https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1108

LN Property Development Co Ltd & another v Fidelity Commercial Bank Ltd (Civil Appeal 587 of 2019) [2026] KECA 1108 (KLR) (12 June 2026) (Judgment) Neutral citation: [2026] KECA 1108 (KLR) Republic of Kenya In the Court of Appeal at Nairobi Civil Appeal 587 of 2019 PO Kiage, J Mohammed & WK Korir, JJA June 12, 2026 Between L.N Property Development Co Ltd 1st Appellant Luore Nyoire Co.Ltd 2nd Appellant and Fidelity Commercial Bank Limited Respondent (Being an appeal from judgment of the High Court of Kenya at Nairobi (G. L. Nzioka J.) dated 16th July, 2019 in HCC Case No. 465 of 2012) Judgment Introduction 1.L. N. Property Development Co. Ltd and Luore Nyoire Co. Limited, the 1st and 2nd appellants respectively, were aggrieved by the judgment of the High Court at Nairobi (G. L. Nzioka J.) dated 16th July, 2019 in Civil Case No. 465 of 2012. In that case the High Court declined to declare the public auction sale in respect of L.R. Kajiado/Kisaju/xxxx-Kisaju (the suit property) as unlawful and proceeded to dismiss the appellants’ case with costs to the respondent, on the basis that the case was not proved on a balance of probability. Fidelity Commercial Bank Limited is the respondent herein. 2.The appellants moved the High Court vide a plaint dated 18th July, 2012 seeking judgment against the respondent for:a.A declaration that the intended sale of L.R. Kajiado/Kisaju/xxxx-Kisaju was unlawful, null and void;b.A permanent injunction restraining the respondent from proceeding with the intended unlawful sale of the suit property;c.General damages; andd.Costs of the suit and interest. 3.The claim was premised on the contention that, on or about 22nd April 2010, the respondent advanced a loan facility of USD125,000.00 to the 1st appellant, secured by a legal charge over the suit property, which was at the material time registered in the name of the 2nd appellant. It was further contended that, some time in December 2011, the 1st appellant defaulted in repaying the loan and was consequently issued with a notification for sale of the suit property by Keysian Auctioneers on behalf of the respondent to recover a total of Kshs.10,454,420.80 then outstanding. 4.The 1st appellant thereafter presented a proposal for settlement of the debt, proposing to pay Kshs.1,080,000.00 by the end of February 2012; Kshs.7,000,000.00 by the end of March 2012; and assignment, upon mutual agreement, of Treasury Bill issue No. 1936/031 of CDS Account No. 09-30-xxxxx-8 of the 1st appellant valued at Kshs.5,000,000.00 to the respondent. 5.The appellants maintained that the proposal for settlement was accepted by the respondent. That, however, the respondent allegedly neglected to perfect the treasury bill, which was already in its possession and over which it had a right of lien, with the result that the proceeds thereof were credited to the wrong account. The appellants further contended that the 1st appellant proposed a way to rectify the shortfall arising from the aforesaid error, which proposal was accepted by the respondent, but that, surprisingly, the respondent proceeded to issue a notice for the intended sale in respect of the suit property. 6.The appellants asserted that the exercise of the statutory power of sale constituted a gross violation of the law and amounted to an attempt to clog the appellants’ equitable right of redemption, as the respondent failed to serve the requisite redemption notice and accord the 1st appellant an opportunity to settle the debt. 7.In its defence dated 8th August, 2012, the respondent admitted having advanced loan facilities to the 1st appellant secured by various collateral, including a first charge over the suit property. It was the respondent’s case that the 1st appellant defaulted in complying with the terms of the facilities, thereby prompting the issuance of a statutory notice on 17th June 2011 and, subsequently, a notification of sale by Keysian Auctioneers on or about 1st December, 2011. 8.The respondent further stated that the auctioneers issued a 21-day notice on 2nd March 2012 and thereafter advertised the suit property for sale on 23rd March 2012. The respondent maintained that any discussions held with the appellants were conducted on a without prejudice basis and that it had been agreed that, should the breach persist, the respondent would be at liberty to exercise its statutory rights. 9.Upon considering the evidence placed before it, the High Court framed issues for determination inter alia whether the statutory power of sale had been legally and/or procedurally exercised; and whether the appellants were entitled to the orders sought. 