[2023] KEHC 26321 (KLR)

Mediheal Diagnostics & Fertility Centre & 2 others v Legacy Auctioneer Services & another (Civil Case 19 of 2023) [2023] KEHC 26321 (KLR) (11 December 2023) (Ruling)

Neutral citation: [2023] KEHC 26321 (KLR)

Republic of Kenya

In the High Court at Eldoret

Civil Case 19 of 2023

RN Nyakundi, J

December 11, 2023

Between

Mediheal Diagnostics & Fertility Centre

1st Applicant

Swaruj Ranjan Mishra

2nd Applicant

Pallavi Jodhipur Rajthan

3rd Applicant

and

Legacy Auctioneer Services

1st Defendant

CIB Kenya Limited

2nd Defendant

Ruling

1. The Applicant approached this court vide a Notice of motion Application dated 27th October 2023 seeking the following orders;1. That this Honourable Court be pleased to certify this Application as urgent and the same be heard ex parte in the first instance.2. That this Honourable Court do issue a temporary injunction to restrain and prevent the 1st and 2nd Defendants/Respondents by themselves and/or their agents, servants, employees, assigns or otherwise howsoever from interfering with the Plaintiffs/ Applicants quiet possession of or marketing and/ or advertising for sale or selling, leasing, sub-dividing, receiving or taking possession of the suit properties being Kapsaret/Kapsaret Block 2 (Kaptuiyo)/14 and Plateau/Plateau Block 2 (Uasin Gishu)/37 pending the hearing and determination inter-parties of this Application.3. That this Honourable Court do issue a temporary injunction to restrain and prevent the 1st and 2nd Defendants/Respondents by themselves and/or their agents, servants, employees, assigns or otherwise howsoever from interfering with the Plaintiffs/Applicants quiet possession of or marketing and/ or advertising for sale or selling, leasing, sub-dividing, receiving or taking possession of the suit properties being Kapsaret/Kapsaret Block 2 (Kaptuiyo)/14 and Plateau/Plateau Block 2 (Uasin Gishu)/37 pending the hearing and determination of the main suit herein.4. That a court mandated independent valuation of the suit property be conducted by a registered valuer jointly appointed by the parties or by the honourable court pending the hearing and final determination of the main suit.5. That the costs of this Application be borne by the Respondents.

2. The Application is premised on the grounds set out therein and the contents of the supporting affidavit sworn by the 2nd Applicant.

3. The Respondents opposed the application vide a replying affidavit dated 2nd November 2023 sworn by the 2nd Respondent’s head of legal department.

Applicant’s case 4. The Applicant contends the legal threshold for granting injunction is settled following the holding of the Court of Appeal in the case of Giella v Cassman Brown & Co. Ltd [1973] EA 358. Further, That 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 prove sequentially as held by the Court of Appeal in Kenya Commercial Finance Co. Ltd v Afraha Education Society [2001] Vol. 1 EA 86.

5. Counsel urged That the Court must first determine whether the Plaintiff has a prima facie case with probability of success. Further, That the courts have had occasion to define what constitutes a prima facie case. He relied on the decision by the Court of Appeal in Mrao Ltd. v First American Bank of Kenya Ltd & 2 others [2003] KLR 125 on the definition of a prima facie case.

6. The Applicant maintained That it has religiously made payments to the 2nd Respondent and That it was shocked to be informed That the Applicants were in arrears vide letter dated 13th October 2023. Further, That the Applicant's dispute the claimed amount by the Respondent's as being excessive. Counsel urged That the statement of Account within the custody of the 2nd Respondent has not been furnished to demonstrate That the Applicants have been religiously making payments.

7. It is the Applicant’s case That the entire procedure and steps taken by the 1st and 2nd Respondent for the 2nd Respondent to exercise its statutory power of sale is flawed as the 1st and 2nd Defendant/Respondents failed to serve the requisite statutory notices upon the Plaintiff's/Applicant's including the 45 days' notice required as per the provisions of the Auctioneers Rules, the 90 days' notice required to be served by the 2nd Respondent as per Section 90 of the Land Act No. 6 of 2012, and the 40 days' Notice required to be served by 2nd Respondent before proceeding to exercise the Statutory Power of Sale as required under Section 96(2) of the Land Act No. 6 of 2012.

