City Finance Limited & 2 others v Nyanja Holdings Limited & 3 others (Civil Appeal 224 of 2020 & E166 & E174 of 2021 (Consolidated)) [2026] KECA 106 (KLR)
The bottom line
#Kenya's Court of Appeal confirmed that once a bank completes a statutory sale, a borrower can usually claim damages only—not get the property back—unless fraud against the buyer is strictly proved.
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 learned Judge erred in nullifying the statutory sale and ordering restoration of the property instead of limiting the available remedies to damages or accounts
- 2.Whether alleged irregularities in statutory notice entitled the court to impeach a completed sale
- 3.Whether the learned Judge erred by failing to substantively determine the Bank's counterclaims and reach consequential conclusions thereon
- 4.Whether the learned Judge erred by determining issues not pleaded and by making adverse findings against a non-party, Mr. Gitau, without affording him a hearing
Key legal issues
#Remedies available to a chargor after a completed statutory sale
The learned Judge erred in nullifying the sale and ordering restoration of the property; such relief was unavailable absent proper pleading and strict proof of fraud or collusion involving the purchaser.
Once a valid sale has taken place, the equity of redemption is extinguished and the court's remedial jurisdiction is limited. Mbuthia v Jimba, Palmy Company and Arthi Highway Developers, together with section 69B(2) of the repealed Indian Transfer of Property Act, establish that a completed statutory sale is unimpeachable absent fraud or collusion involving the purchaser. Fraud here was pleaded only as undervalue, speed of registration, private treaty and subsisting orders, and was not strictly proved.
Effect of irregularities in statutory notice on a completed sale
Irregularities in statutory notice, even if proved, do not entitle a court to impeach a completed sale; the remedy lies in damages or accounting against the chargee.
The confirmation by Ochieng, J. on 28th January, 2011 that no injunctive orders subsisted disposed of any argument that the sale was in contempt of court. Trust Bank v Eros Chemists and Gitau v National Bank establish that defective notice may sound in damages but does not invalidate a completed sale to a protected purchaser.
Duty to determine pleaded counterclaims
The High Court erred in dismissing the Bank's counter-claim without a clear and express determination; the counter-claim is remitted to the High Court for determination on its merits.
A counter-claim is a substantive claim which must be determined on its own terms; findings on accounts do not obviate the need for clear consequential conclusions. Since the court found the High Court granted unavailable reliefs and departed from the pleadings, the accounting findings underlying the dismissal cannot be treated as conclusive, and remittal restores procedural coherence and finality on all pleaded claims.
Adverse findings against a non-party advocate
The High Court acted without jurisdiction in making adverse findings against Mr. Gitau, a non-party, without notice, joinder or hearing; the findings are set aside and expunged.
Parties are bound by their pleadings and courts may not determine unpleaded issues. The pleaded fraud particulars did not include advocate partnerships, conflicts of interest or improper influence. Making condemnatory findings against a non-party offends audi alteram partem; a court cannot pronounce on the conduct or professional propriety of a person without affording a hearing. Mr. Gitau's appeal succeeds on this issue alone.
Legal principles established
#- Once a valid statutory sale has taken place, the equity of redemption is extinguished and the chargor's remedy lies in damages; absent fraud or collusion involving the purchaser, a completed sale is unimpeachable and cannot be set aside or the property re-transferred.
- Fraud must be specifically pleaded and strictly proved to a standard higher than a balance of probabilities; suspicion, conjecture, or inference cannot suffice.
- Defects in statutory notice, even if proved, do not revive the equity of redemption or justify cancellation of a completed sale; they may only found a claim in damages against the chargee.
- A counter-claim is a substantive claim which must be determined on its own terms; a court must reach clear and express consequential conclusions on pleaded counterclaims.
- A court may not determine issues not pleaded or litigated, and may not make adverse findings against a non-party who has not been heard; doing so offends the audi alteram partem rule and exceeds jurisdiction.
