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ELCAllowedCivil Appeal No. 1 of 2014· [2016] KEELC 1017 (KLR)

Housing Finance Company of Kenya Limited v John Mwashigadi Mwakisha [2016] KEELC 1017 (KLR)

Environment and Land Court
13 April 2016
AOA. Omollo
2,280 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan court ruled that mortgage disputes belong in magistrates' courts, but a bank cannot auction your property until it serves a valid statutory notice.

What this practically means

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Executive summary

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This is an appeal to the Environment and Land Court at Mombasa against an interlocutory ruling of Hon. Gandani, SPM in Mombasa CMCC No. 34 of 2014, by which the magistrate restrained Housing Finance Company of Kenya from auctioning the respondent's property, subdivision 2874 Section VI Mainland North, pending the hearing of the suit, having found the statutory notice dated 19th September 2013 invalid under section 90 of the Land Act. The appellant contended, among other grounds, that the subordinate court lacked jurisdiction under the repealed Registration of Titles Act and that the injunction was too broad. The court framed two issues: jurisdiction and the propriety of the injunction. On jurisdiction, it held that a dispute over the exercise of a statutory power of sale where land is charged is a commercial transaction, not one exclusively reserved for the Environment and Land Court; the Registration of Titles Act ouster was inapplicable as the suit was filed after its repeal, and under Rule 7 of the Chief Justice's Practice Directions magistrates' courts with pecuniary jurisdiction may hear land disputes. On the injunction, the court found merit in the appeal, holding that an injunction founded on an invalid statutory notice should last only until a valid, compliant notice is served, following the National Bank of Kenya v Shimmers Plaza approach. The court varied the magistrate's order by substituting an injunction conditional upon service of valid statutory notices under sections 90 and 96 of the Land Act, ordered each party to bear its own costs of the appeal, and directed the return of the subordinate court file. The appeal otherwise succeeded on the scope of the injunction.

Key legal issues

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01

Jurisdiction of the subordinate court over a dispute concerning a statutory power of sale over charged land

Holding

The magistrate's court had jurisdiction; the dispute is a commercial one, not exclusively within the Environment and Land Court, and the applicable law is the Land Act, Land Registration Act, Magistrates' Courts Act and the Chief Justice's Practice Directions.

Reasoning

The court held the boundary between land disputes and commercial transactions is thin, but where land is charged it becomes a commercial commodity. The Registration of Titles Act ouster was inapplicable since the suit was filed after its repeal. Rule 7 of the Practice Directions permits magistrates' courts with pecuniary jurisdiction to hear land cases, consistent with Lenaola J's finding in the Gatura petition that the ELC is not exclusive.

p. 3
02

Whether the interlocutory injunction restraining sale by public auction was properly granted until hearing and determination of the suit

Holding

The appeal had merit; the injunction should only endure until a valid statutory notice compliant with sections 90 and 96 of the Land Act is served, not until determination of the suit.

Reasoning

The dispute centred on the validity of the statutory notice. The magistrate found the notice invalid under section 90 of the Land Act and granted an injunction until full hearing. Following the NBK v Shimmers Plaza approach, once a valid notice is issued the chargee may exercise its statutory power of sale, so the restraint should be limited in duration rather than extending to determination of the suit.

p. 4

Legal principles established

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  • Disputes over charges and mortgages where title to land is used as security are commercial transactions not exclusively reserved to the Environment and Land Court.
  • An injunction restraining sale premised on an invalid statutory notice should only last until a valid, compliant statutory notice is served, not until the suit is determined.

Court orders

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  1. 1.An injunction restraining the defendant from selling or disposing by public auction or otherwise property known as subdivision 2874 Section VI MN and all improvements thereon, subject to valid statutory notice in compliance with sections 90 and 96 of the Land Act being served upon the plaintiff
  2. 2.Each party to meet their own costs of the appeal
  3. 3.The subordinate court file to be returned to the lower court civil registry for parties to deal with the suit as appropriate

Authorities

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Legislation

  • Registration of Titles Actsection 2
  • Land Actsection 90 (including 90(2)(d)) and section 96 (including 96(2))
  • Land Registration Act
  • Magistrates' Courts Act
  • Environment and Land Court Act
  • Constitution of Kenya, 2010Article 162(2)(b)
  • Practice Directions of the Chief JusticeRule 7

Cases cited (8)

  • Joel Ndirangu Njaramba v James Mwangi Kamaru
    [2014] eKLR
  • Kibwana Ali Karisa & Another v Said Hamisi Mohamed & 3 Others
    [2015] eKLR
  • National Bank of Kenya Limited v Shimmers Plaza Limited
    [2009] eKLR
  • United Insurance Co. Ltd v East Africa Underwriters Kenya Ltd
    [1985] EA 898
  • Mbogo v Shah
    [1968] EA 93
  • Joseph Karioba Gicheru v Michael Gachoki Gicheru
    (2013) eKLR
  • Edward M. Gatura & Another v The Attorney General & 2 Others
    Petition No. 72 of 2013
  • Fredrick A. Makumbi v KCB
    HCC 31 of 2013
On appeal from
Chief Magistrate's Court, Mombasa
Mombasa CMCC No. 34 of 2014
Jurisdiction invoked
Appellate jurisdiction of the Environment and Land Court over appeals from subordinate courts; article 162(2) of the Constitution and the Magistrates' Courts jurisdiction discussed

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Housing Finance Company of Kenya Limited v John Mwashigadi Mwakisha [2016] KEELC 1017 (KLR)", Case Analysis (2016). Civil Appeal No. 1 of 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2016/1017/eng@2016-04-13

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