[2017] KEHC 2163 (KLR)

REPUBLIC OF KENYA

IN THE ENVIRONMENT AND LAND COURT OF KENYA

AT NAKURU

ELC NO.350 OF 2016

TRILLION INVESTMENTS (K) LIMITED ……....PLAINTIFF

VERSUS

CONSOLIDATED BANK LIMITED………..……DEFENDANT

RULING

(Application for injunction; applicant having taken a loan secured by a charge over suit land; a second loan taken later; there being default and the bank moving to sell the charged property; argument by applicant that the latter loan is not secured by the charge and seeking orders of discharge; prima facie, the applicant demonstrating that the latter loan is not the subject of the charge; application for injunction allowed)

1. This suit was commenced by way of a plaint that was filed on 30 August 2016. The plaintiff is a limited liability company whereas the defendant is a banking institution. The case of the plaintiff is that around the year 2012, it received a loan facility from the defendant, which loan was secured by a charge over the land parcel Sergoit/Koiwoptoi Block 8/15 (hereinafter referred to as "the suit property"). The suit property is owned by one Robert Kibiwot Murgor who guaranteed the loan. It is averred that the loan under which the property was used as security was paid off in July 2015 and that the plaintiff applied for the suit property to be discharged. In the month of June 2015, it is averred that the defendant approved a separate transaction to restructure a hire purchase facility, said to be secured by separate debentures, and to extend the repayment period by 24 months. It is the plaintiff's case that this is a distinct facility, independent of the first facility, for which the suit property does not form part of the security. It is averred that on 27 May 2016, the defendant arbitrarily issued a statutory demand notice and threatened to sell the suit property. In this suit, the plaintiff seeks orders inter alia for the immediate discharge of the property Sergoit/Koiwoptoi Block 8/15.

2. Together with the suit, the plaintiff filed an application to have the defendant restrained by an order of injunction from offering the said property for sale until this suit is heard and determined. It is that application which is the subject of this ruling. In his supporting affidavit, the plaintiff/applicant has asserted that the loan which was secured by the suit property has been fully paid and thus the statutory notice is illegal.

3. The defendant/respondent has opposed the application through a replying affidavit sworn by Mr. Daniel Kimaiyo, the Recoveries Officer of the defendant bank. He has deposed inter alia that the bank did advance to the applicant financial facilities in the aggregate of Kshs. 24,600,000/= which sum was secured by a charge over the suit property registered on 1 February 2012 and a further charge registered on 8 January 2013. It is said that on 20 May 2015, the applicant passed a resolution to borrow from the respondent. It is averred that the terms and conditions of the loan facilities are expressed in the letters of offer and charge instrument which were signed by the plaintiff's directors and the chargor. He has deposed that there was default in payment of the loan and the bank commenced a process to sell the suit property by way of public auction. He has stated that the bank has discretion granted at clause 6(xi) of the letter of offer dated 24 June 2015, to set off, or combine all or any accounts of the borrower in their own right, whatever their nature and also to consolidate all securities held on any account. It is the view of the bank that the application is thus an abuse of the process of court and should be dismissed with costs.

4. Both Mr. Ikua for the applicant and Mr. Okwengu for the respondent filed written submissions which I have considered.

5. Among the documents tabled by the respondent are the letters of offer dated 30 November 2012 and 24 June 2015; the charge instruments; the deeds of guarantee and indemnity; and the board resolution dated 20 May 2015. The letter of offer dated 30 November 2012, shows that the applicant wished to enhance its overdraft facility from Kshs. 7,000,000/= to Kshs. 15,000,000/=; continue with a local purchase order facility of Kshs. 3,500,000/=; secure a performance bond of Kshs. 6,023,375/=; and have an asset finance facility of Kshs. 5,519,051/=. These were to be secured by a first legal charge of Kshs. 17,000,000/= over the suit property and a further legal charge of Kshs. 7,600,000/= over the same property. I have seen that a first charge over the suit property was registered on 1 February 2012, which charge secured the sum of Kshs. 17,000,000/= advanced to the applicant. A further charge for the sum of Kshs. 7,000,000/= was registered over the same property on 8 January 2013. I have seen a deed of guarantee and indemnity also signed by the chargor but which instrument does not bear the date of execution, save for the year 2011. I assume therefore that it was executed in the year 2011. I have also seen the special resolution dated 20 May 2015, whereupon the applicant company resolved to borrow the sum of Kshs. 3,100,000/= from the respondent, and in the same document, it is stated that the applicant company is authorized to secure the said sum of money vide a "fixed debenture Kshs.5,500,000/= over Komatsu Grader GD850A Registration No. KHMA 744A jointly registered in the name of the Bank and the borrower."

6. The letter of offer of 24 June 2015, is for a term loan of Kshs. 3,100,000/= to be secured by :-

(a) A fixed debenture of Kshs. 5,500,000/= over Komatsu Grader GD850A Registration No. KHMA 744A jointly registered in the name of the Bank and the Borrower (Held).

(b) Board resolution to borrow Kshs. 3,100,000/= from Consolidated Bank of Kenya Limited.

(c) Personal guarantee of Kshs. 3,100,000/= from each director of the borrower .

(d) Letter of set off.

(e) Letter of deposit.

7. The gist of the applicant's case is that the latter loan facility is not among those secured by a charge over the suit property. The respondent on its part has pointed at Clause 6 (xi) of the above letter of offer as entitling it to deem the latter debt as secured by the charge over the suit property. That clause is drawn as follows :-

(ix)The bank reserves the right to set-off or combine all or any accounts of the borrower in their own right, whatever their nature. The right to consolidate all securities held on any account, as security for all liabilities is also held.

8. This latter loan facility is one that was offered in the year 2015 whereas the charge instrument and further charge were registered in the years 2012 and 2013. It is therefore arguable that the owner of the suit property never intended to have his property secure this latter loan of the year 2015, and the suit property is indeed not mentioned in the letter of offer as one of the securities. I have also not been shown any guarantee or indemnity instrument signed by the owner of the property securing this latter loan.

9. Given the above, it is my view that the plaintiff has demonstrated prima facie, that the second loan was never secured by the charge and further charge registered in the years 2012 and 2013. If the property is sold, the owner stands to suffer irreparably. Whether or not the bank is at liberty to rely on the clause 6(xi) of the letter of offer, which was never signed by the chargor, is an issue that the bank can attempt to demonstrate at the hearing of the suit.

10. For the above reasons, I allow this application for injunction and issue an order restraining the bank from offering for sale, selling, or transferring the land parcel Sergoit/Koiwoptai Block 8/15 until this case is heard and determined. The applicant shall also have the costs of this application.

11. Before I close, I note that the owner of the suit property is not a party to these proceedings. He needs to be a party as any decision is going to affect him directly. I therefore order that he be enjoined as an interested party. I direct that he be served forthwith by the plaintiff with all pleadings filed.

12. It is so ordered.

Dated, signed and delivered in open court at Nakuru this 12th day of October 2017.

MUNYAO SILA

JUDGE

ENVIRONMENT & LAND COURT

AT NAKURU

Presence of : -

Ms. Rop holding brief for Ikua for the plaintiff/applicant.

No appearance on the part of M/s Sichangi & Partners for the defendant(respondent)

Court Assistant : Carlton Toroitich.

MUNYAO SILA

JUDGE

ENVIRONMENT & LAND COURT

AT NAKURU