[2017] KEHC 9997 (KLR)

REPUBLICOF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

MILIMANI LAW COURTS

COMMERCIAL &ADMIRALTY DIVISION

CIVIL CASE NO.24 OF 2015

WIL DEVELOPERS & CONSTRUCTION LIMITED….…1STPLAINTIFF

BRONKHO INVESTMENT LIMITED……………………2ND PLAINTIFF

JOHNSON MWANZIA WAMBUA……………….……...3RD PLAINTIFF

ALICE WANGARI MWANZIA……………………..…….4TH PLAINTIFF

-VERSUS-

CONSOLIDATED BANK OF KENYALIMITED…….....…….DEFENDANT

RULING

[1]Beforethe Court for determination is the Notice of Motion dated 30September, 2016and filed on even date. It was filed herein on even date by the Plaintiffs pursuant to Section 3Aof the Civil Procedure Act, Chapter 21of the Laws of Kenyaand Order 40 Rule 1of the Civil Procedure Rules, 2010for the following orders:

[a] Spent

[b] Spent

[c] That pending the hearing and determination of the main suit, an interlocutory injunction order to issue to restrain the Defendant by itself, its agents and/or servants from proceeding with the intended sale by public auction or otherwise howsoever interfering with the ownership of the security herein, namely L.R no. NBI/BLK/116/1212, Zimmerman Estate, Nairobi County.

[d] That the Defendant/Respondent be ordered to render account of all the monies received from sale by Auction of L.R Mavoko Town Blk/12/155Kamulu,Machakos and L.R No. Dagoretti/Riruta/3901, Ngando Estate, Nairobi and running Account of the Plaintiffs.

[e] That the surplus of the sale auction be credited in favour of the Plaintiffs.

[f] That the costs of this Application be provided for.

[2]The application was hinged on the several grounds set out therein, and was further supported by the affidavit of the 3rdPlaintiff, Johnson Mwanzia Wambua, sworn on 30 September, 2016together with the annexures thereto. It was averred that between the years 2010 and 2013 the 1st Plaintiff won several tenders for various projects amounting to Kshs. 155,200,000/= and that, to enable it service those tenders, the 3rd Defendant, who is the Executive Chairman of the 1st Plaintiff, approached the Defendant, as their bankers, for a facility of Kshs. 25,000,000cash cover and Kshs. 15,000,000 non-cash cover; which were granted.

[3] It was further averred by the 3rd Plaintiff that the projects were duly completed but that the client, the Government of Kenya, did not pay the amounts due to the Plaintiff, and as a result the facility ran into arrears; whereupon the Defendant issued notices for payment, and threatened to sell by public auction, in exercise of its Statutory Power of Sale, the charged properties, namely:

L.R No. Nairobi/Block 116/1212, Zimmerman Estate, Nairobi

L.R No. Mavoko Town/Block 12/156 Kamulu, Machakos County; and

L.R No. Dagoretti/Riruta/3901, Ngando Estate

[4] Accordingly, the Plaintiffs approached the Court on 23 January, 2015 seeking orders of injunction against the Defendant with a view of having it restrained from exercising its Statutory Power of Sale. Subsequently, the parties entered into negotiations, granted that the Plaintiffs had paid some Kshs. 10,900,000/= towards settling the loan, and a Consent Order was then recorded on 27 January 2015 whereby the Plaintiffs were to pay Kshs. 30,000,000/= failure to which the Defendant would be at liberty to exercise its Statutory Power of Sale.

[5]It was further averred by the 3rd Plaintiff that the Plaintiffs were not able to meet the terms of the Consent Order and as a result the Defendant proceeded to exercise its Statutory Power of Sale over L.R No. Mavoko Town/Block/12/156 Kamulu, Machakos and L.R No.Dagoretti/Riruta/3901 Ngando Estate, Nairobi. The two properties were sold at Kshs. 9,100,000/= and Kshs. 38,750,000/= respectively. Hence from the auction, the Defendant realized a total of Kshs. 47,850,000/=.It was thus averred that in spite of realizing the aforesaid sum of Kshs. 47,850,000,which sum was in excess of the Kshs. 30,000,000 agreed on between the parties, the Defendant was still demanding a further sum of Kshs. 23,051,683. 10 as at 19 July 2016.

