Mwande v Ecobank Limited & another

is not the registered proprietor of the suit property; that for lack of locus standi the suit ought to be struck o in the rst instance; that the lease agreement on which the suit is anchored is null and void as the interested party does not have any interest in the suit property; that there is no proof of rents paid for the lease as evidence of validity of contract or consideration; that the rights of tenants under the lease would not be aected as they would be transferred to the new owner; that under Section 96(1) (2)(3) and 90(1) (2) (3) the bank was not obligated to issue her with a notice at all; that this court dismissed a similar application brought by the interests party herein in Malindi ELC No 085 of 2024; that subsequently, the High Court in Malindi dismissed a similar application in Malindi HCCOMM No E010 of 2025; that the present suit is a proxy suit led for the benet of the Interested Party; that Petro Soko is the borrower against whom the statutory power of sale is being exercised and is the person that delivered up the suit premises as security against credit facilities the bank advanced to it; that Petro Soko having defaulted on repayment, the Bank is entitled top exercise of statutory power of sale which has now crystallized; that the cause of action herein having arisen from a commercial transaction, this court lacks jurisdiction over the matter; that the plainti is not in any event to the letter of oer or the legal charge giving rise to the cause of action and she is thus a stranger; that the bank is not privy to the lease agreement held by the plainti; that in any event the lease can not confer proprietary rights to her over the suit properties that can supersede those of the bank; that no risk of loss has been demonstrated. Analysis and Determination. 4. There is a theory held and expressed by the bank that the present suit is just a ruse from the Interested Party’s repertoire, using the plainti as her proxy, to delay the exercise of its statutory power of sale. The bank cites at least 2 other cases by the Interested Party – one in this court and one in the High Court in which the Interested Party’s claims were dismissed and applications for injunctive orders were not granted. The particulars of those cases are given herein above. Whether or not that theory is correct is not the concern of this court to nd out at the moment. This court must treat all parties fairly without investing stock into any speculation such as held by the 1st Respondent. 5. Among all the issues raised by the bank, jurisdiction ranks rst because, as stated in the famous case of Owners of the Motor Vessel M.V Lillian S. v. Caltex Oil (K) Limited [1989] KLR 1, the moment a court nds that it lacks jurisdiction it must down its tools. It held as follows: “ Jurisdiction is everything. Without it, a court has no power to make one more step. Where a court has no jurisdiction, there would be no basis for a continuation of proceedings pending other evidence. A court of law downs its tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction.” 6. The Court of Appeal case of Cooperative Bank of Kenya Limited v Patrick Kangethe Njuguna & 5 Others [2017] eKLR held that exclusive jurisdiction of the ELC is conned to Articles 162 (2) (b) of the Constitution and Section 13 of the ELC Act. 7. I have perused the plaint and the application in the present case and found that the suit arises from the intention of the Bank to exercise its statutory power of sale over the suit properties whereby other issues have arisen surrounding the tenancy of the plainti in the premises meant to be sold in realization of security. 8. Article 169(2)(b) reads as follows: “ Parliament shall establish courts with the status of the High Court to hear and determine disputes relating to- https://new.kenyalaw.org/akn/ke/judgment/keelc/2025/18648/eng@2025-12-03 2

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9. a) … b) The environment and the use and occupation of, and title to, land.” Section 13 of the ELC Act provides as follows: “ 13 (1) The Court shall have original and appellate jurisdiction to hear and determine all disputes in accordance with Article 162 (2) (b) of the Constitution and with the provisions of this Act or any other written law relating to environment and land. (2) In exercise of its jurisdiction under Article 162 (2) (b) of the Constitution, the court shall have power to hear and determine disputes relating to environment and land, including disputesa) Relating to environmental planning and protection, trade, climate issues, land use planning, title, tenure, boundaries, rates, rents, valuations, mining, minerals and other natural resources; b) relating to compulsory acquisition of land; c) relating to land administration and management; d) relating to public, private and community land and contracts, choses in action or other instruments granting any enforceable interests in land; and e) any other dispute relating to environment and land. ………………………….” 10. The question that arises is whether, if the plainti is a tenant, the dispute between the plainti and the Interested Party can stall the bank’s exercise of its statutory power of sale until the suit is heard and determined. The bank’s answer to this issue is in the negative, and its grounds were vefold, raised in support of the objection as follows: rst, Counsel for the bank stated that there is no dispute that the applicant is a mere tenant and he referred to Section 96 (1)(2)(3) and Section 96 (1)(2)(3) of the Land Act for the proposition that the bank is not obliged to serve any notice on the plainti in her capacity as a mere tenant. Secondly, he also stated that the validity of the lease is contested. Thirdly, he stated that the date on the applicant’s lease is 13/7/23 while the date of the charge is 18/10/23 (this court notes that the actual date of registration of charge instrument is 30/10/23. It would then be correct to state that Petro Soko inherited the plainti as a tenant from the former owner of the land who is the Interested Party.) Fourthly, he stated that neither the Interested Party nor the plainti have any interest in the suit property. He gave an assurance that if the property is sold the new owner would have to take it up with the encumbrance that is the lease. Fifthly and lastly, he submitted that the fact that the property is up for auction does not aect the tenant’s rights. He states that the proper forum for the present dispute is the commercial division of the High Court. 11. One would have thought that at Mr. Ngaine’s assurances and undertakings that the lease would not be aected, the plainti would retreat and withdraw from her claims, but alas; Mr. Musyoki persisted in his claims on behalf of the plainti that her rights as a user of the suit premises would be prejudiced. https://new.kenyalaw.org/akn/ke/judgment/keelc/2025/18648/eng@2025-12-03 3

