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1. By a plaint dated 1 August 2024, the plaintiffs sued the respondent for, inter alia, a permanent injunction restraining the defendant from disposing of their properties in exercises of the respondent’s power of sale. The prayers in the plaint have been couched as follows:
“a. A Permanent Injunction restraining the defendant, its agents or anyone instructed by the defendants from advertising for sale, selling, or in any other manner dealing or interfering with the and Plaintiffs Plot Nos'' MOMBASA/MWEMBELEGEZA/197, MOMBASA/MWEMBELEGEZA/198 and MOMBASA/BLOCK XVII/809 (herein after referred to as the "Suit Properties").
b. A declaration that the notification of sale dated 21.6.2024 are (sic) illegal, unlawful and null and void in so far as they were never served upon the 2nd and 3rd plaintiffs, the registered owners of the properties.
c. An order compelling the defendant to issue a proper 90 days redemption notice to enable the 2nd and 3rd plaintiffs redeem their suit properties.
d. A mandatory order compelling the defendant to avail a detailed statement of account containing the amount advanced to the 1st Plaintiff on account of securities comprised Ill Plot Nos'' MOMBASA/MWEMBELEGEZA/197, MOMBASA/MWEMBELEGEZA/198 and MOMBASA/BLOCK XVII/809.
e. General, Punitive, exemplary and aggravated damages for failure to issue the redemption notices upon the 2nd and 3rd Plaintiffs.
f. Costs of this suit.
g. In the alternative and without prejudice to all the above prayers, an order allowing the plaintiffs to secure potential buyers in respect of one of the properties, without interference from the defendant for a period of 90 days from the date of judgement; and use the proceeds of sale thereof in offsetting the actual loan arrears as the court will determine.”
2. It is pleaded in the plaint that the 1st plaintiff is a borrower of a loan facility, from the defendant, which was secured by the 2nd and 3rd plaintiffs’ properties known as Plot Nos. MOMBASA/MWEMBELEGEZA/197, MOMBASA/MWEMBELEGEZA/198 and MOMBASA/BLOCK XVII/809 (herein after “the suit properties”). The 2nd and 3rd respondents are guarantors of the loan.
3. The principal loan stated to be Kshs. 15,000,000/= is said to have been advanced sometime in the year 2022 and, since then, the 1st plaintiff had been repaying the loan and had not defaulted prior to “elections”. In any case, the defendant had never sent a default notice on the loan until late 2023.
4. That notwithstanding, the defendant has advertised to sell the suit properties. The 2nd and 3rd plaintiffs aver that they were never served with the 90 days redemption notice as provided under Section 90 2(b) of the Land Registration Act, 2012 and the notifications of sale and, that they only came to learn of the notifications and the redemption notices when they saw advertisements for auction of the suit properties. It is thus contended that they have been denied the right to redeem their properties and, therefore, the intended sale is unlawful, illegal and null and void.
5. It is further contended that the defendant’s auctioneer intended to sell the three suit properties valued at more than 29 million to recover a debt of Kshs. 14,186,314 plus arrears of Kshs. 1,111,459. The sale is, in any event, being done without a current valuation report. According to the plaintiffs, the sale of one property, out of the three properties, ought to be sufficient to pay off the outstanding loan.
6. The plaintiffs have also pleaded that despite their request for a statement of account of the outstanding loan, the same has not been availed and that failure by the defendant to provide this statement is intended to frustrate the plaintiffs.
7. Alongside the plaint, the plaintiffs filed an application for an interlocutory injunction pending the hearing and determination of the suit. The application is by way of a motion dated 1 August 2024 and it is expressed to be brought under sections 1A, 1B, 3, 3A of the Civil Procedure Act, cap. 21; sections 90(2)(b) of the Land Registration Act, 2012 and Order 40 rules 1, 2 and 4 of the Civil Procedure Rules. The prayer relevant to this application has been couched as follows:
“c) That pending the inter partes hearing and determination of this suit, an injunction do issue restraining the defendant, either by itself, employees, servants and/or agents, appointed or authorized by it , particularly Sportlight Intercepts Auctioneers from selling by public auction on 2.8.2024 or any other date plot nos. Mombasa/Mwembelegeza/197, Mombasa/Mwelegeza/198 and Mombasa/Block VII/809 (herein after referred to as the suit properties) or interfering in any way whatsoever with the plaintiff’s interests thereof.”
The applicants have also asked for costs of the application.
8. The application is supported by the affidavit of Dhiraj Premji Halai who has introduced himself as one of the directors of the 1st and 2nd plaintiffs.
By and large, Halai has rehashed in the affidavit the averments made in the plaint. He has stated further that he sought the loan from the defendant to keep his business afloat. Apart from charging the suit properties, the 1st and 2nd plaintiffs also executed a “Commercial Benefit Agreement” according to which the 2nd plaintiff was a surety while the 1st plaintiff was the borrower. The 1st plaintiff’s directors also executed deeds of guarantee and indemnity.
9. Halai has also sworn that the plaintiffs have attempted to renegotiate a loan restructure based on the current valuation of the suit properties but the defendant has refused to honour their request. Given time, he has sworn, the plaintiffs can find a buyer who can pay the current open market price for one property which will be sufficient to pay the entire debt.
10. On 26 November 2024 the 1st plaintiff wrote to the defendant with a payment proposal for payment of Kshs. 800,000/= on the twentieth day of every month to cover the outstanding instalments and to reduce the arrears until the debt was fully settled.
11. On 5 December 2024 the defendant wrote back issuing conditions to be met by the 1st plaintiff before the defendant could call off the auction that was then scheduled for 14 January 2025. The 1st plaintiff was, however, not able to meet the defendant’s conditions but still sought for further indulgence from the defendant proposing an alternative payment offer of Kshs. 1,500,000/= effective immediately. This amount was to cover the outstanding instalments. This offer was again rejected by the defendant through its letter dated 16 December 2024. The defendant instead insisted on its previous conditions.
