Guaranty Trust Bank (Kenya) Ltd v Christopher Kimeli Kiplangat [2022] KEHC 1769 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT AT ELDORET

ELD HCCC APPEAL NO.132 OF 2019

GUARANTY TRUST BANK(KENYA) LTD.................APPELLANT

-VERSUS-

CHRISTOPHER KIMELI KIPLANGAT...................RESPONDENT

(Being an Appeal from the Ruling delivered by Hon.

S. Wewa(SPM) on 20th August, 2019 in Eldoret CMCC NO. 103 OF 2019)

Coram: Hon. Justice R. Nyakundi

Komen, Kipchichir & CO. Advocates

Macharia Mwangi & Njeru & CO. Advocates for the appellant

R U L I N G

This interlocutory appeal arising out of the decision made by the court below on 20/8/2019 in which orders of injunction sought in terms of Order 40 Rule 1 & 2 of the Civil Procedure Rules were granted in favour of the respondent. Being aggrieved with the making of the decision and the grant of temporary injunction, the appellant bank preferred an appeal founded on the following grounds in the memorandum of appeal namely.

1. The Learned Magistrate erred in law and in fact by using temporary injunctive orders in favour of the respondent pending the hearing and determination of the suit to the detriment of the Appellant.

2. The Learned Magistrate erred in law and in fact by failing to consider the respondent replying affidavit filed on 3/07/2019 and the submissions together with case law filed herein in its entirety and instead considered extrinsic factors thus prejudicing the Appellant.

3. The Learned Magistrate erred in law and in fact by failing to find that the respondent was guilty of material non-disclosure thus underserving of the injunctive orders to the detriment of the Appellant.

4. The Learned Magistrate erred in law and in fact by failing to find that when the respondent availed the suit property as security for the loan facility the suit property acquired commercial value and the Appellant was at liberty to exercise its statutory power of sale in view of the indebtness to the Appellant.

5. The Learned Magistrate erred in law and in fact by failing to find that the respondent had failed to establish a prima facie case with a probability of success as against the Appellant.

6. The Learned Magistrate erred in law and in fact by failing to appreciate that granting the respondent injunctive orders, it effectively clogged the Appellant’s right to exercise its statutory power of sale.

7. The Learned Magistrate erred in law and in fact by failing to appreciate that the respondent would suffer irreparable injury which could not be adequately remedied by damages in the absence of injunctive orders.

8. The Learned Magistrate erred in law and in fact by finding that the balance of convenience had tilted in favour of the respondent in view of his willingness to pay the debt and willingness to settle the matter out of court.

Directions on case management taken directed the appeal to be canvassed by way of written submissions, on behalf of the appellant learned counsel Mr Macharia submitted that the nature of the evidence adduced by the respondent in the supporting affidavit annexed with the essential requirements did not establish that the property in dispute was in danger of being damaged, wasted or alienated in any way save for the chargor exercising the statutory power of sale. Learned counsel further contended that the learned trial magistrate on evaluation of the evidence clearly misconceived the facts and the law applicable on the objects of granting an injunction. It was learned counsel’s arguments that the essential ingredients in granting temporary injunctions including prima facie case, irreparable harm and a balance of convenience in favour of the applicant were never satisfied for the orders to be granted in the ruling of the court.

As stated in his submissions, Learned Counsel delved into the factual matrix of the case on what I call the bonafide contentious issues between the parties with regard to the loan agreement of Ksh 2,000,000/= advanced to the respondent. The analytical distinction presented by the appellant counsel relates with the specifics in the loan agreement between the parties in which the respondent continues to be in default of paying the due amount. Learned Counsel further submitted and distilled the salient features of the loan agreement to predict challenges to the findings made by the Learned Trial Magistrate without refocusing on the irreparable harm the appellant bank would be exposed to in absence of payment in full of the loan amount. Learned Counsel submitted that an injury legislated against under Order 40 Rule 1 & 2 of the CPR must be concrete and particularized but not conjectural as to constitute irreparable harm. It was Learned Counsel contention that from the affidavit evidence the requested relief was want of redress-ability as a whole for failure by the applicant to discharge the burden of proof within the zones protected by the rules. The scope of the appellant’s submissions included the dictum from the following authorities Mombasa Civil Appeal NO.39/2002 Mrao Limited –v- First American Bank of Kenya Limited & 2 Others KLR(2003) at page 126, Kisumu HCCA NO. 21/2014 Vivo Energy Kenya Limited –v- Maloba Petrol Station & 3 others(2015)Eklr at page 13 quoted with authority the case of Nguruman Limited –v- Jan Bonde Nielsen & 2 others, Mombasa Civil case NO. 84 of 2013 Sammy Japheth Kavuku –v- Equity Bank Limited & 2 others quoted with authority the case of Maithya –v- Housing Finance Co. of Kenya & Another(2013) 1 E.A, 133 at page 139.

