Jatomy Supermarkets Limited & another v Family Bank Limited & another [2022] KEHC 10265 (KLR)

Jatomy Supermarkets Limited & another v Family Bank Limited & another (Civil Case E011 of 2021) [2022] KEHC 10265 (KLR) (11 May 2022) (Ruling)

Neutral citation: [2022] KEHC 10265 (KLR)

Republic of Kenya

In the High Court at Embu

Civil Case E011 of 2021

LM Njuguna, J

May 11, 2022

Between

Jatomy Supermarkets Limited

1st Plaintiff

Jackson Kibunyi Gerald

2nd Plaintiff

and

Family Bank Limited

1st Defendant

Gitonga Ringera t/a Viewline Auctioneers

2nd Defendant

Ruling

1. By a notice of motion dated 11. 11. 2021, the applicants herein moved this court under certificate of urgency and wherein they sought for orders that:i.Spent.ii.The court be pleased to grant an order of temporary injunction restraining the defendants/respondents whether by themselves, their agents, servants and/or any other person working under the defendant’s/applicant’s instructions and authority from auctioning, dealing with, interfering with, alienating or in any other way disposing off the plaintiff’s/applicant’s parcels of land title numbers; Embu/Municipality/1222, Embu/Municipality/1134, Gaturi/Githimu/11162,Gaturi/Weru/3342 and Ngariama/ Lower/Ngariama/835 pending the hearing and determination of the application herein.iii.The court be pleased to grant an order of temporary injunction restraining the defendants/respondents whether by themselves, their agents, servants and/or any other person working under the defendant’s/applicant’s instructions and authority from auctioning, dealing with, interfering with, alienating or in any other way disposing off the plaintiff’s/applicant’s parcels of land title numbers; Embu/Muniipality1222, Embu/Municipality/1134, Gaturi/ Githimu/11162, Gaturi/Weru/3342 and Ngariama/ Lower/Ngariama/835 pending the hearing and determination of the main suit herein.iv.That pending the hearing and determination of this suit, an order of injunction do issue compelling the 2nd respondent to withdraw the statutory demand notice and the notice of public auction so far issued relating to the suit properties.v.That pending the hearing and determination of the main suit, an order do issue for an independent land valuer to conduct the valuation of parcels of land title numbers Embu/Municipality/1222, Embu/Municipality/1134, Gaturi/Githimu/11162, Gaturi/Weru/3342 and Ngariama/Lower/Ngariama /835. vi.The costs of this application be awarded to the plaintiff/applicants.

2. The application is premised on the grounds on the face of the same and its supported by the affidavit sworn by Jackson Kibunyi Gerald.

3. In a replying affidavit, it is deposed that the application herein has been brought in bad faith and is an abuse of the court process and only meant to derail the bank from realizing its security. That Land Parcel No. Embu/Municipality/1222, Embu/Municipality/1134, Gaturi/Githimu/11162 were offered by the 1st plaintiff as the principal borrower as security while Gaturi/Weru/3342 and Ngariama/Lower/Ngariama/835 were offered by the 2nd plaintiff who was the guarantor, as the guarantor’s collateral. It was deponed that motor vehicle Honda CRV Reg. KCF 255X, BMW X5 Reg KCE 577B Reg KCD 370Q, Isuzu NPR Reg. KBP 863K and Isuzu FRR Reg. KBK 286Q which also formed part of the collateral have been sold save for BMW X5 Reg KCE 577B which is still in the yard having not attracted acceptable bids. That the processes undertaken by the defendants were proper and legal and it is false to allege that they were illegal and fraudulent. Further that, the plaintiffs have not denied being served with statutory notices or being in default. It was deposed that when the agreement was entered into all the suit properties were converted into commercial properties capable of being sold to recover the debt whether matrimonial or otherwise.

4. The application was canvassed by way of written submissions.

5. The applicants submitted that from the start, the valuation of the properties by the 1st defendant was undervalued which forced the 2nd plaintiff to guarantee the 1st plaintiff’s loan which could have been easily secured by the three parcels of Land Parcel No. Embu/Municipality/1222, Embu/Municipality/ 1134, Gaturi/ Githimu/11162 that the 1st applicant owned. That in addition to that, a huge part of the loan that the 1st defendant advanced the plaintiffs/applicants went into redeeming a loan by the 1st plaintiff from KCB Bank as the 1st defendant insisted that the plaintiffs only bank with them and the 1st defendant went ahead to redeem the 40 million loan from KCB Bank from the loan proceeds they had advanced the 1st applicant. That the plaintiffs were faithfully repaying the loan instalments as agreed until, unfortunately, Covid 19 pandemic hit and the plaintiffs’ business was affected when the government imposed a lock down and the restriction of movement of people and goods.

