1. The plaintiff/applicant filed a Notice of Motion application dated 28th November 2023, pursuant to the provisions of Order 40 Rules 1(a) & (b) and 2(1), and Order 51 of the Civil Procedure Rules, Sections 1A, 1B & 3A of the Civil Procedure Act, 2010, Article 40 of the Constitution of Kenya 2010, and all other enabling provisions of the law, seeking inter alia, for an order of temporary injunction prohibiting the 1st & 2nd defendants from selling, advertising, transferring, leasing, letting, alienating, disposing of or otherwise interfering in any way with the plaintiff’s quiet and uninterrupted possession of the suit premises situate in the property known as apartment A3-34A erected on L.R. No. 209/6491, pending the hearing and determination of this suit.
2. The instant application is premised on the grounds on the face of the Motion, and it is supported by an affidavit sworn on the same day by Daniel Mumina Nganda, one of the plaintiff’s Directors. He averred that the 1st defendant granted the plaintiff a loan in the year 2014, which loan balance stood at Kshs.3,313,967.85 as at 5th May 2023. He stated that the said loan was secured by the property known as apartment A3-34A erected on L.R. No. 209/6491. He averred that on 5th May 2021, the 1st defendant approved a top-up loan, which was sought solely by the 3rd defendant and without his consent. That thereafter, the plaintiff filed a complaint with the Bank's forensic team and the Banking Fraud Unit, Kenya, under reference number ECCU 58 of 22, and also requested for clarification from the Bank.
3. Mr. Nganda stated that the plaintiff made a proposal to repay the initial loan balance of Kshs.3,313,967.85, but the 1st defendant rejected the said offer and demanded Kshs.7,325,000/= being the initial loan, the fraudulent top-up facility of Kshs.2,800,000/=, and unjustified interest. He stated that was so despite the fact that there was an ongoing investigation by the Banking Fraud Unit into the fraudulent top-up facility. Mr. Nganda further stated that the plaintiff requested the 1st defendant to investigate how the top-up facility was approved without his consent, but the defendant has remained unresponsive. He deposed that the plaintiff’s Advocates on record vide a letter dated 9th October 2023 wrote to the 3rd defendant seeking clarification on the approval of the top-up facility, as well as the identity of the parties involved, and requested for the documents pertaining to the fraudulent top up facility.
4. Mr. Nganda contended that in an email sent to the plaintiff by the 3rd defendant on 10th October 2023, originating from Mr. Michael Gachau, he confirmed that an employee of the 1st defendant facilitated the top-up loan being fully aware that the plaintiff had not consented to it. Mr. Nganda stated that the plaintiff has since been issued with a Redemption Notice dated 2nd October 2023 by Mbuli Auctioneers, intending to auction the plaintiff's property. He contended that the said Notice was issued without the required Statutory Notices under Section 90(1) of the Land Act, thus violating the plaintiff's right of redemption. He further stated that the 2nd defendant has also advertised the suit property for sale by public auction. Mr. Nganda asserted that the 1st defendant had a duty to detect and report any fraud or suspicious activities in the plaintiff's account. He averred that in the event that the orders sought herein are not granted, the plaintiff will suffer substantial and irreparable damage.
5. In opposition to the application, the 1st & 2nd defendants filed a replying affidavit sworn on 26th January 2024 by Michael Gachau, the 1st defendant’s Business Client Advisor of Community Supreme Branch. He averred that when the plaintiff's account was opened, it was operated solely by the 3rd defendant and her mother, who were listed as Directors of the plaintiff company. That in the year 2011, the plaintiff applied for a loan of Kshs.7,000,000/=, secured by a legal charge over the suit property, and in the year 2014, the plaintiff applied for a top-up loan of Kshs.4,800,000/=, during which time the Directors were relocating to Dubai. He deposed that the loan repayments came from rental income, and the account continued to be operated by the 3rd defendant and her mother. He stated that on 26th April 2021, the 3rd defendant approached the 1st defendant seeking a loan of Kshs.2,500,000/= to pay school fees for her children’s international school enrolment.
6. According to Mr. Gachau, the 3rd defendant appeared desperate, and so the 1st defendant requested for basic documents being a signed application form, a school pro-forma invoice, and a resolution to borrow. He stated that since that was a top-up facility based on equity release, with rental income as the repayment source, minimal documentation was needed, and the proposal was submitted to the Branch Credit Committee, and subsequently approved by the Head Office Credit Committee. That thereafter, the 1st defendant issued the 3rd defendant with a letter of offer for the loan and requested for several documents, including the plaintiff’s Board resolution to borrow, personal guarantees, and the plaintiff’s current CR-12, and a tax compliance certificate. He deposed that after receiving the said documents, the 1st defendant noticed that Mr. Daniel Mumina Nganda was listed as a new Director of the plaintiff company, although he had not signed the required documents.
