[2015] KEHC 2912 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT MOMBASA

CIVIL SUIT NO. 135 OF 2014

SUNRISE RESORT APARTMENTS &SPA LIMITED..........PLAINTIFFS

VERSUS

ECO BANK KENYA LIMITED ….....................................DEFENDANT

R U L I N G

1 SUNRISE RESORT APARTMENT& SPA LIMITED, the plaintiff, by the Notice of Motion dated 27th October 2014 seek the following order:

The honourable court be pleased to issue temporary injunction restraining the defendants by itself or through its servant, agents, nominees, heirs, executors and or any other person or body acting with their authority from alienating LR.NO. MN/1/10776 by way of disposing an interest by selling, transferring, registration or doing anything so as to deprive the plaintiff and its guarantors ownership of the said property pending hearing and disposal of the suit.

2 The plaintiff had an outstanding loan with ECO BANK KENYA LIMITED the defendant which loan was partially taken over by NIC BANK. Following that take over of the loan the defendant by its letter dated 8th July 2011 offered and the plaintiff accepted the convertion of the amount of Ksh 16,341,000 into a loan facility. That letter in part provided:

Date:8th July 2011

The Directors

Sunrise Resort Apartment & Spa Limited

P. O. Box 81737-80100

MOMBASA

Dear sirs,

REQUEST FOR RESTRUCTURE YOUR OVERDRAFT FACILITY INTO A TERM LOAN

We refer to your existing loan facility( hereinafter defined as “Existing Debt”) availed to you by us and your request to restructure the Existing debt into a term loan facility for Ksh 16,341,000 and are pleased to advise you that we are agreeable to restructure the over draft facility into a term loan facility subject and your acceptance of and compliance with the following confirmations, terms and conditions:

Borrower: Sunrise Resort Apartments & Spa Limited (hereinafter “the Borrower”)

Lender: Ecobank Kenya Limited ( Hereinafter “the Bank”)

Existing Debt: It is hereby confirmed that, as at 7th July 2011, you owe the Bank the total sum of Ksh 16,341,000. 00 ( Kenya shillings sixteen million three hundred and forty one thousand only) together with accrued interest with effect from 8th July 2011.

Facility: Term Loan facility for Ksh 16,341,00. 00 ( Kenya shillings sixteen million three hundred and forty one thousand only).

Purpose:The facility will be utilized to pay off the existing debt.

Repayment: The Term Loan facility shall be repaid in (6) equal monthly installments of Ksh 2,861,000. 00 inclusive of interest with effect from 30 days from the date of disbursement and subsequent installments.

3 In this suit the plaintiff alleges that the defendant is not entitled to exercise its statutory power of sale. From my reading of the plaintiff's supporting affidavit the plaintiff alleges various grounds which dis-entitle the defendant from exercising its statutory power over sale of the plaintiff's charged property.

4 One ground is that the plaintiff signed or accepted the letter dated 8th July 2011 on certain conditions. Those conditions are set out in the plaintiff's letter dated 18th September 2011, as follows:

SUNRISE RESORT

APARTMENTS &SPA

September 18, 2011

Managing Director

EcoBank (K) Limited

P.O.Box 49584-00100

NAIROBI

Dear Sirs,

RE: LETTER OF OFFER DATED 8th JULY, 2011.

We have returned the letter of offer subject to the following as agreed in the meeting between Monari, Kengah and Langat.

. Refund of overcharged interests charged when takeover of loan had been approved and delay on takeover occasioned by bank.

. Refund of commitment fees charged when takeover of loan had been approved and delay on takeover occasioned by bank.

. Reversal of amounts recovered from the following companies.

. Firefox (Kenya) limited Ksh 720,000 being commission overcharged on a bank guarantee issued on 23/12/2009 through firefox account CA-09-10200028.

. Amounts overcharged on Sunrise resort account of Ksh 147. 301 and Ksh 63,561 on account No. 002AFLD1030001/9.

Your co-operation will be highly appreciated..

Yours faithfully.

David Lang'at

Executive Chairman

One will note that the above letter refers to another entity’s account, other than the plaintiff.

5 The second ground is that the plaintiff's payment of Ksh 3 million to the defendant was Mis-posted into another account by the defendant.

6 The third ground is that the defendant failed to convert the amount of Ksh 16,341,000 into a term loan.

7 The fourth ground is not entirely clear and I will therefore set it out as stated in the plaintiff's supporting affidavit Viz:

That I am informed by my advocate M/s KADIMA ESQ Defendant has violated Central Bank prudential guidelines of 2006 on recovery of loans which has set a time limit of three months from the debt of default so as not to enrich itself unjustly.

I must admit that even the written submissions of the learned counsel for the plaintiff on this fourth ground was not any clearer to me.

8 It needs to be stated that the plaintiff did, in its supporting affidavit, deponed that on various occasions it sought clarification of the issues brought out in the above grounds, which up to the date of filling this case were not responded by the defendant. One, looking at those correspondence annexed to the plaintiff’s affidavit, gets the sense of frustration the plaintiff felt from the non-response of the defendant to the correspondences and oral inquiries. Those letters show that the plaintiff's representative made several visits to the defendant’s bank.

9 The plaintiff has undertaken to deposit into court Ksh 13 million which is the balance of its loan it admits it owes the defendant.

