1. The plaintiffs’/applicants’ Notice of Motion dated 19/2/2024 seeks an order of temporary injunction to restrain the respondents by themselves, their agents, servants and/or any person who is working for them from auctioning, dealing, selling, interfering and/or disposing of property known as LR No. MN/V/1897 (C.R. 62381) situated at Bonje area, Mazeras, Kilifi pending the hearing and determination of the suit.
2. The application is brought under section 1A, 1B, 3, 3A and 63(e) of the Civil Procedure Act (Cap. 21) Laws of Kenya; Order 40 Rule 1(1)(a) and 2(1) & Order 51 Rule 1 of the Civil Procedure rules, 2010 and section 97(1) & (2) of the Land Act and all other enabling provisions of the law.
3. The grounds in support of the application are set out on the face of the application and expounded in the supporting affidavit sworn on 19/2/2024 by Abdirahman Mohamud Abdow, a director of the 1st applicant End to End Limited (the borrower) who deposes that that the applicants have established more than an arguable case that warrants the orders sought as the actions of the respondents are marred by illegalities and procedural impropriety.
4. The application is opposed by the 1st respondent through a replying affidavit sworn on 23/9/2024 by Samuel Njoroge, the assistant manager, debt recovery unit (the bank) who deposes that the application does not meet the threshold for granting the reliefs sought.
5. The 2nd applicant and the 2nd respondent have not participated in this application as they have not filed any document in any way.
6. The application was argued by way of written submissions supported by authorities filed by learned counsels for the 1st applicant and the 1st respondent which are duly considered in the analysis and evaluation herein.
7. It is discernible from the affidavits filed by the parties that Sammy Andrew Matano the 2nd applicant is the registered owner of the charged property and a guarantor of a loan of KShs 15 million advanced to the borrower, the 1st applicant by the bank/the 1st respondent on or about 6/9/2028. The 2nd applicant offered his subject parcel of land L.R. No. MN/V/1897 (C.R. 62381) as security for the loan whereby a legal charge was created over the property in favour of the bank.
8. The bank deposes that the 1st applicant failed to service the loan as agreed leading to accumulated arrears of KShs 25,410,353.61. Subsequently, the borrower approached the bank and the bank extended an additional facility of KShs 22,900,000/= through a letter dated 28/7/2020. There is a supplementary letter of offer dated 13/8/2020 showing that the maximum amount that the borrower could draw under the facility was KShs 23,684,453/= while the statement of account shows that the loan disbursed on 14/8/2020 was KShs 23,717,048/=. This amount was to be applied for loan consolidation and restructure.
9. I have read the supporting affidavit and I do not find anywhere the 1st applicant deposes that it has made or made attempts to service the loan. It has not attached a statement of account to the affidavit. However, the statements of account annexed to the bank’s replying affidavit show that some credits were made into the account. The most significant one, a sum of KShs 22,610,655.90 was made by Kwale County on 6/11/2018. There is no dispute however that the loan was and has always been in arrears.
10. The 1st applicant blames the non-servicing of the loan upon the 2nd respondent, the County Government of Kwale for failing to pay it money, through its account with the bank, upon a contract for the construction of a dam by the 1st applicant for the 2nd respondent. According to the 1st applicant it had obtained the loan from the bank, the 1st respondent to apply it towards undertaking the contract.
11. The 1st respondent has therefore initiated the process of sale of the 2nd applicant’s property by way of public auction to recover the outstanding sum of KShs 75,067,558.37 as per the auctioneer’s notice to the applicants dated 6/12/2023. According to the 1st respondent, all the requisite notices as required by law have been sent out to the chargor and the borrower.
12. Therefore, it is not in dispute that the 2nd applicant’s property is scheduled to be sold by public auction through Keysian Auctioneers, upon the terms of the guarantee for the loan advanced to the 1st applicant and the charge created thereof as security for the loan by the 2nd applicant.
13. In that respect, the law provides that the lender has a right to proceed against a guarantor on the guarantee. The High Court rendered this position in the case of Olkasasi Limited v Equity Bank Limited [2015] KEHC 5932 (KLR) thus:
“A guarantee constitutes a separate contract from the borrower’s simple contract for loan and the liability of a guarantor is separate from that of the borrower; it arises upon the default by the borrower to fulfil the terms of the contract for loan. The guarantor is, therefore, sued and liable on the guarantee. Except, however, where the guarantee is also given in form of a charge on immovable property of the guarantor, the guarantor will benefit from certain provisions of the law available to a chargor as provided for under sections 90, 96 and 97 of the Land Act as well as rule 15 of the Auctioneers Rules.”
14. I am persuaded to follow this decision. The guarantor herein, the 2nd applicant who is also the chargor has not filed any document challenging the process of the bank realizing the security. But the borrower, the 1st applicant has an issue with that process. It deposes that the amount being claimed by the bank KShs 75,067,558.37 is excessive, arising out of exaggerated interest, which according to the 1st applicant is unlawful, resulting in a demand five times more than what was borrowed. It further deposes that this is against section 97(1) & (2) of the Land Act (Cap. 280) Laws of Kenya. It has however not stated what the contractual interest rate is and what the exaggerated interest the bank is applying is.
15. The 1st applicant also contends that the property has been undervalued with a forced sale value of KShs 15 million assigned to it and this is meant to ensure that the property is disposed to the bank’s benefit and yet a recent valuation of the property has given it a value of KShs 125,000,000/= (Annex. AMA 9).
16. In its response through the replying affidavit of Samuel Njoroge, the 1st respondent deposes that, in the 1st instance, the borrower failed to service the loan leading to accumulation of arrears to the tune of KShs 25,410,353.61. A notice was thus sent to the borrower to rectify the default. After that notice, the borrower approached the bank for a further loan and on 14/8/2020 the bank disbursed KShs 23,717,048/= for consolidation and restructure of the existing loan. He deposes further that the borrower has failed to disclose this position in its application and therefore has come to the court of equity with unclean hands.
17. According to learned counsel for the 1st applicant the three issues raised in the application that warrant the orders of temporary injunction are undervaluation of the charged property, imposition of exorbitant charges and failure to comply with statutory requirements under the Land Act.
18. Learned counsel for the 1st respondent deposes that the 1st applicant having failed to respond to the facts deposed to by the 1st respondent in the replying affidavit, the same remain untraversed and so should be taken as the correct position on the matter. He relies on the case of Mohamed & Another v. Haidara [1972] E.A. 166 and Kenya Reinsurance Corporation v. R.M. Mutiso [2009] eKLR for that proposition. He further submits that the application does not meet the threshold for grant of an interlocutory injunction as set out in Giella v. Cassman Brown & Co. Ltd [1973] EA, 358.
19. I have considered the application and the response thereto by the 1st respondent as well as the submissions by learned counsels. The main issue for determination in this application is whether the conditions for issuance of temporary injunction have been met by the applicants and a collateral issue is whether the 1st respondent’s right of statutory power of sale has accrued.
