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ELCDismissedKericho ELC (as per pleadings; original suit number not stated in extract)· [2018] KEELC 4574 (KLR)

Jackson Kipngetich Komen v K-Rep Bank Limited & 2 others [2018] KEELC 4574 (KLR)

Environment and Land Court
24 January 2018
JOJ. M. Onyango
4,125 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~17 min to read original · ~4 min brief

The bottom line

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A Kericho court confirmed that when a bank properly serves all statutory notices before an auction, the auction buyer gets to keep the land.

What this practically means

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Executive summary

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The plaintiff sued over the auction sale on 27th April 2011 of his property KERICHO/MUNICIPALITY BLOCK 2/83, charged to the 1st defendant to secure facilities of Kshs 3,000,000, alleging non-service of the statutory notice under the Registered Land Act (Cap 300, repealed) and non-compliance with the Auctioneers Rules. He sought declarations that the power of sale had not arisen and that the sale was unlawful, injunctive reliefs and damages in the alternative. The 1st and 2nd defendants maintained all statutory and regulatory requirements were met; the 3rd defendant, the auction purchaser for Kshs 4,500,000, counterclaimed as a bona fide purchaser for value seeking a vesting order and permanent injunction. During the pendency of the suit the plaintiff's case was dismissed for non-attendance and the court proceeded with the counterclaim. The court held that under section 74 of the Registered Land Act all requisite notices were properly served, service by post being deemed sufficient under clause 12(h) of the charge, so the power of sale validly crystallised. Fraud, which must be specifically pleaded and proved to a higher standard, was not established. Applying Court of Appeal authority, no duty of inquiry rests on a purchaser at a duly advertised auction, and the equity of redemption is extinguished on completion of a valid sale. Judgment was entered for the 3rd defendant: the plaintiff's suit was dismissed with costs, a declaration of bona fide purchase, a vesting order and a permanent injunction against the plaintiff were issued, with costs of the suit and counterclaim to the 3rd defendant.

Key legal issues

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01

Whether the statutory power of sale was lawfully exercised

Holding

The power of sale validly crystallised; notices were properly served including by registered post as permitted by the charge

Reasoning

Under section 74(1) of the Registered Land Act (repealed), a chargee may serve a notice on default and, after three months' non-compliance, sell. The 1st defendant's debt recovery officer swore that he prepared and served a statutory notice by registered post; the auctioneer served the notification of sale and prepared a Rule 15(c) certificate. Paragraph 12(h) of the charge deemed service by post sufficient. The court thus found all requisite notices properly served and dismissed the allegation of illegality.

p. 5
02

Whether the 3rd defendant was a bona fide purchaser for value

Holding

Yes - he was the highest bidder at a duly advertised auction, paid Kshs 4,500,000, obtained a certificate of sale and completed payment, without notice of any fraud

Reasoning

Applying the Katende/Mukiri definition, the purchaser held a certificate of sale, bought in good faith at a properly advertised auction and had no notice of irregularity. The Court of Appeal authorities hold there is no duty on an auction purchaser to inquire into the mortgagee's right to sell. No fraud was proved against the 1st and 2nd defendants at the required higher standard.

p. 6
03

Whether a vesting order and injunction should issue in favour of the 3rd defendant

Holding

Yes; the plaintiff's rights of redemption were extinguished on completion of the sale, so the property vests in the 3rd defendant and the plaintiff is restrained

Reasoning

Having found no illegality in the sale, the court saw no reason to refuse vesting. Relying on Nancy Kahoya Amadiva, the equity of redemption was lost upon completion of a valid agreement for sale. Since the 3rd defendant's use of the property had been restricted by interlocutory orders, the temporary injunction was vacated in effect and replaced by a permanent injunction against the plaintiff.

p. 7

Legal principles established

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  • Non-service of a statutory notice is a fundamental breach which prevents the power of sale from crystallising
  • A purchaser at a duly advertised public auction owes no duty to inquire into the mortgagee's right to sell
  • The equity of redemption is extinguished upon completion of a valid contract of sale following a properly exercised statutory power of sale

Court orders

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  1. 1.The plaintiff's claim against all the defendants is dismissed with costs to the 3rd defendant
  2. 2.Declaration that the 3rd Defendant is the bona fide purchaser for value of KERICHO/MUNICIPALITY BLOCK 2/83
  3. 3.Vesting order vesting KERICHO/MUNICIPALITY BLOCK 2/83 unto the 3rd Defendant
  4. 4.Permanent injunction restraining the plaintiff from trespassing into or dealing with the suit property in any manner detrimental to the 3rd defendant's quiet possession and enjoyment
  5. 5.The 3rd defendant shall have the costs of the suit and the counterclaim

Authorities

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Legislation

  • Registered Land Act (Cap 300, repealed)Sections 74(1), 74(2), 77(1)
  • Auctioneers Rules 1997Rule 15(c)
  • Indian Transfer of Property ActSection 69(B)

Cases cited (15)

  • Nancy Kahoya Amadiva v Expert Credit Limited & another
    [2015] eKLR
  • Aiman vs Muchoki
    (1984) K.L.R. 353
  • Lawrence Mukiri v Attorney General and 4 Others
    [2013]
  • Katende v Haridar and Company Limited
  • Abdi Adan Hussein & 2 others v Attorney General & 2 others
    [2017] eKLR
  • Captain Patrick Kanyagia and Another v Damaris Wangeci and others
    NBI Civil Appeal No. 150 of 1993 (unreported)
  • David Katana Ngomba v Shafi Grewal Kaka
    [2014] eKLR
  • Priscilla Krobought Grant v Kenya Commercial Finance Company Ltd and others
    Civil Appeal No. 227 of 1995 (unreported)
  • Muhani and Another v National Bank of Kenya Limited
    [1990] KLR
  • Ruhangi Properties Limited & 2 others v Standard Chartered Bank of Kenya Ltd & 2 others
    [2000] eKLR
  • Central Kenya Limited v Trust Bank and others
    CA 215/96
  • Mbuthia v Jimba Credit Corporation and another
  • Ze Yun Yang v Nova Industrial Products Limited
    [2003] 1 EA 362
  • James Ombere Okoth case
  • Janet Mwendwa v Nancy Mavutha Musyaka
    [2017] eKLR
Jurisdiction invoked
Original civil jurisdiction of the Environment and Land Court over the suit land KERICHO/MUNICIPALITY BLOCK 2/83

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (1)

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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, "Jackson Kipngetich Komen v K-Rep Bank Limited & 2 others [2018] KEELC 4574 (KLR)", Case Analysis (2018). Kericho ELC (as per pleadings; original suit number not stated in extract). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2018/4574/eng@2018-01-24

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