Nanku Company (Kenya) Limited & Robert Mwangi Kahiga v Eco Bank Kenya Limited [2014] KEHC 6124 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

MILIMANI COMMERCIAL &ADMIRALTY DIVISION

CIVIL CASE NO. 99 OF 2013

NANKU COMPANY (KENYA) LIMITED......................................1ST PLAINTIFF

ROBERT MWANGI KAHIGA......................................................2ND PLAINTIFF

VERSUS

ECO BANK KENYA LIMITED..........................................................DEFENDANT

RULING

The application before Court is the Plaintiffs’ Notice of Motion Application dated 19th March 2013 and filed on even date. It is expressed to be brought under Order 40 Rule 1, 2, 3, 4and 10 of the Civil Procedure Rules as well as Section 3A of the Civil Procedure Act.

The Application is seeking for the following orders:-

Spent

Spent

That a temporary injunction do issue restraining the Defendant/Respondent by itself, its servants, employees and/or agents from offering for auction or in any other manner disposing off or interfering with the possession of all that property known as Title No. Nairobi/Block 106/58 located in Langata Dam Estate, Nairobi belonging to the 2nd Plaintiff/Applicant pending hearing and determination of this suit.

That a mandatory injunction does issue requiring the Defendant/Respondent to provide all the Statements of account relating to the loan and overdraft facility it had with the Plaintiff/Applicant herein.

That the costs of this application be provided for.

The Application is based on the grounds stated therein and is supported by the affidavit of NANCY WANJIKU KAHIGA sworn on 19th March 2013.

The deponent, who has sworn the affidavit on behalf of the 1st and 2nd Plaintiffs, is described as a director of the 1st Plaintiff Company. She avers that sometime in the year 2007 or thereabout, the 1st Plaintiff applied for and was granted a loan facility by the Defendant. As a result, the Plaintiff held a Loan Account with the Defendant at its Westminster branch, Nairobi. The 2nd Plaintiff charged his property title No. Nairobi/Block 106/58 (herein “the suit property”) in favour of the Defendant through a Charge dated 12th April 2007, to act as security for the said loan.

The deponent further avers that the said loan granted to the 1st Plaintiff was for the sum of Kshs. 1,500,000/=. Thereafter, the 1st Plaintiff applied for an overdraft facility from the Defendant which was granted in the sum of Kshs. 500,000/= and the same was later increased by a sum of Kshs. 300,000/=. The said facilities were equally secured by the suit property and as a result thereof the 1st Plaintiff held an Overdraft account at the Defendant’s Westminster Branch, Nairobi.

It is averred that the 1st Plaintiff has continuously serviced the two accounts albeit with difficulties as can be seen from annextures “NWK 3” attached to the Plaintiffs’ Application. In addition, it is averred that the 1st Plaintiff requested the Defendant to merge the two accounts which request was accepted.

The deponent avers that on 9th September 2011, the 2nd Plaintiff was served with a Statutory Notice by the Defendant’s Advocates. It is her position that as a result, in December 2012, the 1st Plaintiff was able to clear the monies that it owed the Defendant leaving a debit balance of Kshs. 484. 07 and was issued with a statement to that effect. The said Statement is attached to the application and marked “NWK 5”.

However, as is recounted by the deponent, at the end of December 2012, the 1st Plaintiff was issued with a statement indicating that it owed the Defendant a sum of Kshs. 14, 636. 14. The 1st Plaintiff was informed that the said amount was interest that was not factored in when it cleared the loan.

The deponent further recounts that on 12th March 2013, the 1st Plaintiff was notified by the tenant in the suit property that the same was up for sale by auction. On confirming with the Defendant, the 1st Plaintiff was informed that the suit property was due for auction on 14th March 2013. It is averred for the 1st Plaintiff that they were never served with any Notice of the said auction and neither were the Plaintiffs notified of any monies they still owed the Defendant if any.

It is the deponent’s position that, despite making numerous trips to the Defendant’s offices, she was neither given any notice forming the basis of the auction nor was she given a bank statement relating to the accounts showing the amount the Plaintiffs owed the Defendant, if any.

It is her assertion that the Defendant informed her verbally that she needed to make payments to avoid the sale by auction. She further asserts that since it was late in the day and the 1st Plaintiff could not proceed to Court, the 1st Plaintiff was forced to pay a sum of Kshs. 100,000/= to the Defendant. It is also her assertion that the Defendant shortly thereafter coerced the 1st Plaintiff to pay them a further sum of Kshs. 250,000/=.

The deponent went ahead to state that as a result of the aforesaid payments, the sale by auction which was scheduled for 14th March 2013 never took place. It is further her position that the 1st Plaintiff is yet to receive the statement, if any, relating to the accounts.

It is averred by the deponent that on 15th March 2013, she again received a call from the tenant in the suit property informing her that the Defendant had sent a new set of prospective purchasers to the premises and that the same was set for auction any time between 18th March 2013 and 22nd March 2013.

