TRUST BANK LTD V EROS CHEMISTS LIMITED & ANOTHER [2000] KECA 219 (KLR)
The bottom line
#Kenya's Court of Appeal ruled that a bank cannot sell your property unless its notice clearly states the sale will happen only after three months.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.What constitutes a valid notice under section 69(A)(1) of the Transfer of Property Act - in particular, whether the notice must expressly state the three months' period after which the mortgagee's statutory power of sale may be exercised.
- 2.Whether the Court of Appeal, as the final Court of Appeal for Kenya, is bound by its own previous decisions or is free to depart from them when it appears right to do so.
- 3.Whether the decision of the Court in Russell Company Ltd v Commercial Bank of Africa Ltd was wrong and should be departed from.
- 4.Whether the learned judge erred in the exercise of his discretion in granting the injunction, including his findings that the plaintiff's loss would not be irreparable and that the plaintiff did not come to court with clean hands.
Key legal issues
#Whether the Court of Appeal, as the final Court of Appeal for Kenya, is bound by its own previous decisions.
The Court will normally regard its previous decisions as binding but is free, in both civil and criminal cases, to depart from a previous decision when it appears right to do so; since 1977 it has been a final court of appeal analogous to the House of Lords.
The Court reasoned that since its establishment in 1977 it ceased to be an intermediate appellate court and became the final Court of Appeal for Kenya, analogous to the House of Lords. Because too rigid adherence to precedent may lead to injustice in a particular case and unduly restrict the proper development of the law, the House of Lords will depart from a previous decision when it appears right to do so; so should this Court. The existence of two conflicting decisions of the Court on section 69(A)(1) raised questions of considerable difficulty resolvable only by application of first principles.
What constitutes a valid notice under section 69(A)(1) of the Transfer of Property Act before exercise of the statutory power of sale.
The notice must expressly state that the sale shall take place after the expiry of the three months' period; omitting the period or stating a shorter one denies the mortgagor a statutory right and renders the notice invalid, so that the power of sale never accrues.
The object of the notice is to guard the rights of the mortgagor, because exercise of the statutory power of sale extinguishes the equity of redemption - a serious matter. The law intended to protect the mortgagor in the right to redeem and to warn of an intended sale; the statute provided for a three months' period to lapse after service before the right of sale accrues. The provision as to the length of the notice is positive and obligatory; failing obedience to it the notice is not valid. The 14-day notice in the Russell case was therefore invalid for accrual of a right of sale.
Whether the decision in Russell Company Ltd v Commercial Bank of Africa Ltd, that the three months' period need not be stated in the notice, was wrongly decided.
Yes. The Court declared, with considerable hesitancy, that the Russell decision is wrong; the notice there, threatening sale on 14 days' notice, was an invalid notice for accrual of a right of sale.
The only reason the Russell court held that the three months' period need not be specifically referred to in the notice was that the statute does not say so expressly. Applying first principles, to omit the period or state a shorter one denies the mortgagor a right conferred by statute and must render the notice invalid. The decision was recent, had not acquired the respect and following attributable to age, and it was unlikely that property rights had been acquired in reliance on it; it is the duty of the Court to rectify an erroneous decision.
Whether the learned judge erred in the exercise of his discretion in granting the injunction, having found no irreparable damage and that the plaintiff did not come to court with clean hands.
No. Purely financial damage is not irreparable; once the notice was held invalid the judge could not attach decisive importance to irreparable damage, and an order of costs met the justice of the case on the alleged dishonesty of the Managing Director.
A refusal or grant of injunction is essentially a matter of discretion to be exercised judicially in all the circumstances of the case. The judge found the plaintiff's loss would not be irreparable and that the plaintiff did not come to court with clean hands, its Managing Director having been untruthful about when he first learned of the sale; but he could not attach decisive importance to irreparable damage once he had held the notice invalid. On the dishonesty point he considered that an order of costs would meet the justice of the case. The appellate court found no error in principle.
