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ELCDismissedNot stated in the judgment (ruling applies also to ELC E426 of 2021, ELC E427 of 2021, E432 of 2021 & ELC E429 of 2021)· [2022] KEELC 263 (KLR)

Salim Mohamed Afzai v Monarch Developers Limited & 2 others [2022] KEELC 263 (KLR)

Environment and Land Court
24 February 2022
OMOguttu Mboya
5,676 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~23 min to read original · ~4 min brief

The bottom line

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A property buyer's attempt to stop a bank selling charged land failed because he never got the bank's consent before signing his lease.

What this practically means

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Executive summary

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This is a ruling of the Environment and Land Court at Nairobi (Oguttu Mboya, J) delivered on 24 February 2022 on a Notice of Motion dated 15 December 2021 in which the Plaintiff, purchaser of 3rd-floor office space A3 of Doctors Plaza on L.R No 209/21739, sought temporary and mandatory injunctions restraining the Defendants from selling, alienating or interfering with the suit property. The Plaintiff claimed under a written Agreement to Lease dated 16 December 2013 with the 1st Defendant, whose consideration he allegedly paid in full. The 2nd Defendant, a bank which took over a facility from Diamond Trust Bank and registered a charge securing Kshs 450,000,000, had issued statutory notices under Sections 90(2) and 96(2) of the Land Act after default. The 3rd Defendant, an advocate who had prepared the original charge for Diamond Trust Bank, denied any duty to the Plaintiff. Framing three issues - prima facie case, irreparable loss and balance of convenience - the court applied Mrao Ltd and Nguruman. It held that the chargee's registered rights superseded the chargor's, that dealings with charged land required the chargee's consent under Section 88 of the Land Act, and that privity of contract (per Savings & Loans) barred the Plaintiff's claims against the 2nd and 3rd Defendants. No prima facie case was established; any loss was compensable in money; and the balance of convenience favoured the chargee, whose statutory power of sale had ripened while arrears accrued. The application was dismissed with costs to the 2nd and 3rd Defendants only, and by the parties' consent the same orders applied to the sister files ELC E426, E427, E432 and E429 of 2021.

Key legal issues

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01

Whether the Plaintiff established a prima facie case against the Defendants

Holding

No. The suit property was validly charged to the 2nd Defendant; the Plaintiff's transaction with the 1st Defendant lacked the chargee's consent, and privity of contract bars the Plaintiff's claim against the 2nd Defendant. No cause of action is disclosed against the 3rd Defendant, an advocate who acted for the Bank, not the Plaintiff.

Reasoning

Applying Mrao Ltd and Nguruman, the court found the chargee's rights over the property superseded those of the chargor. The chargor could not deal with the property without the chargee's consent as required by Section 88 of the Land Act. The 2nd Defendant, having taken over the facility and registered a charge, was a stranger to the Agreement to Lease, invoking privity of contract per Savings & Loans. Against the 3rd Defendant, no professional duty was owed to the Plaintiff.

p. 7
02

Whether the Plaintiff would suffer irreparable loss if the injunction were not granted

Holding

No. Any loss is measurable in monetary terms - recovery of purchase price, special damages and damages for breach of contract.

Reasoning

Adopting Nguruman and Kenya Commercial Finance Co. Ltd v Afraha Education Society, the court held that irreparable injury is that which cannot adequately be compensated by damages. The Plaintiff's alleged loss was quantifiable, and the absence of irreparable loss independently disqualifies an interim injunction.

p. 7
03

Where the balance of convenience lies

Holding

It tilts in favor of the 2nd Defendant/Respondent, the legitimate chargee whose statutory power of sale has ripened.

Reasoning

The loan arrears were accruing interest and penalties and were not being serviced, exposing the 2nd Defendant to loss beyond the value of the property. The Plaintiff, by contrast, failed to exercise due diligence before contracting over a property that was manifestly charged.

p. 8

Legal principles established

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  • A chargor cannot deal with or transact over charged land, including leasing or transferring it, without the written consent of the chargee, as statutorily circumscribed by Section 88 of the Land Act, 2012.
  • The doctrine of privity of contract bars a person who was not a party to a contract from enforcing the rights and obligations arising under it.
  • Without irreparable loss, a temporary injunction cannot issue even where a prima facie case is established.

Court orders

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  1. 1.The Notice of Motion Application dated the 15th December 2021 by the Plaintiff/Applicant is dismissed
  2. 2.Costs awarded to and in favor of the 2nd and 3rd Defendants/Respondents only
  3. 3.The Notice of Motion Applications filed in the sister files (ELC E426 of 2021, ELC E427 of 2021, E432 of 2021 & ELC E429 of 2021) are similarly dismissed on same terms, pursuant to the parties' consent

Authorities

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Legislation

  • Constitution of Kenya, 2010Article 40
  • Land Act, 2012 (2016)Sections 90(2), 96(2), 88(1)

Cases cited (12)

  • Mrao Ltd vs First American Bank of Kenya Ltd & 2 others
    [2003] eKLR
  • Nguruman Ltd vs Jan Bonde Nielsen & 2 others
    [2014] eKLR
  • Ramanlal Trambaklal Hatt V. Republic
    [1957] E.A. 332
  • American Cyanamid Co. Ethicon Ltd
    [1975] AC 396
  • Savings & Loans (K) Limited vs Kanyenje Karangaita Gakombe & Another
    [2015] eKLR
  • DUNLOP PNEUMATIC TYRE CO LTD V SELFRIDGE & CO LTD
    [1915] AC 847
  • AGRICULTURAL FINANCE CORPORATION V LENGETIA LTD
  • KENYA NATIONAL CAPITAL CORPORATION LTD V ALBERT MARIO CORDEIRO & ANOTHER
  • WILLIAM MUTHEE MUTHAMI V BANK OF BARODA
  • SHANKLIN PIER V DETEL PRODUCTS LTD
    [1951] 2 KB 854
  • DARLINGTON BOUROUGH COUNCIL V WITSHIRE NORTHERN LTD
    [1995] 1 WLR 68
  • Kenya Commercial Finance Co. Ltd V. Afraha Education Society
    [2001] Vol. 1 EA 86
Jurisdiction invoked
Original civil jurisdiction of the Environment and Land Court over the suit property L.R No 209/21739; interlocutory application under civil procedure (Notice of Motion).

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, "Salim Mohamed Afzai v Monarch Developers Limited & 2 others [2022] KEELC 263 (KLR)", Case Analysis (2022). Not stated in the judgment (ruling applies also to ELC E426 of 2021, ELC E427 of 2021, E432 of 2021 & ELC E429 of 2021). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2022/263/eng@2022-02-24

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