Etrade Limited & another v Thrift Estates Limited & 2 others [2019] KECA 557 (KLR)
The bottom line
#Once a charged property is sold at auction in Kenya, courts won't stop its transfer—losers of the sale must claim money damages, not block the buyer.
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 learned judge erred in granting injunctive orders restraining the 3rd respondent Bank from transferring, dealing or alienating the suit property
- 2.Whether the court erred in restraining the Bank from transferring the suit property to the appellant who purchased it at a public auction held on 9th December 2014
- 3.Whether the judge erred in failing to apply Sections 99(3) and (4) of the Land Act and in issuing injunctive orders after sale by public auction
Key legal issues
#Whether interlocutory injunctive orders could properly issue after the suit property had been sold by public auction, given Section 99 of the Land Act
The judge erred in law in failing to apply Sections 99(3) and (4) of the Land Act; the purchasers' remedy against any irregular sale lies in damages, not an injunction
The court applied Section 99(4) of the Land Act, which grants a person prejudiced by an unauthorized, improper or irregular exercise of the power of sale a remedy in damages. Drawing on Bomet Beer Distributors, Bii v Kenya Commercial Bank and other authorities, it held the equity of redemption expires at the fall of the hammer. Since the auction occurred on 9th December 2014 and the injunction issued one and a half years later, damages were an adequate remedy and the balance of convenience favoured the innocent purchaser for value who had paid the full price.
Whether an innocent purchaser for value at a public auction retains statutory protection
A purchaser at a properly advertised public auction who has paid the purchase price is protected by Section 99 of the Land Act and there is no duty on such a purchaser to inquire into the chargee's right to sell
The court adopted the reasoning in Nancy Kahoya Amadiva v Expert Credit Limited, which restates that an intending purchaser at a properly advertised auction need not inquire into the mortgagee's right to sell, and that the purchaser loses statutory protection only if an improper or irregular exercise of the statutory power of sale is proved of which the purchaser had notice. No fraud or collusion involving the appellant was established; the 1st and 2nd respondents' remedy lay in damages under Section 99(4).
Legal principles established
#- Once a statutory power of sale has been exercised and the property sold by public auction, a chargor's equity of redemption is extinguished and any grievance about irregularity in the sale is remediable only in damages; injunctions cannot restrain transfer to a purchaser protected under Section 99 of the Land Act
- A purchaser at a properly advertised public auction is under no duty to inquire into the chargee's right to sell, and is protected under Section 99 of the Land Act absent fraud, misrepresentation or dishonest conduct of which the purchaser has notice
Court orders
#- 1.Nairobi Civil Appeal No. 156 of 2015 and Nairobi Civil Appeal No. 109 of 2017 and the cross-appeal therein allowed
- 2.The ruling by the High Court dated 30th April 2015 and the ruling dated 21st December 2016 set aside in entirety
- 3.The injunction issued by the High Court on 21st December 2016 set aside
- 4.The 1st and 2nd respondents to bear the costs in the appeals and cross-appeal and costs before the High Court
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya at Nairobi
- H.C.C.S No. 576 of 2014
- Jurisdiction invoked
- First appeal against interlocutory rulings of the High Court, Court of Appeal jurisdiction under the Constitution and the Court of Appeal Act (not expressly stated in the judgment)
- Consolidated with
- Civil Appeal No. 156 of 2015
Relief refused
#Consideration of the other grounds raised in the appeal, including res judicata
Being an interlocutory appeal, those grounds will be canvassed before the trial court
Costs
The 1st and 2nd respondents shall bear the costs in this appeal and cross-appeal and costs before the High Court.
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.
Our final order is Nairobi Civil Appeal No. 156 of 2015 and Nairobi Civil Appeal No. 109 of 2017 and the cross-appeal therein be and are hereby allowed. We set aside in entirety the ruling by the High Court dated 30th April 2015 and the ruling dated 21st December 2016.
For avoidance of doubt, the injunction issued by the High Court on 21 st December 2016 be and is hereby set aside.
Once property is offered as security it by that very fact becomes a commodity for sale. There is no commodity for sale whose loss cannot be compensated in damages.
Once a statutory power of sale is legally activated, any irregularity in the sale is only remediable with damages to the mortgagor if it injures him.
The 1st and 2nd respondents shall bear the costs in this appeal and cross-appeal and costs before the High Court.
Issues in the judgment
#The judgment describes the appeal as brought against interlocutory rulings while the notice of appeal structure and grounds include res judicata and validity of the consent order, but the court declines to determine all other grounds, limiting itself to the Section 99 issue
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Etrade Limited & another v Thrift Estates Limited & 2 others [2019] KECA 557 (KLR)", Case Analysis (2019). Civil Appeal No. 109 of 2017 (consolidated with Civil Appeal No. 156 of 2015). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2019/557/eng@2019-07-05
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.