Mawa Family Limited v Amica Savings & Credit Co-op Society Ltd & another [2022] KEHC 635 (KLR)

Mawa Family Limited v Amica Savings & Credit Co-op Society Ltd & another (Civil Case 2 of 2022) [2022] KEHC 635 (KLR) (16 June 2022) (Ruling)

Neutral citation: [2022] KEHC 635 (KLR)

Republic of Kenya

In the High Court at Murang'a

Civil Case 2 of 2022

GK Kimondo, J

June 16, 2022

Between

Mawa Family Limited

Plaintiff

and

Amica Savings & Credit Co-op Society Ltd

1st Defendant

Bensure Auctioneers

2nd Defendant

Ruling

1. The plaintiff craves an injunction to restrain the defendants from exercising their statutory power of sale over land known as Loc.11/Maragi/7959 (hereafter the suit property).

2. The notice of motion is dated 28th March 2022 and supported by the deposition of Josephine Mukami Maina, a director of the plaintiff.

3. The application is opposed by the defendants through a replying affidavit sworn on 11th April 2022 by Pius Hira, the Credit Manager of the 1st defendant.

4. It is common ground that in the year 2014, the plaintiff charged the suit property to secure borrowing by Josephine Mukami Maina of Kshs 600,000. There was a further charge made in 2015 to secure lending to the same borrower of Kshs 1,350,000. The plaintiff does not deny that the funds were disbursed on 11th July 2015, 17th August 2016 and 25th October 2016 respectively.

5. It is not also disputed that default occurred and that the 1st defendant moved to exercise its statutory right of sale. Its learned counsel, Mr. Masai, informed the court that the scheduled sale did not materialize.

6. It is also conceded by the parties that there was another separate charge made in 2016 over another property belonging to the plaintiff known as Murang’a Municipality Block 11/34 to secure a different loan to the plaintiff. Again, the plaintiff defaulted and the property was sold by public auction. In paragraph 16 of the replying affidavit, the 1st defendant avers that it sold it for Kshs 16,000,000 and “well above the reserve price of Kshs 12,000,000”.

7. The suit was first lodged in the Environment and Land Court at Murang’a on 1st March 2022. Contemporaneously with the suit, the plaintiff presented a Notice of Motion praying for interlocutory injunction. Upon hearing both parties on a preliminary issue, the learned judge transferred the suit to the High Court for want of jurisdiction.

8. The original motion as well as a subsequent one dated 15th March 2022 were withdrawn on 19th April 2022.

9. The plaintiff’s current motion is on a three-strand: Firstly, that the sum of Kshs 16,000,000 realized by the 1st defendant from the other sale was sufficient to satisfy both charges. On this point, the plaintiff assails the lender for material non-disclosure and proceeding with the intended sale in bad faith.

10. Secondly, that the defendants have flouted the mandatory procedures for a forced sale dictated by sections 90 and 96 of the Land Act. For instance, it avers that no proper notice was served or a fresh valuation done, the last having been carried out on 18th November 2016. Thirdly, the plaintiff contends that the sale of Murang’a Municipality Block 11/34 was at a gross undervaluation. In its view, the market price was approximately Kshs 45,000,000.

11. The retort by the lender is four-fold: Firstly, that the lending was to different borrowers as detailed above and secured by separate charges over the two properties particularized earlier. Secondly, that it has operated above board and complied fully with all the required notices for sale and valuation of the remaining suit property. Thirdly, that the plaintiff has admitted its indebtedness and has thus come to court with unclean hands; and, fourthly, that the applicant has not met the threshold for grant of a prohibitive injunction. In a synopsis, the lender’s case is that its right of sale has crystalized.

12. I should add that the disputants filed submissions on 26th April 2022 and 17th May 2022 respectively. On 7th June 2022, I heard further arguments from learned counsel for both parties.

13. I take the following view of the matter. The main suit remains unheard. I thus restrain myself from delving too deep into the merits of the case. The draftsmanship by the plaintiff’s counsel is inelegant. Some of the prayers in the motion, for instance calling for an account, are premature and should be reserved for the trial. For the time being, I will confine myself to the urgent prayer for temporary injunction.

