James Kipruto Lagat & another v Consolidated Bank Limited [2016] KEELC 1007 (KLR)
The bottom line
#A Kenyan court stopped a bank from selling charged land because statutory notices were sent to the wrong address.
What this practically means
#Executive summary
#Key legal issues
#Prima facie case with probability of success
A prima facie case was established on the procedural defects in service of statutory notices
It was not disputed the plaintiffs guaranteed the loan and charged their land. However, recovery must commence with a section 90 notice. The court could not find the section 90 notice among the documents, and the redemption notice and notification of sale were sent to the wrong postal address. These procedural irregularities under sections 90 and 96 of the Land Act gave the plaintiffs a prima facie case with a probability of success.
Proof of service of statutory notice under section 90 of the Land Act
The onus of proving service of the section 90 notice lies on the chargee; on the documents, the notice did not appear, though the certificate of postage later attached was accepted as proof the statutory notice was sent to the proper address
The court reviewed section 90(1) and (2) of the Land Act which require written notice informing the chargor of the default, amount, time to rectify and consequences. The court could not see the notice in the documents and held the defendant bore the onus of proving service. It then examined the statutory notice dated 25.9.2014, found it addressed to the chargor's address in the charge document, and treated the certificate of postage dated 1.10.2014 as proof of dispatch to the proper address.
Service of redemption notice and notification of sale under section 96
Both the redemption notice and the notification of sale were sent to the wrong postal address
Section 96(2) requires service of a notice to sell at least forty days before completing a sale contract. On strict scrutiny, the redemption notice was sent to 2133-30100, Eldoret instead of 827-30100, Eldoret, and the notification of sale was likewise misaddressed. Service to wrong addresses did not meet the statutory requirement and undermined the propriety of the intended sale.
Alleged breach of section 44 of the Banking Act on interest
No breach of section 44 of the Banking Act was demonstrated
The plaintiffs contended that the interest rates in clause 3 of the letter of offer contravened section 44 of the Banking Act, which caps recovery on a non-performing loan at the principal owing when the loan became non-performing plus contractual interest and recovery expenses. The court, having set out the subsection, found nothing demonstrating how the defendant breached the provision and rejected that ground.
Balance of convenience
The balance of convenience favoured granting the temporary injunction because of the defendant's procedural irregularity
Although irreparable loss was not demonstrated, the court weighed the balance of convenience. The defendant's failure to adhere to section 90 and its misdirection of the redemption notice and notification of sale constituted procedural irregularity in the exercise of the statutory power of sale. On that basis the balance tilted in favour of preserving the status quo pending trial.
Legal principles established
#- The burden is on the chargee to prove that statutory notice under section 90 of the Land Act was given; failure of proof means the notice is deemed not given
- Recovery of charged property begins with compliance by the chargee with section 90 of the Land Act, 2012
- Service of statutory notices to a wrong address raises doubt as to due process in exercise of the statutory power of sale
Court orders
#- 1.A temporary injunction is granted as prayed, restraining the defendant, its servants or agents from selling or otherwise disposing of land parcel Baringo/Sabatia/103/155 until the final determination of the suit
- Jurisdiction invoked
- Inherent jurisdiction of the High Court to grant interlocutory injunctions in a suit over charged land (application under the Civil Procedure Rules; sections 90 and 96 of the Land Act, 2012 in issue)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "James Kipruto Lagat & another v Consolidated Bank Limited [2016] KEELC 1007 (KLR)", Case Analysis (2016). Not stated in judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2016/1007/eng@2016-04-15
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.