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MagistratePartially AllowedCivil Case No E210 of 2024· [2024] KEMC 38 (KLR)

Ndivo v Bashy African Credit Limited & another (Civil Case E210 of 2024) [2024] KEMC 38 (KLR)

Chief Magistrate's Court at Machakos (Machakos Law Courts)
12 August 2024
COC.N. Ondieki
3,066 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~12 min to read original · ~4 min brief

The bottom line

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A Kenyan court voided a lender's seizure of two vehicles because no demand or proclamation notices were served, and the auctioneer lost its fees.

What this practically means

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Executive summary

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The Applicant, the registered owner of motor vehicles KCG 348K (Toyota Hilux) and KDN 615E (Subaru Exiga), moved the court by Notice of Motion dated 3rd July 2024 seeking a temporary injunction restraining the Respondents from advertising or auctioning the vehicles and an order for their unconditional release, pending the hearing of the suit. The vehicles had been offered as security for a loan of Kshs. 1,391,200 advanced by the 1st Respondent. Following default, the 2nd Respondent auctioneers, instructed by the 1st Respondent, seized the vehicles. The Applicant contended that neither a proclamation notice nor a demand notice was served, rendering the attachment illegal. The 1st Respondent, through a director Bashiri Kipimo, admitted the loan but asserted default and reliance on clause 4(c)(i) of the loan agreement, arguing no demand notice was contractually required and that the court could not rewrite the contract. The court framed three issues. On the first, it found the auctioneer breached rule 12(1)(b) and (c) of the Auctioneers Rules by failing to issue a proclamation notice, following NCBA Bank PLC v Cyrus Ndung'u Njeri, rendering the attachment void. On the second, it held that section 67(1) of the Movable Property Security Rights Act makes service of a default notification an obligatory statutory condition precedent read into the agreement, and the 1st Respondent's failure rendered all subsequent steps a nullity. The third question (injunction threshold) was deemed academic. The court declared the seizure illegal and void, ordered release of the vehicles, awarded costs against the 1st Respondent (not chargeable to the loan), and denied the 2nd Respondent auctioneers' fees.

Key legal issues

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01

Whether the Applicant was served with a proclamation notice

Holding

The 2nd Respondent (auctioneer) disregarded rule 12(1)(b) & (c) of the Auctioneers Rules; non-service was uncontroverted; the attachment was therefore illegal and void.

Reasoning

The Court adopted the reasoning in NCBA Bank PLC v Cyrus Ndung'u Njeri that once an auctioneer is instructed, the repossession must comply with the Auctioneers Act and Rules, which mandate a proclamation notice with a seven-day redemption period. The Applicant's affidavit evidence of non-service was not controverted in the Replying Affidavit, and the auctioneer exhibited no evidence of compliance. Jumping straight to removal of the goods contravened rule 12(1)(b) & (c), rendering the attachment a nullity per Macfoy v United Africa Co.

02

Whether service of a demand/default notification is mandatory under the loan agreement

Holding

Yes - section 67(1) of the Movable Property Security Rights Act makes service of a written default notification a statutory condition precedent, obligatory and read into the agreement; failure rendered all subsequent steps, including instructions to the auctioneer, illegal and void.

Reasoning

Section 67(1) of the Movable Property Security Rights Act (which repealed the Chattels Transfer Act) uses the mandatory word 'shall' in requiring the secured creditor to serve a default notification informing the grantor of the nature and extent of default. Even though the parties' agreement did not make it a condition precedent, the statute does, and the statutory term is read into the agreement. The 1st Respondent conceded no demand notice was served, so the enforcement steps were nullities.

p. 5
03

Whether the threshold for an interlocutory injunction was met

Holding

The Court found the question academic given the declaration of nullity, but observed it would have granted injunctive relief given the serious question whether an unregistered security right can support a statutory power of sale without court action.

Reasoning

Having declared the attachment void, the Court did not engage the Giella/Mrao/Nguruman threshold analysis. It nonetheless flagged, per American Cyanamid, the serious question to be tried - whether a lender who failed to register its security rights in the movable assets can exercise a statutory power of sale without court action - and indicated it would have issued injunctive relief to avert a wrongful sale of the vehicles.

p. 6

Legal principles established

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  • Once a lender engages an auctioneer in repossession, the process becomes subject to the Auctioneers Act and Rules, which make service of a proclamation notice mandatory prior to repossession
  • Under section 67(1) of the Movable Property Security Rights Act, service of a default notification on the grantor is an obligatory statutory condition precedent, read into the agreement whether or not the parties included it
  • Attachment and subsequent enforcement steps taken without the prescribed notices are illegal, void and a nullity; no proceedings can stand on them

Court orders

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  1. 1.Declared that the seizure of motor vehicles registration numbers KCG 348K and KDN 615E by the 2nd Respondent is illegal and void amounting to a nullity
  2. 2.Ordered the Respondents to release motor vehicles registration numbers KCG 348K and KDN 615E not later than 9th August 2024 at 1200 hours
  3. 3.Directed that the costs of the Application be borne by the 1st Respondent and shall not be loaded to the loan
  4. 4.Held that the 2nd Respondent, having flagrantly infringed the law, is not entitled to auctioneers fees and charges

Authorities

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Legislation

  • Civil Procedure Rulessection 63(c)
  • Civil Procedure RulesOrder 40 rule 1
  • Auctioneers Rulesrule 12 (including rule 12(1)(b), (c), (d))
  • Movable Property Security Rights Act, Cap 499Asections 65, 66, 67 (including 67(1))
  • Auctioneers Licencing Actgeneral
  • Chattels Transfer Actrepealed by the Movable Property Security Rights Act

Cases cited (13)

  • Giella Cassman Brown & Co. Ltd
    [1973] EA 358
  • Mrao Limited vs. First American Bank of Kenya Limited & 2 others
    [2003] eKLR
  • Nguruman Limited vs. Jan Bonde Nielson & 2 others
    [2014] eKLR
  • Joseph Siro Mosiomo vs. Housing Finance Company of Kenya
    [2008] eKLR
  • Priscah Bosibori Peter vs. Waithaka vs. Industrial and Commercial Development Corporation
    [2001] eKLR
  • Films Rover International Limited vs. Cannon Film Sales Limited
    [1986] 3 ALL ER 772
  • Jamii Bora Bank Limited and another vs. James Owek Ochieng
    [2020] eKLR
  • National Bank of Kenya Ltd vs. Pipe Plastic Samkolit (K) Ltd
    [2002] EA 503
  • Megashell Transporters Limited vs. Co-operative Bank of Kenya Limited
    [2021] eKLR
  • Francis Ngarama Kiratu vs. Equity Bank Limited
    [2016] eKLR
  • NCBA Bank PLC vs. Cyrus Ndung'u Njeri t/a Digital Tours And Logistics
    [2021] eKLR
  • Benjamin Leonard Mcfoy vs. United African Company Limited (UK)
    [1962] AC 152
  • American Cyanamid Co vs. Ethicom Ltd
    [1975] AC 396
Jurisdiction invoked
Original civil jurisdiction of the magistrates' court over the suit; interlocutory application under section 63(c) and Order 40 rule 1 of the Civil Procedure Rules

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, "Ndivo v Bashy African Credit Limited & another (Civil Case E210 of 2024) [2024] KEMC 38 (KLR)", Case Analysis (2024). Civil Case No E210 of 2024. Source: https://new.kenyalaw.org/akn/ke/judgment/kemc/2024/38/eng@2024-08-12

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