7. Mr. Gachau stated that the 1st defendant asked the 3rd defendant for Mr. Nganda's contact details to verify the loan application, and the 3rd defendant then provided a filled form with Mr. Nganda's details, a resolution, and his passport photo. Mr. Gachau deposed that when the 1st defendant contacted the number given, the man who answered (the phone) identified himself as Mr. Nganda and confirmed that he was aware of the top-up loan application made by the 3rd defendant. That Mr. Nganda then executed the loan application forms and they were sent to the 1st defendant by the 3rd defendant via email, after which the top-up loan was disbursed to the plaintiff.
8. Mr. Gachau averred that the plaintiff defaulted on the loan repayments, and as the 1st defendant issued a statutory Notice under Section 90(1), (2) and (3)(e) of the Land Act, 2012, and sent it to the plaintiff’s last known postal address, P.O. Box 5976-00200, Nairobi, being the same postal address used in the account opening forms and subject top-up loan application form. He stated that when the plaintiff failed to comply, the 1st defendant issued another Notice under Section 96(2) and (3) of the Land Act, giving the plaintiff 40 days to rectify the default, but the plaintiff again failed to respond hence the 1st defendant instructed the 2nd defendant to issue a 45-day Redemption Notice and Notification of Sale, which was acknowledged by the plaintiff. It was deposed that after the 45-day period expired, the 2nd defendant advertised the property for sale in the Daily Nation Newspapers on 27th November 2023.
9. Mr. Gachau argued that the plaintiff did not deny its indebtedness and admitted in a letter dated 3rd July 2023, from its former Advocates on record that the last loan instalment was paid in May 2021, and as such, the plaintiff is not entitled to the reliefs sought.
10. In a rejoinder, the plaintiff filed a further affidavit sworn on 28th March 2024 by Mr. Daniel Mumina Nganda, one of the plaintiff’s Directors. He argued that the 1st & 2nd defendants failed to provide evidence of approvals by the Branch and Head Office Credit Committees, or proof of how and to whom the proposal was communicated. He also stated that the Postage Certificate submitted by the 1st defendant could not be verified by the Postal Corporation of Kenya and suggested that it could be forged. He claimed that the letter of offer was sent to only one Director instead of both, and that the 1st defendant's claim of not being able to find his contact details was false, as they were available on the CR-12 provided by the 3rd defendant.
11. He asserted that the top-up loan was granted without a duly signed Board resolution to borrow, which should have been signed by him, the 3rd defendant, and the Company Secretary. Mr. Nganda contended that the 1st defendant had a duty of professional care to the plaintiff, which was breached by their Business Client Advisor, Mr. Michael Maina Gachau. He criticized Mr. Gachau for making a phone call to an unknown person whom he believed to be a Director of the plaintiff instead of arranging for an in-person meeting. Mr. Nganda also stated that contrary to the 1st & 2nd defendants' claims that he was in Dubai on 26th April 2021, he was actually in Kenya, as evidenced by the stamp on his passport.
12. The instant application was canvassed by way of written submissions. The plaintiff’s submissions were filed on 2nd April 2024 by the law firm of Ahmednasir Abdullahi Advocates LLP, whereas the 1st & 2nd defendants’ submissions were filed on 14th February 2024 by the law firm of Igeria & Ngugi Advocates.
13. Mr. Mohamed Billow, learned Counsel for the plaintiff referred to the case of Albert Mario Cordeiro & another v Vishram Shamji [2015] eKLR, and submitted that in exercising its statutory power of sale, the 1st & 2nd defendants served the plaintiff with a Redemption Notice dated 2nd October 2023 without issuing the plaintiff with the Statutory Notices provided for under Sections 90 & 94(1) of the Land Act, and Rule 15 of the Auctioneers Rules. He further submitted that the 1st defendant is compelling the plaintiff to repay a fraudulent top up facility solely acquired by the 3rd defendant in the absence of the consent of the plaintiff’s other Director. He relied on the case of Mulee Kioko Mulwa & another v Margaret Mwikali Musyimi & another [2021] eKLR, and stated that in the event that the instant application is not allowed, the suit property will be sold in a public auction without any legal basis thus causing the plaintiff to suffer irreparable loss and damage. Mr. Billow contended that the balance of convenience tilts in favour of the plaintiff.
14. Mr. Mbaji, learned Counsel for the 1st & 2nd defendants relied on the cases of Giella v Cassman Brown [1973] EA 358, and Mrao v First American Bank of Kenya Limited & 2 others [2003] KLR 125, and submitted that the plaintiff has not demonstrated that it has a genuine and arguable case or a right which has apparently been infringed by the 1st & 2nd defendants as to call for an explanation or rebuttal from them. He cited the case of West Build General Contractors Limited v Principal Secretary, State Department Of Infrastructure & 2 others (Commercial Civil Case E058 OF 2020) [2021] KEHC 398 (KLR), and the Court of Appeal case of Kenya Breweries Ltd v Okeyo [2002] 1 EA, and asserted that the plaintiff has admitted to being indebted to the 1st defendant, hence there is no reason why the 1st defendant should be restrained from exercising its statutory power of sale.
