Massawe v Sidian Bank (K) Limited & 2 others [2022] KEHC 13642 (KLR)

Massawe v Sidian Bank (K) Limited & 2 others (Civil Appeal 192 of 2021) [2022] KEHC 13642 (KLR) (6 October 2022) (Ruling)

Neutral citation: [2022] KEHC 13642 (KLR)

Republic of Kenya

In the High Court at Machakos

Civil Appeal 192 of 2021

GV Odunga, J

October 6, 2022

Between

Lizzie Massawe

Applicant

and

Sidian Bank (K) Limited

1st Respondent

Agnes Mulei

2nd Respondent

Julius Syengo

3rd Respondent

Ruling

1. By a motion on notice dated December 8, 2021, the applicant/appellant herein, Lizzie Massawe, seeks the following orders:1. That an interim order of injunction do issue restraining the respondents their agents, servants and or anybody acting through them from selling or purchasing by public auction the remaining security being LR No Machakos Town Block 3/4095 pending the hearing and determination of this appeal.2. An order of permanent injunction restraining the 1st respondent from levying any interest on the loan amount pending the hearing and determination of the appeal herein.3. An interim order of injunction do issue restraining the respondents, their agents, servants and or anybody acting through them from selling or purchasing by public auction the remaining security being LRNo Machakos Town Block 3/4095. 4.An order of permanent injunction restraining the 1st respondent from levying any interest on the loan amount pending the hearing and determination of the appeal herein.

2. The application was supported by an affidavit sworn by the applicant on December 8, 2021 in which she seemed to be regurgitating her case before the trial court. According to the applicant, in her further affidavit sworn on May 24, 2022, since the illegality and breach of client-customer confidentiality forms the substratum of this appeal, subsequent disposal of this subject properties will render the appeal an academic exercise.

3. She reiterated that the appellant did not default in payment of the loan but she had applied severally to the 1st respondent to offset the loan arrears vide letter dated July 7, 2021 which elicited no response. It was averred that the 1st and 3rd respondents were aware of the private treaty between the appellant and the 2nd respondent and therefore acted in total breach of the customer-client confidentiality as a result of which the appellant suffered a loss of Kshs 3,300,000/-. Further, in total disregard of the law, the 1st respondent orchestrated a sale that did not meet the requisite threshold of a first auction which required the 2nd respondent to pay upfront a 25% of the purchase price which the 2nd respondent did not, therefore the sale flopped.

4. It was averred that the cause of action by the Applicant in the suit herein, involves faulting the public auction process and further raises a claim on non-disclosure of confidential information an issue that was not dealt with in MachakosCMELC 48 of 2020: Lizzie Ndila Massawe & Anor v Sidian Bank Limited. Further, the said case was withdrawn and therefore a final decision was not reached by a court of competent jurisdiction.

5. The applicant lamented that the respondents colluded to prejudice the appellant/applicant by breaching of client-customer confidentiality at the expense of the appellant/applicant’s loss.

6. The court was therefore urged not to dismiss suits in limine but to exercise caution bearing in mind the life line given to a party to adduce more evidence at the time if the hearing the application.

7. While acknowledging that the sale of Machakos Town Block 3/4096 had already happened though illegally, the applicant maintained that the application dated August 16, 2021 in the case appealed against is the subject of this appeal. According to him, the law governs violations of contractual terms and the same has been breached by the respondents to which the appellant has a right of access to this court.

8. The applicant asserted that the issue in dispute is one of breach of confidentiality in the manner of sale and not one of debt and that the 1st and 3rd respondent owed the appellant/applicant a duty of care which they consequently breached occasioning loss to the applicant/appellant. As a result, the applicant/appellant has sufficiently demonstrated that she has suffered loss as one of the properties has since been lost due to such breach of confidentiality and the second property will be lost in such a prejudicial manner.

9. It was disclosed that the suit property in dispute is matrimonial home with great sentimental value and cannot be compensated by an award of damages. The applicant insisted that she has not failed to pay any monies as alleged by the respondents but rather the offer to sale by private treaty is allowed in law and shows the intent to repay at the fairest amount possible.

10. The applicant therefore urge the court to grant the prayers made by the applicant/appellant with costs to the respondents.