[6] It was further the contention of the Plaintiffs that they were not satisfied with the conduct of the auction process and, to that end, they had filed a complaint at the Auctioneering Board, being Complaint Number 36 of 2016;and that the same auctioneers,Valley Auctioneers, had been instructed by the Defendant to sell NAIROBI/BLOCK/116/1212 Zimmerman Estate, Nairobi (herein ‘the suit property’), without indicating on what basis and for what amount they were proceeding to auction the suit property.

[7] It was averred that the Plaintiffs are apprehensive that the only remaining property may be sold off in circumstances of non-information and non-disclosure, which would not only be unjust but also oppressive and outrightly illegal; and that it is apparent that the Defendant is out to punish the Plaintiffs and not to recover their dues, given that the value of the Zimmerman property is only Kshs. 5,600,000/=. It was thus the contention of the Plaintiffs that the Defendant would be unjustly enriching themselves without regard to the interests or rights of the Plaintiffs. The Plaintiffs are also of the view that unless the injunctive orders are granted, they are likely to suffer irreparable damage which cannot be compensated by damages as the Defendant has already recovered more than Kshs. 30,000,000/= as per the Consent of 27 January, 2015.

[8]The application was opposed by the Defendant on the basis of the averments in the Replying Affidavit sworn by Daniel Kimaiyo, on 24 October 2016together with the annexures thereto. The Defendant particularized the various facilities granted to the Plaintiffs at paragraph 3 of that affidavit. The Defendant confirmed that, to secure the aforesaid facilities, the properties aforementioned were charged and copies of the Charge documents were annexed to the Replying Affidavit; and that upon default by the Plaintiffs, the Bank caused Statutory Notices to be issued and thereafter the charged properties were advertised for sale.

[9]It was further averred by the Defendant that the Plaintiffs then filed an application for injunction dated 23 January 2015 seeking to restrain the Bank from realizing the securities; whereupon a Consent Order was entered into on 27 January 2015, whereby the public auction was cancelled on express terms of payment. A copy of the Consent Order was exhibited at pages 1 to 3 of the annexures to the Replying Affidavit and the specific terms of payment were thus:

[a] That the Plaintiff do pay the Defendant a sum of Kshs.17,000,000/= on or before 13 March 2015;

[b] The Plaintiff do pay the Defendant a sum of Kshs.13,000,000/= on or before 28 March 2015;

[c] The Plaintiff do pay the auctioneers' charges and those of advertisement within five (5) days from receipt of invoice;

[d] In default of either item [a] or [b] hereinabove, the Defendant be at liberty to exercise its statutory power of sale.

[10]The Plaintiffs did not comply with the above terms of the Consent Order and as a result the Defendant proceeded to advertise the securities for sale by way of public auction; and the Defendant confirmed that they sold two properties namely, L.R No. Mavoko Town/Block/12/156 Kamulu, Machakos and L.R No. Dagoretti/Riruta/3901 Ngando Estate, Nairobi at Kshs. 9,100,000 and Kshs. 38,750,000/=, respectively. According to the Defendant, by a letter dated 27 July 2016,it informed the Plaintiffs that the borrowing had exceeded Kshs. 25,000,000/= and that despite the sale by public auction of two of the charged property, there still remained a shortfall of Kshs. 23,051,686. 15.

[11] In the premises, it is the Defendant’s contention that contrary to the Plaintiff’s allegations that the debt was cleared, the account statements annexed to the Replying Affidavit demonstrate a significant shortfall of Kshs. 25,105,202. 15 as at 17 October 2016. It is further their contention that despite their aforesaid letter notifying the Plaintiffs of the shortfall, the Plaintiffs have refused to pay the said amount. The Defendant thus urged for the dismissal of the application dated 30 September 2016 with costs.

