[2022] KEHC 9904 (KLR)

Witerose Limited v Guardian Limited (Commercial Case E257 of 2022) [2022] KEHC 9904 (KLR) (Commercial and Tax) (22 July 2022) (Ruling)

Neutral citation: [2022] KEHC 9904 (KLR)

Republic of Kenya

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

Commercial and Tax

Commercial Case E257 of 2022

DAS Majanja, J

July 22, 2022

Between

Witerose Limited

Plaintiff

and

Guardian Limited

Defendant

Ruling

1. It is not in dispute that the Plaintiff charged his property; Kisumu/Koru/1493 to the Defendant (‘’the Bank’’) to secure advances amounting to Kes. 7,000,000. 00 to Excel Logistics Limited. The Bank has now threatened to sell the suit property in exercise of its statutory power of sale thus precipitating this suit.

2. In addition to the suit, the Plaintiff filed a Notice of Motion dated 8th July 2022 made, inter alia, under Order 40 rule 1, 2, 3 and 4 of the Civil Procedure Rules seeking an injunction restraining the Bank from selling the suit property in exercise of its statutory power of sale pending the hearing and determination of the application. The application is supported by the affidavit of its director, Polycap Okumu Ochola, sworn on 8th July 2022. It is opposed by the Bank through the replying affidavit of its Legal Officer, Edna Mokaya, sworn on 20th July 2022. At the hearing of the application, the respective advocates made oral submissions in support of their respective positions. The sale of the suit of property is scheduled for 22nd July 2022.

3. The conditions for the grant of an interlocutory injunction such as one sought by the Company were settled in Giella v Cassman Brown [1973] EA 385 where the court held that in order to succeed in obtaining an interlocutory injunction, the 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 the they are to be considered as separate, distinct and logical hurdles a plaintiff is expected to surmount sequentially.

4. The Court of Appeal in Mrao Ltd v First American Bank of Kenya Limited and 2 others [2003]eKLR explained that a prima facie case is, “a case in which on the material presented to the Court, a tribunal properly directing itself will conclude that there exists a right which has apparently been infringed by the opposite party to call for an explanation or rebuttal from the latter.” It also observed in the Nguruman Case (Supra) that that in reaching the decision whether the application has established a prima facie case, the court need not hold a mini trial and ought not examine the merits of the case closely. It must, however, be satisfied that on the face of it, the person applying for an injunction has a right, which has been or is threatened with violation as the parties will have an opportunity to prove their respective positions at the hearing of the case. The prima facie case is in relation what is pleaded in the plaint. In this case, the Company must show, on a prima facie, basis that its right is threatened to the extent that it is entitled to an injunction.

5. The Plaintiff’s case is that the Charge dated 21st March 2011 (‘the Charge’’) is null and void for want of consent of the Land Control Board as required by sections 6(1) and 8 of the Land Control Act (Chapter 302 of the Laws of Kenya) (“the LCA”). The Plaintiff avers that no application for consent in respect of the Charge was made in the prescribed form to Muhoroni Land Control Board (“Board’’) within six months of the making of the agreement for Charge and that it has never given consent in respect of the said Charge in accordance with the provisions of sections 6 and 8 of the LCA.

6. The Plaintiff challenges the Letter of Consent dated 9thSeptember 2010 purportedly issued by the Board on the ground that it is tainted with illegality and is therefore null and void. It contends that there was no agreement for the said Charge as at 9th September 2010 which could form the basis of any application for consent before the Board. That in fact, no application for consent or fees were paid by the Bank to the Board hence no lawful and valid consent was given by Board in accordance with sections 6(1) and 8 of the LCA. The Plaintiff states that it did not attend the Board meeting purportedly held on 9th September 2010 and that the Letter of Consent on its face contains material omissions and alterations.

7. The Bank refutes the allegation that Charge is void for want of Land Control Board Consent and avers that it applied for the consent to charge the suit property in an application signed by the Plaintiff’s director and the Bank’s agent and the consent granted at a meeting of the Board held on 9th September 2010. The Bank avers that under section 8(4) of the LCA, nothing turns on the fact that the application for the Board consent was made and the consent issued before the charge was created on or about 21st March 2011. Consequently, the Bank urges that the Plaintiff’s case is an attempt to avoid its legal obligations since it would have been the obligation of the Plaintiff to procure the Land Control Board consent for purposes of the legal charge and therefore it cannot turn around and rely on its own omission.

