[2022] KEHC 10775 (KLR)

Ecocare International Limited & 2 others v SBM Bank Limited (Civil Suit E028 of 2021) [2022] KEHC 10775 (KLR) (5 May 2022) (Ruling)

Neutral citation: [2022] KEHC 10775 (KLR)

Republic of Kenya

In the High Court at Mombasa

Civil Suit E028 of 2021

OA Sewe, J

May 5, 2022

Between

Ecocare International Limited

1st Plaintiff

Lemmy K Mbogori

2nd Plaintiff

Mary K Muriuki

3rd Plaintiff

and

SBM Bank Limited

Defendant

Ruling

[1]Before the Court for determination is the notice of motion dated 15th March 2021. It was filed by the three plaintiffs pursuant to section 44 of the Banking Act, Chapter 488 of the Laws of Kenya, order 40 rules 1, 2 and 3 and Order 51 rule 1 of the Civil Procedure Rules, for orders that:(a)Spent;(b)Spent;(c)the Court be pleased to issue an injunction against the defendants restraining it either by itself, its agents, servants and/or employees from selling off, transferring, disposing off and/or in any other manner interfering with the plaintiffs’ Plots Nos. Mombasa/block Xiii/68 And Mombasa/sectionII/9/MN (hereinafter, the suit properties) pending the hearing and determination of this suit.(d)That the Court be pleased to make any other or such further orders as it may deem fit and just to grant.(e)That the costs of the application be provided for.

[2]The application was premised on the grounds that the 1st plaintiff is the registered owner of all that property known as LR No. 9/II/MN situate at Junda Creek; whereas the 2nd and 3rd plaintiffs are the registered owners of Plot No. Mombasa/block XIII/68. It was averred that the 1st plaintiff has a standing loan facility advanced to it by Chase Bank Limited, the predecessor of SBM Bank Limited, the defendant herein; which facility was secured by a Charge over the suit property. The plaintiffs’ cause of action was that the defendant instructed auctioneers to advertise the suit property for sale to recover an outstanding balance of Kshs. 63,776,062. 51 yet no statutory notice had been served upon the plaintiffs of the intended sale as required by law.

[3]The plaintiffs also complained that no valuation of the charged properties has been carried out as required; and that since the loan has been declared as non-performing, the In Duplum Rule is applicable; granted that the initial loan was for Kshs. 20,000,000/= only. They therefore argued that the intended sale is unreasonable, oppressive and illegal; and unless stopped by the Court, they will suffer irreparable loss.

[4]The application was supported by the affidavit sworn by the 2nd plaintiff, Lemmy K Mbogori, to which he annexed copies of the Title to the suit property, Official Search and Notification of Sale served on the plaintiffs. The 2nd plaintiff also explained that the 1st plaintiff, through its parent company, EIT Africa Limited, has been granted the go ahead to put up affordable houses on its Plot No. L.R. No. 9/II/MN under the Affordable Housing Project of the Government of Kenya; and that the defendant is fully aware of the project. He annexed documents in proof of that assertion (Annexures “LKM-4”, “LKM-5” and “LKM-6”) and to demonstrate the plaintiffs’ desire to redeem the charged property. It was, thus, the averment of the 2nd plaintiff that the plaintiffs have a prima facie case against the defendants; and therefore ought to be granted the orders sought in the interest of justice.

[5]The application was opposed by the defendant vide the Replying Affidavit sworn by Kevin Kimani on 1st July 2021. He confirmed that the plaintiffs’ facility was taken over by the defendant from Chase Bank Ltd (In Liquidation). He averred that the plaintiffs’ suit is not only frivolous, but is also fatally defective for being res judicata. According Mr. Kimani, the plaintiffs had filed a similar suit in 2013, being High Court Civil Case No. 28 of 2013: Ecocare International Ltd & 2 Others v Chase Bank (K) Ltd involving the same cause of action which was dismissed. He annexed copies of the Plaint, Verifying Affidavit, Statement of Defence and the Ruling dismissing the suit at pages 1-8 of the Replying Affidavit.

[6]Further to the foregoing, Mr. Kimani conceded that the 1st plaintiff applied for and was granted a conditional banking facility by Chase Bank Ltd; and that the agreement was thereafter varied by the parties vide a contract dated 3rd March 2017. He added that, on account of the variation, the plaintiffs offered to pay Chase Bank LtdKshs. 50,000,000/=,which offer was accepted by the Bank; and was payable on or before 31st March 2018. Thereafter, the plaintiffs defaulted and continued in default, thus leaving the defendant with no option but to realize the securities. At paragraphs 12-28, Mr. Kimani deposed that the defendant complied with all the stipulations of the law as to the serving of the statutory notices and valuation of the charged property in readiness for sale. He produced all the relevant documents as Annexure KK-1 to the Replying Affidavit.