8. Counsel submitted That the annexed alleged Statutory Notices in the 2nd Respondent's Replying affidavit dated 2nd November 2023 does not bear any receipt stamps nor has the postal receipts been furnished to demonstrate service vide post. In this regard, the statutory mandated process has not been strictly complied with by the 1st and 2nd Respondents. Additionally, counsel urged That it must be noted That the property known as Kapsaret/Kapsaret Block 2 (Kaptuiyo)/14 and Plateau/Plateau Block 2 (Uasin Gishu)/37, the subject of this suit, hosts critical medical infrastructure which is vital for the maintenance of life of patients within the care of the 1st Defendant/Applicant. on this basis, the Applicant averred That it had established a prima facie case with probability of success.

9. On the second limb, whether the Applicant shall suffer irreparable damage incapable of being compensated by award of damages, counsel urged That aside from the 1st , 2nd and 3rd Applicant's suffering loss of user if the 2nd Respondent were to erroneously and illegally exercise its statutory power of sale, the 1st Applicant being a medical facility will lose crucial infrastructure set up on the property known as Kapsaret/Kapsaret Block 2 (Kaptuiyo)/14 and Plateau/Plateau Block 2 (Uasin Gishu)/37 and its stellar reputation will be severely disparaged. Counsel maintained That any loss to be suffered by the 1st, 2nd and 3rd Plaintiff is not quantifiable. Consequently, an award of damages will not be adequate compensation.

10. On the last limb of balance of convenience, it is the Applicants’ case That the balance tilts in favour of the 1st , 2nd and 3rd Applicants who will lose critical hospital infrastructure and risk the lives of patients under the care of the 1st Applicant. Further, That the reputation of a stellar medical facility is at stake due to the attempted unprocedural and illegal action of the 1st and 2nd Respondent. The Applicant urged the court to allow the application as prayed.

Respondent’s case 11. The 2nd Respondent opposed the application vide a replying affidavit and submissions. It is the Respondent’s case That it is not in dispute That the Respondent provided a loan facility to the Applicant which was secured by the properties known as Kapsaret/Kapsaret Block 2 (Kaptuiyo)/14 and Plateau/Plateau Block 2 (Uasin Gishu)/37. The Applicant defaulted in payment of its loan necessitating action being taken by the 2nd Defendant/Respondent towards recovery of the said loan arrears. On 7th December 2022 the Respondent wrote a letter to the Applicants informing them of the outstanding arrears but the letter did not elicit any response from the Applicants forcing the 2nd Defendant/Respondent to write another letter dated 22. 3.23 reminding the Applicants’ of the outstanding arrears owed to the Bank. There was no response to this and therefore, the 2nd Defendant/Respondent issued the Applicants with a Statutory Notice as per the provisions of section 90 of the Land Act as the arrears were now Kshs.69,529,326. 02. Upon expiry of the 90 days statutory Notice, the 2nd Defendant/Respondent proceeded and issued the Applicants with a 40 days Statutory Notice on 9. 5.23 as per the provisions of Section 96(2) of the Land Act as the arrears were now- Kshs. 73. 041. 458. 00 & USD 903,316. 88.

12. On the 12th of August 2023, Mr. Benjamin Kisoi Sila proceeded to the Applicants' place of business in Eldoret Town and effected service of the 45 days Redemption Notice and Notification of Sale upon one Mr. Hillary Biwott who acknowledged receipt bur declined to sign on the Auctioneers copies. After issuance of the 45 days’ Notice chat the Applicants approached the 2nd Defendant/Respondent with a settlement proposal and the initial Auction chat was slated for 9. 10. 23 was stopped by the Bank. The said negotiations did not materialize and the Defendant/Respondent instructed the 1st Defendant/Respondent to re-advertise the charged properties culminating in the Auction scheduled for 3. 11. 23.

13. Counsel urged That the Applicants seek to enjoy reprieve from the Judicial system yet they continue to fail to abide by the terms of the contract That they got into with the 2nd Defendant/Respondent. Further, That the Applicants Application is only meant to scuttle the Auction slated for 3rd November 2023 all aimed at defeating the ends of justice being met to the detriment of the 2nd Defendant/Respondent That operates as a financial/banking institution receiving and investing its shareholders & customers deposits for their gain.

14. It is the Respondents’ case That it is trite law That for an injunction to be granted the following must be met; An Applicant must show a prima lade case with a probability of success;

An Injunction will not normally be granted unless the Applicant might otherwise suffer irreparable injury which would not be adequately compensated by award of damages; and

If the Court is in doubt, it will decide an application on a balance of convenience.