11. In the submissions filed on behalf of the applicant, reliance was placed on order 40 rule 1(a) of the Civil Procedure Rulesand on Giella v Cassman Brown Co Ltd 1973 EA 358, Kibutiri v Kenya Shell, Nairobi High Court, Civil CaseNo 3398 of 1980 (1981) KLR and Mrao Ltd v First American Bank of Kenya Limited and 2 Others [2003] eKLR. It was submitted that the applicant faults the process of public auction stating that the 3rd respondent who was on his capacity as the manager to the 1st respondent compromised the private treaty between the applicant and the 2nd respondent by breaching client-customer confidentiality thus occasioning the applicant to incur a loss of Kshs 3,000,000/-.

12. According to the applicant, by way of private treaty, the applicant had agreed with the 2nd respondent to sell the suit land at Kshs 10,000,000/- however it was apparent that later the manager being the 3rd respondent disclosed to the 2nd respondent that they would be selling the suit land atKshs 7,500. 000 thus influencing the purchaser the 2nd respondent to abandon the private treaty. The applicant vide a letter dated May 31, 2021 ventilated of the said dissatisfaction and breach of client-customer confidentiality the same which in the applicants knowledge led to investigations of the 3rd respondent. It is further submitted that the projected sale that was to be conducted on May 26, 2021 did not materialize as the 2nd respondent was unable to deposit the requisite 25% of the purchase price occasioning the sale to flop setting the stage for another sale on June 26, 2021 to the said 2nd respondent at a value of Kshs, 7,700,000/-.

13. It was contended that by conduct of the branch manager in breaching the clients trust, the applicant have lost Kshs 2,300,000/- and that if the manager and or other bank officials had maintained their trust and bank-customer confidentiality and professionalism, the sale by way of private treaty would have taken place as it was at a very advanced stage. To the applicant, the 1st and 3rd respondent’s actions were illegal and in total breach of the customer-client confidentiality as a result occasioning the sale of LRNoMachakos Town Block 3/4096 illegally.

14. It was noted that the 1st respondent vide their legal officer admitted that there were negotiations on going indeed confirming that a private treaty was in the process of being conducted and finally effected by signing of a sale agreement by the 2nd defendant. The admission by the 1st and 3rd respondent to negotiations as to one property and leaving out an equally adjacent property is quite appalling as both properties were used as securities. According to her, the unexplained lapses by the 1st and 3rd respondent to issue reasonable explanation as to why negotiations failed with the 1st property are evidence of the ploy to manipulate and hood-wink the applicant under the guise of the exercise of the right to statutory power of sale.

15. In the applicant’s submission, the conduct by the 1st and 3rd respondent to act in bad faith and overlook the engagements made by the applicant to proceed by bad faith establishes a prima facie case that requires determination by this court. Further, the 1st and 3rd respondent violated section 97 of the Land Act rendering the auction process illegal and void in law a question that this court is court to determine on merit.

16. It was submitted that due to the breaches occasioned by the respondent, the 2nd respondent is in fact not rendered an innocent purchaser according to the law as the applicant herein incurred all the cost to find a purchaser to the property, who then introduced the 2nd respondent to the 1st respondent for purposes of due diligence, which unfortunately the respondents proceeded to subvert the negotiations and proceed with the sale secretly. In this regard reliance was placed on American Cyanamid Co v Ethicon Ltd (1975) AC 396 at pp 406 and 408.

17. It was therefore submitted that the applicant had established a prima facie case for a grant of the injunction sought, following the subversion and illegalities proven and the risk of losing the second property in such a crude manner. Secondly, on substantial loss and injury to be incurred on the applicant, it was submitted that there is imminent threat to lose the second property LRNo Machakos Town Block 3/4095 without due regard to the legal process of public auction and/or private treaty and that there is imminent fear that the 1st respondent may act maliciously and disclose confidential information to third parties at the expense of the applicant and occasion loss of monies that would otherwise be used to offset the extra levies and charges accrued due to the outstanding loan.

18. On the balance of convenience, it was submitted that it tilts on the applicant as there exists a right that has been infringed against the applicant by the opposite party and the respondent shall not suffer any irreparable harm until the determination of the suit and hearing of the application herein.

19. In opposing the application, the respondent relied on the affidavit sworn by Jackline Ndung’u, the 1st respondent’s Senior Legal Officer.

20. According to her, the appellant had lost her right of redemption upon the fall of the hammer at the auction sale on June 26, 2021 for Property Machakos Town Block 3/4096 and based on legal advice, she stated that once a property has been knocked down and sold in a public auction by a chargee in exercise of its statutory power of sale, the equity of redemption of the chargor is thereby extinguished. She averred that there was no dispute that there was indeed a sale by auction that took place with regard to the property Machakos Town Block 3/4096 on June 26, 2021 which sale is regular and non-contested by the appellant. The appellant’s only dispute is that the sale ought to have been by way of private treaty. In the circumstances, it was averred that it is trite law that the only remedy available for the appellant is to file suit for general or special damages as enshrined in section 99 of the Land Act, which protects the 2nd respondent as an innocent purchaser.

