Nzuki v African Banking Corporation Limited & 2 others [2023] KEELC 16160 (KLR)

Nzuki v African Banking Corporation Limited & 2 others (Environment & Land Case E037 of 2022) [2023] KEELC 16160 (KLR) (1 March 2023) (Ruling)

Neutral citation: [2023] KEELC 16160 (KLR)

Republic of Kenya

In the Environment and Land Court at Machakos

Environment & Land Case E037 of 2022

A Nyukuri, J

March 1, 2023

Between

Rose Nduku Nzuki

Plaintiff

and

African Banking Corporation Limited

1st Defendant

Igare Auctioneers

2nd Defendant

Alfred Odhiambo Otieno

3rd Defendant

Ruling

Introduction 1. This ruling is in respect of the Preliminary Objection dated 15th July 2022 filed by 1st and 2nd Defendants and Notice of motion dated 20th May 2022 filed by the Plaintiff.

The Notice of Motion Dated 20th May 2022 2. In the Notice of Motion dated 20th May 2022, the Plaintiff/Applicant sought the following orders;a.Spentb.Spentc.Pending the hearing and determination of this suit, this Honourable Court be pleased to issue a temporary injunction order restraining the 1st and 2nd Defendants/Respondents by himself or through their servants, employees, agents or any other persons acting under their instructions or interests from selling, transferring, disposing by way of auction and/or otherwise dealing with the subject property herein registered in the 3rd Respondent’s name ALFRED ODHIAMBO OTIENO known as Title No. Mavoko Town Block 3/2141 situated within Malaa area off Kangundo Road.d.Costs be awarded to the Applicant.e.Any other relief this Honourable Court will be pleased to issue in the circumstances.

3. The application was supported by the grounds on its face together with the affidavit sworn by the Plaintiff on 20th May 2022. The Applicant’s case is that the Plaintiff and the 3rd Defendant are husband and wife having been married in 1989 through customary law and thereafter formally registered their union on 21st November 2018 at the Registrar of Marriages in Nairobi.

4. She further stated that they were blessed with three children. She also asserted that on 27th July 1998, the Plaintiff’s grandfather, one Onesmus Kamende Mailu (now deceased) directed Lukenya Ranching Cooperative Society to transfer Parcel No. Mavoko Town Block 3/2141 (suit property) measuring 40 acres to the 3rd Defendant to be held by him in trust for the Applicant and his great grandchildren.

5. It was the Applicant’s further averment that while the Applicant held the original title, the 3rd Defendant misrepresented that the title deed thereof was lost and was issued with another title on 25th October 2011. She stated that on 11th May 2022, she learnt from a newspaper advertisement that the suit property was slated for auction on 27th May 2022.

6. According to the Plaintiff, the suit property is her matrimonial home and that her consent was not sought before the same was charged. She pleaded that unless this court grants an injunction, the Plaintiff and the children of the marriage will suffer grave prejudice.

7. The 1st Defendant raised a Preliminary Objection seeking the dismissal of the Plaintiff’s application dated 20th May 2022 in limine on the following grounds;a.That the Plaintiff’s Notice of Motion application dated 20th May 2022 is fatally and incurably defective in law and as such cannot stand or be ventilated before this Honourable Court.b.That the application contravenes mandatory provisions of law per Article 162 of the Constitution of Kenya and Section 13 (1) and (2) of the Environment and Land Court Act. The suit as currently instituted is in contra-statute and nullity ab initio.c.That the application is fatally and incurably defective and cannot stand in law.d.That the continued pendency of the application is an abuse of the process of this Honourable Court.e.That this Honourable Court has no jurisdiction to entertain the Plaintiff’s application as presently instituted.Accordingly, the Respondent prayed that the application herein dated 20th May 2022 to be dismissed with costs.

8. The 1st Respondent also filed a replying affidavit sworn on 6th June 2022, by their Legal Manager one Faith Nteere. It was their case that the Applicant was a stranger to the bank as the bank has never had any dealings with her and the bank is not aware that she is the wife of the 3rd Defendant.

9. She further stated that by letter of offer dated 4th October 2012, superseded by letter of offer dated 20th December 2016, amended by addendum dated 3rd January 2017 and a letter of offer dated 31st July 2018, the bank offered Plaza Magnetic Resonance Imaging Limited a credit facility of Kshs. 120,858,372/- whereof the 3rd Defendant executed all the letters of offer and letters of addendum aforesaid in his capacity as Director of the borrower. Further that the 3rd Defendant freely offered the suit property, which is registered in his name as security, which change was registered on 21st March 2013.

