Background
1. This appeal arises from the decision of the Milimani CMCCC No. E5400 of 2022, delivered on 10th March 2023 in which the trial court allowed the Respondent’s application for prayer for interim injunctive orders against the Appellants.
2. The background of the matter is that the Respondent (then a Plaintiff) filed a suit in the lower court seeking, among other reliefs, an order of injunction to restrain the Defendants from advertising, selling, transferring, taking possession, or evicting him from his property, identified as Apartment No. A10, Castle Rock Gardens, Galana Road, Kilimani Estate, Nairobi, on Land Reference Number 209/12760. The Plaintiff contended that there were irregularities in the process, including non-compliance with statutory requirements and a lack of transparency in the issuance of statutory notices. Contemporaneously with the Plaint, the Respondent filed an application dated 27th October 2022 seeking the interim injunctive orders.
3. The Appellants (then Defendants) opposed the application, raising a preliminary objection on jurisdictional grounds. They argued that the matter should be heard in an environmental and land court rather than a commercial court due to the nature of the dispute. The Defendants further maintained that all statutory procedures had been adhered to.
4. After examining the evidence and submissions, the trial court dismissed the jurisdictional challenge raised by the Defendants, finding that the matter had been appropriately filed in the civil registry and not in the environment and land registry. The court also allowed the Plaintiff’s application for interim injunctive relief, restraining the Defendants from interfering with the Plaintiff's peaceful enjoyment of the property pending the determination of the main suit.
The Appeal
5. Aggrieved by the decision of the trial court, the Appellants vide their memorandum of appeal dated 11th April 2023 lodged an appeal to this court, raising ten (10) grounds of appeal that; -
i. The learned trial magistrate erred in law and misdirecting herself in failing to consider, interpret and apply the legal principles for the granting an injunction under Order 40 Rule 1 of the Civil Procedure Rules, 2010.
ii. The Learned magistrate erred in law and in fact by allowing the Notice of Motion Application dated 27" October, 2022 without determining if the Respondent had meet the conditions for granting injunction.
iii. The Learned trial magistrate committed an error of law and fact by failing to take into consideration that the Appellants herein had issued all the requisite statutory notices prior to exercising the statutory power of sale.
iv. The Learned trial magistrate erred in law and in fact by failing to take into account that the Respondent had defaulted in repaying the loan, which balance continues to accrue interest at contractual rates.
v. The Learned trial magistrate erred in law and in fact by failing to take into account that any dispute as to the outstanding loan amount cannot be a ground for granting injunction orders.
vi. The learned trial magistrate erred in law by making no reliance and/or reference on the entirety of the evidence, affidavits, submissions and authorities made by the Appellants in court and gave no reasons for disallowing them in her ruling.
vii. The learned trial magistrate erred in law and fact by predisposing herself to a position favourable to the Respondent and failed to accord the Appellants a fair hearing and determination and arrived at a decision that is unreasonable, wrong in law and unjust in effect and consequence.
viii. The Learned magistrate erred in law and in fact by determining the issue of jurisdiction yet the Appellant’s Notice of Preliminary Objection dated 28" November, 2022 was abandoned by the Appellants on 29" November, 2022.
ix. The Learned Magistrate erred in law by failing to dismiss the entire Application for being devoid of merit since the Respondent had not established any ground for granting interlocutory injunction.
x. The Learned magistrate erred in law and fact by failing to consider all the evidence on record before allowing the Respondent’s Application.
6. The appeal was canvassed by way of written submissions. The Appellant's submissions are dated 11th March 2024. The Respondent however did not file any submissions.
Appellant’s submissions
7. The first issue taken up by the Appellant in its submissions was that the trial court erred in law and in fact by failing to take into account and consider any of the issues raised by the parties at all. According to the Appellant, the learned magistrate formulated and determined her own issues. In particular, it was the Appellant’s submission that the question of jurisdiction on which the court based its impugned decision, had been abandoned by the Appellant on 29th November 2022.
8. Citing the case of Peter Gichuki King’ara v Independent Electoral and Boundaries Commission & 2 Others, the Appellant maintained that a court should not pronounce itself on an issue that is not in the pleadings of the parties.
9. Regarding whether the Respondent met the conditions for the grant of an injunction under Order 40 Rule 1 of the Civil Procedure Rules, the Appellants submitted that the trial court erred by issuing an interlocutory injunction in favour of the Respondent when the legal threshold for the grant of such orders as set out in the case of Giella v Cassman Brown Co. Ltd (1973) E.A. 358 had not been met.