[12] The application was disposed of by way of written submissions. The Plaintiffs filed their written submissions on 12 January 2017in which they reiterated the averments in the Supporting Affidavit of Johnson Mwanzia Wambua, the 3rd Defendant herein. The Plaintiffs also relied on the report by Interest Rates Advisory Centre dated 8 December 2016 but filed on 12 January 2017, prepared by Mr. Wilfred A. Onono. According to that report, the correct amount due to the Defendants, as of 30 September 2016 is Kshs. 2,369,058. 57. Thus, it was the submission of the Plaintiffs that they have established a prima facie case in the form of a right which has been breached by the Defendant in terms of the definition coined in the cases of Giella vs. Cassman Brown & Co. Ltd [1973] EA 360 and Mrao vs. First American Bank of Kenya Ltd & 2 Others [2003] eKLR.It was further submitted that the Plaintiffs have demonstrated that they stand to suffer irreparable damage, granted that the Plaintiff has already recovered sums in excess of Kshs. 82,000,000/= in respect of the facility of Kshs. 25,000,000/=. The case of Payless Car Hire and Tours Limited vs. Imperial Bank Limited [2012] eKLR and Joseph Siro Musioma vs. HFCK and 3 Others [2008] eKLR was cited in support of the argument that a wronged party cannot be compelled to accept damages in lieu of a crystallized right.

[13] As for the balance of convenience, it was the Plaintiffs' submission that the lower risk of injustice would be in granting the orders sought by them, adding that the Defendant has already recovered 95% of their money. In this respect, the Plaintiffs relied on the case of Olympic Sports House Limited vs. School Equipment Centre Limited [2012] eKLR. The Court was accordingly urged to allow the Plaintiff's application dated 30 September 2016 in terms of the prayers set out therein.

[14] The Defendant, on its part, relied on the submissions filed on 27 February 2017 in which it was argued that the Plaintiffs have not satisfied the principles espoused in the Giella vs. Cassman Brown Case. According to the Defendant, the suit property was charged as security and the Plaintiffs have not established any loss that they will suffer if the injunction is not granted. The case of Iqbal Transporters Ltd vs Bank of Baroda (K) Ltd [2015] was cited for the proposition that in executing the securities in favour of the Defendant, the Plaintiffs were well aware that if they defaulted in repaying the facilities thus secured, the Defendant was entitled to exercise its right to sell the securities; and therefore there was no indication that the Plaintiffs would suffer irreparable loss which cannot be compensated by an award of damages.

[15] With regard to the IRAC Report, it was the submission of the Defendant that no leave was sought or granted for the same to be filed and incorporated in the Plaintiff's submissions. The Court was thus urged to disregard that Report on the basis of the decision of the Court of Appeal in Independent Electoral and Boundaries Commission & Another vs. Stephen Mutinda Mule & 3 Others [2014] eKLR to the effect that each party is bound by his own pleadings; the rationale being to avoid trial by ambush. In any event, the IRAC Report was challenged for having ignored vital components of the contractual terms of the parties in its re-calculation. The cases of Muthumu Farm Limited & Another vs. National Bank of Kenya & Another [2016] eKLR and Bulk Medicals Limited vs. Paramount Universal Bank Ltd & 2 Others [2006] eKLR. Accordingly, Counsel for the Defendant urged the Court to dismiss the Plaintiffs' application.

[16]The Plaintiffs through the present application seek to stop the sale of the suit property by way of public auction through the injunction orders sought for. The Plaintiffs are also seeking for orders that the Defendant be ordered to render accounts of all the monies received from sale by auction of the other securities and that the surplus of the sale auction be credited in their favor.The pertinent principles for he grant of an interlocutory injunctive order were well set out in the case of Giella vs. Cassman Brown & Co. Ltd [1973] EA 360, namelythat:

"...an applicant must show a prima facie case with a probability of success. Secondly, an interlocutory injunction will not normally be 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."

[17] It is the Plaintiffs’ submission that they have established a prima facie case with a probability of success. The Plaintiffsadduced an IRAC report, which was filed together with their submissions as evidence that the balance due to the Defendant is Kshs. 2,369,058. 57 as at 30 September 2016 and not the sum of Kshs. 25,105,202. 15 as alluded to by the Defendant. However, the Defendant has refuted the aforesaid evidence on the basis that no leave was sought or granted to file the said IRAC report. The Defendant submitted that it was trite law that parties are bound by their pleadings and where a party attempted to introduce evidence without leave as in the present case the same was to be disregarded. The Defendant relied on the case of Independent Electoral and Boundaries Commission &Another V Stephen Mutinda Mule & 3 Others [2014] eKLR in support of the proposition that parties are bound by their own pleadings.

