Introduction and Background
1. It is common cause that the Plaintiff (“Sunrise” or “the Company”) was at all material times to this suit a customer of the 1 st Defendant (“the Bank”) and it took a credit facility and charged its property, KWALE/DIANI/1446 (“the suit property”) to the Bank. Over time, Sunrise defaulted in servicing the facility and the Bank issued a notice of intention to sell the property on 1 st July 2013 and then instructed the 2 nd Defendant (“the Auctioneers”) to advertise the suit property for public auction on 24 th January 2014. The suit property was sold and this is not controversial, however, through its Plaint dated 20 th January 2014 that was amended on 10 th March 2021, Sunrise challenges the legality or otherwise of the notice preceding the sale and the sale itself.
2. Sunrise alleges that after defaulting on repayments, the Plaintiff requested more time to find funds to redeem the loan, which the Bank allegedly agreed to. It claims that the notice to sell the suit property was defective and void ab initio because it failed to properly state the amount due to rectify the default as required by law. That following the notice, Sunrise underwent management changes and through its new directors, claims to have reached an agreement with the Bank to suspend the sale and allow for a repayment proposal. That this proposal included plans to generate income from the suit property to repay the loan and subdividing the suit property to sell off cottages.
3. Sunrise claims that despite these agreements, the Bank instructed the Auctioneers to advertise the suit property for public auction and then went on to sell the property, which action it contends, was done in breach of their agreement. Sunrise states that the sale process was illegal and irregular due to failure to serve all new directors with the mandatory sale notice, failure to have a proper forced sale valuation as required by law as it claims the valuation was skewed and undervalued the suit property. That the public auction itself was fraudulent as Sunrise claims the Defendants failed to adhere to their own advertised terms and conditions and it asserts that no legitimate auction took place and that it was a pre-arranged sale at a price below market value, which deprived the Plaintiff of its equity of redemption.
4. For the above reasons, Sunrise seeks the court to declare the Bank’s exercise of its statutory power of sale and the auction conducted on 24 th January 2014 as illegal, irregular and null and void and that it be awarded special damages of Kshs. 180,000,000.00, the claimed value of the suit property, general and special damages for the alleged unlawful exercise of the power of sale and costs of the suit.
5. The Bank responded to the suit through the defence and counterclaim dated 4 th September 2025 that was amended on 13 th May 2021. The Bank denies Sunrise’s allegations and states that the sale of the suit property was conducted lawfully. It asserts that it complied with all legal requirements by issuing multiple notices to Sunrise including a statutory notice on 11 th August 2010 under the repealed Registered Land Act , a statutory notice on 1 st February 2013 under section 90(1) of the Land Act(Chapter 280 of the Laws of Kenya) , a Notice of Intention to Sell on 1 st July 2013 under section 96(2) of the Land Act which adequately stated the amount due as Kshs. 88,427,115.85.
6. The Bank claims that a valuation of the suit property was undertaken on 26 th June 2013 to establish its Open Market and Forced Sale values, which the Bank claims was done in compliance with the law. That Sunrise filed an application to stop the sale, but the court (Gikonyo J.,) heard and dismissed the application on 23 rd January 2014, clearing the way for the auction. The Bank confirms that the suit property was sold by public auction on 24 th January 2014 for Kshs. 60,000,000.00 and it contends this price was above 75% of the market value which was Kshs. 51,750,000.00 and thus fulfilling its duty of care to obtain a fair price.
7. The Bank denies entering into any alternative repayment agreement or giving permission to subdivide the suit property as alleged by Sunrise and it also denies any fraud or irregularity in the auction process. The Bank avers it was not legally required to serve the new directors with the notice of sale and that its obligation was to the guarantors, which it fulfilled. The Bank concludes that since the suit property has already been sold, Sunrise’s prayers for an injunction are now spent and the entire suit should be dismissed with costs.
8. In its counterclaim, the Bank is suing Sunrise and its two directors for the outstanding loan balance after the sale of the suit property as the two directors are joint and several guarantors for the facility. That the suit property was sold for Kshs. 60,000,000.00 and the full purchase price was eventually paid by the buyer with the final payment made on 18 th February 2015. The Bank claims that as of 23 rd January 2014, before the sale, the total outstanding debt was Kshs. 87,397,404.52 and after crediting the Kshs. 60,000,000.00 from the sale, a residual balance of Kshs. 40,501,655.12 remained.
9. The Bank contends that despite a demand for payment, Sunrise and its guarantors have refused or neglected to pay the outstanding sum and the Bank is now claiming the sum of Kshs. 41,352,143.17 as of 24 th February 2015, plus interest at 22% per annum until the debt is fully paid. It also prays for the costs of both the main suit and the counterclaim. The 3 rd Defendant in the counterclaim (“Martin”) responded to the amended counterclaim through the defence dated 23 rd August 2021. He states that he and his wife sold and transferred their entire 50% shareholding in Sunrise to United Way Kenya Limited on 25 th March 2013 and that this transfer was completed and registered with the Companies Registry. That the Bank was formally informed of this change of directorship and shareholding through a letter dated 5 th July 2013 from the Company's advocates which included a copy of the updated CR12 form confirming his resignation.
10. He claims that as part of the share sale agreement, the new owners, United Way Kenya Limited and its directors, the 2 nd Defendant in the counterclaim (“Charles”) and GWW agreed to take over all the Company's liabilities, including the Bank loan and the personal guarantees he had signed. That since he was no longer a director or shareholder when the Bank issued the statutory notices and sold the suit property, he states it is unconscionable and unjust for the Bank to pursue him for the outstanding debt and he claims this amounts to unjust enrichment by the Bank. He also states that the Bank sold the suit property for a price significantly below market value, which inflated the residual debt he is now being asked to pay. He thus avers that the Bank is not entitled to any reliefs sought in its counterclaim and that the same ought to be dismissed with costs.