15. Counsel urged That the Applicants have failed and continue to dishonour their agreement with the Defendants regarding repayment of the facilities advanced to them and as such this Honourable Court ought to vacate the Temporary Orders granted in their favour and allow the 2nd Defendant realize the said properties and redeem itself. Counsel urged the court to dismiss the application with costs.

Analysis & Determination 16. Upon considering the application, responses thereto and the attendant submissions, the following issues arise for determination;1. Whether the application for an injunction is merited

Whether the Application for an Injunction is merited 17. The law governing the granting of interlocutory injunction is set out under order 40(1) (a) and (b) of the Civil Procedure Rules 2010 which provides That:Where in any suit it is proved by affidavit or otherwise—(a)That any property in dispute in a suit is in danger of being wasted, damaged, or alienated by any party to the suit, or wrongfully sold in execution of a decree; or [Rev. 2012] Civil Procedure cap. 21 [Subsidiary] C17 – 165;(b)That the defendant threatens or intends to remove or dispose of his property in circumstances affording reasonable probability That the plaintiff will or may be obstructed or delayed in the execution of any decree That may be passed against the defendant in the suit, the court may by order grant a temporary injunction to restrain such act, or make such other order for the purpose of staying and preventing the wasting, damaging, alienation, sale, removal, or disposition of the property as the court thinks fit until the disposal of the suit or until further."

18. The conditions for consideration in granting an injunction were settled in the celebrated case of Giella v Cassman Brown & Company Limited (1973) EA 358, where the court expressed itself on the condition’s That a party must satisfy for the court to grant an interlocutory injunction as follows: -"Firstly, 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."

19. The test for granting of an interlocutory injunction was considered in the American Cyanamid Co. v Ethicon Limited (1975) A AER 504 where three elements were noted to be of great importance namely: -i.There must be a serious/fair issue to be tried,ii.Damages are not an adequate remedy,iii.The balance of convenience lies in favour of granting or refusing the application.

Whether the Applicant has a Prima Facie Case 20. In Mrao v First American Bank of Kenya Ltd & 2 Others [2003] KLR 125 the Court defined a prima facie case as follows;“..in Civil cases, it is a case in 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.”

21. The Applicant contends That there is a dispute as to the arrears That have occasioned the statutory power of sale That the respondents seek to exercise. On its part, the 1st applicant contends That it was never served with the requisite statutory notices and as such the exercise of the statutory power of sale is illegal. On the contrary, the respondents maintain That they have complied with the law on statutory power of sale and That they served the requisite notices as required.

22. Section 90(1) of the Land Act, 2012 provides That:“If a chargor is in default of any obligation, fails to pay interest or any other periodic payment or any part thereof due under any charge or in the performance or observation of any covenant, express or implied, in any charge, and continues to be default for one month, the chargee may serve on the chargor a notice, in writing, to pay the money owing or to perform and observe the agreement as the case may be."

23. The applicant disputes having defaulted on the payments. The respondents on their part, swore in their replying affidavit That the applicant had defaulted in payment of the loan. Being the custodian of the accounts, one would have expected the respondent to produce a statement of accounts pertaining to the loan facility but to the dismay of the court, none was availed. Therefore, there exists a dispute as to whether there was a default in payments That would prompt the exercise of statutory power of sale.

24. Section 96(1) of the Land Act provides That:Where a chargor is in default of the obligations under a charge and remains in default at the expiry of the time provided for the rectification of That default in the notice served on the chargor under section 90 (1), a chargee may exercise the power to sell the charged land.

25. The respondents have produced the notices That were allegedly served on the respondents but there is one essential element That they have not provided to wit; proof That they served the applicants with the requisite notices. It is evident That on the face of it, the applicant has a prima facie case with a chance of success.

Whether the applicant will suffer irreparable injury 26. The sum That is in dispute is quite colossal being Kshs. 61, 479,973. Additionally, the 1st respondent offers healthcare services and it follows That an auction would require some of the vital infrastructure required in offering healthcare services be auctioned. Whereas the same may be compensated by an award of damages, the injury to the reputation of the business and the patients who might be under its care cannot be compensated by an award for damages.

Balance of convenience 27. From the consideration under the limb of irreparable injury, the balance of convenience would lie in preserving the sub stratum of the suit and granting the prayer for an injunction.

28. In the premises, the application succeeds in its entirety. A temporary injunction is hereby granted in terms of prayer 3 of the application pending the determination of the suit. Costs shall be in the main suit.It is so ordered.

DELIVERED DATED AND SIGNED AT ELDORET ON THIS 11TH DAY OF DECEMBER 2023……………………………………R. NYAKUNDIJUDGE