[7]The application was canvassed by way of written submissions pursuant to the directions given herein on March 22, 2021. The plaintiffs’ written submissions were, consequently, filed on 3rd June 2021 by Mr. Mokaya of M/s Mokaya & Onyambu Advocates. He urged the Court to find that the plaintiffs have established a prima facie case with a probability of success; and have therefore satisfied all the conditions set in Giella v Cassman Brown & Co. Ltd [1973] 1 EA 358. Counsel also cited the case ofMrao Limited v First American Bank of Kenya Limited & Others [2003] KLR 125 on the definition of a prima facie case, and submitted that the plaintiffs’ case as pleaded meets all the conditions set out in the above cases.

[8]In connection with section 44A of the Banking Act, Mr. Mokaya submitted that, since the total loan amount was Kshs. 20,000,000/=, it is a matter of concern that the defendant is intent on selling the charged properties to recover Kshs. 63,776,062. 51; which sum is way above double the amount advanced. He relied on Kenya Hotels Limited v Oriental Commercial Bank Ltd [2019] eKLR; Lee G. Muthoga v Habib Zurich Finance (K) Ltd & Another [2016] eKLR, and Mwambeja Ranching Company Ltd & Another v Kenya National Capital Corporation [2019] eKLR, to buttress his arguments on the point.

[9]Counsel also submitted on the Affordable Housing Project that the 1st plaintiff is involved in. He pointed out that the houses are intended to be sold to the public on completion; and that the funds expected to be generated therefrom will be by far in excess of the debt owing to the defendant. He pointed out that the defendant is fully aware that the houses will be constructed on the 1st plaintiff’s charged property and that it also made communications in respect of the project. Mr. Mokaya therefore urged that the plaintiffs’ prayers be granted so as to safeguard the plaintiffs’ charged property as well as the development that is underway on the property.

[10]On behalf of the defendant, Ms. Onyango relied on her written submissions dated October 5, 2021. Her posturing was that the defendant is well within its contractual rights to proceed with the realization of securities. She further submitted that the In Duplum Rule is inapplicable to this case, because the Letter of Offer dated March 3, 2017 was in respect of Kshs. 50,000,000/=; and therefore Kshs. 63,776,062. 51 being less than twice the loan sum, cannot be said to be in breach of the In Duplum Rule.

[11]Ms. Onyango also submitted that this suit is res judicata, in that the plaintiffs had earlier filed HCCC No. 28 of 2013: Ecocare International Ltd & 2 Others v Chase Bank Ltd, which was dismissed on 13th December 2019. She referred the Court to the pleadings exhibited at pages 1-8 of the Replying Affidavit and the ruling exhibited at pages 9-12 of the Replying Affidavit and urged for the striking out of the plaintiffs’ suit herein. Counsel relied on HCCC (NKU) No. 262 of 2005: Rev. Madar A. Evans Okanga Dondo v Housing Finance Company of Kenya and Benjamin Ole Tina v National Bank of Kenya Ltd [2006] eKLR in urging the Court to find that the suit is res judicata. She also urged the Court to take an adverse view of the fact that the plaintiffs deliberately concealed this fact from the Court.

[12]On the merits of the application, Ms. Onyango submitted that, having failed to controvert by way of affidavit or otherwise, the defendant’s averments in the Replying Affidavit of Kevin Kimani, to the effect that all the statutory notices were served, and that a valuation report was prepared in compliance with the law, the plaintiffs cannot say that they have a prima facie case with probability of success. In her view, the plaintiffs have not demonstrated that any of their rights have been infringed upon by the defendant to entitle them to the orders sought.

[13]On whether the plaintiffs stand to suffer irreparable loss, Ms. Onyango submitted that a charged property becomes a commodity for sale and that a chargee will not be restrained from exercising its power of sale because the amount due is in dispute. She relied on HCCC NO. 360 of 2001: Dr.Simon Waiharo Chege v Paramount Bank of Kenya Ltd;Mrao Ltd v First American Bank of Kenya Ltd [2002] eKLR; and Civil Appeal No. 5 of 1979: Mureithi v City Council of Nairobi [1979] eKLR to buttress her submission that the subject property has been valued; that its value is known; and therefore that it is not uncompensable.