20. The traditional conditions to be met by a party seeking a temporary injunction are set out in the case of Giella v. Cassman Brown Co. Ltd [1973] EA 358 to wit:-
a. Has the applicant established a prima facie case with a probability of success?
b. Will the applicant suffer irreparable injury unless an injunction is issued? and,
c. where there is doubt in the mind of the court the application will be determined depending on where the balance of convenience lies.
23. The case of Nguruman Limited v Jan Bonde Nielsen and another (2014) eKLR 589 cited by learned counsels restates the above tests. And as submitted by learned counsel for the 1st respondent, these tests are sequential. They are determined from the first to the last. So that where the first is not satisfied by the applicant the court need not move to the second and the third as held in the case of Kenya Commercial Finance Company Ltd Vs Afraha Education Society [2001] 1 E.A. 86 cited by learned counsel for the 1st respondent.
21. The first test is whether the applicant has established a prima facie case with a probability of success. The guide here is the case of Mrao v First American Bank of Kenya Ltd & 2 Others [2003] KLR 125 which defined a prima facie case as follows;
“..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.”
22. The applicant has raised three issues, undervaluation of the charged property, imposition of exorbitant charges and failure to comply with statutory requirements under the Land Act. The court has to consider these issues in relation to the tests for grant of an interlocutory application above.
23. Starting with the issue of imposition of exorbitant charges, I will immediately dispose of the same. As submitted by learned counsel and held in the various cases cited in the submissions, courts have long held that a dispute as to the amount owed is not sufficient ground for an injunction to be granted. It was stated in the case of Palmy Company Limited v Consolidated Bank of Kenya Limited [2014] KEHC 4811 (KLR) that;
“Unless there are other cogent grounds, disputes on the amounts owing or interest charged will not be the sole basis for grant of an injunction against a chargee who is exercising the statutory power of sale of the charged property…”
24. In the present case, other than deposing that the charges are exorbitant, the 1st applicant has not pointed out from the statement of account where the charges are exorbitant and how exaggerated they are and by how much and therefore outside the contractual rates agreed in the charge document.
25. On its part, the 1st respondent has provided a statement of account in a bid to show how the amounts have accrued to the amount being claimed as per the statutory notices issued. The statements of account annexed are in three sets. The first set is for the period 1/11/2017 to 30/11/2018. The second set is for the period 1/12/2018 to 31/12/2018 when the closing balance was KShs 17,773,272.00. These two are detailed statements on a day by day basis. The third set is a summarized statement of account. It is indicated as being for the period 29/9/2017 to 26/2/2024, the details as are in the statement are for 14/8/2020 then skipping to 31/8/2021 then to 14/9/2021 and thereafter a monthly basis to 31/1/2024. They basically show that the loan was not being serviced until it reached KShs 80,461,732.45.
26. It is apparent from these statements that the period 1/1/2019 to 13/8/2020 is not covered. This lends credence to the applicant’s contention that requests to the bank to show how the monies accrued to what is being claimed have not been honoured.
27. I therefore find the contention by the 1st applicant not to be without merit. In spite of the finding, the fact that the loan is in arrears and is not being serviced is not in contention.
28. On the issue of undervaluation of the charged property the 1st applicant relies on section 97 of the Land Act which provides as follows:
(1) A chargee who exercises a power to sell the charged land, including the exercise of the power to sell in pursuance of an order of a court, owes a duty of care to the chargor, any guarantor of the whole or any part of the sums advanced to the chargor, any chargee under a subsequent charge or under a lien to obtain the best price reasonably obtainable at the time of sale.
(2) A chargee shall, before exercising the right of sale, ensure that a forced sale valuation is undertaken by a valuer.
(3) If the price at which the charged land is sold is twenty-five per centum or below the market value at which comparable interests in land of the same character and quality are being sold in the open market—
(a) there shall be a rebuttable presumption that the chargee is in breach of the duty imposed by subsection (1); and
(b) the chargor whose charged land is being sold for that price may apply to a court for an order that the sale be declared void, but the fact that a plot of charged land is sold by the chargee at an undervalue being less than twenty-five per centum below the market value shall not be taken to mean that the chargee has complied with the duty imposed by subsection (1).
(4) …
29. In the case of Palmy Company Limited v Consolidated Bank of Kenya Limited [2014] KEHC 4811 (KLR) the High Court considering this section of the law observed that:
“The purpose of the valuation under section 97(2) of the Land Act is twofold; One; to obtain the best price reasonably obtainable at the time of sale, thus protecting the right of the chargor to property. Doubtless, best or reasonable price which is comparable to interests in land of the same character and quality is part of the right to property itself; and two; to prevent unscrupulous chargee from selling the charged property at a price which is peppercorn or not comparable to interests in land of the same character and quality. The duty under section 97(2 of the Land Act is, therefore, a serious legal requirement which will entitle the chargor to apply to court under section 97(3) (b) of the Land Act to have any sale based on such breach to be declared void, and the court on the required proof, should declare such sale to be void. That is the onerous nature of the duty.”
30. Therefore, the issue of whether or not the property has been correctly valued is an important one to determine whether the 1st applicant has met the conditions for grant of an interlocutory injunction.
31. The 1st applicant deposes that the current market value of the charged property is KShs 125 million. It has annexed a valuation report dated 7/2/2024 by G.K. Mutugi of Wyco Valuers Co. In response, the 1st respondent annexed a valuation report by Accurate Valuers Ltd dated 12/7/2023 which gives the current open market value of KShs 20 million and forced sale value of KShs 15 million. In the valuer’s report, it is indicated that the property file held at Mombasa Land registry indicated that the property was free from any encumbrance. The valuer attributed this to the charge not being properly registered or all documents not being submitted. Consequently, the certificate of postal search dated 12/7/2023 showed nil encumbrance on the property.
32. The certificate of official search dated 5/2/2024 and annexed to the replying affidavit of the bank as well as the one annexed to the valuation report tendered by the 1st applicant however show that there was an encumbrance by way of a charge dated 6/9/2018 to Rafiki Microfinance Bank Ltd for KShs 15 million. Since there is no dispute on the existence of the charge and its proper registration on the title, nothing turns on that disparity.
33. What is significant is the great disparity in the valuation reports. This is expected though given that the two parties are speaking from two opposite ends, the bank wants to realize its security but the applicant wishes to retain it. Interestingly, neither of the parties found it appropriate to make available the valuation report for the property as at the time of creation of the charge. It would have been of most uses to the court.
34. The challenge here is that the valuation by the borrower comes later than that of the Bank. The bank did not find it prudent to challenge the same with a more current valuation report, even though the onus of proof that the valuation is correct lies with the 1st applicant to show that the applicants’ rights have been infringed by the 1st respondent by failing to discharge the duty of care under section 97(1) of the Land Act.
35. The only way to resolve the issue given that the bank’s valuation is older than that of the 1st applicant by about six months is to conduct a joint valuation of the property by the bank and the borrower. I do not see how the same property can have such a huge disparity in value in a space of six months. One of the parties must be plainly dishonest on that issue.
