[2022] KEHC 534 (KLR)

Ndombi v Credit Bank Limited & another (Civil Suit E023 of 2021) [2022] KEHC 534 (KLR) (15 March 2022) (Ruling)

Neutral citation: [2022] KEHC 534 (KLR)

Republic of Kenya

In the High Court at Kajiado

Civil Suit E023 of 2021

SN Mutuku, J

March 15, 2022

Between

Pamela Namusia Ndombi

Applicant

and

Credit Bank Limited

1st Respondent

Philips International Auctioneers

2nd Respondent

Ruling

1. Pamela Namusia Ndombi, the Applicant, has brought this application through a Notice of Motion dated 24th November, 2021 under Section 44 of the Banking Act (Cap.488), Order 40 Rule 1 and 11 of the Civil Procedure Rules, Section 3, 3A and 63E of the Civil Procedure Act, Section 3, 13, 18 and 19 of the Environmental and Land Court Act,Rule 3 of the High Court Practice and Procedure Rules seeking orders that:1. That this application be certified urgent and be heard ex parte.2. That pending the hearing and determination of his application inter-partes an order of temporary injunction be issued restraining the respondents whether by themselves, their servants, employees and assigns/agents or any person whatsoever acting on their behalf and instructions from alienating, advertising for sale, offering for sale, selling, taking possession of, leasing, transferring, charging or otherwise in any manner whatsoever interfering with LR. NO. NGONG/NGONG/40723 AND L.R NO. NGONG/NGONG/40724. 3.That pending the hearing and determination of this suit an order of temporary injunction be issued restraining the respondents, whether by themselves, their servants, employees and assigns/agents or any person whatsoever acting on their behalf and instructions from alienating, advertising for sale, offering for sale, selling, taking possession of, leasing, transferring, charging or otherwise in any manner whatsoever interfering with LR. NO. NGONG/NGONG/40723 AND LR NO. NGONG/NGONG/40724.

2. This application is supported by an Affidavit sworn by the Applicant on 24th November, 2021. From this affidavit it is the Applicant’s case that she is the proprietor of LR. NO. NGONG/NGONG/40723 and LR. NO. NGONG/NGONG/40724. These two titles were used as collateral by Techspa General Supplies to obtain a loan facility of Kshs. 40,000,000 from the 1st Defendant. Problems arose and she approached the 1st Defendant to restructure the loan without success. The 1st Defendant instructed the 2nd Defendants to sell the properties by public auction on 2nd December, 2021.

3. It is the argument of the Applicant that she was not served with the statutory notices and only learned of the sale through advertisement. She claims that the 1st Defendant also failed to undertake a forced sale valuation of the charged land and serve the same and that legal notice to sell the land was also not issued. She urges that unless a temporary order preserving the substratum of this suit is issued, the owner of the properties shall suffer irreparable loss and that if the orders sought are granted there will be no prejudice to the respondents.

4. The application is opposed. The 1st Respondent filed a Replying Affidavit sworn by Wainaina Francis Ngaruiya the head of legal department. It is the case for the respondents that on 4th November, 2019 the Bank granted a term loan of Kshs. 40,000,000 to Techspa General Supplies Ltd (the Borrower); that the Applicant is a director of the Borrower and the loan was secured by her and a charge secured over LR. NO. NGONG/NGONG/40723 and LR. NO. NGONG/NGONG/40724; that the borrower’s account has since fallen into arrears and the amount owed stands at Kshs 52,088,486. 58; that as a result the 1st Respondent issued a final demand letter on 8th September, 2020.

5. It is further argued that the 1st Respondent exercised its statutory power of sale and issued a 3 months statutory notice dated 3rd December, 2020 and served by registered post on 7th December, 2020; that a 40 days’ notice to sell dated 18th March, 2020 was served upon the Applicant, the Borrower and the spouse of the Applicant through registered mail; that 45 days’ redemption notice dated 8th September, 2021 which was issued by the 2nd Defendant was also served personally upon the Plaintiff on the same day; that the Bank conducted a valuation report and thereafter the property was advertised for sale on 2nd December, 2021.

6. It is the Respondents’ case that the 1st Respondent and the Borrower have had several meetings to discuss the outstanding loan and the latter laid out a payment proposal through a letter dated 4th October, 2021, which the 1st Respondent considered and made a counter proposal through letter dated 25th November, 2021. That it is untrue that the 1st Respondent has received any payments as claimed by the Applicant. That the 1st Respondent is under no obligation to restructure the loan and is entitled to its statutory power of sale. That the Applicant is both the guarantor and the chargor under the charge and the law does not require that the 1st Respondent engages her as a guarantor before exercising its statutory power of sale.