15. Counsel for the defendants cited the case of Amina Karama v Njagi Gachangua & 3 others [2020] eKLR, and stated that the plaintiff has not demonstrated that in the event that the instant application is disallowed, it will suffer irreparable harm that cannot be compensated by an award of damages. He stated that in this case, the loss that the plaintiff stands to suffer is financial in nature which is easily calculable, thus it cannot be classified as irreparable loss. He also stated that the 1st defendant is a financial institution which is in a position to compensate the plaintiff in the event that it is successful in this suit. He submitted that in view of the fact that the loan facilities were obtained from bank deposits from the public, then the balance of convenience tilts in favour of the 1st & 2nd defendants. To buttress these submissions Mr. Mbaji cited the case of National Bank of Kenya Ltd v Isaac A Ogettah [1999] eKLR.
ANALYSIS AND DETERMINATION.
16. I have considered the instant application, the affidavits filed in support thereof, the replying affidavit by the 1st & 2nd defendants, and the written submissions by Counsel for the parties. The issue that arises for determination is whether the plaintiff has made out a case to warrant being granted an order of temporary injunction.
Whether the plaintiff has made out a case to warrant being granted an order of temporary injunction.
17. Interlocutory injunctions are provided for under Order 40 Rules (1)(a) and (b) of the Civil Procedure Rules, 2010 which states as hereunder -
Where in any suit it is proved by affidavit or otherwise -
a) that any property in dispute in a suit is in danger of being wasted, damaged, or alienated by any party to the suit, or wrongfully sold in execution of a decree; or
b) that the defendant threatens or intends to remove or dispose of his property in circumstances affording reasonable probability that the plaintiff will or may be obstructed or delayed in the execution of any decree that may be passed against the defendant in the suit,
the court may by order grant a temporary injunction to restrain such act, or make such other order for the purpose of staying and preventing the wasting, damaging, alienation, sale, removal, or disposition of the property as the court thinks fit until the disposal of the suit or until further orders.
18. The conditions to be considered when dealing with an application for temporary injunction were laid down in the case of Giella v Cassman Brown & Company Limited [1973] EA 358, where the Court held that -
Firstly, 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.
19. The plaintiff is a limited liability company, holding a current account with the 1st defendant. Initially, the company's Directors were the 3rd defendant and her mother. In the year 2021, Mr. Nganda replaced the 3rd defendant’s mother as a Director. In the year 2011, the 1st defendant extended a loan of Kshs.7,000,000/= to the plaintiff, which was secured by a legal charge over the suit property. Additional top-up loans of Kshs.4,800,000/= in 2014 and Kshs.2,500,000/= in 2016 were granted, with the 2016 top-up loan in the year 2016 being allegedly obtained by the 3rd defendant without her co-director’s consent. On its part, the 1st defendant stated that the 3rd defendant's application for the top-up loan was properly processed and approved, resulting in a letter of offer, and during the said process, the 1st defendant noticed that Mr. Daniel Mumina Nganda had become a Director of the plaintiff company but had not signed the necessary documents.
20. To verify the loan, the 1st defendant requested for Mr. Nganda’s contact details, which the 3rd defendant provided. The 1st defendant asserted that it contacted Mr. Nganda, who was out of the country, and he confirmed that he was aware of the top-up loan application made by the 3rd defendant. The 1st defendant claims that it returned the loan application forms to the 3rd defendant for Mr. Nganda to sign, and the 3rd defendant later returned duly signed documents to the 1st defendant via email, after which the top-up loan was disbursed to the plaintiff, but it defaulted on the loan repayments leading the 1st defendant to initiate the security realization process.
21. From the pleadings filed by the plaintiff, it evident that it disputes the validity of the second top-up loan obtained by the 3rd defendant, alleging that it was fraudulently secured through collusion between the 3rd defendant and the 1st defendant’s employee, Mr. Michael Gachau. The plaintiff averred that it filed complaints with the 1st defendant’s forensic team and the Banking Fraud Unit in Kenya. Mr. Nganda, a Director of the plaintiff company, asserted that there was no Board resolution by the plaintiff that authorized the top-up loan applied for by the 3rd defendant, and that he was not contacted by Mr. Gachau as alleged. Mr. Nganda averred that contrary to the 1st defendant’s assertions that he was out of the country at the time of application and processing of the second top-up facility, he was in the country as can be seen from the entry stamps affixed on his passport by the Kenyan Immigration Office when he came back to the country.
22. This Court finds it suspicious that the loan application forms, supposedly signed by Mr. Nganda, were emailed to the 1st defendant by the 3rd defendant, instead of them being sent to the 1st defendant by Mr. Nganda himself. Additionally, the 1st defendant’s employee. Mr. Gachau admitted that he had never met or spoken to Mr. Nganda before receiving his contact details from the 3rd defendant. He has however not demonstrated to this Court how he was able to ascertain that he was indeed speaking to Mr. Nganda when he allegedly called the contact provided to him by the 3rd defendant.