36. The final issue is the contention by the 1st applicant is that requisite statutory notices under the law have not been issued by the bank. But, at the same time the 1st applicant deposes that the 1st respondent gave notice of their intention to proceed and sale the 2nd applicant’s property to recover the charged amount. There is no deposition that the notices were irregular in any way.
37. In the replying affidavit the 1st respondent has outlined in paragraph 17 the notices issued. There is no dispute by the applicant that it is in default of repayment of the loan amount. Such are notices issued in compliance with sections 90 and 96 of the Land Act.
38. As submitted by learned counsel for the 1st respondent, there is no dispute that the said notices were proper and were delivered upon the applicants. Moreover, the 1st respondent has annexed to the replying affidavit copies of all the notices served upon the Borrower and the chargor as guarantor of the loan.
39. I have seen the notices required under section 90(1) of the Land Act that were issued to End-to-End Limited as the borrower/principal debtor and the one issued to Sammy Andrew Matano as the chargor/guarantor and the 2nd applicant herein, each dated 25/10/2021 and titled “First Statutory notice” for an outstanding sum of KShs 30,866,077.25 as at 25/10/2021 attached as annextures to the replying affidavit. The notices were asking the parties to remedy the default within 3 months by paying the outstanding sum and their right to apply to court for relief. I am satisfied that the notices to the respective parties fully complied with section 90(1) of the Land Act which in part provides that:
(1) If a chargor is in default of any obligation, fails to pay interest or any other periodic payment or any part thereof due under any charge or in the performance or observation of any covenant, express or implied, in any charge, and continues to be in default for one month, the chargee may serve on the chargor a notice, in writing, to pay the money owing or to perform and observe the agreement as the case may be.
(2) The notice required by subsection (1) shall adequately inform the recipient of the following matters—
(a) the nature and extent of the default by the chargor;
(b) if the default consists of the non-payment of any money due under the charge, the amount that must be paid to rectify the default and the time, being not less than three months, by the end of which the payment in default must have been completed;
(c) if the default consists of the failure to perform or observe any covenant, express or implied, in the charge, the thing the chargor must do or desist from doing so as to rectify the default and the time, being not less than two months, by the end of which the default must have been rectified;
(d) the consequence that if the default is not rectified within the time specified in the notice, the chargee will proceed to exercise any of the remedies referred to in this section in accordance with the procedures provided for in this sub-part; and
(e) the right of the chargor in respect of certain remedies to apply to the court for relief against those remedies.
(3) If the chargor does not comply within ninety days after the date of service of the notice under, subsection (1), the chargee may—
(a) sue the chargor for any money due and owing under the charge;
(b) appoint a receiver of the income of the charged land;
(c) lease the charged land, or if the charge is of a lease, sublease the land;
(d) enter into possession of the charged land; or
(e) sell the charged land;
(4) …
40. There is no indication that the borrower remedied the default after the expiry of the 3 months (90-days) notice issued under section 90 of the Act. I have also seen another notice titled “Notice to Sell” to both the 1st and 2nd applicants as borrower and chargor respectively dated 28/2/2022, which period is clearly after 90 days of the first notice, giving them 40 days within which to redeem the charged property. The outstanding sum at the time indicated in the notices was KShs 35,422,369.45, otherwise the bank shall sell the charged property. I am satisfied that this notice complies with the mandatory provisions of section 96(2) of the Land Act which provides that:
(1) Where a chargor is in default of the obligations under a charge and remains in default at the expiry of the time provided for the rectification of that default in the notice served on the chargor under section 90(1), a chargee may exercise the power to sell the charged land.
(2) Before exercising the power to sell the charged land, the chargee shall serve on the chargor a notice to sell in the prescribed form and shall not proceed to complete any contract for the sale of the charged land until at least forty days have elapsed from the date of the service of that notice to sell.
(3) A copy of the notice to sell served in accordance with subsection (2) shall be served on—
(a) the Commission, if the charged land is public land;
(b) the holder of the land out of which the lease has been granted, if the charged land is a lease;
(c) a spouse of the chargor who had given the consent;
(d) any lessee and sublessee of the charged land or of any buildings on the charged land;
(e) any person who is a co-owner with the chargor;
(f) any other chargee of money secured by a charge on the charged land of whom the chargee proposing to exercise the power of sale has actual notice;
(g) any guarantor of the money advanced under the charge;
(h) any other person known to have a right to enter on and use the land or the natural resources in, on, or under the charged land by affixing a notice at the property; and
(i) any other persons as may be prescribed by regulations, and shall be posted in a prominent place at or as near as may be to the charged land.
41. The third notice required is what is commonly known as the notice of redemption issued under Rule 15(d) of the Auctioneers Rules made under the Auctioneers Act (Cap. 526) Laws of Kenya to the effect that the owner may redeem the property by payment of the amount outstanding and as indicated in the notice within 45 days. I have seen notices dated 6/12/2023 by Keysian Auctioneers and titled “45 Days’ Notice” addressed to End to End Limited and Sammy Andrew Matano respectively. The notices indicate that at the expiry of 45 days period if the sum of KShs 75,067,558.37 outstanding shall not have been paid to the bank the auctioneers will proceed to sell the charged property by public auction. The auctioneer Muganda Wasulwa deposes in his affidavit of service of the notices sworn on 19/2/2024, that he personally served the notices upon each of the applicants and this is not disputed. I have no reason to find otherwise.
42. Therefore, the contention by the 1st applicant that the requisite notices were not issued in accordance with the law is without basis at all.
43. Based on the material presented to the court as evaluated above, and the court properly directing itself thereto, can it conclude that there exists a right to the applicants which has apparently been infringed by the respondents as to call for an explanation or rebuttal from the respondents? In other words, have the applicants sequentially met the conditions for the grant of an interlocutory injunction above?
44. Save for a few issues pointed out below, it would appear to me that the bank has substantially but not perfectly complied with some requirements before it proceeds with its exercise of power sale. These issues require to be rectified if it should be able to proceed with the same.
45. Having come to the above findings, I must say that I have made observations from the affidavits and documents filed herein and I must say I am curious about certain emerging issues which have not been addressed either by the 1st applicant or the 1st respondent but which all the same are important for the case.
46. First, I have not seen any letter of offer and acceptance for the principal loan of KShs 15 million from the bank to the 1st applicant. It is not mentioned in their respective affidavits nor is it annexed to either. The borrower is the principal debtor of the bank. Where is the letter showing the terms of the loan? Granted that the disbursement of the loan is not disputed but where is the basis of that loan. In the event that this very critical piece of evidence was inadvertently forgotten to be annexed by both parties, it will be fair that it comes out clearly at the main hearing or at least, it is provided.
47. Secondly, it is curious to me that the chargor has not participated in this application even as it is his property under the threat of disposal. A question arises on whether or not he is properly involved in these proceedings even as he is a plaintiff and applicant. That however cannot stop the chargees’ exercise of the power of sale.
