Shallun Construction Limited v Kenya Development Corporation & 2 others

4. When the application was filed, this court declined to issue an order of injunction on the grounds that no urgency had been disclosed. 5. The application was opposed. The 1st defendant filed a replying affidavit sworn by Mr John Karia on 13th June 2025, in which he accused the plaintiff of working in concert with the 3rd defendant to defeat the 1st defendant's attempt to realize the security, after the 3rd defendant defaulted on its loan obligation. Mr Karia deposed that the 3rd defendant was granted a loan by the 1st defendant, which had become non-performing, leaving the 1st defendant with no option but to pursue recovery by means of public auction of the charged property. 6. The 1st defendant also challenged the affidavit sworn in support of the application, contending that it offended the Oaths and Statutory Declarations Act, as it was commissioned by an advocate practicing in the firm that prepared the pleadings. He prayed that the application be dismissed. 7. Plaintiff/applicant filed a supplementary affidavit sworn by Mr George Njoroge Wanjiku on 21st July 2025, in which he deposed that pursuant to the agreement between the 1st and the 3rd defendants, the 1st defendant was to pay contractors, among whom was the plaintiff/applicant. Mr Wanjiku deposed that, having not paid the plaintiff/applicant, the 1st defendant may not now seek to obtain the plaint constructed by the plaintiff/applicant without paying for the suppliers. Regarding the commissioning of the affidavit, it was contended that the advocate who commissioned it works in the conveyancing department of the firm representing the plaintiff/applicant, that he commissioned the affidavit in his own capacity, and that the impugned affidavit was therefore properly attested. 8. The parties filed written submissions. Those of the plaintiff/applicant are dated 21st July 2025. 9. The counsel for the plaintiff/applicant contended that there was a prima facie case with a probability of success. This was so because the 3rd defendant/respondent contracted the plaintiff to construct a food processing plant and was owed Kes.12,264,096/29, in respect of the balance of the consideration. The said amount had not been settled, notwithstanding the fact that the plaintiff/applicant had obtained a judgment against the 3rd defendant/respondent. Counsel submitted that the 1st defendant/respondent had control over the 3rd defendant/respondent and was answerable for the nonpayment. It was urged that the conduct of the 1st defendant was fraudulent. 10. Counsel, relying on the case of Kaiser Investments Limited v Hua Run Company Limited & 3 others [2021] KEHC 6598 (KLR), submitted that the way the affidavit was commissioned did not render the suit defective. It was also contended that if the order of injunction was not granted, the plaintiff would suffer substantial loss and damage. The court was therefore urged to allow the application. 11. The submissions of the 1st defendant were dated 30th September 2025. 12. The 1st defendant identified issues for determination as being:- 13. a. Whether the 1st defendant, a secured creditor, ranks in priority over the plaintiff, an unsecured judgment creditor; b. Whether the plaintiff had met the threshold for the grant of an injunction as set out in the case of Giella vs Cassman Brown & Co. Ltd; c. Whether the application is fatally defective. Regarding the first issue, it was urged that since the 1st defendant was a secured creditor, it ranked above all other creditors, including the plaintiff/applicant. https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19248/eng@2025-12-18 2

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14. Counsel for the 1st defendant/respondent relied on the case of Kenya National Capital Corporation Ltd v Albert Mario Cordeiro & another [2014] KECA 775 (KLR) and In re Hi-Plast Ltd [2019] KEHC 5014 (KLR) where it was held that: “ Where the chargor fails to discharge the debt, the bank is forced to look to its security for repayment of the advance. The rights of the secured creditor are derived from the registered charge whose validity was/has not been contested. In the absence of the chargor servicing the debt or exercising the right of redemption on completion of the loan repayment, and there is discharge of charge; the secured creditor ranks in priority to realize its claim over the security/collateral beyond all other Creditors, be they 2nd Chargee/Mortgagee, Trade Creditors, Floating Charge holders Preferential Creditors and Unsecured Creditors etc.” 15. It was denied that there had been collusion to defeat the claim of the plaintiff/applicant. Counsel urged that the averments to that effect were not supported. Counsel further submitted that there was no privity of contract between the plaintiff and the 1st defendant. 16. Counsel urged that the conditions for the grant of an injunction had not been met as there was no prima facie case with probability of success. 17. The 1st defendant contended that since the suit property was charged as a security, it had become a commodity which could be sold upon the occurrence of default. In support of the said contention, counsel relied on the case of Blay Energy Limited & another v Barclays Bank of Kenya Limited & another [2024] KEHC 4187 (KLR). That being the case, it couldn’t be said that there would be irreparable injury if the injunction was denied. 18. Counsel submitted that the balance of convenience tilted in favour of the refusal of the injunction application, as allowing it would lead to the accumulation of the loan. In support of the said contention, reliance was placed on the case of Cedarwood Hotels & Resorts Investment Company v Kenya Commercial Bank Limited & another [2022] KEHC 15000 (KLR). 19. Lastly, it was submitted that the affidavit was not properly commissioned. Based on the foregoing, counsel urged that the application be dismissed with costs. 20. I have considered the submissions of the parties herein, the pleadings, affidavits filed in support of or in opposition to the application, and documents filed. What the plaintiff seeks is an injunctive relief. Should and order of injunction issue? 21. The conditions under which an injunction may issue are well settled in Kenya. In the case of Giella v Cassman Brown & Co Ltd (1973) EA 358, it was held that:“ The conditions for the grant of an interlocutory injunction are well settled in East Africa. First, an applicant must show a prima facie case with probability of success. Secondly, an interlocutory injunction will not normally be granted unless the applicant might otherwise suffer an irreparable injury which would not be compensated by an award of damages. Thirdly, if the court is in doubt, it will decide an application on the balance of convenience.” 22. The Court of Appeal expounded on the said requirements in the case of Nguruman Limited v Jan Bonde Nielsen & 2 others [2014] KECA 606 (KLR). The court stated that: “ Since those principles are already codified by authoritative pronouncements in the precedents, they may be conveniently noted in brief as follows: https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19248/eng@2025-12-18 3

