Equity Bank Ltd & another v Akuda & another (Civil Appeal E166 of 2025) [2026] KEHC 8696 (KLR) (19 June 2026) (Judgment)

Equity Bank Ltd & another v Akuda & another (Civil Appeal E166 of 2025) [2026] KEHC 8696 (KLR) (19 June 2026) (Judgment) Neutral citation: [2026] KEHC 8696 (KLR) Republic of Kenya In the High Court at Kisumu Civil Appeal E166 of 2025 A Mabeya, J June 19, 2026 Between Equity Bank Limited 1st Appellant Nyaluoyo Auctioneers 2nd Appellant and Diana Mary Akuda 1st Respondent Aggrey Omondi Ogutu 2nd Respondent (Being an appeal from the judgment and decree of the Hon. K. Cheruiyot made on 24/9/2024 in KSM CMCC No. 360 of 2018) Judgment 1.The 1st respondent sued the appellants and the 2nd respondent seeking to nullify the sale of land parcel no. Kisumu/Municipality Block 5/323 (hereinafter “the suit property”) by the appellants to the 2nd respondent and further injunct them from interfering in any way with her occupation of the said parcel. 2.The appellants filed a joint defence averring that they had advanced the 1st respondent a loan of Kshs. 3,500,000/= which she defaulted in repaying and subsequently, they legally exercised their right of sale over the suit property that had been used to secure the loan. 3.The 2nd respondent on his part, denied the averments made by the 1st respondent and filed a counterclaim seeking to be declared the bona fide purchaser for value of the suit property as well as a permanent injunction restraining the 1st respondent from interfering with his quiet possession of the suit property. He also sought mesne profits. 4.By a judgment made on 18/9/2024, the trial court found that there was no proper service of the statutory notices upon the 1st respondent and thus the appellants right to sale had not crystallised therefore the sale to the auction undertaken by the appellants was null and void. The trial court ordered a refund of the purchase price paid by the 2nd respondent. 5.Aggrieved thereby, the appellants appealed to this Court vide a Memorandum of Appeal dated 9/10/2024. It set out 8 grounds of appeal which can be summarized thus: -a.The learned trial magistrate erred in both law and fact by finding and holding that the exercise by the 1st appellant herein of its statutory right of sale as chargee did not scrupulously abide by the procedure laid down in law, a finding contrary to the overwhelming evidence adduced at trial to the contrary.b.The trial court erred in both law and fact by finding and holding that notices required under the law to be served upon a chargor or his guarantor before an exercise of the statutory power of sale were not so served upon the 1st respondent herein when evidence of such service was adduced at the hearing of the case before the trial court.c.The learned trial magistrate erred in law and fact by nullifying and revoking the sale of the suit property to the 2nd respondent herein through a public auction in spite of the clear position of the law in section 99 of the Land Act which provides comprehensive protection for such a sale. 6.The appeal was disposed of by way of submissions. The appellants submitted that the trial court erred in finding that notices under sections 90 and 96 of the Land Act were not served. That all requisite notices, demand letters, redemption notices and auction notices were sent to the 1st respondent’s postal address in Kisumu, which she herself used in her pleadings and affidavits. 7.That the reference to “Ruaka” in the letter of offer was merely a typographical error since the postal code (40100) corresponds to Kisumu and that the auctioneer also served notices through the 1st respondent’s father, which the appellants maintain constituted valid service. 8.That even if there had been defects in service (which they deny), the trial court had no legal basis to invalidate the auction sale as section 99 of the Land Act protects purchasers at statutory auctions and provides that any person prejudiced by an irregular sale has a remedy in damages rather than cancellation of the sale. That no allegations or evidence of fraud were made against the purchaser (2nd respondent), who bought the property in good faith and consequently, the trial court erred in setting aside the sale and ordering a refund of Kshs. 4 million to the purchaser. 9.The 1st appellant submitted that the statutory notices were not properly served as the 1st respondent used an incorrect postal address when sending them and as a result, she did not receive the notices in good time thus the 1st appellant failed to comply with the mandatory requirements of sections 90 and 96 of the Land Act. That since proper service was not effected, the 1st appellant’s statutory power of sale had not accrued and consequently, all subsequent actions, including the auction, were illegal. 10.On his part, the 2nd respondent submitted that the statutory power of sale had properly crystallized as the borrower admitted to being in serious default on her Kshs. 3,500,000/- loan. That the 1st appellant provided certificates of postage showing notices were sent to her last known address and the discrepancy in the town name (Kisumu vs. Ruaka) was merely a typographical error. 