[2006] KEHC 863 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NYERI

Civil Suit 39 of 2005

GEORGE WAHINYA MACHARIA ……………................................…………… PLAINTIFF

VERSUS

EQUITY BANK (K) LIMITED ……………………............................…… 1ST DEFENDANT

GAKUYU FARMERS CO-OP. SOCIETY LTD. …........................…… 2ND DEFENDANT

R U L I N G

George Wahinya Macharia (hereinafter referred to as the Applicant) has come to this court by way of Chamber Summons under rule 3(1) and (2) of the High court (Practice and Procedure) Rules of the Judicature Act Cap 8, and section 3A and 63 (e) of the Civil Procedure Act as well as Order XXXIX rule 1, 2 & 2A of the civil Procedure Rules.

Initially the application was filed during the High Court vacation hence the invocation of the High Court (Practice and Procedure) Rules of the Judicature Act. Prayer (1) which related to this is however now spent. Prayer 3 which required the Plaintiff to be furnished with the statement of accounts has also been spent as the statements have been supplied. The applicant is now pursuing prayer (2), (4) & (5) which are as follows:-

(2) that there be a temporary injunction restraining the 1st Defendant

its servants and or agents from selling the Plaintiff’s property to wit Konyu/Gakuyu/1058, Kiine/Gacharo/1127 and Mwerua/Kabiriri/613 pending the hearing and determination of this application interparties.

(4) That there be a temporary injunction restraining the 1st defendant

its servants and or agents from selling the Plaintiff’s property to wit Konyu/Gakuyu/1058, Kiine/Gacharo/1127 and Mwerua/Kabiriri/ 613 pending the hearing and determination of this suit.

(5)That the costs of this application be borne by the Defendants.

Filed contemporaneously with the Chamber Summons is a plaint in which the applicant as the plaintiff has brought a suit against Equity Bank (K) Ltd. (the 1st Respondent herein) as the 1st Defendant and Gakuyu Farmers Co-operative Society (the 2nd Respondent herein) as the 2nd Defendant seeking judgment in his (i.e. Plaintiff’s) favour for:

(a)A declaration that the charges as created and executed are null and void ab initio

(b)An account hereto

(c)A discharge of the Plaintiff’s obligations and liabilities underthe said charges as the same were null and void “ab initio.”

(d)An injunction restraining the defendant’s from selling thePlaintiff’s property.

(e)Costs and interest.

No summons appear to have been served on the Respondents and no defences have therefore been filed. To this extent the applicant is in breach of Order XXXIX rule 3(3) of the civil Procedure Rules.

The current application is based on the grounds stated on the body of the application which are as follows:-

(a)That the Plaintiff who is the guarantor of 2nd Defendant hasnever received any statutory notice and demand for repayment.

(b)That the Plaintiff is keen to redeem his properties but his right ofredemption has been frustrated and or clogged by the 1st Defendant working in cohorts with the 2nd Defendant.

(c)That the charges herein are defective since:

(i)They were for Kshs.1. 4 million however the defendant advanced the sum of Kshs.3. 0 million to the 2nd Defendant on the basis of those charges.

(ii)No Land Control Board consent was given.

(iii)No accounts have been furnished

(iv)The interest herein is compounded whereas there is no arrangement for the same to be compounded.

(v)There is no priority of contract between the parties.

(vi)The 1st Defendant purporting that there is no liability against the 2nd Defendant which was the Principal Borrower.

6. There was no consideration for the charges.

7. The charges purport to vary statutory provisions and oust the samewithout the court’s consent or authority.

The application is also supported by a lengthy affidavit sworn by the applicant on 29th March 2005. In the affidavit the applicant explains that he is the registered owner of properties known as Konyu/Gakuyu/1058, Kiine/Gacharo/1127 and Mwerua/Kabiriri/613 which properties have been advertised by the 1st Respondent for sale as per the Daily Nation of 23rd March 2005, and that the sale is pursuant to advances made to the 2nd Respondent which loan the 2nd Respondent had repudiated and the 1st Respondent was therefore demanding Kshs.5,491,900/= from the applicant.

The applicant maintains that contrary to a charge for Kshs.1. 4 million executed by him, the 1st Respondent had illegally consolidated the amount with a sum of Kshs.3 million advanced to the 2nd Respondent, which amount has been subjected to compound interest rather than the 24% interest provided in the charge. This has resulted in interest which is unconscionable and against public policy.

The applicant avers that the 1st Respondent has conspired with the 2nd Respondent to clog his right of redemption contending that he was the Principal Borrower when he was only a guarantor.

The applicant further contends that no proper statutory notice was served upon him, and that the charges cannot be transferred from Equity Building Society to Equity Bank Ltd. without the Land Control Board consent.

The annextures which have been exhibited include copies of the Charges for Kshs.1. 4 million executed by the applicant, statutory notices for notification of sale of moveable property and a letter from the 2nd Respondent repudiating liability.

