REPUBLIC OF KENYA
IN THE ENVIRONMENT AND LAND COURT OF KENYA
AT KISII
ELCLA NO. E005 OF 2025
JAMES BICHAGE KENYARIRI .................................................. APPELLANT
=VERSUS=
EQUITY BANK LIMITED .................................................. 1ST RESPONDENT
VERONICAH KWAMBOKA RANGI T/A NIRA AUCTIONEERS .............................. 2ND RESPONDENT
BONDA WELFARE ASSOCIATION ................................. 3RD RESPONDENT
(Being an appeal from the Judgment/Decree of Hon. C.A. Ocharo, Chief Magistrate in Kisii CMELC No. E117 of 2021 delivered on 17 October 2024)
JUDGMENT
1. The appellant commenced suit through a plaint dated 30 September 2021. He filed the plaint in person. He subsequently appointed counsel and the plaint was amended twice, culminating in the further amended plaint filed on 20 April 2022. In the case, he sued Equity Bank Limited, Veronica Kwamboka Rangi T/A Nira Auctioneers and Bonda Welfare Association as the 1st , 2nd and 3rd defendants respectively. They are the 1st, 2nd and 3rd respondents in this appeal. His case was that he was hitherto the registered proprietor of the land parcel Nyaribari Chache/B/B/Boburia/11141 (the suit property). He used this property as security for financial facilities granted by the 1st respondent bank in the year 2014 and 2015. He fell into arrears which he attributed to the Covid-19 pandemic. He pleaded that the 1st respondent approached him with intention of looking for a buyer to buy the property through private treaty. He averred that despite various offers that he made to them for sale by private treaty, the 1st respondent never responded to the lawyers of the interested buyers.
2. On 15 December 2020, he was served with a redemption notice by the 2nd respondent and he wrote to the 1st respondent citing the various offers advanced to them and he quoted to them the current value of the property but they never responded. He pleaded that without any colour of right the 1st respondent proceeded to sell the suit property to the 3rd respondent through the 2nd respondent as auctioneer. He pleaded that he came to learn about the sale on 24 September 2021 through a WhatsApp text message from the 2nd respondent. He contended that no notice to sell was ever served upon him as required by Section 96 (2) of the Land Act, Act No. 6 of 2012. He contended that the sale was defective as it was done in the 2nd respondent’s office contrary to the provisions of the Land Act and the Auctioneers’ Act; that the power of sale had not arisen; that the sale contravened Section 90 (2) of the Land Act and clogged his right of redemption; and that he was not notified about the sale. He further pleaded that the sale was at a gross undervalue. He pleaded that in 2014, the 1st respondent had valued the property at Kshs. 10,134,000/= but 5 years later they proceeded to sell it at Kshs. 6,000,000/=. His view was that the property was worth Kshs. 15,000,000/= at the time of sale. He contended that the suit property was thus sold at a throw away price.
3. In his further amended plaint, he asked for the following orders :
(a) A declaration that the plaintiff herein is the registered proprietor of Land title No. NYARIBARI CHACHE/B/B/BOBURIA/11141;
i. A permanent injunction does issue restraining the defendants and/or their servants, agents or otherwise from entering, trespassing and/or interfering with the property known as Land title No. NYARIBARI CHACHE/B/B/BOBURIA/11141.
(b) A declaration that the public auction that was done privately by the 2nd defendant on 24th September 2021 without involving the plaintiff which is a breach of the statutory requirements of the law (sic).
i. A declaration that the sale of the Land Title No. NYARIBARI CHACHE/B/B/BOBURIA/11141, purportedly conducted by the 2nd defendant on 24th September, 2021 was illegal, improper, irregular and void.
ii. A declaration that Land title No. NYARIBARI CHACHE/B/B/BOBURIA/11141 was undervalued and consequently illegally sold at less than market value at Kshs. 6,000,000/= contrary to the provisions of the Land Act.
iii. A declaration that the illegal sale of parcel Land Title No. NYARIBARI CHACHE/B/B/BOBURIA/11141 on 24th September, 2019 and the subsequent transfer of it to the 3rd Defendant is illegal, fraudulent null and void.
iv. An order for the cancellation of title in the name of the 3rd Defendant in land parcel No. NYARIBARI CHACHE/B/B/BOBURIA/11141 and the restoration of the plaintiff’s name as the owner of the said land.
(c) General damages and interest.
(d) Costs of this suit.
(e) Any other further relief as the Honourable court may deem fit and just to grant.
4. In her defence, the 1st respondent pleaded that the appellant fell into arrears and was served with a demand notice dated 6 June 2017 which was before the Covid pandemic. She pleaded that the appellant was served with all statutory notices as required by Section 90 of the Land Act but he made no corrective action. She averred that the public auction and transfer of the suit property was procedural. She pleaded that at the time the loan was advanced in July 2015 the property was valued at Kshs. 8,500,000/= with a forced sale value of Kshs. 6,375,000/=. She averred that at the time of sale the property was valued at a forced sale value of Kshs. 5,625,000/=.
5. The 2nd respondent neither entered appearance nor filed defence.
6. The 3rd respondent filed a defence and counterclaim. She pleaded inter alia that there was a valid auction sale conducted on 24 September 2021 where she emerged as the highest bidder at Kshs. 6,000,000/= and title transferred to her on 26 October 2021. In the counterclaim, she pleaded that upon purchase of the property, the appellant hired goons to cause chaos and unrest on the suit property. She asked for the appellant to be restrained through a permanent injunction, declaration that she is the bona fide proprietor of the suit property, general damages for trespass until December 2021 when she took possession, and costs. The appellant filed a reply to defence and defence to counterclaim more or less joining issue with the 3rd respondent.
