Kinyanjui v NCBA Limited & another [2023] KEHC 26588 (KLR)

Kinyanjui v NCBA Limited & another (Civil Appeal E094 of 2022) [2023] KEHC 26588 (KLR) (8 December 2023) (Judgment)

Neutral citation: [2023] KEHC 26588 (KLR)

Republic of Kenya

In the High Court at Kiambu

Civil Appeal E094 of 2022

PM Mulwa, J

December 8, 2023

Between

Njoroge Kinyanjui

Appellant

and

Ncba Limited

1st Respondent

Garam Investments Auctioneers

2nd Respondent

(Being an appeal against the ruling and order of Honourable Jacinta A. Owiti (Mrs.) (Senior Principal Magistrate) delivered on 28th April, 2022 in Kikuyu MC ELC no. E082 of 2021)

Judgment

1. The appellant in this instance instituted the suit before the Senior Principal Magistrate’s Court at Kikuyu vide the plaint dated 17th November, 2021 and sought for various reliefs against the 1st and 2nd respondents; namely, a permanent injunction restraining the respondents and/or their servants/agents from selling by way of auction or otherwise the appellant’s property being L.R. No. Dagoretti/Thogoto/T. 649 situated in Kiambu County (the suit property); an order directing the respondents to avail proper statements of account in respect to the mortgage account; an order directing the 1st respondent to discharge the suit property upon receipt of full mortgage amount of USD 46,490. 42; general damages; and costs of the suit.

2. The appellant pleaded in the plaint that sometime in the year 2014 he took out a mortgage facility with the 1st respondent in the sum of USD 82,930 and which facility was to run for a period of 10 years and was repayable by way of monthly instalments. That the suit property served as a security for the facility, valued at the sum of Kshs. 10,500,000/- at the time.

3. The appellant pleaded in the plaint that he had been making payments towards clearing the loan amount at all material times, until he was faced with financial difficulties in the year 2016 which hindered his ability to offset the outstanding balance of the mortgage facility.

4. It is pleaded in the plaint that following his financial predicament, the 1st respondent prepared a valuation report in respect of the suit property indicating that the said property was valued at the original sum mentioned hereinabove, despite it having undergone various improvements. The appellant therefore termed the valuation report as suspicious and questionable.

5. It was pleaded in the plaint that the appellant has been prevented from redeeming the suit property and further, that the statement of account availed by the 1st respondent in no way reflect the repayments so far made towards the mortgage facility.

6. To accompany the plaint, the appellant filed the Notice of Motion dated 17th November, 2021 (“the application”) and sought for a temporary injunction restraining the respondents and/or their agents from selling or otherwise disposing of the suit property pending the hearing and determination of the suit; an order compelling the 1st respondent to produce accounts and statements of the mortgage account in favour of the appellant; an order directing that a proper valuation be conducted by an independent valuer appointed by the Institution of Surveyors of Kenya on the suit property.

7. The application was opposed by the 1st respondent, with a rejoinder by the appellant.

8. Upon hearing the parties on the aforementioned application, the trial court declined to grant any of the orders sought and therefore dismissed the application with costs to the 1st respondent.

9. Being aggrieved by the above decision, the appellant sought to challenge the same by way of an appeal. Through the memorandum of appeal dated 13th May, 2022 the appellant has put forth the following grounds:i.That the Learned Magistrate erred in law by failing to have due regard, take into account and appreciate the substantive legal issues of law and fact raised by the Appellant during the hearing of the Appellant’s application.ii.That the Learned Magistrate erred in law and fact in disregarding the fact that the total security facility had been liquidated in full.iii.That the Learned Magistrate erred in law by not taking into account issues of proper accounts and undervaluation of the suit property.iv.That the Learned Magistrate erred in law by failing to reach a determination on all the prayers sought in the application.v.That the Learned Magistrate erred in law and in fact by failing to appreciate the fact that the unsecured facility was not secured by the suit property and as such would be subject to a different course of action and or suit.vi.That the Learned Magistrate erred in law and in fact by failing to appreciate and distinguish the substantive issues of law and fact raised in the submissions, authorities and other documents on record.vii.That the Learned Magistrate erred in law and in fact by failing to appreciate the fact that the unsecured facility was being handled by different parties/law firm which was not privy to the proceedings before court.viii.That the Learned Magistrate erred in fact and law by determining the suit and disregarding triable issues at the preliminary stage without according the appellant an opportunity to ventilate the same.ix.That in all the circumstances of the case, the Learned Magistrate failed to render justice to the Appellant. (sic).

