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ELCDismissed· [2017] KEELC 2324 (KLR)

Fatuna Osman Abdi v Kenya Industrial Estates Limited & another [2017] KEELC 2324 (KLR)

Environment and Land Court of Kenya
15 June 2017
CYC. YANO
2,326 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 refused to stop a Sacco from auctioning charged land because the borrower admitted defaulting and offered no evidence the sale would be unfair.

What this practically means

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Executive summary

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This was an interlocutory application by Notice of Motion dated 24th November 2016 in which the plaintiff, Fatuma Osman Abdi, sought a temporary injunction restraining the defendants from proceeding with, advertising, completing or otherwise interfering with the intended sale by public auction, scheduled for 29th November 2016, of plot LR.NO.MBWAKA/MAERENI/282, pending the hearing and determination of the suit. The plaintiff obtained a loan facility of Kshs.1,000,000.00 from the 1st defendant in September 2014, secured by a legal charge over the suit property, which was registered in the name of a guarantor. She admitted default, deponing that financial difficulties prevented full repayment and that she had proposed a new, more affordable repayment plan to which the 1st defendant had not responded. She also alleged collusion to sell the property at a throwaway price. The 1st defendant, through a replying affidavit sworn by Faith Onyango, asserted the plaintiff repaid only ten months' installments plus insufficient payments totaling Kshs.461,000.00, leaving Kshs.884,656.94 due as at 28th November 2016; that the statutory notice was issued; that the variation proposal was contrary to the agreed terms; and that a reserve price had been set. Framing the familiar three Giella questions, the court found the plaintiff had admitted default and had not denied indebtedness; that the 1st defendant was not obliged to accept a variation proposal where express contractual terms bound the parties; and that there was no evidence of collusion given the advertised reserve price. Damages were held adequate and the balance of convenience favoured the 1st defendant. The application was dismissed with costs to the 1st defendant on 15th June 2017.

Key legal issues

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01

Whether the plaintiff established a prima facie case with a probability of success for a temporary injunction against the exercise of the statutory power of sale

Holding

No prima facie case was established. The plaintiff admitted default and indebtedness, the loan agreement entitled the 1st defendant to recall the loan and enforce the security upon default, and the plaintiff could not compel variation of the agreed repayment terms.

Reasoning

The court found no dispute that the loan was granted and secured by a legal charge, and that the plaintiff admitted default. The plaintiff's apprehension about collusion to sell at a throwaway price was unsupported by any evidence, as the advertisement was for a public auction subject to a reserve price. Her proposal for a new repayment plan was unenforceable against express contractual terms binding the parties.

p. 4
02

Whether damages would be an inadequate remedy and where the balance of convenience lay

Holding

The plaintiff did not show that damages would not adequately compensate her, and the balance of convenience tilted in favour of the 1st defendant, which should not be hindered in recovering loan arrears that continue to accrue interest and charges.

Reasoning

The court applied the second and third Giella principles. Having found no prima facie case, it noted the plaintiff gave no demonstration of irreparable harm not compensable in damages. The arrears were growing and put the security at risk, so the balance of convenience favoured allowing the 1st defendant to realize its security rather than restraining the sale.

p. 4

Legal principles established

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  • A chargee whose borrower is in default under an express loan agreement is not obliged to respond to or accept a borrower's unilateral proposal to vary the agreed repayment terms, and the statutory power of sale may be exercised in accordance with the agreement
  • Where the advertisement for a public auction discloses a reserve price, an allegation that the property will be sold at a throwaway price is baseless absent evidence of collusion

Court orders

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  1. 1.The plaintiff's Notice of Motion dated 24th November 2016 was dismissed with costs to the 1st defendant

Authorities

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Cases cited (5)

  • GIELLA –VS- CASSMAN BROWN & COMPANY LTD
  • PATRICK WAWERU MWANGI AND ANOTHER –VS- HOUSING FINANCE OF KENYA LTD
    (2013)
  • KYANGARO –VS KENYA COMMERCIAL BANK LTD AND ANOTHER
    (2004) 1 KLR
  • MRAO LTD –VS- FIRST AMERICAN BANK OF KENYA LTD AND 2 OTHERS
    (2003) eKLR
  • ORION EAST AFRICA LTD –VS- ECOBANK KENYA LTD & ANOTHER
    (2015) eKLR
Jurisdiction invoked
Inherent jurisdiction to grant interlocutory relief in a civil suit; application by Notice of Motion

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, "Fatuna Osman Abdi v Kenya Industrial Estates Limited & another [2017] KEELC 2324 (KLR)", Case Analysis (2017). . Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2017/2324/eng@2017-06-15

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