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ELCDismissedNot stated in the excerpt (Notice of Motion dated 3rd September 2015)· [2016] KEELC 1251 (KLR)

John Mathara Mwangi v Consolidated Bank of Kenya Limited [2016] KEELC 1251 (KLR)

Environment and Land Court
20 May 2016
MGMary M. Gitumbi
2,279 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Environment and Land Court dismissed a borrower's attempt to stop KCB over an auctioned property, holding that a defaulted loan's remedy is damages, not an injunction.

What this practically means

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Executive summary

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The plaintiff, John Mathara Mwangi, moved the court by Notice of Motion dated 3rd September 2015 seeking injunctive orders restraining the defendant bank from dealing with or transferring L.R No. 4894/148 Garden Estate, Nairobi, following its sale by public auction on 28th August 2015, plus orders for disclosure of the auction purchaser and an independent valuation. He alleged the property, valued at Kshs 55 million, was sold at Kshs 34.5 million, that the bank declined higher private-treaty offers, manipulated the auction timing, and conspired with the purchaser to fix the price, invoking section 97(3) of the Land Act. The application was unopposed, as the defendant's replying affidavit was filed late and expunged. The court applied the Giella v Cassman Brown principles. It held the plaintiff had no prima facie case: he admitted defaulting on a Kshs 15 million loan and did not dispute the sale procedure, and the statutory 90-day period had lapsed, so no existing right had been infringed. On adequacy of damages, the court adopted Litali v Subai, holding that charged land becomes a commodity for sale upon default and any loss is compensable in damages, and cited Khashoggi v Equity Bank (quoting Mrao) that disputed accounts cannot ground injunctive relief. Since damages were adequate, the balance of convenience did not arise (Nguruman). The application was dismissed with costs in the cause.

Key legal issues

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01

Prima facie case

Holding

The plaintiff failed to establish a prima facie case as the property had been lawfully sold at a public auction under the statutory power of sale

Reasoning

The plaintiff defaulted on a Kshs 15 million loan and did not dispute the sale procedure; his only complaint was that the bank did not allow a private treaty sale a day before the auction. Having defaulted and failed to pay into court, he had no existing right infringed.

p. 3
02

Adequacy of damages

Holding

Damages are an adequate remedy even if the sale were found irregular

Reasoning

Relying on Litali v Subai, once land is charged it becomes a commodity for sale upon default and any loss can be compensated by damages. Disputed accounts and interest cannot ground injunctive relief per Khashoggi v Equity Bank citing Mrao.

p. 3
03

Balance of convenience

Holding

Not applicable because damages are adequate

Reasoning

Following Nguruman Ltd v Jan Bonde Nielsen, the balance of convenience only arises where there is doubt as to the adequacy of damages; here the court had no such doubt.

p. 4

Legal principles established

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  • Once land is given as security for a loan, default in repayment entitles the chargee to sell it, and its loss is compensable in damages
  • A mortgagee will not be restrained from exercising its statutory power of sale merely because the amount due is disputed

Court orders

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  1. 1.The application is dismissed
  2. 2.Costs shall be in the cause

Authorities

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Legislation

  • Civil Procedure ActSections 3A, 63(c) and (e)
  • Civil Procedure Rules, 2010Order 40 Rules 1(a) and 4; Order 5 Rules 1 and 3
  • Land ActSections 97(3), 97(3)(b) and 97(5)

Cases cited (5)

  • Giella vs. Cassman Brown
    (1973) EA 258 / (1973) EA 358
  • Mrao Ltd v First American Bank of Kenya Ltd & 2 others
    [2003] KLR 1215
  • Isaac O. Litali v Ambrose W. Subai & 2 Ors
    HCCC No. 2092 of 2000 (unreported)
  • Mohammed Khaled Khashoggi v Equity Bank Limited
    [2013] eKLR
  • Nguruman Ltd versus Jan Bonde Nielsen
    (2014) eKLR
Jurisdiction invoked
Sections 3A and 63(c) and (e) of the Civil Procedure Act; Order 40 Rules 1(a) and 4 and Order 5 Rules 1 and 3 of the Civil Procedure Rules, 2010; sections 97(3) and (5) of the Land Act

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, "John Mathara Mwangi v Consolidated Bank of Kenya Limited [2016] KEELC 1251 (KLR)", Case Analysis (2016). Not stated in the excerpt (Notice of Motion dated 3rd September 2015). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2016/1251/eng@2016-05-20

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