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Anwar Mohamed Bayusuf Limited v Diamond Trust Bank (K) Limited (Civil Case 13 of 2013) [2023] KEHC 18 (KLR) (6 January 2023) (Ruling)
Neutral citation:
[2023] KEHC 18 (KLR)
Republic of Kenya
Civil Case 13 of 2013
OA Sewe, J
January 6, 2023
Between
Anwar Mohamed Bayusuf Limited
Plaintiff
and
Diamond Trust Bank (K) Limited
Defendant
Ruling
1.This ruling is in respect of the plaintiff’s notice of motion dated February 24, 2021. The said application was filed under sections 1A, 1B, 3, 3A and 63 of the Civil Procedure Act, chapter 21 of the Laws of Kenya and order 40 rules 1, 2 and 3 of the Civil Procedure Rules, 2010, for the following orders:(a)Spent(b)Spent(c)That pending the hearing and determination of the suit, there be an injunction restraining the defendant, its agents, servants or employees from advertising for sale, selling by public auction or private treaty, transferring, disposing or in any other way alienating the parcel of land known as Mombasa/Block X/249 registered in the plaintiff’s name;(d)That the defendant be compelled to avail to the plaintiff, within thirty (30) days or such other period as the court may deem fit, the documents listed in schedule I annexed to the application;(e)That costs of the application be awarded to the plaintiff.
2.The application was premised on the grounds that the defendant had advertised the plaintiff’s property, more particularly known as LR No Mombasa/Block X/249 (hereinafter, “the suit property”) for sale on March 5, 2021; and yet the defendant had not served the plaintiff with the requisite statutory notices antecedent to the exercise of its statutory power of sale. The plaintiff averred that, by a notice of motion dated July 30, 2019, it had challenged the defendant’s attempted exercise of its statutory power of sale on the basis of non-service of the notices under section 90 and 96(2) of the Land Act, No 6 of 2012; and that, by a ruling delivered on January 23, 2020, the court (Hon P.J Otieno, J) found that the two notices had been served, but did not address the service of the 45 days’ redemption notice as it was not an issue then.
3.It was thus the contention of the plaintiff that, after the ruling, the defendant was under obligation to serve the 45 days’ redemption notice as well as a notification of sale pursuant to rule 15 of the Auctioneers Rules, 1997, before attempting to exercise its statutory power of sale. According to the plaintiff, the defendant’s statutory power of sale is yet to accrue given that after the ruling aforementioned, a dispute arose over accounts, in respect of which the defendant had declined to supply it with information. The plaintiff averred that it had to seek the intervention of the Central Bank of Kenya and its Banking Fraud Investigation Unit (BFIU); whereupon BFIU obtained warrants to investigate the plaintiff’s account vide Mombasa Chief Magistrate’s criminal miscellaneous application No 57 of 2019 and was able to obtain some of the documents. The rest of the documents have never been supplied.
4.In addition to the dispute over accounts, the plaintiff also complained that the defendant had not undertaken a current valuation of the suit property to determine its forced sale value as required by section 97 of the Land Act. Thus, it was the contention of the plaintiff that, unless the orders sought are issued, it stands to suffer irreparable harm because:(a)its prime property, which houses its director and her family, will have been sold through a fraudulent, illegal and unlawful process;(b)The plaintiff’s director and her family will all be rendered homeless thus unable to manage the affairs of the plaintiff; which in turn would lead to the plaintiff’s inevitable corporate death as well;(c)The loss of a basic need such as shelter cannot be adequately compensated by any award of damages; especially when the alleged default is a creation of the defendant’s fraudulent and illegal acts;(d)The suit property may be sold to third parties who may transfer it to other parties; and undoing all those transfers will not only be impossible but unjust to would-be innocent purchasers for value without notice.
