Katsran Limited v SBM Bank Limited [2022] KEHC 17088 (KLR)

Katsran Limited v SBM Bank Limited (Commercial Case 111 of 2018) [2022] KEHC 17088 (KLR) (15 July 2022) (Ruling)

Neutral citation: [2022] KEHC 17088 (KLR)

Republic of Kenya

In the High Court at Mombasa

Commercial Case 111 of 2018

MN Mwangi, J

July 15, 2022

Between

Katsran Limited

Plaintiff

and

SBM Bank Limited

Defendant

Ruling

1. The notice of motion application filed by the plaintiff is dated March 17, 2020. It has been brought under the provisions of articles 22, 27(1) & 2, 40(1) (a), (h) & 40(2)(a) of the Constitution, sections 1A, 1B, 3A, 26, 80 and 99 of the Civil Procedure Act, order 45(1) & order 51(1) of the Civil Procedure Rules, 2010and all other enabling provisions of the law. The palintiff seeks the following orders –1. Spent;2. That this honourable court be pleased to review, stay, vary and or set aside the ruling and/or directions and all other consequential orders emanating from the ruling and or directions and/or order of Justice PJ Otieno on December 13, 2019 directing that the defendant does exercise its statutory power of sale over property LR No Kwale/Ngomeni/2401, Kiteje Area, Kwale county as per the valuation report of Maina Chege & Co dated October 31, 2019. 3.Spent; and4. That the costs of this application be borne by the defendant.

2. The application is premised on the grounds on the face of it and the affidavit sworn on March 17, 2020 by Henry Mutua Katambo, a director of the plaintiff. He averred that he and Swabbry are the registered proprietors of property LR No Kwale/Ngomeni/2401, Kiteje Area, Kwale county (the suit property), and that sometime in the year 2015, the plaintiff approached the defendant (previously Chase Bank) for a loan of Kshs 13,017,160. 00, which was advanced to the plaintiff. He stated that he and Swabbry offered the suit property as security.

3. The plainitff averred that the loan was advanced on the strength of a valuation report by Messrs Paul Wambua Valuers Ltd, who gave the current open market value of the property in issue as Kshs 20,000,000. 00, a mortgage value of Kshs 17,000,000. 00, and a forced sale value of Kshs 15,000,000/=.

4. The plaintiff deposed that on 13th December, 2019, in the absence of its Counsel on record, the Court directed the defendant to proceed to exercise its statutory power of sale of the suit property in accordance with the valuation report by Messrs Maina Chege & Co Valuers, who gave an open market value was Kshs 15,500,000/=, mortgage value was Kshs 13,175,000. 00, and the forced sale value was Kshs 11,625,000/=. A mention date was set on March 5, 2020 to confirm the status.

5. The plaintiff disputed the figures, computation and the interest charged by the defendant and averred that as at March 12, 2020, the outstanding loan arrears stood at Kshs 18,531,555. 85. It averred that the in-duplum rule is applicable in this case and that the defendant is bound by it.

6. The plaintiff’s deponent deposed that he is a bond holder with the defendant in the sum of Kshs 15,000,000/= through a Chase bond number CHBD/02/06/22-00044-13. 25, that he invested through Genghis Capital Limited, the defendant’s agent, and that the said bond attracts an interest of Kshs 500,000/= per quarter of every year. He stated that he is desirous that the said bond be utilized in offsetting the loan amount of Kshs 13,017,160. 00, where so far a sum of Kshs 3,962,839. 15 has already been paid.

7. The deponent also deposed that unless the orders sought are granted, he is apprehensive that the defendant might exercise its statutory power of sale rendering the issues raised herein an academic exercise and moot leaving the plaintiff adjudged before being heard.

8. The defendant opposed the application through a replying affidavit sworn on March 8, 2021, by Kevin Kimani, the defendant’s Legal Manager. He deposed that the instant application is res judicata to the notice of motion dated November 27, 2018 and it is an abuse of the court process.

9. He deposed that the plaintiff defaulted in repayment of the loan as per the agreed terms prompting the defendant to issue a demand letter as required by section 90 of the Land Act No 6 of 2012. That after expiry of the timelines in the demand letters, the defendant issued a redemption notice of 90 days to the plaintiff through a letter dated January 15, 2018, and a subsequent one dated May 24, 2018. He stated that a reminder through a forty days’ notice was thereafter sent to the defendant in compliance with section 96(2) of the Land Act.

10. The defendant averred that the plaintiff wrote to it vide a letter dated August 22, 2017 admitting its default and that when nothing was forthcoming from the plaintiff, the defendant issued instructions to Keysian Auctioneers to sell the property in exercise of the Bank’s statutory power of sale. It was further deposed that the auctioneer took the statutory steps by issuing a forty-five days’ notice dated October 5, 2018, and a notification of sale dated October 5, 2018, and thereafter, the suit property was valued in compliance with statute. The defendant averred that as at October 2, 2018 the plaintiff was in arrears of Kshs 16,203,205. 00.

11. The defendant denied that the Chase Bank bonds are applicable to this matter for reasons that Ghengis Capital is a distinct and separate legal entity from the defendant, the plaintiff has no power or authority to offset an outstanding loan with the alleged bonds. The defendant stated that the agreement dated September 28, 2015 clearly sets out the collateral that secured the loan.

