Chege v Mayfair Bank Ltd & another [2022] KEHC 15060 (KLR)

Chege v Mayfair Bank Ltd & another (Commercial Case E887 of 2021) [2022] KEHC 15060 (KLR) (Commercial and Tax) (11 November 2022) (Ruling)

Neutral citation: [2022] KEHC 15060 (KLR)

Republic of Kenya

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

Commercial and Tax

Commercial Case E887 of 2021

A Mabeya, J

November 11, 2022

Between

Gerald Muigai Chege

Applicant

and

Mayfair Bank Ltd

1st Defendant

Leakey's Auctioneers

2nd Defendant

Ruling

1. Before Court are two applications for determination. The first is dated October 27, 2021 and was brought under sections 1A, 1B and 3A of the Civil Procedure Act, 2010, and order 40 rule 1 of the Civil Procedure Rules.

2. The application sought injunctive orders to restrain the respondents and their agents from selling or disposing of or in any manner interfering with the properties known as Nyandarua/Nyairoko/899, Nyandarua/Nyairoko/900 and Nyandarua/Nyairoko/906 pending the hearing and determination of the suit. The grounds for the application were set out on the face of it and in the Supporting Affidavit of Gerald Muigai Chege sworn on October 27, 2021.

3. It was contended that the 2nd respondent had advertised the suit properties for sale by public auction on October 29, 2021 to secure repayment of the loan facility extended by the 1st respondent. The applicant contended that he was not served with the 14 day notices under rule 15(e) of the Auctioneers Rules which curtailed his equity of redemption. The applicant also disputed the penalties and interest charged and contended that the 1st respondent had not provided an account.

4. It was also contended that a valuation of the suit properties had not been conducted and all pleas for restructuring the loan had been ignored by the 1st respondent. It was thus averred that the 1st respondent’s right of statutory power of sale had not crystallized and the intended sale was illegal. That it was thus fair that the orders sought be issued.

5. The respondents opposed the application vide the replying affidavit of Lynette Kamande sworn on November 10, 2021. It was contended that the applicant took out a loan facility with the 1st respondent of Usd 242,700/=. Two charges were created over the suit properties to secure the loan. That the facility was to be repaid in 36 months at an interest rate of 8. 5%, but the applicant fell into arrears.

6. When pleas to pay failed, the 1st respondent proceeded to serve all requisite notices demanding payment of the outstanding balance of Usd 217,862/=. That all necessary steps towards exercise of the 1st respondent’s power of sale were taken including service of notices, valuation of properties, publishing of advertisement for sale by public auction scheduled for October 23, 2020.

7. That the respondent filed CMCC No E5704 of 2020 and obtained interim orders staying the scheduled sale. However, the suit was dismissed vide a ruling dated September 30, 2021 and the interim orders discharged. The respondents again advertised the properties for sale by public auction scheduled for October 29, 2021.

8. That rule 15(e) of the Auctioneers Rules did not provide for service of a 14 days’ notice. It only prohibited sale before 14 days after the lapse of the 45 days’ notice. That service of that notice was out of courtesy and not a legal requirement. That the intended sale was legal and could not be restrained only because of a dispute in the loan amount. That there was no request for statement of accounts by the applicant and he did not deny being in arrears.

9. The second application was similarly brought by the applicant and was dated December 3, 2021. It was brought under order 40 rule 1 and 3 and order 51 rule 1 of the Civil Procedure Rules 2010, sections 63 of the Civil Procedure Act and section 10(3) of the Magistrate’s Act.

10. The application sought orders to restrain Garam Investment Auctioneers and their representatives from selling or dealing with the suit properties through the public auction scheduled for December 6, 2021. It also sought to cite the 1st respondent for contempt of court and its directors be committed to jail for six months.

11. The grounds for the application were set out on the face of it and on the supporting affidavit of Joseph Muhuni sworn on December 3,2021. It was averred that on October 29, 2021, this court issued orders restraining the 1st respondent and its agents from selling or dealing with the suit properties. Those orders have been extended from time to time. That the 1st respondent had now instructed Garam Investment Auctioneers, their agents, to sell the suit properties by public auction scheduled for December 6, 2021. That it was in the interests of justice for the auction to be restrained until the application dated October 27, 2021 was determined and the 1st respondent’s directors be held in contempt.

12. The respondents opposed that application vide the replying affidavit sworn by Lynette Kamande on January 27, 2022. It was contended that upon the ex parte consideration of the application dated October 27, 2021, this court granted interim orders on October 29, 2021 for 14 days only. On November 11, 2021, the parties appeared in court for directions and the applicant was directed to pay Usd 22,000/= being the amount admitted as debt owed to the 1st respondent. The same was payable by close of business November 12, 2021 and in default, the interim orders would lapse.

13. That the applicant failed to comply and instead filed a notice of appeal which was never prosecuted and an application dated December 3, 2021 seeking orders for contempt against the 1st respondent. That the 2nd respondent thus advertised the properties for sale.

14. The applications were canvassed by way of written submissions. The court will first determine the 2nd application dated December 3, 2021.