5.The application was supported by the affidavit of one of the directors of the plaintiff, Nuru Ali Islam Jeizan, to which she annexed copies of the newspaper advertisement dated February 15, 2021 (annexure NAJ-1), the audit report dated May 23, 2017 (annexure NAJ-2), the plaintiff’s memorandum & articles of association (annexure NAJ-3), and the plaintiff’s letter dated June 22, 2018 addressed to the Central Bank of Kenya (annexure NAJ-4”), among other documents. Thus, the plaintiff prayed that the orders sought by it be granted in the interest of justice and fairness.
6.Upon presentation of the application, it was given attention by Hon Njoki Mwangi, J. on February 24, 2021, whereupon prayers 1 and 2 were granted ex parte. In reaction thereto, the defendant filed its notice of motion dated March 17, 2021 for orders that:(a)the application be certified urgent and service thereof dispensed with in the first instance;(b)That pending the inter partes hearing and determination of the application the court be pleased to stay execution of the ex parte orders issued on February 24, 2021 by Hon Lady Justice Njoki Mwangi, in particular order No 3 compelling the defendant to within 30 days’ avail to the plaintiff certain documents as more particularly described in the said application;(c)That the court be pleased to vacate/set aside/discharge unconditionally the ex parte orders issued on February 24, 2021 by Hon Lady Justice Njoki Mwangi in particular order No 3 compelling the defendant to within 30 days’ avail to the plaintiff the documents more particularly described in paragraph 2 of the said application;(d)The the court be pleased to direct the Directorate of Criminal Investigations to carry out an investigation on possible perjury committed by the plaintiff’s director, Ms Nuru Ali Islam Jeizan in her supporting affidavit in this matter, sworn on February 24, 2021.(e)That the costs of the application be borne by the plaintiff.
7.The defendant complained that paragraph 3 of the order issued ex parte on February 24, 2021 is extremely prejudicial to it beause it is final in nature and was issued without giving it an opportunity to respond to the allegations made against it; which in itself is a direct violation of the defendant’s right to a fair hearing and an abuse of the process of the court. The defendant also averred that this is the 4th time the plaintiff is filing an application of this nature, and that its intention is merely to scuttle the defendant’s attempts to exercise its power of sale. Thus defendant was irked that the plaintiff obtained ex parte orders without full disclosure.
8.The defendant relied on the supporting affidavit sworn by its debt recovery officer, Amaan Kassam in which the aforementioned grounds were explicated. The defendant reiterated the assertion that the plaintiff has come to court with inequitable hands and obtained final orders, yet there is a pending investigation by the Directorate of Criminal Investigations. The defendant was particularly concerned that the plaintiff failed to disclose its default as well as other material facts at the time of making its application. He prayed for its dismissal with costs.
9.The plaintiff filed a supplementary affidavit on June 9, 2021 sworn by Nuru Ali Islam Jeizan, and averred that it is in bad faith for the defendant to allege that it (the plaintiff) withheld information to mislead the court into granting an order that was not merited. The plaintiff denied that the dispute is simply about accounts. It asserted that the loan was fully repaid but that the defendant is out to defraud it by creating the impression that there exists an outstanding balance. Hence, the plaintiff asked to be given a chance to demonstrate the illegalities and acts of fraud committed against it by the defendant.
10.Directions were thereafter given by the court (Hon Chepkwony, J) on May 10, 2021 that the defendant’s application dated March 17, 2021 (the 2nd application) be treated as a response to the plaintiff’s application dated February 24, 2021; and that the two applications be canvassed simultaneously by way of written submissions. Further directions were given herein on June 15, 2021, including an order granting leave to the defendant to file a supplementary affidavit in respect of the 2nd application, with corresponding leave to the plaintiff.
