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ELCPartially AllowedELC Case (Mombasa) - application dated 3rd July 2017· [2018] KEELC 3177 (KLR)

Kwale Cement Factory Limited & another v Kenya Deposit Insurance Corporation (KDIC) as a receiver for Chase Bank (K) Ltd [2018] KEELC 3177 (KLR)

Environment and Land Court
25 May 2018
AOA. Omollo
1,584 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~6 min to read original · ~4 min brief

The bottom line

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A Kenyan court stopped a bank auction because the bank could not prove it properly served the borrower's statutory notice.

What this practically means

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Executive summary

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This was an interlocutory application dated 3rd July 2017 by the plaintiffs under Order 40 of the Civil Procedure Rules and Sections 1A, 1B and 3A of the Civil Procedure Act, seeking a temporary injunction to restrain the defendant bank from alienating, selling or dealing with suit properties Kwale/Shimoni Adjudication/47, 616, 730, 762 & 766 pending hearing of the suit. The plaintiffs alleged the intended auction of 20th July 2017 was tainted with illegalities for non-compliance with sections 90(1) and 96(2) of the Land Act and Rule 15 of the Auctioneers Rules. The defendant, which had advanced credit facilities to the 2nd plaintiff secured by the 1st plaintiff's titles, maintained it fully complied with the Land Act, having served a 90-day statutory notice, a 40-day notice, obtained a valuation and instructed Keysian Auctioneers; it had also sold chattels under a tripartite agreement to Thai Group Limited for Kshs 89,199,150. The court identified the sole dispute as whether the mandatory statutory notices were properly issued and served. Finding that the defendant's list of posted letters bore impossible future dispatch dates (November 2018 and 2019), that the post office stamp was illegible and no proof of postage existed as required by clause 22.2 of the charge document, the court held the plaintiffs had established a prima facie case. Following Albert Mario Corderio v Vishram Shamji and Trust Bank Ltd v Eros Chemists Ltd, the court allowed the application: an injunction restrained sale until a valid statutory notice was issued and served; the applicants were to settle arrears within 30 days; each party was to bear its own costs of the application.

Key legal issues

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01

Proof of service of the 90-day statutory notice under section 90(1) of the Land Act

Holding

The defendant failed to prove proper dispatch of the statutory notices; a self-prepared list of posted letters containing impossible future dates was insufficient proof of service

Reasoning

The list of registered-mail letters bore dispatch dates of November 2018 and November 2019, dates yet to occur, and the post office receiving stamp was illegible. No post office receipt proved dispatch by registered mail as required by clause 22.2 of the charge document. The court therefore found non-compliance with section 90 of the Land Act.

p. 2
02

Whether non-compliance with statutory notice justifies a temporary injunction despite admitted default

Holding

Yes - following Gikonyo J in Albert Mario Corderio, the court granted an injunction conditioned on the applicants settling arrears, as the path carrying the lower risk of injustice

Reasoning

Although the 2nd plaintiff admitted default, the intended sale was tainted by defective notices under section 96(2) of the Land Act, Rule 15 of the Auctioneers Rules and clause 22.2 of the charge. The court adopted the approach of granting an injunction to compel proper notice while requiring the applicants to remedy arrears within 30 days.

p. 2

Legal principles established

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  • Non-compliance with the statutory notice requirements under section 90 of the Land Act establishes a prima facie case with a probability of success for purposes of an interlocutory injunction against exercise of the statutory power of sale

Court orders

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  1. 1.A temporary order of injunction to restrain the sale of the suit properties until the Mandatory Statutory notice is issued & served in accordance with section 96 (2) of the land Act and clause 22.1 of the Charge Document
  2. 2.The Applicants to settle any and/or all outstanding instalments/arrears within 30 days of today, the Respondent is at liberty of issuing the notices set out in (i) above
  3. 3.Each party to bear the respective costs of the application

Authorities

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Legislation

  • Civil Procedure ActSections 1A, 1B & 3A
  • Civil Procedure RulesOrder 40
  • Land ActSections 90(1), 96(2), 104(2)
  • Auctioneers RulesRule 15(b) & (c)
  • Transfer of Property ActSection 69(A)(1) (as cited in Trust Bank Ltd v Eros Chemists Ltd)

Cases cited (2)

  • Albert Mario Corderio & Another vs Vishram Shamji
    (2015) eKLR
  • Trust Bank Ltd vs Eros Chemists Ltd
    (2000) 2 E A 550 (CAK)
Jurisdiction invoked
Sections 1A, 1B & 3A of the Civil Procedure Act and Order 40 of the Civil Procedure Rules; section 104(2) of the Land Act

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, "Kwale Cement Factory Limited & another v Kenya Deposit Insurance Corporation (KDIC) as a receiver for Chase Bank (K) Ltd [2018] KEELC 3177 (KLR)", Case Analysis (2018). ELC Case (Mombasa) - application dated 3rd July 2017. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2018/3177/eng@2018-05-25

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