Sasah Contractors Limited VS NATIONAL BANK OF KENYA AND COLINET AUCTIONEERS

REPUBLIC OF KENYA

IN THE HIGH COURT AT KISUMU

CIVIL (COMMERCIAL) SUIT NO E009 OF 2024

SASAH CONTRACTORS LTD (FOMERLY

SASAH GENERAL MERCHANTS LTD).……PLAINTIFF/APPLICANT

VERSUS

NATIONAL BANK KENYA LTD………1^ST DEFENDANT/RESPONDENT

COLINET AUCTIONEERS….………...2^ND DEFENDANT/RESPONDENT

RULING

1. Sasah Contractors (the Plaintiff/Applicant) filed an application dated 29th May 2024, seeking an injunction to restrain the Defendants/Respondents or their agents from selling, by public auction or private treaty, letting, charging, or otherwise alienating his parcel of land, L.R. NO. KISUMU MUNICIPALITY/BLOCK 4/867.
2. In support of the application, Samuel Odhiambo Akumu, the Applicant’s Managing Director, swore a supporting affidavit. He stated that the property had been charged to the 1st Defendant to secure overdraft facilities, initially for Kshs 3,000,000/= and later for Kshs 26,000,000/=.
3. The Applicant further asserted that, according to its records, the overdraft facilities had been fully repaid. Therefore, he was surprised when the 2nd Defendant served him with a redemption notice on 22nd March 2024, indicating that the suit property would be sold by public auction unless the sum of Kshs 6,334,496 was paid within 45 days.
4. The Applicant contended that the statement from the 1st Defendant reflected unusual and unexplained liabilities. He also claimed that the suit property, which includes a hotel, was grossly undervalued. Additionally, he asserted that he had never been served with any notice modifying the interest rates or terms of the charge.
5. The Applicant equally deposed that he would suffer significant prejudice if the property, which he built through years of hard work and which supports many people, were sold. He further argued that such a sale would cause considerable inconvenience to all parties involved, particularly if it were later reversed after the suit is heard and determined.
6. In response to the application, the 1st Defendant filed a Replying Affidavit dated 10th June 2024, sworn by its remedial analyst. In the affidavit, the analyst deposed that the Applicant’s account was in arrears, after the failure to repay the amounts due on time.
7. It is further deposed on behalf of the 1st Defendant that the Applicant took loans of Kshs 1,500,000/= on 10th February 2009, Kshs 3,000,000/= on 18th May 2011, and Kshs 26,000,000/= on 10th September 2012 and failed to repay on time.
8. The 1st Defendant/Respondent maintained that all the necessary notices were duly served, and the required valuation was conducted.
9. Both parties proposed to canvass the application by way of written submissions.

PLAINTIFF/APPLICANT’S SUBMISSIONS

1. The Plaintiff/Applicant submits that the application meets all the necessary requirements for the grant of a temporary injunction. 
2. On a prima facie case the Applicant asserts that there were only two charges, securing Kshs 3,000,000/= on 2/8/2011 and Kshs 26,000,000/= on 10/9/2012. The Applicant submits that the 1st Defendant did not provide evidence that the monies had not been repaid by 1/3/2016.
3. Furthermore, the Applicant contends that the 1st Defendant breached Sections 90 and 97(2) of the Land Act by failing to serve a statutory notice and to conduct a proper valuation, respectively.
4. The Applicant further affirms that the guarantors were not served with the notice of sale as required by Section 96(3)(g) of the Land Act.
5. In further support of its prima facie case, the Applicant points out that the Defendants have not filed a defence to the suit, leaving the case unopposed. To substantiate this claim, the Applicant references Order 7 Rule 1 of the Civil Procedure Rules, which mandates that a Defendant must file a defence within 14 days of entering appearance.
6. Regarding the issue of suffering irreparable injury that cannot be compensated by damages, the Applicant asserts that it will indeed suffer such harm. The Applicant emphasizes the substantial effort invested in improving the property to its current standard, noting that the hotel supports many Kenyans both directly and indirectly. Moreover, the Applicant argues that if the sale proceeds and is later reversed by the court, the process of returning the property would be cumbersome and highly inconvenient.
7. The Applicant further submits that a party should not be denied an injunction simply because damages are available. It cites that case of Said Almed v Mannasseh Benga & Another [2019] eKLR where the court held that the issue of damages should not be considered if the law has been flouted.
8. The Applicant also references the case of Joseph Siro Mosioma v Housing Finance Company Ltd & 3 Others [2008]eKLR where the court held that:

“Damages is not an automatic remedy when deciding whether to grant an injunction or not. Damages is not and cannot be substituted for the loss which is occasioned by a clear breach of the law. In any case, the financial strength of a party is not always a factor to refuse an injunction. More so a party cannot be condemned to take damages in lieu of his crystallized right which can be protected by an order of injunction.” 