23. From the foregoing, this Court notes significant discrepancies in the application and processing of the second top-up loan of Kshs.2,500,000/=. Mr. Nganda has demonstrated that he was in the country at the time of the application and processing of the second top-up loan applied for by the 3rd defendant, contrary to the 1st defendant’s assertions. Additionally, the plaintiff has produced a copy of an email from the 3rd defendant to the plaintiff's Advocates on record confirming that the 1st defendant knew about Mr. Nganda's absence during the loan application, processing, and disbursement. However, the 1st & 2nd defendants have not offered any explanation for the aforesaid inconsistencies.
24. The above notwithstanding, it is not disputed that the plaintiff defaulted on its monthly repayments for both the initial loan and the first top-up facility. In a letter dated 3rd July 2023, to the 1st defendant's debt recovery unit, the plaintiff through its former Advocates, Ongegu & Associates Advocates, acknowledged being indebted to the 1st defendant to the tune of Kshs.3,313,967.85 as at 5th May 2021, and requested for leniency in resuming loan payments pending the investigation of the second top-up loan taken by the 3rd defendant. The 1st defendant contended that as a result of the said default, it issued a Notice under Section 90 of the Land Act, 2012, dated 18th March 2022 to the plaintiff, which Notice was sent vide registered post to the plaintiff’s last known postal address, P.O. Box 5976-00200, Nairobi, being the same postal address used in the account opening forms and the subject top-up loan application form. In support of these averments, the 1st defendant produced a copy of the said Notice, together with a Certificate of Postage from the Postal Corporation of Kenya.
25. The 1st defendant argued that the plaintiff failed to comply with the Notice under Section 90 of the Land Act, and as a result, a further Notice under Section 96 of the said Act, dated 24th August 2022, was issued and sent to the plaintiff’s last known postal address, P.O. Box 5976-00200, Nairobi. The 1st defendant provided a Certificate of Postage as proof. Upon non-compliance with the aforesaid Notice, the 1st defendant instructed the 2nd defendant to issue a 45-day Redemption Notice and Notification of Sale, which the plaintiff herein has acknowledged receiving.
26. It is however worthy of note that the plaintiff disputed having received the two Notices issued by the 1st defendant under Sections 90 and 96 of the Land Act, 2012, and argued that the 1st defendant's Certificate of Postage could not be verified by the Postal Corporation of Kenya, suggesting it was forged. To support the said claim, the plaintiff presented emails sent to the Postal Corporation of Kenya seeking confirmation of the registration or parcel numbers, but the plaintiff did not provide any responses from the Postal Corporation of Kenya, to show if the emails were responded to or not.
27. It is now well settled that the burden of proof lies with the party making an assertion, as outlined in Sections 107, 108 and 109 of the Evidence Act. For this reason, the plaintiff had the responsibility to prove that the Certificates of Postage for the Notices under Sections 90 and 96 of the Land Act, 2012, issued by the 1st defendant, were forgeries. The plaintiff however failed to provide evidence sufficient or otherwise to support the said claim. Consequently, this Court finds that the 1st defendant properly issued the required Statutory Notices to the plaintiff, and since the plaintiff did not rectify the default in repaying the debt, the 1st defendant's right to exercise its statutory power of sale over the suit property had accrued.
28. The Court of Appeal in the case of Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] eKLR, defined what constitutes a prima facie case as follows -
“So what is a prima facie case" I would say that in civil cases it is a case in 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. A prima facie case is more than an arguable case. It is not sufficient to raise issues but the evidence must show an infringement of a right, and the probability of success of the Applicant’s case upon trial. That is clearly a standard, which is higher than an arguable case.”
29. From the analysis made in this ruling, and guided by the above decision, this Court finds that the plaintiff has not demonstrated that it has a prima facie case with a probability of success.
30. On the issue of damage to be suffered by the plaintiff in the event that the instant application is not allowed, Courts have held time and again that a property offered as security becomes a commodity for sale in the event of default. This was the holding in the case of Shimmers Plaza Limited v National Bank of Kenya Limited [2013] eKLR, where the Court of Appeal agreed with the High Court’s finding that damages could be adequate compensation as the appellant’s guaranteed security therein, had been converted into a commodity for sale upon the same being charged to the respondent therein. In view of the above case law, and the fact that the value of the suit property in issue herein can be easily ascertained from Valuation Reports, and the fact that the 1st defendant being a financial institution can easily compensate the plaintiff in the event that its suit is determined in its favour, I am persuaded that the plaintiff does not stand to suffer irreparable damage that cannot be adequately compensated by an award of damages in the event that the instant application is not allowed. The issue of the 2nd top-up which is disputed will be a triable issue in the main suit but it cannot be the basis of stopping a sale that has accrued due to default in repayment of the initial loan and first top-up loan by the plaintiff.
31. In the end, I am satisfied that the balance of convenience tilts in favour of the 1st defendant since the plaintiff has not established a prima facie case with a probability of success, and it can always be compensated by an award of damages in the event that its suit is successful.
32. The upshot is that the plaintiff’s application dated 28th November 2023 is devoid of merits. It is hereby dismissed with costs to the 1st defendant.
It is so ordered.
