Air Travel & Related Studies Ltd v Equity Bank (Kenya) Ltd [2017] KECA 83 (KLR)
The bottom line
#The Court of Appeal allowed Equity Bank to proceed toward auctioning charged property, ruling that merely disputing a loan amount does not block a bank's statutory power of sale.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the intended appeal is arguable
- 2.Whether, if the injunction is not granted, the intended appeal would be rendered nugatory
Key legal issues
#Whether the intended appeal was arguable
The court was not satisfied that the grounds raised were arguable, cautioning against making final determinations on issues subject of the intended appeal.
The court restated the two-limb Rule 5(2)(b) test, citing Reliance Bank vs Norlake and Peter Paul Mburu Ndururi. A single arguable issue suffices and the applicant need not show high chances of success, but must show serious questions of law or a reasonable argument. On the material before it, the court was not persuaded the grounds raised were arguable.
Whether a dispute over the loan amount justifies an injunction against a statutory power of sale
No - disputes over the amount owed or interest do not of themselves warrant restraining a mortgagee or chargee exercising its statutory power of sale.
Relying on Thathy vs Middle East Bank and Halsbury's Laws of England, the court affirmed that a mortgagee will not be restrained from selling merely because the amount due is in dispute or the mortgagor has begun a redemption action. The applicant had defaulted and never denied indebtedness, so the dispute on accounts could not ground the injunction.
Whether the appeal would be rendered nugatory without the injunction
Even if a single arguable point existed, the nugatory limb failed; the court noted uncertainty whether the respondent had actually exercised its statutory power of sale as scheduled.
The applicant had to satisfy both limbs. Although it claimed the properties would be sold at an undervalue and students would suffer irreparable loss, the court observed it was not sure whether the sale scheduled for 30th November 2017 had in fact taken place, undermining the claimed nugatory effect.
Legal principles established
#- An applicant under Rule 5(2)(b) must satisfy both the arguability and nugatory principles; satisfying only one is insufficient.
- A single arguable ground suffices to satisfy the first limb of the Rule 5(2)(b) test.
- A dispute as to the loan amount or interest is not a basis for restraining a chargee from exercising its statutory power of sale.
Court orders
#- 1.The application is dismissed with costs
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- Environment and Land Court
- E.L.C Suit No. 208 of 2017
- Jurisdiction invoked
- Rule 5(2)(b) of the Court of Appeal Rules
Relief refused
#Injunction restraining the respondent from auctioning, selling, charging or otherwise dealing with the suit properties pending the determination of the appeal
The applicant failed to satisfy both limbs of the Rule 5(2)(b) test - the grounds were not shown to be arguable and, even if arguable, a dispute over the loan amount cannot justify restraining a statutory power of sale; the appeal would not be rendered nugatory
Costs
The application is dismissed with costs.
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
In determining an application under the Rule 5(2)(b) we have to satisfy ourselves that the applicant has demonstrated that it has an arguable appeal or an appeal that is not frivolous, and secondly, that if the orders sought are not granted, the intended appeal will be rendered nugatory, if it eventually succeeds.
In light of the foregoing, we decline to exercise our discretion in favour of the applicant. Accordingly, the application is hereby dismissed with costs.
Since it is settled law that a dispute as to the amount owed would not of itself be a ground for injuncting the mortgagee from exercising its statutory power of sale
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Air Travel & Related Studies Ltd v Equity Bank (Kenya) Ltd [2017] KECA 83 (KLR)", Case Analysis (2017). Civil Application No. NAI. 272 of 2017. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2017/83/eng@2017-12-15
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.