11. At the hearing, Sunrise called two witnesses; Charles (PW 1), who adopted his witness statement dated 14 th January 2021 and produced the List and Bundle of Documents dated 22 nd December 2020 (PExhibit 1-24) and Supplementary List and Bundle of Documents dated 14 th January 2021 (PExhibit 25 ) and; Nicodemus Mwangangi (PW 2), a registered valuer who produced the Valuation Report dated 11 th August 2010 (PExhibit 1). On its part, the Bank called three witnesses; Morris Tiema(DW 1), its Remedial Manager who adopted his witness statement dated 25 th August 2015 and produced the Bank’s Lits and Bundle of Documents dated 4 th September 2015 (DExhibit 1-25) and Further List and Bundle of Documents dated 28 th July 2021 (DExhibit 26-32) ; Rashid Shake (DW 2), a registered valuer who produced the valuation report dated 25 th June 2013( DExhibit 6) and; Peter Gichuki(DW 3), a licensed auctioneer trading in the Auctioneers’ firm who adopted his witness statement dated 28 th July 2021 and produced the Auctioneers 45-day notice dated 11 th October 2013 (DExhibit 27) and the Attendance List at the Auction (DExhibit 28). Martin (DW 4) also testified on his own behalf relying on his witness statement dated 30 th September 2021 and producing the List and Bundle of Documents dated 11 th December 2015 (3 rd DExhibit 1-22).
12. After hearing the parties, the court directed them to file written submissions which are on record and since the same are a mirror of the parties’ positions highlighted above, I will not rehash the same but make relevant references in my analysis and determination below.
Analysis and Determination
13. As these are civil proceedings, it should not be lost that the court’s determination is on a balance of probabilities and is guided by the principle that he who alleges must prove. Denning J., in Miller v Minister Of Pensions [1947]2 All ER 372 discussed the burden of proof and he stated as follows:
“That degree is well settled. It must carry a reasonable degree of probability , but not so high as is required in a criminal case. If the evidence is such that the tribunal can say: ‘we think it more probable than not’, the burden is discharged, but, if the probabilities are equal, it is not. Thus, proof on a balance or preponderance of probabilities means a win, however narrow . A draw is not enough. So, in any case in which the tribunal cannot decide one way or the other which evidence to accept, where both parties’ explanations are equally (un) convincing, the party bearing the burden of proof will lose, because the requisite standard will not have been attained.”
14. The aforementioned position has now been espoused by our superior courts and finds statutory comfort in sections 107 and 108 of the Evidence Act(Chapter 80 of the Laws of Kenya) which provide as follows:
107. Burden of proof.
(1) Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.
(2) When a person is bound to prove the existence of any fact it is said that the burden of proof lies on that person.
108. Incidence of burden.
The burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side.
(Also see Ignatius Makau Mutisya v Reuben Musyoki Muli [2015] KECA 612 (KLR )
15. From the parties’ submissions, I find that the court is being asked to determine the following abridged issues:
a) Whether the statutory notice issued under Section 90 of the Land Act was valid.
b) Whether the Bank complied with its duty under Section 97(2) of the Land Act to obtain the best price reasonably obtainable.
c) Whether the public auction was conducted lawfully and in accordance with prescribed terms.
d) Whether Martin is liable to pay the loan outstanding as at 24 th February 2015 under the terms of the Guarantee
e) Whether the Bank’s counterclaim has merit.
f) Whether the Plaintiff is entitled to the reliefs sought.
Validity of the statutory notice under section 90 of the Land Act
16. Sunrise submits that the statutory notice dated 1 st February 2013 issued by the Bank under section 90(1) and (2) of the Land Act is fatally defective and therefore incapable of grounding a valid exercise of the statutory power of sale. That section 90(2) requires that a chargee's notice adequately inform the chargor of the nature and extent of the default, the specific amount required to rectify the default and the time which is not less than three months allowed to do so, that where the default is non-monetary, the act required to rectify it and the time being not less than two months allowed, the consequences of failing to rectify the default within the specified time and the chargor's right to apply to court for relief.
17. Sunrise submits that the notice issued merely demanded payment of Kshs. 87,391,154.50 without disclosing how that figure was computed or providing any breakdown between principal, interest, and charges, and without stating the specific sum required to rectify the default contrary to the mandatory requirement in section 90(2)(b) . It further submits that the notice failed to inform it of its statutory right of redemption or of the consequences of failing to rectify the default, contrary to section 90(2)(d) and (e) . In support of this position, Sunrise calls to aid this court’s decisions in Yusuf Abdi Ali Co Ltd v Family Bank Limited [2015] KEHC 2800 (KLR) and Florence Njeri Karanja v Molyn Credit Limited [2014] KEHC 8745 (KLR) and on this basis, submits that the Bank’s failure to issue a valid notice in strict compliance with section 90 nullifies all subsequent steps, including the purported auction, rendering every act taken pursuant to the notice a nullity.
18. Martin adopts Sunrise’s submissions on this issue wholesale and advances no separate argument of his own, beyond stating his reliance on them. On its part, the Bank submits that the Statutory Notice dated 1 st February 2013 is proper and lawful and satisfies the requirements of section 90(2) of the Land Act . That the notice demanded immediate payment of Kshs. 87,391,154.50, which was described as "the principal amount together with interest and costs thereon," and warned that if the sum was not paid within three months, the Bank would proceed to exercise its remedies, including sale of the suit property while also advising Sunrise of its right to apply to court for relief.
19. The Bank asserts that the amount to be settled to rectify the default was, in the circumstances, the entire debt because the Charge made the secured amounts payable on demand, so a demand not honoured within a reasonable period itself constitutes the relevant default under section 90(1), such that the full sum then becomes the amount required to rectify that default. That on this reading, no breach of section 90(2)(b) arises. The Bank urges the court to adopt a purposive, rather than a narrow textual, approach to section 90(2), pointing to the statutory word "adequately" as signaling that substantial and not exact compliance suffices and it stresses that the section must be read to preserve a fair balance between the chargor's right of redemption and the chargee's right to enforce its security.
