Tropicana Hotels Limited VS SBM Bank Kenya Limited AND Peter Kinyua Muchendu t/a Kinyua & Co Auctioneers

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT MALINDI

CIVIL CASE NO. E018 OF 2024

TROPICANA HOTELS LIMITED …………………...………………..………….....PLAINTIFF  

VERSUS

SBM BANK KENYA LIMITED ….……………...………...………………..….1^ST DEFENDANT  

PETR KINYUA MUCHENDU

T/A KINYUA & CO AUCTIONEERS ...………………..……………...…..…2^ND DEFENDANT  

RULING

1. The Plaintiff has moved this Court by way of a plaint dated 28.9.24, seeking the following prayers:
2. A declaration that the Plaintiff did not charge the suit premises to an entity known as SBM Bank Limited.
3. A declaration that the Plaintiff did not receive euros 1,000,000.00/= from the 1^st Defendant and that the charge dated 31.10.2010 contravened section 56 (1) of the Companies Act, Cap 486(Repealed) and is null and void.
4. A declaration that no debt is outstanding or due from the Plaintiff to the 1st Defendant in Kenya Shillings under the further charge dated 28.8.2012.
5. A declaration that the Plaintiff’s accounts with the 1st Defendant had become non-performing in 2015 and that therefore the Defendant should not have continued levying interest on any monies alleged to be due on those accounts.
6. A declaration that the amount demanded by the 1st Defendant by its letter of 7.11.2015 was Kshs. 71,593,000.00/= later acknowledged to have been overstated and that amount after the acknowledgement would not have risen under the in duplum rule to Kshs. 518,736,1875.36 as at 2.8.2024.
7. A declaration that the Plaintiff’s address for purposes of the charge and further charge is P.O. Box 83063-80100 MOMBASA and not P.O. Box 350 MALINDI and that therefore any notice sent to the Plaintiff as P.O.Box 350 Malindi does not constitute a notice and any notice delivered at Sai Rock Hotel, Mombasa was not delivered to the Plaintiff.
8. A declaration that the Defendants unlawfully foreclosed the Plaintiff’s equity of redemption in the suit premises.
9. A declaration that the 1st Defendant must first provide to the Plaintiff true and faithful statements of accounts freed of all overstatements and errors before it can issue any demand to the Plaintiff.
10. A perpetual injunction restraining the Defendants by themselves, employees, servants and agents from selling or offering the suit premises for sale.
11. A declaration that the 1st Defendant ought not to have issued instructions to the 2nd Defendant before obtaining a professional valuation report over the suit premises and that the notification of sale by the 2nd Defendant dated 7.8.2024 is null and void.
12. A declaration that the advertisement for the auction sale of the suit premises is erroneous, misleading and fraudulent and does not comply with the auctioneer’s rules and is null and void.
13. Costs of this suit paid by the Defendants jointly and severally to the Plaintiff. 