7. At the hearing, the appellant testified that he secured a loan with the 1st respondent in the year 2015 and used the suit property as collateral. He was advanced Kshs. 7,000,000/= and added his own Kshs. 3,000,000/= to acquire the property. At that time the property was valued at Kshs. 10,134,000/=. He stated that he spent about Kshs. 4,000,000/= to make some developments, which he completed, and rented out the premises. He was to pay Kshs. 163,000/= monthly to offset the loan. He testified that he paid timeously until 2018 when he suffered some hardship and could not meet his obligations. He testified that he was called by the bank and they agreed that the property could be disposed of by private treaty. He averred that he presented some persons to the bank who were willing to buy the property. He particularly mentioned one James Omariba who was to pay the bank Kshs. 9 million and Kshs. 4 million to him and an agreement was drawn. He averred that the bank took time to reply and the person went elsewhere. He had another agreement as well drawn by M/s Nyamurongi & Company Advocates. He testified that the bank advertised the property for sale and he did a letter to them but there was no response. He went to their Head Office and told them that he can bring buyers but they refused. He stated that a friend of his informed him that he has seen an advertisement in the newspaper that the property was to be auctioned. On the day of the auction, he posted someone at the auctioneer’s office while he stayed at the Post Office. He asserted that no auction took place on 24 September 2021. He contended that the auctioneer, the 2nd respondent, filed no defence because she knows that no auction took place. At night he got a message that he should hand over the property to the 3rd respondent. The premises was subsequently taken over by the 3rd respondent. He testified that he was not told how much the property fetched at the auction. He claimed that in 2018 the property was valued at 18 Million and in 2015 it was valued at Kshs. 10 million. He testified that he is in court to seek a declaration that the property was undervalued. He refuted any claim that the property could have depreciated. He found it ridiculous that the bank could value the property at Kshs. 10 million, when the loan was taken, and value it at Kshs. 5 million, several years later. He denied being served with any notices. He pointed at the notices exhibited by the respondents and averred that they have errors. He particularly pointed out that they mention one Anne Njeri as his wife which is not true. He added that the documents state that the loanee is Anne Njeri yet the loan was advanced to him.
8. He was cross-examined on his address and he stated that it is P.O Box 2456 Kisii. He could see that it is the same address in the notices displayed by the 1st respondent. He acknowledged being aware of the consequences of default. He did not dispute the amount that the bank claimed he owed. He admitted that he was in arrears. He reiterated that he proposed to the bank to have the property sold by private treaty and the bank verbally requested him to look for a buyer. However the bank did not respond. He repeated that the bank valued the property at Kshs. 10.134,000/= when he took the loan in 2015. He denied meeting the 2nd respondent physically, denied receiving any notice of sale, and denied that the auction took place. On the notices, he denied receiving a demand letter dated 6 June 2017, nor the statutory notice dated 7 November 2017. He acknowledged that he still owes the bank around Kshs. 2 million.
9. Cross-examined by Mr. Nyamurongi, for the 3rd respondent, he yielded that the advertisement indicated that the sale was to take place at the auctioneer’s office. He was at the post office at the time advertised for sale. He claimed that he was at the auctioneer’s office before going to the post office. He stated that he left his friend, one Denis Orina, at the auctioneer’s office but he conceded that he was not calling him as a witness. He affirmed that the bank could sell upon default but according to him it could not sell at a throw away price. He testified that he bought the property at Kshs. 10 million. He had Kshs. 3 million and the bank financed him to the extent of Kshs. 7 million. He testified that he has no problem with the 3rd respondent and that his problem is with the bank which sold the property at an undervalue. He affirmed that the 3rd respondent took possession of the suit property from December 2021 when the court ruled in the 3rd respondent’s favour on an application for injunction. He nevertheless denied having been in possession in September and October as the 3rd respondent had placed security.
10. Re-examined, he stated that the auctioneer’s premises was locked the whole day. He affirmed that he sued the 3rd respondent because she did not participate in the public auction. He asserted that the auction sale is defective as the auctioneer was not there and no auction took place.
11. With the above evidence, the appellant closed his case.
12. The 1st respondent called Benjamin Muge as her witness. He is the Manager at its Eastleigh Branch. He had a witness statement which he adopted as his evidence and also produced various documents as exhibits. He testified that the bank advanced the appellant Kshs. 7 million and he was to pay Kshs. 163,000/= monthly. The loan was advanced on 6 August 2015. He testified that he paid well up to February 2017. The bank sent a 90 day demand notice on 6 June 2017 to the appellant through his postal address and he exhibited the letter and the certificate of posting. He testified that the bank then appointed an auctioneer who served the appellant and he made reference to an affidavit sworn by the 2nd respondent. He mentioned that two valuations were done between 2019 and 2020 by CMT and Green Gain Valuers, as there were negotiations. The negotiations however failed as the appellant did not honour his part of their agreement. He testified that the sale was done through public auction. He could not however confirm if a bank official was present. He testified that the appellant was aware of the auction.
13. Cross-examined by Mr. Nyamurongi, he testified that the bank has a panel of its valuers and a debtor has no authority to have a private valuer value the property. He stated that the valuation done by the appellant’s valuer is not acceptable as the valuer is not one contracted by the bank. On the sale agreements that the appellant claimed were of interested purchasers, he testified that the appellant never came back to the bank with a purchaser. Regarding the auction sale, he testified that it was conducted and a Certificate of Sale was prepared. The bank discharged the property and the property is now in name of the 3rd respondent. He testified that Covid-19 could have depressed the property market and negatively affected the value of the property. According to him the valuation was within range and denied that the suit property was undervalued. He testified that the appellant was not barred from participating in the auction.
14. Cross-examined by Mr. Oremo, for the appellant, he testified that there was a valuation prior to the loan being advanced but he did not produce it. He could not confirm that the property was valued at Kshs. 10 million at the time. He however confirmed that the loan was of Kshs. 7 million and the appellant was directly contributing Kshs. 3 million to purchase the property. Regarding the auction sale, he did not attend it, and he did not know if any bank official attended. He did not know the number of bidders present or where the auction took place. He testified that it is possible for property to depreciate in value. He affirmed that the appellant was not involved in the valuation process. He acknowledged that there were some negotiations with the appellant but he stated that these were verbal. He was not aware that the appellant had fronted some purchasers.
15. DW- 2 was Ronald Makori. He is a member of Bonda Welfare Association, the 3rd respondent. He testified that he attended the auction on behalf of the 3rd respondent after seeing an advertisement in the newspaper of 8 September 2021. The auction was scheduled for 24 September 2021. He testified that he reported at the location of the auction at 10am and registered his name with the auctioneer. He testified that the auction site was outside Shabana Building. He testified that he bidded and they were declared the winners. They paid the money and were issued with a Certificate of Sale. There was a structure when they took possession and there were tenants, though according to him, the property was not in a good state. They thus redeveloped it. He testified that they only responded to the advertisement and did not know the auctioneer or the bank. He was not privy to any irregularities regarding the sale. He testified that after they purchased the property the appellant did a notice dated 28 October 2021 to the tenants and hired goons. It caused them to employ security guards.