20. The Bank relies on the late Onguto J.,’s decision in First Choice Mega Store Limited v Ecobank Kenya Limited [2017] KEHC 7152 (KLR) for the proposition that where a charge makes the secured sum payable on demand, non-payment of that demand within a reasonable time is itself a default under section 90(1), so the chargee may lawfully demand the entire outstanding sum in the statutory notice; that reading a strict limitation on installments alone into section 90(2) would produce an illogical result allowing defaulting chargors to perpetually string out repayment in three-month cycles and would defeat the purpose of the security; and that the demanding test is simply whether there is a default under the charge, whether by an event of default or an unmet demand. The Bank also draws on the First Choice Mega Store Limited(supra) decision's holding that a valuation discrepancy and the mere fact that a purchaser could not settle within 90 days, do not by themselves invalidate a chargee's exercise of the power of sale and that the court retains wide discretion under section 104(2 ) of the Land Act to suspend a chargee's remedy only where the chargor shows a realistic ability to pay within a reasonable time which, the Bank notes, was not established in that case and is not established by Sunrise in this case.
21. The Bank also relies on the decision in Cordeiro & another v Shamji [2015] KEHC 6977 (KLR) to submit that a statutory notice does not need to be flawless but needs only to adequately inform the chargor of the nature and extent of default and the consequences of non-compliance and it is not illegal for a notice to provide that default in one or more instalments renders the entire debt due and payable, such that repayment of the entire sum is itself the means of rectifying the default.
22. All in all, the Bank submits that the Statutory Notice dated 1 st February 2013 afforded Sunrise adequate notice and information as required by section 90(2), particularly bearing in mind that the events in question occurred in 2013, shortly after the Land Act came into force and while practice under the new statute was still developing. The Bank urges the Court to find that this limb of the Plaintiff's challenge to the exercise of the statutory power of sale is unsatisfactory and should fail.
23. Section 90(1) and (2) of the Land Act 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.
24. The impugned Notice of 1 st February 2013(DExhibit 5) is reproduced below for ease of reference and context:
1 st February, 2013
Our Ref: LD/9904/2013(G4)
The Directors - Sunrise Homes Ltd.
P.O. Box 70559-00400
NAIROBI.
Dear Sir,
BY REGISTERED POST
RE: OUTSTANDING DEBT - KSHS. 87,391,154=50 DR. STATUTORY NOTICE OF INTENTION TO SELL BY PUBLIC AUCTION - L.R. NO. KWALE/DIANI BEACH/146 MSAMBWENI DISTRICT
We refer to the above Charge which you issued to the Bank as security for the mortgage facility granted to you, particulars whereof are within your knowledge.
As has been previously communicated to you, default has occurred and the sum of KShs. 87,391,154=50 Dr. remains outstanding, being the principal sum together with interest and costs thereon.
We now demand from you the immediate payment of KShs. 87,391,154=50 Dr. being the principal sum together with interest and costs thereon. The amount continues to accrue interest and other Bank charges.
Further, we hereby give NOTICE that if you fail to pay the above amount after expiry of three (3) months from the date of service of this notice (which is deemed to be seven (7) days from the date of posting) upon you, the Bank will proceed to exercise the powers granted under the Charge and by statute, namely to either sell the charged land, appoint a Receiver of the charged land, enter into possession or sue you for the monies due.
Under the provisions of the Land Act, 2012, you are at liberty to apply for relief in the manner and upon the reasons set out in the Act.
THIS NOTICE is issued to you pursuant to Section 90(1) of the Land Act, 2012.
Yours faithfully,
Signed*
J. W. GITONGA (MRS.)
MANAGER - LEGAL SERVICES
cc. Manager - Remedial
cc. G.M. Credit
25. Having reviewed the Notice in full and comparing it against the mandatory requirements of section 90(1) and (2) of the Land Act above and the authorities cited by the parties, I find that the Notice is clearly adequate, valid and not fatally defective as argued by Sunrise. Section 90(2)(a) requires a notice to inform the chargor of what the default is. The Notice states "default has occurred... particulars whereof are within your knowledge” and I find this to be adequate because the notice explicitly confirms that a default exists and the phrase "particulars whereof are within your knowledge" is sufficient because the Sunrise was fully aware of its own loan repayment history and its failure to service the facility since being issued with the first statutory notice under the repealed Registered Land Act on 11 th August 2010. I do not think the Bank was required to give a lengthy narrative of the default history and it was sufficient in the circumstances only to state that a default had occurred and was continuing and the Notice does exactly that.
26. Section 90(2)(b) then requires that the notice must state the exact amount to be paid and give at least 3 months to rectify. The Notice states, "….the sum of KShs. 87,391,154.50 Dr. being the principal sum together with interest and costs thereon" and "…if you fail to pay the above amount after expiry of three (3) months from the date of service of this notice….” I find that the Notice provides a specific and clear figure of Kshs. 87,391,154.50 as the amount required to rectify the default and the Bank does not need to provide a line-by-line breakdown of principal and interest and I would expect that the Bank's internal accounting records would contain that detail. The law only requires the amount to be stated, the Notice then expressly gives 3 months from the date of service to pay and this complies exactly with the statutory minimum period.
27. As this court has always stated, where a loan is repayable on demand, the entire outstanding sum becomes due upon default and therefore, demanding the full outstanding balance as the amount to rectify the default is entirely lawful. The Bank does not need to break down the sum into component parts for the notice to be valid as long as the outstanding amount has been stated.
