Ndirangu v Agricultural Finance Corporation & another [2023] KEHC 27233 (KLR)

Ndirangu v Agricultural Finance Corporation & another (Civil Suit E033 of 2023) [2023] KEHC 27233 (KLR) (14 December 2023) (Ruling)

Neutral citation: [2023] KEHC 27233 (KLR)

Republic of Kenya

In the High Court at Mombasa

Civil Suit E033 of 2023

DKN Magare, J

December 14, 2023

Between

Teresia Muthoni Ndirangu

Plaintiff

and

Agricultural Finance Corporation

1st Defendant

Legacy Auctioneers Services

2nd Defendant

Ruling

1. By the Application dated 19th April 2023, the Plaintiff sought the following reliefs:(a)Spent(b)Pending the hearing and determination of this suit an order of injunction be issued restraining the 1st and 2nd Defendants whether by themselves, their employees, successors, servants and/or agents or otherwise assigns and or any person whatsoever from selling or exercising in any manner the Chargee’s Statutory Power of Sale pursuant to the Chargee’s Notice herein or or in any manner whatsoever interfering with Plot No. LR No. Kwale/Marenje/78(c)Costs of this Application be provided for.

2. The Application is based on the Grounds stated in the Application as well as the Supporting Affidavit of Teresia Muthoni Ndirangu materially stated inter alia as follows:i)The Plaintiff is the registered owner of the suit premises measuring 5. 4 Ha.ii)The 1st Defendant invoked its statutory power of sale and instructed its auctioneers to auction the Plaintiff’s suit property.iii)The 1st Defendant’s action was informed by a loan facility for Kshs. 1,500,000/= on 10th September 2020 to undertake sugarcane farming on the suit premises.iv)The Plaintiff incurred losses from the sugarcane due to poor harvest owing to COVID restrictions that barred regular weeding and farm care leading to inability to settle the loan arrears.v)The Statutory Notice dated 25th January 2023 for Kshs. 1,730,044/- and the subsequent one dated 30th January 2023 were not properly served and the Plaintiff was not aware.vi)The outstanding amount was wrongly computed and interest rate not disclosed.vii)There shall be substantial loss if the Plaintiff losses the suit property now valued at Kshs. 25,000,000/= owing to the advert for sale dated 21st April 2023.

3. The Application was opposed substantially on the grounds that there was not dispute that the Applicant was in arrears 2 years after Covid and remained in arrears.

The Plaintiff’s Submissions 4. The Plaintiff filed written submissions in support of the Application.

5. It was the submission of the Plaintiff that the intended auction of the suit premises should be stopped by an injunction.

6. Counsel relied on Order 40 of the Civil Procedure Rules and the case of Giella v Cassman Brown (1973) EA 358 to submit that the Plaintiff has established a prima facie case with probability of success.

7. It was submitted that the statutory notices and redemption notices were null and void because they were not served upon the Applicant herein.

8. Counsel further submitted that the 1st Respondent failed to file any accounts as to how the arrears accrued and what interest rate was applicable and as such the arrears were exaggerated to the detriment of the Applicant.

9. On irreparable loss, it was submitted on behalf of the Applicant that the Applicant stood to suffer irreparable damage should the auction and sale of the suit premises proceed.

10. Therefore, counsel submitted that if an injunction is not granted, the Defendant will proceed to sell the property at an under value much to the detriment of the Plaintiff as the property value was about Kshs. 25,000,000/=.

The Defendant’s Submissions 11. The Defendant filed submissions urging the court to disallows the Application.

12. It was submitted on behalf of the Defendant that the Plaintiff was in arrears and continued 2 years after Covid and this court ought not to stop the statutory power of sale. Reliance was placed on the case of Joseph Waud v National Bank HCCC No. 604 of 2001 to buttress the point that the court will not restrain a mortgagee from exercising its power of sale merely because the outstanding loan amount is in dispute.

13. Further, on the existence of a prima facie case, counsel submitted that the Plaintiff had not established a prima facie case.

14. On irreparable damages, it was submitted for the Defendant that the Applicant would not suffer any damages that cannot be remedied by way of damages.

Analysis 15. The Court has considered the Notice of Motion Application, Responses thereto and the submissions and authorities filed in support and opposition to the Application.

16. The singular issue that presents for this Court’s determination is whether the Applicant has fulfilled the legal threshold for the grant of a temporary injunction pending the hearing and determination of the suit.

