[2022] KEHC 13546 (KLR)

Standard Chartered Bank Of Kenya Limited & another v Kaburu & another (Civil Appeal E073 of 2022) [2022] KEHC 13546 (KLR) (Commercial and Tax) (7 October 2022) (Judgment)

Neutral citation: [2022] KEHC 13546 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Civil Appeal E073 of 2022

DAS Majanja, J

October 7, 2022

Between

Standard Chartered Bank Of Kenya Limited

1st Appellant

Joseph M. Gikonyo T/A Garam Auctioneers

2nd Appellant

and

Duncan Josephat Kaburu

1st Respondent

Perpetua Wacheke Muturi

2nd Respondent

(Being an appeal from the Ruling and Order of Hon. D. W. Mburu, PM dated 13th May 2022 at the Magistrates Court at Nairobi, Milimani in Civil Case No. 176 of 2022)

Judgment

1. This is an appeal against the ruling and order of the subordinate court dated May 13, 2022 in respect of the respondents’ application for an interlocutory injunction under order 40 rule 1, 2 and 8 of the Civil Procedure Rules restraining the 1st appellant (‘’the bank’’) through the 2nd appellant (“the auctioneer’’) from exercising its statutory power of sale pending the hearing and determination of the suit before the court. The court granted an injunction restraining the appellant from, inter alia, taking possession or evicting the respondents from the subject property.

2. The facts leading the application before the subordinate court and this appeal are common ground. At the time material to the suit, the respondents owned Nairobi/block 76/139 (‘’the suit property’’) which they charged to the bank by a charge dated July 3, 2018 to secure a loan for the principal amount of Kshs8,100,000. 00.

3. The respondents’ case is set out in their plaint dated January 20, 2022. They state that after they took out the loan, they struggled to repay it and made payments of over Kshs 6,000,000. 00 in 2021. On January 19, 2022, the 1st respondent was shocked when he was served with a notice informing him that the suit property would be sold on January 18, 2022.

4. The respondents allege that they have not been served with the 90-day statutory notice and the 40-day notice to sell the suit property issued under section 90 and section 96 of the Land Act, 2012 and the 45-day redemption notice. They also aver that the bank has not carried out any valuation of the suit property as the last one was done in 2018.

5. The respondents state that they are apprehensive that the suit property may have been sold and transferred to an unknown buyer. They therefore seek a permanent injunction restraining the appellants from interfering with their quiet possession of the suit property, an order prohibiting dealing with the suit property, an order revoking the transfer of the suit property and a cancellation of any entries of sale or transfer of the suit property and revocation of any title and or certificate of lease issued, general damages and costs of the suit.

6. The plaint was accompanied by the application dated January 20, 2022 seeking injunctions on the grounds set out in the plaint and supported by the 2nd respondent’s affidavit and supplementary affidavit sworn on January 20, 2022 and February 16, 2022 respectively. The appellants opposed the application through the affidavit of the bank’s officer, Boniface Machuki, sworn on January 31, 2022. Both parties filed extensive written submissions supported by authorities.

7. After considering the application, depositions and submissions, the trial magistrate granted the injunction restraining the appellants from, inter alia, interfering with the respondents’ quiet possession of the property. The court considered the two issues raised by the respondents. On the first issue whether the bank issued and served statutory notices on the respondents, the court held that there was no evidence that any demand or statutory notice were served on the 2nd respondent. On the issue whether the bank valued the property, the court was satisfied the bank had done a valuation of the suit property.

8. On the basis that the bank did not serve on the 2nd respondent, the requisite statutory notices, the court held that the respondents had established a prima faciecase with a probability of success. The court further held that the respondents were bound to suffer irreparable lose if an injunction was not granted as the respondents would lose their property and be rendered homeless and destitute on a sale that would otherwise be illegal and irregular. The court however observed that the prayer for revocation for sale on/or cancellation of the transfer were final orders which it could not issue at the interlocutory stage.

9. It is the order of injunction that has precipitated this appeal. The thrust of the appellants’ case is found in the memorandum of appeal dated May 24, 2022. The complain that the trial magistrate misapprehended, misconstrued, misinterpreted and misapplied the law on interlocutory injunctions set out in the case of Giella v Cassman Bown and Company Limited [1973] EA 358. They complain that the trial magistrate failed to recognize that the statutory power of sale had accrued as the bank had served the statutory notices. They complain that the trial court granted an order that had not been sought in the application.

10. The respondents support the decision of the trial magistrate and urge that the court exercised its discretion in accordance with the law. They point out the statutory notices were not served and that the court was right in granting the injunction as they had satisfied the principles for the grant of an injunction.

11. At the hearing of the appeal, the parties’ respective advocates made brief oral submissions advancing the positions they had taken before the trial court.

12. The issue in this appeal is whether the trial magistrate properly exercised discretion in granting the injunction hence the court’s approach to the exercise of its appellate jurisdiction is guided by known principles. In Mbogo v Shah [1968] EA 93, Newbold P, expressed the nature and extent of the appellate court’s jurisdiction to interfere with the discretion of the lower court as follows;A court of appeal should not interfere with the exercise of the discretion of a judge unless it is satisfied that the judge in exercising his discretion has misdirected himself in some matter and as a result has arrived at a wrong decision, or unless it is manifest from the case as a whole that the judge has been clearly wrong in the exercise of his discretion and that as a result there has been misjustice.