28. Section 90(2)(c) requires that if the default is non-monetary, the notice must specify the action required. The default in this case is purely monetary and only applies where the default involves a breach of a covenant but since the default is a straightforward failure to pay, this provision does not need to be engaged. Section 90(2)(d) then requires the notice to state what will happen if the chargor does not pay and the Notice provides that "if you fail to pay the above amount after expiry of three (3) months... the Bank will proceed to exercise the powers granted under the Charge and by statute, namely to either sell the charged land, appoint a Receiver... enter into possession or sue you for the monies due." I find that the notice clearly and unambiguously sets out the specific consequences of non-payment with a comprehensive list of the statutory remedies available to the Bank and it complies fully with the requirement to inform the chargor of the consequences of failing to rectify the default.
29. Section 90(2)(e) requires the notice to inform the chargor of its right to go to court to seek relief and I note that the Notice states: "Under the Provisions of the Land Act 2012, you are at liberty to apply for the relief in the manner and upon the reasons set out in the Act." This is adequate as the notice expressly informs Sunrise of its statutory right to apply to court for relief and while it does not quote the exact section or provide a detailed explanation of the procedure, it clearly directs Sunrise to the Land Act itself. I find this to be sufficient to put a reasonable chargor on notice that it has the right to seek judicial intervention to stop or challenge the sale.
30. I am therefore in agreement with the court’s position in Cordeiro(supra) that a notice does not need to be flawless but only needs to adequately inform and I find that the Notice overall does exactly that. It is also my finding that Sunrise’s argument that the notice was defective because it was not served on all directors is flawed because section 90(1) above only required service on the chargor, which is in this case undeniably, Sunrise and not its individual directors.
Sale at a gross undervalue under section 97(2) of the Land Act
31. Sunrise submits that section 97(2) of the Land Act imposes a mandatory, non-delegable duty on a chargee exercising the power of sale to take all reasonable steps to obtain the best price reasonably obtainable at the time of sale, a duty that remains with the chargee even where a professional valuer is engaged. That Sunrise’s valuation (PExhibit 1) placed the current open market value of the suit property at Kshs. 180,000,000.00, with a Forced Sale Value of Kshs. 126,000,000.00 and an Insurance Value of Kshs. 190,000,000.00. Sunrise submits that this valuation properly accounted for the 2.5278-acre property and its substantial developments including 15 fully furnished cottages, a luxury villa, a swimming pool, restaurant and bar facilities, office blocks, servant quarters, landscaped gardens, a private borehole, and complete electrical infrastructure, which converted the suit property into a high-yield holiday resort 300 metres from Diani Beach, targeting the international tourism market.
32. Sunrise notes that this valuation was supported by photographic documentation, which it says mirrors the standard approved by the Court of Appeal in Criticos v National Bank of Kenya Limited (as the successor in Business to Kenya National Capital Corporation Limited “KENYAC”) & another [2022] KECA 541 (KLR), where an elaborate, photographically-supported valuation was preferred, on the footing that expert evidence can only be challenged by another expert. By contrast, Sunrise submits that the Bank’s valuation, which placed the forced sale value at only Kshs. 60,000,000.00, was a gross undervaluation based on two wholly unsuitable comparables of Kwale/Diani Beach/100 , a 0.1878-hectare residential plot with seven flats and is not a commercial or resort property) and Kwale/Diani Complex/655 & 1147 , a one-acre property with five villas still under construction and not operational.
33. Sunrise contends that these comparables were materially different in scale, location, development status and highest and best use from its fully operational 2.5-acre tourism resort and that their use artificially depressed the suit property's assessed value and rendered the report unfit to set a reserve price. Sunrise further highlights that the Bank's valuer, under cross-examination, conceded he was not a security expert, had not consulted government reports, statistics, tourism data, or travel advisories, and had no empirical basis for the alleged regional insecurity and terrorism risk he cited to justify the lower valuation, assumptions Sunrise submits were speculative and used improperly to discount the value.
34. As further evidence of undervaluation, Sunrise points out that within six months of the auction the purchaser was able to charge the same property for Kshs. 100,000,000.00 which Sunrise contends is strong, objective confirmation that the auction price was well below market value and that the Bank failed to obtain the best price reasonably obtainable, in breach of section 97(2). Sunrise submits that even a forced sale valuation does not cure these substantive defects, because the statutory duty is not merely to obtain a valuation but to take reasonable steps to ensure the price achieved genuinely reflects the property's true worth. Sunrise also relies on the case of Palmy Company Limited v Consolidated Bank of Kenya Limited [2014] KEHC 4811 (KLR) and Koileken ole Kipolonka Orumoi v Mellech Engineering & Construction Limited & 2 others [2015] KEHC 6116 (KLR) where it was held that the purpose of section 97(2) is to obtain the best price reasonably obtainable and to prevent an unscrupulous chargee from selling at a peppercorn or non-comparable price and that breach entitles the chargor to have the sale declared void under section 97(3).
35. Sunrise concludes on this issue that the Bank’s reliance on a flawed valuation, use of patently incomparable properties, and reliance on speculative and unverified assumptions amounts to a grave breach of the statutory duty of care under section 97(2). In response, the Bank accepts that section 97 of the Land Act imposes a duty of care on a chargee to take reasonable steps to obtain the best price reasonably obtainable at the time of sale, including obtaining a forced sale valuation, but submits that it discharged this duty and that Sunrise’s undervaluation claim is a red herring.