10. That the bank procured a spousal consent, and the 3rd Defendant availed on Jackline Kishagha Mnjala who executed a spousal consent together with an affidavit confirming that she was the 3rd Respondent’s wife. That besides the securities, a fixed and floating debenture dated 1st January 2013 was registered over the current and future assets of the borrower for a maximum principal amount of Kshs. 150,000,000/.

11. It was the position of the 1st Defendant that the borrower defaulted in repaying the loan facility and despite several demands and reminders to pay, the 3rd Defendant has failed to pay the outstanding amount. That a negotiation resulted in restructuring the facility vide a letter of offer dated 31st July 2018, when the balance was Kshs. 65,939,940. 90, an acknowledgment whereof was made by the 3rd Defendant. That even after restructuring the facility the borrower and 3rd Defendant continued to default, hence as of 26th July 2021, the loan arrears plus interest was Kshs. 57,025,183/-, which led to the 1st Defendant to initiate realization of the charged suit property.

12. That accordingly, on 11th August 2021, the 1st Defendant issued a 90-day statutory notice. That the 3rd Defendant filed a plaint and an application both dated 18th May 2022 in Machakos High Court Commercial Case No. 7 of 2022 seeking injunction against the 1st Respondent. That on 26th may 2022, the High Court granted an interim injunction pending hearing and determination of the application.

13. That upon receiving the statutory 90-day Notice, the 3rd Defendant through his advocate on record requested to pay the arrears by monthly instalment of Kshs. 1,000,000/-, which offer was rejected by the bank for being unsustainable. Therefore, the 1st Respondent issued a 40 days Notice to sell, dated 26th November 2021 as required under Section 96 (2) (3) of the Land Act. That on the lapse of 40 days, the 1st Defendant instructed the auctioneers to commence the sale process and the latter issued a 45 days redemption Notice and Notification of sale both dated 8th March 2022, which were both received by Faith Mwende on the same date on behalf of the Applicant. That after the Notices, the 3rd Defendant approached the 1st Defendant through his advocate by a letter dated 4th April 2022 seeking for restructuring the loan, but the said request was rejected. That in their letter, the 3rd Defendant did not contest the outstanding amount demanded by the bank. That the 3rd Defendant was aware of the default and as the relevant notices have been served on him, there was no justification for the 1st Respondent not to realize the charged property.

14. They also stated that the letter relied on by the Applicant as having been written by her grandfather does not state that the suit property was to be held in trust for the Applicant. According to the 1st Defendant, this suit is as a result of collusion between the Applicant and 3rd Defendant who filed this suit and HCCC No. 7 of 2022 at the same time as a gamble on who will get orders first as the suit property was scheduled for sale on 27th May 2022, and that the application is meant to frustrate the bank from exercising its power of sale.

15. The 1st Defendant took the view that this suit is an abuse of the court process as the matters raised herein are directly and substantially in issue in Machakos HCCC No. 7 of 2022 between the same parties laying a similar claim in respect of same subject matter. They stated that the Applicant can only claim through her husband and that this matter ought to be heard together with HCCC No. 7 of 2022.

16. The 1st Defendant took the position that the Applicant had not demonstrated a prima facie case with probability of success, that her allegations cannot be sustained in fact and in law and that the orders sought are prejudicial to the 1st Defendant.

17. The 3rd Defendant Dr. Alfred Odhiambo Otieno filed a replying affidavit sworn on 6th June 2022. He stated that he was the husband of the Applicant and the chargor in respect of the charge created over the suit property in favour of the 1st Applicant in 2013.

18. He further stated that he married the Applicant under Luo and Kamba Customs in 1989 and later registered his marriage in 2018 and that they were blessed with three children.

19. He stated that in the 1990’s, one Onesmus Kamende Mailu was involved in an accident and that upon treatment, his medical bill was Kshs. 1,200,000/-, which the 3rd Defendant settled by monthly instalments of Kshs. 30,000/- as purchase price for the suit property. That upon payment, the late Onesmus Kamende Mailu instructed the land company to transfer the land to him. That on 7th November 2005, he could not hand over title to the Plaintiff as he was away in St. Louis Missouri in the USA pursuing a fellowship in Neuroradiology and that the Plaintiff took advantage of his absence and collected the title deed and never showed it to him.

