[2024] KEHC 11147 (KLR)

Equip Agencies Limited & 5 others v I&M Bank Limited & another (Commercial Case E943 of 2021) [2024] KEHC 11147 (KLR) (Commercial and Tax) (19 September 2024) (Ruling)

Neutral citation: [2024] KEHC 11147 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts)

Commercial and Tax

Commercial Case E943 of 2021

PM Mulwa, J

September 19, 2024

Between

Equip Agencies Limited

1st Plaintiff

Divyesh Indubhai Patel

2nd Plaintiff

Vinesh Indubhai Patel

3rd Plaintiff

Grishma Kumar Indubhai Patel

4th Plaintiff

Unicom Limited

5th Plaintiff

Interactor Company Limited

6th Plaintiff

and

I&M Bank Limited

1st Defendant

George Njoroge Muiruri t/a Phillips International Auctioneers

2nd Defendant

Ruling

1. By a ruling of the court dated 3rd June 2022, the plaintiffs’ application that sought inter alia injunctive orders against the defendants to restrain the exercise of their statutory power of sale was dismissed. This ruling has prompted the filing of two applications by the parties.

2. First is the plaintiffs’ Notice of Motion dated 6th June 2022 made under Sections 1A, 1B, 3A, 63 (c), 75(1), 95 of the Civil Procedure Act and Order 42 Rule 6 and Order, 50 Rule 6 and Order 51 Rule 1 of the Civil Procedure Rules, 2010 seeking the following orders:1. Spent2. Spent3. That pending the filing, hearing and determination of an application under rule 5(2)(b) of the Court of Appeal Rules in the Court of Appeal or for such reasonable time to enable the plaintiff to prosecute their application under rule 5(2)(b) of the Court of Appeal Rules, this honorable 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 evicting, 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, leasing, letting, charging or otherwise howsoever interfering with the ownership or quiet possession over those parcels of land known as Mainland North/VI/3075 and L.R No. 209/4535, L.R No. 214/172 and L.R No. 209/8755. 4.That in the alternative to prayer 2 and 3, this honorable 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 evicting, 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, leasing, letting, charging or otherwise howsoever interfering with the ownership or quiet possession over those parcels of land known as Mainland North/VI/3075 and L.R No. 209/4535, L.R No. 214/172 and L.R No. 209/8755 for 60 days or such time as it may deem fit to enable the plaintiff to file and prosecute an appeal against the Ruling of this Honourable Court delivered on 3rd June 2022. 5.That costs of this application be in the cause

3. The application is supported by the grounds on its face and the supporting affidavit of the 2nd plaintiff sworn on 6th June 2022. It is opposed by the 1st defendant through the replying affidavit of its Senior Manager, Legal Department, Andrew Muchina, sworn on 8th June 2022.

4. Second, is the defendants’ Notice of Motion dated 14th October 2022 made under Sections 1A, 1B & 3A of the Civil Procedure Act and Order 25 Rule 5 [1] and [2], Order 2 Rule 15, Order 40 Rule 7 and Order 51 Rule 1 of the Civil Procedure Rules seeking the following orders:1. Spent2. Spent3. The suit be marked as settled in terms of judgment dated 30" September 2022, in HCCC No. 87 of 2019: Equip Agencies Limited vs I&M Bank Limited & 2 Others which judgment adopted the terms of the Deed of Settlement dated 10th June 2021. 4.The plaintiff's Notice of Motion dated 6 June 2022 be struck out with costs.5. Costs of this application and the entire suit be borne by the plaintiffs on a full indemnity basis.

5. The application is supported by the affidavit of Andrew Muchina sworn on 21st October 2022 and it is opposed by the affidavit of Divyesh Indubhai Patel sworn on 23rd March 2023. The applications have been disposed by way of written submissions which are on record.

The plaintiffs’ application 6. The plaintiffs state that they are aggrieved by the court’s Ruling and have preferred an appeal against the same to the Court of Appeal as they have lodged a Notice of Appeal and applied for certified copies of the Ruling, Order and Proceedings. That upon dismissing the plaintiffs’ application, the court directed the plaintiffs to file a formal application for further orders and thus, they seek the aforementioned orders to enable them secure the documents applied for above and move the Court of Appeal under Rule 5(2)(b) of the Court of Appeal Rules. That the said documents, specifically the certified copy of the Ruling, order and proceedings are mandatory in lodging an application under Rule 5(2)(b) in the Court of Appeal.

7. The plaintiffs contend that whilst they intend to pursue an appeal and application for injunction pending appeal, the defendants stand to sell the suit property without notice and that although the appeal and the application under Rule 5(2)(b) of the Court of Appeal Rules is arguable and have high chances of success as demonstrated in the draft Memorandum of Appeal, the suit property is at imminent risk of being taken out of the jurisdiction of the Court and both the intended appeal and the application will in the circumstance be rendered nugatory unless the Court grants limited conservatory order. That the 2nd defendant had already set the 22nd June 2022 (now past) as the date of auction for the properties vide newspaper advert in Daily Nation of 6th June 2022 and that whereas the said advert cites the provisions of the law upon which the sale is intended, there is no compliance with the said provisions.

