[2022] KEHC 12575 (KLR)

Globe Autospares And Accessories Ltd v Housing Finance Limited & another (Commercial Case E860 of 2021) [2022] KEHC 12575 (KLR) (Commercial and Tax) (21 July 2022) (Ruling)

Neutral citation: [2022] KEHC 12575 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Commercial and Tax

Commercial Case E860 of 2021

DO Chepkwony, J

July 21, 2022

Between

Globe Autospares And Accessories Ltd

Plaintiff

and

Housing Finance Limited

1st Defendant

Benjamin Sila T/A Legacy Auctioneering Services

2nd Defendant

Ruling

1. The application herein is dated October 14, 2021 and is seeking for orders that;aSpent;bSpent;cThis 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 howsoever interfering with the plaintiff’s ownership or title to all that parcel of land known as Kiambu/Municipality Block II/243 situate in Kiambu county until the determination of the suit;dAn order be made under the doctrine of lis pendens and Section 106 of the Land Registration Act (previously enshrined under section 52 of the Indian Transfer Property Act (1959) (repealed) that pending the final determination of this suit in accordance with the law, all further registration or charge of registration in the ownership, leasing, subleasing, allotment, user, occupation or possession or in any kind of right, title or interest in the charged properties with any land registry, government department and all other registering authorities be and is hereby prohibited in all that parcel of land known as L R Kiambu/Municipality Block II/243 situate in Kiambu;eAn interlocutory mandatory injunction do issue compelling the Defendant to render a true, proper and accurate account to the plaintiff(s) and the court on the actual status of the charge account(s);fCosts of and occasioned y this application be provided for.

2. The application is premised on the grounds on its face and in the annexed Supporting Affidavit of David Njuguna Ngoi sworn on May 18, 2022. It is stated that:aThe plaintiff is the registered proprietor of the prime, unique and fully developed property known as Kiambu/Municipality Block II/243 situated in Kiambu and bringing in a monthly income of kshs 2. 8 Million at capacity;bOn or about February 16, 2021, the plaintiff’s director learnt through the Standard News Paper that the 1st defendant had instructed the 2nd defendant to sell the suit property by public auction which the 2nd defendant has already scheduled on March 2, 2021 at their offices;cSometimes in the year 2015, the plaintiff was approached by one Hannah Wairimu Mutura, who requested it for the suit property as security for financial accommodation from the 1st defendant, to which the plaintiff agreed;dThe 1st defendant offered a mortgage facility of kshs 100,000,000 and on February 17, 2015 a legal charge was registered against the suit property know as L R no Kiambu/Municipality Block II/243;eThe borrower faithfully and diligently serviced the loan facility which is now paid up to the tune of over kshs 50 million barely five years from the date of approval of the facility but unfortunately, the payments were not reflected in the bank statements;fThe 1st defendant has formulated and executed a scheme to rob the plaintiff of its property through illegal and fraudulent actions including inflating of the balance, lumping up illegal charges and interest, failing to reflect the timely payments so as to attract default interest and adjusting interest rates with impunity and without notice;gThe suit property is unreasonably insured twice for the same cover and the amount has been lumped into the loan account with an intention to inflate the loan and create a situation of perpetual indebtedness and deny the plaintiff the equity of redemption;hIt is contended that the 1st defendant is not an insurance company to collect premiums;iIt is averred that before coming into effect of the Banking (Amendment) Act 2016, which capped the interest rate at no more than 4% above the central bank rate, the interest rate was 16% p a but the 1st defendant in contravention with this Act and contractual lending terms charged interest between 20% and 34%;jThe plaintiff contends that this move is in breach of section 33B of the Banking (Amendment) Act, 2016 and Section 44 of the Banking Act;kIn complete disregard of section 44A of the Banking Act, the 1st defendant has failed to determine when the loan facility became non-performing and to inform the plaintiff of such developments;lIf any liability accrued, the plaintiff is discharged by reason that the 1st defendant has materially altered the original agreement without the knowledge and consent of the plaintiff;mThe amounts due contravene in duplum rule.nThe 1st defendant in exercising its statutory rights is estopped by Law under section 90(3) to only take one of the remedies available to it and not exercising all at the same time;oIt is averred that by a letter dated April 26, 2018, the 1st defendant without notice and in contervention of section 92 of the Land Act appointed one Timothy Njehia Trading as, Crystal Valuers Limited as receiver over the suit property which appointment was irregular, illegal and fraudulent for the reason that no notices were issued in exercise of the statutory power of sale in contravention of section 90 and 96 of the Land Act, and the receiver is not qualified as required under the Companies Act;pDespite the illegal and irregular appointment of the 2nd defendant, the plaintiff has learnt that the suit property that was generating a monthly income of between kshs 1. 8 million and 2 million at the time of appointment has been put up for sale by public auction by the 2nd defendant which took place and the Housing Finance Company Ltd was considered the highest bidder after paying kshs 14,300,000;qThe said auction was not conducted as per the provisions of the Auctioneers Act, cap 526 and the Auctioneering Rules of 1997;rThe 1st defendant and its receiver have refused to render accounts or copies of statements for the loan account and rent collected from the date of the illegal receivership;sIn contravention of section 100 of the Land Act that estoppes the 1st defendant as a chargee from purchasing the charged property without the leave of court, the 1st defendant went ahead in total disregard to purchase the suit property in its own self-engineered public auction;tThe purported sale is illegal and premature for the reason that no statutory notices have been issued, no arrears in the loan account are exhibited by the statement of accounts, there has not been valuation and/or proper valuation of the suit property within the last one year to determine the fair market price, having appointed the receiver in 2018, the plaintiff is estopped from simultaneously selling the suit property, the statutory notices if any, were spent upon the appointment of a receiver hence the intended sale is illegal and that the chargee is not a legitimate and bona fide purchaser under section 99 of the Land Act;uThe plaintiff is in a position to regularise the loan as long as the suit property is released to it to manage and collect rents and has committed to taking over the repayment plan despite the tough post Covid-19 circumstances;vThe manner in which the 1st defendant have mismanaged the loan account and the suit property is prejudicial;wThere exist a real and present danger that unless the defendants are restrained by a or otherwise order of permanent injunction from advertising for sale, selling by public auction or otherwise and transferring the suit premises, the said defendants may as well conclude arrangements of the sale and transfer of the suit property to third parties to the irrevocable prejudice, grave loss and irreparable damage of the plaintiff;xThe defendants sent goons to the suit property with a purported court order from Kiambu Chief Magistrates Courts to evict tenants and destroyed goods worth millions belonging to the plaintiff and other third parties;yThe plaintiff is apprehensive that unless this court protects its property rights, the 1st defendant will transfer the suit property to its name or otherwise sell to unsuspecting third parties to the detriment of the plaintiff.zThe suit premises is of unique character and peculiar location within Nairobi County and hence it will be impossible to replace and/or adequately compensate the Plaintiff by way of damages. That it is in the interest of justice that the application herein be allowed.