20. It was his position that when he went to process title, he realised that the same had been collected and therefore reported the same as lost and was issued with another one. That he never borrowed the sum of Kshs. 27,000,000/- but the borrower was Plaza MRI. He insisted that the sum of Kshs. 27,000,000/- which was the borrowed sum was fully paid by the borrower who has paid a total of Kshs. 190,000,000/-. He denied signing or creating a further charge in respect of the suit property.

21. The 3rd Defendant stated that during creation of the charge, he never sought or obtained the consent of the Applicant as his wife and stated that the suit property was heavily developed and occupied as his matrimonial home and property and that the property has not been vacant or undeveloped.

22. The Applicant filed a further affidavit sworn on 27th June 2022, she stated that she was a stranger to the allegation of the 1st Defendant and maintained that this suit was properly before this court. She blamed the 1st Defendant for failure to conduct due diligence in respect of an alleged fraudulent affidavit and spousal consent by one Jackline Kishagha Mnjala as no proof of marriage was produced between the 3rd Defendant and the said Jackline.

23. She further stated that she resides on the suit property which was her matrimonial home. She pointed out that the 3rd Defendant conceded that she was his wife, that the suit property was their matrimonial home and that he never sought or obtained her consent before charging the suit property. She insisted that no consideration was paid to her late grandfather and that the 3rd Defendant did not provide evidence of purchase of the suit property.

24. Both the Preliminary Objection and the application were disposed by written submissions. On record are the Applicant’s submissions dated 29th June 2022, the 1st Respondent’s submissions dated 19th July 2022 and the 1st Respondent’s supplementary submissions dated 8th December 2022.

Plaintiff’s Submissions 25. Counsel for the Plaintiff submitted that the Applicant had proved an arguable case with a high probability of success. Reliance was placed on the cases of Giella vs Cassman Brown & Company Limited [1973] EA 358, Mrao Ltd vs. First American Bank of Kenya & 2 Others [2003] KLR 125 and Order 40 Rule 1 (a) and (b) of the Civil Procedure Rules.

26. Counsel argued that the suit property has been the parties’ matrimonial home for a bout 17 years. That the 3rd Defendant acted fraudulently and illegally and 1st Defendant created illegal charge on the property. Counsel maintained that the Applicant had established a prima facie case that required preservation of her matrimonial property.

27. It was contended for the Plaintiff that the Applicant’s right to property was guaranteed under Article 40 of the Constitution and Section 7 of the Matrimonial Property Act. Counsel argued that Section 90 (3) (c) of the Land Act granted the Applicant as a spouse of the chargor to obtain relief. Counsel also relied in Section 79 (3) of the Land Act and Section 12 (1) and (5) of the Matrimonial Property for the proposition that a matrimonial home shall not be mortgaged or leased or charged without written and informed consent of both spouses.

28. The court was referred to the cases of Elizabeth Gachambi vs. Grace Nduta Kinuthia & Another [2017] eKLR and P. A. vs. Stima Sacco Society Limited & 2 Others (Civil Case 199 of 2018) [2022] eKLR, for the proposition that an affidavit per se is not proof of marriage and that it is upon the chargor to go an extra mile to verify the relationship between the chargor and the alleged spouse.

29. On whether damages shall be sufficient compensation, counsel relied on the case of Joseph Siro Mosioma vs. Housing Finance Company of Kenya & 3 Others [2008] to argue that damages cannot be a substitute for loss.

1st Respondent’s Submissions 30. Counsel for the 1st Respondent submitted that this court draws its jurisdiction from Article 162 of the Constitution and Section 13 of the Environment and Land Court Act. Counsel argued that this dispute does not fall within Section 13 of the Environment and Land Court Act. Counsel contended that the Plaintiff does not dispute ownership of the suit property is vested in the 3rd Respondent, and that her dispute is that the suit property was charged without her consent and that therefore, her dispute is contractual in nature and can only be determined by Commercial Courts.

31. It was maintained on behalf of the 1st Defendant that the charge instrument is a contract emanating from contractual obligations between the bank and the 3rd Respondent and that the Plaintiff was only disputing spousal consent but she has not disputed ownership of the land.

32. The court was referred to the case of Stella Kavutha Muthoka & Another vs. Kenya Women Microfinance Bank Ltd [2021] eKLR, for the proposition that where the predominant issue in a suit is a charge, it is the High Court and not the Environment Land Court that has jurisdiction to deal with the dispute.

