[2017] KEHC 9316 (KLR)

REPUBLICOF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

MILIMANI LAW COURTS

COMMERCIAL &TAX DIVISION

CIVIL CASE NO.411 OF 2016

JESYMONS INVESTMENT LIMITED…………………………PLAINTIFF

-VERSUS-

UNAITAS SACCO SOCIETY LIMITED………………..1STDEFENDANT

INTEGRA AUCTIONEERING (K) COMPANY…….…2ND DEFENDANT

RULING

[1]Before the Court for determination is the Plaintiff’s Notice of Motion dated 10 October, 2016and filed on 11 October, 2016. The same was brought pursuant to the provisions of Sections 1A, 1B and 3Aof the Civil Procedure Act as well as Order 1 Rule 3andOrder 51 Rule 1of the Civil Procedure Rules for the following orders:

[a] Spent

[b] Spent

[c] That the Defendants be restrained jointly and severally either by themselves, their servants, employees and or agents or otherwise howsoever from transferring, charging, dealing, interfering, advertising for sale, disposing of,occupying and or otherwise interfering with the Plaintiff’s enjoyment and occupation of the suit property, Naivasha/Maraigushu Block 11/42 and Ngong/Ngong/63368, pending the hearing and determination of this suit.

[d] That the Defendants be restrained jointly and severally either by themselves, their servants, employees and or agents or otherwise howsoever from harassing the Plaintiff/Applicant or otherwise interfering with the Plaintiff’s enjoyment and occupation of the suit property Title Number: Naivasha/Maraigushu Block 11/42 and Ngong/Ngong/63368 pending the hearing and determination of this application and the suit.

[e] That the costs of its application be borne in the suit.

[2]The application is supported by the affidavit of the Plaintiff's director, Simon Ng’ang’a Wakabasworn on 10 October 2016together with the annexures thereto, in which it was deposed that the Plaintiff is the registered proprietor of the of the properties Title No. Naivasha/Maraigushu Block 11/42 and Ngong/Ngong/63368 (hereinafter "the Suit Properties");and that it procured a credit facility from the 1st Defendant of Kenya Shillings Seventy Seven Million (Kshs. 77,000,000) for which the Plaintiff charged the Suit Properties herein in favour of the 1st Defendant as collateral. The facility was to be repaid in monthly instalments over a period of 120 months.

[3] It was further averred that in the course of time, the Plaintiff ran into difficulties due to unforeseen circumstances, and as a result it fell behind with its payments; and that, to rectify and remedy the default to accord with the terms set out in the Letter of Offer and the Charge Instrument, it approached GT Bankfor assistance; but that the efforts by GT Bank to contact the 1st Defendant to discuss the relevant modalities were frustrated by the said 1st Defendant, who failed to respond to any of the correspondence in that regard. It was further averred that the Plaintiff nevertheless succeeded in securing a secondary source of funds and was able to regularize the account by 7 October 2016 by paying a total sum of Kshs. 9,116,996/=.

[4] It was further deposed by the Plaintiff that, on account of the refusal by the 1st Defendant to provide the information and the particulars required, it engaged the services of the Interest Rates Advisory Centre to audit the loan accounts held with the 1st Defendant, to enable it ascertain the exact amount payable to the 1st Defendant. It is therefore the Plaintiff’s case that it would be in the interest of justice to restrain the Defendants from selling the suit properties pending the conclusion of the audit of the loan accounts. It was further averred by the Plaintiff that it had made great strides towards the completion of the project for which the facility was obtained; and that the proposed sale would lead to frustration of engagements entered into with third parties, including potential investors, tenants and other interested parties, some of whom had already made down payments and were assisting it to repay the subject facility.

[5] As for Title No. Ngong/Ngong/63368, it was the contention of the Plaintiff that the same was being utilized by the directors as residential property; and that unmerited auction would lead to the detrimental eviction of the families of the directors for which damages would not be adequate recompense. It is on the basis of the foregoing the Plaintiff urged the Court to allow its application and grant a temporary injunction in the manner set out in the Notice of Motion dated 10 October 2016.

