Introduction and Background
1. Through an application dated 10th June 2021, the 1st and 2nd plaintiffs seek interim injunctive relief to restrain the defendant Bank from selling, taking possession of, or interfering with the suit property, Title No. Dagoretti/Riruta/T.14. The suit property was charged in favour of the Bank to secure a loan advanced to the 2nd plaintiff. They contend that while the 2nd plaintiff was committed to servicing the facility, economic hardship caused by debtor defaults and the COVID-19 pandemic led to temporary financial constraints. Despite attempts to seek indulgence and proposals to make substantial payments, the Bank has failed to respond and has instead instructed auctioneers to proceed with a public auction then scheduled for 15th June 2021.
2. The plaintiffs challenge the legality of the recovery process, arguing that the Bank had failed to issue proper statutory notices under Sections 90 and 96 of the Land Act. They maintain that they are willing to settle the arrears and that no prejudice would be suffered by the Bank, which continues to earn commercial interest. They invoke Section 103 of the Land Act, urging the Court to exercise its discretion to halt the auction in the interests of justice.
3. The Bank opposes the application, asserting that the facility of Kshs. 6,000,000/= advanced to the 2nd plaintiff was properly secured by a First Legal Charge and personal guarantee of the 1st plaintiff. Due to default by the 2nd plaintiff, the Bank initiated recovery proceedings in full compliance with the Land Act, including issuance and service of a demand notice under Section 90 (dated 21st February 2020), a statutory notice under Section 96 (dated 23rd July 2020), a redemption notice (dated 14th December 2020) and a public auction notice via Sannex Auctioneers (dated 30th March 2021).
4. The Bank contends that the plaintiffs’ default is admitted. It notes that the outstanding loan as of 25th May 2021 stood at Kshs. 6,294,105.79, and that the auction process is lawful and necessary. It denies the plaintiffs’ assertion of improper notice and avers that the plaintiffs were always aware of the auction process.
5. The Bank maintains that it has incurred costs in advertising and preparing for the auction and that the plaintiffs’ application is a bad-faith attempt to frustrate enforcement of its statutory rights. It emphasizes that any loss to the plaintiffs is compensable in damages and that no prima facie case or undertaking as to damages has been established.
Analysis and Determination
6. I have considered the application, response, rival affidavits, annexures, and submissions by the parties. It is not disputed that the 2nd plaintiff obtained a loan of Kshs. 6,000,000/= from the Bank and that the 1st plaintiff guaranteed the same and offered the suit property as security. The plaintiffs admit default, citing economic hardship and the effects of the COVID-19 pandemic. They seek an opportunity to regularize the account and challenge the propriety of the recovery process, particularly the statutory notices issued.
7. The Bank has on its part demonstrated that following the Plaintiffs’ default, it issued the requisite notices under Sections 90 and 96 of the Land Act, including a demand notice, statutory notice, and redemption notice, all of which were annexed with certificates of postage. It also instructed auctioneers, who issued and served a notice of sale. A valuation report was also obtained to determine the reserve price. On the face of it, the Bank’s actions appear to be within the bounds of the law.
8. The principles governing the grant of interlocutory injunctions were settled in Giella v Cassman Brown [1973] EA 358, namely:
a) The applicant must show a prima facie case with a probability of success;
b) That unless the injunction is granted, the applicant stands to suffer irreparable injury;
c) That if in doubt, the court will decide the matter on a balance of convenience.
9. In the present case, while the Court appreciates the sentimental value the 1st plaintiff may attach to the property, the security was voluntarily offered and a binding contract entered into. The plaintiffs admit to being in default and have not demonstrated that the statutory process was fatally defective. On the contrary, the Bank has placed before the Court evidence of compliance with the procedural requirements under the Land Act.
10. Further, the Court takes note that this matter has remained pending since 2021. If the plaintiffs were indeed acting in good faith, one would have expected them to make efforts toward settling the arrears during the pendency of the application and the main suit. However, no evidence has been tendered to show that any payments have been made over this extended period.
11. All in all, the Court is not satisfied that a prima facie case has been established. I am equally unpersuaded that the plaintiffs stand to suffer irreparable harm, given that the property’s value is known and monetary compensation would be an adequate remedy. Finally, the balance of convenience does not favour halting a lawful recovery process, particularly one anchored on an admitted default and clear compliance with the statutory requirements under the Land Act.
12. On the contrary, it is in the interest of justice to allow the Bank to proceed with the realization of the charged property in order to recover the outstanding loan. The debt continues to accrue interest, thereby posing the real risk that it may eventually exceed the value of the security. The plaintiffs cannot be permitted to indefinitely forestall the Bank’s statutory rights while taking no meaningful steps to cure the default.
Final Orders:
Accordingly,
a) The Notice of Motion dated 10th June 2021 lacks merit and is hereby dismissed.
b) The interim orders issued herein (if any) are vacated.
c) Costs of the application shall be borne by the plaintiffs.