12. Halai has sworn that the properties are leased out to third parties and the sale of the properties or eviction of their tenants would expose the 2nd and 3rd plaintiffs to suits for damages on account of failure to issue necessary eviction notices.
13. The respondent has opposed the application for injunction and filed a replying affidavit in that regard. The affidavit has been sworn by Regina Anyika who states that she is the “director legal and company secretary” of the respondent.
14. According to Anyika, the 1st applicant is not only indebted to the defendant but it is also in default of the loan facility advanced to it by the respondent. She has confirmed that indeed the 1st applicant took out a loan of Kshs. 15,000,000/= which was secured by the suit properties. The 1st applicant’s directors executed personal guarantees in favour of the defendant as security for repayment of the loan.
15. It was an express provision of the charge instruments registered against the suit properties that they chargors would repay the principal sum together with the interest at the rates agreed upon. It was also agreed that the respondent would be at liberty to sell the security to recover any amount due in the event of default.
16. When the 1st applicant defaulted, several demand letters, requests and reminders were issued to the applicant calling upon it to regularize its account. Despite making promises undertaking to pay, the 1st applicant refused, neglected or otherwise failed to regularize its loan account. The default persisted and the total outstanding loan together with interest stood at Kshs. 15,000,254.08 as at 1 February 2023. This amount continues to accrue interest.
17. Given these circumstances, the bank had no choice but to seek a realization of securities to safeguard its own interests as well as those of other depositors. In particular, on 1 February 2023, the respondent was constrained to issue statutory notices pursuant to section 90(1) (2) (3) of the Land Act, 2012 to the 3rd applicant and demanded rectification of the loan account by payment of the arrears together with the accrued interest at the contractual rates which rectification and payment was to be completed within three months from the date of service of the statutory notice.
18. In addition, on 13 June 2023, the respondent also issued a similar statutory to the 2nd applicant, demanding rectification of the loan account by payment of the arrears together with accrued interest at the contractual rate. The rectification and payment were to be completed within three months from the date of service of the statutory notice.
19. In the statutory notices, the chargors were advised of the consequences of failing to comply with the provisions of the notice. In particular, they were advised that if upon the expiry of the period of three months, the amounts mentioned in the statutory notices together with interests will not have been paid in full, the respondent would exercise its statutory power of sale. It was also provided in the statutory notices that any money paid by the borrower other than the full amount would be accepted strictly on without prejudice basis and the sale of the suit properties would still be effected upon expiry of the three months, such a payment notwithstanding.
20. Despite having been served with the statutory notices, the chargors still refused to rectify the default. Subsequently, at the borrower’s instance, the bank exceptionally granted the borrower a grace period and conditions to be met by the borrower before the recovery process which had already commenced, in particular the auction of 14 January 2025, could be called off. Despite the indulgence, the borrower still defaulted on its obligations to repay the loan.
21. Given the foregoing, the bank was constrained to instruct the auctioneers to issue appropriate notices being the notification of sale and the forty-five-day redemption notice and thereafter arrange for the sale of the charged properties. After the lapse of the forty-five days, the bank was constrained to instruct the auctioneer to advertise the charged properties for sale in the daily newspaper on 19 December 2020. It is then that the plaintiffs filed the instant suit.
22. Prior to the auction of the suit properties and in compliance with section 97(2) of the Land Act, the respondent instructed CMT Realtors Limited to undertake the valuation of the suit properties.
23. In conclusion, Anyika swore that the applicants have not demonstrated any wrong doing on the part of the respondent with respect to the process of realisation of the security. Accordingly, the applicants have not demonstrated any basis for grant of an injunction.
24. The learned counsel for the applicants and the respondent filed written submissions in support of their clients’ respective positions on the matter before court. I have had occasion to consider these submissions. To begin with, the principles upon which an injunction pending the hearing and determination of a suit may be granted were set out in Giella V. Cassman Brown & Co. Ltd [1973] EA 358. The Court of Appeal revisited these principles in Nguruman Limited v Jan Bonde Nielsen & 2 others (2014) eKLR. At the very beginning of its judgment, the Court of Appeal summarised the case before them in the following terms:
“The sole issue raised in this interlocutory appeal is whether the learned Judge of the High Court (Odunga, J.) in granting the 1st respondent’s prayer to restrain the appellant by an order of temporary injunction properly exercised his discretion or whether he misdirected himself in some matter and arrived at a wrong decision. Put differently, this court is being asked to determine whether the 1st respondent presented a prima facie case with a probability of success before the High Court; whether irreparable injury would result if the injunction was not granted and whether there was evidence that the balance of convenience was in favour of the 1st respondent. See Giella V. Cassman Brown [1973] EA 358.”
25. In disposing of the appeal, the court, in a way, restated the principles in Giella versus Cassman Brown (supra) and held:
“Since those principles are already codified by authoritative pronouncements in the precedents they may be conveniently noted in brief as follows:
“In an interlocutory injunction application, the applicant has to satisfy the triple requirements to;
(a) establish his case only at a prima facie level,
(b) demonstrate irreparable injury 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. These are the three pillars on which rests the foundation of any order of injunction, interlocutory or permanent. It is established that all the above three conditions and stages are to be applied as separate, distinct and logical hurdles which the applicant is expected to surmount sequentially. See Kenya Commercial Finance Co. Ltd V. Afraha Education Society [2001] Vol. 1 EA 86”.
26. The court explained that if an applicant for an injunction establishes a prima facie case, that, in itself, is not enough for the court to grant an interlocutory injunction. Besides establishing a prima facie case, the court must go further and satisfy itself that if the injunction is declined, the injury the applicant for injunction will suffer, will be irreparable. And by this it is meant that if damages recoverable in law is an adequate remedy and that, in any event, the respondent is disposed to pay those damages, no interlocutory order of injunction should be granted, irrespective of how weighty the applicant’s claim may appear to be.