[6] The Defendants opposed the application by filing a Replying Affidavit sworn by the 1st Defendant's Branch Manager for Cardinal Otunga Plaza Branch, Joseph Kihiu Wangunyu, on 24 October 2016. The 1st Defendant acknowledged that it granted the Plaintiff credit facilities totaling to Kshs. 77,000,000/=. It averred that the credit facilities were secured first to the tune of Kshs. 30,000,000/= by a Charge dated 18 March 2015 over the Plaintiff’s property known as Title Number Ngong/Ngong/63368 and further to the tune of Kshs. 48,000,000/= secured by a Charge dated 11 May 2015 over the Plaintiff’s property known as Title Number Naivasha/Maraigushu Block II/42 (Karai).[See annexures marked “JKW-1”, JKW-1(a), “JKW-2” and JKW-2(b)] The Plaintiff was required to make monthly payments of Kshs. 843,192. 50 with respect to account number 018228000004 for the first loan facility and Kshs. 456,219. 30 with respect to account number 018228000006 for the second loan facility. According to the 1st Defendant, the said accounts fell into arrears and by a letter dated 23 February 2016 they issued a demand to the Plaintiff to rectify the default. The said demand clearly indicated the amounts outstanding.[See annexure JKW-4(a)]

[6] With regard to the issue of further financing by GT Bank, the 1st Defendant denied the Plaintiff’s allegations that they had refused to release certain documents. On the contrary, it was their assertion that by a letter dated 7 April 2016it responded to the Plaintiff and informed them that they were at liberty to get the requisite documents from the 1st Defendant’s Cardinal Otunga Plaza Branch. [See annexure JKW-5 (c)] The Plaintiff responded vide their letter dated 15 April 2016 and agreed to collect the requisite documents from the 1st Defendant’s offices. (See annexure JKW-7) The 1st Defendant further avers that the Plaintiff did not regularize the accounts prompting them to issue a Statutory Notice dated 7 April 2016 expressing their intention to exercise their right to statutory power of sale over the charged properties. The 1st Defendant further issued the Plaintiff with a forty (40) days’ Notice of sale dated 13 July 2016. Upon expiry of the said notices, the 1st Defendant instructed the 2nd Defendant, Integra Auctioneering (K) Company, who in turn issued the Plaintiff with the 45 days Redemption Notice dated 15 September 2016.

[7] The 1st Defendant acknowledged the payments made by the Plaintiff to the accounts after being served with the Statutory Notice but averred that this did not clear the Plaintiff’s indebtedness; and contended that as at 15 October 2016 a sum of Kshs. 53,113,314. 38 was outstanding from the Plaintiff’s account number 018228000004 while a sum of Kshs. 26,039,579. 10 was outstanding from the Plaintiff’s account number 018228000006. In view of the foregoing, it is the 1st Defendant’s case that they have fully complied with the law and that so long as the Plaintiff’s account is still in arrears, it is entitled to exercise its Statutory Power of Sale.

[8] The application was canvassed by way of written submissions. The Plaintiff filed its written submissions dated 15 January 2017on 24 February 2017 while the 1st and 2nd Defendants filed their submissions dated 24 April 2017 on 25 April 2017.

[9] The main issue for determination is whether the Plaintiff has established the conditions set out in the case of Giella vs. Cassman Brown & Co. Ltd [1973] EA 360, in which it was held that:

"The conditions for the grant of an interlocutory injunction are ...well settled in East Africa. First, an applicant must show 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. Thirdly, if the court is in doubt, it will decide an application on the balance of convenience."

[10] As to what amounts to a prima facie case, the case of Mrao vs First American Bank of Kenya Limited & 2 others (2003) eKLR,is instructive. This is what the Court of appeal had to say in that case:

“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.”

