TKM Maestro Limited & another v Bank of Africa (K) Limited & another (Environment

& Land Case E231 of 2023) [2023] KEELC 21407 (KLR) (2 November 2023) (Ruling)
Neutral citation: [2023] KEELC 21407 (KLR)

REPUBLIC OF KENYA
IN THE ENVIRONMENT AND LAND COURT AT NAIROBI
ENVIRONMENT & LAND CASE E231 OF 2023
JA MOGENI, J
NOVEMBER 2, 2023

BETWEEN
TKM MAESTRO LIMITED ................................................................ 1ST PLAINTIFF
DR. STEVE TONY NYARANGI MONDA ....................................... 2ND PLAINTIFF

AND
BANK OF AFRICA (K) LIMITED .................................................. 1ST DEFENDANT
JOSEPH NG’ANG’A KARIUKI T/A JOSRICK MERCHANTS
AUCTIONEERS ............................................................................... 2ND DEFENDANT

RULING

1. The matter for determination is the Plaintis’ Notice of Motion Application dated 22/06/2023
brought under Article 159 (2) (c) of the Constitution of Kenya, Section 1A, 1B, 3, 3A & 89 of the Civil
Procedure Act, Orders 40 & 51 of the Civil Procedure Rules 2010, Section 96 and 97 of the Land Act,
Section 21 of the Auctioneers Act, Rules 15 and 16 of the Auctioneers Rules 1997 and all enabling
sections of the law. The Plaintis are seeking for orders that: -

1. Spent.

2. That this Honourable Court do grant a stay of the intended sale purported
to emanate from the unlawful and or unprocedural Auction conducted on
13/06/2023, payment of purchase price, transfer and/or any other dealings
on L.R. No. 1160/709/1247 (IR. No. 201392) (original title 1160/709/1 IR.
201392), Nairobi by the Defendant/Respondent, their agents and or servants
pending the hearing and determination of this Application Inter-Parties.

3. That this Honourable Court do grant a stay of the intended sale purported
to emanate from the unlawful and or un procedural Auction conducted on
13/06/2023, payment of purchase price, transfer and / or any other dealings
on L.R. No. 1160/709/1247 (IR. No. 201392) (original title 1160/709/1 IR.

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 201392), Nairobi by the Defendant/Respondent, their agents and or servants
pending the hearing and determination of this suit.

4. That the 2nd Defendant/ Respondent be compelled to produce the

proceedings of the Auction conducted on 13/06/2023.

5. That the costs of this application be in the cause.

1. The Application is premised on the grounds as stated in paragraph (1) – (10) on the face of the
Application, the annexed Adavit sworn by Dr. Steve Tony Nyarangi Monda on 22/06/2023.
I do not need to reproduce them.

2. The Application is opposed by the 1st Defendant/Respondent vide the Replying Adavit
sworn by Janet Kimunyu on 18/07/2023. The 1st Defendant also led a Notice of Preliminary
Objection dated 29/06/2023. The 1st Defendant seeks to have the Plainti’s Application and
the entire suit struck out with costs to the 1st Defendant on the following grounds:

1. The court lacks jurisdiction to hear the matter.

2. The Application oends the doctrine of exhaustion.

3. Unsubstantiated claims and abuse of the court process.

4. Directions were given on 20/07/2023 that the Application be canvassed by way of written submissions.
By the time of writing this Ruling, it is only the Plainti who had duly submitted and I have
considered them. and I have considered. The Plainti’s written submissions in response to the notice
of preliminary objection are dated 31/08/2023. Analysis and Determination

5. Having carefully read and considered the instant Application, the rival Adavits, the Notice of
Preliminary Objection and the written submissions led by the plainti, I nd that the following issues
stand out for determination;

a. Whether this Court has jurisdiction to determine the Plainti’s suit; and if so,

b. Whether the Plainti’s Application dated 22/06/2023 is merited.