10.In a judgment dated 16th July 2019, the trial court found that a loan facility had indeed been advanced by the respondent to the 1st appellant, but that the same had not been fully repaid. Regarding the issuance of statutory notices, the trial court found that the evidence demonstrated that the notices had been sent to the wrong address of P.O Box xxxx-00603 instead of the 1st appellant’s address of P.O. Box xxxx-00603. However, the High Court observed that the issue of notice had already been the subject of a ruling of the same court (E. K. O. Ogola J.) dated 6th November 2012, wherein it had been held that the auction sale conducted on 10th July 2012 was valid and that proper notices had been issued to the appellants. 11.The High Court (G. L. Nzioka, J.) consequently held that it was functus officio in relation to that issue. The High Court observed, inter alia, that:“It is therefore clear that, the issue of notices was determined in that ruling. Be that as it were, it is noteworthy that, the suit property has already been sold and transferred to the third party. The surplus of the proceeds of sale was sent to the 2nd plaintiff. There is no evidence that, the funds were returned to the Defendant.It is also noteworthy that the Plaintiffs have conceded they fell in arrears and the Defendant indulged them. From the evidence adduced the auction scheduled for 23rd March 2012, was postponed as the parties engaged in “without prejudice” negotiations. It also suffices to note that earlier on or about 25th January the 1st Plaintiff presented a proposal to the Defendant on settlement of the arrears. Therefore, all along the Plaintiffs were aware that the property was exposed to the risk of sale. I therefore find that the sale was properly conducted.” 12.Ultimately, the High Court found that the prayers sought in the plaint seeking a declaration that the intended sale in respect of the suit property was unlawful, null and void; and that a permanent injunction restraining the respondent from proceeding with the intended sale of the suit property had been overtaken by events. This was in view of the fact that the sale in respect of the suit property by public auction had already taken place on 10th July 2012, prior to the filing of the suit. The High court further found that the claim for general damages had not been proved. Consequently, the appellants’ case was dismissed with costs to the respondent. 13.Aggrieved by the said decision, the appellants lodged the instant appeal. The appellant challenged the decision of the High Court, raising nine (9) grounds in the memorandum of appeal dated 25th November 2019, contending that the High Court erred in law and fact by:i.Finding that the appellants did not remit the Treasury Bill Issue No. 1936/031 of CDS Account Number 09-30- xxxxx-8 of the 1st appellant valued at Kshs. 5,000,000.00 to the respondent;ii.Failing to hold the respondent responsible for the failure to remit the Treasury Bill Issue No. xxxx/xxx of CDS Account Number 09-30-xxxxx-8 of the 1st appellant valued at Kshs. 5,000,000.00 issued to the respondent by the 1st appellant;iii.Failing to find that the appellants never received any of the statutory notices issued by the respondent’s advocates and Keysian Auctioneers, despite acknowledging that the statutory notices were sent to the wrong postal address;iv.Finding that, save for the 45-day notice of sale issued by Keysian Auctioneers, the appellants produced the impugned statutory notices as part of their evidence before the trial court;v.Relying on a ruling by E.K.O. Ogolla J. dated 6th November 2012 to determine the question of receipt of statutory notices by the appellants, despite no finding on the issue having been made in the said ruling;vi.Failing to find that the respondent ought to have issued fresh statutory notices upon the appellants honouring the terms of the settlement proposal made by the 1st appellant;vii.Failing to find that the respondent failed to act in good faith in the sale of the suit property;viii.Failing to find that the sale of the suit property was improperly conducted, unlawful, null and void; andix.Finding that the appellants failed to prove their case on a balance of probabilities. 14.The appellant sought orders from this Court that:a.The appeal be allowed;b.The judgment and decree of the High Court delivered on 16th July, 2019 in Nairobi High Court Civil Case No. 465 of 2012 be set aside and substituted with an order awarding general damages in favour of the appellants; andc.The costs of the appeal and those of the High Court be borne by the respondent. Submissions by Counsel 15.The appeal was canvassed by way of written submissions, which were highlighted orally by counsel during the hearing. The appellants were represented by learned counsel, Mr. Wakhisi while the respondent was represented by learned counsel Mr. Muoka. 