ELIAS M. MUSYOKI v HALAI DEVELOPERS LIMITED, INVESTMENTS & MORTGAGES BANK LIMITED, KRISHNALAL B. SASODIA, DHARAMA SASODIA & CHIEF LAND REGISTRAR [2009] KEHC 2706 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI (MILIMANI COMMERCIAL COURTS)

Civil Case 595 of 2004                         ELIAS M. MUSYOKI ………………………………………………….  PLAINTIFF

VERSUS

HALAI DEVELOPERS LIMITED (Receivership of

Deloitte and Touche Accountants) ……………..…….…   1ST DEFENDANT

INVESTMENTS & MORTGAGES BANK LIMITED ….…   2ND DEFENDANT

MR. KRISHNALAL B. SASODIA ……....…………………    3RD DEFENDANT

MRS. DHARAMA SASODIA …….............…………………   4TH DEFENDANT

CHIEF LAND REGISTRAR …………..............…………….   5TH DEFENDANT

RULING

The 2nd defendant/applicant filed the Chamber Summons application dated 11th October 2006, and seeks for orders that the suit filed by the plaintiff by way of an amended plaint be struck out on the grounds that the suit is scandalous and does not disclose any cause of action. The suit is otherwise an abuse of the court process.  This application is also supported by the affidavit of Paul Kinyanjui Ndungu sworn on 11th October 2006.

Briefly stated, the 1st defendant was registered proprietor of a parcel of land known as LR 209/10721 herein referred to as the property.  The 1st defendant borrowed money from the 2nd defendant which was secured by that property.  The 1st defendant secured further monies and executed a further charge on the property.  Later on, the loans due to the 2nd defendant were secured by an all assets debenture which was registered in favour of the 2nd defendant.

Sometimes in 1995, the 1st defendant requested for the applicant’s permission to sub divide the property in various sub plots. One of the subplots was LR 209/10721/42, the subject matter of this litigation.  The applicant was requested to execute a partial discharge of charge because the 1st defendant had allegedly found a buyer and was desirous of selling that sub plot.  Since the applicant was secured by other charges and an all asset debenture, it executed the partial discharge.

Subsequently the 1st defendant entered into a sale agreement with the 3rd and 4th defendant for the sale of this sub plot.  The applicant was not party to the sale agreement and the applicant’s interests ended when they executed a discharge of charge and the same was registered.   It is the applicant’s contention that they were wrongly sued as a party in these proceedings.  The 2nd defendant is only referred to in the amended plaint under paragraph 4, and 5.

The only claim against the applicant is that it placed the 1st defendant under receivership; northing else is pleaded against the applicant.  Moreover the mere fact that the 2nd defendant placed the 2nd defendant under receivership does not in any way connect the 2nd defendant with a sale agreement and the allegations of fraud against the 1st defendant. In any event no particulars of collusion are pleaded against the applicant. The final order that is sought against the 2nd defendant is an order of injunction to restrain the 2nd defendant from the sale of the property.  The 2nd defendant has no interests whatsoever in the land and no useful purpose would be served by maintaining the 2nd defendant as a party.

There are allegations that through some collusion the 1st, 3rd and 4th defendants recorded a consent order in Hccc 734 of 1996, but the 2nd defendant was not a party to the consent and was not even aware for the circumstances under which that consent was recorded.  Thus the 2nd defendant is not a necessary party to these proceedings.  Counsel relied on several authorities for the preposition the court has wide powers to strike out a suit which does not disclose reasonable cause of action.

This application was supported by counsel for the 3rd and 4th defendants who contended that their clients were bona fide purchasers of the property for value without notice.  It is well documented in the replying affidavit of the 4th defendant that the plaintiff had constructive notice of the 3rd and 4th defendants’ interests in the property.  A caveat was registered in the lands office, which was ample notice to all the interested parties who had an interest or wanted to deal with the suit property.  The sale agreement was between the plaintiff and the 1st defendant was illegal since there no property was capable of being sold.

This application was opposed by counsel for the plaintiff; he relied on the replying affidavit sworn by the plaintiff on 28th August 2007.  The plaintiff contends that the 2nd defendant is the one who financed the development of the suit property as they had even admitted having issued a partial discharge in respect of the property. As a result of the discharge the property was transferred to the plaintiff.  The plaintiff later came to learn the same property was sold to the 3rd and 4th defendant.  While the dispute was going on, the 2nd defendant placed the 1st defendant under receivership as a result of that receivership, the plaintiff could not follow the claim.  Moreover the 2nd defendant does not disclose the status of management and has not revealed the report by the receiver manager.  The plaintiff has also field an application seeking to further amend the plaint where he is seeking for the refund of the monies paid to the 1st and 2nd defendants.  The court cannot ignore the proposed amendment while determining whether the 2nd defendant should be struck out of the pleadings because the court will have to determine whether the 2nd defendant passed a good title to the plaintiff.

Having set put the summary of the arguments, this application is brought under the provisions of order 6 r 13(1) b, c and d of the Civil Procedure Rules. A suit which does not disclose a reasonable cause of action can be dismissed.  It is determinable from the facts that the 2nd defendant financed or granted a loan to the 1st defendant who was the registered proprietor of the suit premises.  Subsequently, the 1st defendant applied to sub divide the property into sub plots and the 2nd defendant issued a partial discharge which was executed and registered.  It is therefore clear that the 2nd defendant was not party to the transfer to the plaintiff or to the 3rd and 4th defendants.

The other point to determine is whether by placing the 1st defendant under receivership the 2nd defendant colluded in order to defeat the claim by the plaintiff.  It is evident that there was a debenture issue dated 2nd May 1991 in favour of the 2nd defendant over all the assets of the 1st defendant.  That debenture contains a provision for the appointment of a receiver manager, in the event of any default on the part of the 1st defendant.  That being so, the allegations of collusion between the 1st and 2nd defendants is without basis.

Accordingly, I am persuaded that the amended plaint does not disclose any cause of action against the 2nd defendant.  The 2nd defendant has clearly stated they have no interest in the suit premises; therefore the final order of injunction which is sought against them would be of no effect.  I have also looked at the proposed further amended plaint which is pending for hearing and determination.  The plaintiff seeks a refund of the purchase price from both the 1st and the 2nd defendant.  However the pleadings show that the money was paid pursuant a sale agreement entered between the plaintiff and the 1st defendant.  The property was also registered in favour of the 1st defendant who was the absolute proprietor.  The 2nd defendant was not a party to the agreement of sale, they were only chargors.  They duly discharged the charge and they had no control over what the 1st defendant did with his title upon discharge.

Having so found, the suit against the 2nd defendant is hereby struck off with costs.

RULING READ AND SIGNED AT NAIROBI THIS 17TH DAY OF JULY 2009.

M.K. KOOME

JUDGE