48. The third issue is that the notices under section 96 of the Land Act are mandatory. Among the persons who are required to be served with the notice under sub-section 3(c) is a spouse of the chargor who had given consent. In this case, I have seen among the annextures to the bank’s replying affidavit, an affidavit of spousal consent sworn by Serah Wasai Kiwinda as wife of Sammy Andrew Matano, the chargor and 2nd applicant herein. It is sworn on 6/9/2018, just the same time as the charge herein was being prepared. It does not indicate the parcel of land to which it relates but it becomes curious that it would be filed among the documents provided by the bank. I can only conclude that it was part of the documents required for the creation of the charge as required under the law. I have also seen a certificate of marriage between Sammy Andrew Matano and the said Serah Wasai Kiwinda annexed to the replying affidavit. I have however not seen any notice to sell under section 96(3)(c) of the Land Act issued and served upon Serah Wasai Kiwinda as spouse of the chargor as required under the Act
49. In the case of Solomon Mbili Ngomo v Kenya Deposit Insurance Corporation Dalali Traders [2019] KEHC 10818 (KLR) the High Court while considering the import of this section held that:
“The requirements under section 96(2) of the Land Act are mandatory. Of importance, Section 89 of the Land Act provides expressly that equity of redemption will not be extinguished except in accordance with the provisions of the said Act. Therefore, exercise of Chargee’s Statutory Power of Sale will only extinguish the Chargor’s Equity of Redemption if it is strictly exercised in accordance with the Land Act. Section 96(2) of the Land Act is one of the provisions of the Land Act which reinforce the Chargors Equity of Redemption.”
50. As indicated above notices to sell under section 96(2) of the Land Act were issued to the borrower and the chargor but not to the chargor’s spouse. The statutory power of sale may therefore be exercisable, if the said notice is issued.
51. One last issue that I have noticed is that some of the annextures to the bank’s replying affidavit and particularly, the notice to sell to the chargor Sammy Andrew Matano, dated 28/2/2022, among others are not marked at all by affixing a stamp of the Commissioner for Oaths as required under Rule 9 of the Oaths and Statutory Declarations Rules made under the Oaths and Statutory Declarations Act (Cap. 15) Laws of Kenya that annexures to affidavits should be sealed and stamped. Rule 9 provides that:
“All exhibits to affidavits shall be securely sealed thereto under the seal of the Commissioner and shall be marked with serial letters of identification.”
52. In the case of Solomon Mbili above, the court considering a similar issue referred to the case of Abraham Mwangi v S. O. Omboo & Others HCCC No. 1511 of 2002 as per the Ruling of Hayanga J. (as he then was) who had found that the exhibit itself must be marked and went on to quote Order 41 of the Rules of the Supreme Court of England that dealt with forms of affidavits and exhibits. That Order divided exhibits into documents and nondocuments. The Judge maintained that fly papers are misleading and fraught with uncertainty. He held:
“Exhibits to affidavits which are loose fly sheets for identification attached to them and do not bear Exhibit marks on them directly must be rejected. The danger is so great. These exhibits are therefore rejected and struck out from the record. That makes the affidavit incomplete hence also rejected. That being the case the application fails and is dismissed.”
53. As was held in the Solomon Mbili case this court cannot make a determination on the said notice, as the same has not been presented to the court in compliance with the law.
54. Finally, besides the discrepancies pointed out above in the statement of account as provided by the 1st respondent, I note in the statement of account that besides the loan of KShs 15 million disbursed to the borrower on 15/9/2018 and the KShs 23,717,048/= disbursed on 14/8/2020 for loan consolidation and restructuring, there is another loan disbursement of KShs 10 million on 8/11/2018 which has not been mentioned by either of the parties. Looking at the first two sets of statements of account they are not consistently completed in the balances column even where there are transactions in the credit and debit columns. The balance column has many gaps which are not explained by the 1st respondent at all. The question is, what is the effect of the KShs 10 million further credit to the borrower to the chargor’s security even as it was indicated to be a continuing security? The gaps in the balance column need to be completed.
55. Considering all these issues wholesome, it is difficult to determine whether or not the three conditions for the grant of a temporary injunction have been met. Therefore, this court has to look outside the traditional conditions set out in the case of Giella v. Cassman Brown above. Courts have expressed the view that a temporary injunction may be granted on the basis of the court taking whichever course appears to carry the lower risk of injustice if it should turn out to have been “wrong” This position is expressed in the case of Jan Bolden Nielsen vs. Herman Phillipus Steyn alias Hermannus Phillipus Steyn & 2 Others (2012) eKLR where the High Court in adopting the reasoning in Suleiman vs. Amboseli Resort Ltd (2004) eKLR 589 stated that:
“I believe that in dealing with an application for an interlocutory injunction, the court is not necessarily bound to the three principles set out in the Giella vs Cassman Brown case. The court may look at the circumstances of the case generally and the overriding objective of the law. In Suleiman vs. Amboseli Resort Ltd (2004) eKLR 589 Ojwang Ag. J (as he then was) at page 607 delivered himself thus:-
‘...counsel for the defendant urged that the shape of the law governing the grant of injunctive relief was long ago in Giella vs Cassman Brown, in 1973 cast in stone and no new element may be added to that position. I am not, with respect, in agreement with counsel in that point, for the law has always kept growing to greater levels of refinement, as it expands to cover new situations not exactly foreseen before. Justice Hoffman in the English case of Films Rover International made this point regarding the grant of injunctive relief (1986) 3 All ER 772 at page 780-781:- “ A fundamental principle is that the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been “wrong”….”
Traditionally, on the basis of the well accepted principles set out by the court of Appeal in Giella vs Cassman Brown the court has had to consider the following questions before granting injunctive relief.
i) Is there a prima facie case?
ii) Does the applicant stand to suffer irreparable harm?
iii) On which side does the balance of convenience lie?
Even as those must remain the basis tests, it is worth adopting a further, albeit rather special and more intrinsic test which is now in the nature of general principle. The Court in responding to prayers for interlocutory injunctive relief should always opt for the lower rather than the higher risk of injustice…
56. I wish to adopt this reasoning in the present case, considering the foregoing consideration of this application. Consequently, if this court is wrong that the applicants have not met the conditions for the grant of an injunction then the prayer for a temporary injunction would be merited only because the 1st respondent needs to rectify the various lapses pointed out above. This is because the borrower/the 1st applicant is yet to pay off the loan granted by the 1st respondent/the bank and the bank cannot be unduly barred from exercising its power of sale under those circumstances.
57. Consequently, this court will proceed to grant relief as appropriate and that the application dated 19/2/2024 is allowed in the following terms:-
a. The 1st respondent shall render to the applicants full statements of account of the loan in issue in accordance with the stipulated terms of the loan agreement within 30 days from the date hereof and thereafter comply with the provisions of section 96(2) of the Land Act by issuing the requisite notices to sell the suit property.
b. A conditional temporary injunction restraining the proposed sale of the suit property is hereby issued pending the fulfilment of the condition in (a) above and that upon the fulfilment of the said condition the conditional temporary injunction shall stand vacated.
c. The 1st respondent shall bear the costs of this application and also pay the auctioneers charges so far.
Delivered, dated and signed at Kwale on the Virtual Platform, Teams this 18th day of February 2025.
ANDAYI W. F.
