Kabiru v Faulu Micro-Finance Bank Limited & 2 others (Environment & Land Case 178 of 2016) [2024] KEELC 7091 (KLR)
The bottom line
#The Environment and Land Court upheld KCB's auction of charged land, ruling that once statutory notices and valuation are done, a completed auction sale stands.
What this practically means
#Executive summary
#Key legal issues
#Jurisdiction of the ELC over a dispute arising from realization of a charge
The ELC has jurisdiction because the claim, though arising from a charge, is for a declaration that the sale of land by public auction was fraudulent and void
The 3rd Defendant argued the dispute was commercial and belonged to the High Court. The court noted a preliminary objection on jurisdiction had already been dismissed by Cherono, J in a ruling of 11th March 2022, was not appealed, and the court could not sit on appeal over its own decision, adopting Lydia Nyambura Mbugua on the exclusivity of ELC jurisdiction.
Lawfulness of the public auction
The auction was lawfully conducted; all statutory notices under Sections 90 and 96 of the Land Act were served
The Plaintiff admitted receiving the demand notice and notification of sale and admitted default. Once default occurred the chargee was entitled to realize the security provided due process was followed, and the evidence showed the statutory notices were issued and served before the 7th October 2016 auction.
Whether the property was sold at an undervalue
No undervaluation; the sale at Kshs 3,000,000 conformed to the Forced Sale Value in the chargee's October 2015 valuation
The chargee complied with Section 97(2) by obtaining a valuation placing market value at Kshs 4 million and forced sale value at Kshs 3 million. The plaintiff's contrary valuation was obtained after the auction, its valuer was not called to testify, and she adduced no evidence of collusion. Three bids were received and the highest, meeting the forced sale value, was accepted.
Entitlement to damages
The Plaintiff is not entitled to damages because the chargee breached no statutory duty
Damages for an irregular sale presuppose a breach of the chargee's statutory duty to obtain the best reasonable price. Since the court found the sale regular and compliant with Sections 90, 96 and 97(2) of the Land Act, no breach arose and damages fall away.
Legal principles established
#- A chargor's remedy for an irregular auction sale lies in damages, not rescission of the concluded sale
- A forced sale valuation obtained under Section 97(2) of the Land Act is valid for up to twelve months
- Where a chargee accommodates a defaulting chargor on new terms which the chargor then defaults on, the chargee may re-initiate sale without re-issuing the statutory notice under Section 90
- A purchaser at a properly conducted auction is protected and a party alleging fraud or collusion must prove it with evidence
Court orders
#- 1.The Plaintiff's suit is dismissed
- 2.Costs of the suit awarded to the 1st and 3rd Defendants
- Jurisdiction invoked
- Section 7 of the Environment and Land Court Act, 2011 (jurisdiction over disputes arising from charges over land and sale of charged land)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Kabiru v Faulu Micro-Finance Bank Limited & 2 others (Environment & Land Case 178 of 2016) [2024] KEELC 7091 (KLR)", Case Analysis (2024). Not stated in the extract (suit filed by Plaint dated 2nd November, 2016, amended 28th September, 2017). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2024/7091/eng@2024-10-31
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.