It is the Plaintiffs’ case that the Defendant’s insistence on selling the suit property is not only malicious but illegal as the 1st Plaintiff has paid all monies that it owed the Defendant and was issued with a Bank statement to that effect. Further, that the Defendant has failed and or refused to issue the 1st Plaintiff with a Statement showing any monies that may be owed, if at all. The Plaintiffs maintain that they have not been served with any notice of intended sale by auction and that payment of Kshs. 350,000/= made by the 1st Plaintiff was purely on coercion on the part of the Defendant.

It is further the Plaintiffs’ case that in light of the foregoing, it is necessary that the Defendant gives a proper account relating to the facilities herein and that all excess payments made by the 1st Plaintiff be reimbursed. It is also the Plaintiffs’ case that a proper tabulation of the 1st Plaintiff’s account with the Defendant will show that the 1st Plaintiff has since repaid the facilities herein and that in fact the same has been overpaid.

The Defendant opposed the application vide the Replying affidavits of its Legal Officer, Mosoni L. Apale sworn on 10th May 2013 and that of Samuel Gathogo, a proprietor at Valley Auctioneers sworn on the same date.

It is deponed by the Defendant’s Legal Officer that the Plaintiffs were duly served with the Statutory Notice. To this end, she referred to exhibit “MLA1” being a copy of the Statutory Notice and a Certificate of Posting. She further deponed that the 1st Plaintiff had always been regularly furnished with the statements of account at their request and that at no time did the Plaintiffs complain to the Defendant that they were not in receipt of the Statements of account.

It is averred by the deponent that it is quite evident from the Plaintiffs’ exhibit marked “NWK3” attached to the supporting affidavit that they were duly served with the notification of sale and the redemption notice. She further avers that from the 1st Plaintiff’s letter dated 26th November 2012, attached to the supporting affidavit and marked as exhibit “NWK3”, it is evident that the 1st Plaintiff did not dispute its indebtedness of the outstanding sum but only requested for more time to settle the same.

With regard to the allegation that the 1st Plaintiff had fully repaid the loan, the deponent referred to exhibit “MLP 2”, a copy of the Statement of account for the Loan account to demonstrate that the 1st Plaintiff was still indebted to the Defendant. I believe the deponent meant “MLA 2” as there is no “MLP 2” on record.

The deponent briefly explained the normal procedure for repayment of loans with the Defendant Bank and confirmed that the 1st Plaintiff deposited a sum of Kshs. 350,000/= on 13th March 2013 which sums were duly credited in the Current account. The same is evidenced by the Statement of account attached to the deponent’s affidavit and marked as exhibit “MLA 3”. It is the deponent’s position that at the time of making the said payments the outstanding loan was Kshs. 794, 844. 86.

The deponent further states that on 14th March 2013 a sum of Kshs. 62,306. 81 was applied to the repayment of interest and a sum of Kshs. 264,599. 21 was applied to repay the principal sum all totalling to Kshs. 329,906. 02. According to her, it is evident from the Loan account that the said sum of Kshs. 329,906. 02 was duly credited in the account leaving an outstanding balance of Kshs. 467,938. 84 which to date remains unpaid.

The deponent further avers that at the time the 1st Plaintiff had paid Kshs. 350,000 towards reduction of the outstanding loan the current account had a debit balance of Kshs. 23,093. 98 and part of the said sum was applied to clear the debit balance. In summary, it is the deponent’s position that from the statements of account tendered in evidence it s clear that all the payments made by the 1st Plaintiff were duly accounted for and that the 1st Plaintiff is still indebted to the Defendant. It is also his position that the 1st Plaintiff tendered in evidence copies of statements of accounts for the current account but deliberately omitted to tender the Statements for the Loan account so as to mislead the Court.

In response to the averments in paragraph 12 of the Plaintiffs’ supporting affidavit, the deponent clarified that the sum of Kshs. 14, 363. 14was the interest for the month of December 2012 and not the outstanding loan.

It is the deponent’s assertion that the Defendant suspended the auction that was scheduled to take place on 14th March 2013 after the 1st Plaintiff made payments of Kshs. 350,000/=. She avers that the 1st Plaintiff was duly notified through a letter dated 14th March 2013 that the outstanding balance as at that date was Kshs. 464,733. 96. She further avers that the Defendant instructed the auctioneers to re-advertise for sale the charged property after the 1st Plaintiff defaulted in payment of the outstanding loan. It is also her assertion that at no time was the 1st Plaintiff coerced to make payments or at all.

It is the Defendant’s case that from the statement of accounts it has tendered in evidence, it is evident that they have rendered a proper account relating to the facilities granted to the 1st Plaintiff and that there are no excess payments made by the 1st Plaintiff.

I have considered the application herein, the affidavits on record as well as the submissions by the parties. Having done so, I take the following view of the matter.

The main issue for determination is whether the Plaintiffs have met the conditions for granting an injunction as laid down in the well-known case of Giella v Cassman Brown Co. Ltd & Anor(1973) EA 358. First that 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.

The 1st Plaintiff does not dispute that they were served with a statutory Notice with regard to the intended sale of the suit property. The Plaintiffs were duly served with the Statutory Notice as is evidenced in the Defendant’s exhibit “MLA1” being a copy of the Statutory Notice and a Certificate of Posting.