JUDGE
In the presence of:
Mukoya (Ms) for Plaintiffs/Applicants.
Otieno for the 1st Defendant/Respondent.
N/A for the 2nd Defendant/Respondent.
Johnson: Court Assistant.
2. The application is brought under section 1A, 1B, 3, 3A and 63(e) of the Civil Procedure Act (Cap. 21) Laws of Kenya; Order 40 Rule 1(1)(a) and 2(1) & Order 51 Rule 1 of the Civil Procedure rules, 2010 and section 97(1) & (2) of the Land Act and all other enabling provisions of the law.
3. The grounds in support of the application are set out on the face of the application and expounded in the supporting affidavit sworn on 19/2/2024 by Abdirahman Mohamud Abdow, a director of the 1st applicant End to End Limited (the borrower) who deposes that that the applicants have established more than an arguable case that warrants the orders sought as the actions of the respondents are marred by illegalities and procedural impropriety.
4. The application is opposed by the 1st respondent through a replying affidavit sworn on 23/9/2024 by Samuel Njoroge, the assistant manager, debt recovery unit (the bank) who deposes that the application does not meet the threshold for granting the reliefs sought.
5. The 2nd applicant and the 2nd respondent have not participated in this application as they have not filed any document in any way.
6. The application was argued by way of written submissions supported by authorities filed by learned counsels for the 1st applicant and the 1st respondent which are duly considered in the analysis and evaluation herein.
7. It is discernible from the affidavits filed by the parties that Sammy Andrew Matano the 2nd applicant is the registered owner of the charged property and a guarantor of a loan of KShs 15 million advanced to the borrower, the 1st applicant by the bank/the 1st respondent on or about 6/9/2028. The 2nd applicant offered his subject parcel of land L.R. No. MN/V/1897 (C.R. 62381) as security for the loan whereby a legal charge was created over the property in favour of the bank.
8. The bank deposes that the 1st applicant failed to service the loan as agreed leading to accumulated arrears of KShs 25,410,353.61. Subsequently, the borrower approached the bank and the bank extended an additional facility of KShs 22,900,000/= through a letter dated 28/7/2020. There is a supplementary letter of offer dated 13/8/2020 showing that the maximum amount that the borrower could draw under the facility was KShs 23,684,453/= while the statement of account shows that the loan disbursed on 14/8/2020 was KShs 23,717,048/=. This amount was to be applied for loan consolidation and restructure.
9. I have read the supporting affidavit and I do not find anywhere the 1st applicant deposes that it has made or made attempts to service the loan. It has not attached a statement of account to the affidavit. However, the statements of account annexed to the bank’s replying affidavit show that some credits were made into the account. The most significant one, a sum of KShs 22,610,655.90 was made by Kwale County on 6/11/2018. There is no dispute however that the loan was and has always been in arrears.
10. The 1st applicant blames the non-servicing of the loan upon the 2nd respondent, the County Government of Kwale for failing to pay it money, through its account with the bank, upon a contract for the construction of a dam by the 1st applicant for the 2nd respondent. According to the 1st applicant it had obtained the loan from the bank, the 1st respondent to apply it towards undertaking the contract.
11. The 1st respondent has therefore initiated the process of sale of the 2nd applicant’s property by way of public auction to recover the outstanding sum of KShs 75,067,558.37 as per the auctioneer’s notice to the applicants dated 6/12/2023. According to the 1st respondent, all the requisite notices as required by law have been sent out to the chargor and the borrower.
12. Therefore, it is not in dispute that the 2nd applicant’s property is scheduled to be sold by public auction through Keysian Auctioneers, upon the terms of the guarantee for the loan advanced to the 1st applicant and the charge created thereof as security for the loan by the 2nd applicant.
13. In that respect, the law provides that the lender has a right to proceed against a guarantor on the guarantee. The High Court rendered this position in the case of Olkasasi Limited v Equity Bank Limited [2015] KEHC 5932 (KLR) thus:
“A guarantee constitutes a separate contract from the borrower’s simple contract for loan and the liability of a guarantor is separate from that of the borrower; it arises upon the default by the borrower to fulfil the terms of the contract for loan. The guarantor is, therefore, sued and liable on the guarantee. Except, however, where the guarantee is also given in form of a charge on immovable property of the guarantor, the guarantor will benefit from certain provisions of the law available to a chargor as provided for under sections 90, 96 and 97 of the Land Act as well as rule 15 of the Auctioneers Rules.”
14. I am persuaded to follow this decision. The guarantor herein, the 2nd applicant who is also the chargor has not filed any document challenging the process of the bank realizing the security. But the borrower, the 1st applicant has an issue with that process. It deposes that the amount being claimed by the bank KShs 75,067,558.37 is excessive, arising out of exaggerated interest, which according to the 1st applicant is unlawful, resulting in a demand five times more than what was borrowed. It further deposes that this is against section 97(1) & (2) of the Land Act (Cap. 280) Laws of Kenya. It has however not stated what the contractual interest rate is and what the exaggerated interest the bank is applying is.
15. The 1st applicant also contends that the property has been undervalued with a forced sale value of KShs 15 million assigned to it and this is meant to ensure that the property is disposed to the bank’s benefit and yet a recent valuation of the property has given it a value of KShs 125,000,000/= (Annex. AMA 9).
16. In its response through the replying affidavit of Samuel Njoroge, the 1st respondent deposes that, in the 1st instance, the borrower failed to service the loan leading to accumulation of arrears to the tune of KShs 25,410,353.61. A notice was thus sent to the borrower to rectify the default. After that notice, the borrower approached the bank for a further loan and on 14/8/2020 the bank disbursed KShs 23,717,048/= for consolidation and restructure of the existing loan. He deposes further that the borrower has failed to disclose this position in its application and therefore has come to the court of equity with unclean hands.
17. According to learned counsel for the 1st applicant the three issues raised in the application that warrant the orders of temporary injunction are undervaluation of the charged property, imposition of exorbitant charges and failure to comply with statutory requirements under the Land Act.
18. Learned counsel for the 1st respondent deposes that the 1st applicant having failed to respond to the facts deposed to by the 1st respondent in the replying affidavit, the same remain untraversed and so should be taken as the correct position on the matter. He relies on the case of Mohamed & Another v. Haidara [1972] E.A. 166 and Kenya Reinsurance Corporation v. R.M. Mutiso [2009] eKLR for that proposition. He further submits that the application does not meet the threshold for grant of an interlocutory injunction as set out in Giella v. Cassman Brown & Co. Ltd [1973] EA, 358.
19. I have considered the application and the response thereto by the 1st respondent as well as the submissions by learned counsels. The main issue for determination in this application is whether the conditions for issuance of temporary injunction have been met by the applicants and a collateral issue is whether the 1st respondent’s right of statutory power of sale has accrued.
20. The traditional conditions to be met by a party seeking a temporary injunction are set out in the case of Giella v. Cassman Brown Co. Ltd [1973] EA 358 to wit:-
a. Has the applicant established a prima facie case with a probability of success?
b. Will the applicant suffer irreparable injury unless an injunction is issued? and,
c. where there is doubt in the mind of the court the application will be determined depending on where the balance of convenience lies.