21. It was disclosed a valuation report was conducted over Machakos Town Block 3/4095 on January 20, 2021 had placed the forced sale value of the parcel atKshs 5,625,000/= and that at all material times, the appellant has always been aware of the 1st and 3rd respondent’s actions. It was further averred that it is also not in dispute that property Machakos Town Block 3/4095 is yet to be sold and the same has been the subject of negotiations between the appellant and the 1st respondent, with the last communication being a letter from the bank dated July 8, 2021 advising the appellant to pay Kshs 3,800,000/= in 60-days from the date of the letter to provide an acceptable repayment plan, which letter elicited no response from the appellant.

22. According to the deponent, the appellant and the 1st respondent are bound by the terms and conditions contained in two legal charges both dated October 13, 2016 and duly registered on November 4, 2016 and that the appellant defaulted in the loan repayment but sought to be allowed to sell the charged property by way of a private treaty. However, the 1st respondent was never a party to an agreement that the charged property be sold by way of a private treaty. In the circumstances, it is therefore trite law that a legal charge document that is signed between the appellant and the 1st respondent was the valid contract to govern the transaction. If the appellant had negotiated the sale by private treaty and the 1st respondent failed to accede to it, this court cannot re-write the contract for the parties.

23. It was averred that the appellant was indebted to the 1st respondent herein to the tune ofKshs 10,215,147. 39/= as at December 8, 2021 and that on that date, the 1st respondent instructed Watts Auctioneers to issue a 14-day courtesy notice to the appellant being a follow-up to a previous redemption notice dated March 19, 2021, and thereafter re-advertise for sale by public auction, property Machakos Town Block 3/4095. The same day, the auctioneer proceeded to issue the same notice indicating that they would advertise for sale by auction the said property.

24. According to the deponent, this application is frivolous, vexatious and otherwise an abuse of court process and a waste of precious judicious time, as the application filed herein by the appellant is res judicata to the extent that the same raises issues which were directly and substantially in contention in previous proceedings between the same parties namely (Machakos CM ELCNo 48 of 2020: Lizzie Ndila Massawe & Another v Sidian Bank Limited) in which the dated May 20, was consequently determined by a court of competent jurisdiction in its ruling delivered on July 23, 2020, thereby dismissing the entire application for lack of merit giving the 1st defendant the go-ahead to exercise its statutory power of sale. However, the appellant made yet another attempt vide an Application dated August 6, 2020, in (Machakos High Court Civil AppealNo 65 of 2020: Lizzie Ndila Massawe & Another v Sidian Bank Limited), which application was dismissed on December 3, 2020 for being barred by the doctrine of res judicata. Consequently, the appellant herein withdrew her appeal. However, the appellant made yet another attempt vide an application dated August 16, 2021, in (Machakos Chief Magistrate’s Court Civil Case No411 of 2021: Lizzie Ndila Massawe & Another v Sidian Bank Limited), which application was dismissed on December 1, 2021 for being barred by the doctrine of res judicata.

25. Based on legal advice, the deponent deposed that for the appellant to be granted interlocutory injunctive orders they must satisfy the three cardinal principles of: prima facie case, irreparable injury and a balance of convenience as set out in the landmark case of Giella v Cassman Brown & Co Ltd. (1973) EA 38. According to the deponent, a right to obtain an interlocutory injunction is not a cause of action, it cannot stand on its own. There must be a pre – existing cause of action that is a right is being or will be violated. In this instance it’s the appellant who is in violation of the 1st respondent’s rights under the contractual agreement between the parties. It was averred that there is neither a prima facie case nor a cause of action for the 1st respondent herein since there is a debt due and owed by the appellant to the 1st respondent herein, there is a subsisting and binding legal charge over the suit property and there is evidence of default and continued default of repayment.

26. It was further averred the appellant has not proved that they would suffer any loss if the prayers in their application were not granted since once the suit property was charged to the 1st respondent as security for the loan advanced to the appellant, the suit property became a commodity for sale in default of the loan obligations. Having breached her contractual obligation, the balance of convenience lies in the 1st respondent’s favour to enforce the contractual obligation of the appellant herein. It was averred further that the appellant can be compensated by an award of damages in the event their suit succeeds for the property can be assessed and quantified hence the appellant ought not be granted the temporary injunction they seek having failed to satisfy the tests for granting injunctive orders. It was her position that the appellant has had her rights duly protected and respected and it is time for her to abide by the contract of lending that is pay back the debt and in default cede the interests in the property offered as security in terms of the same contract evidenced in the legal charge. She averred that it is only fair, just and in the interest of justice that the orders sought by the appellant are declined, the application dated December 8, 2021 be dismissed and the appellant be condemned to pay costs to the 1st and 3rd respondents.

