[2022] KEHC 10155 (KLR)

Equip Agencies Limited & 5 others v I & M Bank Limited & another (Civil Case E943 of 2021) [2022] KEHC 10155 (KLR) (Commercial and Tax) (3 June 2022) (Ruling)

Neutral citation: [2022] KEHC 10155 (KLR)

Republic of Kenya

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

Commercial and Tax

Civil Case E943 of 2021

EC Mwita, J

June 3, 2022

Between

Equip Agencies Limited

1st Applicant

Divyesh Indubhai Patel

2nd Applicant

Vinesh Indubhai Patel

3rd Applicant

Grishma Kumar Indubhai Patel

4th Applicant

Unicom Limited

5th Applicant

Interactor Company Limited

6th Applicant

and

I & M Bank Limited

1st Respondent

George Njoroge Muiruri t/a Phillips International Auctioneers

2nd Respondent

Ruling

Background 1. The 1st respondent extended various financial facilities to the 1st to 5th applicants. On or about March 2011, the 1st applicant obtained a financial facility of Kshs. 75,000,000 to purchase L. R. No. Mainland North/VI/3075, and executed a legal charge over the property on September 12, 2012, while the 1st respondent executed the charge on October 12, 2012. The 1st respondent did not execute or have the charge registered until March 31, 2014, contrary to the then requirement of 42 days under sections 96 and 99 of the Companies Act, Cap 486 (now repealed).

2. On or about September 2011, the 1st applicant applied for a further financial facility for Kshs. 324,000,000 to purchase LR No. Gilgil 2/210 and executed a legal charge over that parcel of land. On or about December 2011, the 1st applicant again applied for a financial facility for Kshs. 450,000,000 and executed a legal charge on December 20, 2011 in favour of the 1st respondent.

3. The 2nd, 3rd and 4th applicants executed a legal charge over L.R. No. 209/8755 Pate Road, situate in Industrial Area Nairobi in favour of the 1st respondent to secure a sum of Kshs. 100,000,000 as guarantors. They did not take any money from the 1st respondent. The 2nd 3rd and 4th applicants state that they were fully discharged from their obligations once the 1st respondent assented to the principal debtor’s application for restructuring of the banking facility and granted further loans without reference to them (as guarantors)and lumped secured loans with an unsecured loans contrary to the laid down rules. The 1st respondent did not also keep a separate account for this lending as required by the charge but demanding payment of the total loan.

4. The arrangement is said to have materially altered the standing of the guarantors since their security was subjected to greater liability than originally contemplated and no other securities were given by the principal borrower. On May 21, 2008, the 5th applicant executed a legal charge over L.R. No. 214/172, in Muthaiga, Nairobi to secure a financial facility for Kshs. 125,000,000 which was fully repaid.

5. on May 13, 2016, the 1st respondent’s advocates served statutory notices seeking payment of Kshs 555,391,983. 46 in respect of accounts number 00xxxxxxxxxxxx and Kshs 677,283,313 in respect of account no. 00xxxxxxxxxxxxxxx. The applicants separately filed suits seeking injunctions to stop the 1st respondent from selling the suit properties. The suits were HCCC No. 420 of 2016-Equip Agencies Limited v I&M Bank Limited by 1st applicant; HCCC No. 355 of 2016-Grishma Kumar Patel & 2 Others v I&M Bank Limited by 2nd, 3rd and 4th applicants and HCCC No. 327 of 2016, Unicom Limited v I&M Bank Limited by the 5th applicant.

6. On June 10, 2021, parties entered into a Deed of Settlement and agreed to have the suits together with interlocutory appeals filed before the Court of Appeal withdrawn. The interlocutory appeals were Civil Appeal No. 111 of 2018, Civil Appeal No. 165 of 2018 and Civil Appeal No. 110 of 2018. Parties also agreed to withdrawal of HCCC No. 417 of 2020-Equip Agencies Limited v I & M Bank; HCCC No. 87 of 2019-Equip Agencies Limited v I&M Bank Limited & 2 Others; HCCC No. 418 of 2020-Gilgil Treatment Industries Limited v I&M Bank Limited and Civil Appeal No. 412 of 2020.

7. One of the terms of the Deed of Settlement was that the applicants were to pay Kshs. 875,000,000 in three installments of Kshs. 100,000,000, Kshs. 50,000,000 and Kshs. 725,000,000, within 15, 120 and 180 days of execution of the Deed of Settlement, respectively in full and final settlement of the debt. The applicants paid the first installment of Kshs. 100,000,000 on time but did not pay the second and third installments.