11.The defendant instead filed a replying affidavit on November 12, 2021, sworn on its behalf by one of its officers, Martin Mbithi. In response to the plaintiff’s prayer for documents, Mr Mbithi deposed that the letter of offer for the subject facility dated February 19, 2009 was exhibited by the plaintiff at pages 38 to 47 of its notice of motion. He explained that most of the instructions to the defendant would be given verbally on behalf of the plaintiff at the instance of one Mr Anwar Bayusuf (now deceased) and that the plaintiff would thereafter honour its obligations by making the requisite payments. Mr Mbithi annexed some documents to his replying affidavit in response to the plaintiff’s application; particularly the request for documents.
12.The plaintiff’s written submissions were filed by M/s Gikandi & Company Advocates on June 9, 2021. Counsel thereby proposed the following issues for determination:(a)Whether the plaintiff has made out a prima facie case with a probability of success;(b)Whether there would be irreparable harm absent an injunction;(c)Whether the balance of convenience tilts in favour of granting the injunction sought herein.
13.Mr Gikandi reiterated the plaintiff’s contention that, this suit is not just about accounts but about fraud and illegalities. He pointed out that the illegalities are in respect of the creation of certain accounts by the defendant in the name of the plaintiff without the plaintiff’s authority; and the failure by the defendant to comply with rule 15 of the Auctioneers Rules as well as section 97 of the Land Act. Mr. Gikandi relied on Gichinga Kibutha v Caroline Nduku [2018] eKLR and Juja Coffee Exporters Ltd & another v NIC Bank Limitedx & another [2020] eKLR to press the point that illegalities ought not to be glossed over, but must be thoroughly investigated to enable the court arrive at a just conclusion. He postulated that such inquiry can only be done if the intended sale is stopped.
14.In respect of the redemption notice provided for under rule 15 of the Auctioneers Rules, Mr Gikandi submitted that, while the plaintiff conceded that the same was served and was therefore not an issued in the previous application before Hon Otieno, J, it was imperative that a fresh notice be served after that ruling; which was not done. He relied on Nora Stella Sandhu v National Bank of Kenya Ltd & another [2006] eKLR in support of his argument.
15.Mr Gikandi also submitted that a current valuation ought to have been done by the defendant before putting up the suit property for sale. He relied on section 97 of the Land Act and rule 11(1)(b)(x) of the Auctioneers Rules to anchor his argument that, for the defendant to have lawfully sold the suit property on March 5, 2021 as intended, the valuation ought to have been carried out after March 6, 2020. He urged the court to note that no such report was availed. The case of Francis Kiarie Kinyanjui v HFC Limited [2020] eKLR was cited to support the assertion that valuation is mandatory.
16.On irreparable injury, counsel urged the court to agree with the averments set out at paragraph 18 of the plaintiff’s supporting affidavit as to the harm that will befall it if its prayer for injunction is declined. He added that, since the plaintiff has also shown that the defendant has acted in breach of the law, the plaintiff cannot be compelled to accept damages. On the authority of Said Ahmed v Manasseh Denga & another [2019] eKLR, Mr Gikandi argued that a party should not be allowed to maintain an advantageous position he has gained by flouting the law simply because he is able to pay damages. For the same reason, Mr Gikandi submitted that the balance of convenience is in favour of the plaintiff.
17.On his part, Mr Shah for the defendant urged the court to dismiss the application with costs. He relied on his written submissions filed herein on November 25, 2021. He urged the court to note that, although this suit was filed in 2013, not attempts have been made by the plaintiff to prosecute it. Instead, the plaintiff has been filing one interlocutory application after another, with the primary objective of scuttling the exercise of the defendant’s statutory power of sale. At paragraphs 7 to 20 of his written submissions, Mr Shah endeavoured to show that the plaintiff’s application is an abuse of the process of the court.
18.On the merits, Mr Shah submitted that the plaintiff has failed to demonstrate a prima facie case since the order for discovery has already been complied with. He set out the particulars at paragraphs 22 to 36 of the defendant’s affidavit to underscore the defendant’s assertion that it has fully complied and supplied the requisite documents to the plaintiff. Counsel relied on Francis Karuri Thuku v Kenya Ports Authority & another [2021] eKLR to buttress his argument that the plaintiff is merely on a fishing expedition. Mr Shah then submitted on the law relating to injunctions and cited the cases of Giella v Cassman Brown [1973] EA 358 and Nguruman Limtied v Jan Bonde Nielsen & 2 others [2014] eKLR as to the conditions that an applicant must satisfy to attract the discretion of the court in such an application.