With the principles elucidated therein Learned Counsel submitted that the standard test of temporary injunction as clarified in the law was never satisfied by the movant.

Opposition to the appellant appeal was pursued by the respondent’s Learned Counsel in his brief written submissions. The primary issues considered are:

a) THAT there was a legal Charge registered over the suit parcel of land to wit MOIBEKI/MOIBEKI BLOCK 8(KOISAGAT)/116 measuring 3. 071Ha for the borrowed sum of Kshs 2,000,000/=

b) THAT the said sum was meant for Agricultural purposes.

c) THAT the charged suit parcel of land was and still is registered in the name of the Plaintiff/respondent.

d) THAT as indicated in the Appellant’s submissions the borrowed sum has been so far repaid leaving a balance of Ksh 910,229. 64/= out of the borrowed charged principal sum of Kshs 2,000,000. 00/=.

e) THAT the paid up loan repayment of Ksh 1,089,771/= consist of more than 50% of the borrowed sum of Ksh 2,000,000. 00/=.

f) THAT there is a substantial effort made by the Changor or the respondent herein in settlement of the borrowed money.

g) THAT at no time did the Appellant refuse to accept or acknowledge money paid by installments by the Respondent.

h) THAT the Appellant/Chargor has not refunded any single installments paid by the respondent so as to necessitate an act of foreclosure or sale by Statutory Power of sale as otherwise provided.

i) THAT the amount of interest under the Deed of charge was increasable at the option of the Chargee alone and there is no Deed of arrangement entered mutually between the parties.

j) THAT the charged suit parcel of land forms the only abode and residence for the Respondent’s member of family who include the Respondent, Respondent’s wife and several children and therefore there is an overriding interest under Section 28(a) of the Land Registration Act NO. 3 of 2012(Spousal interest).

k) THAT the suit parcel of land being the only abode and containing Spousal matrimonial interest, hinges more on a balance of convenience tilting towards and the Respondent.

l) THAT the conditions for granting Orders of injunction were met are favourable to the respondent in line with the celebrated case of Giella –v- Cassman Brown(EA) Law Reports 1972 at page 358.

m) THAT neither has the Chargor declined to receive any of the part payment or installment of the monies so far paid.

n) THAT equity demands that, “what ought to be done to be deemed as done.”

Furthermore the respondent submitted that the instant appeal is premature as the trial court still had the opportunity to hear the main suit on the merit. Having heard Learned Counsels for the parties the fundamental question out of the many grounds of appeal preferred by the appellant is whether the impugned ruling can be said to be within the contemplation of Order 40 Rule 1 & 2 of the CPR. On the other hand whether it can be upheld or interfered with by this court.

DETERMINATION

In terms of Order 40 Rule 1 & 2 of the CPR on temporary injunction applied for is to prevent an irreparable harm and this expected harm outweighs the expected irreparable harm imposed as a result of temporary injunction. The issuance of injunction and the scope of the relief ordinarily rests in the sound discretion of the trier of facts. As the court in EM Loews Enterprises INC –V- International Alliance of Theatrical Stage Employees et.al 127 conn 415, 419, (1941) the court stated “An action for an injunction being equitable, whether or a plaintiff is entitled to relief is determined, not by the situation existing when it begun, but by that which is developed at the trial”

The ultimate challenge I see in the exercise of discretion whether to grant or deny a motion of temporary injunction is that confusion persist regarding the interpretation and construing of the standard parameters to the particular facts of the case. The reason being the standard of proof is interpreted differently by the various trial and appeals court and there is no uniformity in applications. For example relying on the principles in Giella –v- Cassman Brown and Mrao Ltd –v- First American Bank one cannot miss to see the differentia in opinion by the courts in applying the four point tests for grant or refusal of temporary injunction. It is crystal clear from the case-law some court circuit interpret and construe the exercise of discretion by implementing a two part balancing standard when faced with a motion on injunction. Whereas others apply the three part sliding scale model. It is evident from the record and affidavit evidence as deponed by the parties the motion substantially indicate that the respondent had paid partially the loan amount. The respondent also contends that the charged parcel of land MOIBEK/MOIBEK BLOCK 8(KOSIAGA) 116 forms the only fixed abode and residence for himself and members of the family. It is against this backdrop the trial court granted the motion for a temporary injunction against the appellant bank.

