Court dismisses man’s bid to stop Equity Bank from auctioning his property at throwaway price
Justice Njoroge's view was that The court’s view is that in absence of a formal suit the injunction sought could not be sustained
The Milimani Commercial Court has dismissed an application by an Equity Bank customer seeking to stop the lender from auctioning his property at a price lower than the market value for defaulting on a loan as he failed to submit a substantive case.
Nicholas Mbugua Kahihu had moved to court on March 25, 2022 under a certificate of urgency seeking to block the bank from auctioning his property in Kanunganga area in Kawangware, Nairobi County, through a forced sale for Ksh 26,250,000 while a separate valuation he commissioned determined that the open market value was Ksh 35 million.
He was initially granted interim orders on March 25, 2022 but in a ruling delivered on Thursday, Justice Benjamin Njoroge said the court could not grant him relief in the absence of a proper suit before it.
“The court’s view is that in absence of a formal suit the injunction sought cannot be sustained. The court notes that in the first limb of the three-way test in the decision in Giella -vs- Cassman Brown E.A [1973] E.A 350, an affidavit has to prove a prima facie case. In absence of a proper suit, no prima facie case can be said to have been proved. The court sees no need to belabour considering the other two limbs laid down in the Giella case,” he said.
“In the circumstances, the proceedings are struck out and the interim injunction granted is discharged. The costs of the application are awarded to the respondents. The same are to be taxed on the scale applicable to miscellaneous applications. This is because there was no proper suit before the court.”
Kahihu took out a loan of Ksh 23,120,000 on August 4, 2018. He thereafter fell into default. He complained that whilst exercising its statutory power of sale, the bank has undervalued his property. Initially the property was valued at Ksh 45,000,000 as at October 9, 2018 before the loan was taken. Prior to the scheduled auction, the bank’s valuer had valued the same property at Ksh18,000,000 for a forced sale value and a market value of
Ksh30,000,000.
He also argued that common sense dictates that properties appreciate upwards in value.
On the other hand, Kahihu commissioned a separate valuation on March 24, 2022 and the open market value was Ksh 35,000,000 while the forced sale value was Ksh 26,250,000.
Kahihu argued that this was a scheme by the bank to undervalue the property and sell it at a loss.
He, however, admitted that he is indebted to the bank at Ksh 29,733,156.59 and that is in default. His main concern was that an independent valuation should be done before the auction takes place so that the true value of the property can be determined.
Equity Bank, on the other hand, the variance in the valuation report was as a result of the effects of the Covid-19 pandemic. The property which was developed for rental occupancy was experiencing a fall in occupancy levels and thus the injunction sought was not deserved.
In dismissing Kahihu’s application, Justice Njoroge noted that it was clear that the prima facie case to be proved would be the substance in the suit, the subject of the interlocutory application.
He said an application for an injunction cannot survive on the basis of an application alone and has to be based on a claim by way of a suit, seeking substantive reliefs.
