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ELCPartially AllowedELC No. 15 of 2017 (O.S) (Thika), consolidated with Thika ELC No. 74 of 2019· [2020] KEELC 1984 (KLR)

Kenwood Property Developers Limited v Family Bank Limited; Onesmus Ngige Munyambu & another (Interested Parties) [2020] KEELC 1984 (KLR)

Environment and Land Court
18 June 2020
LGL. Gacheru
8,962 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~36 min to read original · ~4 min brief

The bottom line

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A Kenyan court stopped Family Bank from auctioning Thika property because the bank sent statutory sale notices to the wrong address, voiding the sale process.

What this practically means

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Executive summary

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The Plaintiff, owner of L.R No. 8361/3 and 8361/4 (Kenwood Villas, Thika), borrowed Kshs. 93,400,000 from Family Bank in 2011 to develop 13 residential villas, securing the loan with a charge over the parent title. After default and failed restructuring, the Bank issued a 45-day Redemption Notice and advertised an auction. The Plaintiff sued seeking declarations that the notices were a nullity and that the interest charged was unconscionable, accounts, an independent valuation and a permanent injunction. Two villa purchasers (Interested Parties) obtained consolidation of their Originating Summons seeking partial discharge of Villas No. 1 and 6 and declarations of ownership. The court framed five issues, first holding that while it lacked jurisdiction over the accounting and interest prayers (following Cooperative Bank v Kangethe Njuguna), it had jurisdiction under Article 162(2)(b) and Section 13 of the ELC Act over the validity of the statutory notices, valuation and injunction. On the evidence, the statutory notices and certificate of postage showed dispatch to a Nairobi address instead of the Plaintiff's Thika address in the letter of offer; applying Nyagilo Ochieng, the court held the notices were a nullity for want of compliance with Sections 90 and 96 of the Land Act. Prayers (a), (d) and (e) were allowed; the accounting prayers were declined for want of jurisdiction. The Interested Parties' summons was dismissed entirely because they had not completed payment of the purchase price. As the Plaintiff remained in default, each party was ordered to bear its own costs. Judgment delivered online on 18th June 2020 pursuant to COVID-19 directives.

Key legal issues

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01

Jurisdiction of the ELC over a banker-borrower dispute involving a charge

Holding

The ELC has jurisdiction over the validity of the redemption notices, valuation and injunction, but not over prayers for accounts and interest.

Reasoning

Relying on Cooperative Bank v Patrick Kangethe Njuguna, the court accepted that accounting questions belong to the High Court. However, following Lydia Nyambura Mbugua v Diamond Trust Bank, the process of sale by a chargee is governed by the Land Act and Land Registration Act, over which the ELC has jurisdiction under Article 162(2)(b) and Section 13 of the ELC Act. The suit raised land issues alongside the accounting issue, so jurisdiction was partial.

p. 7
02

Validity of the statutory notices

Holding

The Auctioneer's Redemption Notice and Notification of Sale were a nullity as they were sent to a wrong Nairobi address rather than the Plaintiff's Thika address.

Reasoning

The letter of offer gave the Plaintiff's address as P.O. Box 1676-00100 Thika, but the statutory notices and certificate of postage showed dispatch to a Nairobi address. Applying Nyagilo Ochieng, once non-receipt is alleged the chargee must prove posting and service; the Defendant failed to do so. Non-compliance with sections 90 and 96 of the Land Act rendered the notices a nullity.

p. 9
03

Interested Parties' entitlement to discharge of their villas

Holding

The Interested Parties' Originating Summons was dismissed in its entirety because they had not completed payment of the purchase price.

Reasoning

The purchasers had paid about 98% of the price but not the balance, and ownership passed only on completion of payment. As the redemption notice was a nullity, the Plaintiff retained ownership of the villas, so partial discharge could not be ordered until the purchasers fulfilled all their obligations. The arbitration objection by the bank failed since the bank was not party to the sale agreements.

p. 10
04

Costs

Holding

Although the Plaintiff partially succeeded, each party was to bear its own costs because the Plaintiff remained in default of the loan facility.

Reasoning

Section 27 of the Civil Procedure Act confers discretion on costs. The successful party normally gets costs, but the court noted the Plaintiff had partially succeeded yet remained in default of the facility; it should not benefit from its default. The court therefore ordered each party to bear its own costs.

p. 10

Legal principles established

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  • Once a chargor alleges non-receipt of statutory notices, the burden shifts to the chargee to prove that the notices were sent to the correct address; notices sent to the wrong address are a nullity.
  • The ELC has jurisdiction over disputes concerning the exercise of a chargee's statutory power of sale under the Land Act, though not over pure accounting questions.
  • Service of an adequate statutory notice and notification of sale are conditions precedent to the valid exercise of the statutory power of sale; a sale conducted without them is void.

Court orders

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  1. 1.Declaration that the service of the Auctioneer's 45 Days Redemption Notice and Notification of Sale was a nullity in law (prayer a)
  2. 2.Order directing that the suit property be valued by an independent valuer (prayer d)
  3. 3.Permanent injunction restraining the Defendant from selling, alienating or interfering with L.R No. 8361/3 and 8361/4 (Kenwood Villas) by public auction or otherwise (prayer e)
  4. 4.Dismissal of the Originating Summons dated 24th April 2019 by the Interested Parties in its entirety
  5. 5.Each party to bear its own costs

Authorities

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Legislation

  • Constitution of Kenya, 2010Article 162(2)(b)
  • Environment and Land Court ActSection 13
  • Land Act No. 6 of 2012Sections 90(1) and 96(1),(2)
  • Land Registration Actnot specified
  • Registered Land Act (Cap 300) (repealed)Sections 74(1) and 77(3)
  • Civil Procedure ActSection 27
  • Interpretation and General Provisions Act (Cap 2)Section 3(5)
  • Civil Procedure RulesOrder 21 rule 1

Cases cited (7)

  • Cooperative Bank of Kenya v Patrick Kangethe Njuguna
    (2017)
  • Lydia Nyambura Mbugua v Diamond Trust Bank Kenya Limited & another
    [2018] eKLR
  • Stephen Kibowen v Agricultural Finance Corporation
    (2015) eKLR
  • Alphose Yankulije v One Twiga Road Limited & 2 others
    [2019] eKLR
  • R Karisa Chengo & 2 Others
    (2017) eKLR
  • Nyagilo Ochieng & Another v Fanuel Ochieng & 2 Others
    Civil Appeal No. 148 of 1995 [1995-1998] 2 EA 260
  • Martha Khayanga Simiyu v Housing Finance Co. of Kenya & 2 Others
    Nairobi HCCC No. 937 of 2001 [2001] 2 EA 540
Jurisdiction invoked
Article 162(2)(b) of the Constitution; Section 13 of the Environment and Land Court Act

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (3)

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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, "Kenwood Property Developers Limited v Family Bank Limited; Onesmus Ngige Munyambu & another (Interested Parties) [2020] KEELC 1984 (KLR)", Case Analysis (2020). ELC No. 15 of 2017 (O.S) (Thika), consolidated with Thika ELC No. 74 of 2019. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2020/1984/eng@2020-06-18

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