1. Through an application dated 10th June 2021, the 1st and 2nd plaintiffs seek interim injunctive relief to restrain the defendant Bank from selling, taking possession of, or interfering with the suit property, Title No. Dagoretti/Riruta/T.14. The suit property was charged in favour of the Bank to secure a loan advanced to the 2nd plaintiff. They contend that while the 2nd plaintiff was committed to servicing the facility, economic hardship caused by debtor defaults and the COVID-19 pandemic led to temporary financial constraints. Despite attempts to seek indulgence and proposals to make substantial payments, the Bank has failed to respond and has instead instructed auctioneers to proceed with a public auction then scheduled for 15th June 2021.
2. The plaintiffs challenge the legality of the recovery process, arguing that the Bank had failed to issue proper statutory notices under Sections 90 and 96 of the Land Act. They maintain that they are willing to settle the arrears and that no prejudice would be suffered by the Bank, which continues to earn commercial interest. They invoke Section 103 of the Land Act, urging the Court to exercise its discretion to halt the auction in the interests of justice.
3. The Bank opposes the application, asserting that the facility of Kshs. 6,000,000/= advanced to the 2nd plaintiff was properly secured by a First Legal Charge and personal guarantee of the 1st plaintiff. Due to default by the 2nd plaintiff, the Bank initiated recovery proceedings in full compliance with the Land Act, including issuance and service of a demand notice under Section 90 (dated 21st February 2020), a statutory notice under Section 96 (dated 23rd July 2020), a redemption notice (dated 14th December 2020) and a public auction notice via Sannex Auctioneers (dated 30th March 2021).
4. The Bank contends that the plaintiffs’ default is admitted. It notes that the outstanding loan as of 25th May 2021 stood at Kshs. 6,294,105.79, and that the auction process is lawful and necessary. It denies the plaintiffs’ assertion of improper notice and avers that the plaintiffs were always aware of the auction process.
5. The Bank maintains that it has incurred costs in advertising and preparing for the auction and that the plaintiffs’ application is a bad-faith attempt to frustrate enforcement of its statutory rights. It emphasizes that any loss to the plaintiffs is compensable in damages and that no prima facie case or undertaking as to damages has been established.
Analysis and Determination
6. I have considered the application, response, rival affidavits, annexures, and submissions by the parties. It is not disputed that the 2nd plaintiff obtained a loan of Kshs. 6,000,000/= from the Bank and that the 1st plaintiff guaranteed the same and offered the suit property as security. The plaintiffs admit default, citing economic hardship and the effects of the COVID-19 pandemic. They seek an opportunity to regularize the account and challenge the propriety of the recovery process, particularly the statutory notices issued.
7. The Bank has on its part demonstrated that following the Plaintiffs’ default, it issued the requisite notices under Sections 90 and 96 of the Land Act, including a demand notice, statutory notice, and redemption notice, all of which were annexed with certificates of postage. It also instructed auctioneers, who issued and served a notice of sale. A valuation report was also obtained to determine the reserve price. On the face of it, the Bank’s actions appear to be within the bounds of the law.
8. The principles governing the grant of interlocutory injunctions were settled in Giella v Cassman Brown [1973] EA 358, namely:
a) The applicant must show a prima facie case with a probability of success;
b) That unless the injunction is granted, the applicant stands to suffer irreparable injury;
c) That if in doubt, the court will decide the matter on a balance of convenience.
9. In the present case, while the Court appreciates the sentimental value the 1st plaintiff may attach to the property, the security was voluntarily offered and a binding contract entered into. The plaintiffs admit to being in default and have not demonstrated that the statutory process was fatally defective. On the contrary, the Bank has placed before the Court evidence of compliance with the procedural requirements under the Land Act.
10. Further, the Court takes note that this matter has remained pending since 2021. If the plaintiffs were indeed acting in good faith, one would have expected them to make efforts toward settling the arrears during the pendency of the application and the main suit. However, no evidence has been tendered to show that any payments have been made over this extended period.
11. All in all, the Court is not satisfied that a prima facie case has been established. I am equally unpersuaded that the plaintiffs stand to suffer irreparable harm, given that the property’s value is known and monetary compensation would be an adequate remedy. Finally, the balance of convenience does not favour halting a lawful recovery process, particularly one anchored on an admitted default and clear compliance with the statutory requirements under the Land Act.
12. On the contrary, it is in the interest of justice to allow the Bank to proceed with the realization of the charged property in order to recover the outstanding loan. The debt continues to accrue interest, thereby posing the real risk that it may eventually exceed the value of the security. The plaintiffs cannot be permitted to indefinitely forestall the Bank’s statutory rights while taking no meaningful steps to cure the default.
Final Orders:
Accordingly,
a) The Notice of Motion dated 10th June 2021 lacks merit and is hereby dismissed.
b) The interim orders issued herein (if any) are vacated.
c) Costs of the application shall be borne by the plaintiffs.