Mr. Macharia who appeared for the applicant submitted that the 1st Respondent advanced Kshs.1. 6 million to the 2nd Respondent in breach of section 24 of the Building Society’s Act, and Article 4 and that this amount was further irregularly tacked with the loan of Kshs.1. 4 million granted to the applicant by the 1st Respondent. Mr. Macharia further submitted that the Charges were illegal as they were asking for an amount which had not been secured. Mr. Macharia also maintained that the notices served on the applicant under section 74 of the Land Registered Act were defective as the interest demanded related to a futuristic date and did not carry the mandatory period of notice required.

With regard to the replying affidavits it was submitted that the replying affidavit sworn by Mary Wangari Wamae was defective as it was not under corporate seal as required by Order III rule 2 (c) of the Civil Procedure Rules, and that paragraph 2, 3 and 4 of the affidavit of Joseph Munene Kamwiti should be struck out as he has not disclosed the sources of his information, and that the affidavit is further defective as paragraphs 10, 12, 13, 14 & 16 are contrary to order 18 rule 5 of the Civil Procedure Rules as they are written in plural instead of being in the first person.

The sum total of Mr. Macharia’s submissions was that the applicant had established a prima facie case with a probability of success and has further shown that he is likely to suffer irreparable injury if the 1st Respondent is not restrained from selling his properties pending the determination of the suit.

The 1st Respondent objected to the application through a replying affidavit sworn by its legal services manager. Mary Wangari Wamae on 3rd May 2005. The 28 paragraph affidavit is quite detailed and I do not propose to go into all the matters raised therein suffice to note that she avers that the 1st Respondent is a bona fide chargee pursuant to the Charges signed by the applicant as the 1st Respondent is a successor or assign of Equity Building Society. It was further averred that the applicant is properly indebted to the 1st Respondent for the sum of Kshs.5,914,629/95 pursuant to an agreement entered into between the 1st Respondent, the applicant and 2nd Respondent for a credit facility of Kshs.3,000,000/= which was partly secured over the applicant’s 3 properties and which the applicant was obligated to repay at the rate of 24% interest per annum but has failed to repay. The 1st Respondent was therefore entitled to realize the security by exercising its statutory power of sale.

It was further averred that both the applicant and the 2nd Respondent have admitted their indebtedness to the 1st Respondent, and that contrary to the applicant’s assertions that the 1st and 2nd Respondent have conspired to clog his right of redemption, it is the applicant who has failed to redeem the Charge.

Grounds of objection were also filed on behalf of the 2nd Respondent in which it was stated that the application is fatally defective and an abuse of the process of the court. It was contended that the provisions of section 63(e) of the Civil Procedure Act are not available to the applicant, and that a prima facie case has not been established by the applicant to warrant the granting of the orders sought.

Mr. Joseph Munene Kamweti the chairman of the 2nd Respondent Society swore a replying affidavit in which he deponed that the 2nd Respondent never authorized the applicant to borrow money from the 1st Respondent on behalf of the 2nd Respondent, nor did the 2nd Respondent authorize the applicant to charge his property on behalf of the 2nd Respondent. He maintained that the applicant got the money advanced and utilized it for his own benefit and a few of his supporters, and that the applicant was not a guarantor but a Borrower/Chargee.

Mr. Ngunjiri appeared for the 1st Respondent, whilst Mr. Munene appeared for the 2nd Respondent. They submitted that the application was defective as its main prayer i.e. No. 4 was not supported by a prayer for a mandatory permanent injunction in the plaint. Relying on the case of Dismus Oduor Owuor v/s Housing Finance Co. (K) Ltd & Another Milimani Commercial Civil Case No. 630 of 2001 the court was urged to dismiss the application. The court was further urged to dismiss the plaint as the verifying affidavit was not adequate.

In response to the submission that the replying affidavit sworn by Mary Wangari Wamae was not under seal, Mr. Ngunjiri submitted that a seal was not necessary since the Deponent had indicated that she was duly authorized to swear the affidavit on behalf of the Company. In this regard the case of Commerce Bank Ltd. v/s Paradiso Court Ltd. & 3 others Milimani High Court Commercial Case No. 1735 of 2000 was relied upon.

It was further submitted that under section 55A (4) (d) of the Building Societies Act, Equity Building Society. was mandated to transfer its business to the 1st Respondent and such a transfer was not subject to the land Control Board consent and that the 1st Respondent was mandated to enforce the charges and that even assuming that the transaction was found to be void for want of land control Board consent, the applicant is still obliged to refund monies that have passed to him in the transaction as the money is recoverable from him as a debt which the successor of Equity Building Society would be entitled to recover.

Finally it was submitted that no prima facie case has been established nor has evidence been adduced to show that moneys were paid, nor has the applicant established that he is likely to suffer loss that cannot be quantified.

