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ELCDismissedE&L 335 of 2013 (OS)· [2013] KEELC 92 (KLR)

Harroil Petroleum Holding Ltd v Consolidated Bank Of Kenya & Another [2013] KEELC 92 (KLR)

Environment and Land Court of Kenya at Eldoret
2 August 2013
MSMunyao Sila
2,325 words in judgment
View original judgmentRead on Kenya Law Watch case
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·~9 min to read original · ~4 min brief

The bottom line

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A Kenyan court ruled that companies cannot use the Land Act's 'reopening a charge' relief to stop bank auctions — that protection is only for matrimonial homes.

What this practically means

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Executive summary

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Harroil Petroleum Holding Ltd, a company and registered owner of two parcels known as East Bukusu/South Kanduyi/15146 and 15147, filed an Originating Summons under Order 37 Rules 4, 8 and 14 of the Civil Procedure Rules seeking nullification of the 2nd defendant auctioneer's Notification of Sale dated 25/4/2013 for an auction scheduled for 4/7/2013, and extension of time to enable it to redeem the charged properties by paying arrears of Kshs 800,000/= and continuing monthly installments. The properties had been charged to Consolidated Bank of Kenya on 12/8/2011 to secure Kshs 2,400,000/= and by further charge on 13/8/2012 for Kshs 793,081/=. Default was admitted; the total demanded as at 29 April 2013 was Kshs 3,737,761.37/=. The applicant attributed the default to the resignation of its directors and asserted that the properties were its sole source of income. The bank maintained it was lawfully exercising its statutory power of sale, that the change of directors was an internal matter, and that the court could not renegotiate the terms of the charge. The key issue was whether the court had power under the Land Act to relieve the chargor. Reading section 106 together with section 105, the court held that the statutory power to reopen a charge and grant relief to chargors is confined to charges secured on matrimonial homes, and that sections 106(2) and (3) merely prescribe the mode of exercising that power without expanding it. As the applicant is a corporate commercial entity owning the charged parcels, the properties could not be matrimonial property. The Originating Summons was accordingly dismissed with costs, leaving the applicant to negotiate directly with the bank.

Key legal issues

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Whether the court has power under the Land Act to grant relief to a chargor facing exercise of the chargee's statutory power of sale

Holding

The power to grant relief exists under sections 105 and 106 of the Land Act, but it is confined to charges secured on matrimonial homes; it does not extend to corporate chargors or commercial charges

Reasoning

The court read section 106 together with section 105. Section 105 permits reopening of a charge secured on a matrimonial home in the interests of justice. Sections 106(2) and (3) merely prescribe how the reopening power is exercised and do not create an independent or wider power. Since the applicant is a corporate entity and the charged parcels are company-owned, they cannot be matrimonial property, so the applicant cannot fit within the statutory scheme and relief was unavailable.

p. 4

Legal principles established

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  • The court's power to reopen a charge and grant relief to a chargor under sections 105 and 106 of the Land Act is exercisable only in respect of charges secured on a matrimonial home
  • Sections 106(2) and (3) of the Land Act only prescribe the mode of exercising the power to reopen a charge and do not expand the power granted under section 105
  • A corporate chargor whose properties are company-owned cannot invoke the statutory relief under sections 105 and 106 of the Land Act and must negotiate directly with the chargee

Court orders

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  1. 1.The Originating Summons is dismissed
  2. 2.Costs of the suit awarded to the respondents/defendants

Authorities

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Legislation

  • Civil Procedure Rules, 2010Order 37 Rules 4, 8 and 14
  • Land ActSection 105
  • Land ActSection 106
  • Auctioneers Rules
Jurisdiction invoked
Originating Summons under Order 37 Rules 4, 8 and 14 of the Civil Procedure Rules, 2010; relief sought under sections 105 and 106 of the Land Act

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, "Harroil Petroleum Holding Ltd v Consolidated Bank Of Kenya & Another [2013] KEELC 92 (KLR)", Case Analysis (2013). E&L 335 of 2013 (OS). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2013/92/eng@2013-08-02

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