Generally there are objectives upon which a court exercised discretion to grant a temporary injunction namely:- (a)to maintain the status quo, (b)to preserve the court ability to render meaningful decision, (c)managing the risk of error likely to occasion prejudice or injustice to the other party.

The question before this court then is whether the instant case tried before the learned trial magistrate met the formulated test on injunction. I note that the appellant seeks to invoke the appellate jurisdiction under Order 42 of the CPR to challenge the findings of the trial court. That therefore brings me to the standard of review of the inferior court decision at the interlocutory stage by this court. The function is typically guided by the principals in Michael Murage –v- Dorcas Atieno (2019)Eklr Mbogo –v- Shah (1968)EA 93. The assorted factors to be considered in reviewing the trial court’s decision are whether there was misdirection on the evidence, the law and the overall facts of the case, whether the trier of facts took into account irreverent material or acted in excess of jurisdiction. No single factor is dispositive, rather each factor must be considered by this court to determine whether there was an overreach with the exercise of discretion so as to review the impugned ruling.

In the instant case the trial court was asked to consider the guiding principles which lean towards grant or refusal of an injunction as stipulated under Order 40 Rule 1 & 2 of the CPR. What was at stake the way I perceive from the pleadings is whether the respondent had a prima facie case likely to succeed on the merits. Second that he will suffer irreparable injuries not remedied in damages. Thirdly, was a question on the balance of convenience. It is not in dispute that the suit property had been offered by the respondent as security to the appellant bank to guarantee redemption of the loan amount by way of sale in the event of default. The main contention by the respondent are that interlocutory stage was that the suit property though charged to the bank is also a family home for himself and the rest of the dependants. He also raised concerns on the amount of interest under the deed of charge which was increased without notice by the appellant bank, hence a violation of the loan agreement. That as it may be the appellant assert that it would never recover the unpaid loan if the court proceeds to sustain the temporary injunction. Likewise the appellant contends that the injury is irreparable because the respondent has continually defaulted to make good the repayment as agreed within the terms set out in the agreement. With those facts in mind the position taken by the court is that once it is conceded that the disputed loan amount and interests as prescribed in the mortgage contract remains unpaid, the court approach ought to be in consonant with the principles by Digby’s An Introduction to The History of the Law of Real Property (1897) (5th) at page 285: “In the time of Littleton a mortgage had become a species of estate upon condition. The land was conveyed, usually by feoffment, by the debtor to the creditor, subject to the condition that on repayment of the loan by a certain date by the feoffor (the debtor) might re-enter. On the failure to the feoffor to perform the condition, the law refused to regard the fact that the real nature of and intent of the transaction was that the land should be held by the feoffee merely as security for the debt, and insisted on the enforcing of the rules relating to estates upon condition in all their strictness, holding that the estate was thereupon vested absolutely in the feoffee. In later times, when the jurisdiction of the Chancellor was firmly established, the rights and duties of the mortgagor and mortgagee recognized by Equity became wholly different from those recognized by Law. …. In Equity, however, the real nature of the transaction is regarded, and even after default is made, notwithstanding the terms of the instrument creating the mortgage, the mortgagee will be made to reconvey the land to the mortgagor on payment of the debt, interest, and costs. The right which remains in the mortgagor is called his equity of redemption (right to redeem), and is in fact the ownership of land subject to the mortgage debt. (Emphasis added)”

Whereas courts are not only supposed to determine those matters on the subject of the validity of the mortgage agreement through which the parties agreed to contract but it must always resolve that validity alongside ripeness of the statutory power of sale. In the disposed application before the trial court it has not been shown that the power of sale was exercised by the mortgagee appellant bank for other purposes other than merely recovering of the outstanding debt. The law as it relates to injunction calls for courts of equity to look at both side of the coin to serve the interests of justice. It is noteworthy to mention that one of the key grievances by the respondent was on the interest rates imposed by the appellant bank. However even in that area of concern the court in Mrao Limited –versus- First American Bank of Kenya and 2 Others (2003) KLR 125, the Court had this to say “I have always understood that it is the duty of any person entering into a commercial transaction particularly one in which a large amount of money is involved to obtain the best possible legal advice so that he can better understand his obligations under the documents to which he appends his signature or seal. If courts are going to allow debtors to avoid paying their just debts by taking some of the defences I have seen in recent times for instance challenging contractual interest rate, banks will be crippled if not driven out of business altogether and no serious investors will bring their capital into a country whose courts are a haven for defaulters. I agree entirely with the Commissioner of Assize Shah that the appellant was not entitled to an injunction upon any one of the grounds urged on its behalf.”