16.Mr. Wakhisi submitted that the respondent granted the appellant a loan facility of USD 125,000 secured by a legal charge over the suit property registered in the name of the 2nd appellant. Counsel submitted that the 1st appellant subsequently defaulted in repayment, resulting in the issuance of a three-month statutory notice dated 7th June 2011 by the respondent’s advocates, followed by a 45-day notification of sale dated 1st December, 2011 issued by Keysian Auctioneers notifying the appellants that the suit property would be sold by public auction on 9th March 2012. 17.Counsel further submitted that the appellants reacted by presenting a payment proposal which was accepted by the respondent. The proposal entailed payment of Kshs.1,080,000 by February 2012; Kshs.7,000,000 by March 2012; and assignment of Treasury Bill No. xxxx/xxx of CDS Account No. 09-30-xxxx-8 valued at Kshs.5,000,000. 18.It was submitted that the first two proposed payments were duly made but that the proceeds of the treasury bill were not remitted due to an error and negligence on the part of the respondent. Counsel contended that, notwithstanding the payments made, the auctioneers issued another 21-day notification of sale dated 21st May 2012 indicating that the auction would take place on 15th June 2012, followed by an advertisement in the Standard newspaper dated 24th May 2012. 19.Counsel added that, following the erroneous crediting of the treasury bill proceedings in the wrong account, the 1st appellant paid Kshs.500,000.00 in May 2012 and proposed obtaining a facility from Housing Finance Co. to rectify the shortfall occasioned by the aforesaid error. It was further submitted that assurances had been given that no precipitate action would be taken against the suit property pending processing of the said facility. 20.Counsel further submitted that the auction scheduled for 15th June 2012 did not proceed but that the auctioneers thereafter issued a 15- day notification of sale dated 20th June 2012 for the sale of the suit property on 10th July 2012, whereupon the auction proceeded. 21.Counsel framed the issues for determination as follows:a.Whether the notices preceding the sale of the suit property by auction were received by the appellants;b.Whether the respondent was responsible for the failure to remit the proceeds of the treasury bill;c.Whether the respondent breached its duty to act in good faith owed to the appellants;d.What the appropriate remedy in the circumstances ought to be. 22.Mr. Wakhisi submitted that the appellants did not receive the notices issued by the respondent’s advocates and the auctioneers prior to the sale of the suit property and that, consequently, the sale was improper, unlawful and void. Counsel argued that the appellant’s postal address was expressly stated in the charge document as 25207-00603, but that the respondent, its advocates, and the auctioneers failed to comply with the statutory requirements for service as the notices were instead addressed to P.O Box xxxxx 00603. 23.Counsel further submitted that there was no evidence that the notices were served upon the 2nd appellant, noting that in its letter dated 19th January 2012 the respondent admitted that it had been unable to reach the 2nd appellant. Counsel asserted that section 74(1) of the Registered Land Act (RLA) (repealed) required service upon the chargor. 24.Reliance was placed on this Court’s decision in Nyangilo Ochieng & Another vs Fanuel B. Ochieng & 2 Others (1996) eKLR, where the Court pronounced itself as follows:“The appellants stated in the plaint that they did not receive the statutory notices. The averment should have put the bank on guard. It is for the chargee to make sure that there is compliance with the requirements of S.74(1) of the Registered Land Act. The burden is not in any manner on the chargor. Once the chargor alleges non receipt of the statutory notice, it is for the chargee to prove that such notice was in fact sent.” 25.By parity of reasoning, counsel submitted that the trial court ought to have found that the sale of the suit property by public auction was null and void for want of proper statutory notice under section 74(1) of the Registered Land Act. 26.Counsel further submitted that the auctioneer’s admission in the letter dated 19th January, 2012 proved non-compliance with Rule 15(c) of the Auctioneers Rules, 1997, which provided that:“Upon receipt of a court warrant or letter of instruction the auctioneers shall in the case of immovable property locate the property and serve the notification of sale of the property on the registered owner …” 27.Counsel also relied on Simiyu vs. Housing Finance Co. of Kenya (2001)2EA 540, where Hon. Ringera J. (as he then was) stated at page 548-549 that:“My interpretation of these provisions is that the chargee has no lawful power to sell the charged property