36. The Bank submits that the burden rests on Sunrise to present cogent evidence discrediting the Bank's valuation and establishing undervaluation in breach of section 97(2) and that Sunrise has failed to discharge this burden. It faults Sunrise’s valuation of having been undertaken in August 2010, well outside the 12-month window before the proposed sale required by Rule 11(b) of the Auctioneers Rules for a forced sale valuation and so does not reflect the circumstances prevailing closer to the actual 2014 sale date. That it relies substantially on what the report itself calls a valuation based on the income approach and a comparative analysis of the neighborhood's market with the European market mindset because they are the ultimate consumers of such, an approach the Bank characterizes as flawed, misguided and unsubstantiated and which the Bank says
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1. It is common cause that the Plaintiff (“Sunrise” or “the Company”) was at all material times to this suit a customer of the 1 st Defendant (“the Bank”) and it took a credit facility and charged its property, KWALE/DIANI/1446 (“the suit property”) to the Bank. Over time, Sunrise defaulted in servicing the facility and the Bank issued a notice of intention to sell the property on 1 st July 2013 and then instructed the 2 nd Defendant (“the Auctioneers”) to advertise the suit property for public auction on 24 th January 2014. The suit property was sold and this is not controversial, however, through its Plaint dated 20 th January 2014 that was amended on 10 th March 2021, Sunrise challenges the legality or otherwise of the notice preceding the sale and the sale itself.
2. Sunrise alleges that after defaulting on repayments, the Plaintiff requested more time to find funds to redeem the loan, which the Bank allegedly agreed to. It claims that the notice to sell the suit property was defective and void ab initio because it failed to properly state the amount due to rectify the default as required by law. That following the notice, Sunrise underwent management changes and through its new directors, claims to have reached an agreement with the Bank to suspend the sale and allow for a repayment proposal. That this proposal included plans to generate income from the suit property to repay the loan and subdividing the suit property to sell off cottages.
3. Sunrise claims that despite these agreements, the Bank instructed the Auctioneers to advertise the suit property for public auction and then went on to sell the property, which action it contends, was done in breach of their agreement. Sunrise states that the sale process was illegal and irregular due to failure to serve all new directors with the mandatory sale notice, failure to have a proper forced sale valuation as required by law as it claims the valuation was skewed and undervalued the suit property. That the public auction itself was fraudulent as Sunrise claims the Defendants failed to adhere to their own advertised terms and conditions and it asserts that no legitimate auction took place and that it was a pre-arranged sale at a price below market value, which deprived the Plaintiff of its equity of redemption.
4. For the above reasons, Sunrise seeks the court to declare the Bank’s exercise of its statutory power of sale and the auction conducted on 24 th January 2014 as illegal, irregular and null and void and that it be awarded special damages of Kshs. 180,000,000.00, the claimed value of the suit property, general and special damages for the alleged unlawful exercise of the power of sale and costs of the suit.
5. The Bank responded to the suit through the defence and counterclaim dated 4 th September 2025 that was amended on 13 th May 2021. The Bank denies Sunrise’s allegations and states that the sale of the suit property was conducted lawfully. It asserts that it complied with all legal requirements by issuing multiple notices to Sunrise including a statutory notice on 11 th August 2010 under the repealed Registered Land Act , a statutory notice on 1 st February 2013 under section 90(1) of the Land Act(Chapter 280 of the Laws of Kenya) , a Notice of Intention to Sell on 1 st July 2013 under section 96(2) of the Land Act which adequately stated the amount due as Kshs. 88,427,115.85.
6. The Bank claims that a valuation of the suit property was undertaken on 26 th June 2013 to establish its Open Market and Forced Sale values, which the Bank claims was done in compliance with the law. That Sunrise filed an application to stop the sale, but the court (Gikonyo J.,) heard and dismissed the application on 23 rd January 2014, clearing the way for the auction. The Bank confirms that the suit property was sold by public auction on 24 th January 2014 for Kshs. 60,000,000.00 and it contends this price was above 75% of the market value which was Kshs. 51,750,000.00 and thus fulfilling its duty of care to obtain a fair price.
7. The Bank denies entering into any alternative repayment agreement or giving permission to subdivide the suit property as alleged by Sunrise and it also denies any fraud or irregularity in the auction process. The Bank avers it was not legally required to serve the new directors with the notice of sale and that its obligation was to the guarantors, which it fulfilled. The Bank concludes that since the suit property has already been sold, Sunrise’s prayers for an injunction are now spent and the entire suit should be dismissed with costs.
8. In its counterclaim, the Bank is suing Sunrise and its two directors for the outstanding loan balance after the sale of the suit property as the two directors are joint and several guarantors for the facility. That the suit property was sold for Kshs. 60,000,000.00 and the full purchase price was eventually paid by the buyer with the final payment made on 18 th February 2015. The Bank claims that as of 23 rd January 2014, before the sale, the total outstanding debt was Kshs. 87,397,404.52 and after crediting the Kshs. 60,000,000.00 from the sale, a residual balance of Kshs. 40,501,655.12 remained.
9. The Bank contends that despite a demand for payment, Sunrise and its guarantors have refused or neglected to pay the outstanding sum and the Bank is now claiming the sum of Kshs. 41,352,143.17 as of 24 th February 2015, plus interest at 22% per annum until the debt is fully paid. It also prays for the costs of both the main suit and the counterclaim. The 3 rd Defendant in the counterclaim (“Martin”) responded to the amended counterclaim through the defence dated 23 rd August 2021. He states that he and his wife sold and transferred their entire 50% shareholding in Sunrise to United Way Kenya Limited on 25 th March 2013 and that this transfer was completed and registered with the Companies Registry. That the Bank was formally informed of this change of directorship and shareholding through a letter dated 5 th July 2013 from the Company's advocates which included a copy of the updated CR12 form confirming his resignation.
10. He claims that as part of the share sale agreement, the new owners, United Way Kenya Limited and its directors, the 2 nd Defendant in the counterclaim (“Charles”) and GWW agreed to take over all the Company's liabilities, including the Bank loan and the personal guarantees he had signed. That since he was no longer a director or shareholder when the Bank issued the statutory notices and sold the suit property, he states it is unconscionable and unjust for the Bank to pursue him for the outstanding debt and he claims this amounts to unjust enrichment by the Bank. He also states that the Bank sold the suit property for a price significantly below market value, which inflated the residual debt he is now being asked to pay. He thus avers that the Bank is not entitled to any reliefs sought in its counterclaim and that the same ought to be dismissed with costs.
