[2023] KEHC 19346 (KLR)

Awino v Absa Bank Kenya PLC & another (Commercial Case E118 of 2023) [2023] KEHC 19346 (KLR) (Commercial and Tax) (30 June 2023) (Ruling)

Neutral citation: [2023] KEHC 19346 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Commercial Case E118 of 2023

DAS Majanja, J

June 30, 2023

Between

Johnson Otieno Awino

Plaintiff

and

Absa Bank Kenya PLC

1st Defendant

Evanson Njoroge Kamuri

2nd Defendant

Ruling

1. Before the court is the plaintiff’s notice of motion dated April 17, 2023 made, inter alia, under order 40 rule 1 of the Civil Procedure Rules. He seeks an injunction to restrain the 2nd defendant from selling or otherwise disposing of and interfering with the plaintiff’s quiet possession of house No 531 situated on LR No 209/12875, Nairobi pending the hearing and determination of the suit. The application is supported by the plaintiff’s affidavit sworn on the same day. It is opposed by the 2nd defendant through his replying affidavit sworn on April 19, 2023 and the 1st defendant (“the bank”) through the replying and further affidavit of its officer, Samuel Njuguna, sworn on May 5, 2023 and June 9, 2023 respectively. The parties have filed their respective written submissions in support of their respective positions.

2. Prior to filing the application under consideration, the plaintiff had filed an application dated March 17, 2023 seeking to restrain the bank from selling the suit property by public auction. I stated as follows in the ruling dated March 6, 2023:In the application dated March 17, 2023, the plaintiff seeks to restrain the defendant from exercising its statutory power of sale. The suit property was sold to a third party on February 8, 2023 at a public auction, a fact admitted by the plaintiff. This was before the suit was filed on March 22, 2023. A third party has acquired an interest in the suit property hence an injunction cannot issue and the equity of redemption extinguished. The application dated March 17, 2023 is therefore dismissed with no order as to costs.

3. As a result of the ruling the plaintiff amended his plaint to join the 2nd defendant and together with it filed the present application.

4. The plaintiff’s case is set out in the amended plaint. It is not in dispute that at the material time the plaintiff was the registered owner of the suit property which he charged to the bank to secure Kshs 12,000,000. 00 to purchase it. The plaintiff admits that he paid the principal amount but has not paid the interest thereon on the grounds that the bank is claiming illegal interest and charges contrary to the in duplum rule. That he requested the bank to reconcile accounts and remove the illegal and unlawful interest thereon but the bank refused to heed the request causing him to file this suit.

5. The plaintiff further urges that the auction that took place on February 8, 2023 is null and void as the Bank failed to issue proper statutory notices, proper notices of sale and reasonable notices in the advertisement of sale. He also claims that the suit property was undervalued. The plaintiff avers that he and his family have occupied the suit property as his family home and are apprehensive that they may be evicted causing them inconvenience and embarrassment.

6. The plaintiff seeks a declaration that the auction that took place on February 8, 2023 is illegal, null and void and an injunction restraining the 2nd defendant from transferring or otherwise disposing of the suit property or interfering with his quiet possession. In addition, he seeks an order that a reconciliation of accounts be taken to ascertain the true, genuine, and legal interest due and payable to the Bank.

7. As stated earlier, there is no dispute that the suit property was sold to the 2nd defendant at a public auction on February 8, 2023. This is confirmed by the memorandum of sale dated February 8, 2023 executed by the 2nd defendant and Joseph G. Muturi t/a Muga Auctioneers and General Merchants and the certificate of sale of the same date. The issue for determination then is whether the court can declare the auction sale to the 2nd defendant null and void at an interlocutory stage and or issue an injunction restraining the 2nd defendant from dealing with the suit property.

8. The plaintiff, as chargor, has a right at any time before the auction to pay the amount outstanding and redeem the property. Once the bank exercised its statutory power of sale by selling the suit property to the 2nd defendant, the highest bidder at the auction, the plaintiff’s right to redeem the suit property was extinguished. This means that the plaintiff no longer has any proprietary right in the suit property which can support any relief (seeSimon Njoroge Mburu v Consolidated Bank of Kenya Ltd[2019] eKLR and Bomet Beer Distributors Ltd v Kenya Commercial Bank Limited and 4 others [2005] eKLR).