19.Mr Shah further pointed out that, in any event, a dispute over accounts has never been a valid basis for granting a temporary injunction. He relied on National Bank of Kenya Limited v Juja Coffee Exporters Limited (supra) in this regard and pointed out that, at paragraph 29 of its affidavit the defendant acknowledged its obligation to obtain a current valuation of the property; granted that the sale of March 5, 2021 was stopped by an order of the court.
20.Mr Shah further pointed out that a redemption notice was duly served and such service endorsed by a ruling of the court dated January 23, 2020. He pointed out that the averment by the plaintiff at paragraph 5 of its supporting affidavit is misleading in so far as it stated that service of the redemption notice was not an issue in the ruling dated January 23, 2020. He therefore urged the court to find that there is no requirement that a further 45-day redemption notice be served.
21.Mr Shah also took the view that the plaintiff has utterly failed to prove that it stands to suffer irreparable harm. He submitted therefore that damages are an adequate remedy in the circumstances of this case. On the authority of Nguruman Limited (supra) counsel submitted that, in any case, the plaintiff having failed to prove a prima facie case, the court is under no obligation to taken into account the second and third considerations, as these only come into play where a prima facie case has been shown. He added that once property is given to a bank as security, the same becomes a commodity that can be subjected to sale. The cases of Andrew Ouko v Kenya Commercial Bank & 3 others [2005] eKLR and Andrew Muriuki Wanjohi v Equity Building Society & antoher [2006] eKLR were relied on by Mr Shah to buttress his arguments in this regard.
22.In the same vein, Mr Shah urged the court to find that the balance of convenience is in favour of the defendant; given that the plaintiff was indebted to it in the sum of Kshs 174,974,218.06 as at January 26, 2018. He added that the figure continues to accrue interest at contractual rates per annum. Thus, counsel urged for the dismissal of the plaintiff’s application.
23.In the light of the foregoing, there is no dispute that the plaintiff is the registered owner of the suit property; or that it charged it to the defendant to secure a loan advanced to it by the defendant sometime in the year 2009 or thereabouts. It is also common ground that the defendant has made several attempts to sell off the property in exercise of its statutory power of sale. The last such sale was scheduled for March 5, 2021 but this too was stopped by an order of the court, made ex parte on February 24, 2021. Thus, the issues emerging for determination from the two applications are:(a)Whether the plaintiff is entitled to the grant of a temporary injunction, given the circumstances of this matter.(b)Whether the plaintiff has made out a good case for discovery in the manner sought by prayer 4 of the notice of motion dated February 24, 2021;(c)Whether the court ought to direct the Directorate of Criminal Investigations to carry out investigations on possible perjury committed by the plaintiff’s director, Ms Nuru Ali Islam Jeizan, as prayed by the defendant in the application dated March 17, 2021.
