Background and Introduction
1. For determination is the application dated 26th March 2025. It seeks injunctive relief to restrain the respondent Bank from selling, disposing of, or in any way interfering with two properties known as NTIMA/IGOKI/2777 and MERU MUNICIPALITY 1/251 (hereinafter “the suit properties”). The application is opposed.
2. When the matter came up for mention on 14th May 2025, the Court issued an interim injunction on the condition that the applicants pay to the respondent Bank the sum of Kshs. 23,000,000/= on or before 16th July 2025. The said amount was mutually agreed upon by the parties.
4. However, when the matter was next mentioned on 23rd June 2025, the eve of the auction, the applicants had not complied with the conditional orders. Instead, they filed a second application dated 20th June 2025, seeking an extension of time within which to comply with the Court's earlier directions. At the time of the mention, this second application had not been served upon the respondent Bank, and as such, the Bank had not filed any response thereto.
5. At the core of the dispute between the parties are several financial facilities advanced by the respondent Bank to the 2nd applicant. It is the Bank’s position that the 2nd applicant defaulted in the repayment of these facilities, thereby entitling the Bank to exercise its statutory power of sale over the suit properties by way of public auction. One of the subject properties, namely NTIMA/IGOKI/2777, is developed with a hotel operated by the 1st applicant (hereinafter “the Hotel”).
Analysis and Determination
6. I have carefully considered the application, the response thereto and the written as well as oral submissions made by Learned Counsels Ms. Wangombe and Ms Maitai on behalf of their clients.
7. The main issue for determination is whether the applicants have met the threshold for granting the injunction orders they seek. Both parties acknowledge that the applicants must satisfy the conditions established in Giella v. Cassman Brown & Co., Ltd. [1973] E.A. 358. These conditions require them to demonstrate a prima facie case with a probability of success, show that they would suffer irreparable harm that could not be adequately compensated by damages, and, if the Court is in doubt, have the application determined on the balance of convenience.
8. These conditions are to be applied as separate, distinct and logical hurdles which the applicants are expected to surmount sequentially which means that if they do not establish a prima facie case then irreparable injury and balance of convenience do not require consideration (see Nguruman Limited v Jan Bonde Nielsen& 2 others [2013] KECA 347 (KLR)).
9. As to what constitutes a prima facie case, the Court of Appeal in Mrao Ltd v First American Bank of Kenya Ltd & 2 others [2003] KECA 175 (KLR) explained as follows:
“A prima facie case in a civil application includes but is not confined to a “genuine and arguable case.” It is a case 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”.
10. The applicants’ primary contention with the Bank relates to the ownership of the suit property known as NTIMA/IGOKI/2777. It is their position that the said property cannot be subjected to sale in satisfaction of the 2nd applicant’s indebtedness, as the development thereon is owned by the 1st applicant. The applicants assert that the construction of the Hotel commenced prior to the advancement of the financial facilities to the 2nd applicant. They further aver that the Hotel is operated by a company in which the 2nd applicant is merely one of the directors and shareholders, and that the 1st applicant was neither a borrower nor a guarantor in respect of the facilities extended by the Bank to the 2nd applicant.
11. The Bank acknowledges that the 1st applicant was neither its customer nor did it engage with the Bank as a borrower or chargor. It maintains that all its dealings were solely with the 2nd applicant, who is both the borrower and the registered proprietor of the charged property. The Bank contends that the 1st applicant is a stranger to the proceedings and that its introduction at this stage is without legal basis. It further argues that the 1st applicant cannot lay claim to ownership of the suit property merely on account of having developed a structure upon it.
12. In support of this position, the Bank invokes the common law doctrine known as Cujus est solum, eius est usque ad coelum et ad inferos which translates to "whoever owns [the] soil, [it] is theirs all the way [up] to Heaven and [down] to Hell".
