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ELCDismissedNot stated in the excerpt (application dated 12th July 2021)· [2022] KEELC 1307 (KLR)

Coast Iron Engineering Limited v Noorjahan Ebrahim Adam & 2 others [2022] KEELC 1307 (KLR)

Environment and Land Court of Kenya
22 February 2022
NMN.A. Matheka
1,319 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A buyer of mortgaged property lost an injunction because the bank never consented to the sale and was not bound by the private agreement.

What this practically means

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Executive summary

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The Plaintiff moved the Environment and Land Court at Mombasa by a Notice of Motion dated 12th July 2021 seeking a temporary injunction restraining the Defendants from disposing of, selling, charging or interfering with Title CR 67477 Mainland North Section 1/20247 Apartment No. 22 Block B2, 2nd Floor, pending hearing of the suit. The Plaintiff relied on a sale agreement dated 10th May 2021 with the 1st Defendant for Kshs. 50,000,000/=, of which a 10% deposit of Kshs. 5,000,000/= was allegedly paid, and complained that the 1st Defendant refused to release completion documents while the 2nd Defendant's auctioneers advertised the property for sale pursuant to a 45 days redemption notice. The 2nd Defendant (a bank) responded that it had advanced a facility of Kshs. 40,000,000/= to the 1st Defendant under a Letter of Offer dated 14th April 2015; that the 1st Defendant defaulted; that statutory notices were served; and that the sale agreement with the Plaintiff was negotiated without the Bank's knowledge or written consent. Applying the Giella vs Cassman Brown principles, the court found as undisputed that the facility was disbursed, the charge was duly registered, the 1st Defendant was in default, and the statutory notices were served. The court held the 2nd Defendant a stranger to the sale agreement and thus not bound by it, and noted that clause 4.1.10 of the charge prohibited disposal of the charged property without the chargee's prior written consent, which the 2nd Defendant denied giving. The application was dismissed with costs.

Key legal issues

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01

Whether the Plaintiff established a prima facie case with a high probability of success

Holding

No. The Plaintiff did not dispute the facility disbursed to the 1st Defendant, the registered charge, the default, or service of statutory notices, and the 2nd Defendant was a stranger to the sale agreement

Reasoning

The court found as facts that the loan facility was disbursed, the charge was duly registered in favour of the 2nd Defendant, the 1st Defendant was in default, and the statutory notices had been served. The chargee was a stranger to the sale agreement between the Plaintiff and the 1st Defendant and could not be bound by it. Further, clause 4.1.10 of the charge prohibited the chargor from disposing of the charged property without the chargee's prior written consent, and no such consent was given.

p. 2

Legal principles established

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  • The principles for granting an interlocutory injunction are those in Giella vs Cassman Brown: prima facie case with high probability of success, irreparable injury not compensable by damages, and balance of convenience if in doubt
  • A chargee who is a stranger to a sale agreement over charged property cannot be bound by that agreement, especially where the charge instrument prohibits disposal of the charged property without the chargee's prior written consent

Court orders

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  1. 1.The Notice of Motion dated 12th July 2021 is dismissed with costs

Authorities

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Legislation

  • Environment and Land Court ActSections 13, 16, 19
  • Constitution of Kenya 2010Article 40
  • Civil Procedure Act Cap 21Sections 1A, 1B, 3, 3A, 63(e)
  • Civil Procedure Rules, 2010Order 40 Rules 1-4; Order 51 Rule 1
  • Land Registration Act 2012Sections 24, 25

Cases cited (1)

  • Giella vs Cassman Brown & Co Ltd
    (1973) EA 358
Jurisdiction invoked
Sections 13, 16 and 19 of the Environment and Land Court Act; Article 40 of the Constitution of Kenya 2010; Sections 1A, 1B, 3, 3A and 63(e) of the Civil Procedure Act; Order 40 Rules 1-4 and Order 51 Rule 1 of the Civil Procedure Rules, 2010; Sections 24 and 25 of the Land Registration Act 2012

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, "Coast Iron Engineering Limited v Noorjahan Ebrahim Adam & 2 others [2022] KEELC 1307 (KLR)", Case Analysis (2022). Not stated in the excerpt (application dated 12th July 2021). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2022/1307/eng@2022-02-22

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