Whether this Court has jurisdiction to handle the matter

6. I need to dispose of the preliminary objection rst before considering the application on merit
should it become necessary. When the issue of a court’s jurisdiction to hear and determine a
matter is raised, the court seized of the matter is then obliged to decide the issue right away on
the material before it. It must rst deal with it as jurisdiction of a court is everything as was
held in the case of the Owners of the Motor Vessel Lillian ‘S’ Vs. Caltex Kenya Limited (1989)
KLR 1.

7. The 1st Defendant seeks to strike out this application and the entire suit on two main grounds;
that this court lacks jurisdiction and that the application oend the doctrine of exhaustion.

8. On lack of jurisdiction, the 1st Defendant asserted that jurisdiction of the ELC Court ows
from Article 162 of the Constitution of Kenya and Section 13 of the Environment and Land
Court Act. That the Environment and Land Court Act as read together with Article 162 (2)
(d) of the Constitution of Kenya does not confer jurisdiction to the ELC to deal with matters
relating to legal charges as the jurisdiction of this Court is limited to disputes relating to the
environment and the use and occupation of, and title to land. That the suit as led seeks to

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 allegedly challenge the 1st Defendant’s right in exercise of their statutory power of sale and not
to the use and occupation or title and title to land and therefore do not fall within the purview
of the ELC. The 1st Defendant submitted that any dispute relating to charged property can
only be dealt with by the High Court pursuant to Article 165 of the Constitution of Kenya.
The 1st Defendant relied on the case of Albert Chaurembo Mumba & 7 others v Maurice
Munyao & 148 others 2019] eKLR, Co-operative Bank of Kenya Limited v Patrick Kang’ethe
Niuguna & 5 others [2017] eKLR, Attorney General & 2 others v Okiya Omtata Okoiti &
14 others /2020] eKLR, Republic v Karisa Chango & Another (2017) eKLR, Stella Kavutha
Muthoka & another v Kenya Women Micronance Bank Ltd [2021] eKLR and lastly, the case
of Owners of the Motor Vessel “Lillian S" v Caltex Oil (Kenya) Ltd 1989l eKLR.

9. On doctrine of exhaustion, according to the 1st Defendant, the prayers sought ought to be
before the Auctioneer’s Licensing Board, pursuant to Section 4 of the Auctioneers Act, 1996.
Therefore, the Applicants have not exhausted the process available to them. They rely on the
case of Republic v Kenya Revenue Authority Ex Parte Stole Industries Limited 2019] eKLR.

10. On the other hand, as to whether this court lacks jurisdiction, the Plainti’s advocate
submitted that the issues to be determined by this Court are whether statutory notices had
been issued to the Plaintis/Applicants prior to the attempted statutory sale and secondly,
whether the unlawful and unprocedural auction conducted by the Defendants/Respondent
on 13/06/2023 dealings on LR No. 1160/709/1247 (IR No. 201392) (Original Title
1160/709/1 IR 201392) have any relation to use, occupation and title to land. That upon
a close cursory look at the said issues, it goes without a say that the dispute falls within the
jurisdiction of this Honourable Court, as the Applicants bone of contention is that the suit
property has been undervalued, which relates to or constitute use or occupation of land and
thus brings the dispute within Article 162 (2) (b) and Section 13 of the Environment and Land
Court Act. More specically, counsel submits that Section 13 (d) of the Environment and Land
Court Act confers jurisdiction to this Court to hear and determine disputes “relating to public,
private and community land and contracts, choses in action or other instruments granting any
enforceable interests in land.”

11. Further, Counsel submitted that Black’s Law Dictionary, 10th edition denes a “chose in
action” as a proprietary right in personam such as a debt owed by another person, a share in a
joint-stock company or a claim for damages in tort or the right to bring an action to recover a
debt, money or thing. The denition given in the dictionary based on the case of Torkington
V Magee [1902] 2 KB was that the legal expression “chose in action” was used to describe all
personal rights of property which can only be claimed or enforced by action and not by taking
physical possession.

