Prime Portfolio Limited & another (Also Suing as an Administrator of the Estate of David Gitau) v HFC Limited [2022] KEHC 13080 (KLR)

Prime Portfolio Limited & another (Also Suing as an Administrator of the Estate of David Gitau) v HFC Limited (Civil Suit E079 of 2021) [2022] KEHC 13080 (KLR) (Commercial and Tax) (16 September 2022) (Ruling)

Neutral citation: [2022] KEHC 13080 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Civil Suit E079 of 2021

A Mabeya, J

September 16, 2022

Between

Prime Portfolio Limited

1st Plaintiff

Mary Muthoni Gitau

2nd Plaintiff

Also Suing as an Administrator of the Estate of David Gitau

and

HFC Limited

Defendant

Ruling

1. Before court is an application dated February 18, 2021. It was brought under article 159(2) (d) of the Constitution, section 3A of the Civil Procedure Act, order 40 rule 1 of the Civil Procedure Rulesand sections 90(2) (e), 92, 93, 94, 96, 103 and 104 of the Land Act.

2. The same sought orders to restrain the defendant from leasing, auctioning, entering into, advertising for sale, and or appointing a receiver over LR No 3734/178 pending the determination of the suit.

3. The grounds were set out on the face of the application and on the supporting affidavit of Mary Muthoni Gitau sworn on February 18, 2021.

4. The 1st plaintiff was the proprietor of LR No 3734/178 (the charged property) whereon there are constructed seven town houses. The 2nd plaintiff was the co-administrator of the estate of David Gitau (deceased). That the 2nd plaintiff and the deceased were co-directors of the 1st plaintiff, the deceased being a 90% shareholder.

5. The defendant advanced the 1st plaintiff loan of Kshs 100 million via three offer letters. The loan was disbursed to two loan accounts being A/C No 600-xxxx359 and A/C No 600-xxxx574. That the second offer letter of April 18, 2013 created an insurable risk of fire of Kshs 115,200,000/=, and the third offer letter of June 27, 2013 created a life insurance of the 1st plaintiff’s directors of Kshs 115,200,000/=. The defendant deducted monthly premiums for fire insurance from the first loan account and deducted monthly premiums for the life insurance from the second account.

6. The plaintiffs contended that when David Gitau died on December 27, 2017, the life insurance of Kshs 115,200,000/= crystalized. That upon being notified of the demise, the defendant only redeemed the debt partially by Kshs 18,886,400/= instead of the full amount of Kshs 115,200,000/=.

7. That on November 19, 2020, the defendant issued a statutory notice over the charged property despite its debt having been redeemed by the Life insurance sum of Kshs 115,200,000/= in the life of David Gitau. That the insurance had crystallized after the death of Gitau.

8. That unless the orders sought were granted, the defendant would dispose of the charged property to the plaintiffs’ detriment. That the balance of convenience tilted in favor of preserving the charged property before the suit was determined.

9. The defendant opposed the application vide the replying affidavit of Christine Wahome sworn on March 9, 2021. It was contended that the plaintiffs had two facilities with the defendant being A/C No 600xxxx359 and A/C No 600xxxx574. The plaintiffs had in 2010 obtained a facility under A/C No 600xxxx473 for Kshs 100,000,000/= which was later redeemed through a second facility being loan under A/C No 600xxxx359 for Kshs 75,000,000/= in 2013.

10. That the facility with A/C No 600xxxx359 did not have a life insurance cover while that of A/C No 600xxxx574 had a life insurance which had already been redeemed. Both facilities had been secured by charged properties through a charge dated March 22, 2013. On the other hand, the 2nd plaintiff had executed a personal guarantee and indemnity of Kshs 20,000,000/= to secure the facility in A/C No 600xxxx574 which also had a life insurance cover. That the sum insured under the life cover was Kshs 20,000,000/= which was released upon the defendant being notified of David Gitau’s demise. That the defendant did not at any time deduct life insurance premiums for Kshs 115,200,000/= as alleged.

11. That the life insurance cover only covered the amount of the loan and the guarantee securing the facility which was Kshs 20,000,000/=. That the fire insurance covered the full value of the charged property which was Kshs 115,200,000/=.

12. That the defendant restructured the facility for A/C No 600xxxx359 by giving three months moratorium as requested by the plaintiffs and upon further default, proceeded to issue the relevant notices for the outstanding amount of Kshs 66,918,459. 25 under that account.

13. The plaintiffs filed submissions dated October 1, 2021, whereas the defendant’s were dated November 22, 2021. The court has considered the pleadings, the affidavits and the submissions on record.

14. This is an injunction application. The principles applicable are those enunciated in the case of Giella vs Cassman Brown & Company Limited (1973) E A 358,. These are that; an applicant must establish a prima facie case with a probability of success, that he must show that he might suffer irreparable injury which would not adequately be compensated by an award of damages and finally if the court is in doubt, it will decide an application on the balance of convenience.

15. InRobert Mugo Wa Karanja v Ecobank (Kenya) Limited & another [2019] eKLR, the court held: -“The circumstances for consideration before granting a temporary injunction under Order 40 rule 1 of the Civil Procedure Rulesrequires a proof that any property in dispute in a suit is in a danger of being wasted, damaged or alienated by any party to the suit or wrongfully sold in execution of a decree or that the defendant threatens or intends to remove or dispose the property, the court is in such situation enjoined to grant a temporary injunction to restrain such acts.”

16. In the present case, there is no dispute about the facilities offered. The dispute is about the securities offered and whether with the demise of one of the directors of the 1st plaintiff, the outstanding amount was cleared by the life cover. There is on record a proposal form to insure the lives of the 1st plaintiff’s directors for Kshs 115,200,000/=. On the other hand, the defendant insists that the life cover was not that sum but Kshs 20,000,000/= which it paid after the demise of David Gitau.

17. To this court’s mind, that is a serious issue that needs to be determined at the trial. If it turns out that the amount of cover was Kshs 115,200,000/=, then wwith the demise of the said David Gitau, the defendant should have recouped that entire sum thereby extinguishing the debt. If by that time the charged property would have been paid, the same would not be recoverable. NO amount of damages would compensate the plaintiffs.

18. Further, the plaintiffs would suffer the greater harm should they lose the charged property preliminarily without an opportunity of having prosecuted their suit. On the other hand, the defendant, if successful, would recover the debt and be compensated through interest and costs of the suit. The balance of convenience lies with the plaintiffs.

19. In light of the above, the court allows the application as prayed with costs to the plaintiffs.It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 16TH DAY OF SEPTEMBER, 2022. A. MABEYA, FCIArbJUDGE