https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/10828

**REPUBLIC OF KENYA** **IN THE HIGH COURT AT NAKURU** **HCCOMM CASE NO.E002 OF 2025** **LAICO SELECTO INVESTTMENT LIMITED ......................1ST PLAINTIFF** **ERNEST MUNGAI KAMAU ....................................................2ND PLAINTIFF** **VERSUS** **PARAMAOUNT UNIVERSAL BANK LIMITED .................1ST DEFENDANT** **SAMUEL MUTAHI GATHOGO T/A** **VALLEY AUCTIONEERS.......................................................2ND DEFENDANT** **HOLLOWM MERCHANTS LIMITED........................INTERESTED PARTY** **RULING** 1. By a Plaint dated 18th March 2025, the Plaintiffs sued the Defendants and the Interested Party seeking the following orders and judgment against the Defendants jointly and severally:- 2. ***An order of permanent injunction be issued restraining the Defendants , their employees, agents, or servants from selling , advertising , transferring, disposing off, issuing notices, or dealing in any manner whatsoever with the properties known as NAIVASHA/MUNICIPALLITY/BLOCK 5/665 and L.R. No. 9042/74.*** 3. ***Costs of the suit together with court rates from the date of judgment.*** 4. ***Any other relief that the Honourable Court may deem just and convenient.*** 5. Simultaneously, the Plaintiffs filed a Notice of Motion dated 18th March 2025 under a certificate of urgency and expressed to be brought under Section 1Aand 1B, 3 & 3A of the Civil Procedure Act, Order 40 Rule 1 and 2 , Order 51 Rule 1 of the Civil Procedure Rules seeking Orders that :- 6. ***Spent.*** 7. ***Spent.*** 8. ***Pending hearing and determination of this suit, the Honourable Court dos issue an order of injunction restraining the Defendants, their employees , agents, or servants from selling , advertising , transferring , disposition, issuing notices , or dealing in any manner with dealing in any manner with the properties known as NAIVASHA/MUNICIPALLITY/BLOCK 5/665 and L.R. No. 9042/74.*** 9. ***Costs of this application be awarded to the Plaintiff.*** 10. Their case was supported by the Affidavit of Ernest Mungai Kamau sworn on even date and his capacity as the Director of the 1st Plaintiff . Their case was that AERO Handling EA Limited secured a tender from the Ministry of Defence in 2017 to supply of ground sheets (Posho new design) TENDER NO. MOD/423 (07057) 2017-for Kshs. 1, 957,595,000/=. To enable it honour its obligations, it looked for a credit facility through its related company. 11. Consequently, and vide a letter dated 26th September 2019, Hollowin Merchants Limited (the Interested Party) being the borrower, was granted an overdraft letter of credit facility in the following manner:- * ***Additional temporary overdraft credit facility for Kshs. 7,500,000/= over the existing overdraft Credit Facility of 26,500,000/= making with the regular overdraft an aggregate of Kshs. 34,000,000/= for working capital requirements.*** * ***Letter of Credit Facility for USSD 84,741 to be issued for payment within sixty (60) days.*** * ***Interest to be charged at the rate of 13 % p.a.*** 1. They stated that the 1st and 2nd Plaintiffs therefore provided their respective properties as security for the said credit facility being:- 2. ***The existing first legal charge for Kshs. 27,000,000/= registered over the property known as LR No. 9042/74 in the name of Ernest Mungai Kamau.*** 3. ***First Legal Charge for Kshs. 13,500,000/= registered over the property plot Naivasha Naivasha/Municipality/Block 5/665 in the name of Laico Selecto Investment Limited (1st Plaintiff ).*** 4. ***First Legal Charge for Kshs. 9,000,000/= registered over the property known as L.R. No. 9042/73 in the name of Ernest Mungai Kamau (2nd Plaintiff) .*** 5. ***First Legal Charge for Kshs. 3,000,000/= registered over the property known Pot Nanyuki Marura Block 111/3320 9 Sweet Waters Embakasi, Nairobi in the name of Ernest Mungai Kamau (2nd Plaintiff) .*** 6. It is alleged that the that thereafter AERO Handling Limited fulfilled its contractual obligations by supplying to the Ministry of Defence in 2019 (MOD) but MOD has delayed in releasing the contractual amount of Kshs. 1,957, 595,000/= which payment has been pending for a while to the detriment of the borrower and the guarantors. This has caused them to write to the Ethics and Anti-Corruption Commission (EACC) for investigations of this pending bill. 7. They were aggrieved that they were not served with proper Statutory Notice as required under Section 90 and 96 of the Land Act but received a courtesy Notice dated 11th February 2025 alleging that a 45-Day Notice had been served on 28th September, 2021. 