23. The case of Nguruman Limited v Jan Bonde Nielsen and another (2014) eKLR 589 cited by learned counsels restates the above tests. And as submitted by learned counsel for the 1st respondent, these tests are sequential. They are determined from the first to the last. So that where the first is not satisfied by the applicant the court need not move to the second and the third as held in the case of Kenya Commercial Finance Company Ltd Vs Afraha Education Society [2001] 1 E.A. 86 cited by learned counsel for the 1st respondent.
21. The first test is whether the applicant has established a prima facie case with a probability of success. The guide here is the case of Mrao v First American Bank of Kenya Ltd & 2 Others [2003] KLR 125 which defined a prima facie case as follows;
“..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.”
22. The applicant has raised three issues, undervaluation of the charged property, imposition of exorbitant charges and failure to comply with statutory requirements under the Land Act. The court has to consider these issues in relation to the tests for grant of an interlocutory application above.
23. Starting with the issue of imposition of exorbitant charges, I will immediately dispose of the same. As submitted by learned counsel and held in the various cases cited in the submissions, courts have long held that a dispute as to the amount owed is not sufficient ground for an injunction to be granted. It was stated in the case of Palmy Company Limited v Consolidated Bank of Kenya Limited [2014] KEHC 4811 (KLR) that;
“Unless there are other cogent grounds, disputes on the amounts owing or interest charged will not be the sole basis for grant of an injunction against a chargee who is exercising the statutory power of sale of the charged property…”
24. In the present case, other than deposing that the charges are exorbitant, the 1st applicant has not pointed out from the statement of account where the charges are exorbitant and how exaggerated they are and by how much and therefore outside the contractual rates agreed in the charge document.
25. On its part, the 1st respondent has provided a statement of account in a bid to show how the amounts have accrued to the amount being claimed as per the statutory notices issued. The statements of account annexed are in three sets. The first set is for the period 1/11/2017 to 30/11/2018. The second set is for the period 1/12/2018 to 31/12/2018 when the closing balance was KShs 17,773,272.00. These two are detailed statements on a day by day basis. The third set is a summarized statement of account. It is indicated as being for the period 29/9/2017 to 26/2/2024, the details as are in the statement are for 14/8/2020 then skipping to 31/8/2021 then to 14/9/2021 and thereafter a monthly basis to 31/1/2024. They basically show that the loan was not being serviced until it reached KShs 80,461,732.45.
26. It is apparent from these statements that the period 1/1/2019 to 13/8/2020 is not covered. This lends credence to the applicant’s contention that requests to the bank to show how the monies accrued to what is being claimed have not been honoured.
27. I therefore find the contention by the 1st applicant not to be without merit. In spite of the finding, the fact that the loan is in arrears and is not being serviced is not in contention.
28. On the issue of undervaluation of the charged property the 1st applicant relies on section 97 of the Land Act which provides as follows:
(1) A chargee who exercises a power to sell the charged land, including the exercise of the power to sell in pursuance of an order of a court, owes a duty of care to the chargor, any guarantor of the whole or any part of the sums advanced to the chargor, any chargee under a subsequent charge or under a lien to obtain the best price reasonably obtainable at the time of sale.
(2) A chargee shall, before exercising the right of sale, ensure that a forced sale valuation is undertaken by a valuer.
(3) If the price at which the charged land is sold is twenty-five per centum or below the market value at which comparable interests in land of the same character and quality are being sold in the open market—
(a) there shall be a rebuttable presumption that the chargee is in breach of the duty imposed by subsection (1); and
(b) the chargor whose charged land is being sold for that price may apply to a court for an order that the sale be declared void, but the fact that a plot of charged land is sold by the chargee at an undervalue being less than twenty-five per centum below the market value shall not be taken to mean that the chargee has complied with the duty imposed by subsection (1).
(4) …
29. In the case of Palmy Company Limited v Consolidated Bank of Kenya Limited [2014] KEHC 4811 (KLR) the High Court considering this section of the law observed that:
“The purpose of the valuation under section 97(2) of the Land Act is twofold; One; to obtain the best price reasonably obtainable at the time of sale, thus protecting the right of the chargor to property. Doubtless, best or reasonable price which is comparable to interests in land of the same character and quality is part of the right to property itself; and two; to prevent unscrupulous chargee from selling the charged property at a price which is peppercorn or not comparable to interests in land of the same character and quality. The duty under section 97(2 of the Land Act is, therefore, a serious legal requirement which will entitle the chargor to apply to court under section 97(3) (b) of the Land Act to have any sale based on such breach to be declared void, and the court on the required proof, should declare such sale to be void. That is the onerous nature of the duty.”
30. Therefore, the issue of whether or not the property has been correctly valued is an important one to determine whether the 1st applicant has met the conditions for grant of an interlocutory injunction.
31. The 1st applicant deposes that the current market value of the charged property is KShs 125 million. It has annexed a valuation report dated 7/2/2024 by G.K. Mutugi of Wyco Valuers Co. In response, the 1st respondent annexed a valuation report by Accurate Valuers Ltd dated 12/7/2023 which gives the current open market value of KShs 20 million and forced sale value of KShs 15 million. In the valuer’s report, it is indicated that the property file held at Mombasa Land registry indicated that the property was free from any encumbrance. The valuer attributed this to the charge not being properly registered or all documents not being submitted. Consequently, the certificate of postal search dated 12/7/2023 showed nil encumbrance on the property.
32. The certificate of official search dated 5/2/2024 and annexed to the replying affidavit of the bank as well as the one annexed to the valuation report tendered by the 1st applicant however show that there was an encumbrance by way of a charge dated 6/9/2018 to Rafiki Microfinance Bank Ltd for KShs 15 million. Since there is no dispute on the existence of the charge and its proper registration on the title, nothing turns on that disparity.
33. What is significant is the great disparity in the valuation reports. This is expected though given that the two parties are speaking from two opposite ends, the bank wants to realize its security but the applicant wishes to retain it. Interestingly, neither of the parties found it appropriate to make available the valuation report for the property as at the time of creation of the charge. It would have been of most uses to the court.
34. The challenge here is that the valuation by the borrower comes later than that of the Bank. The bank did not find it prudent to challenge the same with a more current valuation report, even though the onus of proof that the valuation is correct lies with the 1st applicant to show that the applicants’ rights have been infringed by the 1st respondent by failing to discharge the duty of care under section 97(1) of the Land Act.
35. The only way to resolve the issue given that the bank’s valuation is older than that of the 1st applicant by about six months is to conduct a joint valuation of the property by the bank and the borrower. I do not see how the same property can have such a huge disparity in value in a space of six months. One of the parties must be plainly dishonest on that issue.
36. The final issue is the contention by the 1st applicant is that requisite statutory notices under the law have not been issued by the bank. But, at the same time the 1st applicant deposes that the 1st respondent gave notice of their intention to proceed and sale the 2nd applicant’s property to recover the charged amount. There is no deposition that the notices were irregular in any way.
