Astute Africa Investments & Holding v Spire Bank Kenya Limited & another [2018] KEHC 3360 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

COMMERCIAL & TAX DIVISION

CIVIL CASE NO.455 OF 2017

ASTUTE AFRICA INVESTMENTS & HOLDING.................PLAINTIFF

VERSUS

SPIRE BANK KENYA LIMITED ..................................1^ST DEFENDANT

JOSEPH M. GIKONYO t/a                                                                             

GARAM INVESTMENTS AUCTIONEERS................2^ND DEFENDANT

R U L I N G

Before this Court is the Notice of Motion dated 9^th November 2017 in which the Plaintiff/Applicant approached the Court seeking the following orders:-

1. SPENT

2. SPENT

3. SPENT

4. THAT the Honourable Court be pleased to grant a temporary injunction restraining all the Defendants/Respondents whether by themselves, their servants, agents, representatives and or employees or anyone claiming under their name howsoever from advertising, offering for sale, purporting to sell, disposing off by way of public auction or in any other way alienating Land Reference 7785/381 situated in Runda Estate, Nairobi City County and registered in the names of Plaintiff pending the hearing and determination of the suit herein.

5. THAT an order do issue directing the 1^st Defendant to render accounts of money paid by the Plaintiff and interest debited to the Plaintiff’s loan account from the date of the loan facility to date.

The application which was premised upon Sections 2A, 1B, 3A and 63(c ) and (e) of the Civil Procedure Act, Order 40 Rule 2(1) 4(1), Order 20 Rule 1 of the Civil Procedure Rules was supported by the Affidavit sworn on 9^th November 2017 by DAVID THUO, A Director of the Plaintiff company. The said DAVID THUO also swore a Supplementary affidavit on 20^th November 2017.

SPIRE BANK KENYA LIMITED (the 1^st Defendant) opposed the application by way of the Replying Affidavit sworn on 13^th November 2017 by JOHN WAGECHE the Senior Legal Officer at the Bank.

Following directions given by the court the matter was disposed of by way of written submissions. The plaintiffs filed their submissions dated 5^th December 2017 on 8^th December 2017. The 1^st Defendant also filed their written submissions on 8^th December 2018. Thereafter the Plaintiff/Applicant filed supplementary submissions dated 8^th February 2018.

The brief facts of the case leading up to this application are as set out below. The Plaintiff/Applicant is the registered owner of the property known as Land Reference No.7785/381, situated in Runda Estate, Nairobi County (hereinafter referred to as the “suit property”.) Sometime in February 2014 the Plaintiff charged the suit property in favour of the 1^st Defendant in order to secure a loan facility of US Dollars 180,000.00 advanced to them by the Bank. The Plaintiff/Applicant later fell into arrears in serving this loan.

On 13^th April 2017, the 1^st Defendant served the Plaintiff/Applicant with the 90 day notice to sell the suit property by way of public auction or by private treaty. Thereafter the auctioneers JOSEPH M. GIKONYO t/a GARAM INVESTMENT AUCTIONEERS (the 2^nd Defendant herein) acting under instructions from the Bank, served the Plaintiff/Applicant with the 45 day notice of intended sale of the suit property by way of public auction.

The Plaintiff/Applicant contends that they were never served with the mandatory Statutory Notice as required in law. They further contend that the intended sale of the suit property at a cost of Kshs.32,000,000/= was a breach of the statutory duty of care owed by the Bank to the Plaintiff/Applicant as the prevailing market price for the suit property was Kshs.50,000,000/=.  Therefore the Plaintiff/Applicant’s case is that the intended sale of the suit property by the Defendants through a public auction at a grossly undervalued price, is illegal and unfetters their statutory right of redemption of the charge. As such the Plaintiff/Applicant sought injunctive Orders to restrain the defendants from disposing of the suit property by public auction pending the hearing of the suit.

As stated earlier the application was vehemently opposed by the Defendants. The 1^st defendant categorically refutes the Plaintiff/Applicants allegation that the bank failed to serve them with the requisite Statutory Notice and that no valuation on the property had been conducted. The 1^st defendant firmly asserts that they issued the Plaintiff/Applicant with the Statutory Notice by way of registered post using the address provided to the Bank in the charge documents. An advance copy of that statutory notice was forwarded to the Plaintiff/Applicant on 9^th January 2017 through e-mail and the Plaintiff/Applicant did acknowledge receipt of the same.

Regarding the question of valuation of the suit property the 1^st defendant averred that a valuation was conducted in December, 2015 by which valuation the property was found toto have an open market value of Kshs.32,000,000/= with a forced sale value of kshs.24,000,000/=. A subsequent valuation was conducted on 11^th October 2017 which found the market value of the suit property to be kshs.38,000,000/= with a forced sale value of Kshs.28,500,000/=. Copies of the statutory notice valuation reports, certificate of posting as well as the relevant e-mails were all annexed to the Replying Affidavit.

The 1^st defendant submitted that in view of the above and considering that the Plaintiff/Applicant had not denied the existence of the debt, an injunction cannot issue. The defendant urged the court to dismiss the application with costs.