9. The finality of the sale is addressed by section 99 of the Land Act, 2012 which protects the purchaser from any action to set aside the sale and provides for damages as a remedy. It states as follows:99(1)This section applies to—(a)A person who purchases charged land from the chargee or receiver, except where the chargee is the purchaser; or(b)A person claiming the charged land through the person who purchases charged land from the chargee or receiver, including a person claiming through the chargee if the chargee and the person so claiming obtained the charged land in good faith and for value.(2)A person to whom this section applies—(a)is not answerable for the loss, misapplication or non-application of the purchase money paid for the charged land;(b)Is not obliged to see to the application of the purchase price;(c)Is not obliged to inquire whether there has been a default by the chargor or whether any notice required to be given in connection with the exercise of the power of sale has been duly given or whether the sale is otherwise necessary, proper or regular.(3)A person to whom this section applies is protected even if at any time before the completion of the sale, the person has actual notice that there has not been a default by the chargor, or that a notice has been duly served or that the sale is in some way, unnecessary, improper or irregular, except in the case of fraud, misrepresentation or other dishonest conduct on the part of the chargee, of which that person has actual or constructive notice.(4)A person prejudiced by an unauthorised, improper or irregular exercise of the power of sale shall have a remedy in damages against the person exercising that power.

10. The effect of sale of the charged property by public auction by the chargee was explained by the court in Kamulu Academy Limited& another v British American Insurance (K) Ltd & 2 others [2018] eKLR as follows:The sale by public auction extinguishes Equity of redemption at the fall of the hammer whether the property is transferred to the purchaser or not…in the case of Mbuthia v Jimba Credit Finance Corporation and another [1986-1989]1EA 340(CAK) considered when the impact of an auction sale on the equity of redemption. The charged property was sold by public auction to the second Respondent.The Court of Appeal held:- A sale destroys the equity of redemption in the mortgaged property…The court will not grant to a mortgagor tendering the moneys due under the mortgage an injunction restraining the mortgage from completing by conveyance a contract to sell the mortgagee from completing by conveyance a contract to sell the mortgaged property in exercise of his power of sale unless it is proved that the mortgagee entered into the contract in bad faith…This means that the mortgagor’s right of redemption is lost as soon as the mortgage either sells the mortgaged property by public auction or enters into a binding contract in respect of it. On the acceptance of a bid at an auction, there is an immediate sale binding on the chargor. The chargee is then entitled to immediate possession of the charged property under subsection (2) of the Act. [emphasis mine]

11. Likewise inJoyce Wairimu Karanja v James Mburu Ngure & Another KBU HCCA No 118 of 2017 [2018] eKLR the court observed as follows:[30]This section seems quite clear that a purchaser of property sold in the exercise of a chargee’s statutory power of sale is protected even in cases where the person had actual notice that the chargee had not properly realized that statutory power of sale in terms of procedure. In this case, there is no evidence to show that the appellant had any notice of any irregularities in the planned sale – and evidence suggests that there were none anyway. The point is that the appellant is then inoculated by section 99 from any action to recover the suit property from her.

12. The sale of the suit property by the bank is undisputed hence the equity of redemption extinguished. There is no allegation whatsoever in the amended plaint that the 2nd defendant was involved in any fraud or other dishonest conduct. He is therefore immunized by section 99 of the Land Act, 2012 from any action by the plaintiff and the suit property having been knocked down is now out of reach of the plaintiff. His only relief is for damages against the bank. I therefore find and hold that the plaintiff has not made out a prima facie case with a probability of success as the pre-eminent condition for the grant of an injunction as laid down in Giella v Cassman Brown [1973] EA 348. In Nguruman Limited v Jane Bonde Nielsen and 2 othersNrb CA civil appeal No 77 of 2012 [2014] eKLR, the Court of Appeal explained that the requirement for the grant of an injunction in Giella v Cassman Brown (supra) are to be applied as separate, distinct and logical hurdles which the plaintiff is expected to surmount sequentially. This means that if the plaintiff does not establish a prima facie case with a probability of success then whether irreparable injury can be compensated by an award of damages and balance of convenience when in doubt as to the first two conditions do not require consideration. This inquiry must therefore come to an end.

13. For the reasons I have stated, I dismiss the plaintiff’s application dated April 17, 2023 with costs to the defendants.

SIGNED AT LONDON, ENGLANDD. S. MAJANJAJUDGEDATED and DELIVERED at NAIROBI this 30th day of JUNE 2023. F. MUGAMBIJUDGE