Kenya Hotels Ltd v Oriental Commercial Bank Ltd (Formerly known as the Delphis Bank Limited) (Civil Appeal 252 of 2009) (25 October 2019) (Judgment) (with dissent - SG Kairu, JA) [2019] KECA 250 (KLR)
The bottom line
#Kenya's Court of Appeal confirmed that a hotel's deposit of certified title copies created a valid mortgage, but ordered interest recalculated under the Banking Act's in duplum cap.
What this practically means
#Executive summary
#Key legal issues
#Suitability of originating summons procedure for contentious mortgage enforcement
The originating summons was a proper procedure; complexity does not invalidate it because Order XXXVI Rules 9 and 10 allow conversion to a plaint and directions for further evidence.
Order XXXVI Rule 3A makes an originating summons the medium for enforcing sale, foreclosure or redemption of a mortgage. Rule 10 permits the court to order continuation as if begun by plaint, and Rule 9 permits directions for further evidence where facts are disputed. Here directions were taken by consensus and the matter was disposed of on affidavit evidence and written submissions, so no prejudice was suffered and the objection was rejected.
Requirement of judge's signature on originating summons
Order IV Rule 3(2) of the repealed Civil Procedure Rules does not apply to originating summons; the plaintiff or advocate signs under the Order XXXVI form, and no prejudice was suffered.
Following Harith Sheth, the old Order XXXVI contains the entire procedure for suits by originating summons, under which the plaintiff or advocate, not a judge, signs. The originating summons is itself a summons to enter appearance. The appellant entered appearance, responded and participated fully, so even absent an Order IV rule 3(2) summons it suffered no prejudice.
Validity of an equitable mortgage created by deposit of certified copies of title
A valid equitable mortgage was created. Section 2 of the Equitable Mortgages Act requires delivery of 'a document or documents of title' with intent to create security; certified copies, with a plausible explanation for the loss of the originals, suffice.
The deposit of a document of title coupled with the intention to secure constitutes the security. The memorandum of equitable mortgage was executed, registered and a certificate issued. Statutes governing registration (Government Lands Act, Land Titles Act, Registration of Titles Act) recognise certified copies, and the Evidence Act permits secondary evidence where the original is lost. The appellant itself explained the originals were missing and acknowledged the debt and offered repayment.
Whether the loan was advanced to the appellant or to Block Hotels Limited, and alleged insider lending under section 11 of the Banking Act
The bridging facility of Kshs. 60,000,000 was advanced to the appellant on its application, board resolution and acknowledged receipt; onward transfer to Block Hotels Limited at the instance of the appellant's chairman did not defeat the indebtedness.
The application was on the appellant's letterhead, its directors resolved to deposit the titles as security, funds were disbursed to the appellant's account, and the memorandum acknowledged receipt. Ketan Somaia's affidavits and repayment offers contradicted any claim of no consideration. No proof of insider lending or document manipulation was adduced; Block Hotels Limited was a third party.
Retrospective application of section 44A of the Banking Act (in duplum rule)
Section 44A applies retrospectively to loans made, and to loans already non-performing, before 1st May 2007, per section 44A(6); the parties must compute interest strictly in accordance with that subsection.
Section 44A(6) expressly provides that the section applies to loans made before it came into operation, including non-performing loans, capping recoverable interest at principal plus interest owing on the commencement date, contractual interest thereafter not exceeding that cap, and recovery expenses. The ground was argued implicitly in the memorandum of appeal and had been canvassed in submissions below, so the Court entertained it despite the Judge's silence on it.
Raising new grounds and figures on appeal
The Land Control Act consent ground, raised for the first time in submissions after amendment applications had been refused, was rejected; both parties' interest computations were 'plucked from the air' and remitted for reconciliation.
Rule 104 of the Court of Appeal Rules confines argument to grounds specified or implicit in the memorandum of appeal, or argued with leave. Submissions must be founded on issues before the court. Neither party's in duplum computations were verifiable from the record, so rather than calculate afresh, the Court directed reconciliation in accordance with section 44A(6).
Legal principles established
#- An originating summons under Order XXXVI (now Order 37) is the proper medium for enforcement of sale, redemption or foreclosure of a mortgage, and complexity of the dispute does not defeat the procedure because the court may convert the proceedings to a plaint or direct further evidence.
- A valid equitable mortgage may be created by deposit of certified copies of title documents where the originals are lost, provided the deposit is accompanied by the requisite intention and a written memorandum.
- Section 44A of the Banking Act (the in duplum rule) applies retrospectively to loans made, and loans already non-performing, before the section came into operation on 1st May 2007, capping recoverable interest at the principal and interest owing on that date plus contractual interest thereafter not exceeding that amount, plus recovery expenses.
- A party may not raise or argue grounds on appeal that were not canvassed before the trial court; submissions must be founded on the issues before the court.
- Where figures and interest computations are unclear or contradicted, the appellate court will remit the task of reconciling accounts to the parties rather than calculating the figures itself.
Court orders
#- 1.Appeal dismissed save for the question of interest
- 2.Parties to compute interest due on the sum advanced strictly in accordance with section 44A(6) of the Banking Act: (a) principal and interest owing on 1st May 2007; (b) interest accruing after 1st May 2007 in accordance with the contract, not exceeding the principal and interest owing on that date; and (c) expenses incurred in recovery
- 3.Costs of the appeal awarded to the respondent
- On appeal from
- High Court of Kenya
- Originating Summons (Order XXXVI Rules 3A and 7, repealed Civil Procedure Rules)
- Jurisdiction invoked
- First appeal to the Court of Appeal under the Court of Appeal Rules (Appellate jurisdiction over the High Court); Rule 104 of the Court of Appeal Rules engaged on new grounds
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (1)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Asila v SO Owino & Associates Advocates (Land Originating Summons E050 of 2025) [2026] KEELC 4756 (KLR)[2026] KEELC 4756 (KLR)24 Jul 2026
Cite this brief
#Cite this brief
Caselaw, "Kenya Hotels Ltd v Oriental Commercial Bank Ltd (Formerly known as the Delphis Bank Limited) (Civil Appeal 252 of 2009) (25 October 2019) (Judgment) (with dissent - SG Kairu, JA) [2019] KECA 250 (KLR)", Case Analysis (2019). Civil Appeal (Court of Appeal, Nairobi). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2019/250/eng@2019-10-25
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.