[2022] KEHC 16427 (KLR)

Misati v Consolidated Bank of kenya Limited & 2 others (Civil Case E007 of 2021) [2022] KEHC 16427 (KLR) (8 November 2022) (Ruling)

Neutral citation: [2022] KEHC 16427 (KLR)

Republic of Kenya

In the High Court at Machakos

Civil Case E007 of 2021

MW Muigai, J

November 8, 2022

Between

Kepher Ondere Misati

Applicant

and

Consolidated Bank Of kenya Limited

1st Respondent

Connect Credit Limited

2nd Respondent

Regent Auctioneers

3rd Respondent

Ruling

1. Vide a Notice of Motion dated December 9, 2021, the Applicant seeks the following orders;a.Spentb.That pending the hearing and determination of this application a temporary injunction be and is hereby issued restraining the 1st and 3rd Respondent/ Defendants either by themselves or through their agents, servants or employees from selling through public auction in exercise of its statutory power of sale, disposing off, transferring, using and/or dealing with Land Parcel Lr No Mavoko Town Block 3/2426 located at Athi River Mavoko Municipality

2. The Application was supported by the affidavit of Kepher Ondere Misatisworn on December 9, 2021 in which he deponed that he is the registered proprietor of land parcel known as LR No Mavoko Town Block 3/2426 and on diverse dated between December 2014 and 2016, the 2nd Defendant was granted a loan facility by the 1st Defendant/ Respondent of Kshs 30,000,000 which was secured by a charge registered in favour of the 1st and 2nd Respondent. At which time the 2nd Respondent was operating an active bank account which the loan was processed though. He deponed that the loan was to be serviced by deducting from the said account monthly until payment in full.

3. The Applicant contended that the 2nd Respondent later changed his account to another bank making the 1st Respondent unable to recover the loan directly. Changes the Applicant opines were not communicated to him despite being prejudicial and were done fraudulently to defraud him. He said that the 1st Respondent without lawful reason and notice instructed the 3rd Respondent to advertise the sale which was done on November 28, 2021 for sale via public auction within 45 days from October 7, 2021 to recover a sum of Kshs 24,464,763. 40, the alleged outstanding balance as at September 30, 2021.

4. The Applicant said he learnt about the sale of the property through and advertisement in the daily Nation of November 29, 2021 and belated notices from the 2nd Respondent. He contended that the orders sought will not prejudice the Respondents.

1st Respondent Replying Affidavit 5. Vide an affidavit sworn on January 18, 2020 by Billy Ubindi, who works in the Recoveries Department, he contended that the 2nd Respondent through its directors applied and were granted a loan facility by the 1st Respondent vide a letter of offer dated October 29, 2015 whose terms were that inter alia that;a.The 1st Respondent would cumulatively advance to the 2nd Respondent Kshs 30,000,000 which included an overdraft facility and an overdraft cum term loan facility.b.The cumulative financial facility of Kshs 30,000,000 would be secured by a legal charge over LR NO Mavoko Town Block 3/2426 registered in the name of the Applicant.c.The borrower opens an account with the bank and banks a minimum of Kshs 8,000,000 monthly.d.In default, the bank would have a right to exercise its statutory power of sale as provided in the law.

6. It was deponed that the Applicant executed the guarantee and indemnity dated November 30, 2015 and upon registration of the charge, the loan was disbursed through the 2nd Respondent’s account number xxxx on July 20, 2018. On March 28, 2018 the loan was amalgamated to Kshs 24,846,418. 40 repayable in 60 equal monthly instalments of Ksh 578,133 following a request by the 2nd Respondent on March 8, 2018. At this point, the Applicant executed a guarantee and indemnity dated March 29, 2018 to indemnify the 1st Respondent from any loss.

7. It was deponed that as a result of the 2nd Respondent’s default, statutory notices were issued through the registered post. The auctioneers notice and a notification of auction in 45days was also issued from October 7, 2021 was also issued. He deponed that on December 15, 2021, the 2nd Respondent and the Applicant issued a settlement proposal whose conditions were that;a.They a total of Kshs 2,000,000 with the 1st Respondent on or before December 30, 2021,b.They would furnish the 1st Respondent with an approval for equity release of Kshs 13,000,000 by December 17, 2021 and channel the said funds plus the expected salary to reduce the 2nd Respondent’s liabilities to the bank,c.The Applicant would finalize the sale of a property in Kamulu and sale proceeds would be channeled to offset the loan balance.