[14]On the balance of convenience, Ms. Onyango urged the Court to consider that, while the defendant complied strictly with the law in its bid to realize its security, the plaintiffs, on the other hand, have not met any of their obligations in servicing the loan and are admittedly in arrears with no proposal in view for payment. She further pointed out that the plaintiffs have withheld material facts from the Court; and therefore ought not to be looked in good light by the Court. She therefore submitted that the balance of convenience ought to be weighed against them and in favour of the defendant. In her view, the plaintiffs are undeserving of the orders sought by them.

[15]I have given careful consideration to the application and perused the affidavits filed by the parties. I have likewise considered the submissions made by learned counsel and the authorities they relied on. The agreed facts were well summarized in the Supporting and Replying Affidavits filed herein; and they are that in February 2010, the 1st plaintiff applied for and was granted a loan facility of Kshs. 5,000,000/= by Chase Bank Limited (now SBM Bank Limited). The 1st plaintiff had offered its properties as security for the loan.

[16]The contract was thereafter varied and a fresh Conditional Acceptance Letter dated 3rd March 2017 issued to the 1st plaintiff for Kshs. 50,000,000/=. A copy thereof was annexed to the Replying Affidavit at pages 13-14 and it confirms that the parties agreed to restructure the loan from Kshs. 100,065. 476/= to Kshs. 50,000,000/= on the terms set out in the letter. One of the conditions was that the amount of Kshs. 50,000,000/= was to be paid in full on or before 31st March 2018; and that in the event of default, the defendant would be at liberty to proceed with the exercise of its statutory power of sale over the two properties, being LR No. Mombasa/block XIII/68 and LR No. Mainland North/Section II/9 (Junda Creek).

[17]It is common ground that, owing to the plaintiffs’ default in paying off the loan amount, the defendant instructed Kinyua & Co. Auctioneers to sell the charged properties. It was upon being served with the 45 days’ Redemption Notice that the plaintiffs reacted by filing the instant suit on 15th March 2021 seeking the following reliefs:(a)A permanent injunction restraining the defendant either by itself, its servants, agents and/or employees from selling off, disposing off, alienating and/or interfering with the plaintiffs’ Title No. 9/II/MN and Title No. Mombasa/block XIII/68;(b)General damages for breach of contract;(c)Costs of the suit; and,(d)Any other or such other or further orders as the Court may deem fit and just to grant.

[18]Contemporaneously with the Plaint aforementioned, the plaintiffs filed the instant application, seeking a temporary injunction to restrain the defendant and its agents from proceeding with the intended sale pending the hearing and determination of this suit. In the premises, the main issue for determination is whether the plaintiffs are, in the circumstances, entitled to a temporary injunction pending the hearing and determination of their suit. However, before embarking on a merit consideration of the application, it is imperative to determine a preliminary point raised by the defendant because it is a point which is capable of disposing of the entire suit in limine; namely, that the instant suit is res judicata.

[19]Ms. Onyango endeavoured to demonstrate that this suit is res judicata, in that the plaintiffs had earlier filed HCCC No. 28 of 2013: Ecocare International Ltd & 2 Others v Chase Bank Ltd, which was dismissed on 13th December 2019. She relied on the pleadings exhibited at pages 1-8 of the Replying Affidavit and the ruling exhibited at pages 9-12 of the Replying Affidavit and urged for the striking out of the plaintiffs’ suit herein. The documents also include a ruling dated December 13, 2013 by which Hon. P.J.O. Otieno, J. dismissed the first suit for want of prosecution.

[20]There is no gainsaying that res judicata is a plea that goes to the jurisdiction of the Court, and which, if successfully raised, has the potential of disposing of the entire suit; for section 7 of the Civil Procedure Act, chapter 21 of the Laws of Kenya, does provide that:No Court shall try any suit or issue in which the matter in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title…and has been heard and finally decided by such Court.”

[21]Needless to mention that res judicata applies to applications as well. Hence, in Uhuru Highway Development Ltd vs. Central Bank of Kenya & 2 Others) Civil Appeal No. 36 of 1996), the Court of Appeal held that:There is not one case cited to show that an application in a suit once decided by courts of competent jurisdiction can be filed once again for rehearing. This shows only one intention on the part of the legislature in India and our Civil Procedure Act. That is to say, there must be an end to applications of a similar nature; that is to say further, wider principles of res judicata apply to applications within the suit. If that was not the intention we can imagine that the courts could and would be inundated by new applications filed after the original one was dismissed. There must be an end to interlocutory applications as much as there ought to be an end to litigation..."