27. On behalf of the respondent it was submitted that the matter was res judicata as deposed to in the replying affidavit and reliance was placed on the case of Abdullahi Mohamed Sheikh v Gulf African Bank Limited; Greenbelt Warehouse Limited [2021] eKLR, and it was contended that this is an abuse of the court process, hence subsequent suits and applications by the appellant on the same subject matter, make the instant application dated December 8, 2021, an outright act of forum shopping. Therefore, the 1st respondent is within its legal rights to exercise its power of sale having followed due process in exercising its equitable right of redemption.

28. It was therefore sought that the application dated December 8, 2021 be dismissed with costs to be borne by the appellant.

Determination 29. The application before me seeks an injunction pending the hearing and determination of this appeal. The starting point is the principle enunciated inErinford Properties v Cheshire (1974) 2 ALLER 448, 449 that there is no inconsistency in granting an injunction pending appeal after refusal to grant temporary injunction as the appellate court do at times overturn the decisions of the lower court.

30. However, the principles guiding the grant of an injunction pending appeal are now well settled. In Venture Capital & Credit Ltd v Consolidated Bank of Kenya LtdCivil Application NoNai 349 of 2003, the Court of Appeal held that where there is no positive order made in favour of the respondent which is capable of execution the application for stay of execution of the ruling is misconceived. The court proceeded to hold that the jurisdiction to grant an injunction pending appeal is discretionary and such discretion is exercised judicially and not in whimsical or arbitrary fashion and that there are cases where it would be wrong to grant an injunction pending appeal and these would include where the appeal is frivolous or to grant it would inflict greater hardship than it would avoid. It was emphasised, based on the decision in Butt v Rent Restriction Tribunal [1982] KLR 417 that as a general rule a court ought to exercise its best discretion in a way so as to prevent the appeal, if successful, from being nugatory. Therefore, the court noted, in order to be entitled to an order for maintenance of status quo pending appeal, the applicant must show that reasonable argument can be put forward in support of the appeal and that the principles stated in Giella v Cassman Brown co Ltd [1973] EA 360 guide both the High Court and the Court of Appeal in deciding whether or not to grant a temporary injunction.

31. Similarly, in Rose Wakuthii Mwangi Njunu v Edward Kithinji & Others Civil Application No Nai 46 of 2006, the same court reiterated the forgoing principles and added that where the applicant is appealing against the refusal by the Superior Court to grant a discretionary and equitable relief, the appellate court does not normally interfere with the exercise of a discretion by the trial court unless the strict conditions enunciated in Mbogo v Shah[1968] EA 93 have been shown to exist. It was further held that the applicant is required to satisfy the court, among other things, that the intended appeal is arguable and not frivolous and should attempt to show either in the application or otherwise that the learned Judge erred in the manner he exercised his discretion or that grounds exist for interfering with the exercise of discretion by the Judge.

32. It was therefore held by the said court in Tanui & 4 Others v Birech & 11 Others[1991] KLR 510 that the principles on which the court acts when considering an application for injunction pending appeal are well settled and these are that the applicant must show that the appeal is not frivolous or as it is otherwise put, the applicant must show that he has an arguable appeal and second, the court must ensure that the appeal, if successful, should not be rendered nugatory. In John Nduati Kariuki T/A Johester Merchants v National Bank of Kenya Ltd Civil Application No Nai 306 OF 2005 [2006] 1 EA96, the court held that the purpose of an injunction pending appeal is to preserve the status quo pending the hearing of the appeal and although the jurisdiction is discretionary, it would however be wrong to grant an injunction where the intended appeal is not arguable or is frivolous or where the refusal to grant the injunction would not render the intended appeal nugatory or where the order of injunction could inflict greater hardship than it would avoid.