In response to the Replying Affidavit filed by the 1^st Defendant on 13^th November 2017 the Plaintiff/applicant filed a Supplementary Affidavit in which they challenged the legality of the charge. The Plaintiff/Applicant averred that the Charge document was fatally defective as the 1^st defendant had failed to secure consent from the Land Control Board as required by law. They therefore submitted that the Charge document was unenforceable as it did not conform to the Statutory Provisions.

ANALYSIS AND DETERMINATION

Following the facts as narrated above the following are the issues which arise for determination in this case.

(i) Was a Statutory Notice served upon the Plaintiff/Applicant and was the suit property valued?

(ii) Is the Charge Document Defective and therefore void?

(iii) Has the 1^st Defendant satisfied the duty of care owed to the Plaintiff/Applicant?

(iv) Has the threshold for grant of an injunction been met?

I will proceed to deal with each issue individually

Was the requisite Statutory Notice issued and was the suit property valued?

The Plaintiff had alleged that they had not been issued with the Statutory Notice. The 1^st defendant vehemently refuted this allegation and attached to its Replying Affidavit the Statutory Notice dated 9^th January 2017 which had been sent to the Plaintiff/Applicant by way of registered post. The certificate of Posting is annexed. In addition an advance notice of the statutory notice was sent via e-mail and this was acknowledged by the Plaintiff/applicant as seen in the annexture “JW5” where one “David Thuo” for the 1^st defendant in an e-mail sent on 10^th January 2017 at 10.01 a.m. states “Your notices were received yesterday”. It has therefore been proved that contrary to the allegations by the Plaintiff/Applicant they were in fact properly served with and acknowledged receipt of the Statutory Notice.

The Plaintiff/Applicant also alleged that no valuation had been done on the suit property. This too was denied by the 1^st Defendant who annexed to their Replying Affidavit a copy of the Valuation Reports dated 7^th December 2015 and 16^TH October 2017 respectively. The Plaintiff/Applicants did not offer any rebuttal to the evidence supplied by the 1^st Defendant respecting the valuation of the suit property. In any case based on the written submissions filed by the Plaintiff/Applicant it is clear that they had abandoned these grounds for the application. I therefore find no basis for the above allegations. I am satisfied that the requisite Statutory Notice was served upon the Plaintiff/Applicant and I find that a valuation of the suit property was in fact undertaken.

Was the Charge Document defective?

The Plaintiff/applicant claimed in their submissions that the charge document relied on by the 1^st Defendant was void and did not conform to legal requirements. The 1^st defendant countered by pointing out that this was a fresh averment that was only introduced by the Plaintiff/Applicant at the point of making its submissions. Nowhere in the initial pleadings had such an allegation been made. The 1^st defendant urged that the Plaintiff/applicant ought to be bound by its pleadings and ought not to be allowed to introduce through their submissions extraneous matters which were not contained in the initial pleadings.

It is trite law that a party to a suit will be bound by its pleadings. Courts have in several cases upheld the importance of adhering to this principle. In JOSHUA MUNGAI MULANGO & ANOTHER –VS- JEREMIAH KIARIE MUKOMA [2015] eKLR the Court of Appeal held as follows:

“Parties are bound by their pleadings. The court is bound to determine a dispute on the basis of the pleadings filed by the parties and the evidence adduced on the basis of such pleadings. In an adversarial system such as ours, it is the parties who set the agenda for the trial by their pleadings. The need for this cannot be gainsaid. For the purpose of ensuring certainty and finality, a party cannot be allowed to resile from its pleadings without due amendment. Each party knows the case he has to meet and cannot be taken by surprise. The purpose and importance of the rules in this regard clearly is to ensure that litigation is conducted in a framework that will guarantee fair play without prolixity and needless escalation of litigation costs.” [own emphasis].

Similarly in INDEPENDENT ELECTORAL AND BOUNDARIES COMMISSION & ANOTHER –VS- STEPHEN MUTINDA MULE & 3 OTHERS [2014] eKLR the Court of Appeal held

“….it is now a very trite principle of law that parties are bound by their pleadings and that any evidence led by any one of the parties which does not support the averments in the pleadings, or put in another way, which is at variance with the averments of the pleadings goes to no issue and must be disregarded…”

In the same case the court went on to hold that;-

“In fact that parties are not allowed to depart from their pleadings is on the authorities basic as this enables parties to prepare their evidence on the issues as joined and avoid any surprises by which no opportunity is given to the other party to meet the new situation.”

Finally on this point in HELLEN WANGARI WANGECHI –VS- CARUMERA MUTHONI GATHUA [2015] eKLR it was held:-

“As parties are adversaries it is left to each of them to formulate his case in his own way subject to the basic rules of pleadings…for the sake of certainty and finality, each party is bound by his own pleadings and cannot be allowed to raise a different or fresh case without due amendment properly made. Each party knows the case he has to meet and cannot be taken by surprise at the trial. The court itself is bound by the pleadings of the parties themselves…” (own emphasis)

Therefore authorities abound on the point that a party cannot be allowed to go outside its own pleadings.

