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ELCDismissedNot stated in the judgment (companion ruling referenced: ELC No. E432 of 2021)· [2022] KEELC 346 (KLR)

Adam Mohamed Adam v Monarch Developers Limited & 2 others [2022] KEELC 346 (KLR)

Environment and Land Court
24 February 2022
OMOguttu Mboya
5,682 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 who purchased charged land without the bank's consent or a proper search lost their bid to stop the auction.

What this practically means

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Executive summary

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This was a ruling on the Plaintiff's Notice of Motion dated 14th December 2021 seeking temporary and mandatory injunctions to restrain the Defendants from selling, transferring, alienating or interfering with office premises on the 3rd floor, Office Space A3 of Doctors Plaza erected on L.R No 209/21739. The Plaintiff claimed to have bought the property from the 1st Defendant under an Agreement to Lease dated 16th December 2013, paid the entire consideration, but the 1st Defendant failed to execute the lease. Unknown to the Plaintiff, the property was charged to the 2nd Defendant, a bank which had taken over a facility from Diamond Trust Bank and advanced Kshs.450,000,000/- to the 1st Defendant. Following default, the 2nd Defendant issued statutory notices under Sections 90(2) and 96(2) of the Land Act and instructed valuers for a public auction. The 3rd Defendant, an advocate, had acted for Diamond Trust Bank in preparing the charge. The court framed three issues: prima facie case, irreparable loss and balance of convenience. It applied Mrao and Nguruman, held that the chargee's consent to any dealing with charged land was statutorily mandatory under Section 88 of the Land Act, and that privity of contract barred the Plaintiff's claims against the 2nd and 3rd Defendants. No prima facie case was established; any loss was compensable in monetary terms; and the balance of convenience favored the chargee whose statutory power of sale had ripened. The application was dismissed with costs to the 2nd and 3rd Defendants, in the same terms as the ruling in ELC No. E432 of 2021.

Key legal issues

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01

Whether the Plaintiff established a prima facie case with chances of success

Holding

No prima facie case was established against the 2nd and 3rd Defendants. The suit property was validly charged to the 2nd Defendant whose rights superseded the 1st Defendant's; the 1st Defendant could not transact over the property without the chargee's consent, and privity bars claims by the Plaintiff against the 2nd and 3rd Defendants.

Reasoning

Applying Mrao and Nguruman, the court found the charge in favour of the 2nd Defendant undisputed and its rights superior to the 1st Defendant's. Section 88 of the Land Act statutorily circumscribes dealings with charged land without the chargee's consent, making the consent mandatory. The transaction between the Plaintiff and the 1st Defendant did not involve or bind the 2nd Defendant, and the doctrine of privity of contract prevented the Plaintiff from enforcing charge-related rights against the chargee or the 3rd Defendant (advocate).

p. 5
02

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

Holding

No irreparable loss would be suffered; any loss is measurable in monetary terms (refund of purchase price, special damages, damages for breach of contract), and absent irreparable loss no temporary injunction can issue.

Reasoning

Adopting Nguruman, irreparable injury must be actual, substantial and not adequately compensable by damages. Here the Plaintiff's loss - recovery of the purchase price, perfection costs and proven damages for breach - was quantifiable in money. Kenya Commercial Finance Co. Ltd v Afraha Education Society was cited for the principle that even a strong prima facie claim does not warrant an injunction where damages are adequate.

p. 7
03

Where the balance of convenience tilts

Holding

The balance of convenience tilts in favor of the 2nd Defendant/Respondent, the legitimate chargee whose statutory rights had accrued and ripened.

Reasoning

The loan continued to attract interest and penalties, potentially outstripping the property's value; the 1st Defendant did not dispute the arrears or service of statutory notices, and no evidence showed the arrears were being serviced. By contrast, the Plaintiff transacted without due diligence which would have revealed the charge, leaving the 2nd Defendant exposed to non-recovery of the disbursed facility.

p. 8

Legal principles established

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  • A prima facie case in civil matters is one in which, on the material presented, a tribunal properly directing itself will conclude there exists a right apparently infringed by the opposite party so as to call for an explanation or rebuttal
  • A chargor may not lease, transfer or assign charged land without the previous written consent of the chargee, and dealing with charged property without the chargee's consent is a breach of implied covenants
  • The doctrine of privity of contract bars a person who is not a party to a contract from enforcing its rights or obligations
  • Irreparable loss is loss not compensable in monetary terms; where damages are an adequate remedy, no interlocutory injunction should normally be granted

Court orders

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  1. 1.The Notice of Motion Application dated the 14th December 2021 by the Plaintiff/Applicant be and is hereby Dismissed
  2. 2.Costs awarded to and/or in favor of the 2nd and 3rd Defendants/Respondents only
  3. 3.The Notice of Motion Application dated the 14th December 2021 be and is hereby Dismissed with costs, in the same terms as in ELC No. E432 of 2021, as parties had consented that the ruling in ELC E432 of 2021 applies to the subject matter

Authorities

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Legislation

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

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
  • American Cyanamid Co. v Ethicon Ltd
    [1975] AC 396
  • Ramanlal Trambaklal Hatt V. Republic
    [1957] E.A. 332
  • 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 land matters; no specific constitutional or statutory provision invoked in the judgment

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, "Adam Mohamed Adam v Monarch Developers Limited & 2 others [2022] KEELC 346 (KLR)", Case Analysis (2022). Not stated in the judgment (companion ruling referenced: ELC No. E432 of 2021). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2022/346/eng@2022-02-24

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