[22]The provisions of section 7 aforestated has been discussed in numerous court decisions; and it is now trite that in a plea of res judicata, the court’s interest is to ascertain whether the following factors exist:[a]Whether the matter in issue is identical in both suits.[b]Whether the parties in the suit are substantially the same.[c]Is there concurrence of jurisdiction of the Court?[d]Is the subject matter the same? and finally,[e]Whether there is a final determination as far as the previous decision is concerned.These factors were discussed in the case ofIsaack Mugo Kamau & 10 others -vs- Stephen Gitau Ikere & 2 others[2021] eKLR thus:36. Whether or not a subsequent matter is res judicata is dependent on whether the ingredients necessary to constitute a matter as being res judicata are satisfied. The test predominantly is whether the earlier suit raised the same issues as are being raised in the current suit; whether the parties were the same and ultimately whether a final decision on the issues was rendered by the earlier suit.“(58) Hence, whenever the question ofres judicata is raised a Court will look at the decision claimed to have settled the issues in question; the entire pleadings and record of that previous case; and the instant case to ascertain the issues determined in the previous case, and whether these are the same in the subsequent case. The court should ascertain whether the parties are the same, or are litigating under the same title; and whether the previous case was determined by a court of competent jurisdiction”.

[24][24]And, in Kenya Commercial Bank Ltd -vs- Muiri Coffee Estates Ltd & Another [2016] eKLR, the Supreme Court had the following to say:(54)The doctrine of res judicata, in effect, allows a litigant only one bite at the cherry. It prevents a litigant, or persons claiming under the same title, from returning to Court to claim further reliefs not claimed in the earlier action. It is a doctrine that serves the cause of order and efficacy in the adjudication process. The doctrine prevents a multiplicity of suits, which would ordinarily clog the Courts, apart from occasioning unnecessary costs to the parties; and it ensures that litigation comes to an end, and the verdict duly translates into fruit for one party, and liability for another party, conclusively.(55)It emerges that, contrary to the respondent’s argument that this principle is not to stand as a technicality limiting the scope for substantial justice, the relevance of res judicata is not affected by the substantial-justice principle of article 159 of the Constitution, intended to override technicalities of procedure. Res judicata entails more than procedural technicality, and lies on the plane of a substantive legal concept.”

[25]With the foregoing in mind, I have looked at the documents annexed at pages 1-12 of the Replying Affidavit in the Bundle of Documents marked as Annexure “KK-1”. They confirm that the three plaintiffs herein were the plaintiffs in Mombasa HCCC No. 28 of 2012: Ecocare International Limited v Chase Bank (K) Ltd. The documents further confirm that the cause of action was the same loan facility and the attempt by the defendant, the predecessor of the defendant herein, to realize its statutory power of sale. At paragraph 8 of the Plaint filed in the previous suit, the 1st plaintiff pleaded that:...due to serious difficulties in both local and global business market the 1st plaintiff has not been able to effectively service credit facilities offered to it by the Defendant following which the outstanding debt in the books of the Defendant stood at Kshs. 26,963,068. 94 as at 24th January 2013. ”

[26]In the same vein, the plaintiffs mentioned their intent to develop the Junda Creek property and to use the proceeds therefrom to pay off the outstanding debt. The averments were set out at paragraphs 10 and 11 of the Plaint dated March 27, 2013. It is plain therefore that the cause of action in the two cases is exactly the same. In the premises, I am satisfied that the matter in issue is identical in both suits; that the parties in the suit are substantially the same; that there is concurrence of jurisdiction of the Court; and that the subject matter in both suits is the same. Thus, the only outstanding issue is whether there is a final determination as far as the previous decision is concerned.

[27]In respect of the previous suit, an application was made for its dismissal under order 17 rule 2 of the Civil Procedure Rules and a considered ruling delivered on 13th December 2013 by Hon. P.J.O Otieno, J. that finally disposed of that suit. The Court held, at paragraphs 20 and 22 of the ruling, that:In this matter the court notes that there has not been due explanation by dates when the former counsel died to enable the court evaluate how that unfortunate happening sits with the evident delay. However, I have been to this station since the last quarter of 2015 and do recall that the advocate died in late 2017. By that time the suit had become ripe for dismissal for want of prosecution. It thus cannot be said that it is the death that has occasioned the delay. The delay had occurred before death and continued thereafter yet the suit belongs to the litigant not his counsel. I do find the explanation offered to be implausible and not acceptable. On the foregoing findings, I do find the application to be merited and therefore accede to it and dismiss the plaintiffs’ suit with costs on account of want of prosecution...the application succeeds and the suit is dismissed with costs for want of prosecution.”