The submissions made by the counsels were fairly lengthy and there were numerous authorities cited which I have not referred to herein. That is not to say that I have not considered the same. Nevertheless the counsels appeared to have lost sight of the fact that this was an interlocutory application in which the court cannot consider and determine issues which really ought to be subject of the main trial. Indeed the applicant’s advocate filed what he called issues for determination in which he has identified 22 issues. A number of these issues were taken up during the hearing of this application and the advocates submitted on the issues at length and even cited authorities. In my view however issues such as the validity of the Charge documents, whether the plaintiff’s right of redemption has been fettered whether the applicant or 2nd Respondent received any advances from the 1st Respondent and whether the applicant was the guarantor or principal borrower are all issues which can only be determined at the main trial and I do not find it appropriate to address those issues.

For the purposes of the interlocutory application, all this court needs to consider is whether the application is properly before it or whether the same is fatally defective, whether the applicant has shown that he has a prima facie case with a probability of success, and whether the applicant has shown that he is likely to suffer irreparable loss if the interlocutory injunction is not granted, and if necessary where the balance of convenience lies (see the case of Giella v/s Cassman Brown.

It was submitted that the application before the court was defective as its main prayer for a temporary interlocutory injunction was alleged to be hanging as it was not supported by a prayer for a mandatory permanent injunction in the plaint. The case of Dismas Oduor Owuor v/s Housing Finance Co. (K) Ltd. & Another Nairobi High Court Civil Case No. 360 of 2001 was cited. In that case Hon. Ringera J (as he then was) dismissed an application for an injunction because in his opinion, the plaintiff could not be granted interlocutory orders which are at variance with the permanent orders sought. The plaintiff had in the suit sought an injunction to restrain the sale of the charged property while in the application he sought to restrain the transfer of the property to the auction purchaser and other consequential or subsequent dealing with the property.

In this case however, the prayer in the main suit which is for an injunction to restrain the defendants from selling the plaintiff’s property cannot be said to be at variance with the prayer in the application which is for a temporary injunction to restrain the 1st Respondent from selling specific properties of the applicant pending the determination of the suit. It may well be true that the prayers in the plaint are wanting to the extent that the properties are not identified and the nature of the injunction sought is also not identified but that is a matter that can be dealt with at a different forum. For the purposes of this application, there is a substantive prayer in the plaint which is sufficient to support the interlocutory orders sought.

It was submitted that the replying affidavit sworn by Mary Wangare Wamae was defective as it was not under the seal of the company as required by Order III rule 2 (c) of the Civil Procedure Rules. I find that the advocate for the applicant misread the rule and interpreted it to mean that the affidavit should be under the seal of the company. Nevertheless what is required under order III rule 2 (c) is that the authority of the officer to do the act he or she is purporting to do should be under the seal of the company. This a deponent of an affidavit such as Mary Wangare Wamae who is a senior officer of the company and who swears under oath as she has done in paragraph of her affidavit that she has the authority of the 1st Respondent to swear the affidavit has fulfilled the requirement of Order III rule 2(c) of the Civil Procedure Rules.

As regards the affidavit of Joseph Munene Kamweti it is true that the same offends the provisions of Order XVIII rule 5 as paragraph 10, 12, 13, 14 and 16 are not drawn in the first person. I will however in the interest of expediency exercise powers under Order XVIII rule 7 and allow the affidavit.

On the whole I am therefore satisfied that the application is properly before me.

As I have already stated it would be inappropriate to delve deeply into the issues that have been identified pertinent in this suit suffice it is to state that there is a prima facie case as to whether the Charge under which the 1st Respondent purports to exercise its statutory powers of sale is valid. It is also evident that the major part of the debt sought to be recovered by 1st Respondent is in respect of amounts of Kshs.1. 6 million or Kshs.3 million (there was contradiction) advanced to the 2nd Respondent.

Given that the 1st Respondent has conceded through the replying affidavit of it legal services Manager support that the amount of Kshs.1. 6 million tacked in with the amount advanced to the applicant of 1. 4 million is in respect of advances to 1st Respondent which were supposed to be secured by certain vehicles it would be unconscionable to allow the 1st Respondent at this stage to sell the applicant’s properties before determining who exactly is responsible for that debt of Ksh.1. 6 million and what has secured the debt.

This goes to the very root of the 1st Defendant’s right to exercise it statutory powers of sale in realization of the charged property. Although at this stage it is difficult to determine whether the applicant has higher chances of success than the Respondents, it is evident that the balance tilts in favour of granting the interlocutory injunction. Moreover if the interlocutory injunction is not granted the applicant stands to loose his 3 properties which have already been advertised for sale by the 1st Respondent. That would obviously result in irreparable loss which cannot be adequately compensated by an award for damages.

For all the aforestated reasons I will allow the application and grant the orders sought. Further in order to ensure that the plaintiff takes appropriate action to serve the summonses and ensure that his suit is heard, and determined, I will order that the interlocutory injunction shall expire within 9 months from the date hereof.

Costs of the application shall be in the cause. Those shall be the orders of this court.

Dated signed and delivered this 7th day of November 2006.

H. M. OKWENGU

JUDGE