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12. This court has already noted as above that the plainti lacks any evidence that the owner of the suit premises is the Interested Party and it has also observed that the annextures comprising of title to the CR 41708 and CR 41709 bear witness that the registered proprietor is Petro Soko Ltd. 13. In the circumstances the only dispute that can occasion this court to hold that it has jurisdiction over the matter is that that would be a dispute over the “use and occupation of, and title to, land” between the registered owner, Petro Soko and the Bank. Petro Soko has not been joined to the present suit at all in any capacity. However, the plainti does not state that she is an agent of Petro Soko. Neither is she claiming that the lease she holds is between her and Petro Soko, but with the Interested Party. The present dispute is thus not about “environment and title to land” as envisaged by Article 169) (2) (b). 14. This court nds that in so far as the dispute between principal parties herein is concerned, it is not, in this court’s view, a dispute about the “environment and title to land” but a dispute about whether or not the plainti is a non-owner of the suit premises and who is in occupation, and who is entitled to a notice under Section 96 (1) (2) (3) and Section 96 (1)(2)(3) of the Land Act. 15. The next question is rstly, whether “the use and occupation of land” by a tenant, if proved qualify this dispute to be one this court is possessed of jurisdiction to hear and determine and secondly, whether those such use and occupation mandatorily attract the requirement of service of notice under the aforementioned Sections. 16. Thirdly, the potential existence of use and occupation also attracts the issue whether the chargor’s default in service thereof may necessitate this court’s injunction against the process. 17. Section 90 of the Land Act has the following provisions: “ 90. Remedies of a chargee (1) If a chargor is in default of any obligation, fails to pay interest or any other periodic payment or any part thereof due under any charge or in the performance or observation of any covenant, express or implied, in any charge, and continues to be in default for one month, the chargee may serve on the chargor a notice, in writing, to pay the money owing or to perform and observe the agreement as the case may be. (2) The notice required by subsection (1) shall adequately inform the recipient of the following matters— (a) The nature and extent of the default by the chargor; (b) If the default consists of the non-payment of any money due under the charge, the amount that must be paid to rectify the default and the time, being not less than three months, by the end of which the payment in default must have been completed; (c) If the default consists of the failure to perform or observe any covenant, express or implied, in the charge, the thing the chargor must do or desist from doing so as to rectify the default and the time, being not less than two months, by the end of which the default must have been rectied; https://new.kenyalaw.org/akn/ke/judgment/keelc/2025/18648/eng@2025-12-03 4

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(3) (4) (5) 18. (d) The consequence that if the default is not rectied within the time specied in the notice, the chargee will proceed to exercise any of the remedies referred to in this section in accordance with the procedures provided for in this sub-part; and (e) The right of the chargor in respect of certain remedies to apply to the court for relief against those remedies. If the chargor does not comply within ninety days after the date of service of the notice under, subsection (1), the chargee may— (a) Sue the chargor for any money due and owing under the charge; (b) Appoint a receiver of the income of the charged land; (c) Lease the charged land, or if the charge is of a lease, sublease the land; (d) Enter into possession of the charged land; or (e) Sell the charged land; If the charge is a charge of land held for customary land, or community land shall be valid only if the charge is done with concurrence of members of the family or community the chargee may— (a) Appoint a receiver of the income of the charged land; (b) Apply to the court for an order to— (i) Lease the charged land or if the charge is of a lease, sublease the land or enter into possession of the charged land; (ii) Sell the charged land to any person or group of persons referred to in the law relating to community land. The Cabinet Secretary shall, in consultation with the Commission, prescribe the form and content of a notice to be served under this section.” Section 90(1) states that “ the chargee may serve on the chargor a notice, in writing, to pay the money owing or to perform and observe the agreement as the case may be”. It is clear from the language that service of a notice is strictly connected with the terms of the charge executed between the chargee and the chargor and any party not privy to the charge documents lacks https://new.kenyalaw.org/akn/ke/judgment/keelc/2025/18648/eng@2025-12-03 5