DATED, SIGNED and DELIVERED at NAIROBI on this 22nd day of November, 2024. Ruling delivered through Microsoft Teams Online Platform.
NJOKI MWANGI
JUDGE
In the presence of:
Mr. Mohamed Billow for the plaintiff/applicant
Mr. Mbaji for the 1st and 2nd defendants/respondents
Ms B.Wokabi – Court Assistant.
2. The instant application is premised on the grounds on the face of the Motion, and it is supported by an affidavit sworn on the same day by Daniel Mumina Nganda, one of the plaintiff’s Directors. He averred that the 1st defendant granted the plaintiff a loan in the year 2014, which loan balance stood at Kshs.3,313,967.85 as at 5th May 2023. He stated that the said loan was secured by the property known as apartment A3-34A erected on L.R. No. 209/6491. He averred that on 5th May 2021, the 1st defendant approved a top-up loan, which was sought solely by the 3rd defendant and without his consent. That thereafter, the plaintiff filed a complaint with the Bank's forensic team and the Banking Fraud Unit, Kenya, under reference number ECCU 58 of 22, and also requested for clarification from the Bank.
3. Mr. Nganda stated that the plaintiff made a proposal to repay the initial loan balance of Kshs.3,313,967.85, but the 1st defendant rejected the said offer and demanded Kshs.7,325,000/= being the initial loan, the fraudulent top-up facility of Kshs.2,800,000/=, and unjustified interest. He stated that was so despite the fact that there was an ongoing investigation by the Banking Fraud Unit into the fraudulent top-up facility. Mr. Nganda further stated that the plaintiff requested the 1st defendant to investigate how the top-up facility was approved without his consent, but the defendant has remained unresponsive. He deposed that the plaintiff’s Advocates on record vide a letter dated 9th October 2023 wrote to the 3rd defendant seeking clarification on the approval of the top-up facility, as well as the identity of the parties involved, and requested for the documents pertaining to the fraudulent top up facility.
4. Mr. Nganda contended that in an email sent to the plaintiff by the 3rd defendant on 10th October 2023, originating from Mr. Michael Gachau, he confirmed that an employee of the 1st defendant facilitated the top-up loan being fully aware that the plaintiff had not consented to it. Mr. Nganda stated that the plaintiff has since been issued with a Redemption Notice dated 2nd October 2023 by Mbuli Auctioneers, intending to auction the plaintiff's property. He contended that the said Notice was issued without the required Statutory Notices under Section 90(1) of the Land Act, thus violating the plaintiff's right of redemption. He further stated that the 2nd defendant has also advertised the suit property for sale by public auction. Mr. Nganda asserted that the 1st defendant had a duty to detect and report any fraud or suspicious activities in the plaintiff's account. He averred that in the event that the orders sought herein are not granted, the plaintiff will suffer substantial and irreparable damage.
5. In opposition to the application, the 1st & 2nd defendants filed a replying affidavit sworn on 26th January 2024 by Michael Gachau, the 1st defendant’s Business Client Advisor of Community Supreme Branch. He averred that when the plaintiff's account was opened, it was operated solely by the 3rd defendant and her mother, who were listed as Directors of the plaintiff company. That in the year 2011, the plaintiff applied for a loan of Kshs.7,000,000/=, secured by a legal charge over the suit property, and in the year 2014, the plaintiff applied for a top-up loan of Kshs.4,800,000/=, during which time the Directors were relocating to Dubai. He deposed that the loan repayments came from rental income, and the account continued to be operated by the 3rd defendant and her mother. He stated that on 26th April 2021, the 3rd defendant approached the 1st defendant seeking a loan of Kshs.2,500,000/= to pay school fees for her children’s international school enrolment.
6. According to Mr. Gachau, the 3rd defendant appeared desperate, and so the 1st defendant requested for basic documents being a signed application form, a school pro-forma invoice, and a resolution to borrow. He stated that since that was a top-up facility based on equity release, with rental income as the repayment source, minimal documentation was needed, and the proposal was submitted to the Branch Credit Committee, and subsequently approved by the Head Office Credit Committee. That thereafter, the 1st defendant issued the 3rd defendant with a letter of offer for the loan and requested for several documents, including the plaintiff’s Board resolution to borrow, personal guarantees, and the plaintiff’s current CR-12, and a tax compliance certificate. He deposed that after receiving the said documents, the 1st defendant noticed that Mr. Daniel Mumina Nganda was listed as a new Director of the plaintiff company, although he had not signed the required documents.
7. Mr. Gachau stated that the 1st defendant asked the 3rd defendant for Mr. Nganda's contact details to verify the loan application, and the 3rd defendant then provided a filled form with Mr. Nganda's details, a resolution, and his passport photo. Mr. Gachau deposed that when the 1st defendant contacted the number given, the man who answered (the phone) identified himself as Mr. Nganda and confirmed that he was aware of the top-up loan application made by the 3rd defendant. That Mr. Nganda then executed the loan application forms and they were sent to the 1st defendant by the 3rd defendant via email, after which the top-up loan was disbursed to the plaintiff.
