Joseph Kimari Guanga v Co-operative Bank of Kenya Ltd (Mumias Branch) & another [2017] KEELC 1367 (KLR)
The bottom line
#A Kenyan court dismissed a landowner's bid to stop his bank from auctioning his land, confirming that guarantors who default on payment cannot block a lawful sale.
What this practically means
#Executive summary
#Key legal issues
#Prima facie case for injunction against exercise of statutory power of sale
The Plaintiff, as guarantor and chargor of a defaulted loan, failed to establish a prima facie case; the Bank was within its rights to exercise its statutory power of sale under Section 74 of the Registered Land Act
The court found it undisputed that Joseph Ngugi Kamau took a Kshs.4,500,000 facility secured by the Plaintiff's guarantee and legal charge over the suit property. The borrower defaulted, demand notices issued, and although a 2009 auction was halted after the District Commissioner's intervention, there was no evidence of payment by either borrower or guarantor. The Plaintiff's allegation that the loan was paid was unsupported by any affidavit from the borrower. The guarantor's contractual obligation was to pay on demand, which he had not done, so the Bank could exercise its statutory power of sale.
Irreparable loss and balance of convenience
No irreparable loss: charged land becomes a commodity for sale, and the balance of convenience tilted toward the Bank since neither borrower nor guarantor had paid the outstanding debt
The Plaintiff voluntarily offered his land as security and signed the legal charge; once he did so the property became a commodity for sale and he could not allege irreparable loss incapable of compensation in damages. On the balance of convenience, the loan was taken in 2007, default occurred, and realization was halted in 2009 on the Plaintiff's request, yet no payment followed. The balance of convenience therefore favoured the 1st Defendant.
Mandatory order for removal of charge and return of title deed at interlocutory stage
The prayer for removal of the Bank Charge and return of the title deed is a mandatory order grantable only in exceptional circumstances; none existed, and the order could only issue after evidence at a full hearing
Applying Kenya Breweries Ltd v Washington O. Okeyo, the court held that mandatory injunctions are not normally granted at the interlocutory stage absent special circumstances. The Plaintiff's prayer would require determination after evidence has been tested in cross-examination at a full hearing. At this interlocutory stage the order was not merited.
Legal principles established
#- A guarantor's obligation arises upon default by the principal borrower; the guarantor must pay on demand the guaranteed sum rather than ensure the borrower complies
- Once land is given as security for a loan it becomes a commodity for sale, and a chargor cannot claim irreparable loss from realization of the security
- A mandatory injunction may be granted on an interlocutory application only in special circumstances
Court orders
#- 1.The Notice of Motion dated 20th March 2017 is entirely dismissed
- 2.Costs of the application to be in the cause
- Jurisdiction invoked
- Original civil jurisdiction over the suit and the interlocutory Notice of Motion dated 20th March 2017 (specific enabling provision not cited in the judgment)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Joseph Kimari Guanga v Co-operative Bank of Kenya Ltd (Mumias Branch) & another [2017] KEELC 1367 (KLR)", Case Analysis (2017). Not stated in the judgment (Plaint dated 20th March 2017; Notice of Motion dated 20th March 2017). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2017/1367/eng@2017-10-23
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.