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ELCPartially AllowedEnvironment & Land Case 209 of 2019· [2023] KEELC 21587 (KLR)

Masakha v Family Bank of Kenya & 2 others

Environment and Land Court of Kenya
6 November 2023
LNL.L. Naikuni
22,290 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~89 min to read original · ~4 min brief

The bottom line

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A Kenyan court blocked Family Bank from auctioning a Mombasa property because the bank sent statutory notices to the wrong address.

What this practically means

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Executive summary

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The Plaintiff, joint registered proprietor of Title No. Mombasa/Municipality/Block/2/5 with his wife, sued Family Bank, its auctioneer and the borrower company after the suit property was advertised for auction in November 2019. He claimed the Charge dated 30th May 2016 securing Kshs 6,300,000 was registered without his consent, that the initial facility it secured was repaid in full, and that subsequent facilities of up to Kshs 45,400,000 were advanced on his title without notice, with statutory notices sent to a wrong postal address. He sought declarations that the charge, the banking facilities and the statutory notices were null and void, discharge of the charge, and general and aggravated damages. The 1st Defendant defended the suit, contending the charge was a continuing security validly executed, that notices were properly served, and, belatedly in submissions, that the ELC lacked jurisdiction over what was a commercial charge dispute. The Court framed four issues. It held it had jurisdiction over title, use and occupation issues including the validity of the statutory and auctioneer's notices, but not over accounting issues relating to the loan facility, declining to determine prayers 2, 3 and 4. On the merits, it found the notices were sent to a wrong address and, the chargee having failed to prove posting and receipt, declared the statutory notices and advertisement for sale null and void, barring the sale until proper notice and procedure are followed. It granted prayers 1 and 5 only, refused discharge of the charge and damages, and ordered each party to bear its own costs.

Key legal issues

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01

Jurisdiction of the ELC over disputes on charges and statutory power of sale

Holding

The Court has jurisdiction over issues of title, use and occupation of land including validity of statutory notices and auctioneer's notices, but not over pure accounting issues relating to the loan facility

Reasoning

Relying on Article 162(2)(b), Section 13 of the ELC Act, Sections 150 of the Land Act and 101 of the Land Registration Act, the Court held that challenges to the title being used as collateral and to the statutory and auctioneer's notices fall within the ELC. However, accounting disputes over the loan facility belong elsewhere, and the matrimonial property division aspect is severable.

p. 31
02

Service of statutory notices to a wrong address

Holding

The statutory notices and notification of sale sent to a wrong postal address were a nullity; the chargee failed to prove posting and receipt

Reasoning

The Plaintiff's address in the offer letter (P.O. Box 92233) differed from the address used in the charge (93232) and his claimed address (93231). Citing Nyagilo Ochieng and Martha Khayanga Simiyu, the Court held that once non-receipt is alleged, the chargee must prove posting; a file copy is not proof of posting, and notices to a wrong address are no notice at all.

p. 34
03

Entitlement to discharge of the charge and damages

Holding

Prayers for discharge of the charge and general/aggravated damages were refused; the guarantor did not prove entitlement

Reasoning

The Court noted the charge contained a continuing security clause and that discharge required a formal request under Clause 40 which was never made. As guarantor of a defaulted loan, the Plaintiff failed to prove entitlement to general or aggravated damages, which are not automatic.

p. 36

Legal principles established

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  • Once a chargor/guarantor alleges non-receipt of statutory notices, the burden shifts to the chargee to prove that the notices were sent; notices sent to a wrong address are a nullity
  • Service of an adequate statutory notice and notification of sale are conditions precedent to the valid exercise of statutory power of sale

Court orders

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  1. 1.Judgment entered partially in favour of the Plaintiff against the 1st, 2nd and 3rd Defendants strictly with regard to prayers numbers 1 and 5 of the Plaint dated 22nd November, 2019
  2. 2.A declaration that land title no. Mombasa/Municipality/Block/2/5 being matrimonial property is subject to the provisions of Sections 28(a) and 93(1), (2), (3) and (4) of the Land Registration Act, 2012
  3. 3.A declaration that the statutory notices and advertisement for sale issued by the 2nd Defendant in respect of Title No. Mombasa/Municipality/Block/2/5 on the instructions of the 1st Defendant are null and void
  4. 4.Each party to bear its own costs

Authorities

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Legislation

  • Constitution of Kenya, 2010Article 162(2)(b)
  • Environment and Land Court ActSection 13
  • Land ActSections 84(2), 86, 90, 96(2), 150
  • Land Registration Act, 2012Sections 28(a), 93(1)-(4), 101
  • Evidence ActSection 107
  • Civil Procedure ActSection 27(1); Section 3A; Order 11
  • Law of Contract ActCap 23
  • Matrimonial Property ActNo. 49 of 2013
  • Registered Land Act (repealed)Sections 74(1), 77(3), 82
  • Auctioneers ActRule 15
  • Interpretation and General Provisions ActSection 3(5)
  • Companies ActCap 486