(a) On whether a case for temporary injunction has been made by the plaintiff:
24.Order 40 rule 1 of the Civil Procedure Rules provides that:
25.Thus, the principles that guide the exercise of discretion in this respect were well articulated in Giella v Cassman Brown (supra). The principles were reiterated in the case of Nguruman Limited v Jan Bonde Nielsen & 2 others (supra) thus:
26Accordingly, the first question to pose is whether the plaintiff has established a prima facie case. In Mrao Ltd v First American Bank of Kenya Ltd & 2 others [2003] KLR 123 a prima facie case was defined thus:
27.It is trite that, in considering whether or not a prima facie case has been made out, the court need not go into an exhaustive evaluation of the merits of the plaintiff's case. This caution was aptly expressed by the Court of Appeal in Nguruman Limited v Jan Bonde Nielsen & 2 others (supra) thus:
28.The key concern of the plaintiff appears to be that there is a dispute as to the exact amount due to the defendant. The plaintiff raised this point with the full knowledge that a dispute as to the amount owing is not a valid ground for the grant of a temporary injunction. Hence it raised allegations of fraud by the defendant in the management of the its loan accounts. In my careful consideration, it all boils down to a dispute over accounts in respect of which the Court of Appeal, in National Bank of Kenya v Juja Coffee Exporters Limited (supra) held:
29.I have likewise considered the plaintiff’s contention that, unless the orders sought are issued it stands to suffer irreparable harm. The plaintiff averred in its supporting affidavit that the suit property is prime property which houses its director and her family; and unless the defendant is restrained, the property will be sold through a fraudulent, illegal and unlawful process; and that the plaintiff’s director and her family will all be rendered homeless thus unable to manage the affairs of the plaintiff; which in turn would lead to the plaintiff’s inevitable corporate death as well. The plaintiff further asserted that the loss of a basis need such as shelter cannot be adequately compensated by any award of damages; especially when the alleged default is a creation of the defendant’s through fraudulent and illegal acts. The plaintiff also raised the concern that, since the suit property may be sold to third parties who may transfer it to other parties, undoing all those transfers will not only be impossible but unjust to would-be innocent purchasers for value without notice.
30.It is however trite that once land has been offered as security for a loan, it becomes a commodity for sale just like any other. This point was aptly made by Ringera, J. in Isaac O. Litali v Ambrose Subai & another, HCCC No 2092 of 2000 thus:
31.While there appears to be no dispute that the defendant did not value the suit property prior to the intended sale that was scheduled for March 5, 2021; and therefore that the plaintiff has demonstrated a possible breach of the statute to warrant the intervention of the court for purposes of section 97 of the Land Act, such intervention need not be by way of a temporary injunction pending the hearing and determination of the suit. In this regard, I am in agreement with the observation of the court in Olkasai Limited v Equity Bank Limited [2015] eKLR that:
32.I must hasten to add that, in this instance, the plaintiff is not complaining about the notices provided for under section 90 or section 96 of the Land Act. Indeed, I subscribe to the view that once statutory notices are issued, as was the case herein, there is no obligation on the part of the chargee to re-issue such notices. The only obligation would be service of the redemption notice and the notification of sale as per rule 15 of the Auctioneers Act. By parity of reasoning, the auctioneer would have no option, in such circumstances, but to comply with rule rule 11(1)(b)(x) of the Auctioneers Rules
33.In the light of the foregoing, it is my resultant finding that the plaintiff has failed to satisfy the court that it has a prima facie case with a probability of success to warrant the grant of a temporary injunction. That being the case, I need not consider the aspects of irreparable harm or balance of convenience. In Nguruman Limited v Jan Bonde Nielsen & 2 others (supra) the Court of Appeal made it clear that: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. If the applicant establishes a prima facie case that alone is not sufficient basis to grant an interlocutory injunction, the court must further be satisfied that the injury the respondent will suffer, in the event the injunction is not granted, will be irreparable. In other words, if damages recoverable in law is an adequate remedy and the respondent is capable of paying, no interlocutory order of injunction should normally be granted, however strong the applicant’s claim may appear at that stage. If prima facie case is not established, then irreparable injury and balance of convenience need no consideration. 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.”