12. The defendant stated that on September 26, 2019, the court having considered all the pleadings filed herein established that the only issue of controversy was the valuation of the suit property. That on November 5, 2019, in the presence of Mr Otieno, counsel for the plaintiff and Mr Busieka holding brief for Mrs. Oballa for the defendant, it was confirmed that the suit property had been valued and a copy of the valuation report was placed in the court file and the matter was set for mention on December 13, 2019, for the purposes of recording a possible consent.

13. The defendant averred that on December 13, 2019, the plaintiff’s counsel opted not to attend court, which resulted in the court directing the defendant to proceed with the exercise of its statutory power of sale in accordance with the valuation by Maina Chege & Co Valuers. The defendant further stated that the application before this court does not satisfy the pillars of review and/or of an injunction.

14. Ms Onyango, learned counsel for the defendant relied on the defendant’s replying affidavit and opted not to file any written submissions. The plaintiff’s counsel had not filed the plaintiff’s submissions by the time the matter was fixed for ruling.

Analysis And Determination 15. I have considered the application, the affidavits filed in support thereof, as well as the replying affidavit by the defendant. The issues that arise for determination are as follows-i.Whether this court should set aside, vary and/or review the directions and all consequential orders emanating from the directions given on December 13, 2019; andii.Whether this court should grant an order for an injunction.Whether this court should set aside, vary and/or review the directions and all consequential orders emanating from the directions given on December 13, 2019

16. The law on setting aside of ex parte orders is set out under order 12 rule 7 of the Civil Procedure Rules, 2010 which provides as follows-“Where under this order judgment has been entered or the suit has been dismissed, the court, on application, may set aside or vary the judgment or order upon such terms as may be just.”

17. Section 3A of the Civil Procedure Act gives the court inherent power to make such orders as may be necessary for the ends of justice to be met, while order 51 rule 15 of the Civil Procedure Rulesgives the court power to set aside any order made ex parte. The court's discretionary power should, however, be exercised judiciously, with the overriding objective of ensuring that justice is done to all the parties.

18. In the case of Shah v Mbogoh (1967) EA 167, Harris J, stated thus -“This discretion is intended so to be exercised to avoid injustice of hardship resulting from accident, inadvertence or excusable mistake or error, but is not designed to assist a person who has deliberately sought, whether by evasion or otherwise, to obstruct or delay the course of justice.”

19. It is incumbent upon the party seeking the court's favour or discretion to adduce sufficient and plausible reasons that are persuasive to the court. It is therefore necessary for a party seeking review of orders to show that there were sufficient reasons preventing them from appearing in court. In this case, other than mentioning that his counsel on record was not in court when the court issued directions on December 13, 2019, it has not been demonstrated why the plaintiff’s counsel was not in court on December 13, 2019, so as to give the plaintiff’s view on the valuation report by the valuer, Maina Chege & Co Valuers appointed by consent.

20. In light of all the facts and circumstance of this case, and the fact that the valuation report by Maina Chege & Co Valuers is from a valuer appointed by consent of the parties, it would be unjust and unreasonable to set aside the orders/directions made herein on December 13, 2019. This court will therefore not exercise its discretion in favour of the plaintiff.

Whether this Court should grant an injunction. 21. It is my considered view that the orders given by this court on September 26, 2019 and issued on October 17, 2019 have the effect of a consent order having been agreed by the parties and adopted by the court.

22. The principles that appertain to setting aside of a consent order are well established in a line of cases including Brooke Bond Liebig v Mallya(1975) EA 266 where Mustafa Ag VP stated thus;“The compromise agreement was made an order of the court and was thus a consent judgment. It is well settled that a consent judgment can be set aside only in certain circumstances, eg on grounds of fraud or collusion, that there was no consensus between the parties, public policy or for such reasons as would enable a court to set aside or rescind a contract. In this case the parties and their advocates consented to the compromise in very clear terms; they were certainly aware of all the material facts and there could not have been any mistake or misunderstanding. None of the factors which could give rise to the setting aside of a consent agreement existed.”

23. Similarly, inBoard of Trustees National Social Security Fund v Micheal Mwalo [2015] eKLR, the Court of Appeal stated as follows:“A court of law will not interfere with a consent judgment except in circumstances such as would provide a good ground for varying or rescinding a contract between parties. To impeach a consent order or a consent judgment, it must be shown that it was obtained by fraud, or collusion or by an agreement contrary to the policy of court.”

24. Essentially, the above cited authorities are clear that a consent order will only be set aside if it can be demonstrated that it was procured through fraud, non-disclosure of material facts or mistake or for a reason which would enable a court to set it aside.

25. In this case, the plaintiff and its counsel did not place before the court any evidence to demonstrate that the consent entered into between the parties on September 26, 2019, which was adopted as an order of the court, was obtained illegally or through fraud. The parties hereto are bound by their consent order that appointed a joint valuer Messrs Maina Chege & Co Valuers.

26. Accordingly, the application dated March 17, 2020 is dismissed with costs to the defendant.

It is so ordered.

DATED, SIGNED AND DELIVERED AT MOMBASA ON THIS 15TH DAY OF JULY, 2022. RULING DELIVERED THROUGH MICROSOFT TEAMS ONLINE PLATFORM.NJOKI MWANGIJUDGEIn the presence of:No appearance for the plaintiffMs Kerubo h/b for Ms Onyango for the defendantMr. Oliver Musundi – Court Assistant.