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Court of AppealDismissedCivil Application No. NAI. 272 of 2017· [2017] KECA 83 (KLR)

The Air Travel & Related Studies Ltd. v Equity Bank (kenya) Ltd.

Court of Appeal
15 December 2017
AVAlnashir VisramMartha Karambu KoomeM.K. KoomeAMA. Makhandia
1,823 words in judgment
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The bottom line

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The Court of Appeal allowed Equity Bank to proceed toward auctioning charged property, ruling that merely disputing a loan amount does not block a bank's statutory power of sale.

What this practically means

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Executive summary

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This is a ruling of the Court of Appeal at Nairobi (Visram, Koome and Makhandia, JJ.A) on a Notice of Motion under Rule 5(2)(b) of the Court of Appeal Rules in which The Air Travel & Related Studies Ltd sought an injunction restraining Equity Bank (Kenya) Ltd from auctioning, selling or dealing with two suit properties in Karen pending the hearing and determination of an intended appeal against the ruling of Okong'o, J. of the Environment and Land Court dated 3rd November 2017, which had dismissed the applicant's application for a temporary injunction. The dispute arose from a loan facility of Kshs.194,546,000 secured by a charge over the suit properties. After the applicant defaulted, the respondent issued statutory notices under Section 96 of the Land Act, 2012 of its intention to exercise its statutory power of sale. The applicant, relying on advice from the Interest Rates Advisory Centre that it had been overcharged, sued in the ELC, disputing the amount claimed and the propriety of the notices. The Court of Appeal restated the twin test under Rule 5(2)(b): the applicant must show an arguable appeal and that the appeal would be rendered nugatory if the orders are not granted, satisfying both limbs. Applying established authority, the court held that a dispute over the loan amount or interest cannot ground an injunction restraining the exercise of a statutory power of sale, and that a single arguable ground would suffice but the applicant had not demonstrated even that to the court's satisfaction. It also doubted whether the scheduled sale had occurred, negating any nugatory effect. The application was dismissed with costs.

Key legal issues

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01

Whether the intended appeal was arguable

Holding

The court was not satisfied that the grounds raised were arguable, cautioning against making final determinations on issues subject of the intended appeal.

Reasoning

The court restated the two-limb Rule 5(2)(b) test, citing Reliance Bank vs Norlake and Peter Paul Mburu Ndururi. A single arguable issue suffices and the applicant need not show high chances of success, but must show serious questions of law or a reasonable argument. On the material before it, the court was not persuaded the grounds raised were arguable.

p. 3
02

Whether a dispute over the loan amount justifies an injunction against a statutory power of sale

Holding

No - disputes over the amount owed or interest do not of themselves warrant restraining a mortgagee or chargee exercising its statutory power of sale.

Reasoning

Relying on Thathy vs Middle East Bank and Halsbury's Laws of England, the court affirmed that a mortgagee will not be restrained from selling merely because the amount due is in dispute or the mortgagor has begun a redemption action. The applicant had defaulted and never denied indebtedness, so the dispute on accounts could not ground the injunction.

p. 3
03

Whether the appeal would be rendered nugatory without the injunction

Holding

Even if a single arguable point existed, the nugatory limb failed; the court noted uncertainty whether the respondent had actually exercised its statutory power of sale as scheduled.

Reasoning

The applicant had to satisfy both limbs. Although it claimed the properties would be sold at an undervalue and students would suffer irreparable loss, the court observed it was not sure whether the sale scheduled for 30th November 2017 had in fact taken place, undermining the claimed nugatory effect.

p. 3

Legal principles established

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  • An applicant under Rule 5(2)(b) must satisfy both the arguability and nugatory principles; satisfying only one is insufficient.
  • A single arguable ground suffices to satisfy the first limb of the Rule 5(2)(b) test.
  • A dispute as to the loan amount or interest is not a basis for restraining a chargee from exercising its statutory power of sale.

Court orders

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  1. 1.The application is dismissed with costs
On appeal from
Environment and Land Court
E.L.C Suit No. 208 of 2017
Jurisdiction invoked
Rule 5(2)(b) of the Court of Appeal Rules

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, "The Air Travel & Related Studies Ltd. v Equity Bank (kenya) Ltd.", Case Analysis (2017). Civil Application No. NAI. 272 of 2017. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2017/83/eng@2017-12-15

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