17. The law that governs Applications for injunction is premised under Order 40 Rule 1 of the Civil Procedure Rules 2010 which provides as follows:-1. Where in any suit it is proved by affidavit or otherwise-a)That any property in dispute in a suit is in danger of being wasted, damaged, or alienated by any party to the suit, or wrongfully sold in execution of a decree, orb)That the defendant threatens or intends to remove or dispose of his property in circumstances affording reasonable probability that the plaintiff will or may be obstructed or delayed in the execution of any decree that may be passed against the defendant in the suit,The court may by order grant a temporary injunction to restrain such act, or make such other order for the purpose of staying and preventing the wasting, damaging, alienation, sale, removal or disposition of the property as the court thinks fit until the disposal of the suit or until further orders.

18. The principles were laid down in the celebrated case of Giella v Cassman Brown & Co Ltd [1973] EA 358 where the court held that in order to qualify for an injunction;(i)First the applicant must show a prima facie case with a probability of success.(ii)Secondly an interlocutory injunction will not normally be granted unless the applicant might otherwise suffer irreparable harm which would not be adequately compensated by an award of damages.(iii)Thirdly, if the court is in doubt, it will decide an application on a balance of convenience.

19. I note that it is not in dispute that the advanced loan amount is outstanding and is due for payment.

20. Whereas the Plaintiff’s case is that the intended sale of the suit property is unlawful for want of proper service of the statutory notices of sale, the Defendant did not produce receipts for the registered post to rebut the Plaintiff’s assertions. In Moses Kibiego Yator v Eco Bank Kenya Limited NKU E& L No. 426 of 2013 [2014] eKLR that:In instances where a chargor alleges that he did not receive the statutory notice, the burden shifts to the chargee, to demonstrate prima facie, that the statutory notice was served. If there is material to show that the notice was received or acknowledged, say, through an acknowledgement letter, that will clearly demonstrate that the notice was duly served and received. If the notice was served by way of registered post, the chargee ought to place before the court sufficient material to demonstrate prima facie, that the document was duly dispatched to the proper address of the chargee, and that in the ordinary course of events, the notice must have reached the charge.

21. In any event, these contested matters are of the nature to warrant a meritorious hearing to enable the court explore and analyze the available evidence and testimonies to arrive at a founded conclusion.

22. What is however clear from a perusal of the Application is that the Plaintiff’s apprehension of danger is premised on the fact that if the intended sale is not stopped, the Defendant will sell the suit property which will thereby become unavailable and irredeemable should the court find, after hearing the main suit, that indeed the term loan had a life insurance and the notices were not served in accordance with the law.

23. The Plaintiff in my view has demonstrated a prima facie case. In the case of Palmy Company Limited v Consolidated Bank of Kenya Limited [2014] eKLR the Court stated as follows:“The onus of establishing on prima facie basis, that the Applicant’s right has been infringed by the Respondent by failing to discharge the duty of care under section 97(1) of the Land Act lies on the Applicant….The court needs cogent evidence and material in order to say that prima facie, there has been an undervaluation of the suit property which is an infringement of section 97(2) of the Land Act by the Respondent as to entitle the court to call for an explanation or rebuttal from the Respondent.”

24. On the second limb of irreparable damage, this case brings out an important contractual principle that security pledged to a financial institution or bank stands the risk of being sold and the intended sale is within the contemplation of the parties to the loan agreement. In other words, the sale of property by the mortgagee cannot lead to irreparable loss since it is the contractual arrangement or intention of the parties and expressly provided for in the loan agreement or mortgage deed.

25. However, the procedure leading to the sale must be observed by the lender. This is partly because the chargor has the right of redemption of the property. This means that the chargor must, at all times, have the right to redeem the property and in the absence of notices informing the chargor of default, it would be much easier for an unscrupulous chargee to rid the chargor of the equity of redemption.

26. In determining where the balance on convenience lies, considering the facts of this case in totality, I find that the balance of convenience is in favour of the Applicant.

27. In view of my above analysis and findings, the conclusion becomes irresistible that the Applicant's Notice of Motion dated 19th April 2023 is merited.

Determination 28. Accordingly, the Applicant's Application dated 19th April 2023 is allowed as follows:-(i)Pending the hearing and determination of this suit an Order of Injunction is issued restraining the 1st and 2nd Defendants whether by themselves, their employees, successors, servants and/or agents or otherwise assigns and or any person whatsoever from selling or exercising in any manner the Chargee’s Statutory Power of Sale pursuant to the Chargee’s Notice herein or in any manner whatsoever interfering with Plot No. LR No. Kwale/Marenje/78. (ii)Costs in the Cause.

DELIVERED, DATED AND SIGNED AT MOMBASA ON THIS 14TH DAY OF DECEMBER, 2023. RULING DELIVERED THROUGH MICROSOFT TEAMS ONLINE PLATFORM.KIZITO MAGAREJUDGEIn the presence of:-Maithya for the PlaintiffNo appearance for the RespondentCourt Assistant - Brian