Ichwara v United nations Savings & Credit Co-operative Society Limited & another [2023] KECPT 783 (KLR)

Ichwara v United nations Savings & Credit Co-operative Society Limited & another (Tribunal Case 410 (E226) of 2021) [2023] KECPT 783 (KLR) (31 August 2023) (Ruling)

Neutral citation: [2023] KECPT 783 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Tribunal Case 410 (E226) of 2021

BM Kimemia, Chair, J. Mwatsama, Vice Chair, B Sawe, F Lotuiya, P. Gichuki, M Chesikaw & PO Aol, Members

August 31, 2023

Between

Jared Masini Ichwara

Claimant

and

United nations Savings & Credit Co-operative Society Limited

1st Respondent

Philips International Auctioneers

2nd Respondent

Ruling

Facts Of The Case 1. In 2017, the Claimant was advanced a loan amounting to Kshs. 10,000,000/= by the 1st Respondent, which was secured by way of charge over suit property known as Nairobi/block 139/99 situated at Marurui Estate.Upon the Claimant breaching the terms of the loan agreement when he defaulted in servicing his loan the 1st Respondent engaged the 2nd Respondent who on 10th August issued the Claimant with a Redemption Notice giving him 45 days to pay the accrued loan of Kshs. 12,025. 038. 19/= plus interest, failure to which they’ll proceed to sell the Claimant’s charged property by public auction.

2. The Claimant upon receiving the Redemption notice, approached this Tribunal ex-parte through Certificate of Urgency seeking temporary injunction restraining the 1st and the 2nd Respondents from disposing the charged property indicating among other things that he had not been served with the required mandatory statutory Notice as required by law before power of sale is exercised and also that the proper valuation of the charged property had not been done in accordance to the provisions of section 97(2) of the Land Act.

3. This Tribunal on October 4, 2021 issued a temporary injunction restraining the Respondents or their agents from disposing the charged property pending the determination of the matter.

4. The 1st Respondent later filed Submissions indicating among others that the Claimant has not been candid with the Tribunal and has withheld oratorial facts with a view of misleading the Tribunal. The 1st Respondent has attached valuation of the suit property undertaken by Crystal valuers and also demand letter that was sent to the Claimant to regularize his loan repayments failure to which the 1st Respondent will enforce its security.Issues for determinationi.Whether the Claimant has established a prima facie case with a high chance of success.ii.Whether the Claimant stands to suffer irreparable damage that cannot be compensated with an award of damagesiii.Whether the Claimant has fulfilled the threshold granting for an injunction.i.Whether the Claimant has established a Prima Facie case with a high chance of success.

5. The case of Mrao Ltd vs First American Bank of Kenya Ltd & 2 others [2003] eKLR 125 explained the circumstances under which it could be held that a party has presented a prima facie case with a high chance of success. The Court of Appeal held as follows;“A prima facie case is one 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 opposing party as to call for an explanation or rebuttal from the latter.”

