[2022] KEHC 185 (KLR)

Gachura (Being a Legal Representative of the Estate of Godfrey Mbuuri Gachura) v Family Bank Ltd & another (Civil Case E128 of 2021) [2022] KEHC 185 (KLR) (Commercial and Tax) (14 March 2022) (Ruling)

Neutral citation: [2022] KEHC 185 (KLR)

Republic of Kenya

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

Commercial and Tax

Civil Case E128 of 2021

A Mabeya, J

March 14, 2022

Between

Anne Waithira Gachura

Plaintiff

Being a Legal Representative of the Estate of Godfrey Mbuuri Gachura

and

Family Bank Ltd

1st Respondent

Kenya Orient Life Assurance Co. Ltd

2nd Respondent

Ruling

1. Before Court is an application dated 11/3/2021. It was brought under Articles 40 and 159(2) of the Constitution, sections 1A, 1B & 3A of the Civil Procedure Act, order 40 rules 1 & 2, order 51 (1) of the Civil Procedure Rules and section 90 (1) (2) & 104(2) of the Land Act.

2. The application sought injunctive orders to restrain the 1st defendant from taking any further action to sell, offering for sale, auction, charging further interest on the loan account and or taking any further steps towards realization of the property known as L.R. No. 209/10236 and L.R. Nairobi/Block 82/1282 pending the hearing of the suit.

3. The application was supported by the affidavits of Anne Waithira Gachura sworn on 11/3/2021 and 8/6/2021, respectively. The grounds for the application were that on 31/1/2019, the 1st respondent afforded the deceased a loan facility of Kshs. 70,000,000/= which was secured by; charge over L.R No. Nairobi/Block 82/1282, L.R. No. 132913 and a deed or rental assignment over L.R. Nairobi/Block 82/1282 and L.R. No. 132913. In addition, there was a Life Insurance Cover for Godfrey Mbuuri Gachura, the deceased.

4. That the bank which was associated with the 2nd respondent maintained a group life insurance policy cover with the 2nd respondent. Upon applying for the loan on 31/8/2017, the deceased was requested by the 2nd respondent to attend to the Meridian Medical Centre Ltd for various tests as a precondition for the life insurance cover. The deceased attended these tests on 7/2/2019 and thereafter the loan was approved. The respondents were responsible for determining the cover and payable premiums.

5. The deceased paid all premiums due on the life insurance policy and met all repayments on the loan until his demise on 11/7/2020. His estate notified the defendants of his demise and requested that the facility be discharged and the securities be released to the estate as the facility had been insured against his life. The applicant later realized that on receiving the death claim, the 2nd defendant notified the 1st defendant on 27/10/2020 that the it deemed the claim inadmissible.

6. That shortly thereafter, the 1st defendant issued the applicant with a 90day statutory notice demanding payment of Kshs. 61,722,571/09 failing of which it would sell the properties by auction.

7. The applicant contended that the 1st defendant ought to have stopped further charges on the account upon the demise of the deceased and notify the 2nd defendant accordingly.

8. The 1st respondent filed grounds of opposition dated 16/4/2021. They were founded on grounds that the applicant’s allegations were false and not backed by evidence. That the applicant had not established a prima facie case with a probability of success to warrant grant of the orders sought.

9. That the 1st respondent had a contractual and legal right to recover the outlay in case of default. That the plaint and documents produced amounted to an admission of the loan hence the applicant lacked right of audience in Court. That the issues raised in the application were triable issues which could not be addressed at an interlocutory stage and required a full hearing.

10. In addition, the 1st respondent filed lengthy replying affidavit sworn by Sylvia Wambani on 5/5/2021. It was deponed that it was not denied that the deceased took a facility of Kshs. 70,000,000/=. That the facility identified a mortgage protection insurance cover in favour of the 1st respondent. It was however contested that the amount cover by the insurance was not specified. That the group life insurance was offered by a separate entity from the 1st respondent.

11. That the results attached by the applicant were inconclusive and that the applicant withheld some results of the tests conducted. That some of those results would have indicated the existence of terminal or chronic pre-existing element hence automatically removed the deceased from being a beneficiary under the policy. It was however not denied that Kshs. 102,104. 00/= was debited from the deceased’s account to insure the first loan disbursement of Kshs. 40,000,000/=.