8. Failure to pay the remaining instalments was due to not receiving over Kshs. 50,000,000,000 from the Government arising from a decree in Equip Agencies Limited v The Hon. Attorney General and others, HCCC Petition No. 159 of 2006, HC J. R. No. 55 of 2017 (which execution proceedings are still pending). The 5th applicant was also expecting Kshs. 885,400,000 from Nairobi Metropolitan Services for services earlier rendered.

9. Due to the default, the 1st respondent instructed the 2nd respondent to sell the suit properties by way of public auction to recover Kshs. 1,838,665,884. The 2nd respondent issued and served a 14 days’ notice on November 25, 2021 demanding payment of Kshs. 1,838,665,484 as at 10th August 2020 with interests at daily rates and penalties. The sale by public auction was scheduled for December 15, 2021.

Application 10. The applicants took out a notice of motion dated 6th December, 2021 under sections 82, 84, 90(2 &3), 96, 97, 98, 103, 104 (3), 105 and 106 of the Land Act, sections 56, 68, 69 & 70 and 106 & 107 of the Land Registration Act, section 33B of the Banking Act, section 36 of the Central Bank Act, sections 1A, 1B, 3A, 59 & 63 (e) of the Civil Procedure Act, and Orders 40 rules 1 (a), 2, 4 & 10 and 51 rule 1 of the Civil Procedure Rules, seeking the following orders:1. Spent2. Spent3. Thatthe Honourable court be pleased to grant a temporary order of injunction restraining the defendants whether by themselves, their employees, servants, agents or auctioneers from doing any of the following acts, that is to say; from advertising for sale, selling whether by public auction or private treaty, disposing of or otherwise howsoever completing by conveyance or transfer of any sale concluded by auction or private treaty, taking possession, appointing receivers or exercising any power conferred by section 90 (3) of the Land Act, leasing, letting, charging or otherwise interfering with the plaintiffs’ ownership or title to all that parcels of land known as L.R. No. Mainland North/VI/3075 and L. R. No. 209/4535, L. R. No. 214/172 and L. R. No. 209/8755. 4.Thatin the alternative, the time for compliance and/or for rectifying any default to redeem L. R. No. Mainland North/VI/3075 and L. R. No. 209/4535, L. R. No. 214/172 and L. R. No. 209/8755 be extended or statutory powers of sale be suspended and/or postponed for a period of 12 months or for such other period as the court may determine fit pursuant to powers conferred on the court under sections 104 and 105 as read together with section 90 of the Land Act, 2012. 5.That an interlocutory mandatory injunction do issue compelling the 1st defendant to render a true, proper and accurate account to the plaintiffs and the court on the actual status of the borrowers accounts.6. Costs of the application.

11. The application is premised on the grounds on its face and the affidavit of Divyesh Indubhai Patel, sworn onDecember 6, 2021and a further affidavit by Vinesh Indubhai Patel sworn on February 16, 2022.

12. The grounds are that the 1st respondent moved to sell the suit properties without serving statutory notices as required by sections 90 and 96 of the Land Act and rule 15 of the Auctioneers’ Rules. The applicants also impugned the Deed of Settlement arguing, first; that it is illegal, unconscionable and improvident because it purports to override mandatory statutory provisions on issuance of notices. Second, the Deed of Settlement was based on non-existent liability, in that although the total principal amount borrowed was Kshs. 1,074,000,000, the full amount was not drawn. Third, that the Deed of Settlement was executed under undue influence and duress; that it was based on material misrepresentation of facts and the law; that clause 6 required the applicants to keep the Deed of Settlement strictly confidential from their advocates failure to which they would be liable to damages. Lastly, that the applicants were only required to instruct their advocates to withdraw the suits instead of adopting the impugned Deed of Settlement in Court.

13. The applicants claim that out of Kshs. 450,000,000 borrowed and disbursed, a cumulative sum of over Kshs. 1,000,000,000 was repaid in respective accounts and the accounts in respect of majority of charges have been fully repaid. In addition, the applicants take the position that if interests were waived and amount discounted as provided in the Deed of Settlement, the facilities have fully been repaid. In this respect, the applicants dispute both the discounted amount of Kshs. 875,000,000 and the amount of Kshs. 1, 936, 548, 732. 71 before discount and waiver of interest. The applicants assert that the amount claimed exceeds the maximum cap under the in duplum rule.