10. The parties were directed to file written submissions on the appeal. However; it is apparent from the record that while the appellant’s counsel made mention on 27th September, 2023 that his submissions had been filed; at the time of writing this judgment, the court could not trace the said submissions at all in the court file.

11. By way of the submissions dated 11th September, 2023 the 1st respondent contends that whilst it is true that in the course of the suit, the parties entered into a consent on 23rd November, 2021 thereby confirming the appellant’s payment of the outstanding sums towards the mortgage facility, the legal charge dated 17th March, 2014 in respect of the suit property gave the 1st respondent a right to combine, consolidate and set-off the appellant’s mortgage and current accounts; and that owing to outstanding loan arrears in respect to an unsecured loan facility advanced to the appellant separate from the mortgage facility, the 1st respondent was entitled to hold on to the suit property against the unsecured loan. That in the premises, it is misleading for the appellant to allege that the trial court varied the terms of the consent, citing the case of National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & another [2001] eKLR where the Court of Appeal pronounced that:“A Court of law cannot re-write a contract between the parties. The parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved.”

12. The 1st respondent further contends that the aforementioned consent constituted a partial consent and did not determine all the issues raised in the application. On those grounds, it is the submission by the 1st respondent that there would be no basis on which the suit property can be discharged, in view of the outstanding balance on the unsecured loan.

13. On the crux of the appeal, the 1st respondent argues that the appellant had not met the threshold for the injunctive order sought, pursuant to the principles set out by the court in the oft cited case of Giella v Cassman Brown & Co Ltd [1973] EA 358 thus:“First, an applicant must show a prima facie case with a probability of success. Secondly, an interlocutory injunction will not normally be granted unless the applicant might otherwise suffer irreparable injury, which would not adequately be compensated by an award of damages. Thirdly, if the court is in doubt, it will decide an application on the balance of convenience. (EA Industries v Trufoods, [1972] EA 420. )”

14. The 1st respondent submits that the appellant has not established a prima facie case against it since he has failed to support his averment that the sale of the suit property is illegal; that the suit property has been undervalued; and that the said property constitutes his matrimonial property. To support its respective arguments here, the 1st respondent has drawn reference from inter alia, the case of Zum Investment Limited v Habib Bank Limited [2014] eKLR where the court determined that the actual price of a property can only be ascertained upon its sale, and hence it cannot be anticipated or predicted whether such property was undervalued prior thereto. On the subject of the matrimonial nature of the suit property, counsel for the 1st respondent referenced the following pronouncement by the court in M'mbwani M'njau v K-Rep Bank Ltd & 2 others [2013] eKLR:“The injunction being sought seeks to restrain the 1st and 2nd defendants, among others, “from selling, re-advertising for sale or in any other way manner (sic) whatsoever from dealing with land reference No. Karingani/Mugirirwa/1043 pending the hearing and determination of this suit”. To me this would be a draconian order considering that the plaintiff had willingly offered his land to the 1st defendant as security for the loan obtained by the 3rd defendant.This being an interlocutory application, I will take care not to delve into matters which deserve handling at the hearing and determination of the main suit. At this stage, I only need to rely on the relative weight of the parties' propositions. I find that the applicant has not satisfied the conditions for the grant of an injunction. The applicant has not shown that the intended sale of the suit land to realize a security is unlawful, null and void. He has not established a prima facie case. As I have already stated I am inclined to believe the 1st and 2nd respondents that the apposite Statutory Notice was given.One of the other conditions for grant of an injunction is that the applicant will suffer an irreparable injury which cannot be compensated by an award of damages. I find that the 1st respondent would be able to financially compensate the plaintiff should he win the suit eventually. One might say that there is sentimental value in the land in question, therefore, making the loss irreparable. I hazard to say this, where a party has offered land as security to a financial institution, the irreparable sentimental value is only extant as long as the borrowing party does not default or other satisfactory arrangements are made.”

