Mwathi v Kenya Commercial Finance Co (Civil Application 12 of 1987) [1987] KECA 59 (KLR)
The bottom line
#Kenya's Court of Appeal stopped a land sale because the lender gave too little notice and the auction deposit was paid late, keeping the owner's right to redeem alive.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the respondent, having extended time and allowed the applicant to sub-divide the land for sale, could unilaterally withdraw from that arrangement and sell the property without further notice
- 2.Whether the auction sale constituted a binding contract when the 25% deposit was not paid at the fall of the hammer
- 3.Whether an injunction should issue restraining completion of the sale pending appeal
Key legal issues
#Unilateral withdrawal from an extended redemption arrangement
The respondent could not back out unilaterally of the arrangement allowing sub-division and sale to redeem; reasonable time was required.
Sub-division and sale of land involves survey, approval, beacons, advertising and conveyancing which cannot be done in 30 days. Having committed the applicant to that course, the chargee was bound to allow reasonable time, and the 30-day notice was unreasonable and inappropriate.
When a binding contract arises at auction
Payment of the deposit at the fall of the hammer is essential to form a binding contract; a deposit paid two days after the sale, and after service of a court order, left no binding contract.
The conditions of sale require a percentage payable at the fall of the hammer to form a binding contract, after which the sale document is signed. Concluding a contract without that payment defrauds the mortgagor and other intending purchasers, who might have bid higher had they known deposits could be deferred.
Right of redemption before transfer
The power to redeem remains available so long as no binding contract of sale has been made.
Because the deposit was paid late and no binding contract existed, the applicant's right to redeem the charge persisted, and the court could grant an injunction allowing her to redeem while the appeal was heard.
Interference with discretion on appeal (dissent)
Platt JA held the High Court's refusal of an injunction should not be disturbed absent error in law or a perverse conclusion.
The chargee had given notice, the chargor had not redeemed despite over a year, the undervaluation claim was unproved, and the amendment to section 60 of the Transfer of Property Act does not alter the right of redemption under section 72 of the Registered Land Act.
Legal principles established
#- Where a chargee grants an extension of time for sub-division and sale to redeem, it must give reasonable time and cannot unilaterally withdraw and sell on short notice
- No binding contract of sale arises at auction unless the deposit payable at the fall of the hammer is paid as the conditions of sale require
Court orders
#- 1.Injunction granted as prayed restraining the respondent from completing the sale
- 2.The applicant is at liberty to redeem the charge while the matter is being heard by the court
- 3.No order as to costs; costs of the application to be costs in the appeal
The bench
#Judges wrote separately. A dissent does not bind; a concurrence may narrow the ratio.
Wrote the judgment
Wrote the lead judgment granting the injunction, holding that the extension of time for sub-division and sale made the short notice unreasonable, and that no binding contract arose because the 25% deposit was not paid at the fall of the hammer.
I feel that since deposit of 25% was paid two days after the sale and after the court order had been served on the auctioneers, there was no binding contract.p. 5
Wrote the judgment
Dissented: the chargee had validly exercised its statutory power of sale, the chargor had never redeemed, the sale was not an undervaluation, and the applicant should have lodged redemption money in court. Would have dismissed the application with costs.
In conclusion therefore I would refuse the applicant the injunction she seeks.p. 8
Wrote the judgment
Agreed with Gachuhi JA and would grant the injunction with costs of the application to be costs in the appeal.
I would accordingly grant the injunction and as Gachuhi JA is of the same opinion, it is so ordered. No order as to costs. Costs of the application to be costs in the appeal.p. 8
- On appeal from
- High Court
- Civil Suit No 502 of 1987
- Jurisdiction invoked
- Rule 5(2)(b) of the Court of Appeal Rules
Relief refused
#Stay of execution pending appeal in the strict terms sought (Platt JA's dissenting position)
The chargor had not redeemed; the applicant should have lodged redemption money in court
Costs
No order as to costs. Costs of the application to be costs in the appeal.
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
Having considered all these matters, I would grant the injunction as prayed with no order as to costs. While the matter is being heard by the court, the applicant is at liberty to redeem the charge.
I feel that since deposit of 25% was paid two days after the sale and after the court order had been served on the auctioneers, there was no binding contract.
While acting under the powers contained in the charge, the parties ought to act reasonably.
I would accordingly grant the injunction and as Gachuhi JA is of the same opinion, it is so ordered. No order as to costs. Costs of the application to be costs in the appeal.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Mwathi v Kenya Commercial Finance Co (Civil Application 12 of 1987) [1987] KECA 59 (KLR)", Case Analysis (1987). Civil Application (rule 5(2)(b), Court of Appeal Rules). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1987/59/eng@1987-07-10
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.