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10. The Appellants asserted that the Respondent did not establish a prima facie case which is a primary consideration for the grant of an injunction. They contended that all requisite statutory notices had been issued in compliance with the Land Act, including the 90 days’ statutory notice dated 3rd May 2018, the 40 days’ notice dated 18th December 2018, and the 45 days redemption notice dated 30th August 2022 as well as the Notification of Sale. That proof of service of these notices, including certificates of postage and signed acknowledgments, had been presented before the trial court.
11. The Appellants submitted that the trial court erred by relying on unsubstantiated claims by the Respondent, who alleged non-receipt of statutory notices despite evidence to the contrary. They cited the case of Nest Manor Residence & Suites Ltd & Another v African Banking Corporation Limited & Another [2021] eKLR, emphasizing that the burden of proving non-receipt of notices shifts to the Respondent once the chargee provides evidence of proper service.
12. On the valuation of the suit property, the Appellants argued that the trial court failed to appreciate that they had conducted a forced sale valuation, as required under Section 97(2) of the Land Act. They referred to a valuation report showing the market value of Kshs. 16,900,000 and a forced sale value of Kshs. 12,700,000, which was filed in court as evidence.
13. The Appellants further argued that the Respondent did not prove irreparable harm, as the loss of the property could be compensated through damages. They contended that the outstanding loan amount of Kshs. 62,195,816.58 exceeded the forced sale value of the suit property, exposing the Appellants to financial loss. They relied on the case of Andrew Mwanjohi v Equity Building Society & 7 Others [2006] eKLR, which held that sentimental attachment to property should not override a lender's statutory rights.
14. The Appellants submitted that the balance of convenience tilted in their favor. They argued that continued delay in the realization of the security would further increase the debt owed, potentially exceeding the property’s value, leaving the bank unable to recover its funds.
15. The Appellants criticized the trial court’s ruling for ignoring material evidence, including statutory notices, valuation reports, and statements of accounts, which demonstrated compliance with the law. They faulted the trial court for failing to consider whether the Respondent satisfied the conditions for granting an injunction as set out in Giella v Cassman Brown Co. Ltd (1973) E.A. 358.
16. The Appellants concluded that the trial court’s orders were contrary to the law and amounted to a miscarriage of justice. They prayed for the appeal to be allowed, the orders of the trial court to be set aside, and the Respondent’s application for injunction to be dismissed.
17. Relying on the cases of Mrao v First American Bank of Kenya Ltd & 2 Others [2003] eKLR and Stek Cosmetics Limited v Family Bank Limited & Another [2020] eKLR, the Appellants reiterated that the Respondent did not meet the conditions for the grant of an injunction, and the trial court failed to properly analyze the evidence and legal principles before issuing its ruling.
Analysis and determination
18. This being a first appeal, the duty of this court is to reevaluate and reassess the evidence tendered at the trial court with a view of reaching its own conclusion. In Selle & Another vs. Associated Motor Boat Co. Ltd & Others [1968] EA the Court emphasized that:
“An appeal to this court from a trial court is by way of retrial and the principles upon which this court acts in such an appeal are well settled. Briefly put, they are that this court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect…”
19. I have carefully reviewed the Appellants' memorandum of appeal, the ruling of the subordinate court delivered on 24th March 2023, the orders issued therein, and the applicable law. I have also considered the submissions filed by the Appellants in support of their appeal. The primary issues for determination are whether the trial court erred in granting the Respondent’s application for an injunction dated 27th October 2022, whether it disregarded evidence of compliance with statutory requirements by the Appellants, and whether the Appellants are entitled to the reliefs sought in their appeal, including the dismissal of the Respondent’s application and the award of costs.
20. I will begin by addressing the question of whether the trial court properly exercised its discretion in granting the interlocutory injunction sought by the Respondent. I will then evaluate whether the trial court adequately considered the evidence of statutory compliance presented by the Appellants. Lastly, I will determine whether the Appellants are entitled to the orders sought in their appeal, including the dismissal of the Respondent’s application and the award of costs.
