John Mbaria Wambugu v Jijenge Credit Limited & another
The bottom line
#Lenders must strictly follow the Land Act's procedures, including obtaining a forced sale valuation and serving all parties, before they can legally force a property sale in Kenya.
What this practically means
#Executive summary
#Key legal issues
#Compliance with Section 97(2) of the Land Act - forced sale valuation before exercising statutory power of sale
The chargee breached Section 97(2): all realization steps (instructions to auctioneers, demand notices, newspaper advertisements) were taken before the forced sale valuation of 26th February 2019 was obtained, the valuation received only on the eve of the scheduled auction.
The court read Sections 97(1) and (2) as imposing a duty of care to obtain the best price reasonably obtainable, requiring a forced sale valuation before exercising the power of sale. The 1st Respondent instructed auctioneers in July 2018 and advertised in February 2019 based on a 2018 mortgage valuation; the purported current valuation was received on 19/2/2019, days before the auction. Treating the statutory requirement as a casual step was inconsistent with diligent performance of the duty of care.
Clogging the equity of redemption and the in duplum rule under Section 44A of the Banking Act
The exponential growth of a KShs.3.7 million loan to over KShs.100 million within a year, through 8% monthly interest and 30% monthly penalty interest, placed the Applicant's equity of redemption under threat of infringement and raised a serious question whether the 1st Respondent breached the in duplum rule; the issue is left for trial.
The court noted that Section 44A of the Banking Act caps recoverable interest at the principal owing when the loan becomes non-performing and applies retrospectively, and that a microfinance institution is not on its face exempt. Given the staggering accumulation of debt despite payments and rent collections, the Applicant's complaint that he may never redeem the property did not appear an exaggeration. The court declined to make final findings, reserving the in duplum question for the trial court.
Service of the statutory notice of sale on the guarantor spouse
Mary Waithira Mbaria, as guarantor to the loan, was entitled under Section 96(3)(h) of the Land Act to be served with the notice of sale, and there was no compliance with that requirement.
The court reframed the dispute: the question was not whether the property was matrimonial property but whether the guarantor was entitled to notice. The replying affidavit showed she was a guarantor who executed spousal consent to the Deed of Assignment of Rental Income. Section 96(3)(h) imposed a duty on the chargee to serve her with a copy of the notice to sell, which was apparently not done.
Whether an interlocutory injunction should issue on the Giella principles
A prima facie case was established through the statutory non-compliance findings, and the equity of redemption would be permanently defeated if the sale proceeded; the injunction pending determination of the suit was granted.
Applying the sequential Giella v Cassman Brown test as restated in Nguruman Limited, the court found the Applicant's complaints on valuation, notice to the guarantor and the threatened equity of redemption had merit. Even if the property were sold, proceeds could not cover the accrued debt, and damages would not adequately compensate the permanent defeat of the equity of redemption. The court was persuaded to grant prayer (3) of the motion.
Legal principles established
#- A chargee's exercise of the statutory power of sale commences with the attendant steps leading up to the sale, including service of notification of sale and instructions to the auctioneer, not at the public auction itself; the forced sale valuation under Section 97(2) of the Land Act must therefore precede those steps.
- A chargee may not put in place plans for the sale of the chargor's property before taking the mandatory steps in compliance with Section 97(1) and (2) of the Land Act.
- A guarantor of the loan is entitled under Section 96(3)(h) of the Land Act to be served with a copy of the notice to sell before the chargee exercises its statutory power of sale.
Court orders
#- 1.Interlocutory injunction granted in terms of prayer (3) of the motion filed on 25th February 2019, restraining dealing with, alienation or disposal of LR No. KIAMBU MUNICIPALITY/BLOCK II/120 pending determination of the suit
- 2.Costs to abide the outcome of the suit
- 3.Parties directed to comply with Order 11 of the Civil Procedure Rules within three months to facilitate early hearing of the suit
- Jurisdiction invoked
- Original civil jurisdiction of the High Court; motion brought under Order 40 of the Civil Procedure Rules, filed with a plaint
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "John Mbaria Wambugu v Jijenge Credit Limited & another", Case Analysis (2020). . Source:
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.