8. Mr. Gachau averred that the plaintiff defaulted on the loan repayments, and as the 1st defendant issued a statutory Notice under Section 90(1), (2) and (3)(e) of the Land Act, 2012, and sent it to the plaintiff’s last known postal address, P.O. Box 5976-00200, Nairobi, being the same postal address used in the account opening forms and subject top-up loan application form. He stated that when the plaintiff failed to comply, the 1st defendant issued another Notice under Section 96(2) and (3) of the Land Act, giving the plaintiff 40 days to rectify the default, but the plaintiff again failed to respond hence the 1st defendant instructed the 2nd defendant to issue a 45-day Redemption Notice and Notification of Sale, which was acknowledged by the plaintiff. It was deposed that after the 45-day period expired, the 2nd defendant advertised the property for sale in the Daily Nation Newspapers on 27th November 2023.
9. Mr. Gachau argued that the plaintiff did not deny its indebtedness and admitted in a letter dated 3rd July 2023, from its former Advocates on record that the last loan instalment was paid in May 2021, and as such, the plaintiff is not entitled to the reliefs sought.
10. In a rejoinder, the plaintiff filed a further affidavit sworn on 28th March 2024 by Mr. Daniel Mumina Nganda, one of the plaintiff’s Directors. He argued that the 1st & 2nd defendants failed to provide evidence of approvals by the Branch and Head Office Credit Committees, or proof of how and to whom the proposal was communicated. He also stated that the Postage Certificate submitted by the 1st defendant could not be verified by the Postal Corporation of Kenya and suggested that it could be forged. He claimed that the letter of offer was sent to only one Director instead of both, and that the 1st defendant's claim of not being able to find his contact details was false, as they were available on the CR-12 provided by the 3rd defendant.
11. He asserted that the top-up loan was granted without a duly signed Board resolution to borrow, which should have been signed by him, the 3rd defendant, and the Company Secretary. Mr. Nganda contended that the 1st defendant had a duty of professional care to the plaintiff, which was breached by their Business Client Advisor, Mr. Michael Maina Gachau. He criticized Mr. Gachau for making a phone call to an unknown person whom he believed to be a Director of the plaintiff instead of arranging for an in-person meeting. Mr. Nganda also stated that contrary to the 1st & 2nd defendants' claims that he was in Dubai on 26th April 2021, he was actually in Kenya, as evidenced by the stamp on his passport.
12. The instant application was canvassed by way of written submissions. The plaintiff’s submissions were filed on 2nd April 2024 by the law firm of Ahmednasir Abdullahi Advocates LLP, whereas the 1st & 2nd defendants’ submissions were filed on 14th February 2024 by the law firm of Igeria & Ngugi Advocates.
13. Mr. Mohamed Billow, learned Counsel for the plaintiff referred to the case of Albert Mario Cordeiro & another v Vishram Shamji [2015] eKLR, and submitted that in exercising its statutory power of sale, the 1st & 2nd defendants served the plaintiff with a Redemption Notice dated 2nd October 2023 without issuing the plaintiff with the Statutory Notices provided for under Sections 90 & 94(1) of the Land Act, and Rule 15 of the Auctioneers Rules. He further submitted that the 1st defendant is compelling the plaintiff to repay a fraudulent top up facility solely acquired by the 3rd defendant in the absence of the consent of the plaintiff’s other Director. He relied on the case of Mulee Kioko Mulwa & another v Margaret Mwikali Musyimi & another [2021] eKLR, and stated that in the event that the instant application is not allowed, the suit property will be sold in a public auction without any legal basis thus causing the plaintiff to suffer irreparable loss and damage. Mr. Billow contended that the balance of convenience tilts in favour of the plaintiff.
14. Mr. Mbaji, learned Counsel for the 1st & 2nd defendants relied on the cases of Giella v Cassman Brown [1973] EA 358, and Mrao v First American Bank of Kenya Limited & 2 others [2003] KLR 125, and submitted that the plaintiff has not demonstrated that it has a genuine and arguable case or a right which has apparently been infringed by the 1st & 2nd defendants as to call for an explanation or rebuttal from them. He cited the case of West Build General Contractors Limited v Principal Secretary, State Department Of Infrastructure & 2 others (Commercial Civil Case E058 OF 2020) [2021] KEHC 398 (KLR), and the Court of Appeal case of Kenya Breweries Ltd v Okeyo [2002] 1 EA, and asserted that the plaintiff has admitted to being indebted to the 1st defendant, hence there is no reason why the 1st defendant should be restrained from exercising its statutory power of sale.
15. Counsel for the defendants cited the case of Amina Karama v Njagi Gachangua & 3 others [2020] eKLR, and stated that the plaintiff has not demonstrated that in the event that the instant application is disallowed, it will suffer irreparable harm that cannot be compensated by an award of damages. He stated that in this case, the loss that the plaintiff stands to suffer is financial in nature which is easily calculable, thus it cannot be classified as irreparable loss. He also stated that the 1st defendant is a financial institution which is in a position to compensate the plaintiff in the event that it is successful in this suit. He submitted that in view of the fact that the loan facilities were obtained from bank deposits from the public, then the balance of convenience tilts in favour of the 1st & 2nd defendants. To buttress these submissions Mr. Mbaji cited the case of National Bank of Kenya Ltd v Isaac A Ogettah [1999] eKLR.