6. From the evidence submitted, the Tribunal makes a finding that the Claimant has failed to establish a prima facie case as he was in default of payment for over 5 years, and also, he has not presented any evidence to challenge the fact that all the requisite notices were served to him in accordance with the law. We see no infringement of his rights.The relevant sections of the Land Act dealing with power of sale or remedies of a charge are sections 90,96 and 97(2) which state“90 (1) If a chargor is in default of any obligation, fails to pay interest or any other periodic payment or any part thereof due under any charge or in the performance or observation of any covenant, express or implied, in any charge, and continues to be default for one month, the chargee may serve on the chargor a notice, in writing, to pay the money owing or to perform and observe the agreement as the case may be.(2)The notice required by subsection (1) shall adequately inform the recipient of the following matters—(a)the nature and extent of the default by the chargor;(b)if the default consists of the non-payment of any money due under the charge, the amount that must be paid to rectify the default and the time, being not less than three months, by the end of which the payment in default must have been completed;(c)if the default consists of the failure to perform or observe any covenant, express or implied, in the charge, the thing the chargor [Rev. 2012] No. 6 of 2012 Land 49 [Issue 1] must do or desist from doing so as to rectify the default and the time, being not less than two months, by the end of which the default must have been rectified;(d)the consequence that if the default is not rectified within the time specified in the notice, the chargee will proceed to exercise any of the remedies referred to in this section in accordance with the procedures provided for in this sub-part; and(e)the right of the chargor in respect of certain remedies to apply to the court for relief against those remedies.(3)If the chargor does not comply within two months after the date of service of the notice under, subsection (1), the chargee may—(a)sue the chargor for any money due and owing under the charge;(b)appoint a receiver of the income of the charged land;(c)lease the charged land, or if the charge is of a lease, sublease the land;(d)enter into possession of the charged land; or(e)sell the charged land…(1)Where a chargor is in default of the obligations under a charge and remains in default at the expiry of the time provided for the rectification of that default in the notice served on the chargor under section 90(1), a chargee may exercise the power to sell the charged land. No. 6 of 2012 [Rev. 2012] Land.96 (2) Before exercising the power to sell the charged land, the chargee shall serve on the chargor a notice to sell in the prescribed form and shall not proceed to complete any contract for the sale of the charged land until at least forty days have elapsed from the date of the service of that notice to sell.97 (2) A chargee shall, before exercising the right of sale, ensure that a forced sale valuation is undertaken by a valuer..”

7. The proves of exercising power of sale began with the demand letters dated March 27, 2019, followed by the statutory notice dated May 9, 2019 after the expiry of the 30 days in the demand letter in both cases or over that period, the Claimant did not attempt to service his loan. The Claimant only moved the Court upon being served with the Redemption notice of August 10, 2021, two years from the date the Statutory Notice was issued.

8. From the evidence adduced, the Tribunal also finds that section 97(2) of the Land Act has been compiled with as there is a valuation report dated October 4, 2021 that has not been challenged.ii.Whether the Claimant stands to suffer irreparable damage that cannot be compensated with an award of damages.It is the Claimant’s argument that he stands to suffer irreparable damage as the property charged is matrimonial property. It is now settled law that once you charge or mortgage a property, it becomes commercial property and loses any other sentimental value, a fact that the Claimant needed to consider before offering his matrimonial home as security. This was the position of the Court of Appeal in Nairobi Civil Appeal 114 of 2009 (UR 73109) in which the Court held that;“The conduct of the applicant in charging the same made it a commercial property the loss of which an appropriate case would entitle the Applicant to damages.”iii.Whether the Claimant has fulfilled the threshold for granting of an injunction.

9. In Giella v Casman Brown & Co. Ltd, it was the Court’s view that if the court was still in doubt after considering (i) and (ii) as to whether the threshold for granting an injunction had been met, then it needed to decide the Application on the balance of convenience.

10. In this particular case, the Claimant has not fulfilled the threshold as indicated by adduced evidence and as such we lift the temporary injunction orders issued on October 4, 2021. The notice of motion application dated September 28, 2021 is dismissed with costs.

RULING SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 31ST DAY OF AUGUST, 2023. Hon. Beatrice Kimemia Chairperson Signed 31. 8.2023Hon. J. Mwatsama Deputy Chairperson Signed 31. 8.2023Hon. Beatrice Sawe Member Signed 31. 8.2023Hon. Fridah Lotuiya Member Signed 31. 8.2023Hon. Philip Gichuki Member Signed 31. 8.2023Hon. Michael Chesikaw Member Signed 31. 8.2023Hon. Paul Aol Member Signed 31. 8.2023Tribunal Clerk JemimahMs. Mwangi advocate holding brief for Mrs. Ngugi for the Claimant.Mrs. Wachira advocate for the 1st Respondent.Parties to exchange documents in readiness for trial 14 days from todayMention for Pre-trial directions on 14. 12. 2023. Hon. J. Mwatsama Deputy Chairperson Signed 31. 8.2023