However, it is their position that they were never served with any Notice of the auction scheduled for 14th March 2013 and neither were the Plaintiffs notified of any monies they still owed the Defendant if any. To my mind, the Statutory Notice was sufficient notification to the 1st Plaintiff that they owed money to the Defendant, if any. As for the Notification of sale, the proprietor of Valley Auctioneers in his affidavit sworn on 10th May 2013 averred that the Plaintiffs were duly served with the redemption Notice and the Notification of sale. The deponent attached copies of the said document to his affidavit together with the Certificate of Posting (exhibit “SM 1”).

I take note that the Notification of sale mentioned above was in relation to the auction scheduled for 20th March 2012 as opposed to that of 14th March 2013. However, it is trite that once a valid Notification of sale is issued, there is no requirement that the person seeking to exercise its statutory power of sale should issue fresh ones.

Now to the substantive issue of whether or not the loan was outstanding. On the one hand, it is the Plaintiff’s case that they have fully repaid the loan and in fact overpaid and on the other it is the Defendant’s case that the loan is still outstanding.

It is the 1st Plaintiff’s contention that it was never supplied with statements of accounts by the Defendant and therefore the Defendant should give a proper account relating to the Loan facility. It is also the 1st Plaintiff’s case that they have fully paid the monies advanced. To this end the 1st Plaintiff attached a statement of account marked as “NWK 5” to show that the balance of the loan facility as at 24th December 2012 was nil. The Defendant however clarified that the said statement indicated that there was an interest of Kshs. 14,636. 14 owing to them. The Defendant further established that this Statement was only for the current account and that the Plaintiffs omitted to tender the Statements of the Loan account.

As regards the accounts and repayment of the loan facility, it appears that the 1st Plaintiff and the Defendant are not reading from the same script. The 1st Plaintiff is under the impression that the Loan account and the overdraft account were merged while on the other hand as is manifest from the pleadings, the Defendant was treating the two accounts separately.

It was the 1st Plaintiff’s position that they requested the Defendant to merge the two accounts which request was accepted. However, no evidence to this effect was presented before this Court. Furthermore, from the Statements produced by the Defendant there is no indication that the two accounts or any accounts for that matter had been merged.

The Parties herein are not in agreement as regards the issue of Statement of accounts. The 1st Plaintiff has alleged that they were never issued with Statement of accounts. There is no evidence to prove the same. Be that as it may, the Defendant has provided Statement of accounts including those of the Loan account indicating how far the Loan account had been serviced.

To my mind, the 1st Plaintiff has not shown any substantial reasons before this Court to refute the said Statements. The said statements indicate that the Loan had not been fully repaid. Further, the Plaintiffs have not alleged that the statutory power of sale was being exercised in a fraudulent manner. In addition, vide the letter dated 26th November 2012 (exhibit “NWK 3”), it is evident that the 1st Plaintiff was aware and did not dispute its indebtedness to the Defendant. In other words the dispute herein can be summarised as that of accounts.

To sum this up, it is now trite that the existence of a dispute as to accounts is not a valid ground for restraining the defendant from exercising its statutory power of sale. In Mrao vs First American Bank Ltd [2003] KLR 125 at page 127, the Court quoted Halsbury’s Laws of England, Vol. 32 (4th Edition) paragraph 725 which states as follows: -

“725 When mortgagee may be restrained from exercising power of sale.

The mortgagee will not be restrained from exercising his power of sale because the amount due is in dispute, or because the mortgagor has began a redemption action, or because the mortgagor objects to the manner in which the sale is being arranged.  He will be restrained, however, if the mortgagor pays the amount which the mortgagee claims to be due to him unless, on the terms of the mortgagee, the claim is excessive.”

The Court of Appeal in Civil Appeal NO. 147 of 1989 Habib Bank A.G. Zurich -v- POP -IN (Kenya) ltd and otherswas of the same view when Kwach J.A observed as follows:

“…As I understand the law a dispute as to the exact amount owed under a mortgage is not a ground upon which a mortgagee, who has served a valid statutory notice, can be restrained from exercising its statutory power of sale....”

Therefore, as a result of the foregoing, it is my view that the Plaintiffs have not established a prima facie case. Further, it is plain that if an order of injunction is not given, the charged property will probably be sold before the suit is heard. However, the Plaintiffs have not stated or shown that the defendant has no financial means to compensate them in the event that the suit is decided in their favour.

The result is that the Plaintiffs’ Notice of Motion Application dated 19th March 2013 and filed on even date is hereby dismissed with costs. The result is that the Defendant is entitled to exercise its Statutory Power of sale and the Plaintiffs are at liberty to redeem the suit property upon payment of the outstanding loan.

DATED, READ AND DELIVERED AT NAIROBI THIS 17TH DAY OF MARCH 2014

E. K. O. OGOLA

JUDGE

PRESENT:

No appearance for Plaintiffs

No appearance for Defendant

Teresia – Court Clerk