National Bank of Kenya Limited v Allan George Njogu Residences Ltd [2017] KECA 7 (KLR)
The bottom line
#Kenya's Court of Appeal confirmed banks can lawfully caution land titles when securing debts, and threw out a Kshs 5 million damages award.
What this practically means
#Executive summary
#Key legal issues
#Whether a caution may lawfully be registered by an intending chargee against a title whose proprietor is not the bank's customer
Yes. Under section 131 of the repealed Registered Land Act, a person claiming a right to obtain a defined registrable interest in land, such as a charge, may lodge a caution. The respondent company had willingly handed its title to its director to secure his indebtedness to the appellant.
Section 131 permits any person claiming a right, contractual or otherwise, to obtain a defined interest capable of creation by a registrable instrument to lodge a caution. A charge is such an instrument, so an intending chargee has a cautionable interest. The absence of privity of contract between the bank and the respondent company did not matter, because the company voluntarily made its title available through a board resolution to secure its director's debt. The caution was therefore lawfully registered.
Whether there was reasonable cause for maintaining the caution and retaining the certificate of lease
Yes. Pending the finalization of two related suits concerning the suit property, there existed reasonable cause for lodging and maintaining the caution, and the company could have pursued its director for return of the title.
The trial judge had accepted the caution was not wrongfully lodged and that reasonable cause existed, but faulted the bank for maintaining it after it became clear the charge would not be registered. The Court of Appeal held that the dismissal of the respondent's interlocutory application by Azangalala, J. meant maintenance of the caution had to await full trial, and the respondent had voluntarily surrendered its title to secure the director's debt. Nothing prevented the respondent from pursuing its director to recover its title free of encumbrance.
Whether the award of Kshs. 5 million damages was justified
No. The respondent pleaded no special damages and adduced no evidence of loss; damages for wrongful lodging or maintenance of a caution must be specifically pleaded and proved, and general damages are not recoverable under section 135.
Section 135 requires proof of wrongful lodging or maintenance without reasonable cause and of resulting damage. Having found reasonable cause existed, the Court held no damages were payable at all; alternatively, the burden of proving damage was not discharged. Following William Matheka Wathome v Jackson Munyao, compensation under such provisions relates only to special damages which must be specifically pleaded and proved. The trial judge himself could not identify any basis for the Kshs. 5 million figure.
Legal principles established
#- An intending chargee - a person claiming a right to obtain an interest in land by way of a charge registrable under the (repealed) Registered Land Act - has a recognizable interest capable of supporting registration of a caution under section 131.
- A claim for damages for wrongful lodgment or maintenance of a caution or caveat requires proof of reasonable cause issues and, in respect of compensation, only special damages can be recovered, which must be specifically pleaded and proved.
- To succeed in damages under section 135 of the repealed Registered Land Act, a claimant must prove wrongful lodging/maintenance of the caution, absence of reasonable cause, and that damage was suffered as a result.
Court orders
#- 1.Appeal allowed
- 2.High Court judgment delivered on 16th April 2013 set aside
- 3.Sum of Kshs. 5 million together with interest to be repaid to the appellant in terms of the High Court's ruling dated 28th May 2013
- 4.Appellant to have costs of the appeal
- On appeal from
- Environment and Land Court (High Court) at Eldoret
- ELC No. 384 of 2012
- Jurisdiction invoked
- First appeal to the Court of Appeal under the applicable appellate statute (judgment expressly treated as a first appeal on fact and law)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "National Bank of Kenya Limited v Allan George Njogu Residences Ltd [2017] KECA 7 (KLR)", Case Analysis (2017). Civil Appeal No. 290 of 2013. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2017/7/eng@2017-07-20
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.