for default in payment of the charge debt unless and until the chargee has been served with a notice in writing demanding payment of such debt and the chargor Hs failed to comply within three months. The irregularities on the exercise of the power of sale which are remediable in damages do not in the premise comprehend failure to serve an adequate statutory notice. The statute has in effect commanded that a defaulting chargor be given in the first instance, an opportunity to redeem the charge within three months of the date of service of notice to that effect. If he does not do so then the property may be sold through a licensed auctioneer.That brings me to consideration of the Auctioneers Act 1996. Rule 15(d) of the Auctioneers Rules require that once an auctioneer has been instructed to sell the charged property he should give in writing to the owners of the property a notice of not less than 45 days within which the owner may redeem the property …” 28.Regarding the finding of the High Court that it was functus officio on the issue of service of the notices by virtue of its previous ruling dated 6th November 2012, counsel submitted that no such finding had been made in the said ruling. Counsel further submitted that the burden of proving service remained with the respondent at all times and never shifted to the appellants. 29.Counsel argued that the trial court misapplied the doctrine of functus officio, as the issue of service of notices remained live in the pleadings before the court. Reliance was placed on the Supreme court decision in Raila Odinga & 2 Others v Independent Electoral & Boundaries Commission & 3 Others [2013] eKLR and this Court’s decision in Telkom Kenya Ltd v John Ochanda (suing in his own behalf and on behalf of 996 former employees of Telkom Kenya Ltd [2014] eKLR. 30.On the issue of failure to remit the treasury bill proceeds, counsel submitted that the respondent was wholly liable. Counsel argued that the respondent’s error materially contributed to the eventual sale of the suit property and that, had the proceeds been remitted as expected, the debt would have been settled. 31.Counsel further submitted that the respondent breached its duty to act in good faith under section 77(1) of the RLA (repealed) by failing to ensure proper service of notices, failing to rectify the error regarding the treasury bill proceeds, and failing to accommodate the appellants’ efforts to procure alternative financing. 32.Finally, counsel submitted that the appellants were entitled to damages under section 77(3) of RLA and section 99(4) of the Land Act, 2012. Reliance was placed on the case of Simiyu (supra) and this Court’s case of Euro Bank Ltd (In Liquidation) v Twictor Investments Ltd & 2 Others [2020] eKLR. Counsel urged the Court to allow the appeal. 33.In opposing the appeal, counsel for the respondent, in his submissions submitted relied on the decision of Ringera J. (as he then was) in David Ngugi Mbuthia v Kenya Commercial Bank & Another (HCCC No. 34 of 2001), as cited by this Court in Nancy Kahoya Amadiva v Expert Credit Ltd & Another (2015) eKLR, where the Court held that:“… a person damnified by a transfer of property by mortgage to an auction purchase pursuant to any irregular or improper exercise of statutory power of sale is entitled to recover any damages directly suffered by him from the auctioneer.” 34.Counsel submitted that the auction sale had initially been scheduled for 23rd March 2012 but did not proceed, and that fresh notices were subsequently issued for auction sale on 10th July, 2012. During this period, the appellants’ director engaged the respondent’s officers with proposals for settlement. 35.Counsel submitted that part of the settlement proposal involved assignment of a treasury bill valued at Kshs.5,000,000.00. That, however, despite being deposited with the Central Bank of Kenya, the proceeds were not remitted to the respondent upon maturity. Counsel submitted that the appellant’s director promised to effect the transfer but failed to do so, thereby precipitating the sale. 36.Counsel identified the issues for determination to be whether the notices preceding the auction sale were received by the appellants; whether the respondent was responsible for the failure to remit the treasury bill proceeds; and whether the respondent breached its duty to act in good faith. 37.Counsel submitted that the applicable law was the RLA (repealed), specifically Section 74(1), which required issuance of a three-month statutory notice, and Rule 15 of the Auctioneers Rules, 1997, which required a 45-day redemption notice. 38.Counsel maintained that all requisite notices were duly issued to the appellants. Counsel submitted that the statutory notice dated 7th June 2011 was properly addressed to the address provided in the charge document, namely xxxxx-00603 Nairobi. 