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ELCDismissedNot stated in the judgment as provided· [2020] KEELC 2868 (KLR)

Woodcrest Investment Co. Ltd & 2 others v Jamii Bora Bank Limited & another [2020] KEELC 2868 (KLR)

Environment and Land Court
7 May 2020
JKJ G Kemei
7,254 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~29 min to read original · ~4 min brief

The bottom line

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The Environment and Land Court dismissed borrowers' attempt to stop Co-operative Bank selling their charged land, confirming that a disputed debt doesn't block a lawful sale.

What this practically means

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Executive summary

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The Plaintiffs constructed hostels near Murang'a University using loan facilities of Kshs 17 million and Kshs 6.7 million from Co-operative Bank of Kenya, secured by charges over three parcels of land, and executed deeds of assignment of rental income. They sued after the bank issued statutory notices and auctioneer notifications of sale, seeking a permanent injunction, a mandatory injunction compelling the University to allocate students to their hostels and remit rents to the bank, a declaration of performance and discharge of the charge, damages, and costs. They alleged a tripartite Memorandum of Understanding between the bank, the University and the County Government of Murang'a under which the University would allocate students and collect rent, and invoked estoppel by representation. The bank asserted admitted default and due issuance of statutory notices under Sections 90 and 96 of the Land Act; the University denied any agreement to allocate students or collect rent. The court found no signed tripartite agreement was produced, and the Plaintiffs' own witness admitted there was no agreement with the University and no counterchecking of a back-end contract. It held there was no privity between the Plaintiffs and the University, declined the mandatory injunction, found the Plaintiffs in admitted default, and held no prima facie case or irreparable harm existed, the charged land being a commercialized security. The suit was dismissed with costs to the Defendants, and the bank's statutory power of sale was expressly preserved.

Key legal issues

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01

Privity of contract between Plaintiffs and the 2nd Defendant

Holding

No tripartite agreement existed; the only contracts were between the Plaintiffs and the 1st Defendant

Reasoning

The Plaintiffs did not produce any signed MOU or agreement with the University. Their own witness admitted no agreement on student allocation existed and that the University was not a party to the charge. Marketing materials were subject to 'terms and conditions apply', and no executed agreement was tabled, so misrepresentation and estoppel claims failed.

p. 5
02

Entitlement to permanent injunction against exercise of statutory power of sale

Holding

Refused; Plaintiffs in admitted default and statutory notices under Sections 90 and 96 of the Land Act were duly issued

Reasoning

The charge document clearly spelt out events of default; bank statements showed arrears of Kshs 29.1 million; the Plaintiffs admitted indebtedness and did not rebut the statutory notices. Following Giella v Cassman Brown and Halsbury's, a disputed debt does not restrain a properly exercised power of sale.

p. 7
03

Irreparable harm

Holding

No irreparable loss; damages are foreseeable where land is charged as security

Reasoning

Relying on Kitur v Standard Chartered Bank, once property is charged as security it becomes a commodity for sale upon default, and the chargor cannot claim loss incapable of compensation by damages.

p. 7

Legal principles established

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  • A mortgagee/chargee will not be restrained from exercising the power of sale merely because the amount due is in dispute, where the chargor is in default
  • Land offered as security for a loan becomes commercialized and the chargor cannot claim irreparable loss from a lawful sale

Court orders

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  1. 1.Dismissal of the Plaintiffs' suit
  2. 2.Costs of the suit payable by the Plaintiffs to the Defendants
  3. 3.For avoidance of doubt, the bank retains its right to exercise its statutory power of sale as provided by law

Authorities

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Legislation

  • Evidence ActSection 107
  • Land ActSections 90(1)-(3), 96(1)-(2)
  • Civil Procedure RulesOrder 2 Rule 15; Order 21 Rule 1

Cases cited (4)

  • Giella vs Cassman Brown and Co. Ltd
    (1973) EA 358
  • Mrao vs First American Bank of Kenya Ltd & Two Others
    C.A. No. 39 of 2002 (2003 eKLR)
  • John P.O Mutere & Another vs Kenya Commercial Bank Ltd
    HCCC No. 3125 of 1995
  • Kitur Vs Standard Chartered Bank & 2 others
    (2002) EKLR
Jurisdiction invoked
First-instance civil suit on land charge and contract before the Environment and Land Court

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, "Woodcrest Investment Co. Ltd & 2 others v Jamii Bora Bank Limited & another [2020] KEELC 2868 (KLR)", Case Analysis (2020). Not stated in the judgment as provided. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2020/2868/eng@2020-05-07

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