Terer & another v I & M Bank Limited & 3 others (Civil Appeal 37 of 2020) [2026] KEHC 11160 (KLR) (22 May 2026) (Judgment)

**REPUBLIC OF KENYA** **IN THE HIGH COURT OF KENYA AT ELDORET** **CIVIL CASE NO. 37 OF 2020** ***(******Formerly ELDORET*** ***ENVIRONMENT & LAND COURT CASE NO. 94 OF 2020)*** **RICHARD TERER…………………………......................................................1ST PLAINTIFF** **ALICE CHEBOR TERER………………………….........................................2ND PLAINTIFF** **VERSUS** **I & M BANK LIMITED…………...…………………………………………1ST DEFENDANT** **SILAS KIPTOO KIBII…………...………………………………………….2ND DEFENDANT** **KAPRU LIMITED…………...……………………………………………...3RD DEFENDANT** **ADVENT VALUERS LIMITED…………...……………………………….4TH DEFENDANT** **JUDGMENT** 1. As the title indicates, this matter was initially filed at the **Environment & Land Court** before it was transferred to this Court. The suit was commenced by way of the Plaint dated 26/10/2020, filed through **Messrs Morgan Omusundi Law Firm Advocates**, whereof the Plaintiffs initially sued only the 1st Defendant. The Plaint was however subsequently amended on 7/12/2020, through the Plaintiffs’ new Lawyers, **Messrs Sala and Mudany Advocates** and the rest of the Defendants added. The prayers now presented are as follows: 2. A declaration that the sale and/or the purported sale of 14/10/2020 and/or or any sale have been conducted by forced sale or in any adverse way to the detriment of the Plaintiffs be declared null and void ***ab initio***. 3. The Honourable Court be pleased to grant an order of injunction restraining the Defendant whether by itself, agents, auctioneers and/or any of them or otherwise from trespassing, alienating, taking possession, from evicting and/or dispossessing the Plaintiff’s further of that parcel, namely, parcel of land, **Eldoret Municipality/Block 133/514 & 515**, and/or exercising its equity of redemption 4. An injunction restraining the Defendant from clogging or letting the Plaintiffs’ right of redemption to redeem their property **Eldoret Municipality/Block 133/514 & 515** and/or exercising equity of redemption. 5. An order that the Defendants to pay the Plaintiffs the difference between the price of the 1st valuation being Kshs 42,500,000 and Kshs 17,000,000 which was the auction price for the suit property, with interest from the date of sale until payment in full. 6. Damages to the Plaintiffs. 7. Costs of this suit. 8. Any other relief this Honourable Court deems fit and just to grant. 9. In the body of the Plaint, it was pleaded that the Plaintiffs were the registered owners of the said two properties, that the 1st Defendant agreed to grant to the Plaintiff a loan/credit facility to the extent of Kshs 16,000,000/-, and as security thereof, the Plaintiffs surrendered the title documents for the properties. It was pleaded further that the Plaintiffs have made payments on the loan but despite that, the 1st Defendant still persists in demanding extravagant and inflated figures without rendering statements of accounts, and that the Plaintiffs are in occupation of the properties. It was urged that on or about 23/10/2020, the Plaintiffs received a letter from the 1st Defendant alleging that it had sold the properties through public auction on 14/10/2020, to the 2nd and 3rd Defendants at what, according to the Plaintiffs, was an undervalued price based on a Valuation made by the 4th Defendant. It was then contended that the 1st Valuation made by **L.G. Ringera Valuers** and served upon the Plaintiffs as part of the Notification of Sale had valued the properties at Kshs 42,500,000/- as the open market value, and Kshs 32,500,000/- as forced sale value, but the 2nd Valuation made by the 4th Defendant undervalued the properties at Kshs 30,000,000/- as the open market value and Kshs 22,500,000/- as forced sale price. According to the Plaintiffs, the sale was conducted fraudulently and secretly without complying with legal procedures and formalities. Particulars of fraud were then particularized and which included failing and/or neglecting to off-set the loan when it had been agreed that proceeds from the sale would off-set the loan, and failing to serve the Plaintiffs with a statutory notice of intention to proceed with the auction, failing to issue a notice requiring the Plaintiffs to pay up or the auction to proceed. It was also pleaded that it is the Plaintiffs who have paid all rents, licences and rates due on the properties, and that the 1st Defendant is charging “unagreed” and unauthorized interest together with other exorbitant unexplained charges thereby clogging the Plaintiffs’ equity of redemption. 