39.Counsel further submitted that the auctioneer’s 45-day notice dated 1st December 2011 was issued to the chargor and posted to the correct address. Counsel pointed out that the appellant’s director had acknowledged receipt thereof in an affidavit sworn on 8th July and reiterated the same in his witness statement. 40.Counsel conceded that the subsequent 21-day notice bore an incorrect postal address but argued that the law did not require issuance of any further notice after the statutory notice and 45-day redemption notice. Counsel submitted that another 15-day notice dated 20th June 2012 was thereafter issued to the correct address and that advertisement was published on 23rd June 2012, paving the way for the auction held on 10th July 2012. Counsel submitted that they followed the procedure to the letter as summarized in the case of Kyavango vs Kenya Commercial Bank Ltd & Another (2004) 1KLR. 41.Counsel further submitted that the appellants defaulted under the terms of the charge and thereafter proposed settlement on a without prejudice basis, including assignment of the treasury bill. Counsel maintained that the respondent caused the lien to be lodged with the Central Bank of Kenya and that the lien forms had been duly executed. 42.Counsel argued that the proceeds of the treasury bill belonged to the appellants and that they bore the responsibility of tracing and redirecting the proceeds. Counsel contended that the respondent had no control over the treasury bill proceeds and therefore could not halt the statutory sale process. 43.Regarding the reliefs sought in the plaint, counsel submitted that the appellants sought remedies directed at an intended sale, yet the property had already been sold before the suit was filed. Counsel therefore argued that the prayers for declaration and injunction had been overtaken by events. 44.Counsel further submitted that even assuming the notices were defective, the remedy in damages lay against the auctioneers rather than the respondent. Reliance was placed on the case of Euro Bank Ltd (in Liquidation) (supra) that:“… any person damnified by an unauthorized or improper or irregular exercise of power shall have his remedy in damages against the person exercising the power.” 45.Counsel also relied on the case of Nancy Kahoya Amadiva (supra) that:“… we were however baffled by the appellants’ failure to prefer a claim against the auctioneers despite this direct grievance against them. Had the auctioneers been party to the suit perhaps we would have considered the matter differently and arrived at a different conclusion. However, in the circumstances, we are unable to apply ourselves to that probable situation as the prayers sought in the appellant’s amended claim were against the respondents and not the auctioneers. We therefore find merit in the trial judge’s findings with regards to the issue of damages.” 46.Counsel urged the Court to dismiss the appeal with costs. Analysis And Determination 47.This Court is called upon to exercise its mandate as a first appellate court by reassessing and re-evaluating the evidence adduced before the trial court and arriving at its own independent conclusions bearing in mind that it neither saw nor heard the witnesses testify. See Rule 31 (1) of the Court of Appeal Rules, 2022; and this Court’s decision in Gitobu Imanyara & 2 Others v Attorney General [2016] eKLR; and Selle & Another vs Associated Motor Boat Co. Ltd & Others (1968) EA 123. 48.In exercising its appellate jurisdiction, this Court is further guided by the decision of its predecessor, the Court of Appeal for East Africa in Peters vs Sunday Post Limited [1958] EA page 424 that:“It is a strong thing for an appellate court to differ from the finding, on a question of fact, of the judge who tried the case, and who has had the advantage of seeing and hearing the witnesses. An appellate court has, indeed, jurisdiction to review the evidence in order to determine whether the conclusion originally reached upon that evidence should stand. But this is a jurisdiction which should be exercised with caution; it is not enough that the appellate court might itself have come to a different conclusion.” 49.We have considered the record of appeal, the submissions by counsel, the authorities cited and the applicable law. We discern the following issues for determination:a.Whether statutory notices were properly issued prior to the auction sale of the suit property; andb.Whether the appellants are entitled to the relief of damages sought. 50.The issue of service of statutory notices prior to the exercise of the statutory power of sale is well settled in law and has been the subject of numerous judicial pronouncements. 