ANALYSIS AND DETERMINATION.
16. I have considered the instant application, the affidavits filed in support thereof, the replying affidavit by the 1st & 2nd defendants, and the written submissions by Counsel for the parties. The issue that arises for determination is whether the plaintiff has made out a case to warrant being granted an order of temporary injunction.
Whether the plaintiff has made out a case to warrant being granted an order of temporary injunction.
17. Interlocutory injunctions are provided for under Order 40 Rules (1)(a) and (b) of the Civil Procedure Rules, 2010 which states as hereunder -
Where in any suit it is proved by affidavit or otherwise -
a) that any property in dispute in a suit is in danger of being wasted, damaged, or alienated by any party to the suit, or wrongfully sold in execution of a decree; or
b) that the defendant threatens or intends to remove or dispose of his property in circumstances affording reasonable probability that the plaintiff will or may be obstructed or delayed in the execution of any decree that may be passed against the defendant in the suit,
the court may by order grant a temporary injunction to restrain such act, or make such other order for the purpose of staying and preventing the wasting, damaging, alienation, sale, removal, or disposition of the property as the court thinks fit until the disposal of the suit or until further orders.
18. The conditions to be considered when dealing with an application for temporary injunction were laid down in the case of Giella v Cassman Brown & Company Limited [1973] EA 358, where the Court held that -
Firstly, 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.
19. The plaintiff is a limited liability company, holding a current account with the 1st defendant. Initially, the company's Directors were the 3rd defendant and her mother. In the year 2021, Mr. Nganda replaced the 3rd defendant’s mother as a Director. In the year 2011, the 1st defendant extended a loan of Kshs.7,000,000/= to the plaintiff, which was secured by a legal charge over the suit property. Additional top-up loans of Kshs.4,800,000/= in 2014 and Kshs.2,500,000/= in 2016 were granted, with the 2016 top-up loan in the year 2016 being allegedly obtained by the 3rd defendant without her co-director’s consent. On its part, the 1st defendant stated that the 3rd defendant's application for the top-up loan was properly processed and approved, resulting in a letter of offer, and during the said process, the 1st defendant noticed that Mr. Daniel Mumina Nganda had become a Director of the plaintiff company but had not signed the necessary documents.
20. To verify the loan, the 1st defendant requested for Mr. Nganda’s contact details, which the 3rd defendant provided. The 1st defendant asserted that it contacted Mr. Nganda, who was out of the country, and he confirmed that he was aware of the top-up loan application made by the 3rd defendant. The 1st defendant claims that it returned the loan application forms to the 3rd defendant for Mr. Nganda to sign, and the 3rd defendant later returned duly signed documents to the 1st defendant via email, after which the top-up loan was disbursed to the plaintiff, but it defaulted on the loan repayments leading the 1st defendant to initiate the security realization process.
21. From the pleadings filed by the plaintiff, it evident that it disputes the validity of the second top-up loan obtained by the 3rd defendant, alleging that it was fraudulently secured through collusion between the 3rd defendant and the 1st defendant’s employee, Mr. Michael Gachau. The plaintiff averred that it filed complaints with the 1st defendant’s forensic team and the Banking Fraud Unit in Kenya. Mr. Nganda, a Director of the plaintiff company, asserted that there was no Board resolution by the plaintiff that authorized the top-up loan applied for by the 3rd defendant, and that he was not contacted by Mr. Gachau as alleged. Mr. Nganda averred that contrary to the 1st defendant’s assertions that he was out of the country at the time of application and processing of the second top-up facility, he was in the country as can be seen from the entry stamps affixed on his passport by the Kenyan Immigration Office when he came back to the country.
22. This Court finds it suspicious that the loan application forms, supposedly signed by Mr. Nganda, were emailed to the 1st defendant by the 3rd defendant, instead of them being sent to the 1st defendant by Mr. Nganda himself. Additionally, the 1st defendant’s employee. Mr. Gachau admitted that he had never met or spoken to Mr. Nganda before receiving his contact details from the 3rd defendant. He has however not demonstrated to this Court how he was able to ascertain that he was indeed speaking to Mr. Nganda when he allegedly called the contact provided to him by the 3rd defendant.
23. From the foregoing, this Court notes significant discrepancies in the application and processing of the second top-up loan of Kshs.2,500,000/=. Mr. Nganda has demonstrated that he was in the country at the time of the application and processing of the second top-up loan applied for by the 3rd defendant, contrary to the 1st defendant’s assertions. Additionally, the plaintiff has produced a copy of an email from the 3rd defendant to the plaintiff's Advocates on record confirming that the 1st defendant knew about Mr. Nganda's absence during the loan application, processing, and disbursement. However, the 1st & 2nd defendants have not offered any explanation for the aforesaid inconsistencies.