8. They therefore stated that they were apprehensive that 1st Defendant would deprive them of their properties through auction without due regard to the law. Therefore, they urged the court to grant the injunctive orders sought. 9. In response, the 1st Defendant filed a Replying Affidavit sworn on 7th April 2025 by its Legal Consultant, Timothy Kimani. He deponed that the Application herein together with the Supporting Affidavit contain gross distortion of the facts with sole intention of defeating and/or delaying the 1st Defendant’s right of sale over the suit properties and therefore, the Applicant had approached this court with unclean hands thus undeserving of the orders sought. 10. He explained that he was aware of that the Interested Party (Borrower) had approached the 1st Defendant Bank for a credit facility being Temporally Overdraft of Kshs. 7,500,000/= as working capital with USD 84 741 letter of credit facility. 11. Upon the 1st Defendant agreeing to advance the said credit facility, the parties executed the letter of offer dated 26th September 2019 . The drawdown of the temporary overdraft credit was to be done over the existing overdraft credit facility of Kshs 26,500000 which led to an aggregate overdraft of Kshs. 34,000,000/= . 12. Pursuant to the condition thereof, the Plaintiff volunteered to guarantee the liabilities of the borrower (Interested Party) by submitting the properties: **Naivasha/Municipality/Block 5/665** and **L.R. No. 9042/73** off Mombasa Road to be charged as security for said facilities. 13. Consequently, the 1st Defendant registered the charges as security and held them over the properties as:- 14. **Existing first legal charge for Kshs. 27,000,000/= over the property known as LR No. 9042/74;** 15. **Existing further legal charge for Kshs. 5, 000,000/= registered over the property known as LR No. 9042/74.** 16. **First Legal Charge for Kshs. 13,500,000/= over the property plot Naivasha Naivasha/Municipality/Block 5/665.** 17. In compliance with the letter of offer, the 1st Defendant disbursed the facilities for commercial benefit and use of the Interested Party and the Plaintiffs . However, the Interested Party and Plaintiffs persistently defaulted on payment of the monthly instalments as per the repayment schedule, thus prompting issuance of the three (3) months Notices on 3rd July 2020 to the borrowers and the chargors in the respect of each of the suit properties pursuant to Section 90 (2) of the Land Act 2020. 18. Upon lapse of the three months’ Notices period , the 1st Defendant issued the 40 Days statutory Notices on both the borrowers and the chargors in respect of each of the suit properties. 19. Due to the continued default by the Plaintiffs and the Interested Party, the 1st Defendant instructed the 2nd Defendant to proceed and sell the properties by way of public auction. Indeed, the 2nd Defendant complied 28th September 2021 by issuing the respective Notifications of Sale to the Plaintiffs and the Interested Party. 20. It is deponed that upon receipt of the said Notification of Sale, the Plaintiffs and the Interested Party approached the 1st Defendant promising to pay but despite being indulged severally, they did not pay citing failure of payment of pending bills by the Ministry of Defence yet the 1st Defendant was not party to the or dealings with the Ministry of Defence and repayment of the loan facilities was not contingent upon payment by the Ministry of Defence. As such, the 2nd Defendant advertised the suit properties for sale. 21. It was therefore deposed that the Plaintiffs approached this Court with unclean hands and are guilty of material non- disclosure. Further, that the dealings between the Plaintiffs and the 1st Defendant were in Nairobi and the suit properties being in Nairobi and Naivasha, hence within jurisdiction of other Courts and therefore the Plaintiffs did not meet the prerequisites for grant of the injunctive orders. The 1st Defendant therefore urged this Court to dismiss the Plaintiffs’ application with costs. 22. In his Further Affidavit sworn 20th June 2025 by the 2nd Plaintiff, it was contended that the Certificate of postage receipts are not legible, hence not possible to know where the notices were sent. Further, they do not contain the Plaintiff’s postal address and therefore, there is no evidence of service of the statutory notice. 