Eastmore School Limited & another v Faulu Microfinance Bank Limited & another [2020] KEELC 2978 (KLR)
The bottom line
#The court dismissed a school's bid to stop a bank auctioning its charged land, confirming that banks can sell if statutory notices are properly served.
What this practically means
#Executive summary
#Key legal issues
#Whether the plaintiffs established a prima facie case for an interlocutory injunction
No prima facie case was established; the application was overtaken by events since the threatened sale date had passed
The court applied the Giella test sequentially as explained in Nguruman. The plaintiffs' own material showed acknowledged default and arrears. The statutory notices under sections 90 and 96 of the Land Act were properly issued and served by registered post. The only defect was non-advertisement of the 1st August 2019 auction, but that date had passed, so there was no present threat of violation of any right to be restrained.
Whether the statutory notices under sections 90(1) and 96(2) of the Land Act were validly issued and served
The notices dated 10th May 2018 and 18th January 2019 were validly issued and served by registered post to the chargor's postal address in the charge documents
The notice dated 10th May 2018 was addressed to the 1st plaintiff and copied to the 2nd plaintiff, sent by registered post to the postal address specified in the charge documents, and complied with section 90(2). The chargor was also a director of the borrower. The notice to sell dated 18th January 2019 similarly complied with section 96(2) and section 90(3). The argument that copying rather than addressing the notice to the chargor rendered it defective was rejected.
Whether the failure to advertise the auction and conduct a forced sale valuation warranted an injunction
Although non-advertisement under rule 16(2) appeared valid as a complaint, it related to a sale whose date had passed, so no restraint could issue against a future compliant sale
The court accepted that no advertisement for the 1st August 2019 auction was exhibited, so the plaintiffs' contention seemed valid. However, the failure related to a proposed sale whose date was now past. Any future auction would have to meet the advertisement and valuation requirements, and the court could not restrain the bank from holding a lawful future sale. The prayer was therefore moot.
Legal principles established
#- A dispute as to the amount owing under a charge alone cannot be a basis for granting an injunction to restrain a chargee from exercising the power of sale
- A notice under section 90(1) of the Land Act is not defective merely because the chargor is copied rather than addressed, provided the chargor is adequately informed of the matters specified under section 90(2)
- There is no legal basis for requiring a fresh notification of sale and 45-day redemption notice merely because an auction is rescheduled to a new date
- An injunction will not issue to restrain a future sale by a chargee where the chargee may still comply with the law before that sale
Court orders
#- 1.Notice of Motion dated 29th July 2019 is dismissed
- 2.Costs shall be in the cause
- Jurisdiction invoked
- Original civil jurisdiction over the suit (interlocutory application in a plaint filed 26th July 2019); ruling delivered under the Chief Justice's Practice Directions on remote delivery during the COVID-19 pandemic
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Eastmore School Limited & another v Faulu Microfinance Bank Limited & another [2020] KEELC 2978 (KLR)", Case Analysis (2020). Not stated in the judgment (plaint filed 26th July 2019; Notice of Motion dated 29th July 2019). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2020/2978/eng@2020-04-30
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.