Milestone Engineering Limited & another v Co-operative Merchant Bank of Kenya Limited & another [2001] KECA 267 (KLR)
The bottom line
#Kenya's Court of Appeal stopped a bank from selling charged land because the lender ignored an agreed repayment plan and its own delays caused the default.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the applicants have an arguable appeal against the dismissal of their application for a temporary injunction
- 2.Whether the intended appeal would be rendered nugatory if the injunction pending appeal is not granted
Key legal issues
#Whether the applicants established an arguable appeal notwithstanding the strict limits on restraining a mortgagee's statutory power of sale
The court held that although disputes on accounts alone cannot ground an injunction against a mortgagee, this case falls within the exceptions because the parties had agreed on a mode of repayment which the Bank was seeking to disregard.
The court acknowledged the general rule that a mortgagee's statutory power of sale is restrained only in strictly limited circumstances and that a dispute on accounts is insufficient. It found an exception here: the Bank, the Company and Njoroge had agreed that the subdivided parcels would be sold and proceeds applied to the debt. The Bank's delay in releasing the title to parcel 813 and its failure to obtain replacement titles lost in the 1998 bomb blast were prima facie the Bank's fault, making the claim on interest and penalties for those periods substantial rather than frivolous.
Whether the intended appeal would be rendered nugatory without an injunction
The court held the appeal would be rendered nugatory if the injunction were refused, since the Bank would likely sell the parcels and apply the proceeds without accounting for the applicants' claim on interest and penalty charges.
The nugatory-requirement limb of rule 5(2)(b) was satisfied because an auction sale would likely be completed and proceeds applied by the Bank before the appeal could be determined, extinguishing the applicants' claim regarding interest and penalties for the periods of the Bank's own delay. The parcels could not be restored if sold, so interim restraint was necessary to preserve the appeal's utility.
Legal principles established
#- The circumstances in which a mortgagee can be restrained from exercising its statutory power of sale are strictly limited, and a mere dispute on accounts is not a ground for restraint; however, where the parties have agreed on a mode of repayment, the mortgagee cannot disregard that agreement and exercise its statutory power of sale without showing the borrower's non-compliance.
- An appeal will be rendered nugatory where, absent an injunction, the charged property would be disposed of and the proceeds applied without accounting for the appellant's claim, justifying an injunction pending appeal under rule 5(2)(b).
Court orders
#- 1.An injunction restraining the Bank, its servants and agents, from selling or disposing of parcels Nos Dagoretti/Ruthimitu/812 and 814 pending the hearing and determination of the intended appeal or further order
- 2.Costs of the application to be in the appeal
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya at Nairobi, Milimani Commercial Courts
- H.C.C.C. No. 851 of 2001
- Jurisdiction invoked
- Rule 5(2)(b) of the Court of Appeal Rules
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.
We realise that the circumstances in which a mortgagee can be restrained from exercising its statutory power of sale are strictly limited and even a dispute on accounts is not a ground for doing so. We think though that this case is one of the exceptions to the general rule.
The parties agreed on a mode of payment and unless the Bank can show that the applicants failed to comply with the terms of that agreement, it has no right to disregard it and proceed to exercise its statutory power of sale.
Accordingly, we grant the application and issue an injunction restraining the Bank, its servants and agents, from selling or disposing of parcels Nos 812 and 814 pending the hearing and determination of the intended appeal or further order. Costs of the application to be in the appeal.
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (2)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Ethics and Anti-Corruption Commission v James Makura M’abira [2020] KECA 500 (KLR)[2020] KECA 500 (KLR)24 Jul 2020
- Abdulkadir Shariff Abdirahim v Ecobank Kenya Limited [2015] KECA 737 (KLR)[2015] KECA 737 (KLR)8 May 2015
Cite this brief
#Cite this brief
Caselaw, "Milestone Engineering Limited & another v Co-operative Merchant Bank of Kenya Limited & another [2001] KECA 267 (KLR)", Case Analysis (2001). Civil Application No. Nai. 305 of 2001 (162/2001 UR). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2001/267/eng@2001-09-14
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.