23. While not disputing the credit, facility issued by the 1st Defendant, 2nd Plaintiff averred that he had information that the Ministry of Defence intended to pay the owed money by 27th June, 2025 and therefore, upon being paid, all the outstanding amounts owed to the Bank shall be settled. 24. In response to the 2nd Plaintiff ‘s Further Affidavit sworn 20th June 2025, the 1st Defendant’s legal consultant Timothy Kimani swore Further Affidavit on 24th June 2025 and reiterated that service was indeed effected on the Chargor and Borrower by way of registered posts and email . Further, he deponed that a legible physical bundle of the Respondent’s Replying Affidavit and annexures thereto including the postage receipts was filed on 4th April 205 and served on the Applicant’s Advocate on 17th April 2025 and they clearly indicate who the recipients of the notices were. 25. He stated that upon service of the 90- days’ Notice, the 2nd Applicant reached out via email dated 23rd March 2021 and 6th March 2021 requesting more time to pay citing budgetary allocation and payment of the outstanding debt by the Ministry of Defence in three instalments of in April, May and June 2021 but this promise did not materialise. 26. He therefore deponed that the allegations of none- service amount to perjury and are meant to frustrate the Respondent’s exercise power of sale to and delay recovery of the facility. Further, he deponed that the repayment of the sums advanced was not contingent on the release of monies by the Ministry of Defence. He therefore urged the Court to dismiss the Application with costs. 27. In a Supplementary Affidavit sworn on 24th July 2025 in response to the Further Affidavit sworn on 24th June 2024 by Timothy Kimani for 1st Defendant, Ernest Mungai Kamau deponed that the annexed emails are not supported by a certificate of electronic record as required by under Section 104 B of the Evidence Act and therefore cannot be relied on. 28. Further, he contended that the there was no evidence of service on the Auctioneer’s notice as required by Auctioneers Act and Rules. It was his position that the charge should not be allowed to exercise its power of sale in the circumstances herein. **Plaintiffs’ submissions dated 20th June 2025** 1. Rehashing the contents of the application, the Plaintiffs submitted on two issued for determination, that is:-Whether the court should issue the injunctive orders sought and ; costs of the Application. 2. On prima facies case, it was argued that one of the challenges facing Kenyans is the issue of pending bill where contractors apply for tenders , fulfils their obligations and the government fails to honour their obligation on payment on time thus causing businesses to collapse mental anguish among the business persons and the unfortunate incidences of auctioning by banks during recovery process, 3. In this case, the Plaintiffs relied on the case of ***Mrao*** ***Ltd v First American Bank of Kenya Limited [2003]eKLR*** and ***Paul Banabas Chelimo v Commercial Bank of Africa (K) Ltd [2018] KEHC 4924*** (KLR) and maintained the said notices were not legible urged this Court to direct the 1st Defendant to issue fresh Notices and provide clear evidence of service upon the Plaintiffs. 4. The Plaintiffs maintained that the 1st Defendant did not adhere to the law on service of statutory notices and therefore, failure to allow the application herein will cause them irreparable harm. In support, thy cited the case of ***Said Ahamed vs Mannasseh Benga & another [2019]eKLR*** and ***Joseph Siro Mosioma vs Holding Finance Company of Kenya Limited & 3 Others[2008]eKLR*** to submit that the there was breach of the law by the 1st Defendant and therefore damages are accepted as compensation. They therefore urged this Court to allow the application as prayed. **1st Defendant’s submissions dated 30th April 2025** 1. Giving the background the background of the matter as earlier stated herein, the 1st Defendant framed two issues for determination that is:- ***Whether the Application has met the criteria for granting temporally injunction*** and ***who should bear the costs of this application***. 