Johnson Gakuru Gachoki v Fortune Sacco Society Ltd & Restorers Consult Auctioneers [2021] KECPT 492 (KLR)

REPUBLIC OF KENYA

IN THE CO-OPERATIVE TRIBUNAL AT NAIROBI

TRIBUNAL CASE NO.468 OF 2019

JOHNSON GAKURU GACHOKI............................................................CLAIMANT

VERSUS

FORTUNE SACCO SOCIETY LTD............................................1ST RESPONDENT

RESTORERS CONSULT AUCTIONEERS............................2ND  RESPONDENT

RULING

1. The matter for determination is are two Applications dated 9/8/19 and 9/9/19.

The Application dated 9/8/19 seeks the following prayers;

i.   That this application be certified as urgent and services be dispensed within in the first instance and the same be heard ex-parte.

ii.  That pending hearing and determination of this application, this Honourable Court be pleased to issue an order of Temporary injunction restraining the Defendants/Respondents either by themselves, their agents, employees, servants or otherwise from selling and or interfering with motor vehicle registration No.KCN 087N ISUZU FVZ LORRY.

iii. That pending hearing and determination of this application, this Honourable Court be pleased to issue an order giving the custody of the motor vehicle registration No.KCN 087N ISUZU FVZ LORRY to the PLAINTIFF/APPLICANT herein to continue with investment on condition he will not sell/dispose it or otherwise destroys it.

iv. That pending hearing and determination of the suit herein, this Honourable Court be pleased to issue an order of Temporary injunction restraining the Defendants either by themselves,agents, employers, servants or otherwise  selling and or interfering with motor vehicle registration No.KCN 087N ISUZU FVZ LORRY.

v.  Costs of this application be provided for.

On the grounds of the face of the Affidavit supported by Johnson Gakuru Gachoki deponed on 9/8/19.

The 2nd Application dated 9/9/19 seeks the following prayers:

i.   That this application be certified as urgent and service of the same be dispensed with in the first instance and the same be heard ex-parte.

ii.  That pending hearing and determination of this application, this Honourable Court be pleased to issue an order of Temporary injunction restraining the Respondents either by themselves, their agents, employees, servants or otherwise from selling and or interfering land parcels Numbers KABARE/NYANGATI/5735, KABARE/NJUKU/2000, KABARE/MIKARARA/506 and or any other property deposited by the Claimant/Applicant as collateral with the 1st Respondent.

iii. That pending hearing and determination of the suit herein, this Honourable Court be pleased to issue an order of temporary injunction restraining the Respondents either by themselves, their agent, employers servants or otherwise from selling and or interfering  with land parcels Numbers KABARE/NYANGATI/5735,KABARE/NJUKU/2000, KABARE/MIKARARA/506 and or any other property deposited by the Claimant/Applicant as collateral with the 1st Respondent.

iv. Costs of this application be provided for.

Based on the grounds of the face of the Application supported by the Affidavit supported by Johnson Gakuru Gachoki deponed on 9/9/19 and Further Affidavit deponed on 2/11/20.

2. Both Applications are opposed vide a Replying Affidavit of John Muragurithe Credit Manager deponed on 5/10/20. Both Applications were ordered to be dispensed off together by way of Written Submissions to which the Claimant filed their Submissions on 6/11/20 and Respondent on 29/12/20.

3. The gist of both Applications is that the Applicant took a secured facility of 20. 0 Million and avers to have been servicing it as agreed without any delay until July 2019 he got a challenge when the lorry broke down and thereafter embarked on servicing the loan until the Motor Vehicle was attached by the 2nd Respondent who attached the Motor Vehicle on 10/8/19.

4. The 2nd Application dated 9/9/2019 relates to the security deposited for the secured loan facility Land Parcels KABARE/NYANGATI/5735,/KABARE/NJUKU/2000, KABARE/MIKARARA/506 and logbook for Motor Vehicle KCN 087N.

The Motor Vehicle was advertised for sale through Public Auction on 10/8/19 without informing the Claimant and following proper procedure that the collateral Land Parcels were also advertised.

The intention to sell by way of auction on 24/9/19 that previously the Applicant had visited the 1st Respondent and promised to clear the loan in two months’ time but the 1st Respondent were absent and advertised the collateral for sale through public auction contrary to what had been agreed.