13. Indeed, Article 260 of the Constitution of Kenya defines the term “land” in broad terms to include the surface of the earth and the subsurface rock, any body of water on or under the surface, marine waters in the territorial sea and the exclusive economic zone, natural resources completely contained on or under the surface, and the airspace above the surface.” This expansive constitutional definition affirms the principle that ownership of land extends not only to the surface but also to what is affixed above and below it.
14. The Land Registration Act, 2012 reinforces the constitutional foundation laid under Article 260. In particular, Sections 2, 24, and 25 of the Act vests in the registered proprietor absolute ownership of land, together with all rights and privileges appurtenant thereto.
15. Accordingly, a permanent structure such as a hotel is deemed to form part of the land and vests in the registered proprietor, unless there exists an express legal agreement to the contrary. In the present case, no such agreement has been placed before the Court. The respondent Bank has produced certificates of title in respect of both suit properties, confirming that they are registered in the name of the 2nd applicant. This position is further corroborated by the certificates of official search dated 18th February 2025, annexed to the applicants’ own documents, which affirms the 2nd applicant’s proprietorship over the said properties.
16. Accordingly, it is not in dispute that the financial facilities in question were extended to the 2nd applicant, nor is it contested that the 2nd applicant offered several securities, including legal charges over the two suit properties. In the circumstances, the Bank is entitled to exercise its statutory power of sale in respect of the charged properties. The 1st applicant, being a legal stranger to the loan and security arrangements, and having no proprietary interest in the charged properties, cannot lawfully restrain the Bank from enforcing its rights.
17. I am further satisfied, based on the evidence on record, that the Bank at no time dealt with or recognized the 1st applicant as a borrower, chargor, or guarantor. Notably, the 2nd applicant has admitted that the default in loan repayment arose due to delays in the receipt of rental income, which had been earmarked for servicing the facilities.
18. The applicants have also raised the issue that the amount said to be outstanding is disputed. In his affidavit, the 2nd applicant avers that despite repeated requests, the Bank has failed to provide him with loan statements. However, upon perusal of the documents filed by the applicants, I find no evidence of any specific or formal request made to the Bank for the provision of such statements. On the contrary, the record reflects that the 2nd applicant was at all material times aware of his default.
19. Furthermore, I align with the Court’s holding in Scholastica Nyaguthii Muturi v Housing Finance Co. of Kenya Ltd on the right of statutory sale in cases where amounts are disputed. The Court stated: -
"The mortgagee will not be restrained from exercising his power of sale because the amount is in dispute or because the mortgagor has begun a redemption action or because the mortgagor objects to the manner in which the sale is being arranged. He will be restrained, however, if the mortgagor pays the amount into court...”
20. Even as the 2nd applicant now seeks to accuse the Bank of failing to provide information, the record speaks otherwise. There is correspondence dating back to June 2020 in which the 2nd applicant directly engaged the Bank, expressly acknowledging the outstanding debt and seeking accommodation through the restructuring of the loan facilities. In those communications, he requested a moratorium on the principal amount and sought additional overdraft support. In view of this, I find the 2nd applicant’s assertion that he is unaware of the loan status to be disingenuous and made in bad faith.
21. The applicants further contend that the Bank unfairly lumped excessive interest rates and penalties onto the outstanding loan amount. In my view, any such amounts, if ultimately found to have been improperly or unjustly imposed, are matters that are compensable by way of damages at the conclusion of trial. I therefore align with the holding of the Court in Pelican Investments Ltd v. National Bank of Kenya Ltd [2000] 2 EA 488 (CCK), where it was stated:
“Unless it is plain that fraud or oppression existed, the courts will not interfere with the terms of a contract or the provisions as to interest…in any case, even if the interest charged was unconscionable, the same would only be a dispute as to amount which is not a proper ground for granting an injunction. “
22. I note that the Bank has provided the loan statements covering the period from January 2020 to April 2025. Pursuant to Section 176 of the Evidence Act, such statements of account are prima facie evidence of the entries therein, subject to rebuttal.