Whether the Trial Court Erred in Granting the Injunction
21. The granting of the interlocutory order of injunction is an exercise of judicial discretion and sitting as an appellate court, we cannot readily interfere with the exercise of such discretion, unless we are satisfied that the discretion has not been exercised judicially. For instance in United India Insurance Co. Ltd V. East African Underwriters (Kenya) Ltd (1985) EA 898, at p. 908 Madan JA (as he then was) stressed the point as follows:
“The Court of Appeal will not interfere with a discretionary decision…….unless one or more of the following matters are established: first, that the Judge misdirected himself in law; secondly that he misapprehended the facts; thirdly that he took account of considerations of which he should not have taken account; fourthly, that he failed to take account of considerations of which he should have taken account, or fifthly, that his decision albeit a discretionary one, is plainly wrong.”
22. It has to be remembered that judicial discretion must always be exercised in accordance with the law. In matters of injunction the guiding principles are those set out in Giella v Cassman Brown [1973] EA 358, the locus classicus, which has stood the test of time. It settled the law on the grant of injunction thus:-
“First, an applicant must show a prima facie case with a probability of success. Secondly, an interlocutory injunction will not normally be granted unless the applicant might otherwise suffer irreparable injury, which would not adequately be compensated by an award of damages. Thirdly, if the Court is in doubt, it will decide an application on the balance of convenience…”
23. The trial court granted an injunction restraining the Appellants from exercising their statutory power of sale over the suit property. The Respondent alleged that the Appellants failed to comply with statutory requirements, including non-service of the statutory notices as required under Sections 90(2) and 96(2) of the Land Act, undervaluation of the charged property, and procedural irregularities in the exercise of the power of sale.
24. However, the Appellants demonstrated compliance with the statutory requirements under the Land Act. They presented evidence of service of the 90-day statutory notice dated 3rd May 2018 under Section 90(1), the 40-day notice to sell dated 18th December 2018 under Section 96(2), and the 45-day redemption notice and notification of sale dated 30th August 2022 as required under Rule 15(d) of the Auctioneer Rules. The Appellants further provided certificates of postage as proof of service, demonstrating that these notices were sent via registered post to the Respondent’s postal address as specified in the charge instrument.
25. The court is guided by the reasoning in Nest Manor Residence & Suites Ltd v African Banking Corporation Ltd [2021] eKLR. In that case, the court held:-
"Once the chargee has demonstrated that it effected proper service of the statutory notices, the burden shifts to the chargor to show that they did not receive the said notices."
26. The Appellants discharged their obligation to serve the notices under the prescribed laws. The charge instrument stipulated that notices could be sent via registered post, and the Respondent provided no evidence to rebut the Appellants’ proof of service. The court in Kamunyori & Co. Advocates v Cannon Assurance (K) Ltd [2006] eKLR similarly placed the burden on the chargor to prove non-receipt of notices once the chargee has shown compliance with service requirements.
27. Furthermore, the valuation of the charged property was conducted in compliance with Section 97(2) of the Land Act, which requires that a forced sale valuation be undertaken before the exercise of the statutory power of sale. The valuation report submitted by the Appellants indicated a market value of KES 16,900,000 and a forced sale value of KES 12,700,000. This negates the Respondent's claim of undervaluation. The court in Othaya Villas Ltd v Victoria Commercial Bank Ltd [2020] eKLR held:
“Under Section 97(2) of the Land Act, a chargee must ensure that a forced sale valuation is undertaken to obtain the best price reasonably obtainable at the time of sale. Failure to do so amounts to a breach of duty of care owed to the chargor.”
28. From the above, it is my view that the Appellants complied with the valuation requirements under Section 97(2) of the Land Act. Consequently, I find that the trial court erred in failing to consider this evidence.
29. Despite the evidence of statutory compliance presented by the Appellants, the trial court failed to engage substantively with this evidence and instead centered its ruling on the issue of jurisdiction, which had been explicitly abandoned by the parties. The court in Johannes Matiko & Another v Republic [2014] eKLR underscored that: -
"A trial court has a duty to weigh the evidence adduced by all parties and address the issues raised in the pleadings and submissions before arriving at its decision."
30. In the premises, I find that by focusing on an issue not in contention and disregarding the substantive issues and evidence presented, the trial court misdirected itself in law and fact, leading to an erroneous conclusion.
Whether the Trial Court Erred in Disregarding the Appellants’ Evidence
31. It is a well-established principle that courts must consider all material evidence before rendering a decision. This obligation ensures fairness and adherence to due process. In Peter Gichuki King’ara v IEBC & 2 Others [2013] eKLR, the court stated:
‘’A court can only pronounce itself on issues raised in the pleadings or submissions. To do otherwise would lead to decisions on matters not properly placed before the court, denying the parties the right to a fair hearing.’’