8. They claim that the said properties have not been visited for valuation in more than 3 years as required and intended sale is devoid of the said valuation and that the imminent auction is set for all the properties despite of the same being valued at far much more than the amount demanded. Further, that the application seeks to safeguard the constitutional right of appeal and that despite of dismissing the suit, this Court has jurisdiction and powers to grant the orders sought and that although the intended appeal is arguable noting the issues raised in the memorandum of appeal and closing submissions, the plaintiffs will be prejudiced irreparably should the suit property be sold. That the purpose for which the above interim orders were issued will be defeated if the application is not allowed. And that this application has been brought without undue delay.

9. In response, the defendants state that the plaintiffs have not satisfied any of the conditions necessary for grant of the orders sought, they have not demonstrated that they have an arguable appeal or that to refuse the injunction would render the appeal nugatory or suffer any irreparable loss that cannot be compensated by way of damages or that the 1st defendant may not be in a position to pay the said damages in the event the charged properties are sold and the intended appeal succeeds.

10. The defendants are apprehensive that if the order of injunction is granted, the said order will inflict greater hardship on the 1st defendant than it would avoid. That the plaintiffs have already demonstrated their inability to pay by breaching the terms of the Deed of Settlement and that it is because of the said breach that the 1st defendant now intends to sell the charged properties in compliance with the terms thereof. They state that the debt stands at Kshs. 1,936,548,732. 71 as at 22nd September 2020 together with interest and costs until payment in full. That if the trend continues unabated, the debt shall exceed the securities thereby causing irreparable loss to the 1st defendant. The 1st defendant claims that it continues to incur auctioneers costs every time the charged properties are put up for auction but later stopped by court injunctions.

11. The defendants deny that the charged properties have not been valued for more than 3 years as contended by the plaintiffs. The same having been advertised for auction on 22nd June 2022 have current Valuation Reports. For these reasons, the Defendants urge that the application be dismissed with costs to them.

The defendants’ application 12. The defendants contend that by the Deed of Settlement dated 10th June 2021 the plaintiffs and the 1st defendant agreed to settle various cases stated in the Deed of Settlement. However, the plaintiffs have been in default of the Deed of Settlement for failing to pay the second instalment of Kshs 50,000,000. 00 within 120 days of execution of the Deed of Settlement in breach of Clause 1. 3 thereof. That the plaintiffs have also refused, failed and/or neglected to regularize the default in the Deed of Settlement despite admitting default and promising to regularize the same. That despite several reminders to the plaintiffs to file consents in court to withdraw the cases in the High Court as agreed in the Deed of Settlement, they have refused, failed and/or neglected to do so.

13. On 30th September 2022, the court (the late Majanja J.) entered judgment in favor of the 1st defendant in Equip Agencies Limited v I & M Bank Limited & 2 others (Civil Case 87 of 2019) [2022] KEHC 13525 (KLR) (Commercial and Tax) (30 September 2022) (Ruling) on the terms that the said suit was marked as settled in accordance with the terms set out in the Deed of Settlement. In view of the foregoing, the defendants aver that the plaintiffs’ claim does not disclose any reasonable cause of action against the 1st defendant because Judgment and Decree has been entered in favor of the 1st Defendant in accordance with terms of Deed of Settlement.

14. The defendants urge the court to strike out the application dated 6th June 2022 and the suit as they do not disclose any reasonable cause of action against the 1st Defendant, and that they are scandalous, frivolous, vexatious and otherwise an abuse of the court process. For these reasons, the defendants urge the court to allow their application.

15. In reply and opposition to the defendants’ application, the plaintiffs depose that this suit is not among the matters for settlement in the Deed of Settlement and that in fact, the suit herein challenges the Deed of Settlement in line with Clause 2. That the defendants cannot approbate and reprobate on the issue by alleging that the settlement amount has not been repaid in full and at the same time seek to have the suit withdrawn without discharging the securities as they have in fact sought to exercise statutory power of sale.

16. They assert that it is apparent from the Deed of Settlement that the parties did not intend or envisage to settle the matter herein and that the defendants’ application seeks to convolute and cloud issues and is an afterthought and baseless. They urge the court not to selectively deal with part of the Deed of Settlement as sought by the defendants.

17. The Plaintiffs state that the orders issued in Equip Agencies Limited v I & M Bank Limited & 2 others (supra) have no bearing in this matter, that the application is res judicata, the defendants having sought to have this suit marked as settled and or withdrawn in the Equip Agencies Limited case but which prayer was dismissed in the ruling of 30th September 2022. As such, the plaintiffs seek that the application be dismissed.

