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ELCDismissedNot stated in the judgment· [2017] KEELC 3468 (KLR)

Musa K. Chepsom v Equity Bank Limited [2017] KEELC 3468 (KLR)

Environment and Land Court
24 February 2017
AOA. OMBWAYO
1,856 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 bank auction because the borrower couldn't dispute the debt or the required notices.

What this practically means

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Executive summary

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The plaintiff, Musa K. Chepsom, applied for a temporary injunction to restrain the defendant from selling by public auction, private treaty or otherwise interfering with parcels Baringo/Sabatia-103/619, 620 and 621, of which he is registered proprietor. He had charged the parcels to secure a Kshs. 600,000 loan taken on 31st July 2014 and contended that the defendant withdrew Kshs. 16,000 and Kshs. 52,000 from his account without notice and instructed Keysian Auctioneers to sell the properties on 25th August 2016 without serving the mandatory 90 days' notice under Section 90 of the Land Act. The defendant opposed, asserting that the loan was granted by letter of offer dated 16th June 2014, that the plaintiff defaulted leaving arrears of Kshs. 419,183.05 as at 23rd August 2016, and that all statutory requirements - the Section 90 notices, a Section 96 redemption notice, a 45-day notice and Section 97(2) valuation - were complied with before the properties were advertised in the Standard Newspaper on 1st August 2016. The court applied the established three-limb test for temporary injunctions. It found the charge and the arrears undisputed and the statutory notices served, hence no prima facie case with probability of success; any loss was compensable in damages since the chargor had offered his property as a commodity for recovery of the debt; and the balance of convenience favoured the defendant as the debt might outstrip the property's value. The application was dismissed with costs on 24th February 2017.

Key legal issues

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01

Prima facie case with probability of success

Holding

The plaintiff failed to establish a prima facie case because the charge, the arrears of Kshs. 419,180.50 and service of the statutory notices were not denied and the statutory procedure was complied with.

Reasoning

The court found that the charge was admitted, the arrears figure was not disputed, and the plaintiff had been served with the Notice of Demand and Statutory Notice of Sale. With the statutory procedure under the Land Act complied with, there was no serious question to be tried capable of supporting an injunction.

p. 3
02

Irreparable injury

Holding

Any loss the plaintiff might suffer was compensable in damages; the defendant was capable of compensating him, so no irreparable injury was shown.

Reasoning

The court held that a prima facie case alone is insufficient; the applicant must show injury not adequately compensable in damages and no other remedy. Here, since the property was offered as security for the loan, the defendant could compensate the plaintiff for any loss, meaning the second limb of the Giella-type test failed.

p. 3
03

Balance of convenience

Holding

The balance of convenience tilted against granting the injunction because the amount owed might outstrip the value of the suit property.

Reasoning

The court reasoned that delaying a lawful statutory sale would prejudice the defendant, whose outstanding amount could exceed the value of the charged properties. Where the plaintiff had failed on the first two limbs, and the defendant risked recovering less than the debt, the balance of inconvenience favoured refusing the injunction.

p. 3

Legal principles established

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  • Before granting a temporary injunction the court must consider whether the applicant has demonstrated a prima facie case with a probability of success, whether irreparable harm would occur if the injunction is not granted, and where the balance of convenience lies if the court is in doubt.
  • A chargor who offers property as security equates that property to a commodity which the chargee may dispose of to recover the loan and interest; consequently, loss arising from a lawful exercise of the statutory power of sale is compensable in damages.

Court orders

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  1. 1.The application for a temporary injunction restraining the defendant from selling parcels Baringo/Sabatia-103/619, 620 and 621 was dismissed
  2. 2.Costs awarded to the defendant

Authorities

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Legislation

  • Land ActSection 90 (Notice of Demand)
  • Land ActSections 90(a) and (2)
  • Land ActSection 96 (Redemption notice)
  • Land ActSection 97(2) (Valuation before sale)
Jurisdiction invoked
Inherent jurisdiction of the court to grant temporary injunctions (application under established interlocutory injunction principles); no specific provision stated

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, "Musa K. Chepsom v Equity Bank Limited [2017] KEELC 3468 (KLR)", Case Analysis (2017). Not stated in the judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2017/3468/eng@2017-02-24

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