Kariuki t/a Johester Merchants v National Bank of Kenya Ltd (Civil Application 306 of 2005) [2006] KECA 219 (KLR)
The bottom line
#Kenya's Court of Appeal confirmed that disputing a bank's loan figures doesn't stop it from selling charged property—you must pay the disputed amount into court.
What this practically means
#Executive summary
#Key legal issues
#Whether the intended appeal was arguable on the ground that the bank improperly introduced Johester Merchants Ltd into the proceedings
The ground was not arguable; the bank was entitled to explain the Company's role because the applicant had denied knowledge of the Company and the security documents, including a personal guarantee, intertwined the Company's accounts with the applicant's indebtedness.
The applicant had sworn that he knew nothing of any debt owed by the Company and had never guaranteed its loans. In view of those denials the bank was obliged to explain the Company's role in the accounts, which it did. The Court perused incorporation records, take-over authorisations signed by the applicant and a personal guarantee with consolidation terms, and found the applicant's averments untruthful, expressing grave doubts about the arguability of the ground.
Validity of the statutory notice served on 23.11.01
The notice was valid; the chargor was entitled to notice under section 74 of the Registered Land Act, responded by seeking negotiations, and only questioned it in 2003.
The Court distinguished the Trust Bank v Eros Chemistry line of cases on sufficiency of notices, noting the complaint here was not sufficiency but that the notice referred to Company loans. Since the applicant gave a personal guarantee and authorised the Company's take-over of the accounts, the Court found the notice valid on its face and the challenge an afterthought after he acknowledged the debt in April and June 2003.
Whether a dispute on accounts can ground an injunction restraining the power of sale
No; following J.L. Lavuna and Halsbury's Laws, a mortgagee will not be restrained from exercising the power of sale merely because the amount due is disputed, unless the mortgagor pays the amount claimed into court.
The Court adopted Kwach JA's statement in J.L. Lavuna and the passage from Halsbury's Laws of England (Vol 32, para 725): the mortgagee is not restrained because the amount due is in dispute or a redemption action has begun, but will be restrained if the mortgagor pays the amount claimed into court unless the claim is excessive on the terms of the mortgage. The applicant had not paid anything into court.
Whether refusal of the injunction would render the intended appeal nugatory
It would not; section 52 of the Transfer of Property Act does not apply because the securities are registered under the Registered Land Act (which excludes it by section 164), damages under section 77(3) of the Registered Land Act are an adequate remedy, and the bank can refund any sums found due.
The Court held an injunction would not normally lie where damages are sufficient. The bank, trading with public funds, had advanced a large amount which the applicant fully enjoyed against securities he knew would be sold on default; the securities were not unique to him and the bank's ability to refund any sums found due was unchallenged. Reliance Bank v Norlake Investments was cited on the relevant considerations.
Legal principles established
#- An application under rule 5(2)(b) requires the Court of Appeal to exercise its own discretion de novo; it is not an appeal from the superior court's discretion.
- An injunction pending appeal will be refused where the intended appeal is not arguable or frivolous, where refusal would not render the appeal nugatory, or where the injunction would inflict greater hardship than it would avoid.
- A chargee's statutory power of sale should not be restrained merely because there is a dispute as to the amount due under the mortgage or charge.
- Under rule 15(d) of the Auctioneers Rules 1997, a notification giving 45 days from the date of service satisfies the statutory redemption period.
Court orders
#- 1.The application for an injunction pending appeal is dismissed
- 2.Costs of the application awarded to the National Bank of Kenya Ltd
- On appeal from
- High Court of Kenya at Nairobi
- H.C.C.C. No. 626 of 2003
- Jurisdiction invoked
- Rule 5(2)(b) of the Court of Appeal Rules - independent original jurisdiction to grant injunctions pending appeal
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Kariuki t/a Johester Merchants v National Bank of Kenya Ltd (Civil Application 306 of 2005) [2006] KECA 219 (KLR)", Case Analysis (2006). Civil Appli 306 of 2005. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2006/219/eng@2006-03-17
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.