27. According to the learned judges of Appeal, if a prima facie case is not established, then the conditions of irreparable injury and balance of convenience need not be considered. In judges'' words "the existence of a prima facie case does not permit “leap-frogging” by the applicant to injunction directly without crossing the other hurdles in between”.
28. And as to what a prima facie case entails, the Court adopted the definition given to this phrase in Mrao Ltd. V. First American Bank of Kenya Ltd & 2 others [2003] KLR 125. The Court of Appeal defined the phrase in the following terms:
“In civil cases, a prima facie case 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 to call for an explanation or rebuttal from the latter. A prima facie case is more than an arguable case. It is not sufficient to raise issues but the evidence must show an infringement of a right, and the probability of success of the applicant’s case upon trial. That is clearly a standard, which is higher than an arguable case.”
29. The learned judges of appeal explained this to mean that the party on whom the burden of proving a prima facie case lies must show a clear and unmistakable right to be protected. This right must be 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.
30. The court reiterated that in considering whether or not a prima facie case has been established, the court does not hold a mini trial and it must not examine the merits of the case closely. All that the court is to consider is that, on the face of it, the person applying for an injunction has a right which has been or is threatened with violation. The position of the parties is not to be proved in such a manner as to give a final decision on disputed facts. In particular, an applicant need not establish title but it is enough if he can demonstrate that he has a fair and bona fide question to raise as to the existence of the right which he alleges.
31. The court further explained that, 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.
32. As to the condition of irreparable damage, the court held that it is a threshold requirement and the burden is on the applicant to demonstrate, prima face, the nature and extent of the injury. The court noted further:
“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.”
33. On the question of balance of convenience, the court held that:
“It is where there is doubt as to the adequacy of the respective remedies in damages available to either party or both that the question of balance of convenience would arise. The inconvenience to the applicant if interlocutory injunction is refused would be balanced and compared with that of the respondent, if it is granted.”
34. If I may digress, where the court harbours doubt and has to resort to balance of convenience to determine whether or not to grant an injunction, is the “doubt” on whether a prima facie case exists or is it on whether damages are an adequate remedy? In Thathy v Middle East Bank (K) Ltd & another [2002] KEHC 1159 (KLR), a case in which, as then an advocate of this Honourable Court, I represented the applicant, Ringera, J. (as he then was) held the view that the doubt is attributed to whether a prima facie case exists and not to whether damages are an adequate remedy as the learned judges held in Nguruman Limited v Jan Bonde Nielsen & 2 others (2014) eKLR. In the Thathy case, the learned judge held as follows:
“I have now to weigh the above submissions in the light of the settled principles for the grant of interlocutory injunctive relief. Those principles are as follows. First, the applicant must show a prima facie case with a probability of success at the trial. If the court is in doubt about the existence or otherwise of a prima facie case it should decide the application on a balance of convenience. Secondly, a court will not normally grant an interlocutory injunction unless it can be shown that the applicant is likely to suffer an injury which cannot adequately be compensated in damages: see Giella v Cassman Brown & Co Ltd [1973] EA 358. (Emphasis added).
35. Besides the conditions of prima facie case and that of irreparable damage, the learned judge also added another angle to the conditions that an applicant must meet before an order for injunction can be made in his favour. The learned judge held:
Those two (i.e. the condition for prima facie case and irreparable damage) are, if I may so say, the necessary but not the sufficient conditions for grant of interlocutory injunctive relief. Of equal importance is this: an injunction is an equitable remedy and the court may decline to grant the same if it is shown that the applicant’s conduct pertinent to the subject matter of the suit does not meet the approval of a court of equity.”
36. I will consider the applicants’ application from the foregoing legal perspective.
In the plaint, the applicant has averred that:
“13. The 1st plaintiff aver that it has been repaying the loan faithfully and it had not defaulted payment of the loan, prior to elections and to the best of its knowledge the defendant has never sent a default notice on the loan until late last year.”
37. This averment is repeated by way of a deposition in the affidavit sworn in support of the application. In that affidavit Halai, swore as follows:
“8. That I have been repaying the loan faithfully and I had not defaulted payment of the loan, prior to elections and to the best of my knowledge the defendant has never sent a default notice on the loan until late last year.”
The plaint is dated 1 August 2024 and, therefore, “late last year” would be towards the end of 2023.
38. But in a letter dated 4 December 2024, Halai admitted that indeed the 1st applicant had defaulted in payment of the loan and was seeking to have the loan restructured. This letter, a copy of which is exhibited to the affidavit of Anyika, is instructive and it is necessary that I reproduce it here; it reads as follows:
“Request for Loan Restructure and Modification for Loan Account No. 0500000225
I hope this letter finds you well. We are writing to discuss the current financial challenges we are facing that has (sic) caused us a delay in repayment of the loan amounts and to request a loan restructure for our existing loan account with your esteemed bank.
We have always valued the relationship with your bank and how patient and understanding you have been with us. However, due to unforeseen economic hardships and challenges in our business we find it increasingly difficult to meet the existing loan repayment terms.
In light of the above I am respectively requesting the following modifications to our loan agreement.
1.We kindly request an extension of the loan period from the current term to 10 years. This extension will help alleviate the financial strain and allow us more time to recover and stabilize our business.
2.To ease the immediate burden we propose the capitalization of the arrears and processing fee. By incorporating these amounts into the principal, it will provide a more manageable and sustainable repayment structure for us.
3.Given the challenging economic climate and impact on our business we are seeking a moratorium of three months on the principle and interest. This temporary suspension of payments will provide us with the necessary breathing space to overcome the current difficulties and get back on track.
I understand the importance of meeting our financial obligations and we are committed to working closely with your bank to ensure the success of this restructure. I am willing to provide any additional documentation or information necessary to support our request.