23. The applicants further contend that under Section 90(2) of the Land Act, notices were required to be served upon the tenants occupying the premises of the 1st applicant, and that this was not done. In response, the Bank asserts that the requisite notice was duly served by affixing it on the gate and building of the subject premises, thereby bringing it to the attention of the occupants.
24. Notably, the applicants do not deny this mode of service. Indeed, they acknowledge by an averment in their application that on or about 23rd January 2025, the respondent displayed on the premises of Hotel Ezri a Notice dated 17th January 2024, addressed to the 2nd applicant, indicating the Bank’s intention to sell Land Parcel No. NTIMA/IGOKI/2777.
25. In my view, this mode of service satisfies the requirements of the Land Act. The notice herein was sufficiently brought to the attention of both the chargor and the tenants.
26. The applicants have also contended that the Bank ought to have afforded them an opportunity to dispose of the properties by way of private treaty. While the law permits a chargor to redeem the charged property at any time before the sale, there is no evidence that the Bank unreasonably declined to accommodate such a request.
27. By this point, it is evident that the applicants have not satisfied the first threshold of establishing a prima facie case with a probability of success, as required under the principles set out in Giella v. Cassman Brown & Co. Ltd [1973] EA 358. However, I must address one further issue; that of valuation.
28. The applicants contend that the Bank intends to sell the suit properties at an undervalue. They assert that the market value of Land Parcel No. NTIMA/IGOKI/2777 is Kshs. 600,000,000/= and that of MERU MUNICIPALITY BLOCK 1/251 is Kshs. 350,000,000/=. The applicable procedure for challenging a valuation report was set out by the Court in Zum Zum Investment Ltd v Habib Bank Ltd [2014] eKLR, where it was held that a party disputing a valuation must place before the court a credible counter-valuation or evidence to challenge the report relied upon by the chargee.
29. In the present case, I note that the Bank has attached valuation reports prepared by Ms. ARK Consultants Limited dated 2nd April 2025, which returned the following values:
a) NTIMA/IGOKI/2777: Forced sale value of Kshs. 330,000,000/=
b) MERU MUNICIPALITY BLOCK 1/251: Forced sale value of Kshs. 121,500,000/=
30. From the auction notice, the Bank intends to auction both properties, whose combined forced sale value totals Kshs. 451,500,000/=, against an outstanding loan balance of Kshs. 210,044,019.38.
31. While the Bank is entitled to exercise its statutory power of sale over charged property, it is also under a duty to act in good faith and to take reasonable steps to obtain the best price reasonably obtainable at the time of sale. This Court, as a court of equity, must weigh the competing interests of the parties. I take the view that, although the balance of convenience favours enabling the Bank to realize its security and recover the loan, allowing the auction of both properties, whose combined forced sale value far exceeds the outstanding debt, may occasion unnecessary hardship and financial injustice.
32. In the circumstances, I find that a more proportionate approach would be to permit the Bank to proceed with the sale of only one of the two suit properties at this stage, preferably NTIMA/IGOKI/2777, whose forced sale value is higher, so as to preserve the equitable interests involved while enabling partial recovery of the loan.
Disposition
Accordingly;
i. The application dated 26th March 2025 is partially allowed to the extent that a temporary injunction is hereby issued restraining the respondent Bank, its agents or auctioneers, from selling, alienating, disposing of, or in any other manner interfering with Land Parcel No. MERU MUNICIPALITY BLOCK 1/251, pending further directions by this Court.
ii. The respondent Bank is, however, at liberty to proceed with the sale by public auction of Land Parcel No. NTIMA/IGOKI/2777.
iii. The prayer for a blanket injunction restraining the sale of both suit properties is therefore declined.
iv. In light of this ruling, the application dated 20th June 2025 is now moot.
v. The applicants shall bear half of the costs of the application, while the remaining half shall abide the outcome of the main suit.
