Gold Lida Limited v Nic Bank Limited & another [2017] KEELC 3035 (KLR)

Environment and Land Court

21 March 2017

BEB M Eboso

1,682 words in judgment

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The bottom line

A Nairobi court paused a land auction for 45 days because the bank's two valuations of the property differed wildly, but only if the borrower paid a large deposit.

What this practically means

Executive summary

This ruling by the Environment and Land Court at Nairobi (B M Eboso, J) determines a Notice of Motion dated 16/3/2017 by the Plaintiff, Da Li, seeking an interlocutory injunction restraining the Defendants from selling Land Reference No. 15099, Title No. IR 72132. The property had been charged to secure loan facilities advanced to M/s Foton East Africa by the 1st Defendant; following default, the 1st Respondent advertised an auction. The Plaintiff contended that the intended sale at Kshs.680,000,000 breached the chargee's statutory duty under Section 97(1), (2) and (3) of the Land Act to obtain the best price reasonably obtainable and to undertake a forced sale valuation, pointing to a September 2014 valuation of Kshs.1.3 Billion by M/s Mwaka Musau Consultants. The Respondent relied on a series of valuations showing declining values, arguing the Kshs.1.3 Billion report was inconsistent. Applying the Giella v Cassman Brown criteria, the court found conflicting valuation evidence, holding that the true value could only be ascertained through a valuation within the framework of Section 97. Balancing this against the admitted loan default, and guided by National Bank of Kenya v Shimmers Plaza on the discretionary nature of injunctions, the court declined to grant a straightforward injunction. Instead it suspended the auction for 45 days, conditional on the Plaintiff depositing USD 4,395,964.62 and Kshs.6,469,183.72 plus accruing interest into the Loan Account; in default, the 1st Defendant may undertake a fresh Section 97 valuation by a valuer other than Mwaka Musau Consultants and Landmark Realtors and realize the security. Costs were in the cause, with mention on 24/5/2017.

Key legal issues

Whether the Plaintiff established a prima facie case warranting an interlocutory injunction based on breach of Section 97 of the Land Act

Holding

The court found conflicting valuation evidence making it necessary to ascertain the true value of the suit property through a valuation within the framework of Section 97 of the Land Act, justifying a conditional suspension of the sale

Reasoning

The court applied the Giella v Cassman Brown criteria. It noted the mandatory duty in Section 97 of the Land Act requiring a chargee to obtain the best price reasonably obtainable and to procure a forced sale valuation. Given the conflicting valuation reports from two firms of valuers appointed by the 1st Defendant (Kshs.1.3 Billion in September 2014 versus Kshs.680,000,000 in September 2016), the true value could only be ascertained through a fresh Section 97 valuation. Balancing this against the admitted default by the Principal Debtor, the court suspended the auction for 45 days conditional on a deposit, rather than granting a plain injunction.

p. 3

Legal principles established

Courts should prevent breach of mandatory statutory duties such as the chargee's duty under Section 97 of the Land Act to obtain a forced sale valuation and the best price reasonably obtainable
An injunction is an equitable and discretionary remedy whose duration is at the discretion of the trial judge

Court orders

1.The intended auction of Land Reference Number 15099 Title No. IR 72132 by the Defendants is suspended for a period of 45 days from today
2.The Plaintiff shall within the said period of 45 days deposit into the Loan Account United States Dollars 4,395,964.62, Kshs.6,469,183.72 and all subsequently accruing interest
3.In default of payment, the 1st Defendant shall be at liberty to undertake a valuation of the suit property within the framework of Section 97 of the Land Act and proceed to realize the security in tandem with the terms of the charge instruments; the valuation shall be done by a registered valuer other than M/S Mwaka Musau Consultants and Landmark Realtors Limited
4.Costs shall be in the cause
5.Matter to be mentioned on 24/5/2017 for further directions

Authorities

Legislation

Land ActSection 97(1), (2), (3)

Cases cited (4)

Giella vs. Cassman Brown & Co. Ltd
(1973) E.A 358
Mrao Limited vs. First American Bank of Kenya Limited & 2 others
(2003) KLR 125
Nguruman Limited vs. Jan Bonde Nielsen & 2 others
(2014) eKLR
National Bank of Kenya Vs Shimmers Plaza Limited
(2009) eKLR

Jurisdiction invoked: Original civil jurisdiction over land charge matters; interlocutory injunction application under Section 97 of the Land Act, No. 6 of 2012

Key timeline

Practical implications

Frequently asked questions

Cite this brief

Caselaw, "Gold Lida Limited v Nic Bank Limited & another [2017] KEELC 3035 (KLR)", Case Analysis (2017). Notice of Motion dated 16/3/2017. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2017/3035/eng@2017-03-21

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