33. Counsel also contended that this matter is sub judice as there is a previously filed suit, namely Machakos High Court Commercial Case No. 7 of 2022. Counsel maintained that as the two suits arise from the same set of facts involving the same parties save the Applicant, who has connived with the 3rd Respondent to frustrate the bank. Counsel argued that the suit is sub judice hence it ought to be struck out. In that respect, counsel cited the cases of Republic vs. Paul Kihara Kariuki and Attorney General & 2 Others (Ex Parte Law Society of Kenya [2020] eKLR.

34. On whether the Applicant was entitled to orders of injunction, the 1st Defendant’s counsel submitted that the bank was a secured creditor and therefore the Plaintiff’s interest if any cannot rank pari passu with that of the bank. Counsel argued that if the Applicant was the 3rd Defendant’s wife, she ought to claim against him and not against the bank, and cited the case of Blasovilla Holdings Kenya Limited vs. Foton East Africa Limited [2014] eKLR.

35. Counsel pointed out that the marriage certificate of the Plaintiff was dated 2018, 5 years post registration of the charge instrument. Counsel argued that the Plaintiff could not seek relief from a contract it was never party to. He relied on the case of City Council of Nairobi vs. Wilfred Kamau Githua t/a Githua Associates & Another. Counsel stated that the 3rd Defendant informed the 1st Defendant that Jackline Kishagha Mnjala was his wife and allowed her to execute an affidavit for spousal consent and turned around stating that the Plaintiff was his wife.

36. Counsel argued that the Plaintiff had not met the threshold for grant of interim injunction. Counsel argued that the 1st Defendant is a financial institution capable of compensating the Plaintiff if she is successful. Contention for the 1st Defendant was that balance of convenience tilted against issuance of the orders sought.

37. On the question of jurisdiction, counsel for the 1st Defendant argued in his supplementary submissions that this court lacked jurisdiction to determine this matter. Reliance was placed on the cases of Republic vs. Karisa Chengo & 2 Others [2017] eKLR and Cooperative Bank of Kenya Limited vs. [2017] eKLR. Counsel argued that a charge as defined under Section 2 of the Land Act is an interest in land to secure payment of money or moneys worth and therefore the rights acquired are limited to the realization of the security advanced. Counsel maintained that the creation of the relationship between the chargee and chargor has nothing to do with the use of land as the relationship is limited to ensuing that the chargee is assured of repayment of the money advanced to the chargor. Reliance was placed on the case of Diamond Trust Bank Kenya Ltd vs. Fatma Hassan Hadi.

Analysis and Determination 38. I have carefully considered the application, the responses, the Preliminary Objection and the submissions filed by the parties. The issues that emerge for determination are as follows;a.Whether this court has jurisdiction to hear and determine this matter.b.Whether the Applicant has met the threshold for grant of temporary injunction.

39. Jurisdiction is the power of the court to hear and determine a matter and without it, the court cannot proceed. Jurisdiction flows from the Constitution or statute or both and a court cannot apply judicial craft or innovation to arrogate itself jurisdiction that it does not have. See the Supreme Court decision in Samuel Kamau Macharia & Another vs. Kenya Commercial Bank & Another [2012] eKLR, Paragraph 68.

40. The jurisdiction of this court is set out in Article 162 (2) (b) of the Constitution as well as Section 13 of the Environment and Land Court Act.Article 162 (2) (b) of the Constitution provides as follows;1. The superior courts are the Supreme Court, the Court of Appeal, the High Court and the Courts referred to in Clause (2);2. Parliament shall establish courts with the status of the High Court to hear and determine disputes relating to –a.……b.The Environment and the use and occupation of and title to, land.

41. Section 13 of the Environment and Land Court Act No. 19 of 2011 provides for the jurisdiction of the court as follows;1. The court shall have original and appellate jurisdiction to hear and determine all disputes in accordance with Article 162 (2) (b) of the Constitution and with the provisions of this Act or any other law applicable in Kenya relating to environment and land.2. In exercise of its jurisdiction under Article 162 (2) (b) of the Constitution, the court shall have power to hear and determine disputes –a.relating to environmental planning and protection, climate issues, land use planning, title, tenure, boundaries, rates, rents, valuations, mining, minerals and other natural resources;b.relating to compulsory acquisition of land;c.relating to land administration and management;d.relating to public, private and community land and contracts, choses in action or other instruments granting any enforceable interests in land; ande.any other dispute relating to environment and land.

