Josiah Kamanja Njenga v Housing Finance Corporation of Kenya & Garam Investments [2014] KEELC 391 (KLR)

REPUBLIC OF KENYA

ENVIRONMENT AND LAND COURT OF KENYA

AT MALINDI

LAND CASE NO. 1'B' OF 2014

JOSIAH KAMANJA NJENGA..........................................................PLAINTIFF/APPLICANT

=VERSUS=

HOUSING FINANCE CORPORATION OF KENYA…..........DEFENDANTS/RESPONDENT

GARAM INVESTMENTS.......................................................DEFENDANTS/RESPONDENT

R U L I N G

Introduction

The Application before me is the one dated 21st January, 2014 filed pursuant to the provisions of sections 1A, 3A, 63(c) and (e) of the Civil Procedure Act, Order 40 of the Civil Procedure Rules, Sections 90 and 96 of the Land Act, 2012 and Article 40 of the Constitution.  The application by the Plaintiff is seeking for the following orders;-

(a)    A permanent injunction restraining the defendant, its agents, employees and/or its servants from advertising and/or offering for sale, selling, transferring, alienating all that properties known as L.R. No. Mainland North/Section III/2146 and 2147 and registered in the name of the Plaintiff on the basis of the purported Statutory Notice dated 15. 2.13 and 10. 10. 13, the purported Redemption Notice and Notification of sale dated 18. 11. 13.

(b) Costs of this suit together with interest thereon at such rate and for such period of time as this Honourable Court may deem fit to grant.

The Application is supported by the Plaintiff's Affidavit.

The Plaintiff’s case:

The Plaintiff  has deponed in his affidavit that he is the registered and beneficial owner of Mainland North /Section 111/2146 and 2147(the suit property).

According to the Plaintiff, he entered into a mortgage agreement dated 9th March, 2009 for a loan sum of Kshs. 19,200,000 and the suit property was charged to secure the said sum.

On 18th  November 2013, the Plaintiff was served with a redemption notice which indicated  that the suit property would be sold through public auction unless a sum of Ksh.20,193,655. 25 was paid within 45 days.

It is the Plaintiff's deposition that by  18th  November 2013, he was up-to-date with his repayment; that although the 1st Defendant agreed that the Plaintiff was up-to-date  with his repayments, it loaded on his account a sum of Ksh. 406,100 being the auctioneer's fee and that the bank's statutory power of sale has not occurred.

It is the Plaintiff's case that the 1st Defendant has never issued to him a notice requiring rectification of any default as required by section 90(1) of the Land Act and a Notification of sale; that he was never served with the purported statutory notices dated 15th February, 2013 and 10th October, 2013 and that the 1st Defendant set in motion the said notices with the design to extort the alleged auctioneer's fees from him.

The 1st Defendants' case

In its Replying Affidavit filed on 5th February 2014, the 1st Defendant's Assistant Legal manager deponed that the first occasion when the Plaintiff's account fell into arrears, the 1st Defendant served the Plaintiff with a notice dated 11th March, 2011 giving the Plaintiff a 3 months’ notice within which to settle the arrears.  The Defendant's officer has deponed that the Plaintiff refused to settle the arrears and the 1st Defendant instructed the 2nd Defendant to recover the outstanding amount.

According to the 1st Defendant, the Plaintiff requested for the rescheduling of his mortgage account and the auction was abandoned.  However, on 9th December 2011, the Plaintiff went back into defaulting and the account fell into arrears again.

It is the 1st Defendant’s deposition that on 15th February, 2013, the 1st Defendant served the Plaintiff with a notice erroneously dated 15th February, 2012 pursuant to the provisions of section 90(1)and (2) of the Land Act and gave the Plaintiff three months to rectify the default by settling the arrears of Ksh.1,538,854. 80 projected as at 28th February, 2013.

The 1st Defendant's legal officer further deponed that on 10th October  2013, the Plaintiff was served with a 40 days’ notice under section 90(3) of the Land Act; that the 1st Defendant instructed the 2nd Defendant on 14th November, 2013 to proceed and realize the security constituting the subject property by public auction and that by that time the 1st Defendant`s  statutory power of sale had already crystallized.