I kindly request your prompt attention to this matter and would appreciate the opportunity to discuss this proposal further. Thank you for your understanding and consideration.
Yours faithfully.
Signed
Dhira Halal
DIRECTOR.”
39. According to the affidavit of Anyika, the first statutory notice was issued in February 2023. The statutory notice was addressed to Zaer Mohamed Rafiq but copied to the 1st applicant and its two directors. There is evidence that appears to show that the notice was sent to the addresses given in the charge instruments by registered mail. There is a notification of sale dated 13 June 2023 also sent to Zaher Mohamed Rafiq and which also appears to have been sent by registered by mail.
40. Still there is yet another statutory notice dated 13 June 2023 addressed to the 1st applicant. It is again indicated to have been sent by registered mail on 16 June 2023. A notification of sale dated 27 September 2023 addressed to the 1st applicant appears to have been sent by registered mail on 2 October 2023.
41. It is too early to make any factual conclusions on disputed facts at this stage but for purposes of determination of this application what I make of the 1st applicants’ letter of 4 December 2025 is that it was written against the background of the statutory notices and notifications to realise the security. Most likely and based on the material before court, the 1st applicant’s letter may have been written to pre-empt, the exercise of the statutory power of sale the culmination of which was, of course, the scheduled auction for the sale of the suit property. The defendant’s response to the applicant’s letter of 4 December 2024 a copy of which has been exhibited to the applicants’ own affidavit appears to show that this was the position. This letter, dated 14 December 2023 addressed to the 1st applicant reads as follows:
“RE: ACCOUNT NO 0500000229 - 57
SECURED BY FLAT 88 ON TITLE NO. MOMBASA/BLOCK XVll/809 & PROPERTY TITLE NUMBERS MOMBASA/MWEMBELEGEZA/197 & 198 BORROWER: SEEMA INVESTMENTS LIMITED
We refer to the letter dated 4th December, 2023 contents of which have been duly noted.
The Bank management has reviewed your request and wish to advise that the same has not been considered positively. The proposal advanced falls short of the banks expectations as it cannot clear the arrears.
Consequently, the Bank will proceed with the realization of the security as per the notices in place without any further reference to yourself.
The outstanding balance is Kes 14,186,314.93 Inclusive of arrears at Kes 1,111,459.54 as at 31st December, 2023. The arrears continue to accrue interest at the default rate of 7.87% per annum over and above the subsisting rate of interest, currently 18.13% (which may be varied by the Lender).
Yours Faithfully,
HFC Limited”
42. Even then, the respondent appears to have been prepared to bend over backwards to accommodate the applicants outside the contract executed between themselves but on the respondent’s terms. This position is represented in the respondent’s letter to the 1st applicant dated 16 December 2024 in which the respondent wrote as follows:
“We refer to your letter dated 9 December 2024 contents of which we have noted.
Further to our response dated 5th December, 2024 we wish to reiterate that the Bank is willing to exceptionally call off the auction scheduled for 14th January, 2025 subject to:
1. Full settlement of arrears which currently stand at Kes 4,191,155.78 against a loan balance of Kes 16,228,898.18.
2. 2 Months instalment payment amounting to Kes 600,756.00.
3. Settlement of auctioneer''s fees (currently amounting to Kes 140,347.00). This will increase by the advert cost when the 1st advert scheduled for 19th December, 2024 runs.”
43. It is clear from Halai’s affidavit that the applicant could not meet these conditions. Rather than settle arrears as demanded by the respondent, Halai swore that the 1st applicant made a payment of Kshs. 1,500,000/= which, according to Halai, demonstrated the applicant’s “good intent by the 1st plaintiff to settle its loan obligation with the defendant but only requires indulgence of the defendant to do so.”
44. It is against this background that the applicants instituted the instant suit. I gather from Halai’s affidavits that it is against the backdrop of the respondent’s letter of 14 December 2023 that the applicants thought they had reached a dead end and, therefore, filed the instant suit.
45. In the affidavit sworn in support of the application he has sworn as follows:
“14. We have attempted to renegotiate a loan restructure based on the current valuation of the suit properties but the Defendant has refused to honour our request. Given time we can find a buyer who meets the current open market price to sell 1 property which would be sufficient to pay the entire debt.”
46. And in paragraph 16 of the further affidavit he swore on 8 July 2025. He deposed as follows:
“16. It is on record that we had attempted to renegotiate a loan restructure based on the current valuation of the suit properties but the Defendant refused to honour our request necessitating the filing of this claim.”
47. Subject to the full trial of the applicants’ case, these facts appear to reveal fault lines in the applicants’ suit to such a degree that it falls short of the threshold of a prima facie case with a probability of success.
48. The 1st applicant appears to admit that it has been unable to discharge its obligations under the contract between it and the respondent. To be precise, in its later of 4 December 2024, the applicant admitted unequivocally that it was unable to keep up with the repayment of its loan because of the financial difficulties it was facing. No doubt, it is for this reason that it sought to negotiate the existing terms for repayment of the loan.
49. In the applicant’s own words, the suit was instituted merely because the respondent was not amenable to renegotiating new terms of the agreement and, as far as I gather from the applicants, their quest in this suit is, in part, to compel the respondent to agree to terms that, in their view, are convenient to them. The court cannot go that far as because parties to a contract are bound by the terms of the contract.
50. In the event I am wrong on whether the applicant’s case meets the threshold of a prima facie case, I am not convinced that the applicants will suffer irreparable damage that cannot be compensated by way of damages if an injunction is not granted. I say so because Halai has sworn that they have valued the suit properties and, according to their valuation reports, the properties are worth Kshs. 29,000,000/=. In the affidavit in support of the application, Halai has sworn that:
“13. The Plaintiffs have carried valuation of the properties, the three properties are now valued at Kshs. 29 million. The sale of one property is more than enough to settle the debt.”