15. It is equally the contention by the 1st respondent that irrespective of whether or not the sums claimed are in dispute, a chargee cannot be prevented from exercising its statutory power of sale, whilst borrowing from Stars & Garters Restaurant & another v National Bank of Kenya Limited [2019] eKLR where the court stated that:“The applicants also gave the impression that the amount owed to the respondent is in dispute. That is not a ground for stopping a sale. This was stated long ago in Lalvuna & others v Civil Servant Housing Co. Ltd [1995] LLR 336 (CAK), as quoted in James Juma Muchemi & Partners Limited v Barclays Bank Ltd [2011] eKLR, where Kwach, J. A. stated that: -“A court should not grant an injunction restraining a mortgagee from exercising its statutory power of sale solely on the ground that there is a dispute as to the amount due under the mortgage.”

16. The 1st respondent submits that in the present instance, it is not in dispute that the appellant took out both the mortgage and unsecured loan facilities; and that it is further not in dispute that he defaulted on repayment on both facilities.

17. Flowing from the above circumstances, the 1st respondent is of the view that an injunctive order is rightly not available to the appellant and consequently, the appeal lacks merit and ought to be dismissed with costs.

18. The 2nd respondent on his part did not participate in the appeal or file any documents in that respect.

19. I have considered the submissions on record and the authorities cited therein in respect to the appeal. I have also re-evaluated the relevant material and evidence which was placed before the trial court. It is noteworthy that the appeal encompasses the trial court’s decision declining to grant the orders sought in the application. I will therefore tackle the nine (9) grounds of appeal together.

20. The substantive orders sought in the application have been set out hereinabove and I will not restate them. Suffice it to say that, the application was anchored on the grounds which were reaffirmed in the appellant’s supporting affidavit. Therein, he reiterated his pleadings as set out hereinabove, relating to his right to redeem the suit property and to have the intended sale stopped; the inconsistencies in the account statements presented to him by the 1st respondent thereby prompting a need for reconciliation of accounts; and the allegation that the suit property had been undervalued.

21. In opposition thereto, Steve Atenya, Senior Legal Counsel of the 1st respondent, swore a replying affidavit on 2nd December, 2021 and stated that the mortgage facility in respect of the suit property was secured by a First ranking Legal Charge dated 17th March, 2014 in favour of the 1st respondent. That pursuant to the Charge, the mortgage amount was payable in 120 consecutive monthly instalments. That the Charge further made provision for consolidation and set-off of other accounts belonging to the appellant. That previously, the appellant had taken out an unsecured loan with the 1st respondent to the tune of Kshs. 1,400,000/- vide the loan application dated 20th December, 2013.

22. The deponent stated that owing to the outstanding loan arrears on the abovementioned facilities, the 1st respondent exercised its right to consolidate the appellant’s loan accounts and commenced the process of realization of the security, upon complying with the statutory requirements.

23. The deponent further stated that in light of the above, the 1st respondent proceeded to instruct Landmark Realtors Limited to undertake a valuation of the suit property, the result of which placed its market value at the sum of Kshs. 10,500,000/- and its forced sale value at the sum of Kshs. 7,900,000/-. That resultantly, the appellant has failed to demonstrate the manner in which the suit property was undervalued.

