[2025] KEBPRT 191 (KLR)

Mugure v Kendal Energy Solutions Ltd & 2 others (Tribunal Case E014 of 2024) [2025] KEBPRT 191 (KLR) (8 January 2025) (Ruling)

Neutral citation: [2025] KEBPRT 191 (KLR)

Republic of Kenya

In the Business Premises Rent Tribunal

Tribunal Case E014 of 2024

P Kitur, Member

January 8, 2025

Between

Dorcas Wanjiku Mugure

Applicant

and

Kendal Energy Solutions Ltd

1st Respondent

Ncba Bank Kenya Limited

2nd Respondent

Purple Royal Auctioneers

3rd Respondent

Ruling

A. Parties 1. The Applicant is a business trader operating a shop on Tittle No. 4953/29/IV within Thika Town, Kiambu County as a tenant of the Landlord.

2. The firm of Meg Muhia & Company Advocate represents the Applicant/Tenant.

3. The 1st Respondent/Landlord is the registered owner of the parcel of land known as Title L.R No. 4953/29/IV (‘the suit premises’).

4. The 2nd Respondent is a registered corporation carrying on banking business within the Republic of Kenya.

5. The firm of G.M Gamma Advocates LLP represents the 2nd Respondent.

6. The 3rd Respondent is an auctioneering firm.

B. The Dispute Background 7. On 10th January 2023, the Applicant and the 1st Respondent entered into a tenancy agreement, duly signed and executed by both parties. The Applicant rented the premises to operate a medium-sized retail shop. The tenancy continued without interruption until the Applicant discovered an advertisement in the Daily Nation newspaper indicating that the premises housing her shop were to be auctioned.

8. Aggrieved by the publication, the Applicant approached this Tribunal through a Complaint dated 3rd December 2024, asserting that the Landlord had placed the advertisement in the Daily Nation newspaper and that the 2nd Respondent, employing the services of the 3rd Respondent, had scheduled a public auction of the suit property. This auction includes the Applicant’s movable and immovable property, as well as all improvements thereon, valued at over Kshs. 1,000,000/-.

9. On 3rd December 2024, the Applicant filed a Notice of Motion Application under a certificate of urgency seeking the following orders:-a.That the Application be certified as urgent and service be dispensed with in the first instant.b.That pending hearing and determination of this Application, this tribunal be pleased to issue an order of stay of execution on sale of the suit property L.R NO 4953/29/IV and an injunction against the 1st and 2nd Respondent from evicting, auctioning, trespassing, advertising or in any way interfering with suit property occupied by the Tenant/Applicant, pending the hearing and determination of this Application.c.That in the alternative this Honourable tribunal be pleased to prohibit the 1st, 2nd and 3rd Respondents from evicting, auctioneering, trespassing, advertising, or in any way interfering with suit property occupied by the tenant/applicant, pending the hearing and determination of this Application.d.That an order is issued to the officer commanding Thika Police Station to assist in compliance of the orders and ensures peace prevails.e.That the costs of the Application be provided for.

10. The Application is based on the grounds that the Applicant is a controlled tenant facing eviction from the suit premises by the Landlord. The Applicant asserts that there are no rent arrears owed to the Landlord and that all tenant obligations have been consistently fulfilled.

11. It came to the Applicant's attention that an intended sale of the suit premises is imminent. The Applicant claims to have made improvements to the suit premises, and if the sale occurs, the Applicant stands to suffer irreparable loss that cannot be compensated. The Applicant contends that the business, which is a source of livelihood, will be lost if the injunction is not granted. Furthermore, the Applicant argues that the 2nd Respondent, who intends to carry out the sale, has no connection with the Tenant.

12. On 8th December 2024, the 2nd Respondent filed a Notice of Preliminary Objection against the hearing of the main suit as well as the Application dated 3rd December 2024 and prayed for the Tribunal to dismiss the two in limine with costs.

13. The preliminary objection was based on the grounds that the tribunal lacks jurisdiction to entertain the suit and application, as the subject tenancy does not constitute a controlled tenancy under the Landlord and Tenant (Shops, Hotel, Catering Establishments) Act Chapter 301 (‘the Act’). The 2nd Respondent is neither a landlord nor a tenant within the definition of the Act, and therefore, the current action does not relate to any relevant action on its part that would confer jurisdiction to the Honourable Tribunal. The suit and application seek to challenge the exercise of statutory power of sale by a legal charge under the Land Act and Land Registration Act, which falls outside the jurisdiction of the Honourable tribunal. Consequently, the suit and application are an abuse of the law and should be struck out with costs.

14. The parties took the direction of the court to dispose of the preliminary objection by way of written submissions to which both parties complied.

15. In their written submissions, the Tenant contends that the 2nd Respondent is unlawfully attempting to exercise its power of sale over the property owned by the 1st Respondent/Landlord, the chargor, thereby affecting the Tenant's occupation and tenancy. The Tenant asserts that the Tribunal should exercise its jurisdiction to intervene in the matter, claiming that their rights as a tenant are being infringed upon.

16. The 2nd Respondent, on the other hand, contends that the matter before the Tribunal falls outside the scope of its jurisdiction and should be addressed by a court of competent jurisdiction in the context of the chargee’s right to exercise a statutory power of sale under the provisions of the law, specifically the applicable provisions of the Land Registration Act and the Land Act.