(b) On whether the plaintiff has made out a good case for discovery in the manner sought by prayer 4 of the Notice of Motion dated 24th February 2021:
34.The plaintiff has sought for orders that the defendant be compelled to avail the following documents: -(a)Letter of offer for the overdraft facility under account number 0xxxxx0(b)Email dated October 10, 2013 from Martin Mbithi to the plaintiff’s auditors.(c)Authority for the internal account transfers effected between January, 2009 and December, 2011(d)Account opening documents for accounts 0xxxxx0, 0xxxxx1 and 0xxxxxx3
35.The plaintiff anchors the prayer for the release of documents on its assertion that the defendant created fictitious accounts that have resulted in the loan amount of Kshs 174,974,218.06 in the defendant’s books; yet according to it, the loan was fully repaid as at June 30, 2011. In response to the plaintiff’s request for documents, the defendant contended that, the parties herein entered into a consent on the July 17, 2021 in respect of the prayer for discovery; and that all documents including details about the stated account numbers are are in the plaintiffis’s possession. The defendant further contended that the Interest Rates Advisory Centre (IRAC) prepared an independent report confirming that the plaintiff owes the defendant Kshs 174,974,218.06, which the plaintiff is yet to settle. According to the defendant, IRAC also furnished the plaintiff with all the necessary documents obtained for purposes of the said report.
36In the premises, the the defendant asserted that the plaintiff request for documents is nothing but a mere fishing expedition. The defendant then proceeded to demonstrate that:(a)the letter of offer requested for the overdraft facility under account number 0xxxxx0 is well within the plaintiff’s possession and has been produced at page 38 -47 of the plaintiff’s notice of motion;(b)The email dated October 10, 2013 from Martin Mbithi to plaintiff’s auditors was sent to the plaintiff’s appointed auditors and is well within the knowledge and possession of the plaintiff;(c)The payer for an order for the release of the authority for internal account transfers effected between January, 2009 and December, 2011 is too generic and does not pin point a specific document and therefore amounts to a typical fishing expedition.(d)Account numbers 0xxxxx0, 0xxxxxx1 and 0xxxxx3, have no account opening forms as they were accounts opened for the repayment of loans advanced to the plaintiff based on oral arrangements between the then plaintiff’s director, Mr Anwar Bayusuf (deceased) and the defendant’s then General Manager who has has since retired.(e)The opening forms for account No 0xxxxx4, the main account has been annexed to the defendant’s replying affidavit and marked as “MM 1”.
37.In the premises, since the foregoing assertions were not refuted by the plaintiff, I am satisfied that there was substantial compliance and that any outstanding documents can still be sought at the pre-trial conference stage. If ultimately it is proved that the documents are unavailable, then the parties will have to leave it to the court to decide the merits of the case on the basis of the available evidence. Indeed, in Concord Insurance Co Ltd v NIC Bank Ltd [2013] eKLR, Havelock, J (as he then was) guided by the case of New Zealand case of Kim Margaret Van Gog v Owen Grauman [2013] NZHC 406 held that a party seeking an order for discovery has to show in its application the relevance of the documents that have been sought.
(c) Whether the Court ought to direct the Directorate of Criminal Investigations to carry out investigations on possible perjury committed by the Plaintiff’s director Ms. Nuru Ali Islam Jeizan as prayed by the defendant in the application dated 17th March 2021:
38This aspect of the defendant’s case appears not to have been sufficiently addressed. No submissions were made on the same by either side and thus no basis has been laid for this court to direct the Directorate of Criminal Investigations to carryout an investigation on possible perjury committed by Mrs Nuru Ali Islam Jeizan. In any event, nothing bars the defendant from lodging such a complaint directly to the DCI for investigations.
39.The upshot of the above is that I find no merit in the plaintiff’s application dated February 24, 2021. The same is hereby dismissed. Likewise, the defendant’s application fails and is hereby dismissed. For the avoidance of doubt, it is hereby ordered that:(a)The defendant is at liberty to exercise its statutory power of sale upon obtaining a current valuation of the suit property and upon compliance with rule 15 of the Auctioneers Rules.(b)Costs of the two applications shall be costs in the cause.It is so ordered.
DATED, SIGNED AND DELIVERED VIA EMAIL AT MOMBASA THIS 6TH DAY OF JANUARY 2023.OLGA SEWEJUDGE