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capacity to demand service of notice. This is the only logical because no satisfaction of any obligation is required of any such non-party. 19. Section 96 has the following provisions: “ 96. 20. Chargee’s power of sale (1) Where a chargor is in default of the obligations under a charge and remains in default at the expiry of the time provided for the rectication of that default in the notice served on the chargor under Section 90(1), a chargee may exercise the power to sell the charged land. (2) Before exercising the power to sell the charged land, the chargee shall serve on the chargor a notice to sell in the prescribed form and shall not proceed to complete any contract for the sale of the charged land until at least forty days have elapsed from the date of the service of that notice to sell. (3) A copy of the notice to sell served in accordance with subsection (2) shall be served on— (a) The Commission, if the charged land is public land; (b) The holder of the land out of which the lease has been granted, if the charged land is a lease; (c) A spouse of the chargor who had given the consent; (d) Any lessee and sub lessee of the charged land or of any buildings on the charged land; (e) Any person who is a co-owner with the chargor; (f) Any other chargee of money secured by a charge on the charged land of whom the chargee proposing to exercise the power of sale has actual notice; (g) Any guarantor of the money advanced under the charge; (h) Any other person known to have a right to enter on and use the land or the natural resources in, on, or under the charged land by axing a notice at the property; and (i) Any other persons as may be prescribed by regulations, and shall be posted in a prominent place at or as near as may be to the charged land.” The principal provision in Section 96 is that a chargee who wishes to realize his security through a power of sale shall serve a notice on the chargor, but the section also provides at Sub section (3) (d) that he may serve it on a lessee of sub lessee of the charged land or of any buildings on it; it also provides at Sub section (3) (h) any other person known to have a right to enter on and use the land or the natural resources in, on, or under the charged land by axing a notice at the property; also, as per Sub section https://new.kenyalaw.org/akn/ke/judgment/keelc/2025/18648/eng@2025-12-03 6

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(3) (i) the notice shall be served on any other person as may be prescribed by regulations. Service of the plainti all depends on if he is one of the persons prescribed in those 3 sub sections. Indeed, these are the provisions that the applicant hangs on for his entire claim. Sub section 3(i) was expressly pleaded in the application. The other two provisions only came up during submissions. 21. The applicant relied on Maina & another v CFC Stanbic Bank Ltd & 2 others Civil Case No 20 of 2014) [2025] KEHC 2201 KLR to urge that the notices provided for in Section 96 are mandatory. 22. Bearing in mind the contents of the chargee’s notice under Section 90(1) requiring the chargor a notice, in writing, to pay the money owing or to perform and observe the agreement as the case may be, and the depth of matters of which the recipient shall be adequately informed by that notice, it might appear, upon a cursory examination of Section 96 Sub section (3), (d) Sub section (3) (h), and Sub section (3) (i), to be unimportant to serve a tenant or occupant or other user of the charged premises with a notice since that notice does not seem to require him to do anything to remedy the chargor’s default. It may appear that the provision of information of all the details in Section 90(1) and 90(2) to the tenant is not necessary. Default in such service on the part of the chargee upon the tenant or occupant may at a glance seem not to be a fatal aw to the process of exercise of the bank’s statutory power of sale. The plainti states at paragraph 11 of the plaint that without such a notice the sale is a nullity. 23. Notwithstanding any such potential doubts as outlined in the immediately preceding paragraph, this court notes that the provisions of Section 96(3) of the Land Act are in mandatory terms, and use the word “shall” as follows: “ (3) 24. A copy of the notice to sell served in accordance with subsection (2) shall be served on—…” In the interpretation of statutes, the use of the imperative “shall” denotes a mandatory requirement that leaves no room for even an element of discretion on the part of those required to comply with the specic law being interpreted. In G4s Security Services (K) Ltd v Ongori [2025] KECA 1950 (KLR) the court addressing Section 28 of the Employment Act, Cap. 226 stated as follows: “ 50. The provision being worded in mandatory term by use of the word “shall” means that the entitlement to leave is akin to a non-derogable right.” 25. Arising from the foregoing, it is clear that if there was no purpose for service of notice upon the lessees, the Legislature would not have included the requirement that they be served in the Act. Section 96(2) even provides the duration of the notice for a certain purpose. This court is of the view that if the notice is to be deemed as eective, it must be not only be served upon the tenant but it must also run its full period of 40 days as stipulated in that Section in respect of both the chargor and the lessee. Consequently, where it has not been served the provisions of the law have not been complied with and it is fatal to the process. 26. It is noteworthy that in the present case, the Bank does not defend itself solely by stating that the plainti is not a tenant, or that the notice was served upon her as required by law. It questions whether she is indeed a lessee and stringently maintains that service of notice upon a lessee was not necessary. However, the nding of the court on the interpretation of Section 96(3) being that the bank had no discretion in the matter, it needed to serve the notice on lessees in occupation and use of the property. In any event, one may ask, what prejudice would the bank suer anyway by eecting the provisions of Section 96(3) which require service on a lessee? This court sees no prejudice that would be occasioned to the bank. https://new.kenyalaw.org/akn/ke/judgment/keelc/2025/18648/eng@2025-12-03 7