6. That the order sought by the applicants for an independent land valuer to conduct the valuation of the parcels of land is well within the rights of the plaintiffs given that the defendants have allegedly undervalued the lands in question at a value 25% or more below the market value. Reliance was placed on section 97 (1) and (2) of the Land Act No. 6 of 2012 and further on the case of Palmy Company Limited v Consolidated Bank of Kenya. It was submitted that the auction process was questionable in that not all the notices were issued as required by the law in that the plaintiffs were never served with three months mandatory notice as provided for by the law in reference to Land Parcel No. Embu/Municipality/1222, Embu/ Municipality/1134, Gaturi/Githimu/11162; that the legal procedure as provided for by the Land Act should be strictly followed to the letter and anything to the contrary is therefore null and void.

7. The plaintiffs submitted that a chargee is expected to give notice under section 90 of the Land Act. That as a mandatory requirement, in the event of default, the chargee should issue notice of 3 months under section 90 followed by at least a month’s notice under section 94 (1) after which they will proceed to issue 40 days’ notice to sell before proceeding to give instructions to auctioneers who will then issue a redemption notice under rule 15 of the Auctioneers Rules. Reliance was further made on the case of Manasseh Denga v Eco Bank Ltd & Another (supra). In regards to granting of temporary injunction, reference was made to Giella v Cassman Brown (1973) EA and wherein it was deposed that if the orders are not granted, the plaintiffs will suffer irreparable harm in that the defendants in reference to section 97 have a duty to sell the land at the best reasonable price and given that the defendants have a remedy of filing suit for recovery of damages, the best option at this point would be to grant temporary injunction and an order for independent valuation. In reference to the foregoing, the plaintiff urged this court to allow the application herein.

8. The defendants on the other hand filed grounds of opposition wherein they stated that the 1st plaintiff is in default of the loan facility, a fact admitted by the plaintiffs and that upon default, the 1st defendant’s statutory right of sale accrued. That having admitted the default, the plaintiffs do not have a prima facie case with any chance of success and that under valuation is not a sufficient reason in the circumstances of this case to warrant an injunction. In the end, it was the defendants’ case that the application herein is an abuse of court process which should be dismissed with costs.

9. The main issue for determination is whether the application herein is merited.

10. This court has been moved to issue a temporary injunction for the reasons that the 1st defendant undervalued Land Parcel Nos. Embu/Municipality/1222, Embu/Municipality/1134 and Gaturi/Githimu/11162; not all the notices were issued as required by the law in that the plaintiffs were never served with three months mandatory notice as provided for by the law in reference to Land Parcel Nos. Embu/Municipality/1222, Embu/Municipality/1134 and Gaturi/Githimu/11162.

11. The plaintiffs submitted that a chargee is expected to give notice under section 90 of the Land Act as a mandatory requirement. The test for granting of an interlocutory injunction was considered in the American Cyanamid Co. v Ethicom Limited (1975) A AER 504 where three elements were noted to be of great importance namely: -i.There must be a serious/fair issue to be tried,ii.Damages are not an adequate remedy,iii.The balance of convenience lies in favour of granting or refusing the application.

12. The important consideration before granting a temporary injunction under Order 40 Rule 1 of the Civil Procedure Rules is the proof that any property in dispute in a suit is in a danger of being wasted, damaged or alienated by any party to the suit or wrongfully sold in execution of a decree or that the defendant threatens or intends to remove or dispose the property. The court is in such a situation enjoined to grant a temporary injunction to restrain such acts.

13. In the instant case, there is no doubt that the suit property is in danger of being alienated as the 1st defendant does not deny that it has set in motion the process of realizing the security offered by the plaintiffs for the debt. The 1st defendant however contends that it has a legal right to exercise a statutory power of sale, whereas the Plaintiffs/Applicants challenges such a right while contending that the 1st defendant has grossly undervalued Land Parcel Nos. Embu/Municipality/1222, Embu/Municipality/1134, Gaturi/Githimu/11162; further that, not all the notices were issued as required by the law.

14. The question which therefore arises is whether the application meets the threshold set for the granting of orders of temporary injunction. In Mrao Ltd v First American Bank of Kenya and 2 others, (2003) KLR 125 which was cited with approval in Moses C. Muhia Njoroge & 2 others v Jane W Lesaloi and 5 others, (2014) eKLR, the Court of Appeal defined a prima facie case as: -“A prima facie case in a civil application includes but not confined to a genuine and arguable case. It is a case which on the material presented to the court, a tribunal properly directing itself will conclude there exists a right which has apparently been infringed by the opposite party as to call for an explanation or rebuttal from the later”.