16. Cross-examined by Ms. Orengo for the 1st respondent, he testified that there were two bidders at the auction and they emerged the highest.
17. Cross-examined by Mr. Oremo for the appellant, he testified that the auction took place outside Shabana Building; the offices of the auctioneer were inside the building.
18. With that evidence, the defence closed their respective cases.
19. Counsel were invited to file submissions, which they did, culminating into the impugned judgment.
20. In the judgment, the trial Magistrate narrowed down to five issues being :
(i) Whether the appellant was served with all the requisite notices;
(ii) Whether the sale to the 3rd respondent was lawful;
(iii) Whether the 3rd respondent holds a valid title to the suit property and whether his title is protected;
(iv) Whether the suit property was undervalued hence sold at an undervalue;
(v) What orders as to costs.
21. On the auction, the trial Magistrate held the view that the 3rd respondent produced documents to support the fact that she was the highest bidder and was issued with a Certificate of Sale on 4 October 2021. She found the sale to the 3rd respondent as being lawful and the 3rd respondent holds an indefeasible title which cannot be impeached. She held that the appellant had failed to prove fraud. She found that once the property is knocked down the equity of redemption is extinguished and anyone dissatisfied can seek general or special damages. She found that after the sale, the appellant interfered with the suit property and was liable to pay general damages for trespass which she assessed at Kshs. 150,000/=. On posting of the notices to the appellant, she found that there was a discrepancy in the postal addresses in the letter of offer and the notices. The notices bore the address P.O Box 2456-40200 Kisii, whereas the letter of offer had P.O Box 2456 – 40200 Nairobi. She found that this discrepancy in the addresses was not explained by either party and she chose to leave it at that. She found that the attempts to reach out to the 1st respondent may have been borne out of the default rather than the notices. On the various valuation reports, she held that the valuation report of the plaintiff presenting a value of Kshs. 15 million in 2018 does not reflect the current situation and did not indicate the forced sale value. That notwithstanding, she was of opinion that the argument by the appellant that the property was sold at an undervalue is not far-fetched. She found that the property was acquired in 2015 with a loan of Kshs. 7 million which would presume that the property was valued at more than this price. She found that at the time of advancing the loan the property was valued at Kshs. 8,500,000/= as the market value and Kshs. 6, 375,000/= as the forced sale value. She found that the evidence that the appellant improved the property with Kshs. 4 million was not challenged. She did not see how the same property would be valued at Kshs. 7,500,000/= six years later with a forced sale value of Kshs. 5,625,000/=. She also found that the appellant had presented various buyers to the 1st respondent but the bank went mute. These buyers were offering Kshs. 8 million and Kshs. 9 million and she also found that among them was one represented by Mr. Nyamurongi, now acting for the 3rd respondent. She found it unfair and unjust that the bank did not respond to the appellant’s proposals, only to proceed and dispose off the property at a much lower value. She found the actions of the 1st respondent to have been in bad faith. She found that the property was indeed sold at an undervalue and that the appellant was entitled to damages. She awarded the appellant Kshs. 1 million which she thought was reasonable ‘as the plaintiff was the author of his own misfortune’. This sum was awarded as general damages for the property being sold at an undervalue. She could not declare the appellant as owner of the suit property for reason that she did not find fault in the sale process. She awarded ½ costs of the suit to the appellant payable by the 1st respondent.
22. Aggrieved, the appellant has preferred this appeal on the following grounds :
(1) That, the Learned trial Magistrate grossly erred in both law and fact in holding that the sale of Land Parcel Number NYARIBARI CHACHE/B/B/BOBURIA/11141 to the 3rd Respondent was lawful when no evidence was tendered by the respondents in support of the same.
(2) That, the Learned trial Magistrate grossly erred in both law and fact in holding that a public auction was conducted on 24th day of September 2021 in respect to Land Parcel Number NYARIBARI CHACHE/B/B/BOBURIA/11141 despite the fact that the 2nd respondent who purportedly conducted the said public auction did not appear in court to defend the sale and/or avail any evidence in court in proof of the same.
(3) That, the Learned trial Magistrate erred in both law and fact by awarding the 3rd respondent a sum of Kshs. 150,000/= as damages for trespass without any justification and/or evidence being tendered in that respect by the 3rd respondent.
(4) That, the Learned trial Magistrate erred in both law and fact by holding that the interest in respect to Land Parcel Number NYARIBARI CHACHE/B/B/BOBURIA/11141 had already passed to the 3rd respondent as at the time of filing the suit.
(5) That, the Learned trial Magistrate erred in both law and fact in failing to order the cancellation of title in the name of the 3rd respondent in respect to Land Parcel Number NYARIBARI CHACHE/B/B/BOBURIA/11141 and have the name of the appellant restored back in the register despite there being compelling evidence on record showing that the 1st respondent breached the law while exercising its statutory power of sale and that the sale herein was illegal.
(6) That, the Learned trial Magistrate erred in both law and fact in awarding the appellant herein a sum of Kshs. 1,000,000/= as General Damages for undervaluation despite there being compelling evidence on record that the suit property was valued at Kshs. 15,000,000/= as at the time of the purported sale, which figure is inordinately low as to amount to an erroneous estimate of damages.
(7) That, the Learned trial Magistrate erred in both law and fact by failing to appreciate sufficiently or at all, consider and correctly apply the applicable legal principles that fall for consideration in determining the appellant’s suit.
(8) That, the Learned trial Magistrate erred in both law and fact in failing to appreciate the evidence that was placed before her and in taking into account extraneous issues hence arrived at a decision that was erroneous and against the evidence that was placed before her.
(9) That, the Learned trial Magistrate erred in both law and fact in failing to find that the 1st respondent’s power of sale had not accrued as at the time of the purported sale of the charged property.
(10) That, the Learned trial Magistrate misdirected herself by holding that the appellant was entitled to half costs of the suit, against trite law that costs follow the event.
(11) That, the Learned trial Magistrate erred in law and in fact by exercising her discretion capriciously and not judiciously.
(12) That, the Learned trial Magistrate erred in both law and fact by failing to endorse and enter interlocutory judgment against the 2nd respondent for failure to enter appearance and defend herself despite being served with summons to enter appearance.
