Purbai Gopal Ramji Patel v Asset Recovery Services & Another
The bottom line
#Kenya's Court of Appeal confirmed that a debt buyer cannot auction your property unless the charge itself was formally assigned to it.
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 appellant demonstrated a prima facie case with a probability of success to warrant a temporary injunction
- 2.Whether a statutory power of sale under a charge can be exercised where the charge itself was not assigned to the assignee of the debts
- 3.Whether the High Court's refusal of the injunction was an erroneous exercise of judicial discretion warranting appellate interference
Key legal issues
#Whether a statutory power of sale survives an assignment of debts where the charge itself was not assigned
No. The existence of the charge is a prerequisite to the exercise of the statutory power of sale; the power is exercisable only by the one on whom the charge documents confer it, and an assignment of debts without assignment of the charge confers no power of sale.
The court held it elementary that a statutory power of sale presupposes the existence of the charge. The deed of assignment covered only non-performing loans and made no mention of any charge or mortgage. The 1st respondent itself acknowledged the charge was not assigned, so it had no basis for serving a statutory notice of sale. The High Court's contrary conclusion was a gross misdirection.
Whether the High Court's refusal of the temporary injunction was a proper exercise of discretion
No. The refusal rested on the erroneous conclusion that a statutory power of sale could be exercised without a charge, which was a gross misdirection entitling the appellate court to interfere.
Applying Mbogo v Shah, the court may interfere where the judge misdirected himself on a matter and arrived at a wrong decision. Because the finding of no prima facie case was founded on the erroneous premise that the assignee of debts could exercise the statutory power of sale without the charge, the discretion was wrongly exercised and the order was set aside.
Whether the appellant demonstrated a prima facie case with a probability of success
Yes, on appeal. Once the erroneous premise about the unassigned charge was removed, the appellant's challenge to the assignment disclosed a prima facie case warranting an injunction.
The court found the High Court's finding of no prima facie case was based on the erroneous conclusion that a statutory power of sale could be exercised in the absence of a charge. With the charge unassigned, the 1st respondent had no basis for the statutory notice of sale, so the appellant's suit - including the claim that there was no assignment of the charge - disclosed a prima facie case.
Legal principles established
#- A statutory power of sale under a charge can only be exercised by the person on whom the charge documents confer that power; absent an assignment of the charge, the assignee of debts cannot exercise the statutory power of sale.
- An appellate court may interfere with the exercise of judicial discretion where the judge misdirected himself and thereby arrived at a wrong conclusion.
Court orders
#- 1.Appeal allowed
- 2.Order of the High Court delivered on 1st July, 2009 set aside
- 3.Appellant's chamber summons dated 20th May, 2009 allowed
- 4.Costs of the application to abide the outcome of the suit before the High Court
- 5.Each party to bear their own costs of the appeal
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya (Milimani), Nairobi
- H.C.C.C. No. 352 of 2009
- Jurisdiction invoked
- First appeal to the Court of Appeal against a ruling of the High Court (statutory appellate jurisdiction; no specific provision cited in the judgment)
Relief refused
#Costs of the appeal against the respondents
The estate of the deceased remains indebted to the bank in a substantial sum
Costs
Costs of the application will abide the outcome of the suit before the High Court; each party bears their own costs of the 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.
We think it is elementary, that for any entity to exercise a statutory power of sale under a charge, the existence of the charge is a prerequisite.
Absent the charge, the statutory power of sale has no foundation. To put the issue differently, it is not every creditor who may exercise a statutory power of sale.
If the charge was not assigned the statutory power of sale which could only be exercisable under the charge was not also assigned, so to speak. In that event the 1st respondent had no basis for serving a statutory notice of sale.
We must, therefore, allow this appeal and set aside the order of the High Court delivered on 1st July, 2009. We further order that the appellant’s chamber summons dated 20th May, 2009 is hereby allowed.
Issues in the judgment
#Court heading printed as 'IN THE HIGH COURT OF APPEAL', an unusual designation for the Court of Appeal.
Second respondent's trade name appears inconsistently as 'Aram Investments' in the coram and 'Garam Investments' in the body.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Purbai Gopal Ramji Patel v Asset Recovery Services & Another", Case Analysis (2016). Civil Appeal No. 185 of 2010. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2016/832/eng@2016-01-29
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.