Onesmus v Consolidated Bank of Kenya Ltd [2023] KEHC 23948 (KLR)

Onesmus v Consolidated Bank of Kenya Ltd (Civil Suit E003 of 2023) [2023] KEHC 23948 (KLR) (18 October 2023) (Ruling)

Neutral citation: [2023] KEHC 23948 (KLR)

Republic of Kenya

In the High Court at Embu

Civil Suit E003 of 2023

LM Njuguna, J

October 18, 2023

Between

Martin Fundi Onesmus

Plaintiff

and

Consolidated Bank of Kenya Ltd

Defendant

Ruling

1. The applicant has filed the notice of motion dated 03rd July 2023 seeking orders that:a.Spent;b.The Honourable court do issue a temporary injunction restraining the defendant/respondent, its agents, servants and or employees or any other person claiming through it from offering for sale, selling, disposing or in any other way dealing with the applicant’s premises on land parcel number Embu/Municipality/920 over the amount of Kshs. 36,929,561. 23/= claimed by the respondent pending hearing and determination of this application;c.The Honourable court do issue a temporary injunction restraining the defendant/respondent, its agents, servants and or employees or any other person claiming through it from offering for sale, selling, disposing or in any other way dealing with the applicant’s premises on land parcel number Embu/Municipality/920 over the amount of Kshs. 36,929,561. 23/= claimed by the respondent pending hearing and determination of this suit;d.The honourable court do issue an order for the taking of the accounts in order to establish the correct amount owed by the borrower; ande.The costs of this application be provided for.

2. The application is premised on the grounds set out on its face and in the supporting affidavit.

3. The applicant is the guarantor for a loan advanced to Charmar Enterprises Limited, which loan is in default. It has since the time of default, accumulated interest to the alleged sum of Kshs. 36,929,561. 23/= which the respondent intends to recover through sale of property number Embu/Municipality/920 in the name of the applicant and which property has already been advertised for sale. The applicant contests the amount payable to the respondent, hence this application. In the supporting affidavit, the applicant avers that he is willing to settle the debt once the correct amount is determined by the court. He also states that at the time when the loan fell in default, the principal amount was Kshs. 5,000,000/=. That the property Embu/Municipality/920 is his only property but the respondent has undervalued it to the applicant’s detriment.

4. With the leave of court, the respondent filed his replying affidavit sworn on 25th August 2023 wherein he stated that the application is full of falsehoods and is intended to mislead the court. It is its case that the amount owing was secured through a charge, a further charge and a second further charge over property title numbers Embu/ Municipality/ 920, Ngandori/ Kirigi/ 2836, Ngandori/ Kiriari/ 2929, Gaturi/ Nembure/ 4689, Gaturi/ Nembure/ 5303 and Gaturi/Nembure/5304, the facility having been restructured severally. The respondent produced letters of offer and copies of the charge documents for the securities. That the amounts fell into default and the respondent sought to exercise its statutory power of sale, which process was challenged vide Embu HCCC No. 12 of 2012 which was disposed of by way of a consent order.

5. That the respondent wrote a letter dated 26th February 2019 to the applicant for settlement of Kshs. 16,500,000/= but the applicant did not meet his obligations. That the applicant also failed to honour several notices issued by the respondent and that it is not true that the applicant has initiated private treaties. That the open market value of the property is Kshs. 45,000,000/= which reduced to Kshs. 44,000,000/= while the forced sale value is Kshs. 33,750,000/= which later reduced to Kshs. 33,000,000/=. They reminded the court that the respondent’s statutory power of sale was not to be denied on flimsy grounds and that the respondent has chronologically satisfied the requirements preceding statutory power of sale. They stated that the IRAC report was not commissioned and that the court should disregard the same as it lacks evidentiary value.