1. Regarding the balance of convenience, the Applicant reiterates the significant difficulty of reverting the property back to it if the sale proceeds and the suit ultimately succeeds.
2. Furthermore, the Applicant asserts that the 1st Defendant will not be prejudiced by the injunction, as they can always initiate the sale process again if the suit is decided in their favour.

1ST DEFENDANT/RESPONDENT’S SUBMISSIONS

1. The 1st Defendant/Respondent urges the court to be guide by the principles for granting an interlocutory injunction as outlined in the case of Giella v Cassman Brown & Co. Ltd (1973) EA 358.
2. The 1st Defendant submits that the Applicant has failed to establish a prima facie case. In support of this, the Defendant points to the amounts due, the valuation report provided, and the requisite statutory notices that have been served. The Defendant cites. Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003]eKLR, which defines a prima facie case as one where, based on the available material, a court could reasonably conclude that a right has been infringed by the opposing party, thus warranting a rebuttal or explanation from the infringing party.
3. Additionally, the 1st Defendant draws attention to the condition in the charge document stipulating that in the event of default, the entire amount would fall due. The Defendant references Rehebeam Agencies Limited & another v Equity Bank Ltd & another, where the court held that Section 90 (2) of the Land Act must be interpreted in accordance with the terms and conditions agreed upon by the parties in the charge.
4. In further opposition to the application, the 1st Defendant submits that it cannot be prevented from exercising its statutory power of sale. The Defendant cites Nancy Wacici v Kenya Women Micro Finance Bank Ltd [2017]eKLR where the court held that a court has no power to stop a mortgagee’s power of sale if it is being properly exercised.
5. Furthermore, the 1st Defendant asserts that the Applicant has approached the Court with unclean hands by concealing the existence of a first charge of Kshs 1,500,000/= dated 10/2/2009.
6. In conclusion, the 1st Defendant submits that the balance of convenience favours its position, emphasizing that the Applicant was fully aware of the consequences of failing to meet the conditions set forth in the charge.

ANALYSIS AND DETERMINATION

1. Having considered the Application, the Replying Affidavit, and the rival submissions, the primary issue for determination is whether the Applicant has met the criteria for grant of a temporary injunction.
2.  The guiding principles for the issuance of temporary injunction orders are well-established, as outlined in the judicial decision of Giella Versus Cassman Brown (1973) EA 358. This position has been reiterated in several Kenyan court decisions, particularly in the case of   Nguruman Limited versus Jan Bonde Nielsen & 2 others CA No.77 of 2012 (2014) eKLR where the Court of Appeal held that;

“In an interlocutory injunction application, the Applicant must satisfy three requirements: (a) establish their case at a prima facie level, (b) demonstrate irreparable injury if the injunction is not granted, and (c) show that the balance of convenience favors them. These three conditions form the foundation of any injunction order, whether interlocutory or permanent. It is clear that these conditions must be applied as separate, distinct, and logical hurdles which the Applicant must overcome sequentially.”

1. To support the establishment of a prima facie case, the Applicant highlighted the settlement of the cash owed, the Respondent's failure to serve a statutory notice and conduct a valuation, the failure to serve the guarantors with notice of sale, and the Respondent’s failure to file a defence to the suit.
2. In contrast, the Respondent argued that it had demonstrated the amounts due, provided the necessary valuation report, and served the required notices.
3. Upon reviewing the Application and supporting documents, it is not immediately clear whether the full amount has been repaid. Additionally, the precise nature of the ‘unfamiliar penalties and interests’ has not been substantiated. Nonetheless, it remains uncontested that the Respondents are seeking to auction the property over a debt of Kshs 6,334,496.
4. I have also reviewed the three charges attached to the Replying Affidavit, which total Kshs 30,500,000. Although the amount is disputed, the balance shows that a significant amount of has been paid back.
5. The dispute over the amount owed provides a sufficient prima facie basis for granting an injunction. This is in line with the decision in Nairobi High Court Civil Case No. 517 of 2014 – Lucy Nungari Ngigi & 4 Others v. National Bank of Kenya Limited & Anor (eKLR), which stated:

“....I am also aware that the 1^st Defendant has raised issues in respect of the mortgage herein, their right to exercise the statutory power of sale, breach of the addendum, default of repayment of the loan etc. They have also raised some accountability issues from the 2^nd Defendant on the purchase price. But even these queries should be reserved for and determined at the trial. These issues are in direct conflict with issues raised by the Plaintiffs and the 2^nd Defendant. At this stage I should not make any comments or findings, or express opinions on the substantive issues in controversy in order to avoid hurting the trial herein...”

