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Court of AppealAllowedCivil Appeal 18 of 89· [1990] KECA 25 (KLR)

MUNGA CONCRETE WORKS LTD V INDUSTRIAL DEVELOPMENT BANK LTD [1990] KECA 25 (KLR)

Court of Appeal of Kenya
20 February 1990
JNJO NyarangiJGJM GachuhiJMJRO Masime
1,441 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan bank's attempted sale of charged land failed because it skipped a required statutory notice after appointing a receiver.

What this practically means

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Executive summary

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The Court of Appeal allowed an appeal by Munga Concrete Works Ltd against a High Court ruling in HCCC No 3131 of 1988. Industrial Development Bank had advanced a term loan secured by a charge over title Kiine/Rukenge/408 and a debenture. On default, the bank invoked its powers of sale and obtained land control board consent to transfer the property. The appellant, then in receivership, sued seeking injunctions to restrain the sale and an order compelling the bank to accept its repayment proposals. At the hearing inter partes the bank raised a preliminary objection that, being in receivership, the company's directors could not sue the debenture holder. The High Court judge, in a ruling headed as covering both the substantive suit and a miscellaneous case although no consolidation order existed, found the substantive suit incompetent. The Court of Appeal held that the judge erred in referring to the miscellaneous case as if consolidated with the suit. On the merits, the court analysed section 74 of the Registered Land Act (Cap 300) and found that, having appointed a receiver, the bank could not exercise its power of sale without serving a further statutory notice and giving the chargor three months to comply; no such further notice was proved. The failure to serve the statutory notice was fatal. The appeal was allowed, the High Court ruling set aside, and the appellant awarded costs of the suit in the High Court and of the appeal.

Key legal issues

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01

Validity of the statutory notice under section 74 of the Registered Land Act (Cap 300)

Holding

There was no evidence of a further notice served under sub-section (2) after the appointment of a receiver; the contention that there was no valid service of the statutory notice was unanswerable and the appeal had to be allowed on this ground alone.

Reasoning

The court examined section 74 of the Registered Land Act, noting only sub-sections (1) and (2) concern notice. Default having been made, the respondent appointed a receiver; under the proviso in sub-section (2), a chargee who has appointed a receiver may not sell unless the chargor fails to comply within three months with a further notice under sub-section (1). The September 8, 1986 letter could not establish this, and the May 6, 1986 letter was not on the record. Service of the statutory notice was therefore fatal.

p. 3
02

Procedural irregularity in the High Court ruling referencing a non-consolidated miscellaneous case

Holding

The High Court judge erred in treating the miscellaneous case as if it had been consolidated with HCCC No 3131 of 1988, there being no consolidation order; the ruling, heard on the material in the substantive suit, must be deemed to extend to the miscellaneous case.

Reasoning

The court observed that the ruling bore a startling heading referring to both the civil case and the miscellaneous case, yet there was no order consolidating the two matters, and the miscellaneous file did not form part of the record on appeal. Since the judge specifically held the substantive suit incompetent, the ruling had to be deemed to cover the miscellaneous matter despite only brief references to it.

p. 2

Legal principles established

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  • Where a chargee has appointed a receiver of the income of the charged property, the chargee may not exercise the power of sale unless, after service of a further statutory notice, the chargor fails to comply within three months of service.
  • Failure to serve the statutory notice in accordance with section 74(1) and (2) of the Registered Land Act is fatal to the exercise of the chargee's remedies.

Court orders

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  1. 1.The appeal is allowed
  2. 2.The ruling of the High Court judge is set aside
  3. 3.The appellant shall have its costs of the suit in the High Court
  4. 4.The appellant shall have the costs of this appeal
On appeal from
High Court of Kenya
HCCC No 3131 of 1988
Jurisdiction invoked
First appeal to the Court of Appeal under the applicable appellate statute (not expressly stated in the judgment)

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, "MUNGA CONCRETE WORKS LTD V INDUSTRIAL DEVELOPMENT BANK LTD [1990] KECA 25 (KLR)", Case Analysis (1990). Civil Appeal 18 of 89. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1990/25/eng@1990-02-20

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