2. On the first issue, the 1st Dependant cited the classcus case of ***Giella vs Casman Brown and another (1973) E.A. 358*** on principles governing grant of injunctive orders and the case of ***Nguruman Limited v Jan Bonde Nielse. & 2 others [2014]KECA606(KLR)*** to submit that the conditions must be fulfilled as separate , distinct and logical hurdles which the Applicant must meet. 3. On prima facie, the 1st Defendant submitted that the Plaintiffs have not set out a prima facie case to warrant the grant of injunctive reliefs in that they have not challenge the validity of charge nor default by the Interested Party spanning over 5 years. Their gravamen and objection being solely the issue of notices yet the evidence presented in court shows that the Plaintiffs and the Interested Party were duly served through registered post and they have not challenged the correctness addresses in the notices. Further, that the said addresses were the same ones provided to the 1st Defendant by the Plaintiffs and the Interested Party during the creation of the charge. In support, reliance was placed on the case of ***Amit Aggarwal v National Bank of Kenya Limited [2016]KCHC 5010(KLR.*** Further, it was submitted that indeed, upon being served with the notices, the Plaintiffs engaged the 1st Defendant with a view of settling the loan amount. It was therefore submitted that the 1st Defendant’s power of sale crystallized upon the persistent default. 4. The 1st Defendant therefore submitted that that the 1st Defendant’s power of sale should not be defeated once proper notices have been issued. In support, reliance was placed on ***Mrao*** ***Ltd*** (supra) . 5. On irreparable injury, it was submitted that lawful exercise of power of sale can never constitute irreparable harm. That once activated, any irregularity in the exercise of the power of sale is redeemable by way of damages to the defaulter subject to Section 99 (4) of the Land Act which provides that:- ***“ A person prejudiced by unauthored or irregular exercise of power of sale shall have a remedy in damages against the person exercising that power.”*** 6. The 1st Defendant therefore submitted that is a reputable financial institution and therefore has means and financial competence to indemnify the Plaintiffs against loss suffered, if any. In support reliance was placed on ***Thande and another v Tripple N Car Clinic Limited & another [2024]KEELC13579(KLR)*** where it was held***:- “ Other that the foregoing, it is worth recalling that the 2nd Defendant /Respondent is a banking institution of repute. In this regard, where a situation does arise for compensation, there is no doubt that the 2nd Respondent would be in a position to do so.”*** 7. In this case, it was submitted that if any prejudice would be suffered, it may easily be compensated by damages considering that the dispute herein is monetary and the that the value of the property can easily be determined a valuation. In support, reliance was placed on ***Nguruman Ltd*** case (supra). 8. On the balance of convenience , it was submitted that the same tilts in favour of the 1st Defendant in that failure by the Interested Party to service the loan has led to accumulation of interest and late payment penalties, yet the money held by the 1st Defendant belongs to the respective depositors and as a financial institution, 1st Defendant is only a custodian of the said funds with the customers as beneficiaries. Consequently, the 1st Defendant submitted that granting the injunction would e gravely inconvenience the 1st Defendant who is bound to account for the proceeds of deposit to the depositors and shareholders. 9. In con conclusion, 1st Defendant submitted that the Plaintiffs have failed in satisfying the conditions of granting in junctive orders and therefore urged the Court to dismiss the application with costs to the 1st Defendant. **Analysis and Determination** 1. After considering the application, Affidavits by both parties and the rival submissions and the case law cited, the broad issues that arise for determination are :- 2. **Whether the Applicant has established a case warranting the grant of a temporary injunction.** 3. **Who bears the cost of this Application?** 4. As well put by the parties, the principles for granting in junction are were laid out in the celebrated case of ***Giella V Cassman Brown & Co Ltd*** (supra). Further, they were reiterated by the Court of Appeal in the case of ***Nguruman Limited V Jan Bonde Neilsen & 2 Others [2014] EKLR,*** where the Court listed the three principles as follows:- 5. ***Establish his case only at a prima facie level.*** 6. ***Demonstrate irreparable injury if a temporary injunction is not granted.*** 7. ***Allay any doubts as to(b) by showing that the balance of convenience is in his favour.*** 8. On whether the Applicant has established a *prima facie* case, the Court of Appeal in ***Mrao Ltd*** (supra***)*** had this to say about the term “*‘prima facie 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. … a prima facie case is more than an arguable case. It is not sufficient to raise issues. The evidence must show an infringement of a right, and the probability of success of the applicant’s case upon trial. That is clearly a standard which is higher than an arguable case.”