George Town Travel and Tours Limited v SBM Bank (Kenya) Limited (Formerly Chase Bank Ltd); Kipchirchir & another (Interested Parties) [2022] KEHC 652 (KLR)

George Town Travel and Tours Limited v SBM Bank (Kenya) Limited (Formerly Chase Bank Ltd); Kipchirchir & another (Interested Party) (Commercial Case E923 of 2021) [2022] KEHC 652 (KLR) (Commercial and Tax) (13 June 2022) (Ruling)

Neutral citation: [2022] KEHC 652 (KLR)

Republic of Kenya

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

Commercial and Tax

Commercial Case E923 of 2021

DAS Majanja, J

June 13, 2022

Between

George Town Travel and Tours Limited

Plaintiff

and

SBM Bank (Kenya) Limited (Formerly Chase Bank Ltd)

Defendant

and

Morgan E. Kipchirchir

Interested Party

Linah J. Kipkemoi

Interested Party

Ruling

1. The Plaintiff is the registered owner of a property known as Title No LR No 209/19939 (IR No 131508), Phase III House No. 3 Phenom Estate, Langata (“the suit property”). It took out a loan from the Defendant (“the Bank”) for KES 6,000,000. 00 secured by a charge over the suit property dated 6th February 2012. On 8th May 2013, the Plaintiff took out another loan of KES 15,000,000. 00 secured by a First Charge over the suit property.

2. In its plaint dated November 18, 2021, the Plaintiff states that although it serviced the loan facilities, it fell on hard times due to the COVID-19 pandemic whereupon the Bank took steps to exercise its statutory power of sale by way of public auction scheduled for November 23, 2021.

3. The Plaintiff avers that since it was served with a redemption notice, it sought and found a buyer willing to purchase the suit property for KES 23,000,000. 00. At the time of filing suit, the sale was underway but was delayed by administrative lapses at the Ministry of Lands. The Plaintiff complains that the Bank continues to infringe on its right of redemption by proceeding to take steps to sell the suit property by public auction to its loss and detriment.

4. The Plaintiff avers that the Bank cannot exercise its statutory power of sale as it has not served upon it the requisite notices under the Land Act, 2012. Further that the Bank cannot exercise its statutory power of sale based on the statements issued to it and which do not reflect the two facilities granted without a proper reconciliation of the said accounts. The Plaintiff also claims that the Bank has claimed and debited unlawful and inequitable rates of interest to the loan account which is oppressive, unconscionable, punitive and without legal basis.

5. The Plaintiff states that there is a pending suit; HC COMM No E343 of 2020, George Mwangi and 2 others v SBM Bank Kenya Limited. It seeks several reliefs including an injunction restraining the Bank from selling the suit property in exercise of its statutory power of sale, an order to be allowed to sell the suit property by private treaty, an order directing the Bank to honour the terms of a sale agreement dated 7th May 2021 between it and a third party and an order for proper accounts to be taken.

6. Together with the Plaint, the Plaintiff moved the court by the Notice of Motion dated November 18, 2021 made, inter alia, under Order 40 rules 2 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, an order compelling the Bank to honour the terms of an agreement dated May 7, 2021, an order allowing the Plaintiff to sell the suit property by private treaty and an order for accounts. The application is supported by the affidavit and supplementary affidavit of the Plaintiff’s director, George Mwangi sworn on November 18, 2021 and March 3, 2022 respectively.

7. The Bank opposes the application through the replying affidavit of its Debt Recovery Officer, Juliet Mwangi, sworn on March 10, 2022. The thrust of the Bank’s case is that the Plaintiff defaulted on the facilities whereupon it commenced the process of exercising its statutory power of sale by issuing all the notices required under the Land Act, 2012. It states that the Plaintiff has not met the conditions for the grant of an injunction.

8. In due course, the court allowed the interested parties; Morgan E. Kipchirchir and Linah J. Kipkemoi to join the suit and to respond to the application for injunction on the strength of the being parties to the agreement dated May 7, 2021 relied on by the Plaintiff. In that agreement, they agreed to purchase the suit property from the Plaintiff for KES 23,000,000. 00. Morgan Kipchirchir in his replying affidavit sworn on 26th January 2022 states that they paid a deposit of KES 2,600,000. 00 and while in the process of seeking financing to pay the balance, they learnt that the suit property was being sold by auction by the Bank. That since the Plaintiff failed to respond to their queries about the proposed auction, they rescinded the sale and demanded the deposit which the Plaintiff has failed to return. They complain that the Plaintiff obtained ex-parte orders without informing them he had filed suit and without seeking their consent.

