Shalom Agencies Limited & another v Family Bank Limited [2019] KEELC 4895 (KLR)
The bottom line
#Kenya's Environment and Land Court ruled a bank could lawfully demand payment of all secured debts before releasing charged land, because the charge included a consolidation clause.
What this practically means
#Executive summary
#Key legal issues
#Whether the charge could be consolidated with other securities for monies owed under a separate bank guarantee transaction
Yes. Clause 14 of the charge expressly allowed consolidation, clause 21 declared the charge valid and binding, and the consolidation right was recorded in the register as required by Section 83 of the Land Act, 2012. The Respondent was acting within the law.
Clause 14 of the charge instrument reserved to the bank the right to consolidate all mortgages and charges and barred redemption except on payment of all monies secured by every such charge. Both Applicants signed the instrument. Section 83(1) of the Land Act, 2012 permits consolidation unless excluded, and requires the right to be recorded in the register; the official search showed it was so recorded. The court therefore found the Respondent was acting lawfully in demanding payment of the Kshs.4,000,000 guarantee amount before releasing the security.
Whether the Applicants met the threshold for a temporary injunction
No. The suit rested on the false premise that the charge covered only Kshs.750,000, so no prima facie case or irreparable loss was shown; the application was dismissed with costs.
The court held it need not conduct a detailed analysis of the Giella-type principles because the plaint itself pleaded that the charge guaranteed only Kshs.750,000, which was untrue given the charge instrument. A suit founded on such a premise cannot demonstrate a prima facie case or irreparable harm. Counsel was faulted for not appreciating clause 14 and clause 21 and for ignoring Section 83 of the Land Act as reflected in the search certificate. The application was accordingly dismissed with costs.
Legal principles established
#- Under Section 83(1) of the Land Act, 2012, a chargor may discharge one of several charges without redeeming all, unless the charge instrument expressly provides otherwise; where consolidation is provided for in the instrument and recorded in the register, the chargee may lawfully consolidate securities and refuse redemption until all secured monies are paid
- A party who signs a charge containing a right-of-consolidation clause is bound by it and cannot successfully allege that notices demanding monies under other transactions are invalid
Court orders
#- 1.The Notice of Motion dated 9/11/2016 is dismissed
- 2.Costs of the application awarded to the Defendant/Respondent
- Jurisdiction invoked
- Sections 1A, 1B, 3A and 63(e) of the Civil Procedure Act (Cap 21); Order 40 Rules 1(a), 2, 3, 4 and 9 and Order 51 Rule 1 of the Civil Procedure Rules, 2010
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Shalom Agencies Limited & another v Family Bank Limited [2019] KEELC 4895 (KLR)", Case Analysis (2019). Not stated in judgment (Notice of Motion dated 9/11/2016). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2019/4895/eng@2019-01-30
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.