Omega Foundation v SBM Bank Limited Formerly Chase Bank [2022] KEHC 2432 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT KISUMU

COMMERCIAL SUIT NO. 69 OF 2018

OMEGA FOUNDATION.......................PLAINTIFF/APPLICANT

VERSUS

SBM BANK LIMITED

FormerlyCHASE BANK...............DEFENDANT/RESPONDENT

RULING

The application dated 13th January 2021 was for an interlocutory injunction to restrain the Defendant from realizing the security.

1. The Plaintiff concedes that it borrowed money from the Defendant. The said loan was for the purchase and also the development of the suit property, L.R. NO. KISUMU MUNICIPALITY/BLOCK 4/316.

2. The Plaintiff told the Court that the suit property was first charged to the Defendant for a facility of Kshs 60,000,000/=.

3. Thereafter, the loan was “upgraded”, and was then secured by a second legal charge for Kshs 82,647,755. 45.

4. It is the Plaintiff’s case that although the original valuation of the suit property had indicated the Market Value was Kshs 65,000,000/=; the Mortgage Value was Kshs 52,000,000/=; and the Forced Sale Value was Kshs 48,750,000/=, the Defendant tried to auction the said suit property at an undervalue.

5. In the light of the said attempt, the Plaintiff moved to Court, seeking an injunction.

6. According to the Plaintiff, it obtained an injunction to restrain the Defendant from realizing the security.

7. I pause there to note that I did not trace, in the Court records, the order which the Court granted to stop the sale of the charged property.

8. The records show that on 18th September 2018 the Court dismissed the Plaintiff’s application.

9. It is common ground that the parties engaged in negotiations which culminated in the restructuring of the loan.

10. The terms of the “new Term Loan”were captured in the Agreement dated 15th May 2019.

11. According to the Plaintiff, there was an agreement to suspend the intended realization of the security, provided that the Plaintiff paid Kshs 10 Million.  The Plaintiff told the Court that it duly met its end of the bargain, by remitting payment of Kshs 10,000,000/=.

12. On the other hand, the Defendant emphasized that the Plaintiff failed to remit that amount, immediately, as had been agreed upon.

13. Even though it is not explicitly clear whether or not the sum of Kshs 10 Million was payable immediately, I note from the Plaintiff’s letter dated 28th December 2020, that the first payment of Kshs 5,000,000/= was made on 11th December 2020.

14. Thereafter, on 29th December 2020, the Plaintiff paid a further sum of Kshs 1,400,000/=.

15. On 29th December 2020, the Plaintiff also remitted the sum of Kshs 1,600,000/=.

16. As the total sum paid by 30th December 2020 was Kshs 8,000,000/=, the Plaintiff acknowledged that it would remit the remaining Kshs 2,000,000/=”as soon as funds are available.”

17. Although the Plaintiff’s treasurer, MARTHA ODERA, deponed that the Defendant had accepted the proposal for payment of Kshs 10,000,000/=, a reading of “Exhibit MO-5”reveals that the Defendant’s position was as follows;

“Kindly note the only available option, as advised at the meeting is to raiseKes 10 Million immediately to enableus discuss the repayment thereafter.Please note the security realizationprocess shall continue without further reference to yourselves unless the said amount is paid.”

18. On the basis of the Plaintiff’s own documents, I find that the sum of Kshs 10 Million was supposed to have been paid immediately.

19. A perusal of “Exhibit MO-6”  does not support the Plaintiff’s contention, that they paid Kshs 10,000,000/= immediately.

20. Therefore, on a prima facie basis I find that the condition which was imposed by the Defendant, and which the Plaintiff did not reject, had been flouted by the Plaintiff.  In other words, the Plaintiff has failed to demonstrate that it met its end of the bargain.

21. In the circumstances, the Defendant was entitled to take steps to realize the security.

22. Nonetheless, the Plaintiff asserted that it would suffer irreparable loss if the Defendant was not restrained from auctioning the suit property.

23. The Plaintiff’s case was that the loss it would suffer, from auctioning of the suit property could not be compensated by an award of damages.

24. The basis for that contention was that land is unique and that therefore no one parcel can be equated in value to another.

25. I find that whereas every property may be unique, it would be incorrect to assert that the value of one property cannot be equated to another.

26. Indeed, the Plaintiff did acknowledge as follows in its submissions;

“The value of the suit property can be ascertained and there is a validargument that damages would beavailable.”

27. Not only was the value of the suit property ascertainable, the Plaintiff’s case had been that the value thereof had been ascertained at the time when the Plaintiff offered it as security.

28. It was on the basis of the ascertained value that the Plaintiff was now asserting that the Defendant wanted to sell the property at an undervalue.

29. In my considered opinion, when the value of land has been ascertained, and its owner offers it as security for a financial facility, the owner ought not to be permitted, thereafter, to advance the alleged uniqueness of the property, as a basis for obtaining an injunction to stop the lender from realizing the said security.

30. If the property was so unique that the Plaintiff could not dare risk losing it, the Plaintiff should not have offered it as security.  By making a conscious choice to offer the property as security, the Plaintiff was effectively telling the lender that in the event of default by the Plaintiff, the lender could proceed to take steps to realize the security.

31. Provided that the lender takes the steps required, as appears to have happened in this case, the lender would be perfectly entitled to realize the security.

32. In this case, I have found no cogent evidence, on a prima facie basis, to prove that the Defendant had had the property under-valued.

33. In the event, there is no prima facie case with a probability of success.

34. Secondly, I find that the Plaintiff has failed to prove that if the injunction was not granted, it would suffer irreparable loss.

35. The Applicant concluded its submissions by praying;

“…….. that it be allowed time to arrange for additional funds to ensure compliancewith the contract herein, for purpose ofcompliance with the terms of thecontract between the parties.

In the alternative, that the Respondent restructures the loanor instalments to allow thePlaintiff to comfortably pay up theloan.”

36. Implicit in the said submission is a concession that the Applicant was not in compliance with the terms of the contract: In plain language, the Applicant was in default.

37. In the light of the said default, the Applicant asked the Court to allow it more time to enable it raise additional funds, ORin the alternative, that the Defendant be required to restructure the loan.

38. If the Court were to order the Defendant to give more time to the Plaintiff, so that the Plaintiff takes necessary steps to enable it become compliant, the Court would be re-writing the contract between the parties.

39. Similarly, if the Court were to order the bank to restructure the terms of the contract, the Court would be re-writing the contract between the parties.

40. Courts of law have no jurisdiction to re-write the terms of a contract between parties.  The mandate of the Court is to enforce the contract, by giving effect to the terms which the parties had agreed upon.

41. In conclusion, I find no merit in the application dated 13th January 2021:  it is therefore dismissed.  The Plaintiff will pay to the Defendant, the costs of the said application.

DATED, SIGNED AND DELIVERED AT KISUMU THIS 8TH DAY OF FEBRUARY 2022

FRED A. OCHIENG

JUDGE