Downhill Limited v Harith Ali El-Busaidy & another [2000] KECA 214 (KLR)
The bottom line
#Kenya's Court of Appeal ruled that a borrower who claims a bank sold their mortgaged land unfairly can only sue the bank for damages, not block the sale to a buyer.
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 learned Judge misapprehended the provisions of section 69 of the Transfer of Property Act, 1882, particularly section 69B(2), in granting the temporary injunction
- 2.Whether a finding that the suit premises were sold at an undervalue, or that there was collusion, could support an injunction restraining transfer to the purchaser rather than a remedy in damages against the mortgagee
Key legal issues
#Effect of section 69B(2) of the Transfer of Property Act, 1882 on a purchaser at a statutory power of sale
The purchaser's title is not impeachable on the ground that no case arose to authorise the sale, that due notice was not given, or that the power was improperly or irregularly exercised; the purchaser need not inquire into these matters.
The borrower's case was that the statutory power of sale had been improperly and irregularly exercised. Even assuming those allegations were true, they could not ground a claim against the purchaser. The statute confines the borrower to damages against the mortgagee. The learned Judge directed himself only to section 69A and ignored section 69B(2), thereby misapprehending the law and wrongly exercising his discretion in granting the injunction.
Whether alleged gross undervalue and collusion justified the temporary injunction
No. Undervalue is a ground for damages against the Bank only, and the borrower's four-month delay before seeking an injunction, after his equity of redemption had been extinguished by registration, weighed against relief.
The Judge accepted the borrower's valuations and found fraud could not be ruled out, and treated the payment dates as indicative of collusion. But even if true, these findings would yield only a damages claim against the Bank. The borrower also slept on his rights for four months after the sale and transfer, and instituted proceedings only after his equity of redemption had been extinguished.
Legal principles established
#- Where a transfer is made in exercise of a mortgagee's statutory power of sale, the purchaser's title cannot be impeached on the ground that no case arose to authorise the sale, that due notice was not given, or that the power was improperly or irregularly exercised; the person damnified has a remedy in damages against the mortgagee only.
- A mortgagor alleging undervalue or irregularity in the exercise of the statutory power of sale is entitled to damages against the mortgagee, not an injunction restraining the sale or transfer to a purchaser.
Court orders
#- 1.Appeal allowed
- 2.Ruling and order of Mitey J set aside
- 3.Substituted order dismissing with costs the borrower's application dated 17th October, 1997
- 4.Borrower to pay the appellant's costs of the appeal and one third of the Bank's taxed costs
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya at Nairobi
- H.C.C.C. No. 2599 of 1997
- Jurisdiction invoked
- First appeal to the Court of Appeal from an interlocutory ruling of the High Court (appeal as of right from the High Court)
Relief refused
#Temporary injunction restraining transfer, alienation or dealing with the suit premises
Even if the statutory power of sale was improperly or irregularly exercised, the borrower's only remedy is damages against the mortgagee; the purchaser's title under section 69B(2) is not impeachable on those grounds
Costs
The borrower to pay the appellant's costs of the appeal and one third of the Bank's taxed costs; the borrower's application dismissed with costs.
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.
In the result we allow this appeal set aside the ruling and order of Mitey J. and substitute therefor an order dismissing with costs the borrower's application dated 17th October, 1997.
The law gives him only one remedy against the mortgagee (the Bank) and for the specific relief of damages. He is not entitled to any other relief.
and a purchaser is not, either before or on transfer, concerned to see or inquire whether a case has arisen to authorize the sale, or due notice has been given, or the power is otherwise properly and regularly exercised
We note that the borrower instituted proceedings after his equity of redemption had been extinguished.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Downhill Limited v Harith Ali El-Busaidy & another [2000] KECA 214 (KLR)", Case Analysis (2000). Civil Appeal No. 254 of 1999. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2000/214/eng@2000-12-08
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.