PETER KINUTHIA WATHUO v CO-OPERATIVE BANK K LTD
The bottom line
#Banks can proceed with property sales against guarantors if they followed the contract and served proper legal notices, even if the guarantor disputes the loan terms.
What this practically means
#Executive summary
#Key legal issues
#Whether a guarantor can resist sale of the charged security on the ground that the chargee did not first exhaust remedies against the principal debtor
No - the charge instrument contained no such requirement and there is no legal requirement to that effect
The court perused the instrument of charge and found no clause requiring the Defendant to first exhaust remedies against the principal debtor before calling on the guarantor. The Plaintiff's assertion was therefore unsupported by the charge, and the Defendant was entitled to proceed against the guarantor's charged properties upon default.
Whether an alleged variation of the interest rate contrary to the charge constitutes a prima facie case for injunction
No - a dispute over the amount owed cannot constitute a prima facie case, and the claim was unsupported by evidence
Relying on Mrao Ltd v First American Bank, the court held that a dispute as to the amount owed cannot found a prima facie case for injunction. The Plaintiff's claim that the interest charged was not contractual was not supported by evidence, so this ground failed at the interlocutory stage.
Whether the Plaintiff was served with the requisite statutory notices before exercise of the statutory power of sale
Yes - notices were sent by registered post to the Plaintiff's last known postal address as stated in the charge
The Defendant annexed statutory notices dated 6th February 2006 and 18th February 2010 and a notice of redemption dated 21st July 2010, all sent by registered post to the Plaintiff's stated postal address (c/o P.O. Box 666, Busia). Clause 14 of the charge provided for service at the last known postal address, and no change of address was communicated.
Legal principles established
#- There is no legal requirement that a chargee first exhaust its remedies against the principal debtor before exercising its rights against the guarantor.
- A dispute over the sum owed cannot constitute a prima facie case to entitle the court to grant an order of injunction.
- Service on a chargor through his last known postal address as stated in the instrument of charge is valid where no change of address was communicated.
Court orders
#- 1.The application dated 27th September 2010 is dismissed with costs
- Jurisdiction invoked
- Original civil jurisdiction; application under Order XXXIX (now Order 42) Rules 1 & 3 of the Civil Procedure Rules and Sections 3 & 3A of the Civil Procedure Act
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "PETER KINUTHIA WATHUO v CO-OPERATIVE BANK K LTD", Case Analysis (2013). . Source:
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.