James Mamboleo & another v Consolidated Bank of Kenya & another [2017] KEELC 1934 (KLR)
The bottom line
#A Kenyan court stopped a bank from selling a borrower's land because the bank could not prove it served the legally required notices before the sale.
What this practically means
#Executive summary
#Key legal issues
#Whether the variation of interest rate without notice was unlawful
No prima facie case established; Clause 3.1 of the charge permitted variation at the 1st Defendant's discretion without notice, and default interest of 18% above base rate applied to arrears without needing ministerial approval
The charge expressly permitted the chargee to vary interest at its own discretion without notice, and the letter of offer allowed default interest of 18% per annum above the base rate of 13.75% on arrears. The Plaintiffs admitted default in writing, so the charged rates were within the contractual arrangement, and no ministerial approval was required. The installment increase followed automatically from the rate increase.
Whether the statutory power of sale had lawfully arisen under the Land Act, 2012
Yes, a prima facie case was established because the 1st Defendant failed to prove service of the Section 90 notice, did not show proof of a Section 96(2) notice, and there was no proof of a forced sale valuation under Section 97(2)
The burden of proving service of the statutory notices lay on the chargee once the Plaintiffs disputed service. No certificate of posting of registered mail was exhibited for the Section 90 notice, no proof of the Section 96(2) notice was shown, and no forced sale valuation was exhibited, so compliance with the mandatory statutory pre-conditions to sale was not demonstrated.
Whether irreparable harm and balance of convenience favoured an injunction
The Plaintiffs would suffer irreparable harm if the injunction were refused and the sale could not be justified merely because damages were available
The court was satisfied the Plaintiffs would suffer irreparable harm if the flawed sale proceeded. Because the chargee had not complied with statutory pre-conditions, it could not proceed with the sale and then answer in damages. However, since the Plaintiffs remained indebted, the injunction issued only on condition of monthly payments of Kshs.161,830/=, failing which it would lapse automatically.
Legal principles established
#- Once a mortgagor/chargor disputes service of the statutory notices, the burden lies on the mortgagee/chargee to prove that the notices required by law were served
- A court does not normally grant an injunction to restrain a mortgagee from exercising its statutory power of sale solely on the ground that there is a dispute as to the amount due under the mortgage
- Where the chargee has not complied with statutory notice requirements, an injunction may issue even though damages would otherwise be an adequate remedy, since the chargee cannot proceed with a flawed sale
Court orders
#- 1.Temporary injunction in terms of prayer 3 of the Notice of Motion dated 18th May 2016, restraining the Defendants from advertising for sale, selling, disposing of, leasing, occupying or dealing with the suit property pending the hearing and determination of the suit, on conditions
- 2.Pending the hearing and final determination of the suit or further orders, the Plaintiffs shall pay to the 1st Defendant Kshs.161,830/= per month with effect from 1st August 2017 and on the 1st day of each subsequent month
- 3.In the event the Plaintiffs fail to pay the stated monthly amount on the due date, the injunction shall lapse automatically without further reference to the court
- 4.Costs of the application to be in the cause
- Jurisdiction invoked
- First-instance injunctive relief sought in a suit challenging exercise of a chargee's statutory power of sale; specific statutory basis not stated in the extract
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "James Mamboleo & another v Consolidated Bank of Kenya & another [2017] KEELC 1934 (KLR)", Case Analysis (2017). Not stated in the extract (Notice of Motion dated 18th May 2016 in a pending suit). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2017/1934/eng@2017-07-26
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.