DATED, SIGNED AND DELIVERED IN NAIROBI
THIS 23rd DAY OF JUNE 2025
F. MUGAMBI
JUDGE
1. For determination is the application dated 26th March 2025. It seeks injunctive relief to restrain the respondent Bank from selling, disposing of, or in any way interfering with two properties known as NTIMA/IGOKI/2777 and MERU MUNICIPALITY 1/251 (hereinafter “the suit properties”). The application is opposed.
2. When the matter came up for mention on 14th May 2025, the Court issued an interim injunction on the condition that the applicants pay to the respondent Bank the sum of Kshs. 23,000,000/= on or before 16th July 2025. The said amount was mutually agreed upon by the parties.
4. However, when the matter was next mentioned on 23rd June 2025, the eve of the auction, the applicants had not complied with the conditional orders. Instead, they filed a second application dated 20th June 2025, seeking an extension of time within which to comply with the Court's earlier directions. At the time of the mention, this second application had not been served upon the respondent Bank, and as such, the Bank had not filed any response thereto.
5. At the core of the dispute between the parties are several financial facilities advanced by the respondent Bank to the 2nd applicant. It is the Bank’s position that the 2nd applicant defaulted in the repayment of these facilities, thereby entitling the Bank to exercise its statutory power of sale over the suit properties by way of public auction. One of the subject properties, namely NTIMA/IGOKI/2777, is developed with a hotel operated by the 1st applicant (hereinafter “the Hotel”).
Analysis and Determination
6. I have carefully considered the application, the response thereto and the written as well as oral submissions made by Learned Counsels Ms. Wangombe and Ms Maitai on behalf of their clients.
7. The main issue for determination is whether the applicants have met the threshold for granting the injunction orders they seek. Both parties acknowledge that the applicants must satisfy the conditions established in Giella v. Cassman Brown & Co., Ltd. [1973] E.A. 358. These conditions require them to demonstrate a prima facie case with a probability of success, show that they would suffer irreparable harm that could not be adequately compensated by damages, and, if the Court is in doubt, have the application determined on the balance of convenience.
8. These conditions are to be applied as separate, distinct and logical hurdles which the applicants are expected to surmount sequentially which means that if they do not establish a prima facie case then irreparable injury and balance of convenience do not require consideration (see Nguruman Limited v Jan Bonde Nielsen& 2 others [2013] KECA 347 (KLR)).
9. As to what constitutes a prima facie case, the Court of Appeal in Mrao Ltd v First American Bank of Kenya Ltd & 2 others [2003] KECA 175 (KLR) explained as follows:
“A prima facie case in a civil application includes but is not confined to a “genuine and arguable case.” It is a case 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”.
10. The applicants’ primary contention with the Bank relates to the ownership of the suit property known as NTIMA/IGOKI/2777. It is their position that the said property cannot be subjected to sale in satisfaction of the 2nd applicant’s indebtedness, as the development thereon is owned by the 1st applicant. The applicants assert that the construction of the Hotel commenced prior to the advancement of the financial facilities to the 2nd applicant. They further aver that the Hotel is operated by a company in which the 2nd applicant is merely one of the directors and shareholders, and that the 1st applicant was neither a borrower nor a guarantor in respect of the facilities extended by the Bank to the 2nd applicant.
11. The Bank acknowledges that the 1st applicant was neither its customer nor did it engage with the Bank as a borrower or chargor. It maintains that all its dealings were solely with the 2nd applicant, who is both the borrower and the registered proprietor of the charged property. The Bank contends that the 1st applicant is a stranger to the proceedings and that its introduction at this stage is without legal basis. It further argues that the 1st applicant cannot lay claim to ownership of the suit property merely on account of having developed a structure upon it.
12. In support of this position, the Bank invokes the common law doctrine known as Cujus est solum, eius est usque ad coelum et ad inferos which translates to "whoever owns [the] soil, [it] is theirs all the way [up] to Heaven and [down] to Hell".
