Edward Charles Nginyo v Hans Jurgen Zahlten & 4 others [2015] KECA 276 (KLR)
The bottom line
#Kenya's Court of Appeal confirmed that private individuals can legally hold charges over land, and irregular property auctions may only lead to damages, not cancellation.
What this practically means
#Executive summary
#Key legal issues
#Whether a private individual can lawfully create and register a charge over land
Yes. Under section 65 of the Registered Land Act (repealed), any proprietor may charge land to secure a debt, and a chargee is defined in section 3 simply as a proprietor of a charge, not restricted to banks or financial institutions. The Banking Act only prohibits carrying on banking business with the public, which the 1st respondent was not doing.
The court examined sections 3 and 65 of the Registered Land Act (repealed) and section 3 of the Banking Act. It held that the definitions of “chargee” and “proprietor” embrace natural or juristic persons generally. The 1st respondent was a friend lending money on a single occasion, not transacting banking or mortgage business with the public, so the charge was legal and registered as an encumbrance.
Whether contradictions in the date of the auction vitiated the sale
No. Any irregularity in the exercise of the statutory power of sale does not invalidate the sale; the remedy is in damages under section 77(3). Further, the sale's validity was never challenged in the plaint, and clause 8.5 of the charge permitted sale even by private treaty.
The certificate of sale dated 20th December 2010 showed the sale on 5th November 2010 while the advertisement scheduled it for 26th August 2010. The court accepted this was an irregularity that under section 77 would not affect the sale. It placed the burden on the appellant to prove no public sale occurred, noted the sale was never challenged by averment, and observed the charge permitted private treaty sale.
Whether want of Land Control Board consent rendered the transaction unlawful
The issue could not be determined on appeal because it was raised for the first time in the memorandum of appeal without any determination by the trial court.
Counsel for the respondents objected that the Land Control Board consent question was never before the trial court. The Court agreed that a new issue unsupported by findings of fact at first instance cannot be entertained on appeal, and therefore rejected this ground without expressing any view on its merits.
Whether the appellant, having benefited from the loan, could challenge the legality of the transaction
No. A litigant cannot invoke the court's aid while relying on, or admitting benefit from, an act he alleges to be illegal; ex turpi causa non oritur actio.
Drawing on Lord Mansfield's dictum in Holman v Johnson, as approved in Standard Chartered Bank v Intercom Services Ltd, the court held that the appellant who accepted the loan and its terms and benefited from it could not question its legality. The relationship was purely contractual, and the dispute reduced to the interpretation and enforcement of the loan agreement and charge.
Legal principles established
#- On a first appeal, the Court of Appeal treats the appeal as a retrial, reconsidering the evidence afresh and drawing its own conclusions, but will not disturb findings of fact that took into account material facts and no irrelevant ones.
- Under the Registered Land Act (repealed), a chargee is not restricted to a bank or financial institution; any proprietor may create and hold a charge over land.
- An irregularity in the exercise of the statutory power of sale does not vitiate the sale; the chargor's remedy lies in damages.
- A party who accepts and benefits from a loan transaction cannot be heard to challenge its legality on grounds of illegality.
- A point, such as want of Land Control Board consent, not raised and determined at trial cannot be entertained for the first time on appeal.
- The burden was on the appellant to prove that no public auction took place at all or that the sale was by private treaty.
Court orders
#- 1.Appeal dismissed
- 2.Appellant to pay costs of the appeal
- On appeal from
- High Court of Kenya at Malindi
- ELC No. 61 of 2011
- Jurisdiction invoked
- First appellate jurisdiction over the High Court (appeal against judgment and decree of the High Court at Malindi in ELC No. 61 of 2011)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Edward Charles Nginyo v Hans Jurgen Zahlten & 4 others [2015] KECA 276 (KLR)", Case Analysis (2015). Civil Appeal No. 34 of 2015. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2015/276/eng@2015-10-30
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.