11. At the hearing, Sunrise called two witnesses; Charles (PW 1), who adopted his witness statement dated 14 th January 2021 and produced the List and Bundle of Documents dated 22 nd December 2020 (PExhibit 1-24) and Supplementary List and Bundle of Documents dated 14 th January 2021 (PExhibit 25 ) and; Nicodemus Mwangangi (PW 2), a registered valuer who produced the Valuation Report dated 11 th August 2010 (PExhibit 1). On its part, the Bank called three witnesses; Morris Tiema(DW 1), its Remedial Manager who adopted his witness statement dated 25 th August 2015 and produced the Bank’s Lits and Bundle of Documents dated 4 th September 2015 (DExhibit 1-25) and Further List and Bundle of Documents dated 28 th July 2021 (DExhibit 26-32) ; Rashid Shake (DW 2), a registered valuer who produced the valuation report dated 25 th June 2013( DExhibit 6) and; Peter Gichuki(DW 3), a licensed auctioneer trading in the Auctioneers’ firm who adopted his witness statement dated 28 th July 2021 and produced the Auctioneers 45-day notice dated 11 th October 2013 (DExhibit 27) and the Attendance List at the Auction (DExhibit 28). Martin (DW 4) also testified on his own behalf relying on his witness statement dated 30 th September 2021 and producing the List and Bundle of Documents dated 11 th December 2015 (3 rd DExhibit 1-22).
12. After hearing the parties, the court directed them to file written submissions which are on record and since the same are a mirror of the parties’ positions highlighted above, I will not rehash the same but make relevant references in my analysis and determination below.
Analysis and Determination
13. As these are civil proceedings, it should not be lost that the court’s determination is on a balance of probabilities and is guided by the principle that he who alleges must prove. Denning J., in Miller v Minister Of Pensions [1947]2 All ER 372 discussed the burden of proof and he stated as follows:
“That degree is well settled. It must carry a reasonable degree of probability , but not so high as is required in a criminal case. If the evidence is such that the tribunal can say: ‘we think it more probable than not’, the burden is discharged, but, if the probabilities are equal, it is not. Thus, proof on a balance or preponderance of probabilities means a win, however narrow . A draw is not enough. So, in any case in which the tribunal cannot decide one way or the other which evidence to accept, where both parties’ explanations are equally (un) convincing, the party bearing the burden of proof will lose, because the requisite standard will not have been attained.”
14. The aforementioned position has now been espoused by our superior courts and finds statutory comfort in sections 107 and 108 of the Evidence Act(Chapter 80 of the Laws of Kenya) which provide as follows:
107. Burden of proof.
(1) Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.
(2) When a person is bound to prove the existence of any fact it is said that the burden of proof lies on that person.
108. Incidence of burden.
The burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side.
(Also see Ignatius Makau Mutisya v Reuben Musyoki Muli [2015] KECA 612 (KLR )
15. From the parties’ submissions, I find that the court is being asked to determine the following abridged issues:
a) Whether the statutory notice issued under Section 90 of the Land Act was valid.
b) Whether the Bank complied with its duty under Section 97(2) of the Land Act to obtain the best price reasonably obtainable.
c) Whether the public auction was conducted lawfully and in accordance with prescribed terms.
d) Whether Martin is liable to pay the loan outstanding as at 24 th February 2015 under the terms of the Guarantee
e) Whether the Bank’s counterclaim has merit.
f) Whether the Plaintiff is entitled to the reliefs sought.
Validity of the statutory notice under section 90 of the Land Act
16. Sunrise submits that the statutory notice dated 1 st February 2013 issued by the Bank under section 90(1) and (2) of the Land Act is fatally defective and therefore incapable of grounding a valid exercise of the statutory power of sale. That section 90(2) requires that a chargee's notice adequately inform the chargor of the nature and extent of the default, the specific amount required to rectify the default and the time which is not less than three months allowed to do so, that where the default is non-monetary, the act required to rectify it and the time being not less than two months allowed, the consequences of failing to rectify the default within the specified time and the chargor's right to apply to court for relief.
17. Sunrise submits that the notice issued merely demanded payment of Kshs. 87,391,154.50 without disclosing how that figure was computed or providing any breakdown between principal, interest, and charges, and without stating the specific sum required to rectify the default contrary to the mandatory requirement in section 90(2)(b) . It further submits that the notice failed to inform it of its statutory right of redemption or of the consequences of failing to rectify the default, contrary to section 90(2)(d) and (e) . In support of this position, Sunrise calls to aid this court’s decisions in Yusuf Abdi Ali Co Ltd v Family Bank Limited [2015] KEHC 2800 (KLR) and Florence Njeri Karanja v Molyn Credit Limited [2014] KEHC 8745 (KLR) and on this basis, submits that the Bank’s failure to issue a valid notice in strict compliance with section 90 nullifies all subsequent steps, including the purported auction, rendering every act taken pursuant to the notice a nullity.
18. Martin adopts Sunrise’s submissions on this issue wholesale and advances no separate argument of his own, beyond stating his reliance on them. On its part, the Bank submits that the Statutory Notice dated 1 st February 2013 is proper and lawful and satisfies the requirements of section 90(2) of the Land Act . That the notice demanded immediate payment of Kshs. 87,391,154.50, which was described as "the principal amount together with interest and costs thereon," and warned that if the sum was not paid within three months, the Bank would proceed to exercise its remedies, including sale of the suit property while also advising Sunrise of its right to apply to court for relief.
19. The Bank asserts that the amount to be settled to rectify the default was, in the circumstances, the entire debt because the Charge made the secured amounts payable on demand, so a demand not honoured within a reasonable period itself constitutes the relevant default under section 90(1), such that the full sum then becomes the amount required to rectify that default. That on this reading, no breach of section 90(2)(b) arises. The Bank urges the court to adopt a purposive, rather than a narrow textual, approach to section 90(2), pointing to the statutory word "adequately" as signaling that substantial and not exact compliance suffices and it stresses that the section must be read to preserve a fair balance between the chargor's right of redemption and the chargee's right to enforce its security.
