed, adding that such securities only cease to exist upon formal discharge.
The Court also addressed the question of unsecured borrowing, stressing that loan repayment does not depend on whether security is registered.
“The fact that a borrowing is not secured… does not discharge the borrower from the obligation to repay the loan,” it said.
The Supreme Court ruled that the 1982 debenture and the legal charges were “continuing, valid, and enforceable,” reinstating the High Court judgment in full. Each party will bear its own costs, and the Sh6,000 security deposit lodged for the appeal is to be refunded to the appellant.