Cases cited (25)

  • Surya Holdings Limited & 4 others v ICICI Bank Limited & another [2015] eKLR

    Guarantors must have a say on and consent to consolidation or extra load on securities

  • Abraham K. Kiptanui v Delphis Bank Limited & Another Nairobi (Milimani Commercial Courts) HCCC No.1864 of 1991

    Requiring a second account without guarantor's consent discharges the guarantor

  • George Williams Omondi & another v Co-operative Bank of Kenya Ltd & 2 others [2016] eKLR

    Surety discharged where alteration to principal contract not consented to

  • Equip Agencies Limited v I & M Bank Limited (2017) eKLR

    Doctrine of continuing security and its limits in banking transactions

  • Harilal & Co. & Another v The Standard Bank Limited (1967) EA 512

    Surety ought to be consulted on alterations to the guaranteed contract

  • Kisimani Holdings Limited & another v Fidelity Bank Limited [2013] eKLR

    Section 84 Land Act requires signed memorandum to increase secured amount

  • Gakenga v Consolidated Bank of Kenya Limited & 2 others (Civil Case 13 of 2018) (2022) KEHC 436 (KLR)

    Chargee cannot exercise statutory powers beyond the amount committed in the charge

  • Robert Kipyegon Chepkwony v Barclays Bank of Kenya Limited & Another (2019) eKLR

    A notice sent to the wrong address is no notice at all

  • Peter Ngure v Pioneer Building Society (In liquidation) (2014) eKLR

    Equity of redemption extinguished only by strict compliance with the law

  • Miguna Miguna v The Standard Group Limited & 4 Others (2017) eKLR

    Aggravated damages awarded for improper motive

  • Keter v Ecobank Kenya Limited (Civil Case 16 of 2018) [2023] KEHC 2544 (KLR)

    Jurisdiction is everything; proceedings without jurisdiction are null

  • Cooperative Bank of Kenya Limited v Patrick Kang'ethe Njuguna & 5 Others

    A charge does not constitute land use within Article 162; High Court jurisdiction over charge disputes

  • Equity Bank Limited v Bruce Mutie Mutuku t/a Diani Tour Travel (2016) eKLR

    Jurisdiction is fundamental and cannot be conferred by consent

  • Diamond Trust Bank Kenya Limited v FHH (Civil Appeal 18 of 2020) [2022] KECA769 (KLR)

    Disputes on validity of charge and power of sale fall within the High Court, not ELC

  • Republic v Karisa Chengo & 2 others [2017] eKLR

    ELC, ELRC and High Court have distinct, equal jurisdictions

  • Lillian 'S' v Caltex Kenya Limited [1989] eKLR

    Jurisdiction is everything; a court without it must down its tools

  • Lydia Nyambura Mbugua v Diamond Trust Bank Kenya Limited & another [2018] eKLR

    ELC jurisdiction over chargor/chargee statutory power of sale process

  • Nasibi Aore v Jane Anyona Omutsani (Kitale Land Case No. 67 of 2011 (O.S))

    Similar land ownership disputes handled by ELC

  • Ebony Development Company Ltd v Standard Chartered Bank Ltd (2008) eKLR

    Guarantor becomes liable upon default by principal debtor

  • Robert Njoka Muthara & Another v Barclays Bank of Kenya Limited & Another [2017] eKLR, Civil Appeal No. 18 of 2014

    Definition of a contract of guarantee

  • Nyagilo Ochieng & Another v Fanuel Ochieng & 2 Others Civil Appeal No. 148 of 1995 [1995-1998] 2 EA 260

    Chargee must prove posting of statutory notices once receipt is denied

  • Martha Khayanga Simiyu v Housing Finance Co. of Kenya & 2 Others Nairobi HCCC No. 937 of 2001 [2001] 2 EA 540

    Service of statutory notice and notification of sale are conditions precedent to valid sale

  • Harun Mutwiri v Nairobi City County Government [2018] eKLR

    Costs follow the event

  • Kenya Union of Commercial, Food and Allied Workers v Bidco Africa Limited & Another [2015] eKLR

    Successful party typically entitled to costs

  • Hussein Muhumed Sirat v Attorney General & Another [2017] eKLR

    Costs follow the event as an established principle

Jurisdiction invoked
Article 162(2)(b) of the Constitution and Section 13 of the Environment and Land Court Act, No. 19 of 2011

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, "Masakha v Family Bank of Kenya & 2 others", Case Analysis (2023). Environment & Land Case 209 of 2019. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/21587/eng@2023-11-06

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