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ELCOtherNakuru ELC (formerly HCC) Civil Suit No. 149 of 2003 (O.S.) [not stated in extract]· [2018] KEELC 1599 (KLR)

Lydia Nyambura Mbugua v Diamond Trust Bank Kenya Limited & another [2018] KEELC 1599 (KLR)

Environment and Land Court
20 September 2018
MSMunyao Sila
5,765 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~23 min to read original · ~4 min brief

The bottom line

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Kenya's Environment and Land Court confirmed it can hear disputes over bank sales of charged land, dismissing an objection claiming only the High Court could.

What this practically means

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Executive summary

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This ruling by the Environment and Land Court at Nakuru (Munyao Sila J) determines a preliminary objection raised by the plaintiff, Lydia Nyambura Mbugua, to the effect that, following the Court of Appeal decision in Cooperative Bank of Kenya Limited vs Patrick Kangethe Njuguna & 5 Others, the ELC lacks jurisdiction over her suit. The suit, commenced by plaint on 7 May 2003, challenges the 1st defendant bank's exercise of its statutory power of sale over Njoro/Ngata Block 1/478, seeking a declaration that the 28 March 2002 sale was illegal, irregular and wrongful, cancellation of the sale, and a permanent injunction; the 2nd defendant (since deceased and substituted by his wife) counterclaimed for vacant possession. The court reviewed Article 162 of the Constitution, Section 13 of the ELC Act, Section 150 of the Land Act and Section 101 of the Land Registration Act, and relied on the Supreme Court's decision in Republic vs Karisa Chengo. It held that a charge is an instrument creating an enforceable proprietary interest in land, that a sale by a chargee is a process culminating in acquisition of title, and that challenges to the process of sale, the validity of statutory notices, and the resulting title fall squarely within the ELC's jurisdiction. The court articulated a 'predominant issue' test, modifying Ngugi J's predominant purpose test, and distinguished Cooperative Bank vs Patrick Kangethe, where the dominant issue was accounts. The preliminary objection was dismissed with costs to the 2nd defendant.

Key legal issues

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01

Whether the ELC has jurisdiction over disputes concerning a chargee's exercise of statutory power of sale notwithstanding the mention of a 'charge'

Holding

Yes. A charge is an instrument granting an enforceable interest in land; the process of sale by a chargee is laid down in the Land Act and Land Registration Act, which confer jurisdiction on the ELC, and the sale results in acquisition of title to land, which is squarely within ELC jurisdiction.

Reasoning

Section 13(2)(d) of the ELC Act confers jurisdiction over disputes relating to instruments granting enforceable interests in land. A charge is contractual and proprietary, registered in the title. Sections 150 of the Land Act and 101 of the Land Registration Act vest jurisdiction over disputes under those statutes in the ELC. A challenge to the manner of sale requires scrutiny of those statutes and concerns acquisition of title, a quintessential land matter.

p. 4
02

Whether Cooperative Bank vs Patrick Kangethe ousts ELC jurisdiction over charge-related disputes

Holding

No. The decision is distinguishable: the Court of Appeal there found the predominant issue was accounts under a contractual banker-customer relationship, not the validity of the charge or the process of sale. It did not hold that the ELC must down its tools whenever a charge is mentioned.

Reasoning

The Court of Appeal in Kangethe held the cause of action was a question of accounts, not the charge instrument, whose creation and enforceability were undisputed. In the present case no issue of accounts arises; the agreed issues concern the manner of sale, validity of statutory notice, fraudulent acquisition and title, and vacant possession — all land matters within ELC jurisdiction.

p. 6
03

The proper test for choice between the ELC and High Court where issues are mixed

Holding

The court applies a predominant issue (subject matter) test, modifying Ngugi J's predominant purpose test in Suzanne Achieng Butler. If the predominant issue touches title to, or use and occupation of, land, the ELC has jurisdiction; if severable collateral issues belong to the High Court, the ELC may still hear the whole dispute.

Reasoning

The judge reasoned that the purpose of a transaction may differ from the issue before court: a charge's purpose is to secure financing, but the litigated predominant issue may be the manner of exercising the statutory power of sale. Where the predominant issue affects title to land, the matter belongs to the ELC even if accounts are incidentally involved, provided they cannot be severed.

p. 5

Legal principles established

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  • Where a case raises mixed issues, some falling to the ELC and some to the High Court or ELRC, the litigant should file suit in the court with jurisdiction over the predominant issue; the test is the predominant issue before court, not the predominant purpose of the transaction.
  • The process of sale by a chargee, being governed by the Land Act and Land Registration Act and resulting in acquisition of title to land, falls within the jurisdiction of the ELC.
  • The Constitution does not recognise concurrent jurisdiction between the High Court and the ELC/ELRC; what falls within the jurisdiction of the ELC and ELRC cannot fall within the High Court's jurisdiction by dint of Article 165(5).
  • If accounts issues arise collateral to a chargee's sale and cannot be severed from the dominant issue of the process of sale, the ELC retains jurisdiction over the whole dispute.

Court orders

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  1. 1.The preliminary objection is dismissed with costs to the 2nd defendant
  2. 2.Orders accordingly

Authorities

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Legislation

  • Constitution of Kenya, 2010Article 162 (System of courts); Article 165(5); Articles 42, 69 and 70
  • Environment and Land Court Act No. 19 of 2011Section 13
  • Land Act No. 6 of 2012Section 150
  • Land Registration Act No. 3 of 2012Section 101
  • Registered Land Act (repealed)not specified
  • Civil Procedure Rules (pre-2010)not specified

Cases cited (7)

  • Cooperative Bank of Kenya Limited vs Patrick Kangethe Njuguna & 5 Others
    Mombasa Court of Appeal Civil Appeal No. 83 of 2016
  • R Karisa Chengo & 2 Others
    (2017) eKLR
  • John Kimani Njenga vs Margaret Wanjiru Kanyiri & 2 Others
    Nakuru ELC No. 345 of 2014 (2015) eKLR
  • Stephen Kibowen vs Agricultural Finance Corporation
    (2015) eKLR
  • Ledidi Ole Tauta & others vs Attorney General & 2 others
    (2015) eKLR
  • Suzanne Achieng Butler & 4 Others vs Redhill Heights Investments Limited & Another
    (2016) eKLR
  • Diamond Trust Bank of Kenya Limited vs Isaac Mbugua Ngethe & Lydia Nyambura Mbugua
    Nakuru HCCC No. 213 of 2001
Jurisdiction invoked
Article 162(2)(b) of the Constitution and Section 13 of the Environment and Land Court Act No. 19 of 2011

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (12)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Lydia Nyambura Mbugua v Diamond Trust Bank Kenya Limited & another [2018] KEELC 1599 (KLR)", Case Analysis (2018). Nakuru ELC (formerly HCC) Civil Suit No. 149 of 2003 (O.S.) [not stated in extract]. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2018/1599/eng@2018-09-20

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