1. Contemporaneously with the plaint, the Plaintiff filed an application of even date seeking interim relief by way of injunction restraining the Defendants from selling the suit property. 
2. In opposition to the suit and the Application, the 1^st Defendant filed 2 identical preliminary objections (PO) dated 7.10.24 in respect of both. Which will be considered as one. The objections raised are:
3. This Honourable Court lacks the jurisdiction to hear and determine the matter for the reasons that the issues in this suit primarily pertain to land and environment matters, which fall squarely within the exclusive jurisdiction of the Environment and Land Court as provide in Article 162 (2) (b) of the Constitution of Kenya, 2010 and Section 13 of the Environment and Land Court Act, 2011.
4. In 2015, the Plaintiff herein elected to sue the 1^st Defendant predecessor in title (Fidelity Commercial Bank Limited) over the then intended public auction sale of the suit property to recover the money advanced to the Plaintiff by the said bank; the Plaintiff then elected to file it’s claim in the Environment and Land Court to stop the said auction from taking place and the Plaintiff further pursued an appeal on the said judgment to the Court of Appeal.  The Plaintiff is therefore now estopped from filing the same related dispute in the High Court of Kenya and thereby completely bypass the Environment and Land Court and Court of Appeal where the Plaintiff started the process at.
5. The Plaintiff’s suit is an abuse of the court process for the reason that the issues raised herein are issues that have already been fully and finally determined by a court of competent jurisdiction specifically:
6. The issues now brought before this Honourable Court were conclusively adjudicated upon by the Environment and Land Court in ELC Case NO.220 of 2015, in which judgment was rendered against the Plaintiff.
7. Being dissatisfied with the outcome in the said ELC case, the Plaintiff proceeded on appeal to the Court of Appeal in Civil Appeal No.9 OF 2018, where the appellate court similarly upheld the decision of the Environment and Land Court, and judgment was again not entered in favour of the Plaintiff.
8. Having lost in both the Environment and Land Court and the Court of Appeal, the Plaintiff is now improperly attempting to re-litigate the same issues in the High Court. 
9. On the application of Section 7 of the Civil Procedure Act, Cap 21, the suit herein is barred by the doctrine of res judicata in that the substance of issues raised in this suit was directly/indirectly in issue in ELC Case No.220 of 2015 and Civil Appeal No.9 of 2018 in the following manner:
10. There is identity of parties between the present suit and the previous suits (ELC Case No.220 of 2015 and Civil Appeal No.9 of 2018).
11. The issues now being raised by the Plaintiff were directly and substantially in issue in the prior proceedings before the Environment and Land Court and the Court of Appeal.
12. Both the Environment and Land Court and the Court of Appeal rendered final judgments on the merits, and the Plaintiff’s attempts to re-litigate those same issues in this court are therefore barred.
13. This Honourable Court is bound to uphold the principles of finality in litigation and cannot entertain the re-litigation of matters that have already been conclusively determined.
14. The Plaintiff admits that they were served with the notice to sale dated 7^th August, 2024 yet the Plaintiff filed the application for injunction on 28^th September, 2024, which was a few days to the carrying of the public auction-equity does not assist the docile.
15. The Plaintiff has not offered to settle any part of the loan money or even the costs of carrying out the ongoing public auction sale of the suit property yet those who come to equity should be willing to act equitably.
16. The undisputed facts herein are that the Plaintiff is the registered owner of Land Portions No. 775 and 776, Malindi (the suit property) which are charged to the 1^st Defendant. The Plaintiff filed ELC Case No. 220 of 2015 (the ELC case) in the Environment and land Court (the ELC), seeking several orders and declarations relating to enforcement of the security by the 1^st Defendant. The suit was dismissed and the dismissal was upheld by the Court of Appeal in Civil Appeal No. 9 of 2019. 
17. The 1^st Defendant challenges the jurisdiction of this Court to hear and determine the Plaintiff’s suit principally on grounds that the matters raised therein are res judicata having been directly in issue and conclusively dealt with in the ELC matter and by the Court of Appeal in the appeal filed by the Plaintiff. Further that the matters raised herein are for the exclusive jurisdiction of the ELC.
18. The 1^st Defendant contends that in 2015, the Plaintiff sued the 1^st Defendant’s predecessor in title over the then intended public auction sale of the suit property to recover money advanced to the Plaintiff. Further that the Plaintiff elected to file its claim in the ELC to stop the auction, which was dismissed and that the Plaintiff’s appeal to the Court of Appeal suffered the same fate. The 1^st Defendant thus argued that the Plaintiff is now estopped from filing the same related dispute in the High Court.  
19. Parties filed their written submissions as directed by the Court. Parties further gave vent to their respective positions through oral submissions by their counsel. 
20. On the jurisdiction of this Court over the subject matter of the suit, it was submitted Article 162(2)(b) of the Constitution and the Environment and Land Court Act confers jurisdiction relating to land use and occupation and all matters on environment, exclusively on the ELC. It was argued that the intended public auction of the suit property, if completed, will naturally result in the Plaintiff losing the use and occupation of the same a fact acknowledged by the Plaintiff in paragraph 18 of the supporting affidavit.
21. The 1^st Defendant cited the case of Co-operative Bank of Kenya Limited v Patrick Kangethe Njuguna & 5 others (2017) eKLR where the Court of Appeal held that in matters relating purely to accounting questions arising from charges and mortgages, then the proper court to file suit would be the High Court. The 1^st Defendant however asserted that in the present case, the issue of accounting was just but one of the many raised herein and that the primary essence of the suit is to stop the sale of the suit property by public auction. It was thus submitted that this being the case, the court that has the primary jurisdiction is the ELC and that this is why the Plaintiff in 2015 filed suit in that court. Further reliance was placed on the cases of Siri Ram Kaura vs M.J.E Morgan ca 71/1960 (1961) EA 462, Diocese of Eldoret Trustees (registered) vs AG (on behalf of the Principal Secretary Treasury) & Another (2021) eKLR and Njangu vs Wambua & Another Nairobi HCC No. 2340 of 1991.
22. The Plaintiff submitted that in its plaint, it has challenged the 1^st Defendant’s attempt to exercise the statutory power of sale over the suit property yet the Plaintiff denies owing any money to the bank; further that there is violation of the in duplum rule under Section 44A of the Banking Act for the amount demanded by the 1^st Defendant is more than double that allegedly advance.; that no notice was served; that the Defendants so not intend to abide by the provisions of the Auctioneers Act and Rules in the proposed auction of the suit property. The Plaintiff argued that the issues raised fall squarely within the jurisdiction of this Court.
23. The Plaintiff further submitted that it is the High Court and not the ELC that is competent to hear any issue arising under the repealed Companies Act including whether the charge is null and void under Section 56(1) of that Act; to determine whether the Plaintiff obtained any amount from the 1^st Defendant in Euros. To buttress its submissions, the Plaintiff relied on the cases of Thomas Mutuku Kasue v Housing Finance Company Ltd (HFC) & another [2021] eKLR and that of ELC Case No. E008 of 2024 Wanjiru Yusuf Abdalla vs Elizabeth Mueni where the court held that the ELC Court has no jurisdiction on suits concerning statutory power of sale of immovable property under a charge.
24. The jurisdiction of the ELC Act is set out in Article 162(2)(b) of the Constitution and Section 13 of the ELC Act, which is to hear and determine disputes relating to the environment and the use and occupation of, and title to, land. Under Article 165(3) of the Constitution, the High Court has unlimited original jurisdiction in criminal and civil matters save for those within the exclusive jurisdiction of the Supreme Court, the ELC and the Employment and Labour Relations Act.
25. The jurisdiction question between the ELC and the High Court over matters relating to charges and mortgages has been raging for a long time. The Court of Appeal stepped in to settle the dispute in the case of Co-operative Bank of Kenya Limited v Patrick Kangethe Njuguna & 5 others [2017] eKLR. In that decision which is binding on this Court, the Court of Appeal stated:

40.  To the appellant, the charge was an instrument granting an interest in the land, hence jurisdiction in the matter lay with the ELC. However, under Section 2 of the said Act, an instrument is a writing or enactment which creates or affects legal or equitable rights and liabilities. For the purposes of this suit, that instrument was the charge. However, it bears repeating that the cause of action herein was never the charge (instrument) but the amounts due and owing thereunder. Neither the charge instrument nor the creation of an enforceable interest thereunder, were disputed. The main questions to be determined were the tabulation of the sums owing and whether statutory notices had issued prior to the attempted statutory sale.

41.  Furthermore, the jurisdiction of the ELC to deal with disputes relating to contracts under Section 13 of the ELC Act ought to be understood within the context of the court’s jurisdiction to deal with disputes connected to ‘use’ of land as discussed herein above. Such contracts, in our view, ought to be incidental to the ‘use’ of land; they do not include mortgages, charges, collection of dues and rents which fall within the civil jurisdiction of the High Court. 

1. The Court of Appeal noted that the dominant issue in that case was not the use of land but the settlement of amounts owing from the respondents to the appellant on account of a contractual relationship of a banker and lender. As such, it was the High Court, not the ELC that had jurisdiction over the matter.
2. The Court went on to state:

42.  While exclusive, the jurisdiction of the ELC is limited to the areas specified under Article 162 of the Constitution, Section 13 of the ELC Act and Section 150 of the Land Act; none of which concern the determination of accounting questions. Consequently, this dispute does not fall within any of the areas envisioned by the said provisions. On the other hand, the jurisdiction of the High Court over accounting matters is without doubt, for under Article 165(3) of the Constitution provides inter alia, that;

1.  subject to clause (5), the High Court shall have-

a.  unlimited original jurisdiction in criminal and civil matters.

1. Flowing from the cited authority, it is clear that where the dominant issue is a dispute over the accounting matters, then this Court will have jurisdiction. 
2. This decision was followed by the ELC Court in the cases of Thomas Mutuku Kasue v Housing Finance Company Ltd (HFC) & another [2021] eKLR and Abdalla v Ewins (Miscellaneous Application E008 of 2024) [2024] KEELC 5923 (KLR) (18 September 2024) (Ruling).
3. The dominant issue in the present suit revolves around accounts. The Plaintiff has challenged the amount demanded and the correctness of the statements of account. The dispute does not relate to use, occupation and title to land as contemplated under Article 162(2) of the Constitution as well as the ELC Act.  In the premises, this Court has the requisite jurisdiction to determine the suit.
4. On the ground of res judicata, the 1^st Defendant submitted that the ELC case was filed by the Plaintiff against the 1^st Defendant and the primary purpose of the suit was to ask for a declaration that the Plaintiff did not owe money to the 1^st Defendant either in Euro or Kenya shillings with regard to the charge and further charge over the suit property. Further that the question of whether the Plaintiff owes the 1^st Defendant the sum of 1,000,000 Euros and Kenya Shillings 50,000,000 together with accrued interest is an issue that was fully and finally determined by both the ELC and the Court of Appeal.
5. The Plaintiff on the other hand submitted that the objection of res judicata must fail because the ELC case was filed in a court without jurisdiction; that the 1^st Defendant admitted that it had overstated the amount due by over Kshs. 9,000,000/=; that the suit is based on illegal fresh notices, the service of which was improper demanding excessive amounts; that any fresh notice constitutes a new, separate and distinct fresh cause of action; that no fresh valuation was done as required under rule 9 of the Auctioneers Rules; that the plea of res judicata has been improperly invoked and violates the Plaintiff’s constitutional right to a fair trial under Article 25(c), right to property under Article 40 of the Constitution, access to justice under Article 47 and fair hearing under Article 51 of the Constitution.
6. In determining the issue of res judicata, it is necessary for the Court to consider the applicable legal provisions. Section 7 of the Civil Procedure Act provides:

No Court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a Court competent to try such subsequent suit or the suit in which such issue has been subsequently raised, and has been heard and finally decided by such Court.

1. The doctrine of res judicata bars a court from hearing and making a determination upon a matter or question between the same parties, that has already been heard and determined by a competent court.
2. In the case of Independent Electoral & Boundaries Commission v Maina Kiai & 5 Others [2017] eKLR the Court of Appeal set out the elements of res judicata and stated:

Thus, for the bar of res judicata to be effectively raised and upheld on account of a former suit, the following elements must all be satisfied, as they are rendered not in disjunctive, but conjunctive terms;

(a) The suit or issue was directly and substantially in issue in the former suit.

(b)  That former suit was between the same parties or parties under whom they or any of them claim.

(c)  Those parties were litigating under the same title.

(d)  The issue was heard and finally determined in the former suit.

(e)  The court that formerly heard and determined the issue was competent to try the subsequent suit or the suit in which the issue is raised.

1. The Plaintiff and the 1^st Defendant were parties in the ELC case. In the exhibited judgment in the ELC case, the fact of indebtedness of the Plaintiff to the 1^st Defendant was determined by the ELC as was the validity of the charge instruments as well as the 1^st Defendant’s statutory power of sale. Similarly, a determination was made on the prayer for a permanent injunction restraining the 1^st Defendant from selling the suit property with the Court stating that the 1st Defendant was at liberty to start the recovery process afresh and issue proper notices as required by law. The address for service was also determined as that in the charge and further charge. These issues were considered on merit and a final determination made thereon. The decision of the ELC was affirmed by the Court of Appeal. In light of the foregoing, to entertain the said issues in the present suit will be a violation of the express provisions of Section 7 of the Civil Procedure Act.
2. There is a long list of authorities in which Courts have stated that there comes a time when litigation must come to an end. In the case of William Koross (Legal personal Representative of Elijah C.A. Koross) v Hezekiah Kiptoo Komen & 4 others [2015] eKLR, the Court of Appeal stated:

The philosophy behind the principle of res judicata is that there has to be finality; Litigation must come to an end. It is a rule to counter the all too human propensity to keep trying until something gives. It is meant to provide rest and closure, for endless litigation and agitation does little more than vex and add to costs. A successful litigant must reap the fruits of his success and the unsuccessful one must learn to let go.

1. The Plaintiff has claimed that the ELC did not have the jurisdiction to hear the ELC matter, never mind that it was the Plaintiff that filed that suit. The question as to whether the ELC had jurisdiction to hear and determine the ELC case is not for this Court to determine. By dint of Article 165(6) of the Constitution, this Court does not have supervisory jurisdiction over a superior court. In the premises, this Court cannot consider, least of all determine the correctness or otherwise of the decision of the ELC, which is a superior court under Article 162(1) of the Constitution.
2. As indicated herein, the Plaintiff disputes the amount of Kshs. 518,736,1875.36 (sic) demanded by the 1^st Defendant and contends that the same violates the in duplum rule. This is the gravamen of the Plaintiff’s claim. In his judgment in the ELC case, the learned Judge noted that DWI had conceded that the amount of Kshs. 71,593,000/= claimed, was in excess of the amount due from the Plaintiff by about Kshs. 9,000,000/=. Guided by the decision in Co-operative Bank of Kenya Limited v Patrick Kangethe Njuguna case (supra), this and the disputed statement of accounts are issues over which this Court has jurisdiction in the present plaint. The Court also has jurisdiction to interrogate the contents and adequacy of the statutory notice issued for the sale of the suit property.
3. In the end and in view of the foregoing, the Court finds that the preliminary objection dated 7.10.24 is merited and upholds the same, but only to the extent stated. 

DATED SIGNED and DELIVERED in Malindi this 15^th day of November 2024

_____________________

M. THANDE

JUDGE