7. The matter was argued orally through virtual link on 17th February, 2022. The Applicant reiterated the grounds in support of the application and argued that the 1st Respondent has failed to issue the Statutory Notices contrary to Sections 90 and 96 of the Land Act. The Applicant argued that the respondent also failed to issue the valuation report contrary to Section 87 of the Land Act and that failure to do so was unprocedural and illegal. The Applicant cited on Order 40 of the Civil Procedure Rules and the principles set out in Giella -vs- Casman Brown (1973) EA 358 to support her case.

8. The Respondents, through their counsel, reiterated the depositions contained in the Replying Affidavit and argued that the Applicant is not merely a guarantor but also a director of the Borrower as evidenced by the CR 12; that the Applicant confirmed the loan was advanced to the Borrower and that the attached statements of accounts show that there is an outstanding loan. It is the arguments of the respondents that they have complied with the law and issued all the notices required including the Statutory power of sale. They argue that they also conducted a valuation of the suit property.

9. The respondents relied on Mrao Limited v First American Bank of Kenya and 2 others (2003) KLR 125, Florence Khayanga Musanga v Transnational Bank Ltd & another[2020] eKLR to emphasize the points that the Applicant has not met the threshold for grant of the orders she is seeking. They also submitted that once power of sale has arisen then it is exercised. On this point they relied onNancy Wacici v Kenya Women Microfinance Bank Ltd (2017) eKLR.

10. It was their submission that the Applicant has not approached the court with clean hands in that she has failed to mention to the court that she is the chargor and a director of the Borrower. They also argued that the property was offered as security and as such the 1st Respondent has the right to exercise the statutory power of sale upon default. On this point they relied onSusan Adoyo v Equity Bank (K) Ltd [2021] eKLR.

Analysis and DeterminationThe parties herein did not frame any issues for this court to determine. However, this being an application seeking a temporary injunction, it is clear to me that the test to be applied to this application is the principles of injunctions laid down in numerous decisions including the case of Giella v Cassman Brown and Company Limited(1973) E.A 385. This is the threshold to be met before an injunction of the nature sought by the Applicant can be granted. Following the decision in that case, an applicant seeking an interlocutory injunction must satisfy the following conditions:i.First, an applicant must show a prima facie case with a probability of success.ii.Secondly, an applicant has to demonstrate that he/she will suffer irreparable injury which would not adequately be compensated by an award of damages if an interlocutory injunction is not granted.iii.Thirdly, if the court is in doubt of the first two conditions, then it will decide an application on the balance of convenience.

11. The question that this court must determine is whether the Applicant has satisfied these conditions.

12. My careful consideration of the case for the Applicant shows that her claim is simply that she was not served with the requisite notices as the law provides. She does not deny that there is default in repayments of the loan. She has cited the case of Mrao Limited v First American Bank of Kenya and 2 others(2003) KLR 125 to support her claim that she has established a prima facie case and urges that this court grants the prayers she is seeking in order to preserve the charged properties. In this case the Court defined prima facie case as follows:A prima facie case in a Civil Case include but is not confined to a “genuine or arguable” case. It is a case which on the material presented to the court, a tribunal properly directing itself will conclude 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 but 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.”

13. The Applicant stated that she was a guarantor to Techspa General Supplies Ltd, the Borrower. But it is the argument of the 1st Respondent that the Applicant is misleading the court by failing to disclose that she is a director of the Borrower as shown in the annexed CR12 and the chargor herein as shown in Charge. There is no dispute that the borrower was granted a loan in the tune of Kshs 40,000,000 and this figure is said to have risen to Kshs 52,088,486. 58 as stated by the 1st Respondent. The Applicant did not present any other evidence to this court other that stating that she has not been issued with statutory notices as required under Sections 90 and 96 of the Land Act.

14. I have seen a 3 months’ Notice dated 3rd December 2020. It is addressed to the Applicant herein and bears the postal address 2565 - 00100 Nairobi. This is a requirement under Section 90 (1) of the Land Act. The 1st Respondent claims that it complied with this section whose provisions are1 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 in 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.”