37. In the replying affidavit the 1st respondent has outlined in paragraph 17 the notices issued. There is no dispute by the applicant that it is in default of repayment of the loan amount. Such are notices issued in compliance with sections 90 and 96 of the Land Act.
38. As submitted by learned counsel for the 1st respondent, there is no dispute that the said notices were proper and were delivered upon the applicants. Moreover, the 1st respondent has annexed to the replying affidavit copies of all the notices served upon the Borrower and the chargor as guarantor of the loan.
39. I have seen the notices required under section 90(1) of the Land Act that were issued to End-to-End Limited as the borrower/principal debtor and the one issued to Sammy Andrew Matano as the chargor/guarantor and the 2nd applicant herein, each dated 25/10/2021 and titled “First Statutory notice” for an outstanding sum of KShs 30,866,077.25 as at 25/10/2021 attached as annextures to the replying affidavit. The notices were asking the parties to remedy the default within 3 months by paying the outstanding sum and their right to apply to court for relief. I am satisfied that the notices to the respective parties fully complied with section 90(1) of the Land Act which in part provides that:
(1) If a chargor is in default of any obligation, fails to pay interest or any other periodic payment or any part thereof due under any charge or in the performance or observation of any covenant, express or implied, in any charge, and continues to be in default for one month, the chargee may serve on the chargor a notice, in writing, to pay the money owing or to perform and observe the agreement as the case may be.
(2) The notice required by subsection (1) shall adequately inform the recipient of the following matters—
(a) the nature and extent of the default by the chargor;
(b) if the default consists of the non-payment of any money due under the charge, the amount that must be paid to rectify the default and the time, being not less than three months, by the end of which the payment in default must have been completed;
(c) if the default consists of the failure to perform or observe any covenant, express or implied, in the charge, the thing the chargor must do or desist from doing so as to rectify the default and the time, being not less than two months, by the end of which the default must have been rectified;
(d) the consequence that if the default is not rectified within the time specified in the notice, the chargee will proceed to exercise any of the remedies referred to in this section in accordance with the procedures provided for in this sub-part; and
(e) the right of the chargor in respect of certain remedies to apply to the court for relief against those remedies.
(3) If the chargor does not comply within ninety days after the date of service of the notice under, subsection (1), the chargee may—
(a) sue the chargor for any money due and owing under the charge;
(b) appoint a receiver of the income of the charged land;
(c) lease the charged land, or if the charge is of a lease, sublease the land;
(d) enter into possession of the charged land; or
(e) sell the charged land;
(4) …
40. There is no indication that the borrower remedied the default after the expiry of the 3 months (90-days) notice issued under section 90 of the Act. I have also seen another notice titled “Notice to Sell” to both the 1st and 2nd applicants as borrower and chargor respectively dated 28/2/2022, which period is clearly after 90 days of the first notice, giving them 40 days within which to redeem the charged property. The outstanding sum at the time indicated in the notices was KShs 35,422,369.45, otherwise the bank shall sell the charged property. I am satisfied that this notice complies with the mandatory provisions of section 96(2) of the Land Act which provides that:
(1) Where a chargor is in default of the obligations under a charge and remains in default at the expiry of the time provided for the rectification of that default in the notice served on the chargor under section 90(1), a chargee may exercise the power to sell the charged land.
(2) Before exercising the power to sell the charged land, the chargee shall serve on the chargor a notice to sell in the prescribed form and shall not proceed to complete any contract for the sale of the charged land until at least forty days have elapsed from the date of the service of that notice to sell.
(3) A copy of the notice to sell served in accordance with subsection (2) shall be served on—
(a) the Commission, if the charged land is public land;
(b) the holder of the land out of which the lease has been granted, if the charged land is a lease;
(c) a spouse of the chargor who had given the consent;
(d) any lessee and sublessee of the charged land or of any buildings on the charged land;
(e) any person who is a co-owner with the chargor;
(f) any other chargee of money secured by a charge on the charged land of whom the chargee proposing to exercise the power of sale has actual notice;
(g) any guarantor of the money advanced under the charge;
(h) any other person known to have a right to enter on and use the land or the natural resources in, on, or under the charged land by affixing a notice at the property; and
(i) any other persons as may be prescribed by regulations, and shall be posted in a prominent place at or as near as may be to the charged land.
41. The third notice required is what is commonly known as the notice of redemption issued under Rule 15(d) of the Auctioneers Rules made under the Auctioneers Act (Cap. 526) Laws of Kenya to the effect that the owner may redeem the property by payment of the amount outstanding and as indicated in the notice within 45 days. I have seen notices dated 6/12/2023 by Keysian Auctioneers and titled “45 Days’ Notice” addressed to End to End Limited and Sammy Andrew Matano respectively. The notices indicate that at the expiry of 45 days period if the sum of KShs 75,067,558.37 outstanding shall not have been paid to the bank the auctioneers will proceed to sell the charged property by public auction. The auctioneer Muganda Wasulwa deposes in his affidavit of service of the notices sworn on 19/2/2024, that he personally served the notices upon each of the applicants and this is not disputed. I have no reason to find otherwise.
42. Therefore, the contention by the 1st applicant that the requisite notices were not issued in accordance with the law is without basis at all.
43. Based on the material presented to the court as evaluated above, and the court properly directing itself thereto, can it conclude that there exists a right to the applicants which has apparently been infringed by the respondents as to call for an explanation or rebuttal from the respondents? In other words, have the applicants sequentially met the conditions for the grant of an interlocutory injunction above?
44. Save for a few issues pointed out below, it would appear to me that the bank has substantially but not perfectly complied with some requirements before it proceeds with its exercise of power sale. These issues require to be rectified if it should be able to proceed with the same.
45. Having come to the above findings, I must say that I have made observations from the affidavits and documents filed herein and I must say I am curious about certain emerging issues which have not been addressed either by the 1st applicant or the 1st respondent but which all the same are important for the case.
46. First, I have not seen any letter of offer and acceptance for the principal loan of KShs 15 million from the bank to the 1st applicant. It is not mentioned in their respective affidavits nor is it annexed to either. The borrower is the principal debtor of the bank. Where is the letter showing the terms of the loan? Granted that the disbursement of the loan is not disputed but where is the basis of that loan. In the event that this very critical piece of evidence was inadvertently forgotten to be annexed by both parties, it will be fair that it comes out clearly at the main hearing or at least, it is provided.
47. Secondly, it is curious to me that the chargor has not participated in this application even as it is his property under the threat of disposal. A question arises on whether or not he is properly involved in these proceedings even as he is a plaintiff and applicant. That however cannot stop the chargees’ exercise of the power of sale.
