Timothy Lucheli Injendi v Family Bank Co Ltd [2014] KEHC 3025 (KLR)

REPUBLIC OF KENYA.

IN THE HIGH COURT OF KENYA AT BUSIA.

ELC. NO. 66 OF 2014.

TIMOTHY  LUCHELI  INJENDI………………………PLAINTIFF

VERSUS

FAMILY BANK CO. LTD.,…………………………. DEFENDANT

R U L I N G.

TIMOTHY  LUCHELI INJENDI, hereinafter referred to as the Applicant, filed notice of Motion  under certificate of urgency  dated 24th March, 2014 against  FAMILY BANK COMPANY  LIMITED, hereinafter referred  to as the Respondent, for interlocutory  injunction restraining the Respondent  against selling, transferring,  alienating and or conveying  Bukhayo/Mundika/2212  pending  hearing  and determination of this suit. The  application  is based on twelve  grounds set out on the face  of the application and the affidavit of Timothy Lucheli  Injendi sworn on 24th March, 2014  in which he inter alia  depones to the following;-

That the  Respondent  had not promptly informed  the Applicant when  the principal  debtor fell into arrears of loan payment.

That he had not been served with the statutory notice and therefore the Respondent’s  statutory power of sale had not arisen.

That he had not been served with a notification of sale.

That the Respondent has not carried out a valuation of the land as required before the commencement of the statutory power of sale.

That the Respondent is demanding an amount way above the amount guaranteed.

That the suit land is ancestral land and its sale would result to  displacement of elderly family  members.

That he has a prima facie case with a probability of success and damages would not adequately compensate him if the  intended sale was allowed to proceed.

The application is opposed by the Respondent through the replying affidavit of Daudi Kimathi Kiema, a Branch  Manager  with the Respondent,  sworn on 22nd April, 2014 in which he among others depones  as follows;-

That Applicant had charged the suit land Bukhayo/Mundika/2212 to guarantee a loan of Kshs.1,000. 000/= to his son named Samson Injendi Lucheli on 19th September, 2011.

That the borrower defaulted in the loan repayment which at the time of swearing the replying affidavit stood at Kshs.924,076/=, when  he was supposed to have cleared it in 48 months in equal installments of Kshs.30,140/=.

That Respondent instructed Pawaba Auctioneers who issued the Statutory Notice to the debtor and chargor pursuant to section 96 (1) of Land Act 2012.

That Pawaba Auctioneers had a valuation done on the property before  commencing  the procedure of the statutory sale.

Counsel for the parties then consented to the application  being disposed  off through written  submissions.  M/S.  Wambua  Kigamwa and A.W. Kituyi  & company advocates appeared for the Applicant and Respondent  respectively and filed written submissions both dated 17th June, 2014. The court  having considered the grounds on the face of the application, submissions by both counsel, supporting and reply affidavits finds as follows:-

That indeed the Applicant  charged the suit land, Bukhayo/Mundika/2212 with the Respondent to guarantee one Samson Injendi Lucheli  a loan of Kshs.1,000. 000/=.  The Applicant duly executed  the guarantee and indemnity document dated 19th September, 2011 which is annexed to the replying affidavit.

That the said Samson  Injendi  Lucheli defaulted in the loan repayment  and by 24th March, 2014  when the Applicant filed this application, the  outstanding  loan and interest stood at about Kshs.924,076/= as  shown in the copy of bank statement  attached to the replying  affidavit.

That clause 27 of the Guarantee and indemnity document between the Applicant  and Respondent  and dated 19th September, 2011, provided for service of notices to the guarantor and stated:

‘’ Any notice  or demand for payment by the bank  under this guarantee shall be deemed to have been properly served on the Guarantor if delivered by hand or sent by registered post, telex or fax addressed to     the Guarantor or to a person or upon whom the  notice or demand  is to be made at the registered or principal place of business or last know place of     abode of the Guarantor or of such person, as  the  case may be; in the absence of evidence of earlier  receipt, any  notice or demand shall be deemed to     have been received , if  delivered by hand, at  the time   of delivery or if  sent by post, four  days after the date   of posting (notwithstanding that it be undelivered  or    returned undelivered) or, if sent by telex or fax, on the  completion of transmission. Where  a notice or   demand  is sent by registered  post it shall be   sufficient to prove that the notice or demand  was  properly addressed and posted.’’

The Applicant has denied having received the notice which  is required to be served to a defaulting chargor under section  90 (1)  of the Land Act  No.6 of 2012. The Respondent states in paragraph  8 of the replying affidavit  that they instructed “Pawaba auctioneers who indeed  issue (sic)  statutory  Notice to the debtor and chargor respectively …………’’ The  affidavit by Paul Wamoto sworn on 22nd April, 2014 has three annexetures  as set out below:

Affidavit  of service  by Paul Barasa Wamoto  sworn on 15th April, 2014 .

Certificate of posting registered  postal  article addressed to Samson Injendi Lucheli.

copy of a newspaper page carrying out the advertisement for auction.

It is clear from a perusal of the documents set out above that none  amounts to a copy of the notice envisaged under section  90 (1) of the Land  Act. The documents do not also confirm that any service was effected to the Applicant herein as the person to whom the article was sent to under registered post is named as Samson Injendi Lucheli and not Timothy Lucheli Injendi.

