Housing Finance Company of Kenya v J. N. Wafubwa [2014] KECA 695 (KLR)
The bottom line
#Kenya's Court of Appeal threw out a Kshs. 4.5 million award granted without proper pleadings, but confirmed a bank holding a mortgage surplus must hand it over regardless of time limits.
What this practically means
#Executive summary
#Key legal issues
#Res judicata
The respondent's suit was not res judicata; post-judgment developments (the aborted 1996 sale and the 2009 private treaty sale and eviction) constituted special circumstances
The doctrine bars re-litigation of matters directly and substantially in issue in a former suit between the same parties. The originating summons in Misc. Cause No. 660 of 1997 (OS) concerned redemption and re-conveyance, decided in 2003. Circumstances material to the 2011 suit, including the aborted transaction and the 2009 sale and eviction, did not exist when the earlier suit was decided, attracting the 'special case' exception in Henderson v Henderson.
Limitation under section 19 of the Limitation of Actions Act
The claim was not statute barred; section 20(1) excludes trust claims for trust property or proceeds in the trustee's possession, and a chargee holding a surplus is a trustee of it
Although section 19 bars claims for proceeds of sale after 12 years, section 20(1) carves out actions by a beneficiary to recover trust property or proceeds converted by the trustee. Relying on Halsbury's Laws of England, a mortgagee retaining a surplus of sale proceeds becomes trustee of it for the mortgagor, and limitation cannot be set up as a bar. The trial judge's failure to decide the issue, which both parties had canvassed in submissions, was an error.
Award of Kshs. 4,500,000.00 as value of the property under an omnibus prayer
The award could not stand: the relief was not sought in any pleading, no evidence was led and no submissions made on it; the cross appeal succeeded to that extent
The trial judge used the omnibus prayer to award a remedy neither party sought or addressed. Relying on Blay v Pollard and Morris, Galaxy Paints and related authorities, cases must be decided on issues arising from the pleadings; parties must have notice of the issues. The judge himself doubted the valuation. A plaintiff is generally not entitled to relief not specified in the claim.
Residue of the balance of the purchase price (Kshs. 3,375,000.00)
The claim failed because the auction sale aborted; the appellant could not account for money it never received
The purchaser at the 1996 auction paid only the 25% deposit and failed to complete. Following Wright v New Zealand Farmers Co-op Association, a mortgagee who rescinds an abortive contract is not accountable for a price it never received. Section 69(C) of the ITPA does not apply to an aborted sale. The respondent himself acknowledged the purchaser did not complete payment.
The surplus of Kshs. 20,662.80 and interest
The award of the surplus and interest was upheld as correct, though not on the basis of section 69(C) ITPA
Though section 69(C) ITPA was inapplicable to an aborted sale, the mortgage account had been credited with the forfeited Kshs. 1,125,000.00 deposit, leaving a credit balance of Kshs. 20,662.80. The chargee was later to debit the amount away under unclear circumstances. Once it was clear the forfeited deposit was unclaimed by the initial purchaser, the chargee ought to have applied it to the mortgage account; crediting it to profit and loss was unconscionable.
Damages for wrongful eviction
The appellant was not liable; the eviction was at the behest of the second purchaser, to whom the appellant was not privy
Evidence showed the eviction flowed from possession orders obtained by the second purchaser in the magistrate's court, in proceedings to which the appellant was not a party. The trial judge was therefore right to dismiss the claim for general damages and mesne profits for eviction.
Legal principles established
#- A trial court may not grant relief that was not pleaded, on which no evidence was led and on which no submissions were made, merely by invoking an omnibus prayer
- The defence of limitation must be pleaded before a court can entertain it, but where both parties canvass the issue in submissions and leave it to the court, the court may pronounce judgment on the unpleaded issue
- Where a mortgagee retains or converts a surplus of sale proceeds, the limitation periods in the Limitation of Actions Act cannot be raised as a bar to the mortgagor's claim, the mortgagee being a trustee of the surplus
- Section 69(C) of the Indian Transfer of Property Act applies only where a sale has in fact taken place and been concluded, not where a sale has aborted
- A mortgagee is not accountable to the mortgagor for a purchase price under a rescinded abortive contract which the mortgagee never received, and it is unconscionable for a chargee to credit a forfeited deposit to its profit and loss account instead of the mortgage account
Court orders
#- 1.The award by the High Court in favour of the respondent for Kshs. 4,500,000.00 and interest thereon is set aside
- 2.The award by the High Court to the respondent of Kshs. 20,662.80 and interest thereon is upheld
- 3.The appeal and cross appeal otherwise fail
- 4.Each party to bear its own costs both in the High Court and in this Court
- On appeal from
- High Court of Kenya at Milimani Commercial Courts
- Civil Case No. 385 of 2011
- Jurisdiction invoked
- Appellate jurisdiction of the Court of Appeal over the High Court's judgment (Judgment of the Court; appeal arising from the judgment and decree of E. K. O. Ogolla, J)
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (2)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Kenya Agricultural and Livestock Research Organizatton v County Govt of Kisii & 3 others (Environment and Land Case E003 of 2024) [2026] KEELC 3398 (KLR)[2026] KEELC 3398 (KLR)4 Jun 2026
- Housing Finance v Kihiu (Civil Appeal 202 of 2019) [2026] KECA 408 (KLR)[2026] KECA 408 (KLR)27 Feb 2026followed
Cite this brief
#Cite this brief
Caselaw, "Housing Finance Company of Kenya v J. N. Wafubwa [2014] KECA 695 (KLR)", Case Analysis (2014). Civil Appeal No. 102 of 2013. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2014/695/eng@2014-03-28
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.