3. The application is opposed vide the Replying Affidavit of Christine Wahome sworn on October 27, 2021. It is stated that:-aThe suit property is situated in Kiambu County hence this suit should have been filed at the Kiambu High Court in accordance with section 12 of the Civil Procedure Act.bThe entire application is based on material misrepresentation and non-disclosure;cIt is admitted by the plaintiff that the borrower who is not a party to this suit and the director in the plaintiff company obtained a facility from the 1st defendant bank:dThe plaintiff admits at paragraph 36 of its Supporting Affidavit that the borrower was in default and the plaintiff is offering to regularize the account although the offer has been overtaken by events;eOn various occasions, the debtor pleaded for indulgence and in good faith, the 1st defendant did indulge the plaintiff on various occasions;fAfter repeated default and false promises of repayment, the 1st defendant issued further statutory notices and went ahead to advertise the property for sale although the auctioneers were not successful;gAs admitted by the plaintiff, the suit property was sold by public auction on March 2, 2021 and the 1st defendant was the highest bidder and the borrower and the chargor were notified;hFollowing the successful auction, the suit property was transferred and registered in the names of the 1st defendant who followed the due process of law in the auctioning of the suit property;iThe plaintiff has failed to disclose that there have been two suits previously namely Milimani Commercial Courts, Mccommsu no E1151 OF 2020 Hanna Wairimu Mutura vs Housing Finanace Limited and Legacy Auctioneers Services which was struck out on February 12, 2021 and Kiambu CMCC no E100 OF 2021 Twigamart Express Limited vs Globe Autospares Limited and Legacy Auctioneers Services which is pending hearing of the 2nd defendant’s preliminary objection on the pecuniary jurisdiction of the court. That after the successful sale and transfer of the suit property in the name of the 1st defendant, the occupants declined to grant the 1st defendant vacant possession and account for rent paid to the former proprietor despite notice hence the filing of Kiambu ELC Case no E062 OF 2021 HFC Limited vs Hannah Wairimu Mutura, Globe Autospares and Accessories Limited and Twigmatt Express Limited in which orders were granted for the bank to take control of the suit premises;jNo illegal interests were charged on the loan facility beyond the interests as per the contract executed between parties;kThe plaintiff and the borrower were at all material times aware of the default position of the facility and failed to regularize the same;l.The receiver was duly appointed pursuant to section 90(3) of the Land Act and the plaintiff and the borrower were duly notified;mThe receiver was not successful as the collection of rent failed to hit the expected targets and as consequence, the receivership was terminated on January 30, 2019;nThe suit property having been sold and already registered in the new proprietor HFC Ltd, the equitable prayers sought have been overtaken by events and this court should not make orders in vain;oThe plaintiff’s application is, therefore, an abuse of the court process and should be dismissed with costs.