That  the notice  under section 90 (1)  of the Land Act  is expected to contain  the details  set out under subsection 2  which includes; nature and extent of default by the charger, the  amount that must be paid to rectify the default and time of payment  and the consequence if default is not rectified within time given.  The Respondent having  been aware  that the Applicant  had denied having been served with such a notice would reasonably  have been expected to avail  a copy  to the court to rebut  or controvert such a claim  if it actually existed.

That it is after the chargor  has failed to comply with the notice served  under Section 90 (1)  of the Land Act that the chargee’s   power of sale arises bringing in the operations of section 96 (1)  of Land Act  that states:

‘’  96(1). Where a chargor is in default  of the obligations   under a charge and remains in default at the                         expiry of the time provided for the rectification  of that default in the notice served on the  chargor under section 90 (1), a  chargee may    exercise the power to sell the charged land.’’

The court, having  found as above that  there is no evidence to confirm that Respondent  had issued and served a notice envisaged under  section 90 (1)  of Land Act to the Applicant,  further  finds  that the Respondent’s  power to sell the charged property had not arisen by  the time the auction was advertised. This finding would suffice to deal with the application but the court  will proceed to consider the other issues raised.

That the affidavit of service by Paul Barasa Wamoto  referred  to  in (3)  above  does not mention of any service of notice to sell being served on the Applicant. The affidavit only refers to service of ‘’letter of notice and notification of sale of immovable property to Hellen Mmbone Andeyo  from whom the process server got the telephone number of Samson  Lucheli Injendi.  The process server then called the said Samson  on phone and subsequently  posted the  ‘’served  notice’’ to Samson  Lucheli Injendi’s  postal address. This does not amount to service on the chargor who is the Applicant herein, and contravenes both clause 27 of the Guarantee and the Indemnity document as  set out in (3)  above,  and section 96 (2)  of the Land Act  which states:

‘’  96(2) Before  exercising  the power to sell the charged  land, the  chargee shall  serve  on the chargor a                             notice  to sell in the prescribed form and shall  not proceed to complete any contract for the  sale of the charged land until at least forty  days   have elapsed from the date of the service of that  notice to sell.’’

That considering  the advertised  auction was to take place on 3rd April, 2014, the copy of the valuation  by Prime Valuers cannot be taken to satisfy the requirement of section 97 (2)  of the Land Act which  states:

‘’97 (2   A chargee shall before exercising  the right of  sale ensure that a forced sale valuation is                                        undertaken  by a valuer.’’

This finding  is informed by the following factors:

That the heading of the valuation report at page 1 shows that the purpose of the valuation was to  advise  the Respondent  on ‘’Current open  market  value for  mortgage purposes.’’  This may have been remedied by the inclusion at page 6 under paragraph C of the forced sale value being stated  but for the following other factors.

That the valuation report is dated 6th January, 2013 which is more than one year before the suit property was advertised for auction. The property values keep on changing and a valuation done more than one year before the advertisement of the auction cannot be relied upon to give a reliable forced sale valuation.  A similar  issue arose in the case of David Gitome Kuhiguka =versus=  Equity Bank Ltd., (2013) eKLR where Havelock J,  held:

‘’  Ironically, at page 13 of the report, the  valuers detail the forced sale value of the  suit property at Kshs.30,000. 000. However,   is this enough to satisfy the requirements    of section 97 (2) of the Land Act as  aforesaid?  In my opinion, it does not do   so far two reasons. Firstly, the valuer has clearly stated in its terms of reference that   it had been asked to advice on the suit  property’s current market value for    mortgage purposes. In other words, it  related to the amount that the Defendant   could/would lend  to the Plaintiff as per the charge dated 14th March, 2012  being  Kshs.5500,000/=. Secondly,  the Valuationby the time that the sale came round in  April, 2013, was over a year out  of date.      With  properties in and around  Nairobi in      the current property market boom, it may well be that,  the suit property could havevastly increased in value even for forced sale purposes in  the  14th months  period. As a result , lfind  that the Defendanthas not complied with section 97 (2)  of the   Land  Act in this connection.’’ (emphasize ours).

I may add that the property boom is not only in Nairobi but in all areas around the county headquarters. As the Learned Judge found in the case cited above, it is imperative that  a chargee gets a current valuation for forced sale valuation purposes and  the valuation  dated 6th January, 2013  does not suffice for the purposes of section 97 (2)  of the Land Act.

8.      That the contention  by the Applicant  that the suit land   was ancestral land whose sale would result to   displacement  of elderly family members  would not stop    the chargee to realize their powers to sell ones they have   satisfied the requirements  of the law.  The moment the Applicant charged the suit land with the Respondent, the land became a commercial commodity that can be  transacted as agreed   under the charge documents and  in accordance with the provisions of the law should the  Applicant be in default. The Applicant can only escape from such a predicament by ensuring the loan he guaranteed by charging the suit property does not run  into arrears.

That having found as above, and even though from the materials presented the loan the Applicant guaranteed may be in arrears, the Respondent’s apparent failure to comply with the express legal requirements preceding the advertisement of the auction shows the Applicant has a prima facie case with a probability of success as set out in the case of Giella –vs- Cassman Brown Co. Ltd.

The application dated 24th March, 2014 is granted in terms of prayer (1) pending hearing and determination of this suit with costs in the cause.

It is so ordered.

S.M. KIBUNJA,

JUDGE.

DATED AND DELIVERED ON 17th DAY OF JULY, 2014

IN THE PRESENCE OF;

JUDGE.