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Court of AppealDismissedCivil Appeal 152 of 2006· [2012] KECA 40 (KLR)

SAVINGS AND LOAN KENYA LIMITED V MAYFAIR HOLDINGS LIMITED [2012] KECA 40 (KLR)

Court of Appeal of Kenya
28 November 2012
AVAlnashir VisramDavid Kenani MaragaD. K. Maraga
3,077 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
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The bottom line

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Kenya's Court of Appeal confirmed that a bank selling charged land must cover land rent and rates accrued before the auction, not the purchaser.

What this practically means

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Executive summary

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This appeal concerned a single issue: who, between the purchaser and the seller selling under a statutory power of sale, is liable for land rent and rates accrued up to the time of sale. The respondent, Mayfair Holdings Limited, was the highest bidder at a public auction on 19th August 1996 of property charged to the appellant, Savings and Loan Kenya Limited, following the chargor's default. The respondent paid the auction deposit, then paid Kshs.1,286,049.05 in accrued land rent and rates under protest (on a without prejudice basis) to complete the transaction, and later sued successfully in the High Court for a refund. Wambiliyangah, J entered judgment for that amount with interest and costs on 10th May 2000. The Court of Appeal dismissed the appeal. Construing Clause 13 of the Conditions of Sale literally, the court held that the parties intended the seller to bear pre-auction outgoings, subject to apportionment at the auction date, and that the purchaser could deduct amounts paid for the pre-auction period from the balance of the purchase price. The court rejected the appellant's contention that a chargee selling under statutory power is not a vendor, holding that it assumed the vendor's role under sections 77(1) and (3) of the Registered Land Act. The equity of redemption was held extinguished at the fall of the hammer, when interest passed to the purchaser. The award of interest from the date of the originating summons was held a judicial exercise of discretion under section 26 of the Civil Procedure Act. The High Court judgment was affirmed; the appeal was dismissed with costs to the respondent.

Key legal issues

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01

Construction of Clause 13 of the Conditions of Sale - liability for pre-auction land rent and rates

Holding

The literal interpretation of Clause 13 placed the obligation to pay land rent and rates accrued before the auction on the seller, with apportionment as at the auction date; the purchaser was entitled to deduct the pre-auction outgoings it paid from the balance of the purchase price

Reasoning

The court applied the objective approach to contractual construction from Investors Compensation Scheme, holding that where words are unambiguous the parol evidence rule applies and the ordinary meaning governs. The first limb of Clause 13 obliged the seller to pay outgoings up to the auction; the second limb provided apportionment at the auction date; and the proviso barred purchaser claims for post-auction periods, confirming that only pre-auction outgoings were apportionable.

p. 3
02

Status of a chargee selling under statutory power of sale

Holding

The chargee is a vendor though not in the ordinary sense, empowered by sections 77(1) and (3) of the RLA to sell and transfer despite title vesting in the chargor; the appellant's contention that ordinary vendor obligations do not apply was rejected

Reasoning

The appellant argued it was not a vendor because sale was under a statutory instrument, but tendered no authority for that distinction. The court held that in land transactions generally the purchaser is not obligated to pay outgoings accrued prior to the sale since interest passes only after the sale, and the chargee's statutory role makes it a vendor. The court also noted the chargee had implied and express rights under the charge to recover outgoings from sale proceeds, making the appellant's interpretation unreasonable.

p. 4
03

Time of extinguishment of the equity of redemption and passing of interest at auction

Holding

The equitable and beneficial interest passed to the respondent on 19th August 1996 when it was declared purchaser at the auction; the respondent was only obligated for outgoings after that date

Reasoning

Section 72(1) of the RLA provides that the chargor's right of redemption is extinguished when the property is sold in exercise of the statutory power of sale, and property is deemed sold at public auction once a bid is accepted. This accords with common law and equity applicable via section 163 of the RLA, and with Mbuthia v Jimba Credit Finance Corporation, where the equity of redemption was held lost at the fall of the hammer when a binding contract of sale is concluded.

p. 4
04

Discretion to award interest under section 26 of the Civil Procedure Act

Holding

The High Court properly exercised its discretion in awarding interest from the date of the originating summons because the amount claimed had been expended at the date of filing suit

Reasoning

Section 26 of the Civil Procedure Act confers a wide discretion to award interest, which must be exercised judicially. Following Salim & Another v Kikava, interest is generally awarded from judgment date but from date of filing suit where the amount claimed had actually been expended or incurred at filing. An appellate court interferes only where discretion was exercised on a wrong principle, which was not shown here.

p. 5

Legal principles established

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  • A chargee exercising a statutory power of sale under the Registered Land Act assumes the role of a vendor, notwithstanding that title remains vested in the chargor, and a purchaser at auction is not obligated to pay outgoings that accrued prior to the sale
  • Under the Registered Land Act, the chargor's equity of redemption is extinguished and a binding contract of sale is concluded at the fall of the hammer when the highest bidder is declared the purchaser at a public auction
  • A court cannot rewrite a contract between the parties; the intention of the parties is ascertained objectively from the words of the document where those words are clear
  • An appellate court may interfere with a trial court's award of interest under section 26 of the Civil Procedure Act only where the discretion was exercised on a wrong principle of law

Court orders

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  1. 1.Appeal dismissed
  2. 2.Costs of the appeal to the respondent
  3. 3.Judgment of the High Court for Kshs.1,286,049.05 with interest and costs affirmed

Authorities

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Legislation

  • Registered Land ActChapter 300 Laws of Kenya, section 77(1) and (3)
  • Registered Land Actsection 72(1)
  • Registered Land Actsection 163
  • Registered Land Actsection 69(1)(b) and (1)(j)
  • Civil Procedure ActChapter 21 Laws of Kenya, section 26
  • Civil Procedure RulesOrder 36
  • Court of Appeal RulesRule 32(3)

Cases cited (6)

  • Investors Compensation Scheme Ltd. vs West Bromwich Building Society
    (1998) 1 W.L.R at 912
  • Ford vs Beech
    (1848) 11 QB 852 at 866
  • Shore v Wilson
    (1842) 9 CI & Fin 355, 565
  • Mbuthia vs Jimba Credit Finance Corporation & Another
    Civil Appeal No. 111 of 1986
  • National Bank of Kenya Ltd vs Pipeplastic Samkolit (K) Ltd & Another
    (2001) KLR 112
  • Salim & Another vs Kikava
    (1989) KLR 534
On appeal from
High Court of Kenya at Kisumu
H.C.C.C. No. 312 of 1996 (O.S)
Jurisdiction invoked
First appellate jurisdiction under the Court of Appeal Rules (appeal from High Court judgment); judgment written under Rule 32(3) of the Court's Rules

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (25)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "SAVINGS AND LOAN KENYA LIMITED V MAYFAIR HOLDINGS LIMITED [2012] KECA 40 (KLR)", Case Analysis (2012). Civil Appeal 152 of 2006. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2012/40/eng@2012-11-28

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.