8. Later, the 1st respondent contended that he came to learn that this was just to dupe him into aborting the sale of the property. The court was asked to dismiss the application with costs.

1st Respondent’s Further Affidavit 9. In an affidavit dated May 31, 2022, Lilian Ntongai who works in the asset recovery department of the 1st Respondent deponed that on December 15, 2021 upon the request of the Plaintiff and the 2n Respondent, they agreed to suspend the auction sale over the suit property on the following conditions, that;a.The 2nd Respondent banks a total of Kshs 2,000,000 with the 1st Respondent on or before December 30, 2021,b.The 2nd Respondent furnishes the bank with an approval for equity release of Kshs 13,000,000 by December 17, 2021 and thereafter to channel the said funds plus the expected salary to the 1st Respondent to offset the loan balance by February 28, 2022,c.The 2nd Respondent to similarly settle all recovery costs incurred by February 28, 2022.

10. It was deponed that inn default of this conditions, the 1st Respondent would proceed to re- advertise the charged property for the outstanding amounts. She contended that the Plaintiff and the 2nd Respondent has paid Kshs 1,408,999 while the debt owed was Kshs 23,156,008 and that the representations made by the Plaintiff in court that his indebtedness stood at Kshs 400,000 were untrue and an attempt to mislead the court. They are not in negotiations and the Plaintiff and the 2nd Respondent are in breach of the agreement dated December 15, 2021. The court was urged to dismiss the application with costs.

11. The application was disposed off by way of written submissions.

Applicant’s Submissions 12. As at the time of writing this ruling, there were no submissions by the Applicant on record.

1st Respondent Submissions 13. The 1st Respondent filed submissions on May 8, 2022 in which he reiterated the contents of its Replying affidavit and while relying on the case of Giella vs Cassman Brown & Company Limited (1973) EA 358, Nguruman Limited vs Jan Bonde Nielsen & 2 Others, Civil Appeal 77 of 2022,Mrao Ltd vs First American bank of Kenya & 2 Others (2003) eKLR and Moses C Muhia Njoroge & 2 others vs Jane W Lesiloi & 5 Others (2014) eKLR, Winfred Nyamira Maina vs Peterson Onyiego Gichana (2015) eKLR; National Bank of Kenya vs Pipe Plastic Samkolit (k) Ltd & Anor [2001] eKLR; Root Capital Incorporated vs Tekangu Farmers Cooperative Society Ltd [2016]eKLR; Maithya vs HFCK Ltd [2003]eKLR EA.; Kitur vs Standard Chartered Bank Ltd (2002) 1KLR& Thathy vs Middle East Bank (K) Ltd(2002) 1 KLR submitted that they had discharged their evidentiary burden by furnishing the court with statutory notices, certificate and proof of postage and the Court cannot vary the terms of a contract binding parties to the contract.

14. The 1st Respondent contended that the 2nd Respondent’s default and loan arrears triggered their right to realize its security as contractually agreed. The Applicant, 1st and 2nd Respondent entered into an agreement and the Applicant had not pleaded coercion, fraud or undue influence therefore he must be held to his contractual obligations.

15. It was submitted that the Applicant’s failure to indemnify as contractually agreed preclude him from the realms of equity and as such the application should be dismissed. Further reliance was placed on the cases of Winfred Nayamira Maina vs Peterson Onyiego Gichana (2015) eKLR, National Bank of Kenya vs Pipelastic Samkolit (K) Limited & Another (2001) eKLR, Ruth Ngunju & 2 others vs Kenneth Kaabuga Maina (2020) eKLR.

16. On the issue of whether the Applicant will suffer irreparable loss that cannot be compensated by damages, it was submitted that since the Applicant and the 2nd Respondent offered the suit property as security to be sold in the event of default, the Applicant cannot claim he will suffer irreparable loss incapable of compensation by an award of damages. It was submitted that the 1st Respondent will suffer financial loss because of the 2nd Respondent’s loan account accruing debt. Reliance was placed on the case of Kitur vs Standard Chartered Bank & 2 others (2002) 1KLR.

17. On the issue of balance of convenience, it was submitted that it tilts in the 1st Respondents favour as he stands to suffer more loss if the injunction is granted. In support of this point, the 1st Respondent relied on the case of Thathy vs Middle East Bank (K) Limited (2002) Civil Suit 302 of 2002 1KLR 595.