C. List of Issues for Determination 17. In full consideration of the Preliminary Objection raised by the 2nd Respondent, the main issue arising for determination is:-a.Whether the Tribunal has jurisdiction to hear and determine a dispute involving the exercise of a chargee’s statutory power of sale over property occupied by a tenant, where the landlord is a chargor who defaulted on the loan secured by the property?

D. Analysis and Findings 18. Jurisdiction is a fundamental issue that must be determined once it is challenged. The Tribunal must ascertain its jurisdiction before proceeding with any further action in the matter. If it is found that jurisdiction is lacking, the Tribunal must immediately cease its proceedings. This was the position held in the case of Owners of the Motor Vessel ‘Lillian” (s) v Caltex Oil (Kenya) Ltd [1989] KLR1, which the Court stated as follows:‘Jurisdiction is everything. Without it, a court has no power to make one more step. Where a court had no jurisdiction, there would be no basis for a continuation of proceedings pending other evidence. A court of law downs tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction.’

19. The jurisdiction of this Tribunal is established under the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act, Chapter 301 of the Laws of Kenya (the 'Act'). This Act empowers the Tribunal to adjudicate disputes between landlords and tenants concerning business premises classified as controlled tenancies. Such disputes may include matters relating to rent, lease agreements, and tenant occupation rights.

20. To that end, it is clear that the Tribunal’s jurisdiction is limited to disputes arising between landlords and tenants. It does not extend to disputes involving third parties, such as chargees, in matters concerning the exercise of a statutory power of sale over the property.

21. The provisions of the Land Act and the Land Registration Act govern the exercise of the statutory power of sale by the chargee. Specifically, the chargee is permitted to sell the property in the event of default by the chargor, and such sale may affect the rights of the tenant in the property.

22. The Tribunal does not have the authority to intervene in or adjudicate disputes concerning the validity of a chargee’s exercise of the statutory power of sale. The statutory power of sale is a matter that falls within the jurisdiction of the Magistrates Courts or High Court, subject to pecuniary and/ or geographical jurisdiction considerations, which Courts are clothed with authority to interpret and enforce the terms of the loan agreement, the charge, and the legal rights of the parties.

23. This position was affirmed in the case of Co-operative Bank of Kenya Limited v Patrick Kangethe Njuguna [2017] KECA 79 (KLR), where the Court of Appeal held that disputes involving the exercise of statutory power of sale by a bank fall outside the jurisdiction of Environment and Land Court. The court emphasized that such matters are to be handled by the High Court, as they pertain to land transactions and the enforcement of security interests. The case does infer a limit the of jurisdiction of the Business Premises Rent Tribunal in handling disputes related to the exercise of statutory power of sale.

24. In the case of Bank of Africa Kenya Limited & another v TSS Investment Limited & 2 others (Civil Appeal E055 of 2022) [2024] KECA 410 (KLR) the learned judges in determining whether the Environment and Land Court had jurisdiction to determine a dispute involving an injunction sought to prevent the exercise of a charges statutory power of sale held that;-“We form this view taking to mind this Court’s decision in the afore-cited case of Co-operative Bank of Kenya Limited v Patrick Kangethe Njuguna & 5 others (supra) where it was held that the ELC only has jurisdiction to deal with disputes connected to “use” of land and contracts incidental to the “use” of land, which do not include mortgages, charges, collection of dues and rents which fall within the civil jurisdiction of the High Court. Moreover, a charge is a disposition that has no direct contractual relation to “use” (by a tenant or licensee) as in this case, of a chargor’s land. In view of the foregoing, we agree with learned counsel for the appellants that the learned Judge had no jurisdiction to entertain the respondents’ suit as pleaded.”

25. While the tenant's right to occupy the premises is protected under Cap 301, this does not extend to preventing a chargee from exercising its statutory power of sale. The tenant’s remedy, if affected by the sale, would typically lie in seeking protection under tenancy laws for preservation of their tenancy upon such sale or through seeking compensation for any loss or damage caused by the sale. The Tribunal may have jurisdiction if the tenant's claim is limited to issues such as the status of the tenancy after the sale, the manner in which the sale affects the tenant’s occupation rights, or if the tenant seeks to address any illegalities affecting their occupation post-sale.

26. From the foregoing, I am persuaded that any case involving the exercise of statutory power of sale cannot be entertained by this Tribunal as it falls outside the scope of the tribunal's specialized jurisdiction.

27. In light of the above I proceed to order as follows;- E. Ordersa.The 2nd Respondents’ Preliminary Objection dated 8th December 2024 is hereby upheld.b.The Tenant’s Complaint and Application dated 3rd December 2024 are hereby struck out.c.Costs are awarded to the 2nd Respondent.d.File is marked as closed.

HON P. KITUR - MEMBERBUSINESS PREMISES RENT TRIBUNALRULING DATED, SIGNED AND DELIVERED VIRTUALLY BY HON P. KITUR THIS 8TH DAY OF JANUARY 2025In the presence of Gichangi for the 2nd Respondent, Njuguna Holding brief for Ms Muhia for the Tenant and in the absence of the Landlord and 3rd Respondent.HON P. KITUR - MEMBERBUSINESS PREMISES RENT TRIBUNAL