Gitere Kahura Investments Limited & another v Kenya Planters Co-operative Union Limited & another [2017] KEELC 2918 (KLR)
The bottom line
#A Kenyan court stopped an auction of two Ruiru properties because the bank could not produce the actual charge documents proving the debt.
What this practically means
#Executive summary
#Key legal issues
#Whether the Plaintiffs established a prima facie case with a probability of success
The Plaintiffs established a prima facie case because the 1st Defendant did not produce the charge or mortgage documents to prove it advanced the loans secured by the Suit Properties, and the claim of Kshs. 212,527,533.99 against each property may be untenable under Section 44A of the Banking Act and/or statute-barred
The court applied the well-known Giella principles. It found the Plaintiffs deny owing the 1st Defendant anything and deny charging the properties to it. The 1st Defendant relied solely on certificates of postal searches, not the security documents. Coupled with the arguable Section 44A cap on recoverable interest and the limitation defence, the court was persuaded the Plaintiffs showed a prima facie case and did not need to consider irreparable harm or the balance of convenience.
Whether the recoverable amount on the alleged defaulted loans is capped by Section 44A of the Banking Act
Section 44A of the Banking Act limits recovery on a non-performing loan to principal, contractual interest not exceeding the principal, and recovery expenses, and by subsection 6 it applies retrospectively to loans made and loans that became non-performing before commencement
The court set out the text of Section 44A, including subsection 6, and held that the retrospective application means subsection 6 governs the determination of the sum due if the trial court finds that the loans were advanced and the properties charged. The claim of over Kshs. 212 million against each parcel would be tested against that statutory cap.
Whether service of the statutory notice under the Land Act and the limitation defence defeat the intended auction
These were left as triable issues for the trial court, alongside whether a debt settlement agreement of 30th June 2009 existed and was performed
The Plaintiffs denied service of any statutory notice of sale and argued the demand was time-barred under the Limitation of Actions Act. The 1st Defendant countered that the 2nd Plaintiff's advocates' letter of 18th April 2016 acknowledged indebtedness, restarting time, and referred to a Kshs. 10 Million settlement agreement of 30th June 2009. The settlement agreement was not produced in court, so these issues remain for trial.
Legal principles established
#- Section 44A of the Banking Act applies retrospectively and limits what an institution may recover on a non-performing loan, including loans that became non-performing before the section came into operation
- A party seeking to exercise a statutory power of sale must produce the charge or security document; reliance only on certificates of postal searches does not establish the debt secured by the property
Court orders
#- 1.Prayers 3 and 4 of the application dated 31st August 2016 granted - injunction restraining the Defendants, their agents, servants and/or officers from advertising and auctioning L.R. No. 4872/1 and L.R. No. 4872/2 pending hearing and determination of the suit
- 2.Costs of the application awarded to the Plaintiffs
- Jurisdiction invoked
- not expressly stated; interlocutory application under civil procedure invoking the Land Act, Banking Act and Limitation of Actions Act
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Gitere Kahura Investments Limited & another v Kenya Planters Co-operative Union Limited & another [2017] KEELC 2918 (KLR)", Case Analysis (2017). . Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2017/2918/eng@2017-05-08
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.