20. The Bank relies on the late Onguto J.,’s decision in First Choice Mega Store Limited v Ecobank Kenya Limited [2017] KEHC 7152 (KLR) for the proposition that where a charge makes the secured sum payable on demand, non-payment of that demand within a reasonable time is itself a default under section 90(1), so the chargee may lawfully demand the entire outstanding sum in the statutory notice; that reading a strict limitation on installments alone into section 90(2) would produce an illogical result allowing defaulting chargors to perpetually string out repayment in three-month cycles and would defeat the purpose of the security; and that the demanding test is simply whether there is a default under the charge, whether by an event of default or an unmet demand. The Bank also draws on the First Choice Mega Store Limited(supra) decision's holding that a valuation discrepancy and the mere fact that a purchaser could not settle within 90 days, do not by themselves invalidate a chargee's exercise of the power of sale and that the court retains wide discretion under section 104(2 ) of the Land Act to suspend a chargee's remedy only where the chargor shows a realistic ability to pay within a reasonable time which, the Bank notes, was not established in that case and is not established by Sunrise in this case.
21. The Bank also relies on the decision in Cordeiro & another v Shamji [2015] KEHC 6977 (KLR) to submit that a statutory notice does not need to be flawless but needs only to adequately inform the chargor of the nature and extent of default and the consequences of non-compliance and it is not illegal for a notice to provide that default in one or more instalments renders the entire debt due and payable, such that repayment of the entire sum is itself the means of rectifying the default.
22. All in all, the Bank submits that the Statutory Notice dated 1 st February 2013 afforded Sunrise adequate notice and information as required by section 90(2), particularly bearing in mind that the events in question occurred in 2013, shortly after the Land Act came into force and while practice under the new statute was still developing. The Bank urges the Court to find that this limb of the Plaintiff's challenge to the exercise of the statutory power of sale is unsatisfactory and should fail.
23. Section 90(1) and (2) of the Land Act 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.
24. The impugned Notice of 1 st February 2013(DExhibit 5) is reproduced below for ease of reference and context:
1 st February, 2013
Our Ref: LD/9904/2013(G4)
The Directors - Sunrise Homes Ltd.
P.O. Box 70559-00400
NAIROBI.
Dear Sir,
BY REGISTERED POST
RE: OUTSTANDING DEBT - KSHS. 87,391,154=50 DR. STATUTORY NOTICE OF INTENTION TO SELL BY PUBLIC AUCTION - L.R. NO. KWALE/DIANI BEACH/146 MSAMBWENI DISTRICT
We refer to the above Charge which you issued to the Bank as security for the mortgage facility granted to you, particulars whereof are within your knowledge.
As has been previously communicated to you, default has occurred and the sum of KShs. 87,391,154=50 Dr. remains outstanding, being the principal sum together with interest and costs thereon.
We now demand from you the immediate payment of KShs. 87,391,154=50 Dr. being the principal sum together with interest and costs thereon. The amount continues to accrue interest and other Bank charges.
Further, we hereby give NOTICE that if you fail to pay the above amount after expiry of three (3) months from the date of service of this notice (which is deemed to be seven (7) days from the date of posting) upon you, the Bank will proceed to exercise the powers granted under the Charge and by statute, namely to either sell the charged land, appoint a Receiver of the charged land, enter into possession or sue you for the monies due.
Under the provisions of the Land Act, 2012, you are at liberty to apply for relief in the manner and upon the reasons set out in the Act.
THIS NOTICE is issued to you pursuant to Section 90(1) of the Land Act, 2012.
Yours faithfully,
Signed*
J. W. GITONGA (MRS.)
MANAGER - LEGAL SERVICES
cc. Manager - Remedial
cc. G.M. Credit
25. Having reviewed the Notice in full and comparing it against the mandatory requirements of section 90(1) and (2) of the Land Act above and the authorities cited by the parties, I find that the Notice is clearly adequate, valid and not fatally defective as argued by Sunrise. Section 90(2)(a) requires a notice to inform the chargor of what the default is. The Notice states "default has occurred... particulars whereof are within your knowledge” and I find this to be adequate because the notice explicitly confirms that a default exists and the phrase "particulars whereof are within your knowledge" is sufficient because the Sunrise was fully aware of its own loan repayment history and its failure to service the facility since being issued with the first statutory notice under the repealed Registered Land Act on 11 th August 2010. I do not think the Bank was required to give a lengthy narrative of the default history and it was sufficient in the circumstances only to state that a default had occurred and was continuing and the Notice does exactly that.
26. Section 90(2)(b) then requires that the notice must state the exact amount to be paid and give at least 3 months to rectify. The Notice states, "….the sum of KShs. 87,391,154.50 Dr. being the principal sum together with interest and costs thereon" and "…if you fail to pay the above amount after expiry of three (3) months from the date of service of this notice….” I find that the Notice provides a specific and clear figure of Kshs. 87,391,154.50 as the amount required to rectify the default and the Bank does not need to provide a line-by-line breakdown of principal and interest and I would expect that the Bank's internal accounting records would contain that detail. The law only requires the amount to be stated, the Notice then expressly gives 3 months from the date of service to pay and this complies exactly with the statutory minimum period.
27. As this court has always stated, where a loan is repayable on demand, the entire outstanding sum becomes due upon default and therefore, demanding the full outstanding balance as the amount to rectify the default is entirely lawful. The Bank does not need to break down the sum into component parts for the notice to be valid as long as the outstanding amount has been stated.