9. The application was canvassed by written submissions. The submissions dealt with two main issues; whether the application and suit is res subjudice and whether the Plaintiff has made out a case for grant of interlocutory relief.

10. On the first issue, it is not in dispute that the Plaintiff was a party of ML HC COMM No. E323 of 2020; George Mwangi Chege, Beatrice Wanjeri Kamiti and George Town Travel Tours Limited v SBM Bank Limited. In that case I delivered a ruling dated 29th January 2020 in which I dismissed the Plaintiffs’ application for injunction restraining the Bank from selling two properties; LR No. 209/19939 (IR 131508) which is the suit property herein and LR No. Ngong/ngong/26029 in the name of the Beatrice Wanjeri Kimiti pending the hearing and determination of that suit, an order for taking forensic accounts to establish the amount owed to the Bank, an order that the 1st Plaintiff be allowed to sell the Company property by private treaty and an order for re-valuation of the 2nd Plaintiff’s property by the Ministry of Lands Government Valuer.

11. The Plaintiff refutes the contention that the application and suit are res subjudice or res judicata. It submits that the present suit is a fresh cause of action which resulted from the Bank exercising its statutory power of sale after the interlocutory orders in the earlier suit was made. It states that it is entitled to challenge how the statutory power of sale is being exercised, which issue is new and that it seeks to redeem the property by way of a private treaty which is also a new fact. The Plaintiff adds that while it is true that its earlier suit sought to restrain the Bank from selling the suit property in the realization of the security, in this instance, and at the time of filing this motion, the sale was already ongoing and it was working on the redemption of the suit property. It states that the reliefs sought in this suit do not relate to the sale in the previous suit.

12. The Bank’s position is that this application is res judicata as the subject suit property in the former and present suit is LR No 209/19939 (I.R.131508) Phase III, House No. 3, Phenom Estate, Langa’ata. That the parties in both matters are similar that is the Plaintiff and the Bank and that they are both the Plaintiff and Defendant litigating under the same titles in both suits. The Banks states that once the court dismissed the application for injunction in the previous suit, the same or similar application for injunction is res judicata.

13. The doctrine of res judicata is to be found in section 7 of the Civil Procedure Act which states:7. No Court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a Court competent to try such subsequent suit or the suit in which such issue has been subsequently raised, and has been heard and finally decided by such Court.

14. The Court of Appeal in Independent Electoral and Boundaries Commission v Maina Kiai & 5 others [2017] eKLR, elucidated those elements as follows:Thus, for the bar of res judicata to be effectively raised and upheld on account of a former suit, the following elements must all be satisfied, as they are rendered not in disjunctive, but conjunctive terms;(a)The suit or issue was directly and substantially in issue in the former suit.(b)That former suit was between the same parties or parties under whom they or any of them claim.(c)Those parties were litigating under the same title.(d)The issue was heard and finally determined in the former suit.(e)The court that formerly heard and determined the issue was competent to try the subsequent suit or the suit in which the issue is raised.

15. In the previous suit, the Plaintiff herein who was among the other plaintiffs filed suit seeking to restrain the Bank from exercising it statutory power of sale in respect of the suit property on various grounds which the court considered and in the ruling dated January 29, 2020 held as follows:(21)Based on the documents submitted by the Bank, it is evident that the Company obtained facilities, which were secured by the suit properties. Facility II is a clear and unequivocal admission of indebtedness by the Company. It rebuts the Plaintiffs’ contention that the Bank was lumping together all the facilities when in fact, the facilities were all restructured into a term loan. The Statement of Account shows that the Company is truly indebted. On the other hand, the Plaintiffs have not shown that they made any payments since March 2016 and that the payments are not reflected in the Statement of Account. They have also not pointed out in what way the Statement of Account provided by the Bank is deficient as alleged in their claim.

