Khalid Yamin Khan v Equity Bank Limited & another [2018] KEELC 3567 (KLR)
The bottom line
#The Environment and Land Court allowed a bank to auction a borrower's home, ruling that a contract permitting interest changes without notice was validly enforced.
What this practically means
#Executive summary
#Key legal issues
#Whether variation of interest rate without notice breached the loan contract
No breach; the letter of offer and charge expressly permitted the lender to vary interest without prior notice to the borrower
Clause 4 of the letter of offer allowed interest at 14.5% per annum on reducing balance 'or such other rate as may be determined by the lender from time to time' and reserved the right to amend interest charges without prior notice. These provisions were incorporated into clause 2 of the charge. The court therefore held the variation was contractual, not illegal, and failure to serve notice was not a violation of the loan contract.
Whether a dispute over accounts and interest computation justifies an injunction against sale
No; a court does not grant an injunction restraining a mortgagee's statutory power of sale solely on a dispute as to the amount due
Relying on Priscillah Krobought Grant vs. Kenya Commercial Finance Co. Ltd and Fina Bank Ltd v Ronak Ltd, the court found the plaintiffs' contest was essentially on accounts, and they had admitted indebtedness and proposed settlements. Such a dispute is not a basis for injunctive relief where the chargee's power of sale has arisen on default.
Whether the plaintiffs demonstrated irreparable harm
No; damages would be an adequate remedy and the 1st defendant was not shown to be unable to pay them
Citing Joseph Gitahi Gachau & Another v Pioneer Holdings (A) Limited, the court held that a charged residential property is a commodity for sale on default, and no sentimental attachment operates against the statutory power of sale. The plaintiffs failed to demonstrate that damages would not adequately compensate them if the sale were later found wrongful.
Legal principles established
#- A court does not normally grant an injunction to restrain a chargee/mortgagee from exercising its statutory power of sale solely on the ground that there is a dispute as to the amount due under the mortgage
- Where charge documents expressly reserve the right to charge interest at variable rates at the lender's discretion, the contract cannot be impeached merely because the exact rate was not specified
- A charged property is converted into a commodity for sale; sentimental attachment to it does not bar exercise of the statutory power of sale, and damages are an adequate remedy
Court orders
#- 1.The Notice of Motion application dated 8th January, 2013 is dismissed
- 2.Costs of the application awarded to the defendants
- Jurisdiction invoked
- Original civil jurisdiction over the suit land, considering an application for a temporary injunction under the established principles in Giella vs. Cassman Brown
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Khalid Yamin Khan v Equity Bank Limited & another [2018] KEELC 3567 (KLR)", Case Analysis (2018). Notice of Motion dated 8th January, 2013 (suit number not stated in judgment). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2018/3567/eng@2018-04-12
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.