8. I am aware that the court is not required to conduct a mini-trial of the facts, but I hold that the Plaintiff has established a prima facie case with a probability of success on the issue of the whether the consent to charge the suit property was issued by the Board. The Plaintiff has produced minutes of the Board meetings which show that no meeting was held on the material day to approve the Charge subject of this suit. This is an issue that needs to be investigated and which if established would render the charge null and void.

9. But the aforesaid finding is not decisive in the granting of an injunction. Under the dicta in the Nguruman Case (Supra), the court should also consider whether the damages are an adequate remedy. In my view therefore, the Plaintiff cannot benefit from an unconditional injunction particularly since damages are in any case an adequate remedy. If the suit property is sold, the Bank will be in position to recompense the Plaintiff. I reject the argument that the property is of sentimental value. It is owned by a limited liability company and was offered a security for a commercial transaction hence it is a commodity for sale.

10. Further, an injunction is an equitable remedy and the court is empowered to grant an injunction on such terms as deems fit including the duration of the injunction, keeping of account or giving of security. In this case, the Plaintiff does not dispute that fact that it charged its property to the Bank to secure advances to a third party. Even if the charge is void, it remains an agreement inter se constituting a covenant to pay the debt which debt is not, in fact, disputed. If the Plaintiff is successful, it will still have to pay the debt notwithstanding that the Bank, in the absence of a counterclaim, will not have recourse to the property as security.

11. The Plaintiff has also not disputed the fact that it filed two previous suits in relation to the same cause of action. The first is HCCC No. 548 of 2014 which was dismissed for want of prosecution on 6th September 2019 which it disclosed in its plaint. It also filed HCCC No. 133 of 2012 which was dismissed on 4th November 2021 as it had abated as summons to enter appearance had not been collected by the Plaintiff. The Plaintiff did not disclose this case in its plaint. Failure to disclose the existence of a previous suit would be ground to deny a party an injunction (see Equity Bank Limited v Neptune Credit Management Limited NRB CA Civil Appeal No.62 of 2012[2016] eKLR).

12. I have seen the letters of demand, the statutory notice issued under section 90 of the Land Act and which the Plaintiff admits receipt, the notice to sell issued under section 96(2) of the Land Act, 2012 dated 18th March 2022 and sent by registered post to the Plaintiff as evidenced by the certificates of postage. The notices are all regular on their face. The Bank also conducted a valuation of the suit property as evidenced by the valuation report dated January 2022 prepared by Legend Valuers Limited. All these show there is no merit in the Plaintiff’s argument that the procedure exercising the statutory power of sale was flawed. I hold that in fact, the Bank statutory power of sale has arisen.

13. On the whole therefore, while I find that the Plaintiff has a prima facie case with a probability of success, on the issue of validity of the charge, I am not convinced that it is entitled to an unconditional injunction as damages are an adequate remedy in the circumstances. I also consider that the Bank’s is also entitled to protection as it was at all times entitled to look to the suit property as security. It has been subjected to two previous suits over a ten-year period which the Plaintiff has failed to prosecute. I will therefore order the Plaintiff to secure the Bank by paying part of the debt it covenanted in an interest earning account pending resolution of the case as a condition for the injunction.

14. For the reasons I have set out above, I now make the following orders:(a)Pending the hearing and determination of this suit, a temporary injunction be and is hereby issued restraining the Defendant and its agents from selling or otherwise dealing with the Plaintiff’s property; Kisumu/Koru/1493 in exercise of its statutory power of sale as hereunder.(b)The Plaintiff shall pay Kes. 1,500,000. 00 within 21 days from the date hereof and every month Kes. 100,000. 00 on or every 5th day of every subsequent month in a joint interest earning account in the name of parties and or their advocates pending the hearing and determination of the suit.(c)If the Plaintiff defaults on any of the conditions issued, the injunction shall stand discharged without further orders of the court and the Defendant shall be at liberty to sell the suit property.

DATED AND DELIVERED AT NAIROBI THIS 22ND DAY OF JULY 2022. D. S. MAJANJAJUDGECourt of Assistant: Mr M. OnyangoMr Koyokko instructed by Wagara, Koyokko and Company Advocates for the PlaintiffMr Mutua instructed by Mutua, Waweru and Company Advocates for the Defendant.