(13) That, the Learned trial Magistrate’s decision was arrived at in a cursory and perfunctory manner in consideration of the irrelevant factors while leaving out relevant ones hence arriving at an erroneous conclusion.
(14) That, the Learned trial Magistrate’s decision albeit a discretionary one was plainly wrong.
The Appellant prays that:-
i. The Appeal herein be allowed.
ii. The Judgment of the trial court delivered on 17.10.2024 be set aside and this court does reassess and/or re-evaluate the facts of the case and the evidence on record.
iii. The Judgment of the trial court delivered on 17.10.2024 be set aside and same be substituted with a proper finding taking into account the totality of the evidence adduced by the parties.
iv. The Appellant be awarded costs both in this appeal and in the lower court.
23. The appeal was argued through written submissions and I have taken note of the submissions filed by counsel. I proceed to dispose of this appeal as follows hereunder.
24. There are some significant facts which are not contested and are not the subject of the dispute before this court. The first is that there was indeed a loan of Kshs. 7 million advanced to the appellant in the year 2015 and part of the security offered was the suit land. This loan was offered in order to allow the appellant purchase the suit property. The property was duly charged so as to secure the monies advanced. The other important fact that is not contested is that there was default. Indeed, the appellant did not dispute that he owed the bank and did not dispute the amounts claimed by the bank as owed. There is therefore no dispute on accounts or amounts owed by the appellant.
25. What is disputed is that the requisite notices were not issued; that the power of sale had not arisen; that there was no auction; and that even if there was an auction, then the same was at an undervalue. Assessing these points, it is my view that the following issues are for determination i.e :
(i) Whether the requisite notices were issued;
(ii) Whether there was an auction sale and if so whether the same was lawful;
(iii) Whether the title of the 3rd respondent is one to be protected;
(iv) Remedies and final orders.
I will start with addressing myself on the notices.
(i) Whether the requisite notices were issued
26. The Land Act, Act No. 6, 2012, and the Auctioneers’ Act, Cap 526, Laws of Kenya, provide for the notices that are required to be served in the event that a chargee wishes to exercise his statutory power of sale. There are two notices under the Land Act, and a further notice under the Auctioneers’ Act.
27. The first notice is under Section 90 of the Land Act which provides as follows :
90. Remedies of a chargee
(1) If a chargor is in default of any obligation, fails to pay interest or any other periodic payment or any part thereof due under any charge or in the performance or observation of any covenant, express or implied, in any charge, and continues to be in default for one month, the chargee may serve on the chargor a notice, in writing, to pay the money owing or to perform and observe the agreement as the case may be.
(2) The notice required by subsection (1) shall adequately inform the recipient of the following matters—
(a) the nature and extent of the default by the chargor;
(b) if the default consists of the non-payment of any money due under the charge, the amount that must be paid to rectify the default and the time, being not less than three months, by the end of which the payment in default must have been completed;
(c) if the default consists of the failure to perform or observe any covenant, express or implied, in the charge, the thing the chargor must do or desist from doing so as to rectify the default and the time, being not less than two months, by the end of which the default must have been rectified;
(d) the consequence that if the default is not rectified within the time specified in the notice, the chargee will proceed to exercise any of the remedies referred to in this section in accordance with the procedures provided for in this sub-part; and
(e) the right of the chargor in respect of certain remedies to apply to the court for relief against those remedies.
(3) If the chargor does not comply within ninety days after the date of service of the notice under, subsection (1), the chargee may—
(a) sue the chargor for any money due and owing under the charge;
(b) appoint a receiver of the income of the charged land;
(c) lease the charged land, or if the charge is of a lease, sublease the land;
(d) enter into possession of the charged land; or
(e) sell the charged land;
(4) If the charge is a charge of land held for customary land, or community land shall be valid only if the charge is done with concurrence of members of the family or community the chargee may—
(a) appoint a receiver of the income of the charged land;
(b) apply to the court for an order to—
(i) lease the charged land or if the charge is of a lease, sublease the land or enter into possession of the charged land;
(ii) sell the charged land to any person or group of persons referred to in the law relating to community land.
(5) The Cabinet Secretary shall, in consultation with the Commission, prescribe the form and content of a notice to be served under this section.
28. It will be seen from Section 90 (1) above that if there is a default that continues for one month, the chargee is at liberty to issue a demand to the chargor to rectify the default. If default is on non-payment of money, the notice period should be at least 3 months as provided under Section 90 (2) (b). If the chargor does not make good the demand, then pursuant to Section 90 (3) (e) the chargee has the right to sell the charged land.
29. If a decision to sell is made then a second notice is then issued. This is issued under Section 96 (1) of the Land Act, which provides as follows :
96. Chargee’s power of sale
(1) Where a chargor is in default of the obligations under a charge and remains in default at the expiry of the time provided for the rectification of that default in the notice served on the chargor under section 90(1), a chargee may exercise the power to sell the charged land.
(2) Before exercising the power to sell the charged land, the chargee shall serve on the chargor a notice to sell in the prescribed form and shall not proceed to complete any contract for the sale of the charged land until at least forty days have elapsed from the date of the service of that notice to sell.
(3) A copy of the notice to sell served in accordance with subsection (2) shall be served on—
(a) the Commission, if the charged land is public land;
(b) the holder of the land out of which the lease has been granted, if the charged land is a lease;
(c) a spouse of the chargor who had given the consent;
(d) any lessee and sublessee of the charged land or of any buildings on the charged land;
(e) any person who is a co-owner with the chargor;
(f) any other chargee of money secured by a charge on the charged land of whom the chargee proposing to exercise the power of sale has actual notice;
(g) any guarantor of the money advanced under the charge;
(h) any other person known to have a right to enter on and use the land or the natural resources in, on, or under the charged land by affixing a notice at the property; and
(i) any other persons as may be prescribed by regulations, and shall be posted in a prominent place at or as near as may be to the charged land.