5. In response, the 1st Respondent opposed the Application and in their Replying Affidavit stated the 1st Applicant was granted a business loan facility on 31/7/17, the principal sum being 10Million which was disbursed through the Claimant’s account. It was a condition the business loan would be secured by a legal charge with, KABARE/MIKARARA/506andKABARE/NJUKU/2000.

That the said facility was granted a condition that it would be repaid by way of monthly installment of Kshs.480,000/= for a period of 5 years with an interest rate of 16% p.a in default interest at the rate of 5%.

6. The Respondent was free to dispose off the security offered by the borrower through any means of recovery at the borrower’s costs. That the other “collateral” referred to by the Applicant in Affidavit dated 9/3/20 referred to a different loan a facility which was also in recovery. That the loan facility being an Asset Finance Loan was disposed after Application of 17/10/12 Principal Sum being 10. 8Million.

7. There was a condition that the securedcloan would be recovered by Motor Vehicle KCN 087N ISUZU FVZ LORRY.

That the Asset Finance Loan was to be repaid by monthly installment of Ksh.263,000/= spread over a period of 60 months with the condition that incase of default, the Respondent was free to dispose off security in possession.

That there has been sporadic and nominal payments way below the agreed monthly installments creating arrears for both accounts to the tune of Kshs.23,217,889/=as at 31/8/20. Despite several promises made by the Applicant/Claimant the loan balances continue to increase but they are willing to accommodate the Claimant if he fist cleared the amount in arrears which is Kshs.12,604,034/=as at 2/10/20.

The accommodative loan stands at Kshs.23,217,889. 00.

That the value of the Motor Vehicle KCN 087Nhas continued to depreciate in value whereas the Land Parcel KABARE/NYANGATI/5735has gone down in value since time of disbursement of loan and its value was being propelled by the Claimant Petrol Station which has not been operational since early 2019.

The 1st Respondent with therefore suffer irreparable loss in that the offered securities will not be enough to settle the loans which continue to rise.

7. That by making the Applications, the Applicant continue to frustrate the Respondent and preventing them from exercising their legal remedy in exercising the amount in arrears hence the Claimant should render his obligations to the 1st Respondent.

Parties were ordered to file Written Submissions to dispose off the Application. The Claimant filed Written Submissions on 6/11/20 while Respondents filed their Written Submissions on 29/12/20.

ISSUES

i.   Whether the Claimant has satisfied threshold for the injunction

ii.  Whether the relief sought should be granted.

iii. Costs

8. ISSUE ONE

Whether the Claimant satisfied the threshold for injunction

The Principles of injunctions are well laid out in the case of GIELLA VS  CASSMAN 1973 EAas follows;

i.   The Applicant must show a prima facie case with a probability of success.

ii.  Applicant ought to demonstrate that they should stand to suffer irreparable loss which cannot be adequately compensated by way of damages.

iii. Where in doubt to which side the balance of convenience lies.

9. i) Prima facie Case

The Claimant seeks an injunction against sale of his car and parcels of land he used as collateral for a loan he secured from the Respondent.

In the case GIELLA VS  CASSMAN BROWN (Supra) a prima facie case was defined in:

MRAO LTD VS 1ST AMERICAN BANK OF KENYA LTD [2003] EA eKLR  as:   “…….. in civil cases it is a case which the material presented to the Court or Tribunal, will conclude that there exists a legal right which has been infringed where the opposite party has to call for an explanation or rebutter from the latter”

10. The Claimant submitted that indeed he took a loan facility for which he defaulted due to financial difficulties. That he defaulted the same with the Respondent but the 1ST Respondent instructed the 2nd Respondent to attach and advertise for sale by Public Auction.

On the other hand, the 1st Respondent submitted that indeed the Applicant was granted 2 loan facilities for which he defaulted leading to realization of the security.

11. The Applicant sought an injunction on the grounds that proper procedure of the realization of the securities was not followed because the Respondent just attached the collateral.

12. The Claimant submitted that the Respondent exercised the right of redemption, arbitrarily and capriciously by attaching the collaterals and advertising them for sale.

We have carefully considered the Submissions of parties and note that despite the fact that the Applicant/Claimant defaulted in the payments, a proper procedure should have been followed before attempting to redeem the securities as per the Law of Contact/Agreement.

We have noted the Provisions of the Auctioneer’s Rules 1997 specifically attachment and sale of property Part III in which under Section II it is mandatory to issue a letter instruction for both Moveable and Immovable property and for the case of moveable and immovable properties Section 12 and 15 Auctioneers Rules apply accordingly.