6. The court directed that the application be canvassed by way of written submissions. Both parties complied.

7. In his submissions, the applicant stated that he is ready and willing to settle the debt once the same is established. That going by the report given by Interest Rates Advisory Center Limited, the total amount owed should be Kshs. 15,268,794. 93/= and that the respondent cannot subject the applicant to interest rates of up to 300%. That the property they intend to sell has been undervalued at Kshs. 33,000,000/= by the respondent and yet the actual value as claimed by the applicant is Kshs. 48,000,000/=. That the applicant defaulted on the loan repayment due to ill health and tough economic times but once the amount is established, he has no problem paying it up in full.

8. With the leave of court, the respondent filed its written submissions, in which it relied on the cases of Nest Manor Residence & Suites Lid & Another Vs. African Banking Corporation Ltd & Another (2021) eKLR and Lawrence Muthiani Maithya Vs. Housing Finance Company of Kenya Ltd (1973) EA 98 where the parameters for granting injunctions were discussed as well as in the case of Giella Vs. Cassman Brown & Co. Ltd (1973) EA 358. It relied on the cases of Mrao Ltd Vs. First American Bank Ltd & 2 others (2003) eKLR, Palmy Company Limited Vs. Consolidated Bank of Kenya Limited (2014) eKLR, Fina Bank Limited Vs. Ronak Limited (2001) 1 EA 54 and Bradegate Holdings Ltd & Another Vs. Jamii Bora Bank Limited (2016) eKLR in making its case that a dispute as to the amount owing or interest charged is not a basis for the granting of an injunction.

9. That in as much as the applicant has disputed the valuation reports for the properties, the same are credible and offer the best prices and the valuer is a reputable company. It relied on the case of Studertek Powers (EA) Ltd & Another Vs. Housing Finance Company Ltd (2020) eKLR. It also argued that the interest rates continue running for as long as the facility remains in default and the applicant cannot claim that this was not the position based on the contractual agreements between the parties. For this argument, reliance was placed on the cases of Jopa Villas LLC Vs. Overseas Private Investment & 2 Others (2009) eKLR and Morris and Co. Ltd Vs. Kenya Commercial Bank Ltd & Others (2003) 2 EA 605.

10. From a perusal of the application and submissions by the applicant, the issues for determination are:a.Whether the threshold for issuance of temporary injunction has been met; andb.Whether the court is well placed to order for accounts to be produced by the respondent.

11. On the first issue, the pillars of granting of injunctions are that the applicant must:(a)establish a prima facie case,(b)demonstrate irreparable injury if a temporary injunction is not granted, and(c)if the court is in doubt as to (b), grant the injunction on a balance of convenience.This was the position taken by the court in the case of Nguruman Limited Vs. Jan Bonde Nielsen & 2 Others, CA No. 77 Of 2012.

12. The arguments fronted by the parties reveal that indeed the applicant is in default and has stated that he is willing to settle the same once the amount owing is determined by the court. It is his argument that the valuation carried out by the respondent is in question and that the property has been undervalued. On the other hand, the respondent argued that the valuation was carried out twice by a reputable valuer and that the prices are reliable. It is key that on a balance of probabilities, the applicant demonstrates that he would suffer most harm if the orders are not granted.

13. In this application, he stated that the property intended to be sold by the respondent to recover the debt is the only property which brings him income. That in fact he is ready to pay the debt but the correct amount ought to be determined before he can pay. In other words, if the orders are denied, and the respondent proceeds to sell the property, the applicant will lose in terms of his only property of economic value and secondly, for an underserving price. In the case of Bryan Chebii Kipkoech Vs Barnabas Tuitoek Bargoria & another [20191 eKLR (as cited in the case of Margaret Njambi Kamau Vs John Mwatha Kamau & another [2019] eKLR) the court held;“The court should issue an injunction where the balance of convenience is in favor of the plaintiff and not where the balance is in favor of the opposite party. The meaning of balance of convenience in favor of the plaintiff is that if an injunction is not granted and the suit is ultimately decided in favor of the plaintiffs, the inconvenience caused to the plaintiff would be greater than that which would be caused to the defendants if an injunction is granted but the suit is ultimately dismissed. Although it is called balance of convenience it is really the balance of inconvenience and it is for the plaintiffs to show that the inconvenience caused to them would be greater than that which may be caused to the defendants. Should the inconvenience be equal, it is the plaintiffs who suffer. In other words, the plaintiffs have to show that the comparative mischief from the inconvenience which is likely to arise from withholding the injunction will be greater than which is likely to arise from granting it….”