30. From Section 96 (2) above, it will be seen that this is a 40 day notice to sell.
31. If the default continues and the bank intends to sell, it will hand over to a licenced auctioneer to now deal with the sale. The Auctioneer, on receipt of the letter of instruction, will issue the next notice, which is a 45 day redemption notice under Rule 15 (d) of the Auctioneers’ Rules. Rule 15 is drawn as follows :
15. Immovable property
Upon receipt of a court warrant or letter of instruction the auctioneer shall in the case of immovable property—
(a) record the court warrant or letter of instruction in the register
(b) prepare a notification of sale in the form prescribed in Sale Form 4 set out in the Second Schedule indicating the value of each property to be sold;
(c) locate the property and serve the notification of sale of the property on the registered owner or an adult member of his family residing or working with him or where a person refuses to sign such notification, the auctioneer shall sign a certificate to that effect;
(d) give in writing to the owner of the property a notice of not less than forty-five days within which the owner may redeem the property by payment of the amount set forth in the court warrant or letter of instruction;
(e) on expiry of the period of notice without payment arrange sale of the property not earlier than fourteen days after the first newspaper advertisement.
32. In the case at hand, the 1st respondent asserts that the requisite notices were issued. She exhibited a notice dated 6 June 2017 said to be issued under Section 90 of the Land Act. I have seen the notice and see no issue. It is a 3 month notice, outlines the default, and provides the amount payable. The second is a notice dated 7 November 2017. It is also a 3 month notice said to be issued under Section 96 of the Land Act. Again I see no issue. In fact the 1st respondent was generous in giving 3 months when 40 days would suffice. There were certificates of postage exhibited showing that the letters were dispatched on 12 June 2017 and 14 November 2017.
33. In his submissions, Mr. Ben Gichana for the appellant, argued that these notices were sent to the wrong address. He referred to the letter of offer which bore the address P.O Box 2456-40200 Nairobi and argued that the notices were sent to the wrong address. I am prepared to hold that this address P.O Box 2456-40200 Nairobi is a mistake in the letter of offer because when he testified the appellant acknowledged that his address is P.O Box 2456-40200 Kisii. This Kisii address is also what is displayed in the sale agreements that the appellant relied upon to show that he was trying to sell the land. I am therefore of opinion that the two notices under the Land Act were properly issued.
34. What about the third notice under the Auctioneers’ Rules ? The 1st respondent exhibited an affidavit sworn by Veronica K. Rangi, who is the auctioneer engaged by the 1st respondent. In it, she deposed inter alia that she called the appellant, met him, and served him with the 45 days notification of sale though in the affidavit it appears as if she thought that the loanee was one Hannah Njeri. Nevertheless she did send the same notice on 3 November 2020 by registered post and she annexed the receipt thereof. I have no reason to doubt this affidavit especially given that it was accompanied by the receipt indicating that the 45 day notice was sent by registered post.
35. I am thus prepared to hold that the requisite notices were issued and that the statutory power of sale crystalised and could be exercised by the 1st respondent.
36. Faced with an imminent sale, the appellant made overtures to the 1st respondent. He wished to sell the property himself and it would appear that he had some potential buyers. The appellant exhibited two sale agreements. The first is dated 20 December 2018, with one James Omariba Nyaoga as purchaser, with the consideration being Kshs. 9 million payable into his account with the bank. This sale agreement was drawn by M/s Orina & Company Advocates. The second sale agreement is one dated 8 February 2019 with Edward Morris Ondabu Nyamao as purchaser. The consideration is Kshs. 8 million. This sale agreement was drawn by M/s Nyamurongi & Company Advocates as advocates of the purchaser. There is a letter dated 11 February 2019 from the said law firm to the 1st respondent seeking their consent to proceed with this sale. It was mentioned that this letter elicited no reply. I have also seen a letter dated 19 January 2021, where the appellant raises issue that he has looked for purchasers but the bank delayed and they moved on to buy other properties. He demanded that if the bank is to sell, then it should not sell at below 20% of the value of Kshs. 15 millioin and he attached the valuation of June 2018.
37. It is not clear why the bank declined these proposals that were being made by the appellant. The bank knew that the appellant was in arrears. It had already issued the statutory notices under the Land Act meaning that it had taken steps to sell the land. Here was a chargor who wished to have the property sold at a fair amount and had buyers. Why would the bank not be cooperative at this stage ? The bank needed to appreciate that with every passing day, the amount due from the appellant was increasing on a daily basis and time was of essence. They did not even favour the appellant with the courtesy of a reply to his letters. There was a burden that the appellant wanted to be relieved of and the bank ought to have cooperated in allowing the appellant to sell the suit property in order to clear his indebtedness to the bank. On this, the bank did not act in good faith.
38. But let us move on. Let me now address whether there was an auction and if so whether the same was lawful.
(ii) Whether there was an auction sale and if so whether the same was lawful
39. The bank instructed the 2nd respondent to sell the property and an advertisement was placed in the Daily Nation newspaper of 8 November 2021 scheduling a sale of the suit property for 24 September 2021. The advertisement was by Nira Auctioneers, the 2nd respondent, and it indicated that the sale was to take place “on Friday 24th September 2021 at our offices in Shabana Bld, 3rd Flr at 10.00am or thereabouts.”
40. There is serious contention as to whether the auction actually took place. The appellant asserts that in fact there was no auction sale, whereas the 1st and 3rd respondents’ position is that there was an auction conducted. This alleged auction was said to have been conducted by the 2nd respondent but the 2nd respondent did not file anything to oppose the case. Neither did she appear as a witness of the 1st respondent to affirm that indeed a sale did take place. Now this was a crucial issue in the case and the 1st and 3rd respondents needed to dispel any doubt that no auction took place.
41. In his submissions, Mr. Gichana referred me to a couple of authorities on the importance of having the auctioneer testify in a contested sale. One was the case of John Kuria Mathenge T/A Aberdare Filling Station vs Caltex Oil (K) Ltd & Another (2015) eKLR where Mabeya J, expressed himself as follows :
“Although the name of Jesse M. Gitau of Gallant Auctioneers had been given as a possible witness for the 1st Defendant, he was never produced to testify. It is only him who would have testified on whether there was actually an auction that took place on the 4th April, 2007, how it was conducted, the number of bidders attended and participated. He would have not only produced the bidding list but he would have also disclosed to court what the actual reserve price for the suit property was. This is so considering that although the sale was subject to a reserve price, which both the 2nd Defendant and D2W1 were firm on its existence, they flatly refused to divulge how much it was. There was no explanation that was given why Mr. Jesse M Gitau, a very crucial witness, failed to attend and testify.