12. The Plainti submitted that William R. Anson in Principles of the Law of Contract 362 n.
(b) (Arthur L. Corbin ed., 3d Am. ed.1919) expounded that by “rights of property” the court
meant to include under the term chose in action rights under a contract and rights of action
arising from breach of contract. Based on this denition they submit that the Plaintis’ claim
qualies as a chose in action under Section 13 of the ELC Act and it would be the ELC and
not the High Court to try cases relating to rights under contracts for the sale of land and rights
of action arising from breaches of contracts over land.

13. It is therefore their submission that the Preliminary Objection does not satisfy the test of
what constitutes a preliminary objection and under this limb, the Plainti urged the Court to
dismiss the Preliminary Objection dated 29/06/2023 as it does not meet the threshold of what
constitutes to a preliminary objection with costs.

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14. As to whether the application oends the doctrine of exhaustion, the Plainti submitted that
the issue herein is not about the institution of proceedings against the 2nd Defendant in the
Auctioneer’s Licensing Board, but if the Defendants in an attempt to disposes the Plainti of
their property followed the law. As such, they submit that the suit herein is properly before
the court.

15. The dispute in this case is the sale and purchase of the suit property to a third party vide public
auction on 13/06/2023. The Plainti contends that the public auction was unlawful as they
were not notied. The Plaintis are challenging the legality of the public auction. The public
auction was in relation to land known as LR No. 1160/709/1247 (IR No. 201392) (Original
Title 1160/709/1 IR 201392). The same was sold on 13/06/2023 therein the interest in the
land was transferred to a third party. Therefore, it is my considered view that this Court has
the jurisdiction to hear and determine this matter as pertains to the sale and transfer of interest
in land vide public auction.

16. This Court derives its jurisdiction from Section 13 of the Environment and Land Act. I am
specically guided by Section 13(2)(d) of the Environment and Land Act which provides that
this Court shall have power to hear and determine disputes: “relating to public, private and
community land and contracts, choses in action or other instruments granting any enforceable
interests in land.”

17. Further, it is my humble view that Counsel for the 1st Defendant has misinterpreted the
Plainti’s suit. The 1st Defendant asserts that the jurisdictional dichotomy on which court
ought to hear disputes where charged property was concerned was laid to rest in Co-operative
Bank of Kenya Limited (supra). In the matter, the court talks about ‘use’ of land; which
does not include mortgages, charges, collection of dues and rents which fall within the civil
jurisdiction of the High Court.

18. The plainti is not challenging the charge or the terms thereof. His issue is that at all material
times to this suit, the Defendants irregularly disposed of the 2nd Plaintis suit property
which had been initially been used by the 1st Plainti to secure a loan facility from the
1st Defendant. That unless and until this suit is heard and the prayers sought therein are
granted, the Defendants will continue to illegally dispose the suit property to third parties. The
predominant issue in this matter therefore is not the loan facility or the statutory power of sale.

19. To my mind, the Plainti's main issue is that the property was sold by public auction without
proper notice and that the sale was undervalued. His issue is dispossession and nothing to do
with the loan facility or default thereof. He has no issue with the issuance of the statutory
notice. He only says he was entitled to receive a new letter of instruction and notice before the
fresh public auction was set seeing that the rst auction was compromised. The sale of land
herein has no nexus to mortgages, charges, collection of dues and rents which fall within the
civil jurisdiction of the High Court. The issue here is that the suit property was sold allegedly
without due notice as required by the law and that it was undervalued. So, in this matter, this
court is left to determine whether or not the auction was lawfully staged. The court will not
go into details that are not within its jurisdiction.

20. With regard to the doctrine of exhaustion, I have considered the provisions of Section 4 of the
Auctioneers Act. It provides as follows:

PARAGRAPH 4.

