Mathew Kiprono v Consolidated Bank of Kenya & another [2019] KEHC 6489 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT ELDORET

CIVIL CASE NO. 28 OF 2018

MATHEW KIPRONO.................................................................................PLAINTIFF

VERSUS

CONSOLIDATED BANK OF KENYA...........................................1^ST DEFENDANT

IGARE AUCTIONEERS................................................................2^ND DEFENDANT

RULING

The applicant filed an application dated 2/7/2018 seeking orders for a temporary injunction against the defendants to restrain them from interfering with the Plaintiff’s possession/ownership of title number NANDI/CHEPTIRET/1403.

The application is based on the grounds that the Applicant applied for a loan of kshs. 1,000,000/- from the 1^st defendant and used the suit land as security. The loan was to enable him perform and service a contract awarded to him by the County Government of Nandi. The facility was granted and it was agreed that the county government of Nandi would make payments directly to the bank. The applicant completed the work but the amount was not paid.

The respondents commenced the auction process on the suit land allegedly without notice. The applicant is ready to service the loan and the value of the land is much higher than the loan facility. The applicant also earthed the application on the premise that he is likely to suffer irreparable harm if the orders sought are not granted.

APPLICANT’S CASE

The applicant filed submissions on 29^th November 2018 in support of the application. He filed a supporting affidavit with the application on 2^nd July 2018.

The applicant submitted that he was not served with the statutory notice as required under Sections 90(1) and 90(2)(b) of the Land Act 2012. The onus is upon the defendants to prove service of the said notices. He relied on the case if Nyangilo Ochieng’ & Another vs Kenya Commercial Bank to buttress this point.

He submitted that the defendants failed to serve the applicant with a notice to sell as required under Section 96(2) and (3) of the Land Act. A notice to sell was also not served upon the spouse to the applicant who gave consent as per the respondents’ replying affidavit.

The applicant submitted that a notification of sale under rule 15 of the auctioneers was not served upon the applicant. The 2^nd defendant did not swear any affidavit of service to prove the service of the same and there is no certificate from the auctioneer attached to state that the registered owner refused to sign the notification of sale annexed as B05C on the respondents’ replying affidavit. He relied on the case of Moses Kibiego Yator vs Eco bank Kenya Ltd (2014) eKLR. He further submitted that the absence of the proof of service of notification of sale was a clog on the equity of redemption.

The applicant cited the case of Giella vs. Cassman Brown & Co. Ltd (1973) E.A on the principles of an injunction. Further, he submitted that the above violations presented a prima facie case. He had shown that he will suffer irreparable loss and that the loss cannot be compensated by an award for damages. The property is a matrimonial home and if sold the family shall be rendered homeless.

The applicant submitted that his decision to allow the 1^st defendant receive the amount directly from the County Government of Nandi is proof of his willingness to settle the debt. Further, that it is clear that the amount has not been paid to the applicant thus the application is in good faith.

1^ST & 2^ND DEFENDANT’S CASE

The defendant submitted that their replying affidavit sworn on 18^th July 2018 is supported by several annexures that show the relationship between the parties. The applicant does not deny the existence of a debt as per paragraphs 14, 18 and 22 of the supporting affidavit.

For the plaintiff to show that he has a prima facie case he ought to have shown that he was not in default of his repayment obligations and that the exercise of the defendants’ statutory power of sale does not comply with the law.

Through annexure BO-3 the 1^st defendant has shown that the principal borrower, the plaintiff’s company, defaulted in repaying the loan facility advanced and despite being informed of the default he did not make any payments as the last payment was made on 5^th October 2016 and it was of Kshs. 1,500/-. The default having been admitted and shown in the defendant’s reply, the plaintiff cannot make a case worthy of him being granted an injunction. The defendant cited the case of John Edward Ouko v National Industrial Credit Bank to support this submission.

The 3^rd party, Nandi County Government was not privy to the contract and the plaintiff cannot incorporate it to the said contract and ask the defendant to wait for it to pay. This would amount to an attempted amendment of the contract. The defendant relied on the case of National Bank of Kenya Ltd. Vs Pipelastic Samkolit (K) Ltd & Another [2001] eKLR on whether a court of law can rewrite a contract between parties.  The non-payment by the County Government cannot be an issue in this suit.

It was the plaintiff’s duty to repay the outstanding amount on demand upon default as per the law and the terms of contract. Upon guaranteeing the loan he had an obligation to repay the same upon default by the borrower. The defendants relied on the case of Ebony Development Company Ltd. V Standard Chartered Bank Ltd [2008] eKLR.

The defendants submitted that it has been shown without rebuttal that the notices were served through the plaintiff’s and the principal borrower’s postal address as contained in the charge instrument. They referred to paragraphs 8 and 9 of the replying affidavit and the annexures marked BO-4(a), (b), (c) & (d) & BO – 5 (a), (b) & (c) being the statutory notices and the certificates of postage.

The 1^st defendant complied with the obligation to undertake a valuation prior to sale as required under Section 97(2) of the Land Act, 2012 as evidenced by annexure BO-6. The defendants submitted that they complied with their statutory obligations and therefore there is no prima facie case.

The defendants submitted that if the court finds that the statutory obligations were not complied with the appropriate remedy would be to stall the sale pending issuance of fresh notices and not to grant an injunction. They cited the cases of Albert Mario Cordeiro & Another v Vishan Shamji [2015] eKLR and Moses Kibiego Yator vs Eco Bank Kenya Ltd [2014] eKLR.

The defendants submitted that the plaintiff has not pleaded or provided any proof of loss that he might suffer should the suit property be sold. The 1^st defendant has shown that it stands to suffer irreparably as the outstanding amount may outstrip the value of the suit property for the same continues to accrue interest.

The defendant has undertaken a valuation of the suit property in accordance with Section 97(2) of the Land Act and the value of the suit property is known. The plaintiff can therefore be compensated monetarily in the event that the court finds that the exercise of power of sale was irregular.

The deposition that the suit is his matrimonial home is not a matter to be considered when determining irreparable loss. The plaintiff has not proven that he offered the suit as security out of coercion or mistake and thus cannot plead sentimental attachment to the property to restrain the 1^st defendant’s exercise of its legally protected statutory power of sale. On irreparable loss the 1^st defendant relied on the case of Andrew Muriuki Wanjohi v Equity Bank Building Society Limited & 2 others [2006] eKLR.

The defendants submitted that the balance of convenience lay in allowing the 2^nd defendant proceed with the statutory power of sale for the following reasons;

·   The plaintiff has admitted default and the 1^st defendant has provided true statements of account reflecting that the outstanding balances is of Kshs. 1, 173,366.50/- which continue to accrue interest.

·   The last payment was made on 5^th October 2016 and since the institution of the suit neither the plaintiff or the borrower has attempted to offset the same.

The suit was only brought as a way to prevent the defendant from exercising its legally sanctioned and protected power of sale over the charged property.

ISSUES FOR DETERMINATION

a) Whether the Applicant has a Prima Facie case

b) Whether the applicant stands to suffer irreparable loss

c) Balance of convenience

WHETHER THE APPLICANT HAS A PRIMA FACIE CASE

In order to determine whether there exists a prima facie case the court needs to determine whether the defendants failed to comply with their statutory obligations with regards to the notice of sale under section 90 and 96 of the Land Act and the auctioneer’s rules. The issue of the existence of debt is not denied.

·   Were the requirements statutory notice of sale under Land Act complied with?

Section 90 of the Land Act states;

(1) If a chargor is in default of any obligation, fails to pay interest or any other periodic payment or any part thereof due under any charge or in the performance or observation of any covenant, express or implied, in any charge, and continues to be in default for one month, the chargee may serve on the chargor a notice, in writing, to pay the money owing or to perform and observe the agreement as the case may be.

Section 96 of the Land Act provides;

(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.

(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.

Annexure BO-4(a) is the statutory notice under section 90(1) and (2) of the Land Act and is dated 12^th January 2017. Annexure BO-4(b) is a statutory notice dated 21^st April 2017 as per section 96 of the Land Act. The notice under section 90 gave the applicant 30 days to settle the default and he did not. The second notice was well within the period required for the same to issue.

Were the notices duly served?

The 1^st defendant annexed certificates of postage as annexure BO-4(c) & (d) as proof that the notices were served upon the applicant. In the case of Elizabeth Wanjiku Kariungi v Equity Bank (Kenya) Limited [2017] eKLR the court held;

20. Whilst I do share the view expressed by my learned brother concerning the fact that service of a valid statutory notice of sale on the chargor is a condition precedent to the exercise of the chargee’s statutory power of sale, I am unable to find the legal basis for the contention that the chargee has an obligation of ensuring that the chargor collected or received the notice which was sent by registered post.

21. In my considered view, when the court imposes upon the chargee the obligation of demonstrating knowledge of when the chargor received or collected the notice which had been dispatched by registered post, that constitutes an extra burden, which was not anchored in statute.

22. The chargor has an obligation to dispatch the notice to the correct postal address.

23. The chargor’s other duty is to ensure that the contents of the notice meet the requirements set out in the Land Act.

24. My considered opinion is that the chargee does not have any control over the chargor, so as to be able to ensure that the chargor collects or receives the notice.

The upshot of the foregoing is that the chargee only has to prove that the notices were sent by registered post to the correct postal address to prove service was effected and that the said notice met the requirements set out in the Land Act.  Such has been well established.

Rule 15 of the Auctioneer’s rules states;

“Upon receipt of a court warrant of letter of instruction the auctioneer shall in the case of immovable property-

Give in writing to the owner of the property a notice not less than forty-five days within which the owner may redeem the property by payment of the amount set forth in the court warrant or letter of instruction.”

The defendants acknowledged receipt of instructions from the 1^st defendants as per annexure BO-5(a) and served the redemption notice as per annexure BO-5(b) &(c). However, there is no certificate indicating that the proprietor refused to sign as per rule 15(c) of the auctioneer’s rules. In the case of Moses Kibiego Yator VS Eco Bank Kenya Limited (2014) eKLR, it was held as follows:

The applicant stated that he found the Notification of sale on 29 August 2013 in his home. The prudent thing for the defendant to have done would have been to have the auctioneer swear an affidavit and say when, and upon whom, he served the Notification of Sale. If the proprietor refused to sign, then the requisite certificate ought to have been attached. None was done and I have no material to doubt the averments of the plaintiff that he was not served properly…

The court proceeded to bar the statutory sale based on the fact that the service of the notice was irregular. In the absence of a certificate the applicant cannot be deemed to have been properly served. In the premises the statutory power of sale is irregular for the reason that there is no certificate to prove the proprietor refused to sign.

WHETHER THE APPLICANT STANDS TO SUFFER IRREPARABLE LOSS

In Paul Gitonga Wanjau vs. Gathuthi Tea Factory Company Ltd & 2 Others [2016] eKLR the Court considered the Halsbury’s laws of England on what irreparable loss is, and stated that:

“first, that the injury is irreparable and second, that it is continuous. By the term irreparable injury is meant injury which is substantial and could never be adequately remedied or atoned for by damages, not injury which cannot possibly be repaired and the fact that the plaintiff may have a right to recover damages is no objection to the exercise of the jurisdiction by injunction, if his rights cannot be adequately protected or vindicated by damages.”

In the case of Andrew Muriuki Wanjohi v Equity Building Society Ltd & 2 others [2006] eKLR the court held;

By offering the suit property as security the chargor was equating it to a commercial commodity which the chargee may dispose of, so as to recover his loan together with interest thereon.

The applicant has failed to demonstrate that he will suffer irreparable loss that cannot be compensated by way of damages. The property being his matrimonial home is not proof that he will suffer irreparable loss.

BALANCE OF CONVENIENCE

Given that there is an irregularity with the issuing of the redemption notice, the balance of convenience lies in granting the orders sought so as to allow the notice be served correctly.

In conclusion the application succeeds only to the extent that the respondents regularize the issuing of the redemption notice. Should the applicant refuse to acknowledge service of the same the 2^nd respondent should ensure that he complies with rule 15(c) of the auctioneer’s rules by signing and attaching a certificate to that effect.

Costs be in the cause.

S. M GITHINJI

JUDGE

DATED, SIGNED and DELIVERED at ELDORET this 6^th day of June, 2019.

In the presence of:-

Mr. Langat for defendant/Respondent

Ms khayo for Plaintiff/Applicant

Ms Sarah - Court clerk