1. In response to the Amended Plaint, the 1st Defendant, through **Messrs G&A Advocates LLP**, filed the Amended Statement of Defence dated 13/05/2022, in which it was pleaded that the Plaintiff failed to service the loan, that the public auction was conducted openly, procedurally and in strict compliance with the law, and which auction was occasioned by the Plaintiffs’ breach in servicing the loan. Particulars of breach were then listed and which included failing to service the loan of Kshs 16,000,000/-, failing to pay the monthly instalments of Kshs 214,503.77, permitting the loan account to fall into arrears of Kshs 1,090,588.77 as at 14/06/2019, failing to remedy defaults despite being served with the 90 days and 40 days statutory demands, respectively, and also the 45 days Redemption Notice. The allegation that the 1st Defendant levied unauthorized interest, charges and penalties on the loan was also denied. The 1st Defendant then pleaded a Counterclaim in which it was stated that the loan facility was secured by a Charge registered on 29/10/2014 over the two properties, that upon for a restructure thereof, the 1st Defendant issued the Plaintiffs with the Letter of Offer dated 23/04/2018 which contained the term that the 1st Defendant would continue to hold a Charge of Kshs 15,596,000/- over the properties, and that the Plaintiffs would service the loan facility by monthly instalments of Kshs 214,503/-. It was pleaded that however, in or about the year 2019, the Plaintiffs defaulted on the loan repayments upon which the 1st Defendant began the process of realizing its statutory power of sale, that upon the 1st Defendant’s instructions given on 6/10/2020, the 4th Defendant as Auctioneers, prepared the Valuation Report dated 9/10/2020 which indicated the open market value for the properties to be Kshs 30,000,000/-, and forced value as 22,500,000/-. It was pleaded further that upon the 1st Defendant’s further instructions given by way of the letter dated 28/11/2019, **Messrs View Line Auctioneers** issued to the Plaintiffs a Redemption Notice and a Notification of Sale. It was contended that the Auctioneers thereafter made several unsuccessful attempts to dispose of the properties but failed to attract favourable bids, that the 1st auction conducted on 3/03/2020 attracted one bid for Kshs 12,000,000/-, the 2nd which was conducted on 29/07/2020 did not attract any bids, and the 3rd which was conducted on 3/09/2020, attracted a bid for Kshs 5,000,000/-. It was contended further that in the 4th auction conducted on 13/10/2020, the 2nd Defendant, as the highest bidder, finally purchased the properties at Kshs 17,000,000/-, that the 2nd Defendant paid a deposit of Kshs 4,250,000 at the fall of the hammer and paid the balance of Kshs 12,750,000/- on 22/10/2020. It was asserted that although the Plaintiffs made payments of Kshs 1,940,000/- on 14/10/2020, Kshs 508,000,000/- on 16/10/2020, and Kshs 12,750,000/- on 22/10/2020, the Plaintiffs remained indebted to the 1st Defendant and as at 6/05/2022, had a debit balance of Kshs 5,650,212.93, which is yet to be settled. The 1st Defendant therefore prayed for Judgment in the Counterclaim as follows: 1. The Plaintiffs’ suit be dismissed in its entirety. 2. Judgment be entered in favour of the 1st Defendant for the cumulative amount of Kshs 5,650,212.93 3. Interest on (b) above at Court rates. 4. Costs of this suit. 5. Any other relief this Honourable Court deems fit and just to grant. 2. The 2nd and 3rd Defendants, through **Messrs Mburu Maina & Co. Advocates**, filed the joint Amended Statement of Defence dated 14/02/2022, in which it was averred that the Plaintiffs’ ownership of the properties became extinguished at the fall of the hammer during the public auction conducted on 13/10/2020 and the 3rd Defendant is now the registered and legal proprietor thereof having acquired its interests from the 2nd Defendant who purchased the same at the auction. It was averred that the properties were regularly and legally sold at the public auction as a result of the Plaintiffs’ default in servicing the loan, and that the acquisition of the properties was without any knowledge of any fraud or illegality. The 2nd and 3rd Defendants then jointly pleaded a Counterclaim in which it was pleaded that the 2nd Defendant, on or about 28/09/2018, through an advertisement made by the 1st Defendant’s agent, came to learn of the impending public auction of the properties and decided to participate therein, that the 2nd Defendant attended the public auction and was declared the highest bidder for an amount of Kshs 17,000,000/- and a Certificate of Sale and Memorandum of Sale between him and the 1st Defendant’s agent, **Messrs View Line Auctioneers** made, that the 2nd Defendant then paid the bid price and subsequently, after an expression of interest by the 3rd Respondent, after the purchase, the 2nd and the 3rd Defendants entered into a private arrangement between themselves wherein the 3rd Defendant acquired the properties from the 2nd Defendant for valuable consideration, after which the property was transferred and registered in the name of the 3rd Defendant. It was contended further that the Plaintiffs have been reluctant in handing over vacant possession of the whole of the properties and have adamantly insisted on retaining forceful occupation of the main house leaving only the rest of the houses to the 3rd Defendant, which action continues to subject the 3rd Defendant to financial loss. For this reason, Judgment was sought in the Counterclaim against the Plaintiffs as follows: 3. An order of eviction of the Plaintiffs together with their agents, servants or any other person acting on their behalf from the suit premises known as **L.R Nos.** **Eldoret Municipality Block** **13/514** & **Eldoret Municipality Block 13/515**. 