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In an interlocutory injunction application, the applicant has to satisfy the triple requirements to; (a) establish his case only at a prima facie level, (b) demonstrate irreparable injury if a temporary injunction is not granted, and (c) ally any doubts as to (b) by showing that the balance of convenience is in his favour. 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. It is where there is doubt as to the adequacy of the respective remedies in damages available to either party or both that the question of balance of convenience would arise. The inconvenience to the applicant if interlocutory injunction is refused would be balanced and compared with that of the respondent, if it is granted. On the second factor, that the applicant must establish that he “might otherwise” suffer irreparable injury which cannot be adequately remedied by damages in the absence of an injunction, is a threshold requirement and the burden is on the applicant to demonstrate, prima face, the nature and extent of the injury. Speculative injury will not do; there must be more than an unfounded fear or apprehension on the part of the applicant. The equitable remedy of temporary injunction is issued solely to prevent grave and irreparable injury; that is injury that is actual, substantial and demonstrable; injury that cannot “adequately” be compensated by an award of damages. An injury is irreparable where there is no standard by which their amount can be measured with reasonable accuracy or the injury or harm is such a nature that monetary compensation, of whatever amount, will never be adequate remedy.” 23. As can be seen from the foregoing, the Court held that the 3 conditions are considered sequentially without leapfrogging and that an injunction wouldn’t issue, even if there was a prima facie, where damages are an adequate remedy. 24. That being the case, I will consider the 3 conditions sequentially without leapfrogging, taking conditions as hurdles that the plaintiff/applicant must surmount sequentially. 25. Does a prima facie case exist? What is a prima facie case? The 11th edition of Black’s Law Dictionary defines a “prima facie” case as “1. The establishment of a legally required rebuttable presumption. 2. A party’s production of enough evidence to allow a fact trier to infer the fact at issue and rule in the party’s favour.” https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19248/eng@2025-12-18 4

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26. In Mrao Ltd v First American Bank of Kenya Ltd & 2 others [2003] KLR 125, it was held that:“ In civil cases, a prima facie case is a case in 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 to call for an explanation or rebuttal from the latter. A prima facie case is more than an arguable case. It is not sufficient to raise issues but the evidence must show an infringement of a right, and the probability of success of the applicant’s case upon trial. That is clearly a standard, which is higher than an arguable case.” 27. Applying the foregoing authorities, has a prima facie case been made in this cause? I note that the plaintiff and the 1st defendant have no contract with each other. Each has a conflict with the 3rd defendant. The 1st defendant is a secured creditor with a charge on the suit property, whereas the plaintiff is an unsecured creditor. As a secured creditor, the 1st defendant ranks higher than the plaintiff. 28. I note that the allegation of fraud is not borne out. The fact that the 1st defendant has a 19% interest in Funguo Ltd, which, in turn, owns a 51% interest in the 3rd defendant, is plainly remote and unlikely to have been a factor in the decision to procure payment of the secured facility by way of sale by public auction. I am unable to agree that there is a basis for the contention that the 1st defendant was motivated by any such consideration. The plaintiff bore the burden, as stated in the Nguruman case, to show that there was a prima facie case by showing that there was a clear and unmistakable right to be protected that had been directly threatened by an act sought to be restrained. 29. The conclusion I must draw is that there is no prima facie in this instance. On the basis of the dictum in the Nguruman case, that is enough to dispose of this matter. The plaintiff has failed at the first hurdle and cannot complete the race. 30. Even if I were wrong, the 1st defendant is exercising a statutory power of sale pursuant to a charge. An exercise of such power cannot be said to be an action that would cause irreparable harm. In the case of Blay Energy Limited & another v Barclays Bank of Kenya Limited & another [2024] KEHC 4187 (KLR) , it was held that:“ It is trite that a lawful exercise of statutory power of sale cannot be used as a ground to establish irreparable harm. The 1st defendant’s action was lawful, and there was nothing to establish any irreparable harm on the part of the plaintiffs. By offering the suit property as security, the plaintiffs had equated it to a commodity which could be disposed of so as to recover the outstanding loan together with the interest thereon.” 31. I agree with the counsel for the 1st defendant that the balance of convenience tilts in favor of the refusal of the orders sought. The 1st defendant, as rightly pointed out, is a development finance institution funded by the Kenyan people. Needlessly hobbling its ability to collect its debts is injurious to the public interest, especially where the application is sought by a party who has a collateral interest in the suit properly. The third condition has therefore not been met. 32. Having concluded that the conditions for the grant of an injunction were not met, I need not consider whether the affidavit in support of the application was properly commissioned. That, in my view, is a needless academic exercise I shall not engage in. 33. The upshot of the foregoing is that the application dated 12th May 2025 has no merit. The same is dismissed. I award the 1st respondent costs of Kes.50,000/-. 34. Orders accordingly. https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19248/eng@2025-12-18 5

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DATED AND SIGNED AT MOMBASA, THIS 18TH DAY OF DECEMBER 2025. DELIVERED VIRTUALLY THROUGH MICROSOFT TEAMS. GREGORY MUTAI JUDGE In the presence of: No appearance for the Plaintiff/Applicant; No appearance for the 1st, 2nd and 3rd Defendants/Respondents; and Esther – Court Assistant. https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19248/eng@2025-12-18 6

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