It will be recalled that the Plaintiff made serious allegations that there was no actual auction conducted on 4th April, 2007. He gave the facts he relied on for his said contention. The only people, who would have shed the light on what happened, if at all, on the said 4th April, 2007 were the Auctioneer and the 2nd Defendant. The 2nd Defendant alleged in his previously filed Affidavit that his bid of Kshs.1.5 million was above the set reserve price. He and the Auctioneer failed to attend and disclose what this set reserve price was. It will be presumed that by failing to attend and discount the Plaintiff’s assertions, the evidence they would have given on the matter would have been against them. Surely, there was something the Auctioneer and the 2nd Defendant and his witness (D2W1) did not want the court to know.”
42. On my part, I will not go as far as saying that if the auctioneer does not testify then the conclusion is that there was no sale. A chargee or purchaser may provide sufficient evidence to demonstrate that there was a sale even without the evidence of the auctioneer. At the end of the day, it will all depend on the wealth of evidence tendered though there can be no question that the evidence of the auctioneer in a case where there is an allegation of no sale at all is critical.
43. In our case, the auctioneer of course did not testify. Neither did the 1st respondent offer any person who may have witnessed the auction. Mr. Muge, who testified for the bank, stated that he did not attend the auction and was not aware whether the bank had sent any of its officers to attend the auction on its behalf. We therefore have no first hand evidence from either the chargee or the auctioneer on whether or not the auction actually took place. These were the persons conducting the auction and you would expect that they come with evidence to dispel any notion that there was no auction but they brought no evidence on this point. In his evidence, the appellant stated that he went to the office of the auctioneer at 9.00am on the appointed date but found the offices closed. He then proceeded to the Post Office, where again the respondents could not be seen. I am not too sure why he went to the Post Office because the advertisement did show that the auction was to take place at the offices of the auctioneer at Shabana Building, 3rd floor. He did mention that he had a friend at the office who told him that no auction took place. This is of course heresay evidence that does not have much value. The 3rd respondent’s witness on the other hand testified that there was an auction that took place outside Shabana Building in the presence of Geoffrey Okiru Okasi who acted as the bank’s official at the auction. This person alleged to be Geoffrey Okiru Okasi was never called as a witness. Thus, apart from the evidence of the 3rd respondent, there is actually no other evidence to support the contention that there was an auction that was actually conducted. If really there was an auction, what was so hard in the auctioneer attending to confirm that position, and what was so hard in the bank availing a witness who was actually present at the auction ? The evidence of the 3rd respondent’s witness has absolutely no corroboration and it must be treated with caution because the 3rd defendant is the very person who is alleged to have been the beneficiary of the stage-managed auction.
44. Assuming that what was narrated by the 3rd respondent’s witness is actually what happened, then we have a problem. It was advertised that the auction would take place at the offices of the auctioneer at 3rd Floor Shabana Building, not outside the building. It needs to be appreciated that the public will follow the instructions given in the advertisement, so that if the auction is to take place inside an office, that is the place that they will congregate and not elsewhere. If the venue changes then there needs to be an advertisement for the change of venue. If it is an emergency situation, for which the change of venue must be done immediately, then you would expect such change of venue to be in the immediate proximity of the initial venue and there be a person to usher the bidders to the new venue. I have no evidence of any of this having happened.
45. In her submissions, Ms. Orengo, learned counsel for the 1st respondent, submitted that there is evidence of the auction having taken place and referred to the Memorandum of Sale. I do not see how reference to the Memorandum of Sale can be proof that the auction was conducted as published. In fact it is that very Memorandum of Sale that is being contested and I do not see how it can be the same document to be pointed at to support itself. You need extrinsic evidence to prove that what is contained in the Memorandum of Sale is actually reflective of the true position and I do not have that evidence. The little evidence that I have on whether or not an auction took place is only that of the witness of the 3rd respondent and the net effect of his evidence is that there was no auction that took place on the 3rd floor of Shabana building in the offices of Nira Auctioneers as advertised. Without an explanation as to why the purported auction was taking place elsewhere it cannot be held that there was an auction that was conducted as advertised.
46. The Auctioneers’ Rules provide for advertisement and conduct of a public auction at Rules 16 and 17 which are drawn as follows :
16. Advertisement
(1) An advertisement by an auctioneer shall, in addition to any other matter required by the court, contain—
(a) the date, time and place of the proposed sale;
(b) the conditions of sale or where they may be obtained;
(c) the time for viewing the property to be sold;
(d) in respect of movable property other than perishable goods and livestock, an accurate description of the goods to be sold and a statement as to whether or not they are to be sold subject to a reserve price;
(e) in respect of goods of a perishable nature or livestock an accurate description of the goods to be sold and of their condition and a statement as to whether or not they are to be sold subject to a reserve price;
(f) in case of immovable property all the information required to be contained in the court warrant or letter of instruction except the amount to be recovered and the exact amount of any reserve price.
(2) Except as may be ordered by a court, advertisement by an auctioneer of a sale by auction of any property, movable or immovable, shall be by way of an advertisement in a newspaper, provided that in the case of perishable goods and livestock advertisement in a newspaper may be dispensed with if adequate notice to prospective bidders in all the circumstances can be achieved by radio or television announcement, or handbills or posters, or other means of communication.
17. Auction
(1) Subject to Order 21, rules 62, 63, 65, 66, 68 and 69 of the Civil Procedure Rules (Cap. 21, Sub. Leg.) a public auction shall take place—
(a) of goods seized or repossessed under any contract or any written law between the hours of 10.00 a.m. and 6.00 p.m.; or
(b) in other sales between the hours of 10.00. a.m. and 10.00 p.m., and in either event—
(c) in a venue open to and accessible to the public, provided that it shall be lawful for an auctioneer to charge prospective bidders a reasonable sum for a sale catalogue or other list of lots for sale as a condition precedent to entry to the auction premises.
(2) The auctioneer shall make reasonable arrangements for the identification of the items for sale by list or catalogue and by the allocation of lot numbers which shall so far as possible be indicated on the goods at the time of sale.
(3) The auctioneer shall call out each lot for auction identifying the lot number and showing to bidders the lot for sale or in the case of immovable property identifying the lot for sale by reference to a map or sketch and shall invite bids on it.
(4) The highest bidder shall be the purchaser subject to compliance with the conditions of sale.
(5) The auctioneer shall, after selling the movable property, attaching goods or goods lawfully held under this custody, and for purposes of effecting transfer in favour of the purchase, file an application to the court which issued the decree or to any other competent court which is applicable.
