Shalom Agencies Limites & another v Family Bank Limited [2022] KEELC 358 (KLR)
The bottom line
#A Kenyan court dismissed landowners' attempt to stop Family Bank selling their charged land, holding they were bound by consolidation clauses in the charge document.
What this practically means
#Executive summary
#Key legal issues
#Whether the 2nd Plaintiff (chargor) is bound by the consolidation clauses in the charge
Yes; the 2nd Plaintiff executed the first charge before an advocate and is bound by clauses 14 and 29, which permitted consolidation without notice, although the 2nd Plaintiff was not party to the second charge
The court accepted the 2nd Plaintiff was not a party to the second charge, invoking privity via Agricultural Finance Corporation v Lengetia. However, having signed the first charge in the presence of an advocate, he was presumed to understand its contents. Clauses 14 and 29 reserved the bank's right to consolidate securities and to combine accounts without notice, so the bank could not be faulted for consolidating without notifying him.
Whether consolidation of the two facilities was justified and whether an injunction should issue
Yes; both facilities were operated on one loan account which remains in arrears, so the statutory power of sale cannot be restrained
Although the KShs.750,000 loan was repaid, the statement of account showed one consolidated loan account still in arrears. The first securities were the Remjius Nyakina Otieno parcels, and the Nation Media guarantee was paid after the suit-title charge was registered. The court could not determine when the first loan was cleared relative to the guarantee payment, and since indebtedness was not denied, the injunction could not issue.
Whether the defence should be struck out for want of memorandum of appearance and late filing
No; the notice of appointment served the purpose of an address for service and the late defence, filed two years before hearing, occasioned no prejudice
The court held the purpose of a memorandum of appearance is to provide an address for service, and a notice of appointment had been filed. The defence was filed two years before hearing commenced, so no prejudice was shown. Article 159 of the Constitution requires substantive justice over technical objections, and striking out a defence at submissions stage without hearing the defendant would offend fair hearing rights.
Legal principles established
#- A court cannot rewrite a contract between parties; parties are bound by contractual terms absent coercion, fraud or undue influence
- A contract affects only the parties to it and cannot be enforced by or against a person who is not a party (privity)
- Substantive justice under Article 159 of the Constitution prevails over procedural technicalities such as late filing of a defence before hearing
Court orders
#- 1.The Plaintiffs' suit is dismissed
- 2.No order on costs
- Jurisdiction invoked
- Original civil jurisdiction of the Environment and Land Court over land charges and threatened exercise of statutory power of sale
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Shalom Agencies Limites & another v Family Bank Limited [2022] KEELC 358 (KLR)", Case Analysis (2022). Civil Case No. 151 of 2016. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2022/358/eng@2022-04-21
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.