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Court of AppealDismissedCivil Appeal No. 254 of 2016· [2018] KECA 379 (KLR)

Keziah Njambi Maingi t/a Arrivals Textile Shop v Barclays Bank of Kenya Limited [2018] KECA 379 (KLR)

Court of Appeal of Kenya
27 July 2018
EGE. M. GithinjiHOH. M. OkwenguJMJ. Mohammed
4,503 words in judgment
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The bottom line

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The Court of Appeal ruled that borrowers, not the bank, must keep mortgage insurance alive, so a Kenyan widow could not stop her home being sold over a lapsed policy.

What this practically means

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Executive summary

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The Court of Appeal at Nairobi (Githinji, Okwengu and J. Mohammed, JJ.A.) dismissed this first appeal against the High Court's dismissal of the appellant's suit for a permanent injunction restraining Barclays Bank from recalling a Kshs. 16 million loan advanced to the appellant and her late husband, secured by a charge over property at Tigoni, and from realizing the security. The appellant contended that the bank was contractually obliged to effect and pay premiums for mortgage protection life insurance, and that had such cover been in place at her husband's death in September 2012, the insurer would have discharged the loan. The Court affirmed the trial court's findings that the chargors themselves instructed the bank to cancel an existing Pan Africa policy and to reverse premium debits in favour of a Kenya Alliance policy whose premiums they agreed to pay directly but never paid; that under the letter of offer read with the charge it was the chargors' responsibility to ensure a policy was in place, the bank's role in paying premiums being merely auxiliary; and that the bank was entitled to waive a condition it had itself imposed. The Court held that the High Court properly distinguished Mary Wambui Muturi and Anne N. Parmena, both of which turned on contractual terms placing the insurance obligation on the chargee or on the chargee's representations. It further declined to determine whether the absence of insurance vitiates the statutory power of sale, the point not having been articulated at trial or affirmed by notice. Equitable relief was refused because equity follows the law and an injunction would unjustly enrich the appellant, who paid only one instalment. The appeal was dismissed with costs to the respondent.

Key legal issues

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01

Whose obligation was it to ensure a mortgage protection cover was in place

Holding

It was the chargors' obligation; the bank's role in paying premiums was auxiliary and dependent on a policy being issued

Reasoning

The letter of offer read with clause 6(d) and (e) of the charge required the chargors to insure and deposit policies with the bank. The chargors themselves varied the arrangement by instructing the bank to cancel the Pan Africa cover and to pay Kenya Alliance premiums directly, then failed to pay those premiums.

p. 4
02

Whether the chargors instructed cancellation of the Pan Africa policy

Holding

Yes; the trial court's acceptance of the bank's evidence, corroborated by an email of 16th August 2012, was a finding of fact not disturbed on appeal

Reasoning

The evidence of the bank's senior officers, supported by the internal email of 16th August 2012 recording that the client agreed to pay Kenya Alliance directly and requested reversal of deductions, was credible. The appellant's trial position was inconsistent with her appellate submission that the bank could not cancel the policy.

p. 4
03

Whether the Muturi and Parmena precedents were wrongly distinguished

Holding

No; those decisions turned on their peculiar facts, namely contractual terms placing the insurance obligation on the chargee and representations giving rise to estoppel

Reasoning

In both cases the lending contract placed responsibility for the mortgage protection cover on the chargee, or the chargee had represented that a cover was in place. Here the letter of offer and charge placed the responsibility on the chargors, so the cases were properly distinguished.

p. 4
04

Whether the chargee's statutory power of sale is vitiated by absence of insurance

Holding

The court declined to decide this issue as it was not articulated at trial, no finding was made on it, and the respondent did not file a notice affirming the decision on that ground

Reasoning

The point appeared only in paragraph 13 of the defence and was not the basis of the High Court decision, so it could not be entertained on appeal.

p. 5
05

Availability of a permanent injunction

Holding

Refused; the appellant was in default having paid only one instalment, and equity would not grant a remedy causing unjust enrichment

Reasoning

A charge is governed by the statutory regime in Part VII of the Land Act and Part V of the Land Registration Act; on default and due notice, the chargee may exercise its power of sale. An equitable injunction contrary to law and productive of unjust enrichment could not issue.

p. 5

Legal principles established

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  • Where the letter of offer read with the charge instrument places responsibility for effecting mortgage protection insurance on the chargors, the chargee is not in breach for failure to pay premiums where no valid policy was issued
  • Oral evidence of a distinct oral agreement to rescind or modify contractual terms relating to mortgage protection cover is admissible under proviso (iv) to Section 98 of the Evidence Act
  • A condition imposed by a bank at its own option may be waived by it; mortgage protection insurance is not a statutory requirement of a lending contract
  • A permanent injunction cannot be granted to restrain a chargee from exercising statutory powers where the chargor is in default, as equity follows the law

Court orders

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  1. 1.Dismissal of the appeal
  2. 2.Costs of the appeal awarded to the respondent

Authorities

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Legislation

  • Evidence ActSection 98, proviso (iv)
  • Land ActSection 2 (definition of charge)
  • Land ActPart VII
  • Land ActSections 90, 96(1), 49
  • Land Registration ActSection 91(4)(b); Part V

Cases cited (2)

  • Mary Wambui Muturi vs. Housing Finance Company Limited (2012) eKLR
    (2012) eKLR
  • Anne N. Parmena v Housing Finance Company of Kenya Limited
    Court of Appeal Nairobi Civil Appeal No. 239 of 2007
On appeal from
High Court of Kenya at Nairobi
H.C.C.C No. 773 of 2012
Jurisdiction invoked
First appeal to the Court of Appeal under the Court of Appeal's appellate jurisdiction (the judgment does not cite a specific provision)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (3)

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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, "Keziah Njambi Maingi t/a Arrivals Textile Shop v Barclays Bank of Kenya Limited [2018] KECA 379 (KLR)", Case Analysis (2018). Civil Appeal No. 254 of 2016. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2018/379/eng@2018-07-27

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