13. Indeed, Article 260 of the Constitution of Kenya defines the term “land” in broad terms to include the surface of the earth and the subsurface rock, any body of water on or under the surface, marine waters in the territorial sea and the exclusive economic zone, natural resources completely contained on or under the surface, and the airspace above the surface.” This expansive constitutional definition affirms the principle that ownership of land extends not only to the surface but also to what is affixed above and below it.
14. The Land Registration Act, 2012 reinforces the constitutional foundation laid under Article 260. In particular, Sections 2, 24, and 25 of the Act vests in the registered proprietor absolute ownership of land, together with all rights and privileges appurtenant thereto.
15. Accordingly, a permanent structure such as a hotel is deemed to form part of the land and vests in the registered proprietor, unless there exists an express legal agreement to the contrary. In the present case, no such agreement has been placed before the Court. The respondent Bank has produced certificates of title in respect of both suit properties, confirming that they are registered in the name of the 2nd applicant. This position is further corroborated by the certificates of official search dated 18th February 2025, annexed to the applicants’ own documents, which affirms the 2nd applicant’s proprietorship over the said properties.
16. Accordingly, it is not in dispute that the financial facilities in question were extended to the 2nd applicant, nor is it contested that the 2nd applicant offered several securities, including legal charges over the two suit properties. In the circumstances, the Bank is entitled to exercise its statutory power of sale in respect of the charged properties. The 1st applicant, being a legal stranger to the loan and security arrangements, and having no proprietary interest in the charged properties, cannot lawfully restrain the Bank from enforcing its rights.
17. I am further satisfied, based on the evidence on record, that the Bank at no time dealt with or recognized the 1st applicant as a borrower, chargor, or guarantor. Notably, the 2nd applicant has admitted that the default in loan repayment arose due to delays in the receipt of rental income, which had been earmarked for servicing the facilities.
18. The applicants have also raised the issue that the amount said to be outstanding is disputed. In his affidavit, the 2nd applicant avers that despite repeated requests, the Bank has failed to provide him with loan statements. However, upon perusal of the documents filed by the applicants, I find no evidence of any specific or formal request made to the Bank for the provision of such statements. On the contrary, the record reflects that the 2nd applicant was at all material times aware of his default.
19. Furthermore, I align with the Court’s holding in Scholastica Nyaguthii Muturi v Housing Finance Co. of Kenya Ltd on the right of statutory sale in cases where amounts are disputed. The Court stated: -
"The mortgagee will not be restrained from exercising his power of sale because the amount is in dispute or because the mortgagor has begun a redemption action or because the mortgagor objects to the manner in which the sale is being arranged. He will be restrained, however, if the mortgagor pays the amount into court...”
20. Even as the 2nd applicant now seeks to accuse the Bank of failing to provide information, the record speaks otherwise. There is correspondence dating back to June 2020 in which the 2nd applicant directly engaged the Bank, expressly acknowledging the outstanding debt and seeking accommodation through the restructuring of the loan facilities. In those communications, he requested a moratorium on the principal amount and sought additional overdraft support. In view of this, I find the 2nd applicant’s assertion that he is unaware of the loan status to be disingenuous and made in bad faith.
21. The applicants further contend that the Bank unfairly lumped excessive interest rates and penalties onto the outstanding loan amount. In my view, any such amounts, if ultimately found to have been improperly or unjustly imposed, are matters that are compensable by way of damages at the conclusion of trial. I therefore align with the holding of the Court in Pelican Investments Ltd v. National Bank of Kenya Ltd [2000] 2 EA 488 (CCK), where it was stated:
“Unless it is plain that fraud or oppression existed, the courts will not interfere with the terms of a contract or the provisions as to interest…in any case, even if the interest charged was unconscionable, the same would only be a dispute as to amount which is not a proper ground for granting an injunction. “
22. I note that the Bank has provided the loan statements covering the period from January 2020 to April 2025. Pursuant to Section 176 of the Evidence Act, such statements of account are prima facie evidence of the entries therein, subject to rebuttal.