15. There is also a Notice to Sell. This is a Notice for 40 days and is issued under Section 96 (2) of the Land Act. It is dated 18th March 2021. It is addressed to the Applicant through postal address number 40809 00100 Nairobi. This is a different address than the one used to serve the 3 months’ notice.Section 96 (2) of the Land Act provides that:Before exercising the power to sell the charged land, the chargee shall serve on the chargor a notice to sell in the prescribed form and shall not proceed to complete any contract for sale of the charged land until at least forty days have elapsed from the date of the service of the notice to sell”.

16. And lastly, there is 45 days’ Redemption Notice issued by the 2nd Respondent to the Applicant. It is dated 8th September 2021. It is addressed to the Applicant through postal address number 2565 – 00100 Nairobi. Postal address number 2565 – 00100 Nairobi is the address in the Charge document. It is her address. Although I note that one of the notices bears a different address that the one used in the Charge document, the Applicant did not claim that the Respondents used a wrong address to serve her. Her claim is simply that she was not served with the notices at all.

17. I have considered the case for the Applicant against the arguments by the Respondents on the issue of prima facie case. I am not persuaded that the Applicant has established a case that fits the definition of a prima facie case contained in the Mrao case. Her case does not meet the threshold. It is simply a mere denial that she was not served with the requisite notices without evidence to support her case.

18. From the material placed before me, can the Applicant be said to have demonstrated that she will suffer irreparable injury which would not adequately be compensated by an award of damages if an interlocutory injunction is not granted? I do not think so. The Court of Appeal while adopting the sentiments of the court in Nguruman Limited v Jan Bonde Nielsen [2020] eKLR had this to say in Florence Khayanga Musanga v Transnational Bank Ltd & another [2020] eKLR in respect of irreparable injury:On the second factor, that the applicant must establish that he ‘might otherwise’ suffer irreparable injury which cannot be adequately remedied by damages in the absence of an injunction, is a threshold requirement and the burden is on the applicant to demonstrate, prima facie, the nature and extent of the injury.……………..The equitable remedy of temporary injunction is issued solely to prevent grave and irreparable injury: that is injury that is actual, substantial and demonstrable; injury that cannot ‘adequately’ be compensated by an award of damages. An injury is irreparable where there is no standard by which their amount can be measured with reasonable accuracy or the injury or harm is such a nature that monetary compensation, or whatever amount, will never be adequate remedy

19. The Applicant is in default and the 1st Respondent has chosen to exercise its statutory power of sale. The Applicant has come to this court seeking to restrain that action by the 1st Respondent. In Nancy Wacici -vs- Kenya Women Microfinance Bank Ltd (2017) eKLR, cited by the respondents, //“Once a power of sale has arisen, a mortgagee has the right to exercise it. The Court has no power to prevent the exercise of that power it is being properly exercised. It is a power parliament has granted a mortgagee and courts cannot and ought not to interfere if it is being exercised.”

20. On the third condition for grant of a temporary injunction, that is, the balance of convenience, the 1st Respondent argued that the balance of convenience tilts their favour in exercising its statutory power of sale of the subject property as a result of default in payment by the Applicant. They have argued that Applicant did not approach the court with clean hands for failure to disclose that she was a director of the Borrower and not merely a guarantor.

21. I have carefully considered this matter. It is my view that the 1st Respondent has acted within the law. Although the Applicant claims that she was never served with the notices as required by the law, this is not the case. I have indicated in this ruling that all the requisite notices have been served. I have also noted that a valuation has been done on the property.

22. In this matter, I find myself in agreement with the court in case ofAndrew Muriuki Wanjohi v Equity Building Society Ltd (2006) eKLR that:Whenever the Applicant offered the suit property as security, he was conscious of the fact that if the borrower did not meet his obligations, the suit property could be sold off. Therefore, in the event that it later became necessary for the suit property to be sold off, by the charge, the chargor could not be heard to complain that his loss was incapable of being compensated in damages. He had the property evaluated in monetary terms. He had then told the chargee that he knew the property to be capable of providing the chargee with the peace of mind, of knowing that the money given as a loan would become recoverable even if the borrower did not pay it.”

23. The Applicant has failed to meet the threshold for grant of the temporary injunction he is seeking. She has not met the conditions for grant of a temporary injunction. For that reason and without belabouring the point, her application must fail. Consequently the Notice of Motion dated 24th November 2021 is hereby dismissed with costs to the 1st Respondent. Orders shall issue accordingly.

DATED, SIGNED AND DELIVERED THIS 15THDAY OF MARCH 2022. S. N. MUTUKUJUDGE