(22)At this stage it is useful to point out that unless the Plaintiff demonstrates that the unlawful and illegal interest defeats the chargor’s right of redemption, the issue of interest would only affect the amount payable. It is not enough to make broad and sweeping statements that the interest is exorbitant or illegal. Reference must be made to the agreement between the parties and the applicable law to enable the court conclude that the indeed the right of redemption is being impeded in some way. In this case, the application principle is that the court will not restrain the chargee from exercising it statutory power of sale merely on the basis of disputed accounts or interest (see Mrao Limited v First American Bank of Kenya Limited and 2 Others (Supra) and Mohammed Khaled Khashoggi v Equity Bank Limited [2013] eKLR and Joseph Okoth Waudi v National Bank of Kenya CA NRB Civil Appeal No. 77 of 2004 [2006] eKLR).

(23)Once the Company defaulted, the Bank was entitled to issue a notice under section 90 of the Land Act calling on the chargors to remedy default within 90 days from the date for service of the notice failing which it would proceed to sell the suit properties. The Plaintiffs admit that they have received the statutory notice dated 17th June 2020 sent to the 2nd Plaintiff and the Company and which are attached to their supplementary affidavits. Both notices refer to the Facility II as the basis for indebtedness. The Bank also issued Notices dated 19th October 2020 to Sell the charged properties under section 96(2) of the Land Act. The Bank has also produced a Valuation Report dated 22nd November 2019 prepared by Crystal Valuers Limited in respect of the 1st suit property.

(24)Since the notices are admitted and Plaintiffs have not shown how they are defective, there is no reason to restrain the Bank proceeding to exercising the power of sale. The argument that the Bank may sell the property at an undervalue is speculative as there is no evidence placed before the court to show that the Bank will not comply with the necessary steps to realise the securities. Likewise, the Plaintiffs have not established any legal basis for the court to appoint the Government Valuer to conduct the valuation.

16. I have set out contents of the ruling to show that not only are the parties and subject matter in the previous matter the same as in the present suit, but that the issues raised are the same. The court dealt with the issue of interest, unlawful debits and accounts and statutory notices. In short, the court settled the issue that the Bank was entitled to exercise its statutory power of sale and that the power of sale had accrued. I therefore hold that the application in so far as it seeks an injunction restraining the Bank for exercising its statutory power of sale on the same grounds is res judicata.

17. Even if I were wrong the ground that the application is res judicata and it is conceded that that there is new cause of action based on the sale agreement between the Plaintiff and the interested parties, the application would still fail on its merits. The reason is that the interested parties have clearly and unequivocally stated that they are not interested in pursuing the sale agreement between them and the Plaintiff. They state that they have rescinded it and have even demanded the deposit. Further, it is only the Bank, as charge, that can consent to the sale of the suit property charged to it. In the circumstances, the court cannot restrain the Bank from exercising its statutory power of sale on the basis an agreement which one party has disclaimed and which the Bank has not given its consent. The application would therefore fail on this ground.

18. While the application is res judicata, the suit is res subjudice. The issues raised in this suit are the same issues raised in the previous suit. This suit violates section 6 of the Civil Procedure Act which states:6. No court shall proceed with the trial of any suit or proceeding in which the matter in issue is also directly and substantially in issue in a previously instituted suit or proceeding between the same parties, or between parties under whom they or any of them claim, litigating under the same title, where such suit or proceeding is pending in the same or any other court having jurisdiction in Kenya to grant the relief claimed.

19. The suit meets the test as the parties and cause of action are the same. As I have shown in the previous ruling, the issues sought to be litigated have already been touched on and are awaiting full trial. The Plaintiff must prosecute its earlier suit in order to get its final relief. It cannot be permitted to continue with this suit.

20. For the reasons I have set out above, I make the following orders:a.The Notice of Motion dated 18th November 2021 is dismissed with costs to the Defendant and Interested Parties assessed at KES 50,000. 00 for the Defendant and KES 40,000. 00 for the Interested Parties.b.The suit be and is hereby stayed pending the hearing and determination of ML HC COMM No. E323 of 2020; George Mwangi Chege, Beatrice Wanjeri Kamiti and George Town Travel Tours Limited v SBM Bank Limited.c.The interim orders in force are discharged forthwith.

DATED AND DELIVERED AT NAIROBI THIS 13TH DAY OF JUNE 2022. D. S. MAJANJAJUDGECourt of Assistant: Mr M. OnyangoMs Wangoi instructed by G. N. Muthie and Company Advocates for the PlaintiffMr Odongo instructed by Robson Harris Advocates LLP for the DefendantMr Bundotich instructed by Kale Maina and Bundotich Advocates for the Interested Parties.