23. The applicants further contend that under Section 90(2) of the Land Act, notices were required to be served upon the tenants occupying the premises of the 1st applicant, and that this was not done. In response, the Bank asserts that the requisite notice was duly served by affixing it on the gate and building of the subject premises, thereby bringing it to the attention of the occupants.
24. Notably, the applicants do not deny this mode of service. Indeed, they acknowledge by an averment in their application that on or about 23rd January 2025, the respondent displayed on the premises of Hotel Ezri a Notice dated 17th January 2024, addressed to the 2nd applicant, indicating the Bank’s intention to sell Land Parcel No. NTIMA/IGOKI/2777.
25. In my view, this mode of service satisfies the requirements of the Land Act. The notice herein was sufficiently brought to the attention of both the chargor and the tenants.
26. The applicants have also contended that the Bank ought to have afforded them an opportunity to dispose of the properties by way of private treaty. While the law permits a chargor to redeem the charged property at any time before the sale, there is no evidence that the Bank unreasonably declined to accommodate such a request.
27. By this point, it is evident that the applicants have not satisfied the first threshold of establishing a prima facie case with a probability of success, as required under the principles set out in Giella v. Cassman Brown & Co. Ltd [1973] EA 358. However, I must address one further issue; that of valuation.
28. The applicants contend that the Bank intends to sell the suit properties at an undervalue. They assert that the market value of Land Parcel No. NTIMA/IGOKI/2777 is Kshs. 600,000,000/= and that of MERU MUNICIPALITY BLOCK 1/251 is Kshs. 350,000,000/=. The applicable procedure for challenging a valuation report was set out by the Court in Zum Zum Investment Ltd v Habib Bank Ltd [2014] eKLR, where it was held that a party disputing a valuation must place before the court a credible counter-valuation or evidence to challenge the report relied upon by the chargee.
29. In the present case, I note that the Bank has attached valuation reports prepared by Ms. ARK Consultants Limited dated 2nd April 2025, which returned the following values:
a) NTIMA/IGOKI/2777: Forced sale value of Kshs. 330,000,000/=
b) MERU MUNICIPALITY BLOCK 1/251: Forced sale value of Kshs. 121,500,000/=
30. From the auction notice, the Bank intends to auction both properties, whose combined forced sale value totals Kshs. 451,500,000/=, against an outstanding loan balance of Kshs. 210,044,019.38.
31. While the Bank is entitled to exercise its statutory power of sale over charged property, it is also under a duty to act in good faith and to take reasonable steps to obtain the best price reasonably obtainable at the time of sale. This Court, as a court of equity, must weigh the competing interests of the parties. I take the view that, although the balance of convenience favours enabling the Bank to realize its security and recover the loan, allowing the auction of both properties, whose combined forced sale value far exceeds the outstanding debt, may occasion unnecessary hardship and financial injustice.
32. In the circumstances, I find that a more proportionate approach would be to permit the Bank to proceed with the sale of only one of the two suit properties at this stage, preferably NTIMA/IGOKI/2777, whose forced sale value is higher, so as to preserve the equitable interests involved while enabling partial recovery of the loan.
Disposition
Accordingly;
i. The application dated 26th March 2025 is partially allowed to the extent that a temporary injunction is hereby issued restraining the respondent Bank, its agents or auctioneers, from selling, alienating, disposing of, or in any other manner interfering with Land Parcel No. MERU MUNICIPALITY BLOCK 1/251, pending further directions by this Court.
ii. The respondent Bank is, however, at liberty to proceed with the sale by public auction of Land Parcel No. NTIMA/IGOKI/2777.
iii. The prayer for a blanket injunction restraining the sale of both suit properties is therefore declined.
iv. In light of this ruling, the application dated 20th June 2025 is now moot.
v. The applicants shall bear half of the costs of the application, while the remaining half shall abide the outcome of the main suit.
DATED, SIGNED AND DELIVERED IN NAIROBI
THIS 23rd DAY OF JUNE 2025
F. MUGAMBI
JUDGE