15. As I have already stated in this ruling, the applicant’s main contention is that the 1st defendant has allegedly undervalued the land parcels in question at a value 25% or more below the market value and that not all the notices were issued as required by the law.

16. The 1st defendant asserts that it complied with the provisions of section 97 of the Land Act before it attempted to sell the charged property. It carried out valuation of the property to establish the forced sale value which is obligatory under section 97 of the Land Act (see David Gitome Kuhiguka v Equity Bank Ltd[2013] eKLR). The 1st defendant thus submits it discharged its duty of care to the chargor and argues that the 1st plaintiffs/applicants claim that the property was undervalued is not founded. In Palmy Company Ltd -vs- Consolidated Bank of Kenya Ltd [2014] eKLR (as adopted in Olkasasi Limited v Equity Bank Limited [2015] eKLR) where the court stated:-“The onus of establishing on prima facie basis, that the applicant’s right has been infringed by the respondent by failing to discharge the duty of care under Section 97(1) of the Land Act lies on the applicant. The court needs cogent evidence and material in order to say that prima facie, there has been an undervaluation of the suit property which is an infringement of section 97 (2) of the Land Act by the Respondent as to entitle the court to call for an explanation or rebuttal from the respondent”.

17. The court in the case of Spero Holdings Limited v Cooperative Bank of Kenya Ltd &another [2016] eKLR, held that though a discrepancy in the forced sale value of over Kshs. 34,000,000/= was “a hefty sum”, it was not good enough reason to stop the chargee from exercising its statutory right of sale as the chargors loss would in any event be quantifiable.

18. In the present case, I note that it is not disputed that the applicants obtained a loan facility from the 1st defendant and that they charged their property being Land Parcel Nos. Embu/ Municipality/1222, Embu/Municipality/1134, Gaturi/ Githimu/11162 as security for the said loan. It is also not disputed that the applicants fell into arrears on the loan repayments thus precipitating the 1st defendant’s move to exercise its statutory power of sale of the suit property.

19. I am therefore not satisfied that the applicants have established a prima facie case to warrant the granting of the orders of injunction. Needless to say, it is trite law that he who comes to equity must come with clean hands and in this case, the applicants/plaintiffs cannot be said to have clean hands owing to the existing outstanding debt. I am guided by the decision of Ringera J. (as he was then was) in the case of Showind Industries v Guardian Bank Limited & another (2002) 1 EA 284 where the Learned Judge stated as follows: -“…….an injunction is granted very sparingly and only in exceptional circumstances such as where the Applicant’s case is very strong and straight forward. Moreover, as the remedy is an equitable one, it may be denied where the applicant’s conduct does not meet the approval of court of equity ….”

20. From the record, I note that the 1st defendant sent the plaintiffs a statutory notice on 26. 03. 2021 wherein the 1st defendant informed the applicants/plaintiffs that they were in breach of the agreement and that if the default was not rectified within the notice period, the 1st defendant reserved the right to exercise any of the remedies granted pursuant to section 90(3) of the Land Act, 2012 which included and not limited to the sale of the charged land. On 16. 07. 2021, the 1st defendant issued a notice to the plaintiffs/applicants herein informing them of the need to make payment of the outstanding loan balance, accrued interest and cost in recovering the debt. Thereafter, the 2nd defendant on 16. 09. 2021 issued the 1st plaintiffs/applicants with a 45 day redemption notice pursuant to rule 15 (d) of the Auctioneers Rules 1997.

21. Having found that the applicants have not established a prima facie case, I find that it will not be necessary to consider if the two remaining conditions for the granting of orders of injunction have been met as it is a requirement that all the three conditions be fulfilled before an order of injunction can be granted. [See Nguruman Limited v Jan Bonde Nielsen & 2others, CA No. 77 of 2012].

22. In the circumstances, I hold the view that it would not be proper to deny the 1st defendant the right to dispose off the charged property given that the debt has been admitted by both parties and equally the same has accrued.

23. In the end, I find that the application has no merits and it is hereby dismissed with costs.

24. It is so ordered.

DELIVERED DATED AND SIGNED AT EMBU THIS 11TH DAY OF MAY, 2022. L. NJUGUNAJUDGE...................for the Plaintiffs...................for the Defendants