[28]There is no indication whatsoever that, between December 13, 2013 and 15th March 2021, the plaintiffs took steps to either appeal the dismissal order or seek its setting aside by way of review. Accordingly, I take the view that the dismissal became operative as a final decision of the Court; and therefore brings the instant suit within the purview of section 7 of the Civil Procedure Act. I find succor in the case of __Njue Ngai v Ephantus Njiru Ngai & another [2016] eKLR in which the Court of Appeal held that dismissal for want of prosecution constitutes a final judgment unless a successful application to set aside the dismissal is made. Here is what the court of Appeal had to say at paragraphs 18 and 21 of its judgment:Another issue may arise as to whether the dismissal of suit for non-attendance of the plaintiff or for want of prosecution, amounts to a judgment in that suit. The predecessor of this court answered that issue in the affirmative when considering the dismissal of a suit for failure to attend court in the case of Peter Ngome –vs- Plantex company Ltd (1983) eKLR…Now we have seen that a dismissal for want of prosecution was as good as a final judgment in the appeal unless a successful application for setting aside was filed. There can be no doubt therefore that Njue’s appeal to the High Court was decided by competent court. The dismissal also meant that the decision of the Appeals Committee stood unchallenged and final…”**

[29]In addition to the foregoing is the fact that the plaintiffs did not disclose, in their Plaint dated March 15, 2021 that they had filed a previous suit which had been dismissed for want of prosecution. Ms. Onyango** took issue with this lack of candour and urged the Court to find that it comprises a further reason for striking out the suit. She relied on __HCCC (NKU) No. 262 of 2005: Rev. Madar A. Evans Okanga Dondo v Housing Finance Company of Kenya in which it was held that:Having found that the Plaintiffs’ suit is res judicata, and further having found that the Plaintiffs concealed material facts from this court, and further having found that the Plaintiffs made false averments and swore false affidavit, this court invokes its inherent jurisdiction and orders the Plaintiffs’ application together with the entire suit struck out with costs to the Defendant.”

[30]Ms. Onyango also relied on Benjamin Ole Tina v National Bank of Kenya Ltd[2006] eKLR for the holding by Hon. Ochieng, J. that:In this case, I have come to the conclusion that the suit was res judicata. I have also come to the conclusion that the Plaintiff did conceal material fact to wit, that there was a previous suit between same parties over the same subject matter...I uphold the preliminary objection on the grounds of both material non-disclosure, as well as the fact that the suit is res judiicata...”.

[31]More apposite are the comments of the Court of Appeal in Uhuru Highway Development Ltd v Central Bank of Kenya & 2 Others, CA Civil Application No. NAI 140 of 1995 (UR) that:Once the learned Judge was satisfied, as he was, that the applicant had obtained the order by concealing other relevant material, he was entitled not to consider the applicant’s application any further for the courts must be able to protect themselves from parties who are prepared to deceive, whatever their motive for doing so may be and whatever the merits of the case might be. A man who is prepared to deceive a court into granting (him) an order cannot validly claim that he has a meritorious case and would have been entitled to the order anyway. If the case is meritorious, there can be no reason for concealing some parts of it from the court.”

[32]The facts of the cases abovementioned are similar to the facts at play in the case at bar. In fact, it is apparent that the suit was filed solely for the purpose of scuttling the intended sale; and therefore I would adopt the sentiments of Hon. Kimaru, J. in Rev. Madara Evans Okanga Dondo v Housing Finance Company of Kenya(supra) that:In the instant case, it is clearly evident that the plaintiff did not file this suit with the object of seeking justice from this court. The plaintiff filed this suit purposely to secure the interim orders of injunction and thereby frustrate the defendant from realizing the security duly charged. The plaintiff knew that the defendant would expose his duplicity; by that time the plaintiff would have succeeded anyway in postponing the sale...”

[33]The foregoing being my view of the matter, it follows that the instant application as well as the entire suit are untenable. The plaintiffs’ suit, including the application dated March 15, 2021, is accordingly struck out with costs for being res judicata.It is so ordered.

DATED, SIGNED AND DELIVERED VIRTUALLY AT MOMBASA THIS 5TH DAY OF MAY 2022. OLGA SEWEJUDGE