Donald Earle Smith & another v Kenya Deposit Insurance Corporation (As Receiver of Chase Bank Limited) & another [2022] KEELC 1953 (KLR)
The bottom line
#A Kenyan court struck out a Kshs.678 million land dispute against Chase Bank's receiver because the lawsuit was filed without the required court permission.
What this practically means
#Executive summary
#Key legal issues
#Jurisdiction of the ELC over a charge dispute
The ELC has jurisdiction because the Plaintiffs dispute the creation of an enforceable interest by alleging illegality and/or fraud, and the pleadings raise a land-use question on the development of the properties; further, charges are creatures of the Land Act, 2012
The court distinguished Kang'ethe, where the charge instrument and creation of enforceable interest were not disputed. Here the Plaintiffs seek discharge of the charge for illegality or fraud, disputing creation of an enforceable interest. The Defence also put to strict proof the claim that the properties carry a cottage and family restaurant, inviting determination of a land-use fact. Section 2 and Section 150 of the Land Act, 2012 vest charge disputes in the ELC.
Proper parties / misjoinder
Grounds 3 and 4 of the preliminary objection failed; misjoinder is curable under Order 1 Rule 10(2) and cannot sustain a preliminary objection
The court held that questions of improper joinder are addressed by Order 1 Rule 10(2) of the Civil Procedure Rules, which permits striking out or adding parties at any stage. Such a defect does not invalidate the suit and is not a pure point of law suitable for a preliminary objection.
Leave under Section 56(2) of the Kenya Deposit Insurance Act
Ground 5 succeeded: the suit, touching on the assets of a bank in receivership and seeking USD 1,000,000 held by it, was filed without the court's sanction and was therefore defective
Section 56(2) of the Kenya Deposit Insurance Act, 2012 prohibits commencement of civil proceedings against an institution in receivership or in respect of its assets without the sanction of the Court. It was undisputed that no leave was sought. The relief claiming USD 1,000,000 held by the Bank showed the suit touched the institution's assets. Following Muchai v Chase Bank, the court struck out the suit.
Legal principles established
#- Where the creation of a charge and an enforceable interest over land are disputed, the dispute falls within the jurisdiction of the Environment and Land Court
- A charge is a creation of the Land Act, 2012, whose disputes are for the Environment and Land Court under Section 150
- Misjoinder of parties is not fatal to a suit and cannot be raised as a valid preliminary objection
- A party suing a company under receivership must seek the Court's leave before commencing suit against it
Court orders
#- 1.The Plaintiffs' suit is struck out
- 2.Costs of the suit awarded to the Defendants
- Jurisdiction invoked
- Article 162(2)(b) of the Constitution and Section 13 of the Environment and Land Court Act (jurisdiction of the ELC); Preliminary Objection under the Kenya Deposit Insurance Act, 2012
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Donald Earle Smith & another v Kenya Deposit Insurance Corporation (As Receiver of Chase Bank Limited) & another [2022] KEELC 1953 (KLR)", Case Analysis (2022). Not stated in judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2022/1953/eng@2022-01-27
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.