14. The applicants further assert that the 1st respondent illegally sold L.R. No. Gilgil Township Block 2/210 to third parties at a throw away price (of about Kshs. 353,000,000) and utilized the proceeds to service the consolidated amount borrowed but the property is yet to be retransferred. The applicants also claim that the 1st respondent failed, refused and/ or neglected to procure removal of the negative customer credit information placed against them once they settled the first installment as agreed under clause 1. 2 of the Deed of Settlement. The applicants also assert that a force majoure situation under clause 7. 1 of the impugned deed of settlement arose due to the withholding of the payment expected from the Government after the government issued directives, orders and decrees citing budgetary constraints.

Response 15. The respondents filed a notice of preliminary objection dated December 10, 2021and a replying affidavit by Andrew Muchina sworn on 14th January 2022. The respondents contend the application is res judicata because the applicants have filed several applications before the High Court seeking similar orders over the same properties which were dismissed by Hon. Nzioka, J. in rulings dated 1st November 2017, 7th May 2018 and November 15, 2017, in HCCC No. 420 of 2016, HCCC No. 327 of 2016 and HCCC No. 355 of 2016, respectively.

16. The respondents further contend that the application is an abuse of the court process in that the applicants withdrew their appeals in the Court of Appeal against those rulings, namely; Civil Appeal No. 111 of 2018, Civil Appeal No. 165 of 2018 and Civil Appeal No. 110 of 2018.

Submissions 17. Parties agreed to disposed of the application through written submissions with oral highlights. The 1st to 4th and 6th have filed written submissions dated February 17, 2022, while the 5th applicant’s written submissions are dated February 21, 2022, fully associating itself with the submissions of 1st to 4th and 6th applicants. On their part, the respondents’ written submissions are dated February 9, 2022.

Applicants’ submissions 18. The applicants submit that this application is not res judicata and does not amount to an. The applicants add that rulings on previous applications for injunction are not a bar to future applications, provided circumstances are different. The applicants rely on Nyali Construction & Ele v Barclays Bank Limited (Mombasa Civil Suit No. 315 of 2007); [2015] eKLR.

19. According to the applicants, the present circumstances and cause of action and issues in the previous proceedings are different and beyond the scope of section 7 of the Civil Procedure Act. This is because the impugned Deed of Settlement was not an issue in the previous suits. The applicants rely on Kibundi v Mukobwa & another (Civil Suit No. 390 of 1992(OS); [1993] eKLR where it was held that the development of fresh circumstances may found a new cause of action.

20. The applicants also cite the decision in Super Drill International Limited v Sidian Bank Limited (Civil Suit No. 310 of 2018; [2021] eKLR, where it was held that the plaintiff had not crossed the red tape of res judicata because the issues raised in that case were different from the issues in a former suit. The applicants again rely on Equip Agencies Limited v I & M Investment Bank Limited & 2 others (Civil Suit No. 87 of 2019); [2019] eKLR, that the main issue in that case was not res judicata.

21. Regarding material non-disclosure, the applicants point out that they disclosed payment of deposit at paragraphs 15 of the application and 17 of the supporting affidavit respectively. They also disclosed withdrawal of the appeals at paragraphs C (iv) of the application and 6 of the supporting affidavit respectively, and that they had only paid the deposit on signing the Deed of Settlement. The applicants however state that the amount demanded was not due and the Deed of Settlement was obtained through duress, misrepresentation and undue influence.

22. The applicants argue that they sought extension time to pay further the instalments in the Deed of Settlement following the force majeure situation but the request was declined. They refer to 179 to 186 of the annexure on the engagement between the parties on default and extension of time. The applicants rely on Joseph Kaguthi & 11 others v Permanent Secretary Ministry of Interior & Coordination of Government & another [2021] eKLR to argue that withdrawal of a suit is not a bar the filing of a new suit.

23. The applicants urge that they have met the conditions for grant of interlocutory injunction, and rely on Giella v Cassman Brown and Company Limited [1973] E.A 358 and Mrao Ltd v First American Bank of Kenya Ltd & 2 others [2003] eKLR. The applicants assert that the exercise of statutory power of sale cannot proceed without serving mandatory statutory notices. They rely on Nyangilo Ochieng & another v Fanuel B. Ochieng & 2 others [1996] eKLR; Stephen Boro Gitiha v Nicholas Ruthiru Gatoto & 2 others [2017] eKLR; Michael Gitere & another v Kenya Commercial Bank Limited [2018] eKLR; East Africa Ventor Co. Ltd v Agricultural Finance Co-op Ltd & another [2017] eKLR; David Ngugi Ngaari v Kenya Commercial Bank Limited [2015] eKLR and Harbert Ponyochi Kunyobo vs National Housing Corporation & another [2019] eKLR.