The court of equity cannot overlook all sideline which has come out of the wisdom of the two contracting parties unless there exist an allegation of misrepresentation, fraud or mistake in the transaction. The effect of the illegality is to prevent a party from receiving or benefiting under his own illegal act. Clearly it is important to note that the respondent borrowed the loan amount from the appellant bank and on the basis of it offered land parcel MOIBEK/MOIBEK/BLOCK 8/116 as security. The redemption of it dependent upon evidence of settling the debt. The court in Debenture Trust Corporation PLC –V- Concord Trust (2007) EWHC 1380said thus: “The essence of the equitable right to redeem is that the mortgagor is allowed to perform his contract, apart from time stipulations I do not consider that the court in the exercise of it is equitable jurisdiction, can or should rewrite the contractual terms of redemption in favour of the mortgagor. To do that would in effect allow the mortgagor to benefit from his own breach of contract.”

So the question I must answer is what liabilities are secured by the security. In the appeal before court the learned Trial Magistrate having determined that there were serious triable issues in respect of the mortgage contract grounded on the strength that the property charged was family land went ahead to grant an injunction.

As a matter of law and facts the appellant is challenging the legality of that decision which runs contrary to the provisions of Section 90, 91, 92 & 96 of the Land Act 2012 and the terms of the mortgage instrument.

In exercising discretion it is not sufficient that the court approves an application simply because it seems the right thing to do. That exercise of discretion in decision making in the adjudication of dispute has to be judiciously considered to give effect to the facts and the law in a particular case. The unfettered discretion under Order 40 Rule 1 & 2 of the CPR is an important tool in promoting good administration of justice but the standards to be applied must be in conformity with the law. There should be a caveat placed on the injunctive orders that the consequences of it has not resolved the appropriate suit.

Let us consider now the model of the decision made by the trial court and whether we must accept it or interfere with it as submitted by the appellant. There are factors which are intertwined with the reading of the impugned ruling which I fault the trial court for not legitimately addressing them in the decision making process.

a) Whether the power of sale had arisen at all to call upon the appellant to exercise it within the ambit of the statute.

b) Whether the validity of the mortgage instrument was in issue at the main trial i.e for allegations of fraud, mistake, misrepresentation, voidness or illegality.

c) Whether the loan amount claimed by the appellant had fallen due and owing from the respondent.

With this in mind the discretion so challenged by the appellant is indicative that the trial magistrate did not properly apply the conditions precedent to the exercise of discretion of granting an injunction in favour of the respondent. The power to make that choice was whether the above questions were responsive in the decision making under Order 40 Rule 1&2 of the CPR to grant an injunction in the subject matter. In the circumstances it is clear that the decision made was not in accordance with clear and specific criteria for grant of an injunction.

In Kenleb Cons Ltd –v- New Gatitu Service Station Ltd another, (1990)eKLR “To succeed in an application for injunction an applicant must not only make a full and frank disclosure of all relevant facts to the just determination of the application, but must also show he has a right, legal or equitable, which requires protection by injunction.”

The presumption raised by the respondent that the subject matter is land and damages are not an adequate remedy was not sufficiently enquired into by the learned trial magistrate. For my view it was necessary to comment that the proprietary rights were conditionally transferred to the appellant bank as the value of the loan advanced for his primary use. Among other things which the court failed to address are matters on prejudice the appellant bank was likely to suffer in the event the injunction turns out to have been wrongly granted. It is also acceptable that in order to achieve the objectives of Order 40 Rule 1& 2 of the CPR an order for an undertaking for damages or measures for an effective mechanism for the respondent to continue servicing the loan in conformity with the mortgage instrument ought to have been made enthusiastically by the court.

For the above reasons the court concludes that the decision of the trial court must be reversed with costs to the appellant.

DATED, SIGNED AND DELIVERED VIA EMAIL AT ELDORET THIS 9th DAY OF MARCH, 2022.

..........................

R. NYAKUNDI

JUDGE

(legal@mmnlaw.co.ke, mwinamoadvocates@yahoo.com)