Sema Health Products Ltd v Housing Finance Corporation; Ali (Interested Party) [2022] KEHC 16164 (KLR)

Sema Health Products Ltd v Housing Finance Corporation; Ali (Interested Party) (Civil Case E654 of 2021) [2022] KEHC 16164 (KLR) (Civ) (9 December 2022) (Ruling)

Neutral citation: [2022] KEHC 16164 (KLR)

Republic of Kenya

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

Civil

Civil Case E654 of 2021

A Mabeya, J

December 9, 2022

Between

Sema Health Products Ltd

Plaintiff

and

Housing Finance Corporation

Defendant

and

Ramadhani Juma Ali

Interested Party

Ruling

1. This is a ruling on an application dated November 16, 2021. It was brought under article 159 (2) (e) of theConstitution, sections 1A, 2B & 3A of the Civil Procedure Act, order 10 rule 2, order 40 rule 1, order 50 rule 6 & order 51 of the Civil Procedure Rules.

2. The application sought to have the respondent restrained from evicting, collecting rent, transferring and/or in any other way interfering with the applicant’s ownership and occupation of that property known as LR No Nairobi/Block 93/1248 (Marcia Hotel). It also sought that the Court appoints a valuer to conduct a valuation of the property.

3. The application was supported by the affidavit of Margaret Nzioka sworn on November 16, 2021. The applicant’s case was that; in January 2016, the applicant took a loan facility of Kshs 65,500,000/= and a charge was created over the suit property to secure the loan.

4. It was the applicant’s case that the respondent had unjustly auctioned the suit property on August 25, 2021 without issuance of statutory notices, and in defiance of the Court’s directions of July 1, 2021. The applicant had been directed to deposit Kshs 5 million in a joint account but the respondent frustrated efforts to open one, and that the respondent failed serve notices on the estate of the deceased guarantor.

5. That the respondent also failed to conduct a valuation of the property and sold the property at a gross under value. The applicant thus averred that its equity of redemption was clogged and the sale was unjust.

6. The respondent opposed the application vide the replying affidavit of Regina Anyika sworn on December 9, 2021, a preliminary objection dated November 23, 2021 and the grounds of opposition dated November 23, 2021.

7. It was contended that the application was res judicata as the applicant had filed 6 different suits seeking similar orders. That the respondent’s advocates wrote the applicant on July 2, 2021 requesting confirmation to their proposed banks to enable it to commence with account opening, thus the allegation that the respondent frustrated the process was not true.

8. That the respondent’s advocates again wrote to the respondent on July 30, 2021 and requested that since the account opening would taker longer than expected, the should deposit Kshs 5 million into the respondent’s advocate’s client account at Bank of Africa and the same would be transferred to the joint account once opened.

9. The applicant remained unresponsive and that therefore, it was the applicant who failed to comply with the orders of July 1, 2021. That neither the 1st interested party nor the applicant responded to the letter dated June 21, 2021 which indicated certain conditions that were to be met.

10. That the applicant only wrote on August 27, 2021 indicating that the 1st interested party had passed on thus it was impossible to avail any of the requested details. The respondent also contended that it had already served the statutory notices once and the court had in E063 of 2018 rendered itself on the issue of notices thus the same was res judicata.

11. The respondent stated that a valuation was conducted an advertisement made and the suit property sold to the 2nd interested party on August 24, 2021 as the highest bidder at Kshs 121,000,000/=. The deposit had since been paid.

12. That the applicant was notified of the sale on August 30, 2021 but only brought this application three months later. That the applicant no longer had an interest in the property and the only available remedy was damages.

13. The 2nd interested party opposed the application vide the replying affidavit of Yuanxiang Zhang sworn on January 14, 2022. He contended that following the advertisement placed on the Daily Nation on August 5, 2021 and August 16, 2021, for the public auction of the suit property, he attended the auction and successfully bided at Kshs 121,000,000/=. That he was issued with a certificate of sale and made a deposit of Kshs 12,100,000/= and thus became a bonafide purchaser for value.

14. That the auction could not be set aside unless there was proof of fraud, misrepresentation or improper conduct on the respondent’s part to which the 2nd interested party had no notice of.

15. The application was canvassed by way of written submissions. The applicant’s, respondent’s, and 2nd interested party’s submissions were dated March 1, 2022, March 28, 2022 and March 29, 2022, respectively. The court has considered the entire record.

16. This is an injunction application. The applicable principles as set out in Giella v Cassman Brown & Company Limited[1973] EA 358, are that the applicant should establish a prima facie case with a probability of success, he must demonstrate that damages would be inadequate and if the Court is in doubt, it will determine the matter on a balance of convenience.

17. On prima facie case, although the applicant faults the respondent for non-compliance with the court orders of July 1, 2021, it was itself non-compliant. The applicant sought to apportion blame to the respondent for frustrating efforts to open the joint bank account. However, there is evidence that the non-compliance was on the applicant’s part.

18. The respondent promptly wrote to the applicant on July 2, 2021 seeking confirmation on the proposed account. This was only a day after the court’s orders. There was no response from the applicant. The respondent’s advocates again wrote on July 30, 2021 requesting that Kshs 5 million be deposited into their client’s account as the 30 days period was expiring and that the amount would be transferred to the joint account once opened. Again, there was no response. Till date, there is nothing to indicate that the applicant finally deposited Kshs 5 million into a joint account as directed.