24. The applicants again submit that the amount the 1st respondent claims offends the in duplum rule which states that interest on a non performing loan stops once the accrued interest and expenses equal the loan amount advanced. Reliance is placed on Kenya Hotels Ltd v Oriental Commercial Bank Ltd (Formerly Known as Delphis Bank Limited) [2019] eKLR and Housing Finance Company of Kenya Limited v Scholarstica Nyaguthii Muturi & another [2020] eKLR.

25. The applicants also cite Margaret Njeri Muiruri v Bank of Baroda (Kenya) Limited [2014] eKLR to argue that the Deed of Settlement is illegal, unconscionable, improvident and ought to be set aside.

26. The applicants submit that this Court has power under sections 103 1(a)& (3), 104(2)(a)(b) and 105 of the Land Act to cancel, vary, suspend or postpone a scheduled sale or extend the time for compliance by the chargor ,or issue a different remedy than outright sale. Reliance is placed on Gerishon Mbugua Kang’ethe v Housing Finance Company Limited [2016] eKLR and Beatrice Wathanu Waithaka v Kenya Women Micro-Finance Limited & another [2019] eKLR that the court may consider mitigating factors in granting an injunction. In that regard, the applicants allude to the force majeure situation that had arisen as proof that they are capable of settling the outstanding amount from the amount the Government and Nairobi Metropolitan Services owe them. Reliance is placed on Pankaj Transport PVT Limited v SDV Transami Kenya Limited [2017] eKLR to argue that they have proved that a force majeure situation had arisen even though they were not admitting the debt.

27. The applicants assert that they will suffer irreparable loss that cannot be compensated by damages given that the suit properties are worth multibillion shillings, are situate in major cities and the loans may have been fully repaid. They rely on James Titus Kisia v Guaranty Trust Bank (Kenya) Limited [2018] eKLR and Lucy Njoki Waithaka v Industrial & Commercial Development Corporation (Civil Suit No 321 of 2001) [2001] eKLR for the holding that it is not an inexorable rule that where damages may be an appropriate an interlocutory injunction should never issue as that may be unjust. (See also Joseph Mbugua Gichanga v Co-operative Bank of Kenya Ltd [2005] eKLR).

28. The applicants also argue that the balance of convenience tilts in their favour as their equity of redemption would be extinguished if interim injunction is not granted. They rely on Bomet Teachers Training College Limited v Bank of Africa Limited & another [2021] eKLR, and urge the court to allow the application.

Respondents’ submissions 29. The respondents contend that the application is res judicata as the court had declined to grant injunctions in earlier applications and this court cannot sit on appeal over its own decisions. The respondents rely on Kenya Commercial Bank Limited v Muiri Coffee Estate Limited & another [2016] eKLR, and Osman Tajir Sheikh Said & 3 others v Bank of Africa Limited (HCCC No. 86 of 2019). The respondents further contend that despite the Deed of Settlement, the issue for determination remains whether this court can stop the sale of the properties after it had declined to do so in earlier applications.

30. Regarding the in duplum rule and import of section 44A of the Banking Act, the respondents argue that the court had finally determined the issue in the earlier applications. They rely on E. T. v Attorney General & another (Petition No. 212 of 2011); [2012] eKLR that courts must guard against litigants who evade the doctrine of res judicata by introducing new causes of action so as to seek the same remedy. (See also Kenya Commercial Bank Limited v Muiri Coffee Estate case (supra).

31. The respondents submit that the applicants did not disclose that they had withdrawn pending appeals on the basis of the Deed of settlement; that they had paid Kshs. 100,000,000 in partial fulfillment of the terms of the Deed of Settlement and that on October 22, 2021, the applicants sought extension of time to comply. The respondents rely on Bahadurali Ebrahim Shamji v Al Noor Jamal & 2 others (Civil Appeal No. 210 of 1997); [1998] eKLR, for the proposition that material non-disclosure at the ex-parte stage disentitles a party any advantage from the proceedings, and is a ground for setting aside of ex-parte orders obtained.

