PIUS LAWRENCE v METALLICA ENGINEERING INDUSTRIES LIMITED, FIDELITY COMMERCIAL BANK LIMITED & MUGANDA WASULWA t/a KEYSIAN AUCTIONEERS [2009] KEHC 1957 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI (MILIMANI COMMERCIAL COURTS)

Civil Case 462 of 2009

PIUS LAWRENCE ...........................................................PLAINTIFF

VERSUS

METALLICA ENGINEERING INDUSTRIES LIMITED..........1ST DEFENDANT

FIDELITY COMMERCIAL BANK LIMITED ........................... 2ND DEFENDANT

MUGANDA WASULWAT/a KEYSIAN AUCTIONEERS.......3RD DEFENDANT

RULING

The plaintiff/applicant instituted this suit against the defendants on the grounds that sometimes in May 2003 the 1st defendant sold to the plaintiff all those pieces of land known LR NO. 209/2352/12 AND 209/2352/13 (herein after referred to as the suit premises) for a consideration of 17 million.  After the sale agreement the plaintiff contends that he paid 3 million and on diverse dates paid another sum of Ksh.10,600. 000/-.  The plaintiff claims that the 1st defendant  was supposed to redeem the suit premises from the 2nd defendant but instead, the 2nd defendant appointed a receiver manager who took over the premises from the plaintiff and purported to sell it to a 3rd party.  The plaintiff claims there was fraud and collusion between the 2nd defendant and the 3rd defendant and sought for several orders.

Simultaneously with the filing of the plaint, the plaintiff filed a chamber summons dated 26th June 2009, which is before me for consideration. The plaintiff is seeking for several orders, but during the hearing of this application counsel for the applicant indicated that he was only pursuing prayer No.2 which seeks for the following orders.

“The principal Registrar of Titles or whomsoever acting under him e and is hereby inhibited from registering, transferring, or in anyway dealing with the suit premises known as L.R. Number 209/2352/12 and 209/2352/13 pending the hearing of the matter inter parties”

This application is premised on the grounds stipulated on the body thereto, and the supporting affidavit sworn by the plaintiff on 29th June 2009.  According to the plaintiff, he purchased the suit premises from the 1st defendant and paid a total of Ksh.13,600. 000/= towards the purchase price which amount was utilized to settle the mortgage debt.  The 2nd defendant instead of redeeming the title appointed a receiver manager who purported to sell the suit properties by public auction through the 3rd defendant.

The plaintiff contends that no sale by public auction was carried out but when he tried to register a caveat restricting any dealings on the suit premises, the registrar of titles advised him to obtain a court order. He was also asked to vacate the suit premises which were purportedly sold to a third party.  The plaintiff now contends that there was fraud when the suit properties were sold and the 2nd defendant did not properly exercise the statutory power of sale because a valid statutory notice was not issued.  The property was not valued before the sale, and the auctioneer did not issue a notice or adhere to the auctioneers rules.

Counsel for the applicant in further argument submitted that the title over the suit premises is registered under the Registration of Titles Act and substantive law is the Indian Transfer of Property Act.  According to the provisions of section 52 of the ITPA, when there is a suit over the suit premises, a Court can issue an inhibition order pending the determination of the suit.  Despite the fact that the principal registrar is not a party to these proceedings, that does not bar this court from making the necessary orders because the plaintiff’s suit raises serious issues of fraud and collusion against the 2nd and 3rd defendants which should be determined, and meanwhile, the property should not be transferred.

This application was opposed by the 2nd defendant, who relied on the replying affidavit by Rana Sengupta sworn on 9th July 2009.  According to the 2nd defendant, banking facilities were extended to the 1st defendant and the suit properties were charged as security.  The suit premises were charged by a charge dated 3rd September 2004 to secure the repayment of a sum of 36 million.  The suit premises which were already charged to the 2nd defendant were not available for sale to the plaintiff.