51.Section 74 of the RLA (repealed) provided as follows:1.If default is made in payment of the principal sum or of any interest or any other periodical payment or of any part thereof, or in the performance or observance of any agreement expressed or implied in any charge, and continues for one month, the chargee may serve on the chargor notice in writing to pay the money owing or to perform and observe the agreement, as the case may be.2.If the chargor does not comply, within three months of the date of service, with a notice served on him under sub- section (1), the chargee may –a.appoint a receiver of the income of the charged property; orb.sell the charged property: 52.Rule 15 of the Auctioneers Rules, 1997 provides, in relation to immovable property, that the auctioneer shall:“(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.” 53.The question falling for determination in the circumstances of this case is whether the appellants were accorded the requisite 90-day and 45-day redemption periods before the suit property was sold by public auction. 54.This Court in Euro Bank Ltd (In Liquidation) vs. Twictor Investments Ltd & 2 Others (2020) eKLR pronounced itself as follows:“A mortgagor’s right of redemption would be violated if the property is sold before the 90 days following the notice. The issue is whether the mortgagor was given 90 days before the sale and not whether the notice gave him 90 days. Even assuming the subsequent notice of 90 days was not proper, the question we need to ask ourselves is whether the mortgagor was given at least 90 days to make good the payments.From the record, it is clear after receiving the notice … the advocates on record for the mortgagor engaged counsel for the Bank with a proposal on how to liquidate the loan. They did not complain that the notice they had been given was invalid. They actually acted on it …” [Emphasis supplied]. 55.Similarly, in the instant appeal, the appellants pleaded at paragraph 6 of the plaint that they received a notification of sale from Keysian Auctioneers dated 1st December, 2011 notifying them of an intended sale scheduled for 9th March 2012, and that they reacted thereto by making a settlement proposal. 56.The record demonstrates that the postal address for both appellants in the charge document was P.O Box xxxxx-00603 Nairobi. A 90-day statutory notice dated 7th June 2011 was issued by the respondent’s advocates through the said address to the 2nd appellant, with copies to the 1st appellant and the directors. 57.Thereafter, Keysian Auctioneers issued a 45-day notice dated 1st December 2011 to the 2nd appellant. Although one certificate of postage reflected an incorrect postal number, copies of the notice were sent to the directors through the correct postal address. 58.We are therefore satisfied that the chargor was served with the statutory notice and the 45-day redemption notice, which prompted the appellants to enter into negotiations and make proposals for settlement. 59.The record further shows that the respondent accommodated the appellants for approximately six months. However, the debt remained unpaid, as the treasury bill proceeds were never remitted to the respondent despite assurances by the appellants. 60.It is notable that the issue regarding the non-perfection of the treasury bill was brought to the appellants’ attention by email dated 2nd May 2012, to which the appellants responded by indicating that they would effect an RTGS transfer to the respondent’s account. 61.Ultimately, the debt remained unsettled, prompting the auctioneers to issue further notices before the suit property was sold on 10th July 2012. 62.In the circumstances, we find that the appellants were duly served with the statutory notices and afforded ample opportunity to redeem the suit property before the sale. 63.As regards the claim for damages, the record demonstrates that the appellants were afforded sufficient opportunity to redeem the property but failed to do so. We therefore find no basis for the award of general damages against the respondent. 64.Further, to the extent that the appellants complained about the conduct of the auctioneers, we are guided by this Court’s decision in Nancy Kahoya Amadiva (supra), wherein it was held that grievances concerning breaches of the Auctioneer’s Rules ought properly to be directed against the auctioneers themselves. 65.In the result, we find no reason to interfere with the findings of the High Court (G. L. Nzioka, J.). The appeal lacks merit and is hereby dismissed with costs to the respondent. 66.It is so ordered. DATED AND DELIVERED AT NAIROBI THIS 12TH DAY OF JUNE, 2026.P. O. KIAGE............................JUDGE OF APPEAL JAMILA MOHAMMED ............................JUDGE OF APPEAL W. KORIR............................JUDGE OF APPEAL I certify that this is a true copy of the originalSignedDEPUTY REGISTRAR