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 Object and functions of the Board

1. The object and purpose for which the Board is established is to exercise
general supervision and control over the business and practice of
auctioneers.

2. Without prejudice to the generality of subsection (1), the Board shall

—

a. license and regulate the business and practice of auctioneers;

b. (b) supervise and discipline licensed auctioneers;

c. to carry out training programmes for licensed auctioneers.

21. It is evident that the 2nd Plainti is not challenging the licence and/or discipline of the 2nd
Defendant. The suit challenges the validity and lawfulness of the public auction. Therefore,
the dispute herein does not fall within the purview of the Auctioneer’s Licensing Board’s
functions and objectives. The plainti has not raised any complaints against the auctioneers
of misconduct which expression includes disgraceful or dishonorable conduct. The doctrine
of exhaustion does not apply in this matter.

22. In the end, I am of the view that this Court has jurisdiction to hear and determine this suit
hence the preliminary objection dated 29/06/2023 is devoid of merit and is hereby dismissed.

Whether the Plainti ’s Application dated 22/06/2023 is merited

23. The Applicant has sought the Court to stay the intended sale purported to emanate from the
unlawful and/or unprocedural auction conducted on 13/06/2023, payment of purchase price,
transfer and/or any other dealings on the suit property by the Defendant/Respondent, their
agents and/or servants pending the determination of this application and suit.

24. The pleadings before me in this matter show that the Plaintis have a contractual duty to
either repay the entire outstanding sums now due to the 1st Defendant, failure whereof, as has
happened, the 1st Defendant is entitled to sell the security. So, in this application, we are not
concerned with the 1st Defendant’s rights to realize its security. Rather, the duty of the Court is
to look at the process adopted by the Auctioneer, question the same and establish whether the
same was done in accordance with the law. The Applicants herein now challenged the outcome
of the said public auction on the basis that it was neither lawful nor procedural.

25. The Plainti/Applicant’s argument centers on the purported sale of the suit property by the
2nd Defendant, which took place through a disputed auction on 13/06/2023. According to
information presented by the 1st Defendant/Respondent, the Plaintis/Applicants have come
to understand that the property was supposedly sold to an unidentied third party for Kshs.
40,130,000/-. This sale occurred despite the 1st Defendant/Respondent’s awareness that there
was an interested buyer willing to acquire the property for a signicantly higher sum of Kshs.
57,000,000. Evidently, the property was undervalued during the sale process.

26. The Plaintis/Applicants argue that the 2nd Defendant/Respondent had a legal obligation
to issue them with a new letter of instruction, provide a notication of the sale, and a 45-
day notice, which would require the Plaintis/Applicants to settle the outstanding amount.
Failing that, the property should have been advertised for sale, followed by an auction 14 days
after the advertisement if payments were not received. To the best of their knowledge, the 2nd

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 Defendant/Respondent failed to inform them about the auction date, time, and location, the
terms of the property's sale, and its reserve price. Moreover, the Defendants/ Respondents did
not conduct a recent property valuation, despite the common knowledge that property values
generally appreciate over time.

27. The Plainti asserts that the 1st Defendant/Respondent initiated the exercise of their legal
authority to auction the suit property and scheduled the auction for 29/03/2022. They
acknowledge that they unintentionally and unexpectedly defaulted on the loan repayment
in line with the loan/settlement agreement, and they promptly informed the 1st Defendant/
Respondent about this situation. They even made eorts to nd a buyer for the property and
presented a proposed sale agreement, which was rejected. When the 2nd Plainti requested a
copy of the property’s title while actively searching for a buyer, they were informed through
a letter dated 19/06/2023 that the 2nd Defendant/Respondent had conducted the disputed
auction of the subject property on 13/06/2023.

28. On their part, in her replying adavit, the 1st Defendant alleges that the Applicant failed to
disclose crucial information regarding the dispute between the parties, particularly the events
leading up to the ling of this suit and application, and that they concealed pertinent facts. The
1st Defendant also disclosed the terms of the credit facilities between the bank and the Plaintis
and highlighted the continued default by the Plaintis, as explained in paragraphs 8 and 9.