32. According to the respondents, the default to pay the balance necessitated the move to realize the securities in accordance with the terms of the Deed of settlement, thus the application is an abuse of the process of the court because a multiplicity of applications on the same subject matter and issues. Reliance is placed on Juja Coffee Exporters Limited & 3 others v Bank of Africa Limited & 4 others (Mombasa HCCC No. 57 of 2016-para. 88–91) on the meaning of abuse of the court process.

33. The respondents argue that the applicants cannot approbate and reprobate at the same time. According to the respondents the applicants cannot rely on the force majeure clause in the Deed of Settlement and at the same time challenge its legality. Reliance is placed on on Behan & Okero Advocates v National Bank of Kenya Limited (Civil Appeal (Application No 158 of 2006); [2007] eKLR and Republic v Institute of Public Certified Secretaries of Kenya ex-parte Mundia Njeru Geteria (Misc. Civil Case No. 322 of 2008); [2010] eKLR. The respondents urge the court to uphold the Deed of Settlement as it was executed in good faith and partially performed.

34. The respondents further argue that the applicants cannot invoke the force majeure clause because no unforeseeable event has been proved to warrant invocation of the clause. There is also no evidence of decrees or directives from the government citing budgetary constraints as the reason for non-payment of the alleged sum of Kshs. 50,000,000,000 due to the applicants. The clause had also not been invoked since 2018.

35. Citing Kitur v Standard Chartered Bank Limited & 2 others, (Civil Case No. 50 of 2002), the respondents argue that the suit properties having been offered as securities, they are commodities of possible sale in the event of default. For that reason, there being a default, the applicants will not suffer irreparable loss that cannot be compensated by damages. The respondents also assert that the balance of convenience tilts in favour of the 1st respondent as it will face greater hardship if the injunction is granted given that the outstanding debt continues to attract interest. The respondents rely on Thathy v Middle East Bank (K) Ltd [2002] 1 KLR, 595; [2002] eKLR, and urge the court to dismiss the application with costs.

Determination 36. I have considered the application, the response, submissions and the decisions relied on by parties. The applicants seek an interlocutory injunction to restrain the respondents from selling the suit properties to recover Kshs. 1, 936, 548, 732. 71, pending the hearing and determination of this suit. The main reasons for seeking the orders, as can be gleaned from the pleadings, are that the respondents did not serve statutory notices as required by law and that the 1st respondent is enforcing terms of a disputed Deed of settlement which was executed under undue influence and duress and was based on material misrepresentation of both facts and the law.

37. The respondents on their part contend that the application is res judicata because similar applications were dismissed on 1st November 2017, May 7, 2018 and November 15, 2017 in HCCC No. 420 of 2016, HCCC No. 327 of 2016 and HCCC No. 355 of 2016, respectively. The respondents further contend that the Deed of Settlement was freely executed by parties and the applicants partially performed the terms of that Deed; withdrew the suits and appeals and paid the first instalment of Kshs. 100,000,0000. The respondents maintain that the application is an abuse of the court process.

38. The issues that arise for determination are whether the application is res judicata and whether the court should grant an interlocutory injunction pending hearing and determination of the main suit.

Whether application is res judicata 39. I have considered the parties’ arguments and perused the record. It is a fact that the applicants obtained financial facilities from the 1st respondent which were secured by legal charges over the suit properties. It is also true from the record, that the applicants filed several applications before this court for injunctions but all the applications were dismissed by Nzioka J on diverse dates. The rulings were dated 1st November 2017, May 7, 2018 and November 15, 2017, in HCCC No. 420 of 2016, HCCC No. 327 of 2016 and HCCC No. 355 of 2016, respectively. The applications had been filed following the 1st respondent’s move to sell the suit properties in exercise of the statutory power of sale after the applicants defaulted in loan repayment.

40. Section 7 of the Civil Procedure Act provides that:No court shall try any suit or issue in which the matter directly and substantially 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, in a court competent to try such subsequent suit or the suit in which such issue has been subsequently raised, and has been heard and finally decided by such court.

41. The ingredients of res judicata are that, there must have been a previous suit, the issue must be the same or substantially the same as the present suit, the previous suit must be between the same parties or parties acting on their behalf and the issue must have been finally determined by a competent court with jurisdiction to determine the issue.

