1. I have considered the Notice of Motion Application dated 13 April, 2023 together with affidavit in support sworn on even date and the replying affidavit sworn on 28th April 2023, the submissions of the parties, and the applicable law.
2. It is evident that the Defendant extended banking facilities to the Applicant under various term loans. The same is annexed at FN 1 of the supporting affidavit. Further, the Applicant secured the said facilities, details of the same are set out in scheduled 1 of the Agreement between the parties.
3. Vide a letter dated 22nd March, 2023 the bank wrote to the Plaintiff and clarified the Plaintiff was in default in the administration of the facilities. The Bank stated that the Asset Based Financing had an outstanding balance of Kshs 28,730,498.73 and was in arrears, to the tune of Kshs 4,095,905.20 as at the date of the letter.
4. In the same letter the Applicant was advised by the Bank to make payment of all the arrears amounting to Kshs 33, 256,468.92 within 14 days, failure to which recovery action would be instituted. A copy of the said letter is found at page 8 of the replying affidavit, annexure MF 4.
5. The Bank’s version of events is that following the said demand, the Plaintiff defaulted in repaying the loan, and continues to be in default. As a result, the Bank exercised its statutory power of sale to recover the outstanding amount. The Bank subsequently instructed auctioneers to issue a proclamation notice to recover the arrears together with interest and penalties. The proclamation provoked the filing of the present Application.
6. The Applicant on the other hand, disputes the amount owing, and further averred that some of the movable properties proclaimed do not form part of the securities offered for various banking facilities.
7. More importantly, the Applicant contended that the demand notice was never served on it prior to the auctioneer’s proclamation of its movable goods as per clause 12 of the said agreement. Issuance of the same was, in the Applicant’s view, mandatory and was never complied with.
8. Further, Counsel submitted that the proclamation notice was irregular. He contended that the auctioneer had no instructions to proceed and no basis for its action in recovery. In his view, several of the vehicles were not part of the security as agreed between the Applicant and the Bank.
9. I note that the demand letter in question is found at annexure MF 4 of the replying affidavit. Looking at the same, it evidently addressed to the Directors of the Applicant at P.O. Box 22223-04000, Nairobi. This is not the Applicants correct address. The Applicant’s address is clearly stated in the facility dated 21 July, 2021 (the “Facility” or the “Agreement”) annexure FM 1 of the supporting affidavit and the same reads as P.O. Box 22223-00100 Nairobi. Therefore, I am persuaded that the Applicant was not served with the said demand.
10. Having found the above, I am of the view that fresh notice ought to be issued in this regard to allow the Applicant an opportunity to comply with the said demand.
11. Further, I note that the Facility at clause 8.1 under the heading of ‘security’, states as follows:
“the borrower shall create in favour of the Bank the security documents particulars of which are set out in schedule 1 or such other security as the bank shall from time to time require to secure the Borrowers obligations hereunder”
12. Looking at the above, it is evident that the Agreement is not in itself the charge, but rather, contemplates the creation of such a document in addition to the Facility, and to be executed between the parties.
13. The assets of the Applicant to be included in such further document are set out in the schedule 1 (c). Therefore, while the vehicle in question, namely registration number KCP 019N is listed in the Agreement, in my view it is listed for the further purpose of being charged as security for the loan. That further document contemplated at clause 8.1 of the Facility has not been provided to the court.
14. Accordingly, the proclamation dated 3rd April, 2023 is also set aside because not only was it issued before the demand was served on the Applicant, but also because the Respondent has not produced the charging instrument pursuant to which the proclamation was issued.
15. Based on record before me, I am persuaded that the Applicant has met the threshold for the grant of an injunction set out in Giella v Cassman Brown [1973] EA 358, namely:
a. Establish his case only at a prima facie level,
b. Demonstrate irreparable injury that cannot be compensated by way of damages if a temporary injunction is not granted, and
c. Ally any doubts as to (b) by showing that the balance of convenience is in his favour.
16. In particular, given the facts as set out above, I am satisfied that the Applicant has made out a prima facie case under the first limb, in accordance with Mrao Ltd v First American Bank of Kenya Limited and 2 Others [2003] eKLR , namely “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 to call for an explanation or rebuttal from the latter.”
17. I say so, because in addition to the reasons set out above, in the absence of the charging instrument, the Facility provides for only default interest and not the sale of the Applicant’s assets. Such action on the part of the Respondent’s would no doubt threaten or infringe the Applicant’s rights under the terms of the Agreement.
18. I am further satisfied that the Applicant may suffer irreparable loss because in the event its assets and machinery are disposed of there is a danger the company may come to an indeterminate stand still and risk collapse. Moreover, without such assets it may be impossible for it to perform its contract with the Bank, leading to further loss on the part of all parties.
19. Finally, I do not think it is appropriate for the court to re write contracts between parties, and therefore, I decline to allow prayer No. 4 seeking a forced settlement on unilateral terms. I do however find it appropriate to refer the parties to mediation with a view towards discussion on mutually agreeable terms of repayment, if possible.
20. In the premise, I am inclined to allow the Application on the following terms:
a. The proclamation notice dated 3rd April, 2023 is hereby set aside.
b. A temporary injunction in terms of prayer No. 3 is granted pending the hearing and determination of the suit.
c. The parties are referred to mediation