11.That he is a bona fide purchaser for value having bought the property in good faith at a heavily advertised public auction for due consideration and protected under section 99 of the Land Act. That even if the bank committed a statutory breach, section 99(4) of the Land Act mandates that the borrower’s remedy lies strictly in damages against the bank, not the nullification of the sale to an innocent third party. 12.This being a first appellate court, its jurisdiction was well set out in the case of Selles & Another vs Associated Motor Boat Company & Others (1968) EA 123. This is that the Court must re-appraise the evidence tendered in the court below afresh and arrive at its own independent conclusions and findings but at all times having in mind that it did not see the witnesses testify. 13.That being said, it is noteworthy that the instant appeal turns on the issue of service of statutory notices to the 1st respondent and the consequent exercise of the statutory power of sale by the 1st appellant. The appellant testified as Pw1 before the trial court. Having admitted to taking a loan with the 1st defendant and subsequently being in default, she stated that she did not receive any notice from the 1st appellant and thus there was nothing to ignore. That she was in constant communication with the loan officer. That she had arranged with a third party to sell the property by private treaty which information she communicated to the 1st appellant. That she was not aware whether the 1st appellant served her father with the statutory notices and further that she did not live with her father. 14.The appellants called one John Gateru, the 1st appellant’s Credit Manager, Kenyatta Avenue Branch as Dw1. Addressing the court on the issue of statutory notices, he testified that the appellant sent the relevant notices to the 1st respondent starting with a demand notice and further that the 2nd appellant similarly sent the requisite notices to her. In cross-examination, he admitted that there was a typo error in the address of the notices sent to the 1st respondent vis a vis the address on the loan application form. That the 1st respondent’s correct address was 19001 – 40100, Kisumu 15.The 2nd respondent testified that he purchased the suit property at an auction and as such he was a bona fide purchaser. That he got to know of the auction through an advertisement in the newspapers and through friends. That he did not collude with the bank but was merely the highest bidder. That he was a victim of circumstances and if not granted the order of permanent injunction sought, he ought to be refunded the funds used in purchasing the suit property. 16.It was this evidence that the trial court based its judgment on. As earlier stated, this appeal turns on determination whether the 1st respondent was duly served with the requisite statutory notices and the fate of the consequent public auction. 17.Section 90 of the Land Act, 2012 (Laws of Kenya) provides as follows: -“ 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 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. 18.Section 90(1) in my view lays down the circumstances under which the statutory notice is to be issued by the chargee on the chargor. Clearly, a statutory notice is issued where there is default of payment or performance of the expressed or implied covenants in a charge. A notice must be served upon the chargor by the chargee in writing clearly stating the payment of any amount owing or performance or observance of the obligations under the agreement between the parties, as the case may be. The notice notifying the chargor of the intended sale of the charged property by auction is mandatory. 19.In Enoka Watako Makokha v Co-operative Bank of Kenya [2015] eKLR, the Court of Appeal held that service of notice by registered post is effective service. In the case of Peter Kuria Munyuira v Housing Finance Company of Kenya Limited & Another HCCC No. 457 Of 2006, Warsame J. (as he then was) held: -“A notice sent through registered post takes effect after the collection of the registered mail of the chargor from the Postal Corporation of Kenya. It is therefore incumbent upon the chargee to ensure the registered mail sent through any process is received and there must be evidence of receipt and the date it was collected or received by the addressee”. 20.However, when a chargor alleges that the requisite notices were not served upon it/him/her, the chargee has to prove that the said notices were properly served. In Moses Kibiegon Yator v Eco Bank Kenya Limited NKU E & L No 426 of 2013 [2014] eKLR, it was stated as follows: -“In instances where a chargor alleges that he did not receive the statutory notice, the burden shifts to the chargee, to demonstrate prima facie, that the statutory notice was served. If there is material to show that the notice was received or acknowledged, say, through an acknowledgement letter, that will clearly demonstrate that the notice was duly served and received. If the notice was served by way of registered post, the chargee ought to place before the court sufficient material to demonstrate prima facie, that the document was duly dispatched to the proper address of the chargor, and that in the ordinary course of events, the notice must have reached the chargor.” 