32. In this case, it is apparent that the trial court disregarded substantive issues, including the Appellants’ compliance with statutory requirements under the Land Act and adherence to auction procedures. I agree with the Appellant that the trial court erroneously revisited the issue of jurisdiction, an argument explicitly abandoned during the proceedings. As rightly submitted by the Appellant, this diversion not only contravened procedural fairness but also deprived the parties of a determination on the real dispute before the court.
33. On the question of service of statutory notices, the Appellants presented uncontroverted evidence demonstrating compliance with Sections 90 and 96 of the Land Act, 2012. This included the issuance of a 90-day notice dated 3rd May 2018, a 40-day notice to sell dated 18th December 2018, and a 45-day redemption notice and notification of sale dated 30th August 2022. These notices were served via registered post, as evidenced by certificates of postage. In Nest Manor Residence & Suites Ltd v African Banking Corporation Ltd [2021] eKLR, the court emphasized:
‘’Once the chargee has demonstrated that it effected proper service of the statutory notices, the burden shifts to the chargor to show that they did not receive the said notices.’’
34. A review of the evidence on record reveals that the Appellants discharged their statutory obligation under Sections 90 and 96. Therefore in the absence of rebuttal evidence from the Respondent, this court finds that the claim of procedural impropriety on the basis of non-service of notices is unsubstantiated.
35. On the valuation of the charged property, Section 97(2) of the Land Act, 2012 imposes a duty on the chargee to conduct a forced sale valuation to ensure the best price reasonably obtainable is achieved, thereby protecting the chargor’s right to property. In Palmy Company Limited v Consolidated Bank of Kenya Ltd [2014] eKLR, the court noted: -
'The purpose of the valuation under Section 97(2) of the Land Act is twofold: to obtain the best price reasonably obtainable at the time of sale and to prevent unscrupulous chargees from selling the property at an undervalue.'
36. The Appellants submitted a valuation report prepared by a professional valuer, which indicated a market value of Kshs. 16,900,000 and a forced sale value of Kshs. 12,700,000. This evidence demonstrates that the Appellants complied with the statutory duty to obtain a reasonable valuation, negating the Respondent’s claim of undervaluation.
37. From my review of the record of appeal and the proceedings at the trial court, I note that the Respondent failed to demonstrate irreparable harm, which is a critical element for the grant of an injunction. Charged properties, by their nature, are treated as commercial assets, and their loss through sale is an eventuality contemplated by the parties at the time of creating the charge. This principle is well captured in Paul Gitonga Wanjau vs Gathuthi Tea Factory Company Ltd & 2 Others [2016]eKLR the court considered 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.”
38. Similarly, in Maithya vs Housing Finance Co. of Kenya & Another [2003] 1 EA 133 at 139 where Honourable Nyamu J, stated as follows:-
“Charged properties are intended to acquire or are supposed to have a commercial value otherwise lenders would not accept them as securities. The sentiment of ownership which has been greatly treasured in this country over the years has in many situations given way to commercial considerations. Before lending, many lenders, banks and mortgage houses are increasingly insisting on valuations being done so as to establish forced sale values and market values of the properties to constitute the securities for the borrowings or credit facilities….Loss of the properties by sale is clearly contemplated by the parties even before the security is formalised. For these reasons, I hold that damages would be adequate remedy and it has not been suggested that the respondent cannot pay damages should it become necessary.”
39. The Respondent did not provide sufficient evidence to demonstrate that the harm they stood to suffer was incapable of being quantified or compensated through monetary damages. The court in Paul Gitonga Wanjau v Gathuthi Tea Factory Co. Ltd & 2 Others [2016] eKLR defined irreparable harm as: -
‘’Injury which is substantial and could never be adequately remedied or atoned for by damages, not injury which cannot possibly be repaired.’’
40. The charged property was offered as security for a commercial loan, and its sale is a risk contemplated and agreed upon by the parties in the charge instrument. As the court observed in Maithya v Housing Finance Co. of Kenya Ltd & Another [2003] 1 EA 133, damages would be an adequate remedy in such circumstances, particularly where the property’s value is quantifiable. The Respondent failed to adduce evidence demonstrating otherwise, further undermining their claim for injunctive relief.