18. I note that the 2nd and 3rd Respondents did not respond to the Application nor put in any submissions.

Determination 19. I have considered the Application, the responses thereto and the submissions on record. The court notes that this is a matter that when the application herein was filed before the Environment and Land Court in Machakos, the Court transferred the matter to this court citing lack of jurisdiction vide an order of December 14, 2021.

20. It is trite law that parties are bound by their pleadings. The Court of Appeal in the case of Dakianga Distributors (K) Ltd v Kenya Seed Company Limited [2015] eKLR observed as follows;A useful discussion on the importance of pleadings is to be found in Bullen and Leake and Jacob's Precedents of Pleadings, 12th Edition, London, Sweet & Maxwell (The Common Law Library No 5) where the learned authors declare:-'The system of pleadings operates to define and delimit with clarity and precision the real matters in controversy between the parties upon which they can prepare and present their respective cases and upon which the court will be called upon to adjudicate between them. It thus serves the two-fold purposes of informing each party what is the case of the opposite party which he will have to meet before and at the trial, and at the same time informing the court what are the issues between the parties which will govern the interlocutory proceedings before the trial and which the court will have to determine at the trial.'Sir Jack Jacob in an article entitled “The Present Importance of Pleadings” published in (1960) Current Legal Problems and which article was quoted with approval by the Supreme Court of Malawi in Malawi Railways Limited v Nyasulu [1998] MWSC 3 states of the importance of pleadings:''As the parties are adversaries, it is left to each one of them to formulate his case in his own way, subject to the basic rules of pleadings for the sake of certainty and finality, each party is bound by his own pleadings and cannot be allowed to raise a different or fresh case without due amendment properly made. Each party thus knows the case he has to meet and cannot be taken by surprise at the trial. The court itself is as bound by the pleadings of the parties as they are themselves. It is no part of the duty of the court to enter upon any inquiry into the case before it other than to adjudicate upon the specific matters in dispute which the parties themselves have raised by the pleadings. Indeed, the court would be acting contrary to its own character and nature if it were to pronounce any claim or defence not made by the parties. To do so would be to enter upon the realm of speculation. Moreover, in such event, the parties themselves, or at any rate one of them might well feel aggrieved; for a decision given on a claim or defence not made or raised by or against a party is equivalent to not hearing him at all and thus be a denial of justice.'In the adversarial system of litigation therefore, it is the parties themselves who set the agenda for the trial by their pleadings and neither party can complain if the agenda is strictly adhered to. In such an agenda, there is no room for an item called 'Any Other Business' in the sense that points other than those specific may be raised without notice.'In Libyan Arab Uganda Bank for Foreign Trade and Development & Anor v Adam Vassiliadis [1986] UGCA 6 the Court of Appeal of Uganda cited with approval the dictum of Lord Denning inJones v National Coal Board [1957] 2 QB 55 that:'In the system of trial which we have evolved in this country, the judge sits to hear and determine the issues raised by the parties, not to conduct an investigation or examination on behalf of society at large, as happens, we believe, in some foreign countries.'

21. In this case, the Applicant has indicated that the orders sought are as follows;'Thatpending the hearing and determination of this application a temporary injunction be and is hereby issued restraining the 1st and 3rd Respondent/ Defendants either by themselves or through their agents, servants or employees from selling through public auction in exercise of its statutory power of sale, disposing off, transferring , using and/or dealing with Land Parcel Lr No Mavoko Town Block 3/2426 located at Athi River Mavoko Municipality'

22. This Court on December 15, 2021 granted this order. The auction was called off on condition that the Applicant was to pay Ksh 2 million within 60 days and pay the Auctioneers Fees pending the hearing and determination of the Application.

23. On May 11, 2022, the Applicant informed the Court that the condition for injunction were partly complied with as the Applicant paid Kshs 1. 6 million and was negotiating the payment of the balance of Ksh 2 million. The Court granted the parties further 30 days for compliance.

24. On July 6, 2022, the Applicant stated that Ksh 2 million was paid and needed more time to complete negotiations. The Respondent objected that there were no negotiations; the Ksh 2 million was to be paid by June 10, 2022 and was not paid. The outstanding loan was now in excess of Ksh 23 million. The Plaintiff/ Applicant breached the Agreement/contract and orders of the Court. Hence the Respondent filed Written Submissions, List & bundle of documents and asked the Court to rely on the Replying Affidavit of June 8, 2022.

