Esther Kemuma Mogaka & another v Diamond Trust Bank Kenya Limited [2017] KEELC 3000 (KLR)
The bottom line
#A Kenyan court allowed a bank to proceed with selling mortgaged land, ruling that disputing the loan amount does not stop a proper statutory sale.
What this practically means
#Executive summary
#Key legal issues
#Whether the plaintiff's application met the Giella test for an interlocutory injunction
The application failed at the first hurdle - no prima facie case with probability of success - since the statutory notices under Sections 90 and 96(2) of the Land Act were properly served and the power of sale had accrued
The court examined the demand letter of 17th February 2016, the statutory notice of 23rd February 2016 and the notification of sale of 25th May 2016, all posted to the address in the charge instrument with a deemed-service clause of five days from posting. It was persuaded service was effected, so the defendant's power of sale accrued. A dispute over quantum is no bar to the power of sale, and no particulars of fraud were furnished.
Whether failure to obtain a fresh valuation under Section 97(2)/(3) of the Land Act, 2012 can restrain the sale
Non-compliance with Section 97 would not be a ground to restrain an accrued power of sale; the chargor's remedy lies under Section 97 if the property is sold at an undervalue
The court held that non-compliance with Section 97(3) would not be a ground to restrain an accrued power of sale; the plaintiffs would have remedies under Section 97 if the property sold at an undervalue. In any event, the defendant showed a valuation was obtained on 13th August 2016, so there was compliance even if the sale had proceeded.
Whether damages would be an adequate remedy
Yes - by charging the property the plaintiffs made it a commodity capable of sale, and any loss is calculable on the market value
Relying on Andrew Muriuki Wanjohi -vs- Equity Building Society, the court reasoned that a chargor who voluntarily offers property as security cannot complain that its loss on sale is incapable of compensation in damages, since the property was evaluated in monetary terms and constituted a commodity the chargee may dispose of to recover the loan and interest.
Whether the plaintiffs came to equity with clean hands
They did not; they did not repay the facility and gave no particulars of the alleged fraudulent mismanagement of the account
The plaintiffs admitted the debt but disputed quantum, alleging fraud and unlawful mismanagement by the defendant without furnishing any particulars of the alleged fraudulent acts. Having defaulted on the facility and sought to escape the consequences of their own default, they failed the equity requirement of clean hands and were not entitled to the discretionary remedy of an injunction.
Legal principles established
#- The chargee will not be restrained from exercising its power of sale merely because the amount due is in dispute
- Once the power of sale has accrued and notices have been duly served, courts ought not to interfere with its proper exercise
- Where property is charged as security, damages are an adequate remedy for the chargor and an injunction will not lie
- A certificate of indebtedness by an officer of the chargee is binding absent manifest error
- A party seeking an injunction must come to equity with clean hands
Court orders
#- 1.The plaintiffs' notice of motion dated 16th September 2016 is dismissed with costs to the defendant
- 2.The interim order of injunction granted on 5th October 2016 is discharged and vacated
- 3.The determination disposes of the defendant's application dated 15th October 2016
- Jurisdiction invoked
- Not expressly stated; court seized of a notice of motion for interlocutory injunction in a pending suit
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Esther Kemuma Mogaka & another v Diamond Trust Bank Kenya Limited [2017] KEELC 3000 (KLR)", Case Analysis (2017). Kisii ELC (Notice of Motion dated 16th September 2016; defendant's Notice of Motion dated 15th October 2016). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2017/3000/eng@2017-03-31
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.