4. As a rejoinder to the depositions in the Replying Affidavit the plaintiff put in a Further Affidavit sworn by David Njuguna Ngoi on November 18, 2021. The averments in the Further Affidavit are in essence the same and/are a reiteration of those in the application and the annexed Supporting Affidavit.

5. By consent of parties, this application was canvased by way of written submissions which I have considered together with the application and the affidavits in support and against.

6. In considering the application dated October 14, 2021, I have read through the affidavits in support and opposition thereof, the submissions filed by both parties and the cited statute and case law. I find that in essence, the plaintiff is seeking to injunct and/or restrain the 1st defendant from selling or transferring the property in its own name or to third parties. The 1st defendant argues that the said orders have been overtaken by events since the sell has been completed and the title has already been registered in the name of the 1st defendant.

7. I have perused the annexures to the 1st defendant’s Replying Affidavit and at Page 161 is a certificate of lease for property No Kiambu/ Municiplaity Block 2/243 for 99 years in the name of HFC Limited that was registered on June 17, 2021. The application was filed on October 14, 2021, which is after the registration of the title to the suit property.

8. The Court of Appeal in the case of Eric V J Makokha & 4 Others vs Lawrence Sagini & 2 Others Civil Application No 20 of 1994 (12/94 UR) held that:“An application for injunction under rule 5(2)(b) is an invocation of the equitable jurisdiction of the court. So its grant must be made on principles established by equity. One of it is represented by the maxim that equity would not grant its remedy if such order will be in vain. As is said, "Equity, like nature, will do nothing in vain". On the basis of this maxim, courts have held again and again that it cannot satisfy itself by making orders which cannot be enforced or grant an injunction which will be ineffective for practical purposes. If it will be impossible to comply with the injunction sought, the court will decline to grant it.”

9. Similarly, the court in the caseAbiba Ali Mursal & 4 Others v Mariam Noor Abdi[2018] eKLR“……The purpose of an injunction is to restrain that which is threatened to occur or is in the process of being undertaken in breach of one’s right. It is never meant to prevent what has already occurred. It will therefore be futile to grant injunctive orders. I will therefore decline to grant any orders in the notice of motion dated October 11, 2018 save for an order that the respondent shall meet the costs of this application. It is so ordered.”

10. Further, in the case of Muyumba Watita & 51 others v Joannes Satia & 4 others [2020] eKLR the court declined to grant an injunction where parties had been evicted and stated:-“An injunctive order is essentially a restraining order aimed at preventing the happening of a certain event. If that event has already occurred then an order of injunction cannot issue.”

11. From the above decisions, even though the plaintiff/applicant has raised clear case that would warrant grant of injunction to stop public auction since what is meant to be stopped has already happened, my hands are tied as to the orders sought. However, in view of the grievance address in the application dated May 18, 2022 which this directed to be marked as spent, and in view of balancing and safeguarding the rights of the applicant’s pending determination of the suit, the respondent is hereby restrained from further subdividing, registering, or changing registration in ownership in all that parcel of land known as Kiambu Municipality Block 11/243 and status quo to prevail over the said property pending the determination of the dispute through arbitration. Parties can therefore proceed to fix the mention date before the deputy registrar and agree on how to proceed with the arbitration.

12. The 1st respondent shall have costs of the application.It is hereby so ordered.

RULING DELIVERED VIRTUALLY, DATED AND SIGNED AT NAIROBI THIS 21ST DAY OF JULY, 2022. D O CHEPKWONYJUDGEIn the presence of;M/S Ndungu for plaintiff/applicantMr Kimani for Sakina