*** 1. In this case, the Plaintiffs/Applicants had not disputed the validity of charge nor default by the Interested Party. Indeed, when the Applicant appeared for the first time before this Court on 19th March 2025, Mr. Gakunga for the Applicant was apprehensive that the Auction would proceed as it was slated to take place at 10.00 a.m on the same day 19th March 2025. 2. To be fair to both parties, this Court directed Mr. Gakunga to serve the Respondents immediately and upload the Affidavit of Service. Shortly after, Mr. Gakunga confirmed service on the 1st and 2nd Defendants/ Respondents. Only the interested Party was yet to be served. 3. Sure enough, Ms Wachuka who was the Internal Counsel for the 1st Defendant/ Respondent intimated that the Director of the Plaintiff was also Director of the Interested Party. Mr. Gakunga Confirmed that indeed, the Interested Party was the borrower and the 1st Plaintiff was the Chargor. That the Director of the 1st Plaintiff and the Interested Party was the same and they already had knowledge of the matter. 4. Ms Wachuka informed the Court that the sale was Auction slated for 10.30 a.m on that day and was ongoing yet the Plaintiff/ Applicant was trying to stop it alleging none service of the Statutory Notice but she was ready to demonstrate the Service on the Plaintiff and that the Plaintiff had always been aware of this recovery hence, the allegations by the Plaintiff was not true. 5. She prayed for Seven (7) days to appoint an External Counsel and file a response. 6. In regard to stopping the sale, she told the Court the application must have been overtaken by events. That should the Court find that the 1st Defendant was not right, then damages were available to the Applicant. At that point, Mr. Gakunga told the Court that he had offered the entire amount to the Respondent within 14 days upon release by the Central Bank. 7. Upon hearing those arguments, the court informed that parties that it would give a Ruling in 10 minutes. 8. At that point, Ms. Wachuka told the Court that she had received information from Plaintiff’s Director that the funds were expected to be released by Central Bank as alleged by Counsel for the Applicants. However, she request for a formal communication from Central Bank but the Applicants could not provide the same thus prompting the 1st Defendant to call Central Bank but The Central Bank declined to confirm it. She therefore prayed proceed with the Auction. 9. Mr. Gakunga responded that since Government Agencies do not act as fast as the 1st Defendant’s Counsel had expected, it is the reason he had sought 14 days to pay the entire amount and that would offset the whole outstanding balance. He therefore sought stay to preserve the subject with the Respondent being given 3 days to file response. 10. That prompted this Court’s Ruling immediately and on the same day, granting stay in terms of prayer 2 thereof pending hearing and determination of this application thus stopping the auction if the same had no tot yet been done. 11. It is therefore clear from the material before Court that Plaintiffs and the Interested Party were aware of the Notices served on them through their addresses they used in the agreement herein . There can be no argument about that issue. 12. Further, the repayment of the loan by instalments was not conditional to release of any monies from the Central Bank. This Court cannot be invited to rewrite a contract between the parties. 13. Indeed, they always promises to pay the loan and sought indulgence from the 1st Defendant but the Applicants failed to honour their undertaking and promises to pay. 14. . In the circumstances , they have failed to demonstrate any of the principles set for granting injunction . 15. Further, and from their conduct, they have caused inconveniences to the 1st Defendant Respondent, by utilising the funds in question for so many years without making any payments agreed upon. The balance of convenience is in favour of the 1st Defendant/Respondent. 16. In conclusion therefore, the application dated 18th March 2025 is hereby dismissed with cost to the Defendants. **Dated and signed Nakuru, this 14th Day of July , 2026.**  **PATRICIA GICHOH** **JUDGE** **Delivered at Nakuru this 14th Day of July 2026.** **………………………** **DR. JOSEPH SERGON** **JUDGE**