41. By disregarding the Appellants’ evidence and submissions, the trial court denied them a fair hearing, thereby contravening the principles of justice and procedural fairness. The right to a fair hearing is a cornerstone of justice, as recognized in Johannes Matiko & Another v Republic [2014] eKLR, where the court emphasized that: -
‘’A trial court has a duty to weigh the evidence adduced in its entirety and ensure that all parties are accorded a fair hearing before arriving at a decision.'
The trial magistrate’s ruling, which focused on a jurisdictional issue that had been explicitly abandoned, not only misdirected itself in law but also failed to engage with the substantive issues, leading to a flawed and unjust outcome.”
Whether the Appellants Are Entitled to the Reliefs Sought
42. The evidence on record demonstrates that the Respondent failed to establish a prima facie case as required under the Giella v Cassman Brown [1973] EA 358 test. A prima facie case requires more than a mere allegation; it must be supported by credible evidence showing a likelihood of success. In Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] eKLR, the Court of Appeal defined a prima facie case as:
‘’A case which, on the material presented to the court, a tribunal properly directing itself will conclude that there exists a right which has apparently been infringed by the opposite party as to call for an explanation or rebuttal from the latter.’’
43. The Appellants provided evidence of compliance with statutory requirements, including service of notices under Sections 90 and 96 of the Land Act and valuation of the charged property under Section 97. The Respondent neither rebutted this evidence nor demonstrated that their rights were infringed. Additionally, the balance of convenience tilts in favor of the Appellants, as the outstanding loan amount of KES 62,195,816.58 far exceeds the forced sale value of the property, and continued accrual of interest threatens to render the security inadequate.
44. Additionally, an applicant seeking an equitable remedy such as an injunction must approach the court with clean hands. This principle was emphasized in Francis J.K. Ichatha v Housing Finance Company of Kenya, Civil Application No. 108 of 2005, where the Court of Appeal stated:
‘’A plaintiff should not be granted an injunction if he does not have clean hands, and no court of equity will aid a man to derive advantage from his own wrong. He who seeks equity must do equity.’’
45. The Respondent was in default of the loan repayment obligations under the charge instrument and failed to demonstrate a willingness to remedy the default. The Respondent cannot seek to benefit from equitable relief while disregarding the terms of the agreement that gave rise to the charge. Consequently, their conduct disentitles them from the relief sought.
46. In John Nduati Kariuki v National Bank of Kenya Ltd [2006] eKLR, the Court of Appeal emphasized the need to balance the rights of chargees and chargors, observing:
‘’A bank has no money of its own but relies on public funds to trade. The rights of the chargee to realize the security must be protected unless it is demonstrated that the statutory power of sale is being exercised unlawfully.’’
47. The Respondent did not demonstrate any illegality or procedural irregularity in the Appellants’ exercise of their statutory power of sale. Conversely, restraining the Appellants from selling the property would result in continued accrual of interest, potentially rendering the security insufficient to cover the outstanding debt. As the court observed in Stek Cosmetics Ltd v Family Bank Ltd & Another [2020] eKLR, the balance of convenience tilts in favor of allowing the chargee to recover its debt where it has complied with statutory requirements. The same reasoning applies here, justifying the denial of injunctive relief to the Respondent.
48. The Appellants on their part demonstrated compliance with all legal requirements for exercising their statutory power of sale, and there is no evidence of bad faith or illegality in their actions.
49. Having carefully considered the grounds of appeal, the submissions by the Appellants, and the applicable law, I find that the trial court erred in granting the injunction sought by the Respondent. The Respondent failed to establish a prima facie case, irreparable harm, or that the balance of convenience tilted in their favor.
50. On the other hand, the Appellants demonstrated compliance with statutory requirements under the Land Act, including service of notices and valuation of the charged property, which the trial court failed to consider. Accordingly, I make the following findings: -
i. The appeal is allowed with costs to the Appellant
ii. The ruling and orders of the trial court issued on 10th March 2023 are hereby set aside.
iii. The Respondent’s Notice of Motion application dated 27th October 2022 is dismissed with costs.
iv. The Appellants are awarded the costs of this appeal.
51. This matter shall proceed to full trial before the subordinate court for the determination of the substantive issues raised in the plaint.
52. It is so ordered.
SIGNED DATED and DELIVERED IN VIRTUAL COURT
THIS 19TH DAY OF DECEMBER 2024
ADO MOSES
JUDGE
In the presence of:
Moses – Court Assistant
Rotich ………………for the Appellant
N/A…………………for the Respondent