28. Section 90(2)(c) requires that if the default is non-monetary, the notice must specify the action required. The default in this case is purely monetary and only applies where the default involves a breach of a covenant but since the default is a straightforward failure to pay, this provision does not need to be engaged. Section 90(2)(d) then requires the notice to state what will happen if the chargor does not pay and the Notice provides that "if you fail to pay the above amount after expiry of three (3) months... the Bank will proceed to exercise the powers granted under the Charge and by statute, namely to either sell the charged land, appoint a Receiver... enter into possession or sue you for the monies due." I find that the notice clearly and unambiguously sets out the specific consequences of non-payment with a comprehensive list of the statutory remedies available to the Bank and it complies fully with the requirement to inform the chargor of the consequences of failing to rectify the default.
29. Section 90(2)(e) requires the notice to inform the chargor of its right to go to court to seek relief and I note that the Notice states: "Under the Provisions of the Land Act 2012, you are at liberty to apply for the relief in the manner and upon the reasons set out in the Act." This is adequate as the notice expressly informs Sunrise of its statutory right to apply to court for relief and while it does not quote the exact section or provide a detailed explanation of the procedure, it clearly directs Sunrise to the Land Act itself. I find this to be sufficient to put a reasonable chargor on notice that it has the right to seek judicial intervention to stop or challenge the sale.
30. I am therefore in agreement with the court’s position in Cordeiro(supra) that a notice does not need to be flawless but only needs to adequately inform and I find that the Notice overall does exactly that. It is also my finding that Sunrise’s argument that the notice was defective because it was not served on all directors is flawed because section 90(1) above only required service on the chargor, which is in this case undeniably, Sunrise and not its individual directors.
Sale at a gross undervalue under section 97(2) of the Land Act
31. Sunrise submits that section 97(2) of the Land Act imposes a mandatory, non-delegable duty on a chargee exercising the power of sale to take all reasonable steps to obtain the best price reasonably obtainable at the time of sale, a duty that remains with the chargee even where a professional valuer is engaged. That Sunrise’s valuation (PExhibit 1) placed the current open market value of the suit property at Kshs. 180,000,000.00, with a Forced Sale Value of Kshs. 126,000,000.00 and an Insurance Value of Kshs. 190,000,000.00. Sunrise submits that this valuation properly accounted for the 2.5278-acre property and its substantial developments including 15 fully furnished cottages, a luxury villa, a swimming pool, restaurant and bar facilities, office blocks, servant quarters, landscaped gardens, a private borehole, and complete electrical infrastructure, which converted the suit property into a high-yield holiday resort 300 metres from Diani Beach, targeting the international tourism market.
32. Sunrise notes that this valuation was supported by photographic documentation, which it says mirrors the standard approved by the Court of Appeal in Criticos v National Bank of Kenya Limited (as the successor in Business to Kenya National Capital Corporation Limited “KENYAC”) & another [2022] KECA 541 (KLR), where an elaborate, photographically-supported valuation was preferred, on the footing that expert evidence can only be challenged by another expert. By contrast, Sunrise submits that the Bank’s valuation, which placed the forced sale value at only Kshs. 60,000,000.00, was a gross undervaluation based on two wholly unsuitable comparables of Kwale/Diani Beach/100 , a 0.1878-hectare residential plot with seven flats and is not a commercial or resort property) and Kwale/Diani Complex/655 & 1147 , a one-acre property with five villas still under construction and not operational.
33. Sunrise contends that these comparables were materially different in scale, location, development status and highest and best use from its fully operational 2.5-acre tourism resort and that their use artificially depressed the suit property's assessed value and rendered the report unfit to set a reserve price. Sunrise further highlights that the Bank's valuer, under cross-examination, conceded he was not a security expert, had not consulted government reports, statistics, tourism data, or travel advisories, and had no empirical basis for the alleged regional insecurity and terrorism risk he cited to justify the lower valuation, assumptions Sunrise submits were speculative and used improperly to discount the value.
34. As further evidence of undervaluation, Sunrise points out that within six months of the auction the purchaser was able to charge the same property for Kshs. 100,000,000.00 which Sunrise contends is strong, objective confirmation that the auction price was well below market value and that the Bank failed to obtain the best price reasonably obtainable, in breach of section 97(2). Sunrise submits that even a forced sale valuation does not cure these substantive defects, because the statutory duty is not merely to obtain a valuation but to take reasonable steps to ensure the price achieved genuinely reflects the property's true worth. Sunrise also relies on the case of Palmy Company Limited v Consolidated Bank of Kenya Limited [2014] KEHC 4811 (KLR) and Koileken ole Kipolonka Orumoi v Mellech Engineering & Construction Limited & 2 others [2015] KEHC 6116 (KLR) where it was held that the purpose of section 97(2) is to obtain the best price reasonably obtainable and to prevent an unscrupulous chargee from selling at a peppercorn or non-comparable price and that breach entitles the chargor to have the sale declared void under section 97(3).
35. Sunrise concludes on this issue that the Bank’s reliance on a flawed valuation, use of patently incomparable properties, and reliance on speculative and unverified assumptions amounts to a grave breach of the statutory duty of care under section 97(2). In response, the Bank accepts that section 97 of the Land Act imposes a duty of care on a chargee to take reasonable steps to obtain the best price reasonably obtainable at the time of sale, including obtaining a forced sale valuation, but submits that it discharged this duty and that Sunrise’s undervaluation claim is a red herring.
36. The Bank submits that the burden rests on Sunrise to present cogent evidence discrediting the Bank's valuation and establishing undervaluation in breach of section 97(2) and that Sunrise has failed to discharge this burden. It faults Sunrise’s valuation of having been undertaken in August 2010, well outside the 12-month window before the proposed sale required by Rule 11(b) of the Auctioneers Rules for a forced sale valuation and so does not reflect the circumstances prevailing closer to the actual 2014 sale date. That it relies substantially on what the report itself calls a valuation based on the income approach and a comparative analysis of the neighborhood's market with the European market mindset because they are the ultimate consumers of such, an approach the Bank characterizes as flawed, misguided and unsubstantiated and which the Bank says
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