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ELCAllowedE.L.C. Appeal No. 22 of 2017

Electrical Marketing (Wholesale) Ltd v Nairobi City County & 2 others [2019] KEELC 1982 (KLR)

Environment and Land Court
15 July 2019
4,804 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~19 min to read original · ~4 min brief

The bottom line

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The Environment and Land Court cancelled a Nairobi county auction of a company's land worth Kshs. 120 million, sold for just 5 million, because proper notice was never given.

What this practically means

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Executive summary

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This was a first appeal to the Environment and Land Court at Nairobi against the ruling of Hon. M. W. Njagi, First Class Magistrate, delivered on 29/5/2017 in Nairobi City Court Civil Suit No. 3 of 2011, in which the Learned Magistrate had upheld the service and sale of the Appellant's property, L.R. No. 209/8323, in execution of a decree for rates recovery by the City Council of Nairobi (now Nairobi City County). The Appellant, through its director Sunil K. Patel, contended that it was never properly served, that the demand notice and summons were not served as required by Sections 17 and 26 of the Rating Act, that the execution process under Order 22 of the Civil Procedure Rules was irregular, and that the sale at Kshs. 5,000,000/- of property valued at over Kshs. 120,000,000/- was fraudulent. The 1st Respondent maintained service was proper under Section 17(4)(b) of the Rating Act, while the 2nd and 3rd Respondents claimed protection as innocent purchasers for value. The court examined the process server's affidavits, noted anomalies including a summons dated four years before the suit was filed, and held that no demand notice or proper service was effected and that the deserted state of the premises required the summons to be returned to court under Order 5 Rule 20(2). It further found the execution process fundamentally irregular: no notice of entry of judgment, an improperly used notice to show cause, no registration of the prohibitory order, no valuation or proper notification of sale, sale proceeds not paid into court, and a wrongly issued vesting order for immovable property. Allowing the appeal, the court set aside the judgment of 29/5/2017, the sale orders of 30/8/2011 and all consequential orders, and awarded the Appellant costs against the 1st Respondent.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether there was proper service of the summons, demand notice and notice to show cause on the Appellant under Section 17 of the Rating Act
  2. 2.Whether the proceedings taken before judgment and the execution process were irregular and unprocedural such that the magistrate's court lacked a proper basis for the orders made
  3. 3.Whether the Learned Magistrate erred in failing to find fraud in the sale of the Appellant's parcel of land
  4. 4.Whether the Appellant was entitled to have the judgment of 29/5/2017 and the orders for sale of the Suit Property set aside

Key legal issues

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01

Proper service of demand notice and summons under the Rating Act

Holding

No demand notice was served before suit and no proper service of the summons was effected; affixing the summons on the gate of a deserted property did not give the Appellant reasonable notice.

Reasoning

Section 17 requires service of a written demand notice before suit, and Section 26(2) prescribes modes of service. The process server's own affidavits showed the property was deserted and unmanned. The court held the options must not be applied mechanically and that reasonable notice of the demand and suit must be shown. Since the premises were deserted, the process server should have returned the summons under Order 5 Rule 20(2), or served out of Kenya under Order 5.

p. 3
02

Irregularity of the execution process

Holding

Execution was irregular: no notice of entry of judgment was served, a notice to show cause was wrongly used, the prohibitory order was never registered against the title, no valuation or notification of sale occurred, sale proceeds were not paid into court, and a vesting order was wrongly issued for immovable property.

Reasoning

Under Order 22 Rule 6, ten days' notice of entry of judgment was required where judgment was entered in default; none was served. A notice to show cause under Rule 18 was inapplicable. Rule 48 required registration of the prohibitory order for attachment to be complete, which was not done. Rules 57, 58 and Rule 11 of the Auctioneers Rules required a valuation, reserve price and disclosure of encumbrances; none was done. Rule 70 required sale proceeds to be paid into court; they were not.

p. 4
03

Fraud and material irregularity in the sale and availability of setting aside

Holding

The failure to value the property before the sale rendered the auction improper and fraudulent, and the Appellant was entitled under Order 22 Rule 75 to seek setting aside rather than being confined to damages.

Reasoning

No valuation was carried out before sale despite the property being valued at Kshs. 120,000,000 in 2008 and sold at Kshs. 5,000,000. The court rejected the Respondents' argument that damages were the sole remedy, holding that Rule 75 entitles an affected person to apply to set aside a sale conducted with material irregularity or fraud on proof of substantial injury.

p. 4

Legal principles established

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  • Service under Section 17 of the Rating Act must afford the rate defaulter reasonable notice of the demand and of the suit; the modes of service are not to be applied mechanically.
  • Where the premises are deserted and personal service impossible, the process server should return the summons to court with an affidavit of the attempts made, which is deemed evidence of non-service, under Order 5 Rule 20(2).
  • Attachment of immovable property in execution is effective and complete only upon registration of the prohibitory order against the title.
  • A person affected by a sale of immovable property in execution may apply under Rule 75 of Order 22 to set the sale aside for material irregularity or fraud on proving substantial injury; damages are not the only remedy.

Court orders

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  1. 1.The appeal is allowed
  2. 2.The orders made for the sale of L.R. No. 209/8323 by way of public auction on 30/8/2011 and all subsequent orders relating to the Suit Property are set aside
  3. 3.The judgment of Hon. M. W. Njagi, First Class Magistrate delivered on 29/5/2017 in Civil Suit Number 3 of 2011 and all consequential orders are set aside
  4. 4.The Appellant is awarded the costs of the appeal to be borne by the 1st Respondent

The bench

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One judgment of the whole court — no separate or dissenting opinions.

majority

Wrote the judgment

On appeal from
Nairobi City Court (First Class Magistrate)
Civil Suit Number 3 of 2011
Jurisdiction invoked
First appellate jurisdiction over a magistrate's court suit (memorandum of appeal; appeal against ruling and order of the First Class Magistrate)

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

The court allows the appeal and sets aside the orders made for the sale of L.R. No. 209/8323 by way of public auction on 30/8/2011 and all subsequent orders relating to the Suit Property.
p. 4Final orders - appeal allowed and sale set aside
The judgement of Hon. M. W. Njagi, First Class Magistrate at Nairobi City Court delivered on 29/5/2017 in Civil Suit Number 3 of 2011 and all consequential orders are hereby set aside.
p. 4Setting aside the judgment below
It must be shown that the rates defaulter had reasonable notice of the demand made by the local authority for the rates due, and of the suit filed to recover the rates to afford him an opportunity to pay the rates due and to defend the claim
p. 3Reasonable notice in rates recovery
The attachment is effective and complete upon registration of the prohibitory order against the title to the property.
p. 4Attachment of immovable property
No valuation was done of the suit land before it was sold which leads to the conclusion that the auction conducted was not only improper, but also fraudulent.
p. 4Fraud in auction sale

Issues in the judgment

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minor

The judgment inconsistently dates the ruling sought to be set aside: the appeal is against orders made on 29/5/2017, but the application dated 17/11/2015 sought setting aside of 'the orders made on 30/8/2011', and the court's final order sets aside sale orders made on 30/8/2011 while separately setting aside the magistrate's judgment of 29/5/2017.

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (1)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Electrical Marketing (Wholesale) Ltd v Nairobi City County & 2 others [2019] KEELC 1982 (KLR)", Case Analysis (2019). E.L.C. Appeal No. 22 of 2017. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2019/1982/eng@2019-07-15

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