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27. From the bank’s own documents, the deduction of this court is that no such notice was served on the plainti; there is an issue arising from the Banks end as to whether the plainti is indeed a lessee in use and occupation of the suit premises. Nothing would have been easier for the Bank than to present a manifest to demonstrate that she is not a lessee. However, a perusal of the plainti’s documents reveals a prima facie case that she may be a lessee on the suit premises, and that she was not served with notice and potential loss and damage in that her rights under the law will not have been observed during the sale process. In this regard the court notes that loss needs not always be material loss. Even the advantage of the benet and application of the law prior to implementation of an action likely to aect one’s rights can also be termed as loss. 28. There is no dispute over title to the land in this particular case between the bank and the plainti. Despite not having exhibited any copy of title in proof, the plainti’s case is that the suit land is owned by the Interested Party with whom she has entered into a lease agreement. Her only evidence is the lease document between her and the Interested Party. That, in this court’s view, is no proof of ownership on the part of the Interested Party. Besides, even if it were to be assessed for its validity and legal force, the said lease has no marks on its face, and no other evidence has been adduced by adavit, to demonstrate that it has been registered against the title at the land registry. This lack of evidence contrasts sharply with the press advertisement she has annexed to her application in which the proprietor of the suit land is stated to be Petro Soko Ltd. The two entries numbered (5) respectively in the Bank’s annextures comprising of title to the CR 41708 and CR 41709 bear witness that the registered proprietor is Petro Soko Ltd (herein after also referred to as “Petro Soko”). 29. This being not a claim for or connected with title in the plainti’s behalf, this court is, however, of the view that in the light of the disclosure that the suit premises belonged to the interested party before the transfer to Petro Soko and before the charge to the bank was registered, it would be unduly harsh to adjudicate the issue between the bank and the plainti solely on the issue of who is the current registered proprietor of the suit land. 30. Issues of accounting, in the opinion of this court, do not also arise herein as between the principal parties as would make this court to conclude that the present suit is a mere case of mathematical computations t for the commercial court, and immediately down its tools in line with the authority in the Cooperative Bank case (supra), and there is no proof that the plainti holds brief for the interested party, the former owner of the suit land according to the bank’s belief. 31. A tenant has no privity within the chargor-chargee contractual relationship, but nevertheless the Legislature included him as one of the persons to be served with a notice under Section 96 of the Act. 32. The only issues herein are whether the plainti is a tenant, and if so, whether she is entitled to notice. That is the dominant dispute in this case. There is therefore, in this court’s view, a dispute over use and occupation of the land by virtue of the existence of the dispute over the lease purportedly entered into between the plainti and the interested party, and by which the plainti claims entitlement to service of notice, which apparently has not been served on her. 33. For the reason that by the law in Section 96 of the Land Act a lessee is entitled to notice, and it is evident that the plainti has established a prima facie case not only that she is a lessee, but also that she was not served with notice, and for reason of the risk of loss and damage as stated above, this court is of the view that the application dated 16/9/2025 has merit. 34. Prayer no (3) in the application is granted under the following conditions, whichever is earlier, to last either: https://new.kenyalaw.org/akn/ke/judgment/keelc/2025/18648/eng@2025-12-03 8

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35. a. Until the plainti is issued with the proper notice and the time therefore provided in Section 96(3) has run till the end; or b. Until the hearing and determination of the present suit. As the plainti has established merits of her application and she is not the principal borrower, her deposit of Kshs 500,000/- ordered on 18/9/2025 shall be refunded to her forthwith. DATED, SIGNED AND DELIVERED AT MALINDI ON THIS 3RD DAY OF DECEMBER 2025. MWANGI NJOROGE JUDGE, ELC, MALINDI https://new.kenyalaw.org/akn/ke/judgment/keelc/2025/18648/eng@2025-12-03 9

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