Win for NCBA as court dismisses bid to block sale of loanee's land

Judge Majanja said in case of undervalued Watunu could be remedied.

In Summary
  • In regards to the proposed sale of the property LR No. 20301/11, Judge Majanja noted that there is no dispute that the bank's statutory power of sale has arisen.
  • He further noted that Watunu had not disputed the same or denied that he had received the statutory notices from NCBA.
Image: FILE

Sometime in 2019, Danson Njuguna Watunu obtained a Sh7,779,000 loan from NCBA, which was then secured by legal charges over four plots of land.

The suit properties included Kajiado/Kaputei North/62328, Ruiru East/Juja East Block2/9362, Ruiru East/Juja East Block2/29708 and L.R. No. 20301/11.

In 2020, Watunu took up additional facilities amounting to Sh16 million secured by Charges over the suit properties.

Watunu however fell into arrears in repaying the loan and NCBA moved to exercise its statutory power of sale and sold the two plots of land in Ruiru East/Juja East Block.

In December 16, 2021, the bank sold Ruiru East/Juja East Block 2/9362 for Sh2,250,000 and on June 21, 2022, it sold Ruiru East/Juja East Block 2/29708 for Sh700,000.

Watunu was however not satisfied with the sale, saying the properties were sold at an undervalue.

On June 5, 2023, he filed a suit at the Milimani Commercial Courts claiming that the aforementioned properties were sold at an undervalue and that he was never given any valuation report for Kajiado/Kaputei North/62328.

He told Judge David Majanja that he was not aware of the purchase price for the 2/29708 and how much went to the principal loan balance.

Watunu said the true market price for the property was Sh950,000 and the forced sale value Sh712,500.

A forced sale value is an involuntary transaction in which the sale is based upon legal and not economic factors.

Regarding Ruiru East/Juja East Block 2/9362, Watunu said its true market price is Sh5.5 million while its forced sale value is Sh4,125,000.

He went on to say the bank had served him with a notice of sale by auction of property LR 20301/11.

It said the amount owing to NCBA is Sh16,667,831.74 as of May 2, 2023, indicating the property was to be sold by public auction on June 7, 2023.

NCBA had valued the property at Sh15 million which Watunu said is incorrect as its true value is Sh28 million, while the forced sale value is Sh21 million.

He further stated that the three suit properties that had been sold were undervalued but the loan still stands at Sh16,667,837.74.

He told the court that the NCBA and the other firm listed in the suit, Purple Royal Auctioneers, had failed to conduct proper forced valuation and instead undervalued the suit properties to his detriment and contrary to the laws.

He was apprehensive that they would sell the property LR 20301/11 at the current undervalued amount.

Watunu prayed that the court restrict NCBA and Purple Royal Auctioneers from repossessing, auctioning, or interfering with L.R. No. 20301/11 pending the hearing and determination of the suit.

"That the Honourable Court be pleased to order the 1st Respondent (NCBA) to provide the current and updated statement of the loan account and all documentation of the previous sale of the charged properties pertaining to the loan," he further prayed.

He also urged the court to order an independent valuation of the suit property to be conducted by a registered valuer jointly appointed by the parties or by the court pending the hearing and final determination of the main suit.

NCBA however denied the claims through its Principal Legal Counsel Stephen Atenya.

The Bank said the sale of the suit properties; Ruiru East/Juja East Block 2/29708 and Ruiru East/Juja East Block 2/9362 was guided by a valuation report dated October 22, 2021.

It denied that the suit property Kajiado/Kaputei North/62328 had been sold.

Further, NCBA contended that from the sales conducted, even assuming no other costs were deducted, it could only have cumulatively recovered Sh2,950,000 and there would still be a need to sell the fourth property, LR No. 20301/11, to satisfy the shortfall.

If Watunu's values were to be relied on, the bank said, the sale of the suit properties at the forced sale values he fronted would only have fetched Sh4,837,500.

This, it added, would still mean that the fourth land would need to be sold unless Watunu cleared the balance.

It stated that a dispute on the value of the three properties sold in 2021, should not be a basis for stopping the yet-to-be-conducted sale of the fourth property.

It also said it had instructed an ex-facie qualified professional to value.

Ex-facie is used to note that a document's explicit terms are defective without further investigation.

NCBA said a difference in opinion as to the values, is not a ground for stopping a sale that is otherwise being conducted in accordance with the law.

It submitted that at any rate, the difference in the values is a mathematical exercise that will be easily concluded after the trial, and as such Watunu can be compensated by way of damages.

The bank showed that the properties had been valued prior to the sale, which differed from the valuations of Watunu.

Judge Majanja deliberated the matter and agreed with NCBA that a difference in valuation was not sufficient to stop a chargee (NCBA)  from exercising its statutory right of the sale especially when damages would be an adequate remedy.

He further said Watunu was at liberty to seek damages, in the event that he was aggrieved by the value placed by the bank on the properties, resulting in undersale.

This is the statutory remedy provided for in the Land Act, 2012.

"It cannot be a ground for restraining the sale of the subsequent property on the same ground," the judge added.

In regards to the proposed sale of the property LR No. 20301/11, Judge Majanja noted that there is no dispute that the bank's statutory power of sale has arisen.

He further noted that Watunu had not disputed the same or denied that he had received the statutory notices from NCBA.

"Even if he was to ultimately prove that the said property would be sold at an under-value, that would not be a sufficient reason to warrant the grant of an interlocutory injunction as he has not contended that the Bank is unable to compensate him for any undervalue of the suit properties," Judge Majanja said.

"The Plaintiff (Watunu) has not made a case for an injunction as its claim can clearly be remedied by an award of appropriate damages. This prayer therefore fails."

On the order sought for an independent valuation of the property, the judge said the duty to the value belonged to the bank.

He said in the case that the suit property is sold at an undervalue, NCBA is to bear full liability for compensating the chargee.

"There is no reason for the court to interpose the Bank's duty to obtain a valuation in accordance with the law. In this case, the Bank has commissioned the valuations hence a further or independent valuation is not necessary. This prayer also fails," the judge said.

Delivering the judgement on September 5, 2023, Judge Majanja dismissed Watunu's application.

"The Plaintiff's application dated June 5, 2023, is dismissed. The Plaintiff shall pay the Defendants  (NCBA and Purple Royal Auctioneers) costs of the application," the judge ordered. 

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