(6) An application under this rule shall be by motion by way of miscellaneous application, supported by an affidavit and may be heard ex parte.
47. Now, you would expect that any auction be conducted in line with what has been advertised. Rule 17 (3) above provides for the calling out of the property being sold in the auction and inviting of bids. It will then be the highest bidder who has complied with the conditions of sale who is to be declared the purchaser. In our case, given the contest by the appellant that no sale took place, the respondents needed to provide actual evidence that there was truly an auction sale that was undertaken at the place and time that was prescribed. Clearly the respondents failed to do so, the thin evidence on this score being that the auction did not take place at the place that was advertised.
48. I would think that once a chargor alleges that no auction took place, the burden must shift to the chargee to demonstrate that there was indeed an auction, and that the auction was conducted in conformity to the advertisement and to the conditions of sale. The 1st and 2nd respondents did not discharge this burden.
49. It cannot be said that an auction that is not conducted in the place advertised is an auction that is above board. You cannot give one place as the venue for the auction then conduct it elsewhere without notification and hope that this will pass for an auction that is open and transparent. It cannot be considered so. In fact, for all intents and purposes this would be a fraudulent sale aimed at skewing the process in favour of one bidder against other bidders. Auction sales must be conducted in the manner prescribed by law and in the manner advertised and the ground must be level for every member of the public. The expectation of the public is that the sale will be conducted at the time and place advertised and that all persons will be subjected to the same conditions of sale. That is the only way that all bidders ae given a level playing field. The court ought not to condone a purported public auction that takes place secretly or which is not in conformity with the advertisement and conditions of sale. If we are to encourage this, then auction sales will lose the transparency that they ought to have.
50. In the circumstances herein, I am unable to hold that there was an auction sale that was conducted in the manner advertised and it is therefore my holding that there was no auction sale, or if there was one, then it did not conform to the terms of advertisement and was therefore not a proper auction, and as such, the same must be set aside.
(iii) Whether the 3rd respondent holds a valid title and whether it is protected
51. I am guided by the reasoning of Nambuye J.A in the case of Marteve Guest House Limited v Njenga & 3 others (Civil Appeal 400 of 2018) [2022] KECA 539 (KLR) (28 April 2022) (Judgment) (with dissent - W Karanja, JA) where the judge stated as follows :
“On the role of the court when confronted with an appeal of this nature, the position I take and which I fully adopt is that taken by the court in the case of Wambui v Mwangi & 3 others (Civil Appeal 465 of 2019) [2021] KECA 144 (KLR) (Civ) (19 November 2021) (Judgment). In it, the court reviewed numerous case law on the subject and variously distilled guiding principles therefrom. Those I find relevant in the determination of this appeal are the following:
(i)No court ought to enforce an illegal contract or allow itself to be made the instrument of enforcing the obligations alleged to arise out of a contract or transaction which is illegal, if the illegality is duly brought to the notice of the court.
(ii)It is trite law that where an act is a nullity it is void and every proceeding founded on it is also in law a nullity.
(iii)Every act premised on a nullity cannot accrue legitimacy or legality.
(iv)Sanctity of title was never intended or understood to be a vehicle for fraud and illegalities or an avenue for unjust enrichment at another person’s expense.
(v)A court of law cannot protect title to land which has been obtained illegally or fraudulently merely because a person is entered in the register as proprietor.”
52. In our case, the illegality of the auction sale, i.e that there was no sale, has been brought to the attention of the court and this court ought not to allow itself to be made an instrument of enforcing an obligation arising out of an illegality. The purported auction sale is null and void and such nullity cannot therefore vest upon the 3rd respondent title to the suit land.
53. In the case of Lydia Nyambura Mbugua vs Diamond Trust Bank Kenya Limited & Another, Nakuru ELC No. 296 of 2013, I did find that no auction took place and I declared that such title would be subject to nullification and proceeded to nullify the same. I am also persuaded to do so in this case. A title that has been procured through an unlawful process is subject to cancellation as provided for by Section 26 of the Land Registration Act, which provides as follows :
26. (1) The certificate of title issued by the Registrar upon registration, or to a purchaser of land upon a transfer or transmission by the proprietor shall be taken by all courts as prima facie evidence that the person named as proprietor of the land is the absolute and indefeasible owner, subject to the encumbrances, easements, restrictions and conditions contained or endorsed in the certificate, and the title of that proprietor shall not be subject to challenge, except—
a) on the ground of fraud or misrepresentation to which the person is proved to be a party; or
b) where the certificate of title has been acquired illegally, unprocedurally or through a corrupt scheme.
c) A certified copy of any registered instrument, signed by the Registrar and sealed with the Seal of the Registrar, shall be received in evidence in the same manner as the original.
54. It will be seen from the above that a title can be nullified if obtained through fraud or misrepresentation of which the title holder is a party, or where it is obtained illegally, unprocedurally or through a corrupt scheme. In our case, there can be no question that the title was at the very least obtained unprocedurally, in that it was obtained without there being an auction sale or vide an auction sale that was flawed. The title is thus subject to cancellation pursuant to Section 26 (1) (b) above.
55. In his submissions, Mr. Nyamurongi, learned counsel for the 3rd respondent, urged that his client is protected by Section 99 of the Land Act, and he provided a couple of authorities on this point. Section 99 provides as follows :
99. Protection of purchaser
(1) This section applies to—
(a) a person who purchases charged land from the chargee or receiver, except where the chargee is the purchaser; or
(b) a person claiming the charged land through the person who purchases charged land from the chargee or receiver, including a person claiming through the chargee if the chargee and the person so claiming obtained the charged land in good faith and for value.
(2) A person to whom this section applies—
(a) is not answerable for the loss, misapplication or non-application of the purchase money paid for the charged land;
(b) is not obliged to see to the application of the purchase price;
(c) is not obliged to inquire whether there has been a default by the chargor or whether any notice required to be given in connection with the exercise of the power of sale has been duly given or whether the sale is otherwise necessary, proper or regular.
(3) A person to whom this section applies is protected even if at any time before the completion of the sale, the person has actual notice that there has not been a default by the chargor, or that a notice has been duly served or that the sale is in some way, unnecessary, improper or irregular, except in the case of fraud, misrepresentation or other dishonest conduct on the part of the chargee, of which that person has actual or constructive notice.
