Peter Musembi Muthama v National Bank of Kenya Limited [2018] KEELRC 2055 (KLR)
The bottom line
#A Kenyan court stopped a bank from auctioning a retired worker's property because the loan secured by it was already fully repaid.
What this practically means
#Executive summary
#Key legal issues
#Prima facie case
Applicant established a prima facie case because the secured loan was fully paid from terminal dues and the respondent could not justify selling the premises for unsecured loans
The court relied on the respondent's own admission in the replying affidavit that the secured loan balance at retirement was only Kshs.324,581.63 and was paid from the applicant's account. Annexures MMM 6 and 7 showing a new outstanding balance were denied and dismissed by the applicant as an illegal entry. The respondent failed to demonstrate why the suit premises should be sold to settle unsecured loans.
Irreparable injury
Selling the suit property to recover unsecured loans would violate the applicant's right to own property under Article 40 of the Constitution
The applicant alleged he depended solely on rent income from the suit property for his livelihood. Given the finding that the premises were no longer security for any loan, the court agreed that selling it to recover unsecured loans would violate the constitutional right to property.
Balance of convenience
Balance of convenience tilts in favour of the applicant because he paid all the loan secured by the suit premises before the auctioneer was appointed
The court found the applicant had demonstrated by evidence that the secured loan was fully paid even before the respondent appointed an auctioneer to sell the property, making the balance of convenience favour him.
Distinguishing authority relied on by respondent
Francis Kalama Mulewa case distinguished because the claimant there caused his own dismissal through misconduct, whereas here the claimant is an innocent victim of employer-initiated early retirement
The court distinguished the authority relied on by the respondent: in Mulewa the claimant's dismissal arose from his own misconduct, while here the early retirement was initiated by the employer contrary to the applicant's reasonable expectation to continue employment and repay loans under signed contracts, which explained his refusal to sign for VER.
Legal principles established
#- Where a secured loan has been fully repaid, a chargee cannot auction the suit premises to recover unsecured loans before determination of the suit
- An interlocutory injunction does not operate as a freeze on repayment of outstanding loan obligations under contract
Court orders
#- 1.Interlocutory injunction restraining the respondent and/or her agents and servants from selling, dealing, interfering, alienating or disposing of LR. No. MN/11/1513 (C.R. 20377) Mtopanga Estate Mombasa pending the hearing and determination of the suit
- 2.Declaration that the order is not a freeze on repayment of the unsecured loan balance; the applicant to continue servicing the loans under the respective contracts pending determination of the suit
- 3.Costs of the application in the cause
- Jurisdiction invoked
- Article 40 of the Constitution and Rule 17(3), (4), (5) and (6) of the Employment and Labour Relations Court Rules
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Peter Musembi Muthama v National Bank of Kenya Limited [2018] KEELRC 2055 (KLR)", Case Analysis (2018). ELRCC (Consolidated suit with ELRCC 1476 of 2015). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2018/2055/eng@2018-05-10
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.