29. The 1st Defendant argues that despite the clear terms of the credit facility and the option
for restructuring by the bank, the 1st Plainti failed to adhere to the terms and defaulted. In
response, the bank initiated a series of legal notices, starting with a 90-day Statutory Notice on
6/06/2019, followed by a 40-day Statutory Notice on 19/09/2019, and demand notices to the
directors of the 1st Plainti's Guarantors on 8/09/2021. On 7/10/2021, the bank’s advocates
informed the Plaintis that the loan was in arrears, amounting to Kshs. 344,438,604.25, with
Kshs. 62,242,278.18 payable by 5/10/2021.

30. Despite these actions, the Plaintis continued to neglect their accounts, prompting the bank
to instruct the 2nd Defendant, Josrick Merchants Auctioneers, to begin the process of selling
the property. The previous court proceedings were concluded through a settlement deed dated
14/06/2022 between the bank and the 1st & 2nd Plaintis.

31. According to the 1st Defendant, the settlement deed’s Clause 1.5 detailed events of default,
allowing the bank to recover the advanced funds immediately in case of any breach of the letter
of oer or the settlement deed. Clause 1.5.2 granted the bank the right to exercise its statutory
power of sale regarding the subject property. Despite these agreed terms, the Plaintis defaulted
again and only deposited a total of Kshs. 3,403,500.00 after the execution of the settlement
deed on 14/06/2022.

32. Regarding the auction on 13/06/2023, the 1st Defendant states that the 2nd Defendant
served the Plaintis with a 45-day redemption notice on 17/01/2022. Given the continuous
default by the Plaintis, instructions were given to the 2nd Defendant to proceed with the
auction process, as evidenced by an advertisement in the Daily Nation on 29/05/2023. The
Plaintis failed to settle the outstanding amount owed to the bank, resulting in the sale of the
property for Kshs. 40,130,000 to Eric Njiiri Marigu, who has already paid Kshs. 10,032,500,
constituting 25% of the deposit price.

33. The 1st Defendant emphasizes that granting the orders sought in this application would
prejudice third parties not involved in this case. The bank, despite providing numerous

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 opportunities for the Plaintis to settle their debt, asserts its right to exercise its statutory power
of sale. The 1st and 2nd Plaintis admitted their indebtedness and default in the repayment
of the credit facilities as per the terms of the settlement deed, and this is not disputed in the
Applicants' pleadings.

34. Furthermore, the 1st Defendant states that the 1st Plainti presently owes the bank Kshs.
333,269,965.97 as of 11/07/2023, which remains outstanding even after the sale of the subject
property, with interest continuing to accrue.

35. The Applicant has led the case on 22/06/2023 which is 7 days or so after the purported
auction. He contended that he became aware of the public auction through a letter ref:
JK/302233/Jun 23/ dated 19/06/2023 from the 1st Defendant. The Plainti/Applicant does
not deny being in default and owning monies to the 1st Defendant. The 1st Plainti admits
that he used the suit property to secure a loan facility from the 1st defendant. The Applicant is
only challenging the fact that the auction was not procedurally done and also denies receipt of
statutory notices from the 2nd Defendant prior to the statutory sale. The Applicant asserts that
he was not aware of that the public auction would take place on 14/06/2023. He contends
that he only found out about the auction when he received a letter from the 1st Defendant who
informed him that the suit property was sold for Kshs. 40,130,000.00. The 2nd Plainti even
admits that he had a buyer who was willing to purchase the property for Kshs. 57,000,000. He
even adduced a draft sale agreement in support of his allegations.