15. This application cannot see the light of day. The orders laying the foundation for that application were long discharged due to the applicant’s own contempt and non-compliance with a court orders requiring him to pay the admitted sum of Usd 22,000/= by close if business November 12, 2021. On December 15, 2021, when the matter came up for mention, the applicant’s advocate confirmed that the applicant had not complied with the orders of November 11, 2021. Consequently, the court set aside those orders.

16. The applicant alluded therein to an advertisement placed by the 1st respondent scheduling sale by public auction on December 6, 2021. However, no such advertisement was produced. Those orders cannot therefore issue.

17. The upshot is that the application dated December 3, 2021 lacks merit and is an abuse of court process and the same is dismissed with costs to the respondents.

18. The court now turns to the first application dated October 27, 2021. It sought injunctive orders against the respondents pending the hearing of the suit. The grounds were that the intended sale of the properties was illegal as the 14 days notice had not been served as required by rule 15(e) of the Auctioneers Rules. That this had clogged the applicant’s equity of redemption. It was also based on grounds that the applicant contended the penalties and interests charged were illegal and that he had not been provided an account despite requests.

19. The principles applicable in granting interlocutory injunction were settled in the case of Giella v Cassman Brown & Company Limited (1973) EA 358. These are that the applicant must establish a prima facie case with a probability of success. That an injunction would not normally issue unless the applicant would suffer loss that cannot be compensated by an award of damages. Finally, if the court is in doubt it would determine the matter on a balance of convenience.

20. The applicant alleged that the 1st respondent had not taken out a valuation of the suit properties. However, in the replying affidavit dated November 10, 2021, the 1st respondent provided a valuation report dated May 28, 2020.

21. The applicant also contended that he had not been served with the 14 days notice under rule 15(e) of the Auctioneers Rules. That rule provides: -“Upon receipt of a court warrant or letter of instruction the auctioneer shall in the case of immovable property—(a)record the court warrant or letter of instruction in the register;(b)prepare a notification of sale in the form prescribed in Sale Form 4 set out in the second schedule indicating the value of each property to be sold;(c)locate the property and serve the notification of sale of the property on the registered owner or an adult member of his family residing or working with him or where a person refuses to sign such notification, the auctioneer shall sign a certificate to that effect;(d)give in writing to the owner of the property a notice of not less than forty-five days within which the owner may redeem the property by payment of the amount set forth in the court warrant or letter of instruction(e)on expiry of the period of notice without payment arrange sale of the property not earlier than fourteen days after the first newspaper advertisement.”

22. This rule only provides for statutory procedures to be carried out before the lawful exercise of power of sale. The only notice required to be issued is the 45 days’ notice under sub-rule (d). That is meant to give the chargoor an opportunity to redeem his property. Nothing in sub-rule (e) places a mandatory requirement of a 14day service on the defaulter. The rule simply states that no sale can be conducted before the lapse of 14 days from the date of service of the 45 days.

23. In Emrre Global Investors Ltd v Housin Finance Company of Kenya Ltd & 2 Others (2014) eKLR, it was held:“A clear reading of rule 15 (e) of the Auctioneers Rules shows that it is not mandatory for notice of fourteen (14) days to be issued by an auctioneer. It merely states that no sale may be arranged until fourteen (14) days have expired after the notice of forty five (45) days envisaged under rule 15 (d) of the Auctioneers Rules have lapsed. Any notice notifying a chargor of intended sale after the mandatory forty five (45) days is only a courtesy notice giving such chargor notice of an auctioneer’s intention. The Plaintiff’s argument that the sale was illegal due to non-issuance of the said fourteen (14) days cannot therefore be sustained.”

24. As for the applicant’s contention that he disputes the penalties and interest amounts, it has already been settled that a chargee cannot be restrained from exercising its power of sale for reason that there is a dispute on the amount owing or interest chargeable.

25. In Jim Kennedy Kiriro Njeru v Equity Bank (K) Limited [2019] eKLR, the court held: -“I wish set it clear that in accordance with the already existing jurisprudence, a dispute touching on the amount payable or interest chargeable without more is not a ground for restraining a chargee from exercising its statutory power of sale. In the case of Priscillah Krobought Grant v Kenya Commercial Finance Co Ltd and 2 Others, Court of Appeal at Nairobi, Civil Application No Nai 227 of 1995 (108/95 VR) (unreported), the court stated as follows: -“Finally, it will bear repetition, we think if we were to state that a court does not normally grant an injunction to restrain a mortgagee from exercising its statutory power of sale solely on the grounds that there is a dispute as to the amount due under the mortgage…”

26. From the foregoing, it is clear that the applicant has failed the first test by failing to establish a prima facie case with a probability of success. Consequently, there is no need for the court to labor on the other tests. The respondents have demonstrated that all statutory notices and procedures have been followed and there is no justification to restrain the 1st respondent from exercising its statutory power of sale.

27. The upshot is that the application dated October 27, 2021 is similarly unmerited and the same is dismissed with costs to the respondent.

It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 11TH DAY OF NOVEMBER, 2022. A MABEYA, FCIArbJUDGE