Analysis and determination 18. I have gone through the parties’ pleadings and submissions. I propose to first deal with the defendants’ application that seeks to have this suit marked as settled as per the terms of the Deed of Settlement and strike out the plaintiffs’ application for not disclosing a cause of action against the defendants. My determination of this application will determine whether or not the plaintiffs’ application will be considered on its merits.

19. The Deed of Settlement is common to the parties. In the court’s ruling of 30th September 2022 in Equip Agencies Limited v I & M Bank Limited & 2 others (supra) the late Majanja J., held that there is no order either from this court or the Court of Appeal staying, varying or setting aside the implementation of the Deed of Settlement meaning its import is still alive and applicable to the executing parties. Whereas I am aware that this suit is challenging the Deed of Settlement, I have still perused the same and found that on the face of it, this suit was not one of those the parties agreed to have settled or compromised. The defendants cannot therefore rely on the Deed of Settlement or the court’s ruling in Equip Agencies Limited case. The Court’s ruling only settled the said case and the Deed of Settlement does not provide for the settling of this instant matter.

20. I now turn to determine whether the plaintiff’s suit and application ought to be struck out for not disclosing any cause of action because of the Deed of Settlement and the court’s ruling in the Equip Agencies Limited case (supra). Having found as above and aware that this suit is challenging the Deed of Settlement, it follows that the defendants cannot state that the plaintiffs’ claim and application has no a cause of action against them. I assert that the propriety of the Deed of Settlement is a live issue before this court and is a valid cause of action by the plaintiffs who claim that the same was executed using undue influence and threats to sell the suit property. I therefore decline to strike out the plaintiffs’ claim and application. The net effect of my aforementioned findings is that the defendants’ application dated 14th October 2022 has no merit and is for disallowing.

21. Turning to the plaintiffs’ application, the same seeks an injunction pending the filing of an application under Rule 5(2)(b) and an appeal before the Court of Appeal. I note that the plaintiffs grounded their application under, inter alia Order 42 Rule 6 of the Civil Procedure Rules which for all intents and purposes applies to a stay of execution pending an appeal and not an injunction pending an appeal. This court, in James Juma Muchemi And Partners Limited v Barclays Bank of Kenya Ltd NRB HCCC No. 339 of 2011 [2011] eKLR held that such an application is made under the court’s inherent jurisdiction and the court applies the principles set out in the English case of Erinford Properties v Cheshire County Council (1974) 2 ALL ER 4 where the court having first dismissed an application for interlocutory injunction, proceeded to grant an ex-parte injunction to the plaintiff pending an appeal to the Court of Appeal of England. The defendant applied to discharge that injunction on the ground that the court was functus officio but the motion was dismissed.

22. In Butt v Rent Restriction Tribunal (1982) KLR 417 the Court of Appeal (Madam J.) at page 420 cited with approval the finding of Megarry J., as he then was, in Erinford Properties Limited vs Cheshire County Council (1974)2 All ER 448 and held as follows:“…that there was no inconsistency in granting such an injunction after dismissing the motion, for the purpose of the order is to prevent the Court of Appeal’s decision being rendered nugatory should that court reverse the judge’s decision. (emphasis mine)

23. Therefore, an applicant must demonstrate that the intended appeal will be rendered nugatory should the injunction not be granted. Going through the parties’ rival positions I highlighted in the introductory part above, I am inclined to agree with the defendants that it is them who will be prejudiced if an injunction is granted as the outstanding debt is likely to outstrip the value of the security and as such, the 1st defendant would not be holding good security by the time the appeal is concluded. I am further persuaded that even if the Court of Appeal reverses the court’s ruling of 3rd June 2022, any inconvenience or loss occasioned on the plaintiffs either by reason of an undervaluation of the security or overstatement of the outstanding debt, can be assuaged by way of costs and damages which the 1st defendant has stated it is capable of paying. I also note that the plaintiffs have been enjoying interim injunctive orders for more than 2 years now since the court’s ruling which is more than enough time for them to get the copy of the Ruling and proceedings to enable them file their appeal and have their application under Rule 5(2)(b) of the Court of Appeal Rules placed before the Court of Appeal. The plaintiffs’ application must also fail.

Conclusion and disposition 24. In the foregoing, it is my finding that both the plaintiffs’ application dated 6th June 2022 and the defendants’ application dated 14th October 2022 are lacking in merit and are dismissed with no orders as to costs. The interim orders of injunction currently in place are discharged.

25. Orders accordingly.

RULING DELIVERED VIRTUALLY, DATED AND SIGNED AT NAIROBI THIS 19TH DAY OF SEPTEMBER 2024. P. MULWAJUDGEIn the presence of:Mr. Mirie for 1st – 4th plaintiffsMs. Kimere for 5th plaintiffMr. Wawire for defendantsCourt Assistant: Carlos