21.In this case, the 1st respondent’s address on both the Application for Loan Form and the Letter Offer dated 23/7/2015 and 24/9/2015, respectively, was shown to be P.O. Box Number 19001- 40100 Ruaka. However, all the statutory notices were addressed to P.O. Box Number 19001-40100 Kisumu. 22.It was the 1st respondent’s contention that the address used was not hers and that as a result, she did not receive the said notices. Dw1 who testified for the 1st appellant also admitted that the address used seem to have been the wrong one or that there was an error. 23.However, according to the Charge dated 31/12/2015 and produced by the 1st respondent, her postal address was shown as being P.O. Box Number 19001 – 40100, Kisumu. 24.The question is therefore whether the statutory notices sent to the address P.O. Box Number 19001 – 40100, Kisumu amounted to proper service and what befalls the public auction that was undertaken pursuant thereto. 25.On the basis of the evidence and material placed on record, there is no dispute that the 1st respondent had defaulted in the loan repayment. Although it was proved that the notices were served on an address that was contended, and presumably admitted so by Mr. Gateru Dw1, to have been wrong, I do not agree with the finding by the trial court that it nullified the public auction. 26.The primary document upon which the parties created the security, the subject of the exercise of the 1st appellants’ statutory right of sale, was the Charge document dated 31/12/2015. It was neither the Offer Letter or the Loan Application Form. The mode of service of notice was contained in clause 42 of the Charge document. It did not refer to either the Offer Letter or the Application Form. The Charge was the latest document to be executed by the parties. The plaintiff executed the same without protest. It was neither contended nor stated that the particulars set out in the Charge document were false or erroneous. The view which this Court takes is that, the parties were bound by the contents therein unless shown and proved that there was an error. That was neither pleaded not proved before the trial court nor before this Court. 27.Accordingly, to the extent that the trial court relied on the addresses supplied in the Offer Letter and the Application for Loan Form as being the correct addresses to arrive at the decision that there was no service of the statutory notices, it was in error. Its decision was based on a wrong premise. The primary document that govern the exercise of a Chargee’s statutory power of sale is the Charge document and no other. If there be a conflict between the Charge document and other documents, the Charge document takes precedence as it is the one that creates, perfects the security and provides for the statutory power of sale. The other documents do not. 28.Accordingly, the 1st appellant was entitled to rely on the address that was provided for in the Charge document and exercise its statutory power of sale accordingly. The trial court was of the view that there was an error in that address in the Charge. That was neither pleaded, contended nor proved by the plaintiff. 29.To the extent that the trial court raised the importance of the documents that were superseded by the Charge document and rely on them, it fell into error. The plaintiff did not herself challenge the contents of the Charge document. She executed it without protest. Yet it had the impugned address. This Court concludes that the exercise of the statutory power of sale was not irregular or illegal as held by the trial court. 30.As to the 2nd respondent’s counterclaim, the trial court was of the view that since the exercise of the statutory power of sale was a nullity, the 2nd respondent was entitled to a refund of the purchase price. 31.The view this Court takes is that, even of the exercise of the statutory power of sale was found to be irregular, which is not the case here, still that would not affect the interest of the 2nd respondent. He pleaded and testified that he was a bonafide purchaser for value without notice. That he was unaware of any irregularity in the 1st appellant’s exercise of its statutory power of sale. 32.Section 99 (2) (3) and (4) of the Land Act provides: -“(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.” 33.From the foregoing, it is clear that a bonafide purchaser of a property at a public auction for value without notice is protected. The remedy for a wrongful exercise of a statutory power of sale is damages to the Chargor. It was not shown or proved that the 2nd respondent was not a bona fide purchaser. No fraud on his part was alleged or proved. Accordingly, the sale to him of the suit property cannot be impugned. 34.In view of the foregoing, this Court finds the appeal to be meritorious and allows the same with costs.It is so decreed. DATED AND DELIVERED AT KISUMU THIS 19TH DAY OF JUNE, 2026.A. MABEYA, FCI ArbJUDGE