GIRO COMMERCIAL BANK LIMITED vs HALID HAMAD MUTESI [2002] KECA 158 (KLR)
The bottom line
#Kenya's Court of Appeal ruled that a borrower who admits owing money cannot stop a bank selling pledged property by disputing valuation or sale details.
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 superior court erred in granting an interlocutory injunction restraining the mortgagee from selling the charged property by auction or private treaty pending trial
- 2.Whether the respondent established a prima facie case with a probability of success under the Giella v Cassman Brown principles, given that the debt was admitted and due but the valuation and description of the property in the notification of sale were disputed
Key legal issues
#Whether disputes over valuation and description of the charged property justify restraining a mortgagee's exercise of the power of sale
No. Complaints that the property was undervalued for a forced sale or misdescribed in the notification of sale do not amount to a prima facie case where the debt is admitted and due; the injunction was wrongly granted.
The court found the only disputes raised were the valuation (respondent's Shs.13,000,000 versus the auctioneer's forced-sale figure of Shs.11,000,000) and the alleged misdescription that the building's construction was complete. On the admitted facts - an acknowledged debt of Shs.9,134,486/65, non-servicing of the loan, and due statutory notice under Section 69(1)(a) of the Transfer of Property Act - the respondent could not satisfy the first Giella principle, so the Commissioner of Assize erred in granting the injunction.
Legal principles established
#- A mortgagee cannot be restrained from exercising the power of sale merely because the amount due is in dispute, the mortgagor has commenced a redemption action, or the mortgagor objects to the manner in which the sale is arranged.
- Where the debt is admittedly due and the loan is not being serviced, an interlocutory injunction restraining the mortgagee's sale should not be granted, as the mortgagor will have failed to demonstrate a prima facie case with a probability of success.
Court orders
#- 1.The order of injunction made on 30th May 2000 is set aside
- 2.The respondent's application dated 24th April 2000, filed on 25th April 2000, is dismissed with costs
- 3.The appellant is awarded the costs of this appeal
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya (superior court, Commissioner of Assize)
- Mombasa H.C.C.C. No. 205 of 2000 (ruling and order of 30th May 2000)
- Jurisdiction invoked
- Interlocutory appeal to the Court of Appeal under its appellate jurisdiction (statutory right of appeal from an interlocutory order of the superior court; specific provision not stated in the judgment)
Relief refused
#The respondent's interlocutory injunction restraining sale of the suit property
The respondent failed to establish a prima facie case with a probability of success; a mortgagee cannot be restrained from exercising the power of sale merely because the amount due is in dispute or the mortgagor objects to the manner of sale
Costs
The respondent's application dated 24th April 2000 is dismissed with costs, and the appellant will also have the costs of this appeal.
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.
It has been held time and again that a mortgagee cannot be restrained from exercising his power of sale because the amount due is in dispute, or that the mortgagor has commenced a redemption action or because the mortgagor objects to the manner in which the sale is being arranged.
In view of the admitted facts, and in view of the fact that the debt was admittedly due and further that the loan was not being serviced, the superior court should not have granted the injunction.
In the circumstances this appeal is allowed. The order of injunction made on 30th May, 2000, is hereby set aside; the respondent's application dated 24th April, 2000 filed on 25th April, 2000 is dismissed with costs. The appellant will also have the costs of this appeal.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "GIRO COMMERCIAL BANK LIMITED vs HALID HAMAD MUTESI [2002] KECA 158 (KLR)", Case Analysis (2002). Civil Appeal 342 of 2000. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2002/158/eng@2002-01-18
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.