Automated Summary
Key Facts
The case involves Labuena Construction Limited suing ADM Consulting Limited and Victoria Commercial Bank Limited over an unpaid construction contract for two residential houses on Plot LR No. 2327/330 in Karen. The 1st Defendant (ADM) had a construction contract valued at KES 25,000,000 with the Plaintiff, while the 2nd Defendant (Bank) held multiple registered charges over the property totaling KES 295,000,000. The Plaintiff alleges it incurred costs of KES 11,579,512 for work done and sought an injunction to prevent the Bank from auctioning the property, citing a contractor's lien and assurances from the Bank. The court ruled that the unregistered contractor's lien cannot override the Bank's registered charges and dismissed the injunction application.
Issues
- The court assessed if the bank's representations to the plaintiff about funding the project could prevent the bank from exercising its statutory power of sale, finding no such effect.
- The court determined whether an unregistered contractor's lien can supersede a registered charge held by a bank, concluding that it cannot.
Holdings
- The court dismissed the injunction application, concluding that the Plaintiff has no legal basis to restrain the Bank from auctioning the suit property. The ruling emphasized adherence to the principles in Giella v Cassman Brown and Nguruman Limited v Jane Bonde Nielsen, which require sequential satisfaction of three criteria for injunctive relief.
- The court held that the Plaintiff has not established a prima facie case with a probability of success, as it lacks any proprietary interest in the suit property. The contractor's lien asserted by the Plaintiff cannot supersede the Bank's registered interest. Furthermore, there is no evidence that the Bank represented to the Plaintiff it would refrain from exercising its statutory power of sale due to the 1st Defendant's debt.
- The court found that the Plaintiff is not a party to the agreements between the 1st Defendant and the Bank and cannot seek relief based on those agreements. The Plaintiff's claim that the Bank monitored project progress and gave funding assurances was deemed insufficient to create an obligation preventing the Bank from exercising its statutory power of sale.
- The court determined that the Plaintiff's contractor's lien is only exercisable against the 1st Defendant and not the Bank. The lien, being an unregistered interest, does not bind the Bank's registered charges over the property. The Plaintiff's reliance on alleged representations by the Bank was rejected, as those representations did not pertain to the suit property or the exercise of the power of sale.
Remedies
The court dismissed the Notice of Motion dated 6th January 2021 and awarded costs to the 2nd Defendant (Victoria Commercial Bank Limited). The interim orders in force were discharged, and the sum deposited in court was released to the 2nd Defendant on account of the costs of the aborted auction.
Legal Principles
The court applied the principles for granting an interim injunction as outlined in Giella v Cassman Brown and reiterated in Nguruman Limited v Jane Bonde Nielsen, requiring the plaintiff to demonstrate a prima facie case with a probability of success, irreparable harm without the injunction, and a balance of convenience favoring the plaintiff. The ruling concluded the plaintiff failed to meet these criteria.
Precedent Name
- Mrao Ltd v First American Bank of Kenya Limited
- Nguruman Limited v Jane Bonde Nielsen
- Giella v Cassman Brown
- Spentech Engineering Limited v Methode Limited
- China Wu-Yi Company Limited v Suraya Property Group Limited
Cited Statute
- Land Registration Act
- Civil Procedure Act
Judge Name
D. S. Majanja
Passage Text
- I therefore find and hold that the Plaintiff has not established a prima facie case with a probability of success as it does not have any proprietary interest in the suit property. At any rate, the contractor's lien it is asserting cannot defeat the Bank's registered interest.
- While the contractor has a right to be paid for work done, that right which is against its employer does not extend to an interest in the property unless that interest is duly registered in order to bind a third party. Since the lien is an unregistered interest, it cannot supersede the Bank's registered interest.
- It must be borne in mind that the Plaintiff is not a party to or privy to the agreements or charges between the 1st Defendant and the Bank, it cannot therefore seek relief in respect thereof. Further, the Plaintiff does not allege that the representation was in respect of the suit property.