13. The trial court accepted the conditions for the grant of an interlocutory injunction settled in Giella v Cassman Brown(supra). The conditions are that in order to succeed in obtaining an interlocutory injunction, an applicant must demonstrate that it has a prima facie case with a probability of success, that it will suffer irreparable loss which cannot be compensated by an award of damages if the injunction is not granted and if the court is in doubt regarding the nature of injury, determine the matter on a balance of convenience. In Nguruman Limited v Jane Bonde Nielsen and 2 others Nrb CA civil appeal No 77 of 2012 [2014] eKLR, the Court of Appeal reiterated those conditions and added that they are to be considered as separate, distinct and logical hurdles a plaintiff is expected to surmount sequentially.

14. In this case, the trial court’s decision and finding that the respondents had a prima facie case rested the finding that the bank had not served statutory notices on the 2nd respondent. The trial court accepted that the respondents’ had defaulted in paying the loan and were in arrears hence the bank was entitled to exercise its statutory power of sale once it followed the laid out procedure.

15. In order to exercise its statutory power of sale, the chargee must issue and serve the chargor notices under the Land Act, 2012. The first notice prescribed under section 90 is issued when the chargor defaults in any of its obligations which include payment of interest or any other periodic payment or any part thereof due under the charge. If the chargor does not comply with the demand within 90 days after service of the notice, the chargee may proceed to sell the charged property. It is at this point that it is said the statutory power of sale has crystallised. Upon crystallization of the power of sale, the chargee is required to issue and serve on the chargor a 40-day notice to sell the subject property under section 96 of the Land Act. If the chargor does not comply, the chargee may then instruct an auctioneer who will serve a 45-day redemption notice under the provisions of the Auctioneers Rules.

16. Service of the statutory notices by the chargee on the chargor is mandatory for it is only upon service, that a chargor is notified of default of obligations under the charge and given the opportunity to exercise its right of redemption. The duty to serve the notices and the burden of proof when the issue of service is in dispute is squarely on the chargee (see Nyagilo Ochieng and another v Fanuel Ochieng and 2 others [1995-1998] 2 EA 260).

17. The bank, in its deposition before the trial court, produced the 90-day statutory notice issued under section 90 of the Land Act, 2021 dated November 4, 2020 sent by registered post to the respondents’ address “P.O Box 11378-0040” as evidenced by a certificate of posting of the same date. The 40-day notice to sell issued under section 96(2) of the Land Act, 2012 dated February 12, 2021 was served personally on the 1st respondent who acknowledged it by signing on the face thereof on February 23, 2021. This is confirmed by the affidavit of service of Isaac Oichoe sworn on March 8, 2021. The 45-day redemption notice dated October 21, 2021 issued by the auctioneer was served personally on the 1st respondent on October 22, 2021 and sent to both respondents by registered post on October 23, 2021 as evidenced by the certificates of postage of the same date.

18. From the totality of the evidence, both respondents were served with the 90-day statutory notice issued under section 90 of the Land Act, 2012 while only the 1st respondent was served with the 45-day notice issued under section 96(2) of the Land Act, 2012. Both respondents were served with the 45-day redemption notice by the auctioneer. In so far as the 45-day notice was not served on the 2nd respondent, the trial court was right to hold that she had established a prima facie case with a probability of success on that account.

19. The next consideration is the issue whether damages are an adequate remedy is dealt with under section 99 (4) of the Land Act, 2012 which provides that:99. (4)A person prejudiced by unauthorized, improper or irregular exercise of the power of sale shall have a remedy in damages against the person exercising that power.

20. Thus while there was a basis for holding that the respondents had established a prima facie case with a probability of success, it is clear that the damages are an adequate remedy as a matter of fact and also a statutory remedy hence an injunction could not be issued. Further, it has been held that the fact that the suit property is matrimonial home does not mean that the parties will suffer irreparable harm. Once the suit property was charged, the parties agreed that it could be sold upon their default as it was now a commodity for sale available for purchase by the public upon default (see Joseph Gitahi Gachau and another v Pioneer Holdings (A) Limited and 2 others [2009] eKLR). The trial court thus erred in holding that the respondents would suffer irreparable loss that could not be compensated by damages.

21. But that was not the end of the matter as there was clear evidence that the suit property had been sold to a third party; Octavia Kedenyeka Chanzu on January 18, 2022 as evidenced by the certificate of sale dated January 18, 2022. This means that the respondents’ equity of redemption was extinguished and the suit property now belonged to the third party who was entitled immediate possession of the property. In the circumstances, the court failed to take into account a material fact that a third party had a right to the suit property and an injunction could not be issued without hearing her on the matter. The court therefore erred in granting an order which affected a third party who was not party to the suit.

22. For the reasons I have explained, the trial magistrate failed to apply the principles for grant of an injunction in a proper manner and therefore came to the wrong conclusion that the respondents were entitled to an injunction.

23. I therefore allow the appellants’ appeal and order as follows:a.The application dated January 20, 2022 filed in the subordinate court be and is hereby dismissed and the order granted on May 13, 2022 be and is hereby set aside.b.The respondents shall pay the costs of the application and this appeal assessed at Kes 40,000. 00.

DATED AND DELIVERED AT NAIROBI THIS 7TH DAY OF OCTOBER, 2022. D. S. MAJANJAJUDGECourt Assistant: Mr M. Onyango.Mr Karanja instructed by Muthomi and Karanja Advocates for the Appellants.Ms Tuwei instructed by Kinyanjui, Kirimi and Company Advocates for the Respondents.