48. The third issue is that the notices under section 96 of the Land Act are mandatory. Among the persons who are required to be served with the notice under sub-section 3(c) is a spouse of the chargor who had given consent. In this case, I have seen among the annextures to the bank’s replying affidavit, an affidavit of spousal consent sworn by Serah Wasai Kiwinda as wife of Sammy Andrew Matano, the chargor and 2nd applicant herein. It is sworn on 6/9/2018, just the same time as the charge herein was being prepared. It does not indicate the parcel of land to which it relates but it becomes curious that it would be filed among the documents provided by the bank. I can only conclude that it was part of the documents required for the creation of the charge as required under the law. I have also seen a certificate of marriage between Sammy Andrew Matano and the said Serah Wasai Kiwinda annexed to the replying affidavit. I have however not seen any notice to sell under section 96(3)(c) of the Land Act issued and served upon Serah Wasai Kiwinda as spouse of the chargor as required under the Act
49. In the case of Solomon Mbili Ngomo v Kenya Deposit Insurance Corporation Dalali Traders [2019] KEHC 10818 (KLR) the High Court while considering the import of this section held that:
“The requirements under section 96(2) of the Land Act are mandatory. Of importance, Section 89 of the Land Act provides expressly that equity of redemption will not be extinguished except in accordance with the provisions of the said Act. Therefore, exercise of Chargee’s Statutory Power of Sale will only extinguish the Chargor’s Equity of Redemption if it is strictly exercised in accordance with the Land Act. Section 96(2) of the Land Act is one of the provisions of the Land Act which reinforce the Chargors Equity of Redemption.”
50. As indicated above notices to sell under section 96(2) of the Land Act were issued to the borrower and the chargor but not to the chargor’s spouse. The statutory power of sale may therefore be exercisable, if the said notice is issued.
51. One last issue that I have noticed is that some of the annextures to the bank’s replying affidavit and particularly, the notice to sell to the chargor Sammy Andrew Matano, dated 28/2/2022, among others are not marked at all by affixing a stamp of the Commissioner for Oaths as required under Rule 9 of the Oaths and Statutory Declarations Rules made under the Oaths and Statutory Declarations Act (Cap. 15) Laws of Kenya that annexures to affidavits should be sealed and stamped. Rule 9 provides that:
“All exhibits to affidavits shall be securely sealed thereto under the seal of the Commissioner and shall be marked with serial letters of identification.”
52. In the case of Solomon Mbili above, the court considering a similar issue referred to the case of Abraham Mwangi v S. O. Omboo & Others HCCC No. 1511 of 2002 as per the Ruling of Hayanga J. (as he then was) who had found that the exhibit itself must be marked and went on to quote Order 41 of the Rules of the Supreme Court of England that dealt with forms of affidavits and exhibits. That Order divided exhibits into documents and nondocuments. The Judge maintained that fly papers are misleading and fraught with uncertainty. He held:
“Exhibits to affidavits which are loose fly sheets for identification attached to them and do not bear Exhibit marks on them directly must be rejected. The danger is so great. These exhibits are therefore rejected and struck out from the record. That makes the affidavit incomplete hence also rejected. That being the case the application fails and is dismissed.”
53. As was held in the Solomon Mbili case this court cannot make a determination on the said notice, as the same has not been presented to the court in compliance with the law.
54. Finally, besides the discrepancies pointed out above in the statement of account as provided by the 1st respondent, I note in the statement of account that besides the loan of KShs 15 million disbursed to the borrower on 15/9/2018 and the KShs 23,717,048/= disbursed on 14/8/2020 for loan consolidation and restructuring, there is another loan disbursement of KShs 10 million on 8/11/2018 which has not been mentioned by either of the parties. Looking at the first two sets of statements of account they are not consistently completed in the balances column even where there are transactions in the credit and debit columns. The balance column has many gaps which are not explained by the 1st respondent at all. The question is, what is the effect of the KShs 10 million further credit to the borrower to the chargor’s security even as it was indicated to be a continuing security? The gaps in the balance column need to be completed.
55. Considering all these issues wholesome, it is difficult to determine whether or not the three conditions for the grant of a temporary injunction have been met. Therefore, this court has to look outside the traditional conditions set out in the case of Giella v. Cassman Brown above. Courts have expressed the view that a temporary injunction may be granted on the basis of the court taking whichever course appears to carry the lower risk of injustice if it should turn out to have been “wrong” This position is expressed in the case of Jan Bolden Nielsen vs. Herman Phillipus Steyn alias Hermannus Phillipus Steyn & 2 Others (2012) eKLR where the High Court in adopting the reasoning in Suleiman vs. Amboseli Resort Ltd (2004) eKLR 589 stated that:
“I believe that in dealing with an application for an interlocutory injunction, the court is not necessarily bound to the three principles set out in the Giella vs Cassman Brown case. The court may look at the circumstances of the case generally and the overriding objective of the law. In Suleiman vs. Amboseli Resort Ltd (2004) eKLR 589 Ojwang Ag. J (as he then was) at page 607 delivered himself thus:-
‘...counsel for the defendant urged that the shape of the law governing the grant of injunctive relief was long ago in Giella vs Cassman Brown, in 1973 cast in stone and no new element may be added to that position. I am not, with respect, in agreement with counsel in that point, for the law has always kept growing to greater levels of refinement, as it expands to cover new situations not exactly foreseen before. Justice Hoffman in the English case of Films Rover International made this point regarding the grant of injunctive relief (1986) 3 All ER 772 at page 780-781:- “ A fundamental principle is that the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been “wrong”….”
Traditionally, on the basis of the well accepted principles set out by the court of Appeal in Giella vs Cassman Brown the court has had to consider the following questions before granting injunctive relief.
i) Is there a prima facie case?
ii) Does the applicant stand to suffer irreparable harm?
iii) On which side does the balance of convenience lie?
Even as those must remain the basis tests, it is worth adopting a further, albeit rather special and more intrinsic test which is now in the nature of general principle. The Court in responding to prayers for interlocutory injunctive relief should always opt for the lower rather than the higher risk of injustice…
56. I wish to adopt this reasoning in the present case, considering the foregoing consideration of this application. Consequently, if this court is wrong that the applicants have not met the conditions for the grant of an injunction then the prayer for a temporary injunction would be merited only because the 1st respondent needs to rectify the various lapses pointed out above. This is because the borrower/the 1st applicant is yet to pay off the loan granted by the 1st respondent/the bank and the bank cannot be unduly barred from exercising its power of sale under those circumstances.
57. Consequently, this court will proceed to grant relief as appropriate and that the application dated 19/2/2024 is allowed in the following terms:-
a. The 1st respondent shall render to the applicants full statements of account of the loan in issue in accordance with the stipulated terms of the loan agreement within 30 days from the date hereof and thereafter comply with the provisions of section 96(2) of the Land Act by issuing the requisite notices to sell the suit property.
b. A conditional temporary injunction restraining the proposed sale of the suit property is hereby issued pending the fulfilment of the condition in (a) above and that upon the fulfilment of the said condition the conditional temporary injunction shall stand vacated.
c. The 1st respondent shall bear the costs of this application and also pay the auctioneers charges so far.
Delivered, dated and signed at Kwale on the Virtual Platform, Teams this 18th day of February 2025.
ANDAYI W. F.
JUDGE
In the presence of:
Mukoya (Ms) for Plaintiffs/Applicants.
Otieno for the 1st Defendant/Respondent.
N/A for the 2nd Defendant/Respondent.
Johnson: Court Assistant.