1. I am of the view that the question of whether the amounts claimed are valid, and which will be determined at the hearing, constitutes a prima facie case, particularly if you compare the amount being sought with the value of the property. This position is supported by Nguruman Limited case (supra) which held:

“The party on whom the burden of proving a prima facie case lies must show a clear and unmistakable right to be protected which is directly threatened by an act sought to be restrained, the invasion of the right has to be material and substantive and there must be an urgent necessity to prevent the irreparable damage that may result from the invasion.  We reiterate that in considering whether or not a prima facie case has been established, the court does not hold a mini trial and must not examine the merits of the case closely.  All that the court is to see is that on the face of it the person applying for an injunction has a right which has been or is threatened with violation.  Positions of the parties are not to be proved in such a manner as to give a final decision in discharging a prima facie case.  The applicant need not establish title it is enough if he can show that he has a fair and bona fide question to raise as to the existence of the right which he alleges.  The standard of proof of that prima facie case is on a balance or, as otherwise put, on a preponderance of probabilities.  This means no more than that the Court takes the view that on the face of it the applicant’s case is more likely than not to ultimately succeed.”

1. Moving on to whether the Applicant would suffer irreparable harm, it was argued that significant investments were made to bring the hotel to its current standard. Additionally, the Applicant contended that it would be exceedingly difficult to revert the hotel’s ownership if the sale proceeds and the court later rules in its favour. The Applicant further asserted that payment of damages would not adequately remedy the situation.
2. In the Nguruman Limited case (supra) it was stated as follows regarding irreparable loss.

“On the second factor, that the applicant must establish that he “might otherwise” suffer irreparable injury which cannot be adequately remedied by damages in the absence of an injunction, is a threshold requirement and the burden is on the applicant to demonstrate, prima face, the nature and extent of the injury. Speculative injury will not do; there must be more than an unfounded fear or apprehension on the part of the applicant. The equitable remedy of temporary injunction is issued solely to prevent grave and irreparable injury; that is injury that is actual, substantial and demonstrable; injury that cannot “adequately” be compensated by an award of damages. An injury is irreparable where there is no standard by which their amount can be measured with reasonable accuracy or the injury or harm is such a nature that monetary compensation, of whatever amount, will never be adequate remedy.”

1. While the evidence regarding the efforts to enhance the hotel’s status has not been fully provided, the pictures in the valuation report suggest that the hotel is in good condition. Furthermore, the Respondent has not challenged the Applicant’s claims of suffering irreparable loss. As a result, I find that the Applicant has met the second condition.
2. Regarding the balance of convenience, I align with the decision Pius Kipchirchir Kogo vs. Frank Kimeli Tenai [2018] eKLR, which emphasized:

“The balance of convenience in favour of the plaintiff means that if an injunction is not granted and the suit is ultimately decided in favour of the plaintiff, the inconvenience caused to the plaintiff would be greater than the inconvenience caused to the defendant if the injunction is granted but the suit is dismissed. The plaintiffs must show that the inconvenience they would face without the injunction is greater than the inconvenience to the defendant if the injunction is granted.”

1. Based on the findings above, I am satisfied that the Plaintiff has satisfied the conditions necessary for the grant of the injunctory orders sought.
2. In the premises I grant the following orders:
3. Pending the hearing and determination of this suit, the Respondents are hereby restrained, either by themselves, their employees, servants and/or any person acting on their behalf from selling whether by public auction or private treaty, transferring, letting, charging, alienating or interfering with the Land Parcel No. KISUMU MUNICIPALITY/BLOCK 4/867 pending hearing and determination of the suit.
4. Costs of the application be in the cause:

Orders accordingly.

Delivered, signed and date at Bungoma this 7^th day of February 2025

                                   MWANAISHA S SHARIFF

     JUDGE