[11] The Plaintiff’s case in essence is that the issuance of the Statutory Notice with the intention to auction the suit properties is unmerited because the 1st Defendant’s right to statutory power of sale has not crystallized. In its submissions the Plaintiff has reiterated the assertions that they have made attempts to remedy the default and pay back the amount owing on the credit facilities. It is the Plaintiff’s submission that as at 7 October 2016 they had paid a total of Kshs. 9,116,996/=. The Plaintiff has not unequivocally told the Court that they have cleared the outstanding amounts and that their accounts are not in arrears. In fact from the submissions, the Plaintiff’s position is that the failure to pay the amounts outstanding was not their doing but the same was caused by the 1st Defendant who frustrated their negotiations.

[12] The Plaintiff has accused the 1st Defendant of frustrating negotiations with GT Bank by failing to respond to any correspondences. However, from the material availed herein, there is no substantive evidence to show that the efforts, if any, by GT Bank to offer a credit facility to the Plaintiff was frustrated by the 1st Defendant Bank.What is evident is that the Plaintiff’s Advocates wrote to the 1st Defendant on 25 January 2016 and 17 February 2016 requesting for copies of the Charge document and recent statements of the Plaintiff’s accounts held with the 1st Defendant. This was to facilitate the process of procuring further financing from GT Bank as indicated by the Plaintiff.

[13] Contrary to the Plaintiff’s allegations that the said letters were never responded to, there is a letter dated 7 April 2016 from the 1st Defendant’s Advocates responding to the Plaintiff’s letter of 17 February 2016. In the said letter the 1st Defendant informed the Plaintiff that they could obtain copies of the Charges and statements of account from their Cardinal Otunga Plaza Branch. The 1st Defendant further informed the Plaintiff that at the time, they had not received any communication with regard to further financing by GT Bank. They further indicated that once such communication was received they would issue the relevant consent subject to and without prejudice to any of its rights. In summary, there is nothing to show that the 1st Defendant denied the Plaintiff access to copies of the Charge documents and to the statement of accounts. In any event, the 1st Defendant was under no obligation to accept the proposal of further financing from GT Bank, especially if the same would prejudice its rights under the charge documents.

[14] With regard to the Plaintiff’s contention that they had questioned the exorbitant interest rates which the 1st Defendant imposed on the loan account, in respect of which they engaged the services of Interest Rates Advisory Centre (IRAC),no report, whether interim or final was availed by the Plaintiff to fortify the argument that the 1st Defendant charged exorbitant interest rates. What the Plaintiff has produced before the Court is their intention or the step taken to engage the Interest Rate Advisory Centre. To that end, the amounts outstanding as stated by the 1st Defendant still stand undisputed. In any case, it is trite law that a dispute as to accounts cannot form the basis for the grant of an injunction. (See Fina Bank Ltd. vs.Ronak Ltd[2001] 1 EA 54). Indeed, a Chargee can only be restrained on payment of sums due, as more succinctly stated in Halsbury’s Laws of England, Vol. 32 (4th Edition) paragraph 725:

The mortgagee will not be restrained from exercising his power of sale because the amount due is in dispute, or because the mortgagor has begun a redemption action, or because the mortgagor objects to the manner in which the sale is being arranged. He will be restrained, however, if the mortgagor pays the amount claimed into court, that is, the amount which the mortgagor claims to be due to him, unless, on the terms of the mortgage, the claim is excessive’’.

[29] In the light of the foregoing, it is my considered finding that the Applicant has not made out a prima facie case in the sense envisaged by the definition given in the Mrao Caseaforestated. That being the case, it would be unnecessary to consider the second principle laid down in the Giella Case, namely whether he stands to suffer irreparable loss for which damages may not be adequate recompense. This is because, as was laid down in the Nguruman Case:

“It is established that all the above three conditions and stages are to be applied as separate distinct and logical hurdles which the applicant is expected to surmount sequentially…if prima facie case is not established, then irreparable injury and balance of convenience need no consideration…”

[30] In the result, it is my considered finding that the Applicant's application dated 10 October 2016 is lacking in merit and is hereby dismissed with costs.

It is so ordered.

DATED, SIGNED AND DELIVERED AT NAIROBI THIS 15TH DAY OF SEPTEMBER, 2017

OLGA SEWE

JUDGE