(4) A person prejudiced by an unauthorised, improper or irregular exercise of the power of sale shall have a remedy in damages against the person exercising that power.
56. I am not persuaded that Section 99 is available for all manner of ills and I am not persuaded that it should be a cover for fraudulent conduct. But I do not even see how Section 99 can help the 3rd respondent. If you look at Section 99 (3) there is no protection ‘in the case of fraud, misrepresentation or other dishonest conduct on the part of the chargee, of which that person has actual or constructive notice.’ In our situation, there is ample evidence of fraud, misrepresentation and other dishonest conduct on the part of the auctioneer, and given that the auctioneer is an agent of the chargee, that conduct must be deemed as the conduct of the chargee. The fraud, misrepresentation and other dishonest conduct is that there was no auction, or if there was, then it was not at the place advertised. Undertaking an auction away from the site that is advertised is itself a misrepresentation. It is also dishonest to say that you will hold an auction, then proceed not to hold it, or advertise that you will hold an auction at point A, then proceed to hold the auction at point B. It is a fraud to proceed to do so. And the 3rd defendant had notice of this. It is either the 3rd defendant participated in a purported auction that never was, or participated in an auction that took place in a place that was not the advertised venue of the auction. The 3rd respondent’s own witness testified that the auction sale was not held at the venue that was published in the newspaper advertisement. He did not say that he raised any issue regarding that and what the response of the auctioneer was. I do not therefore see how the 3rd respondent can plead ignorance of the flawed auction. The 3rd respondent had actual and constructive notice of all this. He falls under the category of persons exempted from protection pursuant to Section 99 (3) above.
57. Mr. Nyamurongi further submitted that the equity of redemption of the appellant got extinguished and his remedy is in general or special damages. I am not persuaded that one can contend that the equity of redemption of a chargor is extinguished when there was either no sale or that the sale was not lawfully held. If a chargee purports to transfer land on the basis of an auction that was never held, that is not an irregularity; that is down right fraud, and one cannot be heard to support maintenance of a title that is a product of fraud. He further submitted that from his pleadings the appellant was content with an award of damages. That is not correct. In his further amended plaint, prayer (b) (i) is a specific prayer for a declaration that the sale of the suit land purportedly conducted by the 2nd respondent on 24 September 2021 is illegal null and void. We therefore have a specific prayer for such declaration. Nothing barred him from pursuing any alternative claim for damages in the event that he could not get this prayer. I am clearly not persuaded by Mr. Nyamurongi’s submissions.
58. It is my holding that the title of the 3rd respondent is a product of fraud and/or illegality, or a product of an auction process that was flawed, and such title is subject to nullification and cancellation. I am persuaded to nullify and cancel the title of the 3rd respondent.
(iv) Remedies and final orders
59. Having nullified the auction process and the title of the 3rd respondent, I really need not go to the issue of whether the sale was at an undervalue or damages that the appellant may have suffered owing to an undervaluation of the property.
60. However, if I was to decide that point, I would have decided it in favour of the appellant. I do not see how a property that was valued at Kshs. 10 million with an incomplete structure in the year 2017, supposedly with no tenants, could now be given an open market value of Kshs. 7,500,000/= when it has been partly completed with 22 bedsitters and bringing in an annual income of Kshs. 792,000/= if we go by the valuation of the bank. It is either the bank misvalued it in 2017 when it gave out the loan or misvalued it at the time of sale for those two valuations are completely irreconcilable. There could of course be instances when property has dipped in value but you would expect an explanation of that but my perusal of the valuation reports by the bank do not reveal to me any explanation. There were offers of Kshs. 8 and 9 million in the year 2018 which offers were being made on a desperate sale by the appellants and to me they could easily have passed as the forced sale values.
61. The trial Magistrate was alive to this and actually declared that the sale was at an undervalue. She then proceeded to give an award of Kshs. 1 million in damages on the basis that the appellant was the author of his own misfortune. There was no basis for such an award. She needed to make a correct assessment of the damages irrespective of whether or not the appellant had been in default. She could have taken several factors including, but not limited to, the difference between the selling price and the correct reserve price. The award could not be at a whim without any basis and no basis was given for the award of Kshs. 1 million as general damages.
62. On my part, I would have made an award of Kshs. 2.5 million, being the difference between the Kshs. 6 million fetched at the auction and the Kshs. 8 million that was the low selling price in the year 2018 and adding an extra Kshs. 500,000/= to cover an expectation of increase in value over time. But I am not making this award, my decision being that the title of the 3rd respondent is one for nullification for reason that there was either no auction sale, or if there was such a sale, then it was so unprocedural to an extent that surpasses a mere irregularity.
63. What then should happen with the nullification of title of the 3rd respondent ? The suit property and the parties themselves should be returned to the same position that they were in before the auction. The amount due to the appellant at the time of the purported sale should remain the amount still owed at the time of this judgment. In other words, there should be no loading of any interest or any charges on that account subsequent to the auction. At the time of this judgment, the account of the appellant must be adjusted to the manner that it was at the time of the auction.
64. If the appellant wishes to redeem the property, by exercising his equitable right of redemption, he is at liberty to do so. If he does not pay the debt, then the bank is at liberty to exercise its statutory power of sale which power must be exercised strictly in the manner provided by law. Thus, from the time of this judgment, it is the appellant who should be declared as the rightful owner of the suit property and he takes in the manner that it currently is. The 3rd respondent is hereby barred by an order of permanent injunction from entering, being upon, collecting rents, interfering with the structures, or in any way dealing or interfering with the quiet possession of the appellant of the suit property. In essence, the counterclaim by the 3rd respondent is dismissed. He can however engage the 1st respondent for a refund of what he paid purporting to be the purchase price.
65. The last issue is costs. I award costs of both suit and the counterclaim before the lower court to the appellant jointly and severally against the respondents. The appellant shall also have the costs of this appeal jointly and severally against the respondents.
66. Judgment accordingly.
DATED AND DELIVERED THIS 16 DAY OF JULY 2025
JUSTICE MUNYAO SILA
JUDGE, ENVIRONMENT AND LAND COURT
AT KISII
Delivered in the presence of :
Mr. Atisi for the appellant
Ms. Orengo for the 1st respondent
N/A for the 2nd respondent
Ms. Kebungo for the 3rd respondent
Court Assistant – Michael Oyuko