14. The motion is brought under the provisions of Order 40 of the Civil Procedure Rules 2010. The principles governing the grant of prohibitive injunctions are well settled. See Giella v Cassman Brown and Company Limited [1973] E.A 358. Those principles are first, that the applicant must show a prima facie case with a probability of success; secondly that he stands to suffer irreparable harm not compensable in damages; and thirdly, if in doubt, the court must assess the balance of convenience.

15. Being a discretionary remedy, there is also ample authority that a party, who has acted in a manner not acceptable to a court of equity, will be denied the remedy. See Kenya Hotels Limited v Kenya Commercial Bank and another [2004] 1 KLR 80, George Munge v Sanjeev Sharma & 3 others HCCC ELC 677 of 2011 [2012] eKLR.

16. In Mrao Limited v First American Bank of Kenya Ltd and others [2003] KLR 125, the Court of Appeal stated that a prima facie case is one –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.

17. The plaintiff freely admitted that it or the borrower failed to repay the debts secured by the charges over the two properties. In a sense, it has come to court with dirty hands. But that would be a little too simplistic. One of the issues at the trial will be whether the amount realized in the sale of the first property of Kshs 16,000,000 may have satisfied the entire debt. I am alive that the two charges and borrowers are distinct. The plaintiff has also conveniently failed to enjoin into the suit the other borrower, Josephine Mukami Maina, who is its director. The trial court no doubt has powers to make her a party if it deems so necessary.

18. At paragraph 13 of the replying affidavit, the lender concedes that the amount due on the lending over the suit property as at 23rd March 2022 was Kshs 1, 951, 414. 20. Doubt is erased by the statement, exhibit 4.

19. The lender has sought to account for the proceeds of the auction by a letter dated 29th December 2021. It begins by saying that the loan “is now repaid in full”. The loan to the plaintiff sought to be recovered is stated as Kshs 11,153,457. 80. But it then adds items such as re-called guarantees of Kshs 3,971, 225, auctioneers and legal costs to make a total of Kshs 16,322,727. The lender claims to have “attached part of [the plaintiff’s] investment deposit” to cover the shortfall.

20. From the defendants’ arithmetic in the above letter, and the two bank statements annexed to the affidavit of Josephine Mukami Maina sworn on 28th March 2022, I find that the plaintiff has raised an arguable case on the accounts. I must emphasize that it does not mean that the suit will succeed.

21. Secondly, there is an issue whether the lender fully complied with sections 96 and 97 of the Land Act. For instance, the valuation on the first property that was sold and annexed to the replying affidavit was carried out on 18th November 2016. With regard to the remaining suit property, Loc.11/Maragi/7959, I note from the defendant’s exhibit 13 that a valuation is dated 21st July 2021. I make those observations very guardedly and without a final finding. Like I stated, the main suit remains unheard.

22. The plaintiff does not deny that it offered the two properties as security. The plaintiff also conceded that it had not repaid the principal debt. But from my earlier observations, there is a real question whether the projected sale is proceeding in good faith. Paraphrased, the trial court will have to decide whether the plaintiff is now entitled to redeem its title. Again I say that carefully and without making a finding. That will be the true province of the trial court.

23. Granted those circumstances, I am persuaded that the plaintiff has established a prima facie case for grant of interlocutory injunction. Having reached that conclusion, I do not need to weigh the balance of convenience. Kenya Commercial Finance Company Ltd v Afraha Education Society[2001] 1 E.A. 86.

24. The upshot is that the 1st and 2nd defendants, their agents or assignees or in any other manner whatsoever be and are hereby restrained by injunction from advertising for sale, selling or transferring the plaintiff’s property known as Loc.11/Maragi/7959 until the hearing and determination of the suit.

25. The plaintiff shall ensure that the suit is heard expeditiously. If the suit is not determined within twelve months from the date hereof, the injunction shall lapse unless for any sufficient reason the court orders otherwise.

26. Costs shall be in the cause.

It is so ordered.

DATED, SIGNED AND DELIVERED AT MURANG’A THIS 16TH DAY OF JUNE 2022. KANYI KIMONDOJUDGERuling read in open court in the presence of:Ms. Akinyi for the plaintiff instructed by Akinyi Juma & Company AdvocatesMs. Susan Waiganjo, Court Assistant.