33. It is therefore clear that whereas this court has jurisdiction to grant the orders sought herein, that jurisdiction being discretionary, such discretion is exercised judicially and not in whimsical or arbitrary fashion. Accordingly, the burden lies on the applicant to satisfy the court his appeal is arguable or, as is often put, not frivolous. In so doing the court must be alive to the provisions sections 1A and 1B of the Civil Procedure Act, which enjoin the court to give effect to the overriding objective in the exercise of its powers under the Act or in the interpretation of any of its provisions. According to section 1A(2) “the court shall, in the exercise of its powers under this Act or the interpretation of any of its provisions, seek to give effect to the overriding objective”; while under section 1B some of the aims of the said objective are; the just determination of the proceedings; the efficient disposal of the business of the court; the efficient use of the available judicial and administrative resources; and the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties.

34. It therefore follows that the court is expected to ensure that the aims and intendment of the overriding objective as stipulated in section 1A as read with section 1B of the Civil Procedure Act are attained. It is therefore important that the court takes into consideration the likely effect of granting the stay on the proceedings in question. In other words, the court ought to weigh the likely consequences of granting the stay or not doing so and lean towards a determination which is unlikely to lead to an undesirable or absurd outcome. What the court ought to do when confronted with such circumstances is to consider the twin overriding principles of proportionality and equality of arms which are aimed at placing the parties before the court on equal footing and see where the scales of justice lie considering the fact that it is the business of the court, so far as possible, to secure that any transitional motions before the court do not render nugatory the ultimate end of justice. The court, in exercising its discretion, should therefore always opt for the lower rather than the higher risk of injustice. See Suleiman v Amboseli Resort Limited[2004] 2KLR 589. Accordingly, the court must consider whether or not to grant it would inflict greater hardship than it would avoid.

35. In order to satisfy the court that the appeal is not frivolous, the applicant is expected to demonstrate that reasonable argument can be put forward in support of the appeal

36. In this case since the appeal seeks to overturn a decision arrived at in the exercise of the trial court’s discretion, the applicant is expected to go further and justify the interference with the exercise of a discretion by the trial court based on the strict conditions enunciated in Mbogo v Shah [1968] EA 93.

37. I have considered the material placed before me in this application and nowhere has the applicant addressed what the gravamen of her appeal is. Instead, she has dwelt on the background of her case before the trial court without pointing out to the court the issues she intends to raise in the appeal and how arguable the said issues are. In effect, nowhere has it been pointed out to me areas where in the applicant’s opinion, the trial court erred and the grounds upon which the decision is challenged. Whereas, the grounds of appeal are on record, it does not suffice to simply throw the grounds at the court and expect the court to arrive at a favourable decision particularly where the record of the proceedings before the trial court has not been placed before the court. The applicant is expected to address the court, briefly, on the strength of the appeal so as to enable the court make a finding on the frivolity or otherwise of the appeal.

38. In this case the applicant has only addressed albeit briefly, the second consideration the applicant stands to suffer irreparable loss if the injunction is not granted. She however, has not addressed the issue whether her appeal raises a prima facie case. What amounts to aprima faciecase was dealt with in the case of Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] KLR 125, where the Court of Appeal held as follows:“The principles which guide the court in deciding whether or not to grant an interlocutory injunction are, first, an applicant must show 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...A mere scintilla of evidence can never be enough: nor can any amount of worthless discredited evidence. It is true that the court is not required at that stage to decide finally whether the evidence is worthy of credit, or whether if believed it is weighty enough to prove the case conclusively: that final determination can only properly be made when the case for the defence has been heard. It may not be easy to define what is meant by “prima facie case”, but at least it must mean one on which a reasonable tribunal, properly directing its mind to the law and the evidence could convict if no explanation is offered by the defence...The terms “prima facie” case, and “genuine and arguable” case do not necessarily mean the same thing, for in using another term, namely a sustainable cause of action, the words “prima facie” are frequently used to refer to a case which shifts the evidential burden of proof, rather than as giving rise to a legal burden of proof in the manner of considering, which was in relation to the pleadings that had been put forward in the case. It would be in the appellant’s interest to adopt a genuine and arguable case standard rather than one of aprima facie case, the former being the lesser standard of the two...In civil cases a prima faciecase is a case in 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 to call for an explanation or rebuttal from the latter. A prima faciecase is more than an arguable case. It is not sufficient to raise issues but the evidence must show an infringement of a right, and the probability of success of the applicant’s case upon trial. That is clearly a standard, which is higher than an arguable case.”

39. Having considered the material placed before me, the inescapable conclusion I come to is that the application dated December 8, 2021 lacks merit. The same is dismissed with costs.It is so ordered.

G V ODUNGAJUDGERULING READ, SIGNED AND DELIVERED IN OPEN COURT AT MACHAKOS THIS 6TH DAY OF OCTOBER, 2022M W MUIGAIJUDGEDelivered the presence of: