Background and Introduction
1. This is a ruling on the Applicant’s motion for a temporary injunction to restrain the Respondent bank from exercising its statutory power of sale over land parcel L.R. No. MUGUGA/GITARU/2824 (the suit property) pending hearing and determination of this suit. The Applicant is the chargor of the suit property, who admits being in loan default. The Respondent, as chargee, has moved to realize the security through a public auction. All requisite statutory notices under the Land Act (Sections 90 and 96) were served, and the Applicant does not dispute receipt of those notices.
2. The Applicant’s grievance is that the intended sale may be at a gross undervalue, contrary to the bank’s duty of care under Section 97 of the Land Act. In support, the Applicant points to two contradictory valuation reports commissioned by the bank. The first report of November 2022, assessed the property’s open market value at Kshs. 35 million and a forced sale value of Kshs. 26.25 million. A second, more recent report of October 2024 pegs the open market value at Kshs. 25 million with a forced sale value of Kshs. 18.75 million.
3. The Applicant contends that the sharp drop in value within two years is irregular and suggests the property might be sold at an unreasonably low price. On this ground, the Applicant alleges non-compliance with Section 97 of the Land Act (which requires a chargee to obtain the best reasonably obtainable price upon sale) and urges the Court to intervene and halt the auction.
4. The Respondent bank opposes the application. It acknowledges the discrepancy between the 2022 and 2024 valuations but attributes it to changed market conditions and possibly depreciation of the property over time. The bank maintains that it has fully complied with the law: it issued all mandatory notices and obtained a current valuation prior to scheduling the sale. In fact, the October 2024 valuation was procured precisely to fulfill the duty under Section 97(2) of the Land Act of having a recent professional valuation before sale.
5. The Respondent insists that the mere existence of a higher older valuation does not mean the current valuation is flawed. Notably, the bank indicates it has no objection if an independent valuer is appointed to appraise the property afresh. The core question for determination is therefore whether the two conflicting valuation reports and the Applicant’s allegations under Section 97 of the Land Act establish a sufficient ground to grant an interlocutory injunction.
Analysis and Determination
6. The power of this Court to grant a temporary injunction is codified in Order 40 Rule 1 of the Civil Procedure Rules. The conditions for granting an interlocutory injunction are well established in the famous case of Giella v. Cassman Brown & Co. Ltd (1973) EA 358. An applicant must demonstrate the following elements to merit injunction relief;
i. Prima facie case with a probability of success
ii. Irreparable injury
iii. Balance of convenience
7. On the first requirement, in the context of mortgagee sales, Section 97 of the Land Act, 2012 is a pivotal statutory provision. Section 97(1) obligates a chargee, when exercising the power of sale, to act in good faith and ensure that the sale yields the best price reasonably obtainable at that time. To give effect to this duty, Section 97(2) requires the chargee “before exercising the right of sale, [to] ensure that a forced sale valuation is undertaken by a valuer”. This means the bank must obtain a current valuation of the property prior to sale, so as to know the approximate market value and forced sale value and thereby guard against selling at an undervalue.
8. Moreover, if a chargee sells the property at a gross under-value the chargor may have a right of action for compensation for the difference, or other relief, under the Land Act. There is sufficient jurisprudence on the point that an anticipated undervalue is not sufficient ground for the grant of an injunction. The mere production of a counter-valuation or reference to an older valuation is not prima facie proof that the chargee is in breach of its Section 97 duty.
9. As Kasango, J. stated in Zum Zum Investment Ltd v. Habib Bank Ltd [2014] eKLR, which decision has been reiterated by other courts, a party challenging a mortgagee’s valuation must show some serious flaw such as: the valuer lacked proper qualifications or independence, or the valuation considered improper/irrelevant factors, or the valuation was too remote in time such that it is not reliable for the impending sale. In the absence of such evidence, a mere difference in opinion on value will not justify the court’s interference and a decline in value over time is not automatically indicative of fraud or negligence by the selling bank.
10. The court will intervene only if the chargor shows the bank is acting in reckless disregard of the duty to obtain the best price or is poised to sell at a manifestly low price. After reviewing the evidence, the Court finds that the Applicant has not tendered sufficient proof at this stage to establish a prima facie case of non-compliance with Section 97. Besides suspicion, the Applicant has not proved the the Respondent’s explanation – that market conditions have changed leading to a lower current value – is far-fetched and implausible.
11. Crucially, the bank did obtain an updated professional valuation in October 2024, just before the planned auction. This suggests the bank was mindful of its duty and sought to base the sale on a recent appraisal. The mere fact that an older 2022 report had a higher figure does not, by itself, prove that the 2024 valuation is wrong or that the bank is willfully undervaluing the property. There is also no claim or evidence that the valuer who did the 2024 report is unqualified or used improper methodology. Therefore, the Applicant has failed to show a prima facie case with a probability of success that the bank is in breach of its duty under Section 97 of the Land Act.
12. Even if one I was to assume the Applicant had shown an arguable case, the Applicant must further demonstrate that they stand to suffer irreparable harm if an injunction is denied. The suit property is a security for a commercial loan. The potential harm the Applicant emphasizes is financial: the risk of the property being sold at a throw-away price, leaving him with a larger loan deficiency or loss of equity. Such financial loss is quantifiable.
13. If at trial it is proven that the bank breached its duty and the property was indeed sold far below market value, the law entitles the chargor to seek appropriate compensation under Section 97 of the Land Act. Thus, the injury the Applicant fears, being a sale at an undervalue, is ultimately a monetary loss that can be addressed by an award of damages. Additionally, the Applicant has not pleaded or shown that the Respondent is incapable of satisfying any monetary judgment that might arise. In the circumstances, the Court is not persuaded that the Applicant faces harm of an irreparable nature. I find that this limb of the test has not been satisfied by the Applicant.
14. Even if there were lingering doubts on the foregoing limbs, the Court would consider where the balance of convenience lies. On one side is the Applicant, a defaulting borrower who has enjoyed the benefit of the loan and yet fallen into arrears. The Applicant’s indebtedness is not disputed. On the other side is the Respondent, a chargee lawfully seeking to enforce its security after giving all required notices. The loan continues to accrue interest and stopping the sale on speculative grounds would delay the bank’s recovery efforts should the debt enlarge beyond the security’s worth.
15. The Court must also consider that the Respondent has, in principle, acted within its rights and procedures. It served the default notices, waited the statutory periods, and obtained a recent valuation. There is no allegation of bad faith beyond the valuation issue. Conversely, the Applicant’s equity of redemption remains exercisable until the hammer falls at auction. In these circumstances, the balance of convenience does not favor granting an injunction. All factors considered, the balance tilts in favor of the Respondent who seeks to enforce a legitimate security interest.
Conclusion and Orders
16. Accordingly, the Court finds that the Applicant has not met the threshold for granting a temporary injunction under Order 40 of the Civil Procedure Rules and the Giella v. Cassman Brown test. The application for a temporary injunction is hereby dismissed with costs. Any interim order that was previously in force is discharged forthwith.
It is so ordered.
DATED, SIGNED AND DELIVERED IN MOMBASA
THIS 15TH DAY OF MAY 2025.
F. MUGAMBI
JUDGE