51. Thu
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1. By a plaint dated 1 August 2024, the plaintiffs sued the respondent for, inter alia, a permanent injunction restraining the defendant from disposing of their properties in exercises of the respondent’s power of sale. The prayers in the plaint have been couched as follows:
“a. A Permanent Injunction restraining the defendant, its agents or anyone instructed by the defendants from advertising for sale, selling, or in any other manner dealing or interfering with the and Plaintiffs Plot Nos'' MOMBASA/MWEMBELEGEZA/197, MOMBASA/MWEMBELEGEZA/198 and MOMBASA/BLOCK XVII/809 (herein after referred to as the "Suit Properties").
b. A declaration that the notification of sale dated 21.6.2024 are (sic) illegal, unlawful and null and void in so far as they were never served upon the 2nd and 3rd plaintiffs, the registered owners of the properties.
c. An order compelling the defendant to issue a proper 90 days redemption notice to enable the 2nd and 3rd plaintiffs redeem their suit properties.
d. A mandatory order compelling the defendant to avail a detailed statement of account containing the amount advanced to the 1st Plaintiff on account of securities comprised Ill Plot Nos'' MOMBASA/MWEMBELEGEZA/197, MOMBASA/MWEMBELEGEZA/198 and MOMBASA/BLOCK XVII/809.
e. General, Punitive, exemplary and aggravated damages for failure to issue the redemption notices upon the 2nd and 3rd Plaintiffs.
f. Costs of this suit.
g. In the alternative and without prejudice to all the above prayers, an order allowing the plaintiffs to secure potential buyers in respect of one of the properties, without interference from the defendant for a period of 90 days from the date of judgement; and use the proceeds of sale thereof in offsetting the actual loan arrears as the court will determine.”
2. It is pleaded in the plaint that the 1st plaintiff is a borrower of a loan facility, from the defendant, which was secured by the 2nd and 3rd plaintiffs’ properties known as Plot Nos. MOMBASA/MWEMBELEGEZA/197, MOMBASA/MWEMBELEGEZA/198 and MOMBASA/BLOCK XVII/809 (herein after “the suit properties”). The 2nd and 3rd respondents are guarantors of the loan.
3. The principal loan stated to be Kshs. 15,000,000/= is said to have been advanced sometime in the year 2022 and, since then, the 1st plaintiff had been repaying the loan and had not defaulted prior to “elections”. In any case, the defendant had never sent a default notice on the loan until late 2023.
4. That notwithstanding, the defendant has advertised to sell the suit properties. The 2nd and 3rd plaintiffs aver that they were never served with the 90 days redemption notice as provided under Section 90 2(b) of the Land Registration Act, 2012 and the notifications of sale and, that they only came to learn of the notifications and the redemption notices when they saw advertisements for auction of the suit properties. It is thus contended that they have been denied the right to redeem their properties and, therefore, the intended sale is unlawful, illegal and null and void.
5. It is further contended that the defendant’s auctioneer intended to sell the three suit properties valued at more than 29 million to recover a debt of Kshs. 14,186,314 plus arrears of Kshs. 1,111,459. The sale is, in any event, being done without a current valuation report. According to the plaintiffs, the sale of one property, out of the three properties, ought to be sufficient to pay off the outstanding loan.
6. The plaintiffs have also pleaded that despite their request for a statement of account of the outstanding loan, the same has not been availed and that failure by the defendant to provide this statement is intended to frustrate the plaintiffs.
7. Alongside the plaint, the plaintiffs filed an application for an interlocutory injunction pending the hearing and determination of the suit. The application is by way of a motion dated 1 August 2024 and it is expressed to be brought under sections 1A, 1B, 3, 3A of the Civil Procedure Act, cap. 21; sections 90(2)(b) of the Land Registration Act, 2012 and Order 40 rules 1, 2 and 4 of the Civil Procedure Rules. The prayer relevant to this application has been couched as follows:
“c) That pending the inter partes hearing and determination of this suit, an injunction do issue restraining the defendant, either by itself, employees, servants and/or agents, appointed or authorized by it , particularly Sportlight Intercepts Auctioneers from selling by public auction on 2.8.2024 or any other date plot nos. Mombasa/Mwembelegeza/197, Mombasa/Mwelegeza/198 and Mombasa/Block VII/809 (herein after referred to as the suit properties) or interfering in any way whatsoever with the plaintiff’s interests thereof.”
The applicants have also asked for costs of the application.
8. The application is supported by the affidavit of Dhiraj Premji Halai who has introduced himself as one of the directors of the 1st and 2nd plaintiffs.
By and large, Halai has rehashed in the affidavit the averments made in the plaint. He has stated further that he sought the loan from the defendant to keep his business afloat. Apart from charging the suit properties, the 1st and 2nd plaintiffs also executed a “Commercial Benefit Agreement” according to which the 2nd plaintiff was a surety while the 1st plaintiff was the borrower. The 1st plaintiff’s directors also executed deeds of guarantee and indemnity.
9. Halai has also sworn that the plaintiffs have attempted to renegotiate a loan restructure based on the current valuation of the suit properties but the defendant has refused to honour their request. Given time, he has sworn, the plaintiffs can find a buyer who can pay the current open market price for one property which will be sufficient to pay the entire debt.
10. On 26 November 2024 the 1st plaintiff wrote to the defendant with a payment proposal for payment of Kshs. 800,000/= on the twentieth day of every month to cover the outstanding instalments and to reduce the arrears until the debt was fully settled.
11. On 5 December 2024 the defendant wrote back issuing conditions to be met by the 1st plaintiff before the defendant could call off the auction that was then scheduled for 14 January 2025. The 1st plaintiff was, however, not able to meet the defendant’s conditions but still sought for further indulgence from the defendant proposing an alternative payment offer of Kshs. 1,500,000/= effective immediately. This amount was to cover the outstanding instalments. This offer was again rejected by the defendant through its letter dated 16 December 2024. The defendant instead insisted on its previous conditions.