According to the 1st Defendant, the 40 days’ notice under section 96(2) of the Act may run concurrently with the Auctioneer's 45 days’ Redemption Notice and that the 1st Defendant can realize its security before the lapse of the 40 day's Notice.

The Further Affidavit

In his Further Affidavit, the Plaintiff deponed that on 27th November 2013, the 1st Defendant demanded a settlement Ksh.406,100 being the auctioneer's fees; that on 4th December 2013, the 1st Defendant demanded Ksh.632,693. 10 which was inclusive of the alleged November 2013 monthly installment and that as at 17th January, 2014, the bank had loaded on his account Ksh.630,730. 90 which he has since settled under protest.

The parties’ advocates filed their respective submissions and authorities which I have considered.

Analysis and findings:

The only issue that I am supposed to determine is whether the 1st Defendant's statutory power of sale had crystallized by the time it instructed the 2nd  Defendant to sell the suit property through a public auction.  The determination of that issue will, prima facie, determine whether the 1st Defendant was entitled to load the auctioneer's fees of Kshs.406,100 on the Plaintiff's account.

Section 90(1) and (2) of the Land Act provides that if a chargor fails to pay interest or any other periodic payment under a charge, and continues to be in default for one month, the chargee may serve on the chargor a notice in writing requiring the chargor to pay the money owing.  The notice should adequately inform recipient the nature and extent of the default.  The chargor must also be informed in the notice the amount that must be paid to rectify the default and the time within which to do so, being not less than three months.

According to section 90(2) (d) of the Act, if the default is not rectified within the specified time, the chargee may proceed to exercise any of the remedies provided in the Act, which includes selling the land.  Section 96(2) of the Act provides that before exercising the power to sell charged land, the charge shall serve on the chargor a notice the prescribed form and shall not proceed to complete any contract for the sale of the charged land until at least forty days from the date of the service of that notice.

The Plaintiff has denied that he was ever issued with a written notice requiring rectification of any default as required by the provisions of section 90(1) and a valid notification of sale as required by section 96(2) of the Act.

According to the 1st Defendant's Replying Affidavit, the Plaintiff was served with the first statutory Notice dated 11th March, 2011 which was annexed on the Affidavit as PMW 1. In the said notice, the outstanding arrears was indicated as Ksh.1,318,136. 25.  The notice was sent to the Plaintiff by way of registered post.  The address used as showed in the list of letters received by the Postal Corporation of Kenya was 89272-80100 Mombasa.  The Plaintiff has denied that that is his postal address.

However, by way of a letter dated 9th December, 2011 and annexed on the 1st Defendant's Replying Affidavit, the 1st Defendant rescheduled the Plaintiff's mortgage account.  The monetary loan repayment was adjusted to Ksh.312,000 with effect from 30th December, 2011.  The address used in their letter was 41825-80100 Mombasa, which, according to the  Plaintiff,  is the correct address.

According to the 1st Defendant's annexture PMW 4, the Plaintiff, vide a letter dated 18th December, 2012, was informed to regularize his loan account which had fallen into arrears of Ksh.1,205,591. 80.  The address that was used by the 1st Defendant to inform the Plaintiff about his default was 41825-80100 Mombasa.

PMW 5 is a copy of a statutory notice, which, according to the 1st Defendant, was erroneously dated 15th February, 2012 instead of 15th February, 2013.  By that time, the Plaintiff was in arrears of Ksh.1,538, 854. 80 which was projected as at 28. 02. 2013.  The address indicated in the letter is 41825-80100 which is the same address that is shown in the list of the letters that were received by the Post Master General on 19th February, 2013.

The 1st Defendant also annexed on its Replying Affidavit the notice dated 10th October, 2013 issued pursuant to the provision of section 96(2) of the Land Act in which it stated as follows;-

“We shall proceed to  exercise our statutory remedy under section (3) (e) of the Land Act and sell the charged land at the expiry of fourty(40) days from the date of service of this notice.”

The address that is indicated in the said notice is 41825-80100 which is the same address that is shown in the list of letters that was received by the Post master general on 14th October, 2013.  It is not true, as alleged by the Plaintiff, that the address indicated in the bank's dispatch book is 41825-8000 Mombasa and not 41825-8100.

In any event, the Plaintiff has not offered any evidence from the post master general that indeed the address used by the 1st Respondent to send to him the statutory notice and the demand letter was not his or that  in fact those letters were never sent. In the case of Elizabeth Wambui Njuguna-vs- Housing Finance Co. Kenya Ltd, Nairobi HCCC NO.293 of 2006, Kasango J held as follows;-

“The Plaintiff ought to have brought evidence to show that the letter sent by the Defendants was not received by her and this could have been confirmed by the post master general”

I am in agreement with the holding of the Judge in the above matter.  In the circumstances, I am persuaded that the Plaintiff was validly served with the statutory power of sale erroneously dated 15th February, 2012 instead of 15th February, 2013 and the demand letter dated 10th October, 2013.

The Plaintiff has annexed on his supporting Affidavit a letter dated 27th November, 2013 in which the bank acknowledged receipt of Ksh.750,000. The money was received by the 1st Defendant on 18th November, 2013.  In the letter, the bank advised the Plaintiff that the auction which had been scheduled for 26th January, 2014 will continue as per the notices served unless the auctioneer's fees amounting to Ksh.406,100 is cleared. It is the Plaintiff’s contention that that fee is not payable.

The 1st Defendant instructed the 2nd Defendant to sell the suit property by way of public auction to recover its outstanding balance of Ksh.20,193,655. 25 as at 30th November, 2013 by way of a letter dated 14th November, 2013.

It is the Plaintiff's case that according to clause 11 of the charge, any notice or demand shall be deemed to have been received if sent by post four days after posting.  Consequently, it was argued, if the 40 days demand letter was sent on 10th October, 2013, the 40 days would have expired on 19th November, 2013.  If the four days of service was to be considered, it was submitted, the expiry of 40 days was to be on 23rd November, 2013.  However, the 1st Defendant, it was urged, instructed the 2nd Defendant on 14th November, 2013 to sell the suit property, an act which paved way for claiming the unlawful auctioneer's charges.

The Plaintiff annexed on the Supporting Affidavit the 2nd Defendant's “Notification of sale issued to the Plaintiff pursuant to the letter of instructions by the bank dated 14th November, 2013.

Having analysed the chronology of events, I take the view that the auctioneer's fees is only payable once the bank gives to the auctioneer lawful instructions.  Section 96(2) of the Land Act stipulates that the Bank cannot exercise its power to sell the charged property  until at least 40 days have lapsed.  The Plaintiff was served with the 40 days’ notice on 18th October 2013, which was the fourth day after the posting of the letter dated 10th October, 2013. The letter, according to the documents annexed on the Replying Affidavit, was received by the post master general on 14th October, 2013.

It is only after 27th November, 2013, which was the 40th day after 18th October, 2013, when the Plaintiff is supposed to have been served with the letter, that the 1st Defendant would have instructed the 2nd Defendant to proceed to issue to the Plaintiff with a notification of sale pursuant to the provisions of Rule 15 of the Auctioneers Rules, 1997 and not earlier than that.

Consequently, the letter of instructions dated 14th November, 2013 by the 1st Defendant addressed to the 2nd Defendant instructing it to sell the suit property was prematurely issued and is contra-statute. The said instructions and the subsequent notification of sale by the 2nd Defendant are therefore, prima facie, a nullity and cannot be the basis for the auction which had been scheduled for 26th January, 2014 or the loading of the auctioneer's fees on the Plaintiff's loan account.

For the reasons I have given above, I find and hold that the Plaintiff has established a prima facie case with chances of success. Consequently, I allow the Plaintiff’s Application dated 21st January, 2014 as prayed.

Dated and delivered in Malindi this 16th   day of      May,  2014.

O. A. Angote

Judge