14. The wisdom of more previous court is also welcome in my determination as to what guides issuance of injunctive orders. In the case of Joel Kipkurui arap Koech vs Alice Wambui Magandu & 3 others [2018] eKLR the court stated:“In the case of Suleiman Vs Amboseli Resort Ltd (2004) KLR 589, Ojwang Ag. J (as he then was) stated thus: “Counsel for the Defendant urged that the shape of the Law governing the grant of injunctive relief was long ago, in Giella Vs Cassman Brown, in 1973 cast in stone and no new element may be added to that position. I am not, with respect, in agreement with counsel in that point, for the law has always kept growing to greater levels of refinement, as it expands to cover new situations not exactly foreseen before. ……Traditionally, on the basis of the well accepted principles set out by the Court of Appeal in Giella Vs Cassman Brown, the court has to consider the following questions before granting injunctive relief:i)Is there a prima facie case…..ii)Does the applicant stand to suffer irreparable harm….iii)On which side does the balance of convenience lie……Even as those must remain the basic tests, it is worth adopting a further, albeit rather special and more intrinsic test which is now in the nature of general principle. The court in responding to prayers for interlocutory injunctive relief should always opt the lower rather than the higher risk of injustice… if granting the applicant’s prayers will support the motion towards full hearing, then should grant those prayers...”

15. I take notice of the fact that the respondent made several attempts to claim the money but the applicant did not make any effort to redeem the loan. I think both parties present an arguable case and the same should be determined on merit subject to the court’s determination of this application. Under Order 40 Rule 1 of the Civil Procedure Rules, it is clear that injunctions are granted at the discretion of the court. It provides: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; or(b)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.

16. In as much as injunctions are granted at the discretion of the court, as a matter of precedence, where the bank is seeking to exercise its statutory power of sale, the orders will not be granted if the only dispute is the money owing. On this, I am guided by the decision in the case of Ooko Vs Barclays Bank of Kenya Ltd (2002) eKLR the court held that:“Accordingly, one would be confronted with the long-established principle that a dispute as to the amount due is not a ground for injuncting the mortgagee from exercising its power of sale.”In the case of Giro Commercial Bank Limited Vs Halid Hamad Mutesi (2002) eKLR the court stated:“It has been held time and again that a mortgagee cannot be restrained from exercising his power of sale because the amount due is in dispute or that the mortgagee has commenced a redemption action or because the mortgagor objects to the manner in which the sale is being arranged. In that case, where the debt is admitted as due and the loan is not being serviced, the court should not grant an injunction.”In the similar case of Priscillah Krobought Grant vs. Kenya Commercial Finance Co. Ltd. and 2 Others, Court of Appeal at Nairobi, Civil Application No. Nai 227 of 1995 (108/95 V.R) (unreported), the court stated as follows: -“Finally, it will bear repetition, we think if we were to state that a court does not normally grant an injunction to restrain a mortgagee from exercising its statutory power of sale solely on the grounds that there is a dispute as to the amount due under the mortgage – see Barmal Kanji Shah & Another Vs. Shah Depar Devji (1965) E. A. 91, 32 Halsbury’s Laws of England (4th Edition) paragraph 725 and Uhuru Highways Development Ltd. Vs. Central Bank Kenya and 2 Others, Civil Application No. Nai 140 of 1995 (unreported) per Kwach J. A.”

17. Therefore, having considered the application and arguments made herein and the relevant case law, I hereby decline to grant a temporary injunction as prayed by the applicant. However, an order is hereby issued in terms of prayer (d) for taking of accounts. The same to be supplied within 14 days from the date of this ruling.

18. It is so ordered.

DELIVERED, DATED AND SIGNED AT EMBU THIS 18TH DAY OF OCTOBER, 2023. L. NJUGUNAJUDGE