12. Halai has sworn that the properties are leased out to third parties and the sale of the properties or eviction of their tenants would expose the 2nd and 3rd plaintiffs to suits for damages on account of failure to issue necessary eviction notices.
13. The respondent has opposed the application for injunction and filed a replying affidavit in that regard. The affidavit has been sworn by Regina Anyika who states that she is the “director legal and company secretary” of the respondent.
14. According to Anyika, the 1st applicant is not only indebted to the defendant but it is also in default of the loan facility advanced to it by the respondent. She has confirmed that indeed the 1st applicant took out a loan of Kshs. 15,000,000/= which was secured by the suit properties. The 1st applicant’s directors executed personal guarantees in favour of the defendant as security for repayment of the loan.
15. It was an express provision of the charge instruments registered against the suit properties that they chargors would repay the principal sum together with the interest at the rates agreed upon. It was also agreed that the respondent would be at liberty to sell the security to recover any amount due in the event of default.
16. When the 1st applicant defaulted, several demand letters, requests and reminders were issued to the applicant calling upon it to regularize its account. Despite making promises undertaking to pay, the 1st applicant refused, neglected or otherwise failed to regularize its loan account. The default persisted and the total outstanding loan together with interest stood at Kshs. 15,000,254.08 as at 1 February 2023. This amount continues to accrue interest.
17. Given these circumstances, the bank had no choice but to seek a realization of securities to safeguard its own interests as well as those of other depositors. In particular, on 1 February 2023, the respondent was constrained to issue statutory notices pursuant to section 90(1) (2) (3) of the Land Act, 2012 to the 3rd applicant and demanded rectification of the loan account by payment of the arrears together with the accrued interest at the contractual rates which rectification and payment was to be completed within three months from the date of service of the statutory notice.
18. In addition, on 13 June 2023, the respondent also issued a similar statutory to the 2nd applicant, demanding rectification of the loan account by payment of the arrears together with accrued interest at the contractual rate. The rectification and payment were to be completed within three months from the date of service of the statutory notice.
19. In the statutory notices, the chargors were advised of the consequences of failing to comply with the provisions of the notice. In particular, they were advised that if upon the expiry of the period of three months, the amounts mentioned in the statutory notices together with interests will not have been paid in full, the respondent would exercise its statutory power of sale. It was also provided in the statutory notices that any money paid by the borrower other than the full amount would be accepted strictly on without prejudice basis and the sale of the suit properties would still be effected upon expiry of the three months, such a payment notwithstanding.
20. Despite having been served with the statutory notices, the chargors still refused to rectify the default. Subsequently, at the borrower’s instance, the bank exceptionally granted the borrower a grace period and conditions to be met by the borrower before the recovery process which had already commenced, in particular the auction of 14 January 2025, could be called off. Despite the indulgence, the borrower still defaulted on its obligations to repay the loan.
21. Given the foregoing, the bank was constrained to instruct the auctioneers to issue appropriate notices being the notification of sale and the forty-five-day redemption notice and thereafter arrange for the sale of the charged properties. After the lapse of the forty-five days, the bank was constrained to instruct the auctioneer to advertise the charged properties for sale in the daily newspaper on 19 December 2020. It is then that the plaintiffs filed the instant suit.
22. Prior to the auction of the suit properties and in compliance with section 97(2) of the Land Act, the respondent instructed CMT Realtors Limited to undertake the valuation of the suit properties.
23. In conclusion, Anyika swore that the applicants have not demonstrated any wrong doing on the part of the respondent with respect to the process of realisation of the security. Accordingly, the applicants have not demonstrated any basis for grant of an injunction.
24. The learned counsel for the applicants and the respondent filed written submissions in support of their clients’ respective positions on the matter before court. I have had occasion to consider these submissions. To begin with, the principles upon which an injunction pending the hearing and determination of a suit may be granted were set out in Giella V. Cassman Brown & Co. Ltd [1973] EA 358. The Court of Appeal revisited these principles in Nguruman Limited v Jan Bonde Nielsen & 2 others (2014) eKLR. At the very beginning of its judgment, the Court of Appeal summarised the case before them in the following terms:
“The sole issue raised in this interlocutory appeal is whether the learned Judge of the High Court (Odunga, J.) in granting the 1st respondent’s prayer to restrain the appellant by an order of temporary injunction properly exercised his discretion or whether he misdirected himself in some matter and arrived at a wrong decision. Put differently, this court is being asked to determine whether the 1st respondent presented a prima facie case with a probability of success before the High Court; whether irreparable injury would result if the injunction was not granted and whether there was evidence that the balance of convenience was in favour of the 1st respondent. See Giella V. Cassman Brown [1973] EA 358.”
25. In disposing of the appeal, the court, in a way, restated the principles in Giella versus Cassman Brown (supra) and held:
“Since those principles are already codified by authoritative pronouncements in the precedents they may be conveniently noted in brief as follows:
“In an interlocutory injunction application, the applicant has to satisfy the triple requirements to;
(a) establish his case only at a prima facie level,
(b) demonstrate irreparable injury 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. These are the three pillars on which rests the foundation of any order of injunction, interlocutory or permanent. It is established that all the above three conditions and stages are to be applied as separate, distinct and logical hurdles which the applicant is expected to surmount sequentially. See Kenya Commercial Finance Co. Ltd V. Afraha Education Society [2001] Vol. 1 EA 86”.
26. The court explained that if an applicant for an injunction establishes a prima facie case, that, in itself, is not enough for the court to grant an interlocutory injunction. Besides establishing a prima facie case, the court must go further and satisfy itself that if the injunction is declined, the injury the applicant for injunction will suffer, will be irreparable. And by this it is meant that if damages recoverable in law is an adequate remedy and that, in any event, the respondent is disposed to pay those damages, no interlocutory order of injunction should be granted, irrespective of how weighty the applicant’s claim may appear to be.