24. It is the averment by the deponent that the 1st respondent therefore indicated to the appellant that it would only discharge the security on the suit property upon redemption of the two (2) facilities.

25. It is the averment by the deponent that in view of the foregoing circumstances, the 1st respondent would be entitled to proceed with the sale of the suit property accordingly.

26. In his further affidavit sworn on 18th February, 2022 the appellant echoed his earlier sentiments and averred that the outstanding arrears on the mortgage facility had since been cleared and hence it would be in the interest of justice for the interim injunctive order to be confirmed in order to safeguard the suit property.

27. The appellant further averred that the mortgage and unsecured loan facilities are distinct accounts and should be regarded as such. That in any event, the unsecured loan facility was not the subject of the suit proceedings and therefore has no bearing on the suit.

28. In the end, the learned trial magistrate; in dismissing the application; reasoned that since it is not in dispute that the unsecured loan is in arrears and it was an agreement by the parties that the 1st respondent had the right to combine the two (2) facilities in a bid to recover any arrears, the appellant had not established a prima facie case which constitutes the first condition upon which an interlocutory injunction can be granted.

29. On the subject of whether the suit property was undervalued, it was the reasoning by the learned trial magistrate that the 1st respondent having complied with the statutory requirements preceding the exercise of its statutory power of sale, the averments made by the appellant hold no ground.

30. It was also the reasoning by the learned trial magistrate that any loss suffered by the appellant can be compensated by way of costs, and that the balance of convenience tilted in favour of the 1st respondent in that instance.

31. From my study of the record, I note that the orders sought in the application were three (3)-fold in nature. Nevertheless, it is apparent that the order seeking the production of accounts and statement pertaining to the mortgage facility was complied with during the course of directions on the application pursuant to the trial court order made on 19th November, 2021. As a consequence, the said order has since been overtaken by events and need not be deliberated in the appeal.

32. Concerning the second order seeking an interlocutory injunction pending the hearing and determination of the suit, the germane principles on interlocutory injunctions originated from the Court of Appeal in East Africa in Giella v Cassman Brown & Co. Ltd [1973] EA cited in the submissions by the respective parties and are as follows:a.The applicant must first establish a prima facie case with a probability of success.b.The applicant must then demonstrate that he, she or it stands to suffer irreparable loss that cannot be adequately compensated through damages.c.Where there is doubt on the above, then the balance of convenience should tilt in favour of the applicant.

33. In respect to the first principle, the Court of Appeal in the case of Mrao Ltd v First American Bank of Kenya and 2 others [2003] eKLR sought to define a prima facie case in the following manner:“A prima facie case in a civil application includes but is 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 that there exists a right which has apparently been infringed by the opposite party as to call for an explanation or rebuttal from the latter.”The Court further opined that the standard for proving a prima facie case is higher than that associated with an arguable case and that an applicant must show an infringement of a right and the probability of success of his or her case upon trial.

34. Upon my consideration of the pleadings and material presented at the trial, I note that it is not in dispute that the appellant took out a mortgage facility with the 1st respondent and upon which the suit property was offered as a security by the appellant. It is also not in dispute that the outstanding sums on the said mortgage facility have since been settled in full, as confirmed by the trial court proceedings of 21st November, 2021 and which proceedings indicate the recording of a consent to that effect.

35. Suffice it to say that, it is apparent that the bone of contention lies in the 1st respondent’s argument that in view of the outstanding loan arrears on the unsecured loan facility previously taken out by the appellant and pursuant to the agreement signed between the parties, purporting that the former had the right to consolidate and/or set off any loan accounts belonging to the former, the suit property cannot be discharged unless and until the unsecured loan is equally redeemed.

36. The appellant has ridden on the above circumstances to argue that his right of redemption is being infringed upon by the 1st respondent notwithstanding the fact that he has cleared the mortgage loan upon which the suit property acted as security, and that the unsecured loan facility constitutes an entirely separate facility which cannot be lumped together with the already settled facility.

