Four Farms Limited v Agricultural Finance Corporation & 19 others [2020] KEELC 1364 (KLR)
The bottom line
#A Kenyan landowner lost its bid to undo a bank auction because once the auctioneer's hammer falls, redemption rights end and diligent buyers keep their titles.
What this practically means
#Executive summary
#Key legal issues
#Whether the 1st defendant forfeited its statutory power of sale by virtue of the 1989 consent
No; the consent said nothing about the chargee's power of sale, the charge remained registered (evidenced by the partial discharge of plot 3464), and the Ojwang ruling did not conclusively bar exercise of the power of sale
The consent of 24/11/1989 provided for subdivision and sale of plots to repay the loan but did not extinguish or suspend the chargee's statutory power of sale. The partial discharge over plot 3464 confirmed the charge survived on the resultant titles. The ruling by J.B. Ojwang' was rendered after the sale and contained no retrospective orders, and no finding by the trial court in HCCC 652 of 1988 declared the 2009 sale irregular.
Service and adequacy of statutory notices
Statutory notices under section 74 of the Registered Land Act were duly served; the plaintiff's witness statement never alleged non-service
The plaintiff annexed the three-month statutory notices to its bundle and its witness statement was silent on non-service, permitting the court to infer due service. The 45-day redemption notices by the auctioneer were served personally (albeit unsigned) and by registered post. Misdescription of acreage in the advertisements was minor and could not alter the terms of sale.
Whether Land Control Board consent was required
No consent was required: AFC as a state corporation is exempt under section 6(3)(b); alternatively the auction sale falls outside the requirement and the buyer had done due diligence
Sections 3(3), 3(4) and 4(2) of the Agricultural Finance Corporation Act and section 3 of the State Corporations Act show AFC is a government vehicle, attracting the section 6(3)(b) exemption. Further, a sale at public auction is outside the scope of section 3 of the Law of Contract Act, and the court applied the equitable principles in Kitilit (via Public Trustee v Wanduru) that the Land Control Act does not apply to title arising by operation of law.
Whether transfers executed after the injunction of 6/11/2009 were illegal
No; the equity of redemption ended at the fall of the hammer, the 2nd defendant was not shown to know of the order, the order was not proved registered at the time of the transfers, and the original register was missing
Under Mbuthia v Jimba, Ze Yu, Bomet Beer and Kanyagia, the chargor's rights end on acceptance of a bid. The plaintiff bore the burden of proving the 2nd defendant's knowledge of the order and its registration on the title, but the register had been lost and reconstructed and the order contained no direction to the Registrar. Section 39 RLA protected purchasers for value without notice.
Whether the 2nd to 21st defendants are innocent purchasers for value
Yes; the 2nd defendant conducted physical and registry searches and bought at a properly advertised auction; downstream purchasers dealt with a regular title; the 21st defendant obtained LCB consent and was without notice
The 2nd defendant verified the charge entries and relied on the public advertisement; no duty lies on a purchaser at a properly advertised auction to inquire into the mortgagee's right to sell. The 4th to 19th defendants searched titles showing the 2nd defendant as unencumbered owner, and the 21st defendant did due diligence, obtained LCB consent on 7/5/2015, and found the injunctive orders only in 2018.
Limitation of the counter-claim
The counter-claim, filed without leave and seeking the post-auction balance, was time barred under section 4 of the Limitation of Actions Act and was struck out
A counter-claim is equivalent to a suit. The balance of the loan became a debt on 27 June 2009 when the chargee exercised its statutory power of sale, so the six-year period expired on 26 June 2015. The counter-claim dated 2017 was filed without leave and out of time.
Legal principles established
#- A chargor's equity of redemption is extinguished when a bid is accepted at a public auction in exercise of statutory power of sale; subsequent execution of transfers cannot be vitiated on that account
- The Agricultural Finance Corporation is a government body exempt from Land Control Board consent requirements under section 6(3)(b) of the Land Control Act
- A counter-claim is equivalent to a suit and a claim for recovery of a debt accruing after a chargee's sale is subject to the six-year limitation period
Court orders
#- 1.Plaintiff's suit dismissed for failure to prove the claim to the required standard
- 2.1st Defendant's counter-claim struck out for being time barred
- 3.Each party to meet their respective costs of the suit
- Jurisdiction invoked
- Original civil jurisdiction of the Environment and Land Court over title, charge and sale of land (Article 162(2)(b) Constitution context; not expressly cited in the judgment text)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Four Farms Limited v Agricultural Finance Corporation & 19 others [2020] KEELC 1364 (KLR)", Case Analysis (2020). Civil Case No 41 of 2009. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2020/1364/eng@2020-09-21
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.