27. According to the learned judges of Appeal, if a prima facie case is not established, then the conditions of irreparable injury and balance of convenience need not be considered. In judges'' words "the existence of a prima facie case does not permit “leap-frogging” by the applicant to injunction directly without crossing the other hurdles in between”.
28. And as to what a prima facie case entails, the Court adopted the definition given to this phrase in Mrao Ltd. V. First American Bank of Kenya Ltd & 2 others [2003] KLR 125. The Court of Appeal defined the phrase in the following terms:
“In civil cases, a prima facie case 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 to call for an explanation or rebuttal from the latter. A prima facie case is more than an arguable case. It is not sufficient to raise issues but the evidence must show an infringement of a right, and the probability of success of the applicant’s case upon trial. That is clearly a standard, which is higher than an arguable case.”
29. The learned judges of appeal explained this to mean that the party on whom the burden of proving a prima facie case lies must show a clear and unmistakable right to be protected. This right must be 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.
30. The court reiterated that in considering whether or not a prima facie case has been established, the court does not hold a mini trial and it must not examine the merits of the case closely. All that the court is to consider is that, on the face of it, the person applying for an injunction has a right which has been or is threatened with violation. The position of the parties is not to be proved in such a manner as to give a final decision on disputed facts. In particular, an applicant need not establish title but it is enough if he can demonstrate that he has a fair and bona fide question to raise as to the existence of the right which he alleges.
31. The court further explained that, 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.
32. As to the condition of irreparable damage, the court held that it is a threshold requirement and the burden is on the applicant to demonstrate, prima face, the nature and extent of the injury. The court noted further:
“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.”
33. On the question of balance of convenience, the court held that:
“It is where there is doubt as to the adequacy of the respective remedies in damages available to either party or both that the question of balance of convenience would arise. The inconvenience to the applicant if interlocutory injunction is refused would be balanced and compared with that of the respondent, if it is granted.”
34. If I may digress, where the court harbours doubt and has to resort to balance of convenience to determine whether or not to grant an injunction, is the “doubt” on whether a prima facie case exists or is it on whether damages are an adequate remedy? In Thathy v Middle East Bank (K) Ltd & another [2002] KEHC 1159 (KLR), a case in which, as then an advocate of this Honourable Court, I represented the applicant, Ringera, J. (as he then was) held the view that the doubt is attributed to whether a prima facie case exists and not to whether damages are an adequate remedy as the learned judges held in Nguruman Limited v Jan Bonde Nielsen & 2 others (2014) eKLR. In the Thathy case, the learned judge held as follows:
“I have now to weigh the above submissions in the light of the settled principles for the grant of interlocutory injunctive relief. Those principles are as follows. First, the applicant must show a prima facie case with a probability of success at the trial. If the court is in doubt about the existence or otherwise of a prima facie case it should decide the application on a balance of convenience. Secondly, a court will not normally grant an interlocutory injunction unless it can be shown that the applicant is likely to suffer an injury which cannot adequately be compensated in damages: see Giella v Cassman Brown & Co Ltd [1973] EA 358. (Emphasis added).
35. Besides the conditions of prima facie case and that of irreparable damage, the learned judge also added another angle to the conditions that an applicant must meet before an order for injunction can be made in his favour. The learned judge held:
Those two (i.e. the condition for prima facie case and irreparable damage) are, if I may so say, the necessary but not the sufficient conditions for grant of interlocutory injunctive relief. Of equal importance is this: an injunction is an equitable remedy and the court may decline to grant the same if it is shown that the applicant’s conduct pertinent to the subject matter of the suit does not meet the approval of a court of equity.”
36. I will consider the applicants’ application from the foregoing legal perspective.
In the plaint, the applicant has averred that:
“13. The 1st plaintiff aver that it has been repaying the loan faithfully and it had not defaulted payment of the loan, prior to elections and to the best of its knowledge the defendant has never sent a default notice on the loan until late last year.”
37. This averment is repeated by way of a deposition in the affidavit sworn in support of the application. In that affidavit Halai, swore as follows:
“8. That I have been repaying the loan faithfully and I had not defaulted payment of the loan, prior to elections and to the best of my knowledge the defendant has never sent a default notice on the loan until late last year.”
The plaint is dated 1 August 2024 and, therefore, “late last year” would be towards the end of 2023.
38. But in a letter dated 4 December 2024, Halai admitted that indeed the 1st applicant had defaulted in payment of the loan and was seeking to have the loan restructured. This letter, a copy of which is exhibited to the affidavit of Anyika, is instructive and it is necessary that I reproduce it here; it reads as follows:
“Request for Loan Restructure and Modification for Loan Account No. 0500000225
I hope this letter finds you well. We are writing to discuss the current financial challenges we are facing that has (sic) caused us a delay in repayment of the loan amounts and to request a loan restructure for our existing loan account with your esteemed bank.
We have always valued the relationship with your bank and how patient and understanding you have been with us. However, due to unforeseen economic hardships and challenges in our business we find it increasingly difficult to meet the existing loan repayment terms.
In light of the above I am respectively requesting the following modifications to our loan agreement.
1.We kindly request an extension of the loan period from the current term to 10 years. This extension will help alleviate the financial strain and allow us more time to recover and stabilize our business.
2.To ease the immediate burden we propose the capitalization of the arrears and processing fee. By incorporating these amounts into the principal, it will provide a more manageable and sustainable repayment structure for us.
3.Given the challenging economic climate and impact on our business we are seeking a moratorium of three months on the principle and interest. This temporary suspension of payments will provide us with the necessary breathing space to overcome the current difficulties and get back on track.
I understand the importance of meeting our financial obligations and we are committed to working closely with your bank to ensure the success of this restructure. I am willing to provide any additional documentation or information necessary to support our request.