37. Upon considering the foregoing circumstances, I am of the view that the question of whether the 1st respondent had the right to hold the suit property as security on the unpaid unsecured loan facility on grounds of consolidation can be categorized as a substantive issue which can only be adequately ventilated at the trial stage of the suit and not at this early stage. Suffice it to say that and as earlier mentioned, it is not in dispute that the mortgage loan facility for which the suit property was charged against, has been fully settled.

38. At this juncture and without going into the merits of the case, I am of the view that the appellant had established a prima facie case, thereby departing from the finding by the learned trial magistrate on this subject.

39. On the principle of the irreparable loss to be suffered, upon my consideration of the material and evidence tendered, I observed that the suit property constitutes the subject matter of the dispute and which the appellant is apprehensive may be disposed of by the 1st respondent in a bid to recover the outstanding unsecured loan arrears, notwithstanding its sentimental value as matrimonial property coupled with the undisputed fact that the mortgage sum which was secured by the suit property has been cleared.

40. Upon taking the foregoing circumstances into account, I am of the view that it would be prudent for the status quo to be maintained in order to preserve the suit property until such time as the issue of the unsecured loan sum vis-à-vis the security is determined.

41. In so saying, I am persuaded by the following pronouncement made by the Court of Appeal in the case of Charter House Investment Ltd v Simon K. Sang & 3 others [2010] eKLR cited in the submissions by the appellant:“Injunction is an equitable and discretionary remedy, given when the subject matter of the case before the court requires protection and maintenance of the status quo. The award of a temporary injunction by courts of equity has never been regarded as a matter of right, even where irreparable injury is likely to result to the applicant. It is a matter of sound judicial discretion, in the exercise of which the court balances the conveniences of the parties and possible injuries to them and to third parties.”

42. Moreover, I respectfully disagree with the reasoning by the learned trial magistrate that in the present circumstances, an award of damages would constitute adequate compensation to the appellant for the loss to be suffered.

43. Flowing from the above and contrary to the reasoning by the learned trial magistrate, I find that the appellant reasonably demonstrated the manner in which he stands to suffer irreparable damage in the absence of an order of interlocutory injunction.

44. Having determined so, I am persuaded that the balance of convenience tilts in favour of the appellant under the third principle. I note that there is need to interfere with the finding by the learned trial magistrate.

45. In respect of the third order which sought an independent valuation of the suit property, further to my reasoning above, I am not convinced that the appellant has brought forth any credible evidence to warrant or necessitate the grant of such an order at this early stage. In any event, if the appellant is doubtful as to the valuation undertaken on the 1st respondent’s behalf, he is at liberty to seek an independent expert opinion. I do not deem it necessary for the court to intervene in the manner sought.

46. On the issue touching on whether the learned trial magistrate overlooked the submissions and authorities cited by the appellant, upon my perusal of the impugned ruling, while I have departed from certain aspects of her reasoning and findings in the specific manner set out hereinabove, I have not come across anything to indicate that she ignored or otherwise disregarded the aforementioned documents in rendering her decision.

47. Accordingly, the appeal partially succeeds. Consequently:a.The ruling delivered on 28th April, 2022 in Kikuyu MC ELC No. E082 of 2021 is hereby set aside and is substituted with an order allowing the Notice of Motion dated 17th November, 2021 only in terms of prayer no. 3. b.The appellant shall also have the costs of the appeal.c.Costs of the Notice of Motion dated 17th November, 2021 shall abide the outcome of the suit.It is so ordered.

JUDGMENT DELIVERED VIRTUALLY, DATED AND SIGNED AT KIAMBU THIS 8TH DAY OF DECEMBER 2023. .....................................P. MULWAJUDGEIn the presence of:Duale – court assistantMr. Otieno h/b for Mr. Kinyanjui - for the appellantMr. Ngugi h/b for Mr. Kabaiko - for 1st the respondent