Court orders
#- 1.The consolidated appeals are allowed
- 2.The judgment and decree of the High Court are set aside, including the declaration that the sale of L.R. No. 7583/1 Karen Estate to Redmars Holdings Limited was illegal, unlawful, null and void; the order cancelling the conveyance dated 21st August, 2007; the order restoring the property to George Njau Mbugua Nyanja; and the permanent injunction restraining Redmars Holdings Limited
- 3.A declaration that the transfer and registration of L.R. No. 7583/1 Karen Estate in favour of Redmars Holdings Limited shall not be impeached, no fraud having been specifically pleaded and strictly proved against the purchaser under section 69B(2) of the repealed Indian Transfer of Property Act
- 4.All adverse findings, observations, and remarks made in the High Court judgment against Mr. James Gitau Singh, Advocate, are expunged in their entirety
- 5.A declaration that the respondents' remedies for alleged irregularities in the exercise of the statutory power of sale lie in damages and/or accounting against City Finance Bank Limited, not in setting aside the transfer to the purchaser
- 6.The dismissal of the Bank's counter-claim in HCCC No. 251 of 2008 is set aside and the counter-claim is remitted to the High Court for determination on its merits, limited to issues of accounts, indebtedness, interest and consequential relief, without disturbing Redmars' title
- 7.No order of injunction shall issue restraining Redmars Holdings Limited from possession, occupation, or dealings with the property pending determination of the remitted issues
- 8.Costs of the suits in the High Court shall abide the outcome of the remitted proceedings
- 9.Costs of the appeals are awarded to the appellants, jointly and severally, against the respondents
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya (Commercial & Tax Division)
- HCCC No. 1965 of 1991 (consolidated with HCCC No. 251 of 2008)
- Jurisdiction invoked
- First appellate jurisdiction under the Court of Appeal Act and the Civil Procedure Act (appeals against the judgment of the High Court as a court of first instance); the judgment does not state the precise provision.
- Consolidated with
- Civil Appeal No. E166 of 2021, Civil Appeal No. E174 of 2021
Relief refused
#Restorative reliefs sought by the respondents (setting aside the sale and re-transfer of the property)
Absent fraud or collusion specifically pleaded and strictly proved against the purchaser, a completed statutory sale is unimpeachable; the chargor's remedy is in damages
Respondents' argument that defective statutory notice invalidated the sale
Defects in statutory notice may found a claim in damages but do not revive the equity of redemption or justify cancellation of a completed sale
Costs
Costs of the suits in the High Court shall abide the outcome of the remitted proceedings; costs of the appeals are awarded to the appellants, jointly and severally, against the respondents.
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.
Read together, the authorities and the statute establish a clear rule: absent fraud or collusion to which the purchaser is a party, a completed sale in exercise of the statutory power of sale is unimpeachable, and the court cannot grant orders cancelling the sale or directing re-transfer of the property.
Once a sale of charged property has taken place in exercise of a statutory power of sale, the equity of redemption is extinguished. The court cannot set aside the sale; the remedy of the chargor lies in damages.
Failure to serve a valid statutory notice may give rise to a claim for damages but does not, of itself, invalidate a sale that has already taken place.
The parties are bound by their pleadings and any evidence adduced outside the pleadings cannot be considered. A court of law should not make determinations on issues not pleaded.
Mr. Gitau was condemned without notice, without joinder, and without a hearing. To that extent, the learned Judge acted without jurisdiction.
It is hereby declared that the transfer and registration of L.R. No. 7583/1 Karen Estate, Nairobi, in favour of Redmars Holdings Limited shall not be impeached, no fraud having been specifically pleaded and strictly proved against the purchaser within the meaning of section 69B(2) of the repealed Indian Transfer of Property Act.
All adverse findings, observations, and remarks made in the judgment of the High Court against Mr. James Gitau Singh, Advocate, are hereby expunged in their entirety, the said advocate not having been a party to the suit and not having been afforded an opportunity to be heard.
The dismissal of the Bank's counter-claim in HCCC No. 251 of 2008 is hereby set aside, and the said counter-claim is remitted to the High Court for determination on its merits, limited strictly to issues of accounts, indebtedness, interest, and any consequential relief, but without disturbing the title of Redmars Holdings Limited to L.R. No. 7583/1 Karen Estate, Nairobi.
Costs of the appeals are awarded to the appellants, jointly and severally, against the respondents.
Issues in the judgment
#The judgment states the High Court judgment was delivered on 30th July, 2020, but the operative orders set aside a 'judgment and decree of the High Court dated 5th May, 2020 (Kasango, J.)', an internal inconsistency in the date of the impugned judgment.
The final orders contain two consecutive subparagraphs both lettered 'f'.
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (3)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Nickson v Collins & 3 others (Environment and Land Case E001 of 2024) [2026] KEELC 2169 (KLR)[2026] KEELC 2169 (KLR)15 Apr 2026
- KS v Republic (Criminal Appeal E009 of 2021) [2026] KECA 590 (KLR)[2026] KECA 590 (KLR)13 Mar 2026applied
- Kombo v Republic (Criminal Appeal E013 of 2020) [2025] KECA 705 (KLR)[2025] KECA 705 (KLR)25 Apr 2025followed
Cite this brief
#Cite this brief
Caselaw, "City Finance Limited & 2 others v Nyanja Holdings Limited & 3 others (Civil Appeal 224 of 2020 & E166 & E174 of 2021 (Consolidated)) [2026] KECA 106 (KLR)", Case Analysis (2026). Civil Appeal No. 224 of 2020 (consolidated with Civil Appeal No. E166 of 2021 and Civil Appeal No. E174 of 2021). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2026/106/eng@2026-01-30
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.