[18]A perusalof the Court record confirms that the IRAC Report was introduced as further List and Bundle of Documents, presumably under Order 3 Rule 2 of the Civil Procedure Rules.It is noteworthy that no leave was sought or granted for the late filing; but even assuming that the best option would have been to introduce the document as an annexure by way of a supplementary affidavit, noting that the document did not precede the application for purposes of Paragraph 15(c) of the Practice Directions Relating to Case Management in the Commercial and Admiralty Division of the High Court at Nairobi, Gazette Notice No. 5179 of 2014. In the circumstances, would agree with the Defence Counsel that the said report has been improperly introduced herein and that it would be unfair to take it into consideration for the purposes of the application. As was pointed out by the Court of Appeal in Independent Electoral and Boundaries Commission & Another vs. Stephen Mutinda Mule & 3 Others [2014] eKLR(quoting from Malawi Railways Ltd vs. Nyasulu [1998] MWSC 3):

"... 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 bound by the pleadings of the parties as they are themselves...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 [points] may be raised without notice."

[19] As the Plaintiffs placed heavy reliance on the IRAC Report to show that they have a prima facie case, in the absence of that report, the Plaintiffs are back to the situation in which they were on 15 December 2015when a similar application filed by them was dismissed. The position I took then was that:

"...it is now trite that a dispute on accounts per se is not a basis for the grant of injunction. This point has been succintly made in Halsbury's Laws of England, Vol. 32 (4th Edition) at paragraph 725 thus:

"The mortgagee will not be restrained from exercising his power of sale because the amount is in dispute, or because the mortgagor has begun redemption action, or because the mortgagor objects to the manner in which the sale is being arranged. He will be restrained however, if the mortgagee pays the amount claimed into court, that is, the amount which the mortgagee claims to be due to him..."

[20] It is not in dispute that the Plaintiffs breached the Consent order as they were not able to pay the amount of Kshs. 30,000,000/=.In the premises, the Defendant was entitled to recover the amount due from the Plaintiffs at the time of issuing the relevant statutory notices and that they were not limited to the sum of Kshs. 30,000,000/=in the Consent which collapsed.The contention of the Defendant is that there is still an outstanding debt on the part of the Plaintiffs as it endeavoured to show in its Replying affidavit and the attached Bank Statements.No doubt, whatever amount is due will be ascertained in due course at the hearing.Thus, having established that a dispute as to accounts should not bar a Mortgagee/Chargee from exercising its statutory power of sale, I find no basis for granting an injunction restraining the Defendant from selling the suit property by way of public auction. Accordingly, it cannot be said that the Plaintiffs have made out a prima facie case. That being my view there would be no need to consider whether the Plaintiffs stand to suffer irreparable harm or the balance of convenience, for in the case of Nguruman Limited Vs Jan Bonde Nielsen & Others [2014] eKLR the Court of Appeal held that:

“It is established that all the above three conditions and stages are to be applied as separate distinct and logical hurdles which the applicant is expected to surmount sequentially…if prima facie case is not established, then irreparable injury and balance of convenience need no consideration…”

[21] As regards the prayer that the Defendant do render accounts of all the monies received from sale by auction of the other securities and that the surplus of the sale auction be credited in the Plaintiffs’ favor, it would appear that the same was not pursued further in the Plaintiff's written submissions. At any rate, having taken the view that the dispute appears to be hinged on accounts, it would be premature to make the orders sought before affording the parties a hearing. In any event, Order 20 Rule 1 of the Civil Procedure Rules presupposes that a prayer for accounts be sought in the Plaint for an application in that regard to be entertained by the Court; and more importantly, Order 20 Rule 4 of the Civil Procedure Rules recognizes that an order of accounts would not lie if there are questions to be tried.

[22] In the result, my finding is that the Plaintiffs' application dated 30September, 2016,is unmeritorious and is hereby dismissed with costs.

It is so ordered.

DATED, SIGNED AND DELIVERED AT NAIROBI THIS 7TH DAY OF SEPTEMBER, 2017

OLGA SEWE

JUDGE