(Standard Chartered Financial Services Ltd v Manchester Outfitters Ltd & 2 Others
Supreme Court Petition No. E012 of 2024)

The Supreme Court has delivered an important decision clarifying the effect of continuing securities in Kenya. The case centred on whether a debenture and legal charge executed in 1982 continued to secure a 1986 localised loan and whether the Bank was required to obtain fresh securities for the later facility.

Manchester Outfitters executed a debenture and a legal charge in 1982 to secure a Eurocurrency loan. In 1986, the Bank converted the remaining balance into a Kenya-shillings loan. Upon default, a receiver was appointed under the 1982 debenture. The borrower argued that the debenture no longer secured the 1986 facility.

The High Court upheld the Bank’s position, but the Court of Appeal reversed the decision, holding that the 1986 loan required fresh security documentation.

The Supreme Court allowed the appeal and reinstated the High Court judgment. The Court held that one, continuing securities remain valid until discharged. A debenture expressed as a continuing security covers subsequent advances unless expressly limited. Lenders are not required to register fresh securities where earlier securities remain undischarged.

Secondly, the Court held that a loan remains payable even if unsecured. The borrower’s obligation to repay a debt does not depend on the existence of a security instrument. An unsecured loan does not become irrecoverable.

The decision restores commercial certainty by affirming that security instruments remain effective until they are formally released, allowing banks to rely on existing securities when advancing later facilities. It further reinforces that a borrower’s obligation to repay a debt exists independently of the security structure, meaning repayment remains due regardless of whether a loan is secured or unsecured.