10 I have considered the defendant's replying affidavit sworn by JACK KIMATHI. In my view the depositions thereof do not in any way respond to the plaintiffs grounds raised in its application. The pertinent grounds which that affidavit fails to respond to are two. This is because the first ground of the plaintiff identified above cannot be the basis of granting interlocutory injunction. It will be recalled that in that first ground the plaintiff made a counter offer by its letter dated 18th September 2011, which was counter offer to the defendant's offer in its letter dated 8th July 2011, reproduced above. Rudimentary knowledge of contract law will show that an offer unless it is accepted cannot form the basis of a contract. It therefore follows since the defendant did not accept the plaintiff's offer contained in the letter dated 18th September 2011, there was therefore no contract which the plaintiff could rely upon.

11 The plaintiff second and third ground identified above required the defendant's response. The defendant by its replying affidavit failed to respond to those two ground.

12 In the second ground, it will be recalled, the plaintiff alleged that the defendant had mis-posted its Ksh 3 million repayment of the loan. That ground only elicited defendants response to the effect that payments totaling Ksh 3 million, was credited into the plaintiff’s account. The defendant did not, by that response, deny or admit that it had mis-posted the amount. Failure to traverse that allegation by the plaintiff can only lead this court, at this stage and on a prima facie basis, to conclude that the plaintiff’s assertion is correct.

13 If what the plaintiff asserted is correct how did the mis-posting of that amount affect the accrual of interest in the plaintiff’s account at the defendant’s bank; and what effect, if any, did it have in the defendants intention to realize its security by exercising its statutory power of sale over the plaintiff’s charged property. The answer will perhaps be known at the full hearing of this case.

14 The third ground raised by the plaintiff was that the defendant failed to convert the amount of Ksh 16,341,000 into a term loan. It will be recalled that defendant’s letter, to restructure plaintiff’s loan, dated 8th July 2011 was reproduced above. The defendant by that letter covenanted to restructure plaintiff overdraft facility of Ksh 16,341,000 into a term loan. The question that immediately arises is, did the defendants convert that amount into a term loan. The plaintiff’s persistent complaint is that the defendant did not so convert.

15 In reference to the defendant offer in the letter dated 8th July 2011, the defendant by its replying affidavit stated:

“ That after formalizing all matters connected or precedent to the disbursement of the facility including commitment fee etc, the facility was disbursed on 19. 2.2013. ”

16 Although the defendant stated that the plaintiff’s allegations cannot stand because the plaintiff was always supplied with bank statements of its account, that did not answer the plaintiff’s allegations that it, through its representatives made several inquiries both in writing and orally, which inquiries were in respect of the amount outstanding , which inquiries did not receive a response. It also did not answer the allegation that the outstanding amount was not converted into a term loan

17 In what I can only state is the defendant’s attempt to respond to the plaintiff’s allegation that its account did not reflect the true state of affair, the defendant by its Defence, paragraph 5 stated:

The defendant states that as at 25th July 2011 when the plaintiff’s current account No. 002002501187201 was taken over by NIC Bank, the balance left outstanding after applying the partial redemption funds was a debit balance of Ksh 21,411,674. 01 cts and therefore, notwithstanding the grant of the loan facility of Ksh 16,341,000 there remained a net debit amount in the plaintiff’s account which sum was an unauthorized overdraft and therefore the subject of interest and other bank charges.

18 That paragraph should be understood in the background that the plaintiff alleged that the defendant failed severally to give the plaintiff the correct amount outstanding sometimes on the ground that operating system was down and on the ground that the members of staff plaintiff’s representative spoke to were unfamiliar with the state of plaintiff’s account.

19 The defendant opposed the plaintiffs application by relying on the case SAMMY JAPHETH KAVUKU –V- EQUITY BANK LIMITED & ANOTHER (2014) e KLR where it was stated:

“The legal position therefore is that even if it was established that the outstanding amount had been inflated due to interest and charges levied by the 1st defendant that would not form a basis for restraining the 1st defendant from exercising its statutory power of sale.”

20 The above is the correct jurisprudence where the claim is merely for an injunction on the basis of dispute on amount due. But in my view that is not strictly the case in this matter. This is because the plaintiff has offered to deposit the amount it admits into court being Ksh 13 million. Also in the light of the defendants failure to address the second and third issue identified above. I find that the plaintiff is entitled to an interlocutory injunction as sought.

CONCLUSION

21 In the end therefor I grant the following orders:-

(a) An interlocutory injunction is granted pending the hearing and determination of this suit restraining the defendants, its servants or agents, from selling, disposing, or alienating property L.R. MN/1/10776 or from doing anything which would deny the plaintiff or its guarantors ownership of the said property.

(b) The injunction order in (a) above is granted on condition the plaintiff does deposit within 90 days from today into an interest earning account jointly held by the advocates in this mater, at any reputable bank, except the defendant’s bank Ksh 13 million. That amount shall be held in that account pending further orders of this court. Failure to pay that amount on the stated date the injunction in (a) above shall be vacated.

(c) The costs of the Notice of Motion dated 27th October 2014 shall be in the cause.

Dated and delivered at Mombasa this 24th day of September 2015.

MARY KASANGO

JUDGE

24. 9.2015

Coram

Before Justice Mary Kasango

C/Assistant –

For: Plaintiff:

For: Defendant:

Court

The Ruling is delivered in their presence/absence in open court.

MARY KASANGO

JUDGE