36. From the documents before this Court, I note that the suit property was advertised for sale
by public auction in the Daily Nation on 25/05/2023 by the 2nd Defendant, and the auction
was slated to take place on 13/06/2023 at 11am at the Auctioneer’s oce, Utalii House, Utalii
Lane, 3rd Floor, South wing room 304. The auction was attended to by the 1st Defendant’s
representative Janet Kimuyu, the Auctioneer himself and three other people. This is seen on
the public auction attendance register. That the highest bidder paid Kshs. 10,032,500.00 being
25% deposit and agreed to pay the balance of the purchase price within 90 days. However, I
note that there is no evidence before me demonstrating that the highest bidder, M/S Eric Njiiri
Murigu indeed paid the 25% deposit as is alleged. There is no memorandum of sale, certicate
of sale or a sale agreement for sale by auction adduced in evidence.

37. The issues the Plainti/Applicant is raising cannot be fully eectuated upon at this
interlocutory stage and the court must refrain from purporting to do so. The evidence before
me is simply not suitable for a full and proper adjudication of all the issues in dispute in the
suit and should be taken through a full trial.

38. There are inconsistent narratives concerning the auction. The 1st Defendant contends that
the Plainti was served the notices as required by the law and the 2nd Plainti denies being
served with any notices. He contended that the Defendants were statutorily required to issue
the Plainti/ Applicants with a new letter of instruction, notication of sale, a 45- day
notice requiring the Plainti/ Applicants to clear the amount owed. This is not reconcilable.
Therefore, there is no way that the Court can determine, at this stage, whether the public
auction was lawfully staged.

39. In the case of John P. O. Mutere & Another v Kenya Commercial Bank Ltd, HCCC No. 3125
Of 1995 the court held as follows;

“ Once a power of sale has arisen a mortgagee has the right to exercise it.

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 The Court has no power to prevent the exercise of that power if it is properly
exercised.” Emphasis added

40. I understand the court to be saying that where the power of sale had not been exercised
properly, the court has the power to intervene, as may be deemed appropriate.

41. I appreciate the bold pronouncement by the Court of Appeal in Mbuthia v Jimba Credit
Finance Corporation & Another [1985] KLR 1, at page 6, as follows;

“ Next there was the consideration of the scope of the equity of redemption. It is now
clear that the English notions apply, that the equity is lost on the completion of a
valid agreement for a valid sale. It is not allowed to continue until conveyance nor
until registration.”

42. Once again, there has got to be a valid agreement for a valid sale.

43. At the heart of the Applicants’ case is the question as to the validity of the sale.

44. If the court were to allow the sale to be completed, through the transfer thereof, the suit
property may be put beyond the reach of the court whilst the substantive suit was still pending.

45. In the event that the trial court were to hold that the sale was not valid, yet the suit property
had already been transferred, that could give rise to more legal complications.

46. In my considered view, justice demands that the status quo currently prevailing be maintained
until the suit is determined. Simply put is that there is no transfer to be done every part
maintains its position and do nothing regarding the suit property until the main suit is heard
and determined.

47. I am alive to the fact that the third party and highest bidder, M/S Eric Njiiri Murigu is not
a party to this suit. Therefore, considering that the 25% deposit of the purchase price was
allegedly paid for on 13/06/2023, the continued delay in resolving the issues may be prejudicial
to him.

48. Accordingly, it is imperative that the substantive suit be set down for hearing as soon as parties
comply with all the pre-trial procedures which I will shortly issues.

49. Finally, I order that the costs of the application shall be in the cause, so that the party who wins
the substantive case, will also be awarded the costs of this application.
It is so ordered.
DATED, SIGNED AND DELIVERED AT NAIROBI THIS 2ND DAY OF NOVEMBER, 2023
.........................................
MOGENI J.
JUDGE
In the virtual presence of: -
Mr. Wachira for the 1st and 2nd for Plaintis/Applicants
Mr. Githinji for 1st Defendant/Respondent
No appearance for the 2nd Defendant

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Ms. Caroline Sagina: Court Assistant.
.............................................
MOGENI J
JUDGE

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