Microscan Technologies Limited v Standard Chartered Bank of Kenya Limited [2020] KEHC 736 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI

MILIMANI LAW COURTS

COMMERCIAL & TAX DIVISION

HCCC NO. E 006 OF 2020

MICROSCAN TECHNOLOGIES LIMITED.............................. PLAINTIFF

VERSUS

STANDARD CHARTERED BANK OF KENYA LIMITED....DEFENDANT

RULING

1. The Trial Court may find that the Plaintiff’s letter of 24th June 2019 very much narrows this dispute.  In it is an admission of default but a complaint that an interest rate of 24% allegedly charged is without legal or contractual basis.

2. For now, the Court is asked to grant an injunction in terms of prayers 2 and 3 of the Notice of Motion of 21st January 2020:-

2. THAT a temporary injunction do issue restraining the respondent, its agents and/or assigns or any of them from advertising for sale, disposing of, selling or otherwise interfering with Cottage Number 3 Erected on Land Reference Number 7533/2 Karen, Nairobi, pending the hearing and determination of the main suit.

3.  THAT an order of stay of the statutory notice dated 11th November 2019 be issued pending the determination of this civil suit.

3. Microscan Technologies Limited (the Plaintiff or Microscan) is a customer of Standard Chartered Bank Kenya Limited (the Defendant or Standard Chartered).  The customer was granted a facility of Kshs.30 Million through a letter of 22nd December 2009 to purchase a residential property being LR Number 7533/2 Karen.  Another loan facility of Kshs.26,000,000/= was granted to the customer and secured by a charge dated 10th October 2013 making an aggregate sum of Kshs.56,000,000/=.

4. Then by a banking facility dated 28th February 2014 various credit facilities were extended to the Plaintiff, and Rayovac Industries Limited (a related company) and Mugo Roki Kimani trading as Fidelity Medical Supplies.  The facilities were:-

Existing Mortgage Loan                         -        26,807,520/=

New Import Invoice Financing Facility  -        70,000,000/=

New Overdraft Facility                           -        10,000,000/=

Total                                                        =        106,807,520/=

5.  In a Plaint filed on 21st January 2020, Microscan complains that the Bank imposed exorbitant and uncontracted interest.  Further, that on 26th June 2016 the Bank consolidated the additional facilities.

6. What seems to have triggered the suit is a notice issued by the Bank on 11th November 2019 demanding payment of Kshs.143,497,620. 75/=.  In the suit the Plaintiff prays for Judgment for:-

a. An order of injunction restraining the Defendant whether by itself, agents, servants, employees or otherwise from advertising for sale, selling by public auction or private treaty, transferring, alienating or otherwise interfering with the Plaintiff’s right of ownership and/or possession of Cottage Number 3 Erected on Land Reference Number 7533/2 Karen.

b. An order of injunction restraining the Defendant from applying interest rates on the additional loan facilities other than the 16% p.a interest rate stipulated in the Banking Facility letter dated 28th February 2014.

c. Orders that the Statutory Notice dated 11th November 2019 be declared null and void for failure to comply with the requirements stipulated in Section 90 of the Land Act No. 6 of 2012.

d. A declaration that the Defendant owes the Plaintiff a sum of approximately Kshs.11,553,032. 59 as at 26th June 2015 being the overcharged interest charged on the Plaintiff and the sums be offset against any claims that may be found owing, if at all and interest thereon until payment in full.

e. A declaration that accounts be taken as the Defendant has overcharged the Plaintiff and the sums be offset against any claims that may be found owing, if at all and interest thereon until payment in full.

f. General damages for breach of contract.

g. The costs of the suit and;

h. Interest on the sum in (d) and (f) above.

7. The Bank denies wrongdoing.

8. As stated in the opening paragraph of this decision a letter of 24th June 2019 does strongly suggest that this dispute is a narrow issue which the Plaintiff itself points out as follows:-

“The only issue that is now outstanding and remains unresolved and which has an impact in the outstanding figures is the issue of your levying 24% interest rate over and above the agreed rate of 16%.  You will note that in all our previous correspondences and face to face meetings, we have always raised our concerns about you having levied a 24% interest rate over and above the 16% agreed without any legal lawful or contractual basis and without consent or notice.”

9. Elaborating further through the Plaint, the application and submissions is that the rate of interest of 24% would be levied if the overdraft facility is overdrawn.  The answer by the Bank is that the loan facility would attract a default interest of 24% per annum in accordance with the facilities letter of 28th February 2014.

10. The Trial Court will have to determine whether the clauses providing the charge of interest in the letters of offer of 24th April 2013 and 3rd June 2014 were incorporated in the facility letter of 28th February 2014.  Further, as I understand it, when a Bank honours an Invoice Finance and Bond and guarantee then the sums paid out is debited to the customer’s account.  The Trial Court will have to grapple with the question whether in fact the default interest should not be charged if the payments put the customer’s account beyond the overdraft limit.

11. What is clear however is that by its own concession (letter of 24th June 2015), the customer owes the Bank at least some Kshs.68,683,602. 18/= and this is in default.  The Bank can therefore not be restrained from exercising its power of sale because of a dispute in the difference between what is admitted as owed (Kshs.68,683,602. 18/=) and what is demanded (Kshs.143,497,620. 75/=).

12. There is another complaint.  This is directed at the Statutory Notice issued.  In Paragraph 23 (a) the customer avers:-

“Section 90 of the Land Act No. 6 of 2012 provides for the requirements of the notice to be issued if a Chargor is in default.  In this instance, the Statutory Notice issued by the Defendant to the Plaintiff does not comply with the said requirements i.e the Statutory Notice does not describe the nature and extent of default, it does not state when the Plaintiff defaulted in its payment obligations under the Mortgage Facility and it also does not state the amount to be paid to rectify the default and the time within which the payment in default must have been completed.”

13. But even on a cursory look at the notice of 11th November 2019, it is one issued under section 56 (2) of the Land Registration Act and not sections 90 and 96 of the Land Act.  Section 56(2) states:-

“A date for the repayment of the money secured by a charge may be specified in the charge instrument, and if no such date is specified or repayment is not demanded by the charge on the date specified, the money shall be deemed to be repayable three months after the service of a demand, a written, by the chargee.”

14. The customer may have missed the point.

15. I do not perceive that the Plaintiff’s claim shows a prima facie case or that it will suffer irreparable harm if the injunction is not granted.  The present application does not pass the test in Giella –vs- Cassman Brown.  The Application of 21st January 2020 is dismissed with costs.

Dated, Signed and Delivered in Court at Nairobi the 7th Day of December 2020

F. TUIYOTT

JUDGE

ORDER

In view of the declaration of measures restricting Court operations due to the COVID-19 pandemic and in light of the directions issued by his Lordship, the Chief Justice on 17th April 2020, this Ruling has been delivered to the parties through virtual platform.

F. TUIYOTT

JUDGE

PRESENT:

Migos for Plaintiff.

Miss Mukami for Defendant