42. Part VII of the Land Act (Sections 78 to 106) provides for charges and all matters appurtenant thereto and the jurisdiction of the court in respect of the matters that arise in respect thereto. These include the power of the court under Section 104 to grant remedies and reliefs to the chargor or chargee, and the court’s power to re-open certain charges and revise terms thereof under Section 106 of the Land Act.

43. It is important to note that under Section 2 of the Land Act, the court is defined to mean;“court” means the Environment and Land Court established under the Environment and Land Court Act, 2011 (No. 19 of 2011).

44. It is therefore my considered view that since the Land Act which provides for charges defines the court as the ELC, therefor this court has jurisdiction to try matters touching on charges.

45. I am also aware that Part VII of the Land Act makes provisions for matters touching on charges in respect of matrimonial home (See Section 79 (3) of the Land Act) yet under Rule 6 of the Matrimonial Property Rules, 2022, the court with jurisdiction to hear matters touching on matrimonial property is the High Court where the value is in excess of the pecuniary jurisdiction of a Magistrates Court, or in the Magistrates Court with pecuniary jurisdiction to hear the matter.

46. I therefor observe that matters touching on charges are both matters touching on interest in land and as they involve the lending and borrowing of funds, they are also commercial matters, which in some cases, also touch on matrimonial matters, like in this case. Therefore, these matters may be heard before this court or the High Court; depending on the predominant matter to be tried. I therefore opine that this is a matter where a predominant purpose test ought to be applied to decide which court is best suited to hear the matter based on the predominant issue in controversy.

47. In the case of Suzanne Butler & 4 Others vs. Redhill Investments & Another [2017] eKLR, it was held as follows;c.When faced with a controversy whether a particular case is a dispute about land (which should be litigated at the ELC) or not, the courts utilize the predominant purpose test. In a transaction involving both a sale of land and other services or goods, jurisdiction lies at the ELC if the transaction is predominantly for land, but the High Court has jurisdiction if the transaction is predominantly for the provision of goods, construction or works.d.The court must first determine whether the predominant purpose of the transaction is the sale of land or construction. Whether the High Court or the ELC has jurisdiction hinges on the predominant purpose of the transaction, that is whether the contract primarily concerns the sale of land or in this case, the construction of a town house.e.Ordinarily, the pleadings give the court sufficient glimpse to examine the transaction to determine whether sale of land or other services was the predominant purpose of the contract. This test accords with what other courts have done and therefor leads to predictability to the issue.

48. The 1st Defendant has raised the issue that the question raised herein being the legality of the charge is predominantly a commercial matter and ought to be determined by the High Court which is the court with jurisdiction to determine commercial matters. Looking at the Plaintiff’s claim, she has faulted the legality of the charge created on the suit property for want of spousal consent contending that the property in issue is matrimonial property. I agree with the 1st Respondent’s submissions that the issue before this court is predominantly commercial although it touches on interest in the suit property. This is because there is no dispute on ownership of the suit property or registration thereof as all the parties agree that the suit property is registered in the 3rd Defendant’s name, and lawfully so. Therefore, the main issues are whether in the creation of chargor/chargee relationship in regard to the suit property, the Plaintiff’s consent ought to have been sought and obtained and whether the 3rd Defendant is justified in disputing the amount due to be paid to the bank/chargee.

49. Therefore, having considered the pleadings herein and noting that the predominant questions on whether the suit property was not validly charged for want of spousal consent on the basis that the same was matrimonial property and whether the 3rd Defendant has discharged his obligations as per the covenants in the charge, it is my finding that the predominant matters herein ought to be heard before the High Court.

50. In view of the above, I order that this matter be and is hereby transferred to the High Court sitting at Machakos for hearing and determination.

51. Orders accordingly.

DATED, SIGNED AND DELIVERED AT MACHAKOS VIRTUALLY THIS 1STDAY OF MARCH, 2023 THROUGH MICROSOFT TEAMS VIDEO CONFERENCING PLATFORMA. NYUKURIJUDGEIn the Presence of;Ms Odongo holding brief for Mr. Shadrack Wambui for PlaintiffMr. Oira holding brief for Mr. Mugisha for 1st Defendant/RespondentCourt Assistant – Josephine