Rivalene Limited & 3 others v KCB Bank Kenya Limited & 2 others (Environment & Land Case E283 of 2021) [2022] KEELC 3402 (KLR)
The bottom line
#A Nairobi court blocked KCB from selling five occupied apartments whose buyers had paid and moved in before the bank registered its charge.
What this practically means
#Executive summary
#Key legal issues
#Whether the arbitration clause in the sale agreements ousts the court's jurisdiction
The court has jurisdiction; the dispute is against the 1st Defendant who is not a party to the sale agreements, and the 2nd Defendant did not apply for a stay timeously while also impugning the very agreements.
The court held the dispute is not strictly one arising from the sale agreements since the injunction is sought principally against the 1st Defendant chargee, a stranger to the arbitral clauses. Section 6(1) of the Arbitration Act requires a stay application at the time of entering appearance, which was not done. Further, the 2nd Defendant both relied on and attacked the sale agreements, which the court condemned as approbating and reprobating.
Whether the 3rd Defendant, a director of the 2nd Defendant, was improperly enjoined
At the interlocutory stage the court could not find the 3rd Defendant improperly joined, since particularized allegations of fraud against him engage the exception to separate corporate personality and must be determined at trial.
While reaffirming Salomon v Salomon and the rule that an agent of a disclosed principal is not liable to be sued, the court noted fraud as a recognized ground for lifting the corporate veil. The Plaint particularized fraud and misrepresentation against the 3rd Defendant, and whether personal liability attaches is a matter for trial, not summary determination on affidavits.
Whether the Plaintiffs established a prima facie case for a temporary injunction
Yes. The Plaintiffs purchased and occupied the apartments before the charge to the 1st Defendant; the partial discharges on the mother title and occupation should have put the 1st Defendant on notice of their beneficial interest.
The court found the Plaintiffs paid for and occupied the apartments between 2013 and 2017, while the 2nd Defendant registered the sub-leases in its own name and charged them on the same day. The Defendants produced no evidence of tenancy, rent arrears or 21-day default notices under the sale agreements. The chargee's search would have revealed partial discharges indicating third-party beneficial interests, warranting postponement of the bank's interest if proved at trial.
Whether the Plaintiffs would suffer irreparable injury not compensable by damages
Yes; sale would destroy the substratum of the suit and displace the Plaintiffs from their homes since 2013, rendering them destitute.
The court accepted that the suit properties are the Plaintiffs' homes and that their loss before the hearing would cause irreparable injury not compensable by costs. The sequential Giella/Nguruman thresholds were satisfied.
Legal principles established
#- An arbitration agreement binds only parties to the agreement, not non-parties; a bank charged with property is not bound by arbitration clauses in sale agreements between the purchaser and the developer.
- A party wishing to rely on an arbitration clause must apply for reference to arbitration at the time of entering appearance or before it.
- Where a purchaser in occupation has a prior beneficial interest and the chargee had or ought to have had notice of it, the chargee's interest may be postponed to the purchaser's.
- Conflicting interests in land are resolved by the order of creation rule subject to the order of notice rule and exceptions of fraud, estoppel and gross negligence.
- The corporate veil may be lifted where there is fraud or improper conduct; whether it should be lifted is a matter for trial.
Court orders
#- 1.Pending the hearing and determination of the suit, the 1st, 2nd and 3rd Defendants whether by themselves, their employees, assigns, and/or agents are restrained from selling, transferring, taking possession of or in any way dealing with the suit properties being Apartment Numbers A9, B1, B2, B4 & C7 at Rings view Estate erected on Land Reference Number 4858/11
- 2.The Defendants to pay the costs of the application
- Jurisdiction invoked
- Original jurisdiction of the Environment and Land Court over land and charges over land (article 162(2)(b) of the Constitution implied; no provision expressly cited in the judgment)
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (1)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Kaburu & 17 others v Kanyi & 5 others (Environment & Land Case E009 of 2024) [2025] KEELC 1159 (KLR)[2025] KEELC 1159 (KLR)6 Mar 2025
Cite this brief
#Cite this brief
Caselaw, "Rivalene Limited & 3 others v KCB Bank Kenya Limited & 2 others (Environment & Land Case E283 of 2021) [2022] KEELC 3402 (KLR)", Case Analysis (2022). . Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2022/3402/eng@2022-05-26
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.