12. It was contended that the deceased was requested to attend a second medical report before the second disbursement of Kshs. 30,000,000/= was made, but he failed to attend. That only premiums for the first disbursement were paid. That the applicant’s death claim of 27/1/2021 was a mortgage protection policy and not a life insurance.

13. That a 90 days statutory notice was sent to the estate of the deceased. That freezing of interest would only occur once the policy crystallized. That the deceased could not derive a benefit from the policy.

14. The applicant filed her submissions dated 8/6/2021 and 6/7/2021, respectively. The 1st respondent filed its submissions dated 25/6/2021. The Court has considered the pleadings and the submissions the parties on record.

15. This is an injunction application. The principles applicable for granting an interlocutory injunction were settled in the case of Giella vs Cassman Brown & Company Limited (1973) E A 358. These are that, first, an applicant must establish a prima facie case with a probability of success. Secondly, an interlocutory injunction will not normally be granted unless the applicant might otherwise suffer irreparable injury, which would not adequately be compensated by an award of damages, and thirdly, if the Court is in doubt, it will decide an application on the balance of convenience.

16. On prima facie case, the grant of a loan facility of Kshs. 70,000,000/= by the 1st respondent is not in dispute. The loan was secured by charges and deed of rental assignment over the suit properties. There was an life insurance cover or a policy protection cover for the deceased.

17. It is this life insurance or policy insurance cover that is the center of dispute. On a prima facie basis, the applicant has demonstrated that the deceased underwent medical tests and results submitted. There was a contention that most of the results were sent6 directly to the 2nd respondent who issued the policy upon a premium of Kshs. Kshs. 102,104/= being paid. The demise of the deceased was communicated to both respondents on time. However, the 2nd respondent denied the claim.

18. In the view of this Court, the question is, was the facility protected by the insurance cover? If so, upon demise of the deceased, was the insurance cover not supposed to discharge the liability under the cover? Was the 2nd respondent entitled to decline the claim upon the demise of the deceased and not earlier? The question turns on the importance of insurance protection covers which are usually insisted upon by the lenders and on which, borrowers do pay premiums on and interest thereon. To this Court’s mind, that is not a trivial matter which must be investigated at the trial.

19. The Court has considered the 1st respondent’s contention that the deceased failed to attend tests for a second medical report and that therefore, only the first loan disbursement of Kshs. 40,000,000/= was secured by the insurance cover.

20. There was no evidence of any request for further tests on the deceased. If that was the case, there was no explanation why there was a second disbursement of Kshs. 30,000,000/=. The 1st respondent submitted that it failed to deduct any insurance premiums for the second disbursement due to the deceased’s alleged non-attendance for a second medical report. There was no evidence that such a decision was communicated to the deceased.

21. I also take judicial notice of the fact that the 1st respondent issued a 90 day statutory notice on the very day that it wrote to the applicant that the death claim was under investigations. It is clear that the investigations had not been concluded. Even then, the 1st respondent did not take any measures to inform the estate of the deceased that the death claim had been declined and the reasons therefor. It is therefore doubtful whether the statutory notice was issued in good faith.

22. In any event, the 1st respondent did not deny the applicant’s allegation that the deceased continued to pay the premiums due on the insurance cover and met all repayments on the loan until his demise.

23. In the circumstances, I find that the applicant has established a prima facie case against the respondents with a probability of success.

24. As regards the second test of whether the applicant will suffer irreparable injury, the answer is in the affirmative. The 1st respondent admitted that it had already issued a 90 day’s statutory notice. If the suit properties are sold and it later turns out that the insurance cover should have discharged the deceased’s liability, the estate of the deceased would have been permanently lost of the properties. Such sale would occasion the applicant irreparable injury.

25. On the balance of convenience, the same tilts in favor of the applicant. The 1st respondent can always proceed with its statutory power of sale should it succeed in the suit and recover interest.

26. In the circumstances, I find the application to be merited and allow the same as prayed with costs.It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 14TH DAY OF MARCH, 2022. A. MABEYA, FCIArbJUDGE