The charge specifically provided that the 1st defendant could not sell or agree to sell the charged property or any part thereof, without the prior written consent by the 2nd defendant.  No such consent was given, by the 2nd defendant, thus if there was any sale agreement between the plaintiff and the 1st defendant it was null and void.  Moreover the plaintiff did not annex any evidence of payment of the purchase price into the 1st defendant’s mortgage account.  Even the copy of the alleged sale agreement purportedly entered into with the 1st defendant is not dated nor is it stamped under the Stamp Duty Act. It is an essential requirement under the stamp duty act for a document of sale of land to be relied upon in evidence to be stamped under the Act.

Moreover the plaintiff swore a verifying and supporting affidavit in HCCC No.559 of 2008 between the East African Limited vs. Ismail Mawjiand 2nd defendant herein, in that suit the plaintiff alleged that his company was a lessee of the suit premises from the 1st defendant since 2003 to date. It is interesting that the plaintiff has conveniently omitted to state in that he was a lessee in that suit, and brought a new allegation that he is actually a purchaser of the property.

The plaintiff also claims to have entered into the sale agreement while knowing the property was charged and monies were advanced to the 1st defendant by the 2nd defendant.  The 2nd defendant denies any knowledge of any sale transaction between the plaintiff and the 1st defendant over the charged property.  The 2nd defendant is only aware of the sale carried out in exercise of the statutory power of the sale, after the 1st defendant defaulted in the repayment of the loan.  The 2nd defendant followed all the requirements provided for by the law which includes a statutory notice and auctioneers notification of sale.

Counsel for the 2nd defendant submitted that the plaintiff has not established a prima facie case with a probability of success.  The 1st defendant equity of redemption of the charged property was extinguished upon the successful sale.  The property was placed under a receiver manager, the 1st defendant lacked capacity to purport to sell the suit premises.  The order sought by the plaintiff is against the Registrar of Titles who is not a party to these proceedings.  More fundamentally the 3rd party who purchased the property and who is going to be affected by an order of inhibition is also not a party to these proceedings.  Counsel  urged the court to dismiss this case in line with a court of appeal decision in the case of  Habib Zurich Finance (K) Ltd. v Muthoga & Another East African Law Reports [2002] I EA 71 (HCK). In that case the court of appeal held as follows:-

“We agree with the Learned Judge that the 1985 amendment which changed the law in such a way that the equity of redemption is lost on the fall of the hammer at the auction sale could not be applied to the transactions which took place from the middle of December 1983 to the middle of April 1984. ”

Having set out the summary of the rival submissions and also the gist of the application, the issue for determination is whether the plaintiff is entitled to an order of inhibition against the principal registrar of titles inhibiting any transfer or dealings with the suit premises until the final determination of this suit. The plaintiff is relying on an alleged sale agreement between him and the 1st defendant who was the registered proprietor of the suit premises.

Apart from the fact that the copy of the sale agreement is not dated or stamped, for this court to rely on it as evidence of sale, the 2nd defendant has annexed a copy of the charge which was registered over the suit premises on 15th September 2004, going by the provisions in that charge, the 1st defendant could not sell the suit premises to the plaintiff without first obtaining the consent by the 2nd defendant. The 2nd defendant denies having given any consent to the 1st defendant to sell the suit premises. The plaintiff merely alleges to have paid money to the 2nd defendant but he has not annexed any payment receipts of the monies he purports to have paid to redeem the loan with the 2nd defendant.

The plaintiff also failed to make material disclosure that he filed another suit in HCCC No.559 of 2008 where he swore the verifying and supporting affidavit claiming to be a lessee. He has not disclosed the connection between his claim in that suit and the new claim that he purchased the suit property.  Taking the totality of the matter, I am not persuaded that the application by the plaintiff has merit or discloses a prima facie case.  The plaintiff has not satisfied the threshold of granting an interlocutory order of this nature.  He has not joined necessary parties especially the 3rd party who purchased the suit premises in an auction and who is likely to be affected by this order.  The plaintiff has also not established a prima facie case with a probability of success in that he purported to enter into a sale agreement with the 1st defendant while knowing there was a charge in existence.  He has not furnished this court with any evidence of payment of the loan owing to the 2nd defendant as alleged in his affidavit.

The application lacks merits and is hereby dismissed with costs to the 2nd defendant.

RULING READ AND SINGED AT NAIROBI ON 31ST DAY OF JULY 2009.

M.K. KOOME

JUDGE