I kindly request your prompt attention to this matter and would appreciate the opportunity to discuss this proposal further. Thank you for your understanding and consideration.
Yours faithfully.
Signed
Dhira Halal
DIRECTOR.”
39. According to the affidavit of Anyika, the first statutory notice was issued in February 2023. The statutory notice was addressed to Zaer Mohamed Rafiq but copied to the 1st applicant and its two directors. There is evidence that appears to show that the notice was sent to the addresses given in the charge instruments by registered mail. There is a notification of sale dated 13 June 2023 also sent to Zaher Mohamed Rafiq and which also appears to have been sent by registered by mail.
40. Still there is yet another statutory notice dated 13 June 2023 addressed to the 1st applicant. It is again indicated to have been sent by registered mail on 16 June 2023. A notification of sale dated 27 September 2023 addressed to the 1st applicant appears to have been sent by registered mail on 2 October 2023.
41. It is too early to make any factual conclusions on disputed facts at this stage but for purposes of determination of this application what I make of the 1st applicants’ letter of 4 December 2025 is that it was written against the background of the statutory notices and notifications to realise the security. Most likely and based on the material before court, the 1st applicant’s letter may have been written to pre-empt, the exercise of the statutory power of sale the culmination of which was, of course, the scheduled auction for the sale of the suit property. The defendant’s response to the applicant’s letter of 4 December 2024 a copy of which has been exhibited to the applicants’ own affidavit appears to show that this was the position. This letter, dated 14 December 2023 addressed to the 1st applicant reads as follows:
“RE: ACCOUNT NO 0500000229 - 57
SECURED BY FLAT 88 ON TITLE NO. MOMBASA/BLOCK XVll/809 & PROPERTY TITLE NUMBERS MOMBASA/MWEMBELEGEZA/197 & 198 BORROWER: SEEMA INVESTMENTS LIMITED
We refer to the letter dated 4th December, 2023 contents of which have been duly noted.
The Bank management has reviewed your request and wish to advise that the same has not been considered positively. The proposal advanced falls short of the banks expectations as it cannot clear the arrears.
Consequently, the Bank will proceed with the realization of the security as per the notices in place without any further reference to yourself.
The outstanding balance is Kes 14,186,314.93 Inclusive of arrears at Kes 1,111,459.54 as at 31st December, 2023. The arrears continue to accrue interest at the default rate of 7.87% per annum over and above the subsisting rate of interest, currently 18.13% (which may be varied by the Lender).
Yours Faithfully,
HFC Limited”
42. Even then, the respondent appears to have been prepared to bend over backwards to accommodate the applicants outside the contract executed between themselves but on the respondent’s terms. This position is represented in the respondent’s letter to the 1st applicant dated 16 December 2024 in which the respondent wrote as follows:
“We refer to your letter dated 9 December 2024 contents of which we have noted.
Further to our response dated 5th December, 2024 we wish to reiterate that the Bank is willing to exceptionally call off the auction scheduled for 14th January, 2025 subject to:
1. Full settlement of arrears which currently stand at Kes 4,191,155.78 against a loan balance of Kes 16,228,898.18.
2. 2 Months instalment payment amounting to Kes 600,756.00.
3. Settlement of auctioneer''s fees (currently amounting to Kes 140,347.00). This will increase by the advert cost when the 1st advert scheduled for 19th December, 2024 runs.”
43. It is clear from Halai’s affidavit that the applicant could not meet these conditions. Rather than settle arrears as demanded by the respondent, Halai swore that the 1st applicant made a payment of Kshs. 1,500,000/= which, according to Halai, demonstrated the applicant’s “good intent by the 1st plaintiff to settle its loan obligation with the defendant but only requires indulgence of the defendant to do so.”
44. It is against this background that the applicants instituted the instant suit. I gather from Halai’s affidavits that it is against the backdrop of the respondent’s letter of 14 December 2023 that the applicants thought they had reached a dead end and, therefore, filed the instant suit.
45. In the affidavit sworn in support of the application he has sworn as follows:
“14. We have attempted to renegotiate a loan restructure based on the current valuation of the suit properties but the Defendant has refused to honour our request. Given time we can find a buyer who meets the current open market price to sell 1 property which would be sufficient to pay the entire debt.”
46. And in paragraph 16 of the further affidavit he swore on 8 July 2025. He deposed as follows:
“16. It is on record that we had attempted to renegotiate a loan restructure based on the current valuation of the suit properties but the Defendant refused to honour our request necessitating the filing of this claim.”
47. Subject to the full trial of the applicants’ case, these facts appear to reveal fault lines in the applicants’ suit to such a degree that it falls short of the threshold of a prima facie case with a probability of success.
48. The 1st applicant appears to admit that it has been unable to discharge its obligations under the contract between it and the respondent. To be precise, in its later of 4 December 2024, the applicant admitted unequivocally that it was unable to keep up with the repayment of its loan because of the financial difficulties it was facing. No doubt, it is for this reason that it sought to negotiate the existing terms for repayment of the loan.
49. In the applicant’s own words, the suit was instituted merely because the respondent was not amenable to renegotiating new terms of the agreement and, as far as I gather from the applicants, their quest in this suit is, in part, to compel the respondent to agree to terms that, in their view, are convenient to them. The court cannot go that far as because parties to a contract are bound by the terms of the contract.
50. In the event I am wrong on whether the applicant’s case meets the threshold of a prima facie case, I am not convinced that the applicants will suffer irreparable damage that cannot be compensated by way of damages if an injunction is not granted. I say so because Halai has sworn that they have valued the suit properties and, according to their valuation reports, the properties are worth Kshs. 29,000,000/=. In the affidavit in support of the application, Halai has sworn that:
“13. The Plaintiffs have carried valuation of the properties, the three properties are now valued at Kshs. 29 million. The sale of one property is more than enough to settle the debt.”
51. Thu
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