The documents filed by the Respondent has not provided any proof of the letter of instruction to the 2nd Respondent herein being the Auctioneers nor have there been any notices filed to prove that a proper procedure of the attachment and Sale of moveable and immovable properties has been followed.

13. The Claimant contends that the Respondent just went ahead and attached Motor Vehicle KCN 087Nand the land parcels (the collaterals) without following the laid down procedures.

In as much as the Claimant defaulted, there are laid down procedures in the exercise of the right of redemption and attachment of collaterals in case of default.

In this case, there having being no proof of compliance to the laid down procedures, we find that the Claimant has demonstrated a prima facie case in that the Claimant’s legal rights was infringed upon by the action of the Respondent and there was no rebuttal from the Respondent they followed the due process on laid down procedures in exercising the right of redemption.

14. ii) Irreparable Harm

In PIUS KIPCHIRCHIR KOGO VS FRANK KIMELI TENAI [2018] eKLR

The irreparable injury was defined as follows;

“irreparable injury means that the injury must be one that cannot be adequately compensated for damages and that the existence of a principle case is not in itself sufficient.

The Applicant should further show that the irreparable injury will incur to him if the injunction is not granted and there is no other remedy to him by which he will not protect himself from the consequences of the apprehended injury...”

From the above discussion, we note that the proper laid down procedure was not followed by the Respondent. The Respondent attached and advertised for sale by public auction the collateral of the Applicants to which effect the Claimant was left without any means to earn an income and service the facility.

15. We also note that the Motor Vehicle attached was in danger of deteriorating and if the collaterals were sold, it would have caused more harm than good which may not have been compensated by way of damages.

There was no denial of the said attachment advertised by the Respondent who indeed confirmed in Paragraph 13 of Replying Affidavit that they were free to dispose off securities offered by the borrower.

We do not refuse that indeed the Respondent had the right of redemption of the collaterals but they should have followed the proper laid down procedures.

16. iii) Balance of Convenience

In Pius Kipchirchir case(Supra), it is defined as follows;

“……………the meaning of balance of convenience in favor of the Plaintiff is that if an injunction is not granted and suit is ultimately decided in favor of the Plaintiffs, the inconvenience caused to the Plaintiff would be greater than that which would be caused to the Defendant if an injunction is granted but the suit is ultimately dismissed. Although it is called Balance of Convenience, it is really the Balance of Inconvenience and it is for the Plaintiff to show the inconveniences caused to them would be greater than that which may be caused to the Defendant. Should the inconvenience be equal, it is the Plaintiffs who suffer.

In other words, the Plaintiffs have to show that the comparative mischief from the inconvenience which is likely to arise from withholding the injunction would be greater than which is likely to arise from granting it…..”

17. We note that as discussed above, the Applicant was granted interim orders for purposes of preservation of the collateral. Since the Respondent did not follow the proper laid down procedures then if the suit succeeded, then the Applicant would be likely to suffer much more inconvenience.

We therefore find that the Applicant has met the threshold of the principles for granting an injunction as discussed above and as laid down in the case of GIELLA VS CASSMAN BROWN(Supra).

18. ISSUE TWO.

Whether the Relief Sought Should be Granted

As discussed above, the Applicant has demonstrated that they have met the threshold in favoring granting the injunctions sought in both Applications dated 9. 8.2019 and 9. 9.2019 pending the hearing and determination of the suit pending  hearing and determination  of the suit,  the Applicant  should  continue  repayments of  the loan  as agreed  between the parties.

We state this noting that there is also an agreement between the parties on the interest payable in case of default so they are not left without a remedy.

19. ISSUE THREE

Costs

Costs follow the event of the instant matter and there is pending hearing of the main suit. We therefore order for costs in  the cause.

Parties  to comply  by filing witness statement  and documents.

Mention  for Pre-trial  and  to  fix a hearing  date on 28. 7.2021.

Ruling signed, dated and delivered virtually this 27thday of May, 2021.

Hon. B. Kimemia                  Chairperson                Signed      27. 5.2021

Hon. J. Mwatsama              Deputy Chairperson  Signed      27. 5.2021

Mr. P. Gichuki                       Member                       Signed      27. 5.2021

Tribunal Clerk                       Leweri

Miss Wanjiru holding brief  for Kibue  for both Respondent : Present

Kimemia  Advocate for  Claimant: Present

Hon. B. Kimemia                  Chairperson                Signed      27. 5.2021