The Plaintiff/Applicant submitted that the issue of the defective charge document had in fact been pleaded and refer to paragraph 13 of the Plaint, dated 9^th November 2017 paragraph 12 of their Supporting Affidavit of even date and paragraph 7 of their Supplementary Affidavit. Paragraph 13 of the Plaint which is reiterated at paragraph 12 of the Supporting Affidavit reads as follows:-

“The Plaintiff is apprehensive that the planned sale by public auction is an attempt by the Defendants to defeat its statutory right to redeem the suit property, unlawfully and unjustifiably dispossess it of the suit property without following the procedure of law”.

By paragraph 12 of the Plaint the Plaintiff/Applicant had accused the Defendants of failing to follow the due process of law. This allegation flowed from the averments that the 1^st Defendant had failed to serve them with the Statutory Notice and that no valuation of the suit property had been done. The Plaint as filed did not touch at all on the legality or otherwise of the Charge document. In any event the question of the legality of the Charge is a matter of substance and cannot amount to a procedural default.

It is only in Paragraph 7 the Supplementary Affidavit sworn on 20^th November 2017 that the Plaintiff/Applicant avers

“That the 1^st Respondent has not demonstrated that the Charge document conforms to Statutory Provisions”

The question of the legality of the charge was not raised in the Plaint or in the Notice of Motion dated 9th November 2017. To raise it by way of the Supplementary Affidavit amounted to raising fresh or different issues at a very late stage. The general purpose of a Supplementary Affidavit is to allow the Plaintiff/Applicant to respond to the 1^st Defendant’s Replying Affidavit or in the alternative to buttress and/or clarify the averments in the Supporting Affidavit. The Plaintiff/Applicant cannot use its Supplementary Affidavit as a means to introduce new facts or raise issues that were not at the core of the suit or the application. Raising this issue at such a late stage means that the 1^st Defendant had no opportunity to respond to the same to their prejudice. For this reason I am inclined to disregard this issue of the legality of the charge.

Even if this court were to address the question of the legality or otherwise of the charge document, the fact of the matter is that the Plaintiff/Applicant has not denied benefitting from the loan in question. Nor has it denied its indebtedness to the 1^st Defendant. The Plaintiff/Applicant cannot so late in the day seek to renege on its obligations to the 1^st defendant by claiming that the Charge documents were defective. This is a matter which ought to have been raised at the very first opportunity. I therefore dismiss this ground of the application.

Duty of care owed by the 1^st defendant to the Plaintiff/Applicant.

The Plaintiff/Applicant contends that the 1^st defendant intended to sell the suit property at an unreasonably low price, much below the market price of Kshs.50 million or the forced sale value of Kshs.40 million. The plaintiff/Applicant’s contends that this intended sale well below the market price was unlawful and amounted to a breach of the duty of care owed them by the 1^st defendant. Section 97(1) and (2) of The Land Act imposes on a chargee a duty of care to obtain the best possible price at the time of sale. It is not in dispute that the 1^st defendant conducted a valuation on the suit property. The Valuation Report of October 2017 put the market value of the suit property at Kshs.38 million with a forced sale value of kshs.28,500,000/=. The Plaintiff/Applicant has not produced to the bank or annexed to its court documents a counter valuation report in support of its allegation that the current market value of the suit property is Kshs.50 million with a forced sale value of Kshs.40 million. The Plaintiff/Applicant has therefore failed to substantiate its allegation that the 1^st Defendant had breached its duty of care by undervaluing the suit property. There is nothing to show that the 1^st defendant intended to sell the suit property for anything other than the best obtainable price. This allegation therefore holds no water and is dismissed.

Has the threshold for the grant of an injunction been met?

The principles governing the grant of an injunction are well known and are set out in the case of GIELLA –VS- CASMAN BROWN & CO. LTD [1973] E.A 358. They are that, first the applicant must show a prima facie case with a probability of success, secondly an interlocutory injunction will not be granted unless the Applicant stands to suffer irreparable loss which cannot be compensated through an award of damages, and thirdly if the court is in any doubt it should decide the application upon a balance of convenience.

It is manifestly clear that the Plaintiff/Applicant has failed to establish a prima facie case with a probability of success. The Plaintiff/Applicant has not denied its indebtedness to the 1^st defendant. It has been proved that the 1^st defendant did serve upon the Plaintiff/Applicant the requisite Statutory Notice informing them of the intended sale of the suit property by way of public auction. The 1^st defendant did conduct a valuation on the suit property in compliance with the law before the same was advertised for sale therefore there was no breach of the duty of care. In light of the foregoing there exists no valid reason for this court to step in and prevent the 1^st Defendant from exercising its statutory power of sale.

Finally based on the foregoing it is my finding that no prima facie case has been established by the Plaintiff/Applicant to warrant the grant of the orders sought.

Accordingly, I do dismiss the present application with costs to the 1^st Defendant.

 Dated in Nairobi this……….….day of October, 2018.

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Justice Maureen A. Odero

Ruling delivered at the Nairobi High Court this…5^TH ..day of OCTOBER, 2018.

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 JUDGE