19. Secondly, there was no evidence that the applicant provided further and better particulars of the 1st interested party as directed. The 1st interested party wrote to the respondent on June 3, 2021 and introduced himself as a mediator in the dispute and undertook to source for a buyer within 2 months, within which interest on the loan would not be charged. When the respondent wrote on July 2, 2021 requesting that certain conditions be met before it gives its consent for the sale, both the applicant and 1st interested party remained unresponsive.

20. It was not until August 27, 2021 when the applicant informed the respondent that the 1st interested party had passed on thus it was impossible to share the details requested for. The applicant cannot thus allege that the respondent frustrated the sale.

21. Further, the applicant was directed to obtain a grant and have the administrator/executor of the deceased’s guarantor to represent his estate. There was nothing to show that this direction was complied with. More still, the applicant was directed to pay the auctioneer’s fees and the respondent forwarded the auctioneer’s fee note in its letter dated July 2, 2021. There was no evidence of compliance with that either. The respondent’s consent was heavily dependent on the applicant’s compliance, in the absence of which the respondent withheld consent on merit.

22. The respondent proceeded with the sale on August 24, 2021. The applicant however alleged that statutory notices were not issued either to him, or to the estate of the deceased guarantor. The respondent’s position was that it had already served the notices and there was no need to serve fresh ones. That the court in HCC E063 of 2018 had already rendered itself on the issue of notices, thus it was res judicata.

23. The court has considered attachments produced as “RAI” and notes that the alluded to notices were never availed to this court. This court cannot ascertain that indeed the notices had been served. Further, the respondent did not attach any proceedings or ruling in HCCC E603 of 2018 to show that the court had pronounced itself on the issue of notices.

24. All that was availed was a notice of withdrawal dated October 24, 2018 and a consent dated February 8, 2019. None of those documents reveal the court’s position on the statutory notices to ascertain that the issue had already been determined.

25. Further, in paragraph 7 of the ruling dated July 1, 2021, the court found that the respondent was seeking to rely on notices from 2019 which were set aside by the court upon parties entering into a consent in HCC No E209 of 2019.

26. Again, it is not clear whether the notices set aside in that matter are the same notices sought to be relied upon by the respondent. This court cannot say with certainty that requisite statutory notices had been served thus absolving the need for issuance of fresh notices.

27. There is also another elephant in the room; service upon the estate of the deceased guarantor. The respondent did not indicate whether it had served the estate with the requisite notices. If at all the beneficiaries of the deceased have not taken any steps towards obtaining letters of administration/executor for his estate, then the respondent ought to have exercised other legal options to cite the family and take out the relevant letters, to enable it serve the notices upon the estate of the deceased.

28. Moreover, the applicant alleged that it was not served with the notification of sale, and the respondent did not rebut this allegation by providing the served notification of sale. This alone would have an adverse itself on the public auction that took place on August 24, 2021.

29. In the circumstances, this court forms the opinion that the appellant has established a prima facie case in as far as the lawfulness of the sale is concerned.

30. In RJR Macdonald v Canada (Attorney General), which was cited with approval by this court in Paul Gitonga Wanjau v Gathuthi Tea Factory Company Ltd & 2 others [2016] eKLR, court held of interlocutory injunctions:i)Is there a serious issue to be tried?;ii)Will the applicant suffer irreparable harm if the injunction is not granted?iii)Which party will suffer the greater harm from granting or refusing the remedy pending a decision on the merits? (often called" balance of convenience)”.

31. The question whether the 2nd interested party had any notice of fraud, misrepresentation or dishonest conduct on the part of the respondent so as to invalidate the sale at the public auction is indeed a triable issue that requires judicial consideration. As such, it is imperative that the suit property is preserved pending the determination of those issues.

32. That being the case, the applicant has not come with clean hands and continues to be non-compliant with several court orders.

33. The respondent complained of the applicant’s tendency to file a multitude of cases to deny it from recovering the loan, and termed this suit as res judicata. The Court has considered the various pleadings before it from other cases and though the suit property is constant in the cases, the nature of the cases and orders sought are not quite similar.

34. In this instance, the nature is materially different from the last six suits as it challenges the sale of the suit property and seeks to restrain the completion of the sale. The parties are different, and if the suit is entirely struck out, the 2nd interested party who has purchased the property would be greatly prejudiced.

35. The court however takes judicial notice of the multitude of cases that the applicant has filed as relates to the suit property. The applicant had already been given an opportunity to make good its debt in HC No E209 of 2019 wherein a consent dated October 8, 2020 was recorded allowing the applicant a 6 months payment moratorium. However, the applicant failed to settle the debt.

36. Litigation must come to an end and the applicant cannot continue taking the respondent in circles entering into consents knowing fully well that it shall not comply with the consented terms. Justice is a double edged sword. The applicant must be ready to comply with the very law that it seeks protection from and must come to justice with clean hands.

37. In this regard, the court makes the following orders: -a.Prayer 1 of the application is allowed on the following conditions: -i.The applicant pays to the respondent Kshs 10m within 14 days of this ruling.ii.The parties to open a joint interest earning account within 21 days of the applicant’s compliance with (i) above and the applicant continue to pay thereunto monthly instalments due on the loan until further orders of the Court or until the suit is determined.b.In default of compliance with a) above, the orders herein shall stand discharged.c.Each party to bear its own costs.

It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 9TH DAY OF DECEMBER, 2022. A MABEYA, FCIArbJUDGE