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ELCAllowedELC Case No. 300 of 2014 (formerly HCCC No. 137 of 2014)· [2016] KEELC 1136 (KLR)

Thalia Katia Maria Castanha v Middle East Bank Kenya Limited [2016] KEELC 1136 (KLR)

Environment and Land Court
19 February 2016
AOA. Omollo
2,864 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~11 min to read original · ~4 min brief

The bottom line

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A Kenyan court ordered Middle East Bank to complete an auction sale of land, ruling that a court injunction excused the buyer's delayed payment.

What this practically means

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Executive summary

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The plaintiff sued the defendant bank seeking completion of a purchase of L.R No. 1581/I/MN bought at a public auction held on 24th February 2006 by Thaara Auctioneers on the defendant's behalf, for Kshs 9 million. She paid the 25% deposit of Kshs 2,250,000 at the auction, but completion was thwarted by an injunction issued in HCCC No. 40 of 2006 restraining the bank and the auctioneer from dealing with the property. After that suit was struck out on 13th June 2014, she paid the balance of Kshs 6,750,000 on 28th July 2014. The bank demanded 18% interest on the balance for the delay, refused to complete, and purported to rescind the agreement. It also denied signing the memorandum of sale, invoking Section 3(3) of the Law of Contract Act, and alleged want of the lessor's consent. The court framed three issues: whether an auction sale occurred; whether the plaintiff was in default justifying interest; and whether the defendant was bound to complete. The court found the auction validly concluded, holding that once the defendant denied the auction it bore the burden of proof and, having called no witness, failed. The court held the delay was not the plaintiff's fault since the injunction bound the defendant, who confirmed it could not transact; no interest was payable. The defendant, having received the full purchase price, was estopped from rescinding. The court granted specific performance, directing execution of a transfer and discharge of charge and surrender of original title within 30 days, with costs to the plaintiff.

Key legal issues

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01

Whether a valid sale by public auction was concluded on 24th February 2006

Holding

An auction took place and was concluded on 24.2.2006 in favour of the plaintiff; the defendant's denial failed for lack of evidence.

Reasoning

The defendant did not deny instructing the auctioneer and produced auction advertisements. It alleged no auction was concluded but adduced no evidence, calling no witness including the auctioneer. The plaintiff produced a bankers' cheque for the 25% deposit acknowledged by the auctioneer and a memorandum of sale signed by the auctioneer and the plaintiff. The issuance of the bankers' cheque was part of the course of the public auction.

p. 3
02

Whether the plaintiff was to blame for the delay in completing the sale and liable for 18% interest

Holding

The plaintiff was not to blame for the default; no interest was payable.

Reasoning

The injunction in HCCC No. 40 of 2006 issued on 17th March 2006 bound the defendant and the auctioneer before the 60-day completion period expired. The plaintiff became aware of the order through the auctioneer and newspaper publication. The defendant itself confirmed it could not transact because of the order and never sought the court's consent to receive payment. Prudence dictated awaiting the ruling; any default shifted to the defendant.

p. 4
03

Whether the defendant was obligated to complete the transaction

Holding

The defendant, having received the full purchase price of Kshs 9 million, was estopped from rescinding and was ordered to complete the transaction.

Reasoning

The balance was paid on 28th July 2014. The defendant's purported cancellation of 17th October 2014 for non-payment of interest was an afterthought since no interest was payable, default not being attributable to the plaintiff. Had the defendant refunded the deposit when demanded, it might have exercised a right of cancellation, but it did not.

p. 5

Legal principles established

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  • Submissions cannot be used to introduce new evidence; evidence from the bar is impermissible.
  • Where a defendant alleges that no auction was concluded, the burden of proof shifts to it to prove that fact, and failure to call the auctioneer as a witness is fatal.
  • A party cannot be penalised with interest for default occasioned by the counterparty's inability to transact due to injunctive orders.
  • A party who has received the entire purchase price cannot rescind the sale agreement.

Court orders

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  1. 1.A declaration that the defendant's action of demanding interest accrued during the period when payment was suspended by the court order is null and void (prayer (a) granted)
  2. 2.Specific performance - the defendant directed to execute a transfer and discharge of charge of L.R 1581/1/MN in favour of the plaintiff and surrender the original title documents to facilitate registration within 30 days of delivery of the judgment (prayers (b) and (c) granted)
  3. 3.Costs of the suit awarded to the plaintiff

Authorities

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Legislation

  • Law of Contract ActSection 3(3)

Cases cited (3)

  • Silver bird vs Junction
    (2013) 2 EA 334
  • Maty vs Abdulla
    (2009) eKLR
  • Wanjao vs Andambi
    (2011) eKLR
Jurisdiction invoked
not stated in the judgment

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, "Thalia Katia Maria Castanha v Middle East Bank Kenya Limited [2016] KEELC 1136 (KLR)", Case Analysis (2016). ELC Case No. 300 of 2014 (formerly HCCC No. 137 of 2014). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2016/1136/eng@2016-02-19

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