42. There can be no argument that the issue in the previous applications, namely; injunction was to restrain sale of the suit properties. That is the same issue presently before this court. There is also no doubt that parties in the former applications are the same in the present application and those applications were determined by a competent court with jurisdiction to determine those applications. The applicants argue that the issue before this court is different as it relates to a Deed of Settlement which was not an issue in the previous applications and, therefore, the present application is not res judicata.

43. The real issue in the previous applications and in the current application, is on injunction to restrain the 1st respondent from selling the suit properties for default. This application, just like the previous applications, arises from default in meeting contractual obligations on the part of the applicants and the 1st respondent is exercising a reserved right in the contract. The properties, the subject of the present application were the same properties in the former applications and the circumstances then are the same as now.

44. In that regard, therefore, the applicants cannot successfully argue that merely because there is now a Deed of Settlement, the dispute or issue is different from what was before the court when the applications for injunction were dismissed. Section 7 states that a “court shall not try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties.” The matter in issue in the new suit must have been directly or substantially in issue in the previous suit. In fact, the matter being raised in this application was directly or substantially in issue in the previous applications.

45. In E. T. v Attorney General & another (supra) the court stated:(57)The courts must always be vigilant to guard against litigants evading the doctrine of res judicata by introducing new causes of action so as to seek the same remedy before the court. The test is whether the plaintiff in the second suit is trying to bring before the court in another way and in a form a new cause of action which has been resolved by a court of competent jurisdiction.

46. In Omondi v National Bank of Kenya Limited and others [2001] eKLR, the court held that parties cannot evade the doctrine of res judicata by merely adding other parties or causes of action in a subsequent suit.

47. In John Florence Maritime Services Limited & another v Cabinet Secretary for Transport and Infrastructure & 3 others [2015] eKLR, the Court of Appeal stated the public policy behind the doctrine of res judicata thus:The rationale behind res judicata is based on the public interest that there should be an end to litigation coupled with the interest to protect a party from facing repetitive litigation over the same matter. Res judicata ensures the economic use of court’s limited resources and timely termination of cases. Courts are already clogged and overwhelmed. They can hardly spare time to repeat themselves on issues already decided upon. It promotes stability of judgments by reducing the possibility of inconsistency in judgments of concurrent courts. It promotes confidence in the courts and predictability which is one of the essential ingredients in maintaining respect for justice and the rule of law. Without res judicata, the very essence of the rule of law would be in danger of unraveling uncontrollably.

48. This court, differently constituted. dealt with applications for injunction between the same parties over the same properties for default in loan repayment. The court handed down no less than three rulings, each time dismissing an application for injunction. What before this court is another application for injunction due to default in loan repayment. The application relates to the same properties and pits the same parties. That being the case, I agree with the respondents that the present application, in so far as it seeks an injunction on substantially the same grounds over the same properties and between the same parties, is res judicata. This should have been the end of the matter, but for completeness, I turn to consider whether an injunction should be granted.

Whether to grant an injunction 49. The applicants’ case, as I perceive it, is that the loans were secured by several properties situate in various towns; the loans were repaid and that if an injunction is not granted, the properties will be sold, occasioning irreparable harm. The applicants also argue that statutory notices were not served and, therefore, the intended sale is unlawful.

50. Conditions for granting an interlocutory injunction are settled. An applicant must establish a prima facie case with a probability of success; an interlocutory injunction will not normally be granted unless the applicant may otherwise suffer irreparable injury that would not adequately be compensated by an award of damages and, if in doubt, the court will determine the application on a balance of convenience. (Giella v Cassman Brown & Co Ltd (supra); Mrao Ltd v First American Bank Ltd & 2 others (supra).

51. The applicants executed a Deed of Settlement with the 1st respondent. The Deed of Settlement had terms and conditions, including requiring that all suits and appeals be withdrawn. The agreed amount was to be paid in three instalments on given timelines. The applicants indeed withdrew the suits and appeals and paid the first instalment as was required by the Deed of Settlement. The applicants did not, however, pay the second and third instalments. The 1st respondent invoked the default clause in the Deed of Settlement, served a formal demand and on failing to pay, the 2nd respondent served the 14 days notice demanding full payment of the outstanding amount and set the date for sale of the properties by public auction.

52. There is no argument that the applicants are in default; that the respondents acted in terms of the Deed of Settlement and that the notice required under that deed of settlement was served.

