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ELCDismissedNotice of Motion dated 22nd May, 2017 (suit number not stated in the judgment)· [2018] KEELC 3926 (KLR)

Erick Kibinu Kinuthia & 2 others v Kenya Women Microfinance Bank Limited [2018] KEELC 3926 (KLR)

Environment and Land Court
21 March 2018
COChristine Ochieng
2,671 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~11 min to read original · ~4 min brief

The bottom line

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A Kenyan court allowed a bank to auction charged land because the borrowers admitted the debt and received proper statutory notices.

What this practically means

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Executive summary

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This was a ruling on the Plaintiffs' notice of motion dated 22nd May 2017 seeking a temporary injunction to restrain the Defendant bank from exercising its statutory power of sale over land parcel NGONG/NGONG/55812, charged to secure loans advanced to the 3rd Plaintiff, with an auction scheduled for 30th May 2017. The Plaintiffs argued that no statutory notice was served on the chargors, that the bank had levied unlawful and excessive interest creating an artificial debt, that the power of sale had not crystallised, and that the 3rd Plaintiff could liquidate the true debt given time, offering Kshs. 100,000 per month and proposing to sell two other plots. The Defendant, through its Legal Counsel Bernard Kiprotich, countered that the loans were contractually advanced and charged, default was admitted, arrears stood at over Kshs. 5.4 million, the interest variation was contractually permitted, and all statutory notices (three-month, 40-day and 45-day notices) were duly issued with a valuation undertaken before the auction. Applying the Giella v Cassman Brown principles, the court found the statutory notices were served in accordance with the law to the addresses in the charge, with unchallenged certificates of posting; that the indebtedness was admitted, invoking the rule that a chargee cannot be restrained where part of the debt is admitted; and that the interest rates were contractually agreed under clause 5 of the charge and section 84(1) of the Land Act. The court declined to be drawn into renegotiating the parties' contract and found no prima facie case. The application was dismissed with costs in the cause.

Key legal issues

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01

Whether the Plaintiffs established a prima facie case warranting a temporary injunction

Holding

No prima facie case was established; statutory notices were properly served to the addresses in the charge, the debt was admitted, and the interest variation clause was contractually agreed.

Reasoning

The court found the three-month statutory notice, the 40-day notice under section 90(3) of the Land Act and the 45-day Notice to Sell were issued and posted to the chargors' addresses per the charge document, with certificates of posting unchallenged. The chargors admitted default, and clause 5 of the charge permitted variation of interest under section 84(1) of the Land Act. A chargor cannot claim rights contrary to a charge voluntarily executed. A dispute in accounts is not a ground for injunction.

p. 2
02

Whether the power of sale had crystallised and whether the valuation supported restraint

Holding

The power of sale had crystallised on default and the Defendant had properly valued the suit land before the intended auction.

Reasoning

Section 96(1) of the Land Act permits a chargee to exercise its statutory power of sale where the chargor remains in default after the rectification period. The Defendant undertook a valuation in March 2017 before the auction; the Plaintiffs alleging undervalue produced no comparative valuation report. Once land is charged to secure a loan it becomes a commodity that can be sold upon default.

p. 3

Legal principles established

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  • A chargee cannot be restrained by injunction where part of the amount claimed is admitted or proved to be due
  • The court cannot be made a party to the contractual obligation between a chargor and chargee

Court orders

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  1. 1.Dismissal of the Plaintiffs' Notice of Motion dated 22nd May, 2017
  2. 2.Costs in the cause

Authorities

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Legislation

  • Civil Procedure ActSections 1A, 1B, 3A
  • Civil Procedure RulesOrder 42 Rules 1 and 2
  • Land ActSections 82(3), 84(1), 90(1), 90(3), 96(1), 97, 104(2)

Cases cited (8)

  • Giella vs. Cassman Brown & Co. Ltd
    (1973) E.A 358
  • Albert Mario Cordeiro Vs Vishram Shamji
    Nairobi HCCC No. 329 of 2014
  • Yusuf Abdi Ali Co. Ltd Vs Family Bank Ltd
  • David Gitome Kihiguka Vs. Equity Bank
    HCCC No. 94 of 2013
  • Mrao Limited Vs. First American Bank of Kenya Limited & 2 others
    (2003) KLR 125
  • Geoffrey Omondi Otiyo V Cooperative Bank of Kenya Limited & another
    (2016) eKLR
  • Palmy Company Limited Vs Consolidated Bank of Kenya Limited
    (2013) eKLR
  • LABELLE INTERNATIONAL LTD. AND ANOTHER – VS – FIDELITY COMMERCIAL BANK & ANOTHER
    Civil Case No. 786 of 2002
Jurisdiction invoked
Sections 1A, 1B and 3A of the Civil Procedure Act; Order 42 Rules 1 and 2 of the Civil Procedure Rules; Sections 82(3), 97 and 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, "Erick Kibinu Kinuthia & 2 others v Kenya Women Microfinance Bank Limited [2018] KEELC 3926 (KLR)", Case Analysis (2018). Notice of Motion dated 22nd May, 2017 (suit number not stated in the judgment). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2018/3926/eng@2018-03-21

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