24. The above notwithstanding, it is not disputed that the plaintiff defaulted on its monthly repayments for both the initial loan and the first top-up facility. In a letter dated 3rd July 2023, to the 1st defendant's debt recovery unit, the plaintiff through its former Advocates, Ongegu & Associates Advocates, acknowledged being indebted to the 1st defendant to the tune of Kshs.3,313,967.85 as at 5th May 2021, and requested for leniency in resuming loan payments pending the investigation of the second top-up loan taken by the 3rd defendant. The 1st defendant contended that as a result of the said default, it issued a Notice under Section 90 of the Land Act, 2012, dated 18th March 2022 to the plaintiff, which Notice was sent vide registered post to the plaintiff’s last known postal address, P.O. Box 5976-00200, Nairobi, being the same postal address used in the account opening forms and the subject top-up loan application form. In support of these averments, the 1st defendant produced a copy of the said Notice, together with a Certificate of Postage from the Postal Corporation of Kenya.
25. The 1st defendant argued that the plaintiff failed to comply with the Notice under Section 90 of the Land Act, and as a result, a further Notice under Section 96 of the said Act, dated 24th August 2022, was issued and sent to the plaintiff’s last known postal address, P.O. Box 5976-00200, Nairobi. The 1st defendant provided a Certificate of Postage as proof. Upon non-compliance with the aforesaid Notice, the 1st defendant instructed the 2nd defendant to issue a 45-day Redemption Notice and Notification of Sale, which the plaintiff herein has acknowledged receiving.
26. It is however worthy of note that the plaintiff disputed having received the two Notices issued by the 1st defendant under Sections 90 and 96 of the Land Act, 2012, and argued that the 1st defendant's Certificate of Postage could not be verified by the Postal Corporation of Kenya, suggesting it was forged. To support the said claim, the plaintiff presented emails sent to the Postal Corporation of Kenya seeking confirmation of the registration or parcel numbers, but the plaintiff did not provide any responses from the Postal Corporation of Kenya, to show if the emails were responded to or not.
27. It is now well settled that the burden of proof lies with the party making an assertion, as outlined in Sections 107, 108 and 109 of the Evidence Act. For this reason, the plaintiff had the responsibility to prove that the Certificates of Postage for the Notices under Sections 90 and 96 of the Land Act, 2012, issued by the 1st defendant, were forgeries. The plaintiff however failed to provide evidence sufficient or otherwise to support the said claim. Consequently, this Court finds that the 1st defendant properly issued the required Statutory Notices to the plaintiff, and since the plaintiff did not rectify the default in repaying the debt, the 1st defendant's right to exercise its statutory power of sale over the suit property had accrued.
28. The Court of Appeal in the case of Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] eKLR, defined what constitutes a prima facie case as follows -
“So what is a prima facie case" I would say that in civil cases it is a case in 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. A prima facie case is more than an arguable case. It is not sufficient to raise issues but the evidence must show an infringement of a right, and the probability of success of the Applicant’s case upon trial. That is clearly a standard, which is higher than an arguable case.”
29. From the analysis made in this ruling, and guided by the above decision, this Court finds that the plaintiff has not demonstrated that it has a prima facie case with a probability of success.
30. On the issue of damage to be suffered by the plaintiff in the event that the instant application is not allowed, Courts have held time and again that a property offered as security becomes a commodity for sale in the event of default. This was the holding in the case of Shimmers Plaza Limited v National Bank of Kenya Limited [2013] eKLR, where the Court of Appeal agreed with the High Court’s finding that damages could be adequate compensation as the appellant’s guaranteed security therein, had been converted into a commodity for sale upon the same being charged to the respondent therein. In view of the above case law, and the fact that the value of the suit property in issue herein can be easily ascertained from Valuation Reports, and the fact that the 1st defendant being a financial institution can easily compensate the plaintiff in the event that its suit is determined in its favour, I am persuaded that the plaintiff does not stand to suffer irreparable damage that cannot be adequately compensated by an award of damages in the event that the instant application is not allowed. The issue of the 2nd top-up which is disputed will be a triable issue in the main suit but it cannot be the basis of stopping a sale that has accrued due to default in repayment of the initial loan and first top-up loan by the plaintiff.
31. In the end, I am satisfied that the balance of convenience tilts in favour of the 1st defendant since the plaintiff has not established a prima facie case with a probability of success, and it can always be compensated by an award of damages in the event that its suit is successful.
32. The upshot is that the plaintiff’s application dated 28th November 2023 is devoid of merits. It is hereby dismissed with costs to the 1st defendant.
It is so ordered.
DATED, SIGNED and DELIVERED at NAIROBI on this 22nd day of November, 2024. Ruling delivered through Microsoft Teams Online Platform.
NJOKI MWANGI
JUDGE
In the presence of:
Mr. Mohamed Billow for the plaintiff/applicant
Mr. Mbaji for the 1st and 2nd defendants/respondents
Ms B.Wokabi – Court Assistant.