25. The Court granted parties time to comply by filing written submissions as negotiations failed.

26. On July 28, 2022 the Applicant failed to file written submissions and asked the Court to rely on Affidavits on record.

27. The 1st Respondent’s Replying Affidavit to the Plaintiff’s application is that the 2nd Respondent through its directors applied for a loan facility from the 1st Respondent vide letter dated October 29, 2015 and sought loan facility of Ksh 30,000,000 which included overdraft facility.

28. The facility was secured by Land Parcel/LR Mavoko Town Block 3/2426 and a legal charge was drawn and a copy was annexed to the Pleadings by the Respondent.

29. The Plaintiff was/is guarantor of the Loan. As a result of persistent default, the 1st Respondent served by post demand notices for payment of arrears and later served the Plaintiff the statutory notices of 90 days & 40 days prescribed by Section 90 & 97 of the Land Act and thereafter 45 days Notice by Auctioneer.

30. To forestall, the intended auction on October 7, 2021 the Plaintiff approached the 1st Respondent and came to a Settlement Agreement with a Payment Schedule. The Plaintiff defaulted and later sought refuge in Court vide Court orders granted on December 15, 2021.

31. The Plaintiff failed to comply with the conditions. The Plaintiff does not deny being in default of repayments of the loan facility /overdraft nor the 1st respondent’s bank’s right to exercise statutory power of sale.

32. The Plaintiff’s claim is that the 1st Respondent without lawful claim and reason advertised the suit property for an auction without notice or knowledge. The amount outstanding as at September 2021 was/is Kshs 24,464,763. 40/- which was to be deducted from the 2nd Respondent’s account a Limited Liability Company as a Guarantor.

33. From the further affidavit by the 1st Respondent, it appears that the Applicant has not complied with the conditions that were set for the orders of injunction being granted from December 2021- July 2022.

34. The Court has gleaned through List & Bundle of Documents filed by 1st Respondent, the Loan & Overdraft Facility Agreement is annexed and its terms bind the parties, this Court cannot rewrite the terms of the contract. The Plaintiff does not deny indebtedness due to default in servicing the loan and that as Guarantor the plaintiff is liable to settle the outstanding amount the default of the 2nd Respondent. The statutory notices are annexed as served to the Plaintiff. In the premises, the 1st Respondent served the statutory notices.

35. Giella vs. Cassman Brown & Co Ltd [1973] EA at Page. 358 whose holding is as follows:-'The condition for the grant of an interlocutory injunction are now, I think well settled in East Africa.First, an applicant must show a prima facie case with a probability of success.Secondly, an interlocutory injunction will be normally 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'.

37. Ringera J(as he then was) in Elijah Kipng’eno Arap Bii vs Kenya Commercial Bank Limited [2001] eKLR where the Judge held as follows:'In my opinion, justice must always be dispensed in accordance with well-established legal principles and not in accordance with judicial idiosyncrasy or whim. And of course it is trite learning that equity follows the law. Being of that persuasion I cannot see that a lender who happens to be the employer of the borrower can be restrained from exercising his contractual or statutory powers merely because the borrower has brought into question the lawfulness of his dismissal from the lender’s service. And even if it may be the case that in common parlance the dismissal of an employee and the recalling of his loans thereafter may be called double jeopardy, such action cannot be conceived to be double jeopardy within the meaning of the law.'Enforcement of contractual rights cannot be regarded as punishment. The bottom line is that all applications for injunction irrespective of the contractual or other relationships between the parties are to be decided on the basis of the settled principles for the grant of such relief.'

36. From the totality of the evidence on record, this Court finds that the relief to grant a temporary /interim injunction pending hearing and determination of the application and/or suit is not tenable as it does not fulfil conditions under Order 40 CPR2010 and Giella vs Cassman Brown case supra. The Plaintiff has failed to establish a prima facie case with probability of success. The Plaintiff’s claim does not controvert the 1st Defendant’s position and the grant of injunction is not available/granted.

Disposition 1. The application to grant injunction is dismissed with costs to 1st Respondent.

DELIVERED SIGNED & DATED IN OPEN COURT IN MACHAKOS ON 8TH NOVEMBER (VIRTUAL/PHYSICAL CONFERENCE).M.W. MUIGAIJUDGEIn the presence of:No appearance for the applicant/plaintiffNo appearance for the respondents/ defendantsGeoffrey/patrick - Court Assistant(s)