Legal principles established
#- The Court of Appeal of Kenya, as the final Court of Appeal, will normally regard its own previous decisions as binding but is free, in both civil and criminal cases, to depart from a previous decision when it appears right to do so.
- A mortgagee's notice under section 69(A)(1) of the Transfer of Property Act must expressly state that the sale of the charged property shall take place after the expiry of the three months' period from service; a notice omitting that period or stipulating a shorter one is invalid and the statutory power of sale does not accrue.
- Purely financial damage cannot in principle amount to irreparable damage for the purposes of an interlocutory injunction.
- The grant or refusal of an injunction is a judicial discretion which an appellate court will not disturb absent error in principle; where the court has already held the underlying notice invalid, it need not attach decisive importance to irreparable damage.
Court orders
#- 1.The appeal is dismissed.
- 2.The appellant to pay the costs of the appeal - the Court dismissed the appeal 'with costs'.
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court (the superior court)
- Jurisdiction invoked
- Not stated in the judgment; the appeal is an appeal from a ruling of the superior court (High Court, Otieno J) in a civil suit, and no constitutional or statutory provision underpinning the appeal is cited.
Relief refused
#The appellant's challenge to the injunction restraining it and the auctioneers from selling L.R. No. 1870/X/60, maisonette No. 5 Ring Road Westlands, until the hearing and disposal of the suit.
The notices served were not valid notices under section 69(A)(1); the statutory power of sale never accrued, and the judge's discretion was soundly exercised.
The appellant's reliance on the Russell decision, under which a notice need not state the three months' period.
The Court declared the Russell decision wrong; a notice must expressly state that sale shall take place after the three months' period, failing which it is invalid.
The appellant's attack on the judge's findings that the plaintiff's loss would not be irreparable and that the plaintiff did not come to court with clean hands.
Purely financial damage is not irreparable; once the notice was held invalid the judge could not attach decisive importance to irreparable damage, and an order of costs met the justice of the case on the alleged dishonesty of the Managing Director.
Costs
The appeal was dismissed with costs.
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
Accordingly and, for all the reasons above stated, this appeal fails and we dismiss it with costs.
In our judgment, a notice seeking to sell the charged property must expressly state that the sale shall take place after the three months' period.
We consider that the provision as to the length of the notice is a positive and obligatory one; failing obedience to it a notice is not valid.
To omit to say so or to state a period of less than three months for sale (as in the Russell case) is to deny the mortgagor a right conferred upon him by statute. That clearly must render the notice invalid.
For these reasons we are satisfied that as a matter of judicial policy this Court, as the final Court of Appeal for Kenya, while it will normally regard a previous decision of its own as binding, should be free in both civil and criminal cases to depart from such a previous decision when it appears right to do so.
With considerable hesitancy we have come to the conclusion that this Court should declare, as we hereby do, that the decision of this Court in the Russell case is wrong.
Of course, purely financial damage could not be regarded in principle as irreparable.
Issues in the judgment
#The dates of the Bank's advocate's two notices are inconsistent within the judgment: they are first described as letters of 2 January and 5 February 1996, but the 2 January letter is later introduced and quoted as a letter of 2 January 1999.
The second notice is first dated 5 February 1996 but is later referred to as the Bank's advocate's letter of 2 February 1999; the day, month and year differ between the two references. The discrepancy does not affect the holding, since the court found that none of the notices constituted a valid section 69(A)(1) notice.
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (1)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Julius Musili Kyunga v Kenya Commercial Bank Ltd & 2 others [2015] KECA 920 (KLR)[2015] KECA 920 (KLR)12 Feb 2015
Cite this brief
#Cite this brief
Caselaw, "TRUST BANK LTD V EROS CHEMISTS LIMITED & ANOTHER [2000] KECA 219 (KLR)", Case Analysis (2000). Civil Appeal No. 133 of 1999. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2000/219/eng@2000-06-30
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.