53. The Deed of Settlement ushered is a different arrangement between the parties on the mode of payment of the outstanding amount and has consequences in default. The applicants performed part of their obligations under the terms of that deed of settlement, withdrew the suits and paid the initial amount. Having partly performed the terms their obligations under the deed of the settlement, the applicants cannot now complain that they should have been served with statutory notices under the legal charges that had been shelved in favour of the new contractual arrangement,

54. In Mrao Ltd v First American Bank Ltd & 2 others(supra), the Court of Appeal observed that a prima facie case in a civil application includes but is not confined to a “genuine and arguable case.” It is a case which, on the material presented to the court, a tribunal properly directing itself, will conclude that there exists a right which has apparently been infringed by the opposite party as to call for an explanation or rebuttal from the latter.

55. And in Nguruman Limited v Jan Bonde Nielsen & 2 others [2014] eKLR, the Court of Appeal again stated:The party on whom the burden of proving a prima facie case lies must show a clear and unmistakable right to be protected which is directly threatened by an act sought to be restrained, the invasion of the right has to be material and substantive and there must be an urgent necessity to prevent the irreparable damage that may result from the invasion. We reiterate that in considering whether or not a prima facie case has been established, the court does not hold a mini trial and must not examine the merits of the case closely. All that the court is to see is that on the face of it the person applying for an injunction has a right which has been or is threatened with violation. Positions of the parties are not to be proved in such a manner as to give a final decision in discharging a prima facie case. The applicant need not establish title it is enough if he can show that he has a fair and bona fide question to raise as to the existence of the right which he alleges. The standard of proof of that prima facie case is on a balance or, as otherwise put, on a preponderance of probabilities. This means no more than that the Court takes the view that on the face of it the applicant’s case is more likely than not to ultimately succeed.

56. The applicants have an obligation to show that they have a prima facie case with a probability of success. The applicants have argued that the Deed of Settlement was not freely executed. Without making a final pronouncement on this issue, I do not think this amounts to a prima facie case, given that parties executed the deed of settlement whose terms were partially performed. The applicants are clearly in default and have not in any way attributed the default to the 1st respondent.

57. Further, the applicants cannot approbate and reprobate the deed of settlement. that is; they cannot on the one hand argue that the deed of settlement is illegal and on the other hand invoke the force majeure clause which is a condition applicable in the same deed. The respondents argue that no unforeseeable event have been proved to warrant invocation of the clause; that there is no evidence of decrees or directives from the government citing budgetary constraints as the reason for non-payment of the alleged sum of Kshs. 50,000,000,000 due to the applicants and that the clause had also not been invoked since 2018. The applicants have not satisfactorily answered this criticism.

58. I am not persuaded that the applicants have met the first test for granting an interlocutory injunction.

59. Regarding irreparable injury which cannot be adequately compensated through damages, all the applicants state is that the loans were repaid; that the properties are situate in towns and if the auction is allowed to proceed, they will suffer irreparable loss. The respondents on their part argue that the properties were charged to secure loans and the applicants knew that the properties would be sold in the event of a default. The respondents maintain that there being default, the applicants will not sufferer irreparable loss.

60. I have considered this argument and the material before court. On whether the applicants will suffer irreparable injury that cannot be compensated by damages, I am not persuaded that this will be the case. an applicant must show that the loss to be suffered is such that it cannot be undone by way of damages. The 1st respondent is a financial institution that would easily compensate the applicants were the suit to eventually succeed. The value of the charged properties is also known or can easily be ascertained and, therefore, the applicants can recoup the value of those properties if their suit succeeded.

61. On the balance of convenience, the applicants argue that the balance tilts in their favour as their equity of redemption would be extinguished if interim injunction is not granted. I am of the considered view that the balance of convenience tilts in favour of the 1st respondent. The loan amount continues to attract interest and, as a result, the amount plus interest could outstrip the value of the properties. This means that if the 1st respondent is restrained from exercising its right under the Deed of Settlement until the suit is heard and determined, it is not certain when the suit will be determined and the 1st respondent may not be able to recover the outstanding balance plus interest by the time the suit will be determined. This is so because the value of the property cannot be guaranteed to be sufficient to cover the outstanding loan amount and interest then outstanding. In that regard, I find that the balance of convenience tilts in favour of the 1st respondent since it can pay the value of the properties if the applicants eventually succeeded in the suit.

62. In the end, the conclusion I come to is that the application lacks merit and is dismissed with costs

DATED, SIGNED AND DELIVERED AT NAIROBI THIS 3RD DAY OF JUNE, 2022. E C MWITAJUDGE