4. An order of permanent injunction restraining the Plaintiffs together with their agents, servants and/or any employees from trespassing, entering, alienating and/or interfering with the suit properties known as L.R. Nos. **Eldoret Municipality/Block 13/514 & 515**, in any other manner. 5. General damages and mesne profits. 6. Costs of the Plaintiffs’ suit and the Counterclaim herein. 7. Interest on prayers (c) & (d) above at Court rates. 8. Any such further and/or other reliefs as this Honourable Court deems fit. 9. The 4th Defendant, also through **Messrs G&A Advocates LLP**, filed the Statement of Defence dated 20/07/2022, in which it was pleaded that the 4th Defendant received instructions on 6/10/2020 from the 1st Defendant, to carry out valuation of the two properties and thereafter prepare a Valuation Report. It was pleaded that the specific instructions were to provide the market value, mortgage value, forced sale value and the insurance value, that the 4th Defendant inspected the premises on 7/10/2020 and valued the same on “***as is basis***” as at 9/10/2020 at the market value of Kshs 30,000,000/-, mortgage value of Kshs 25,000,000/-, and forced sale value of Kshs 22,500,000/-. He testified that the 4th Defendant then prepared the Valuation Report dated 9/10/2020 and presented it to the 1st Defendant. He denied that the 4th Defendant undervalued the properties and insisted that the valuation was carried out in conformity with applicable and relevant professional local and international Valuation Manuals. 10. The parties also filed respective Witness Statements, which basically reiterated the positions advanced in the Plaint and the Defences as already set out. They also filed respective bundle of documents. The trial of the case then commenced before me on 19/02/2024 and lasted until 31/10/2025 when it was closed. At the trial, the Plaintiffs called 3 witnesses, while each one of the 4 Defendants called 1 witness. **Plaintiff’s Witnesses’ Testimony** 1. The 2nd Plaintiff,testifying as **PW1**,led by her Counsel, **Mr. Sala**, adopted her Witness Statements, which was basically a restatement of the contents of the Plaint, and also produced the several documents contained in the Plaintiffs’ respective bundles of documents. She testified that the 1st Plaintiff is her husband. Regarding the 1st Valuation Report prepared by **Messrs Chrisca Real Estates Ltd**, she testified that the valuers went to their house and involved the Plaintiffs fully and even shared the Report. Regarding the Report prepared by **Messrs Advent Valuers**, she testified that they only learnt of it after the properties were disposed of, and that it was prepared less than 1 year later. She reiterated that the 1st Report estimated the value of the properties at about Kshs 42,000,000/- while the latter estimated it at Kshs 30,000,000/-, a depreciation of Kshs 12,000,000/- in less than 1 year. She stated that they were not objecting to the sale as they had become financially unstable because her husband (1st Plaintiff) lost his job after about 9 months of taking the loan, although they had a purchaser who was willing to buy the properties at Kshs 35,000,000/-. A position known to the 1st Defendant but she agreed that they had not yet introduced the potential purchaser to the 1st Defendant. She agreed that they received the statutory notice, and also the Redemption notice, but testified that by that time, they had already settled a big chunk of the loan and only a balance of about Kshs 6,000/- was remaining. She then testified that they were up to date with their instalments at that time but later on, again, defaulted and thus allowed the 1st Defendant to sell the property because they did not have any money. She insisted that they were never notified of the latter Valuation Report, that the auction was never advertised, that the last time they were supplied with a loan statement was around January 2020, and the auction was conducted in October 2020. She contended that they are questioning the process of disposal of the properties since they were not involved or notified even after the auction, and were, instead, unceremoniously evicted. 2. Under cross-examination by **Mr. R.G. Mwangi**, Counsel for the 1st Defendant, she agreed that they were advanced a loan of Kshs 15,596,000/- for which they offered the two properties as security, which they understood would be sold if they defaulted, and that they owed arrears of about Kshs 1,200,000/- by the time that the auction took place but that the total balance was about Kshs 13,000,000/-. Regarding the two statements produced by the 1st Defendant, she stated that she only saw them in documents filed in this suit as they had not been given any statements by the 1st Defendant despite their demands, and that the last statements she received were for around March 2020. She then asserted that they made some payments around that time but the same are not captured in the statements produced. She however agreed that the statements she had herself produced were supplied to the Plaintiffs by the 1st Defendant. Regarding the potential purchaser she referred to, she insisted that the 1st Defendant was aware by way of verbal communication and that there was nothing in writing. She agreed that the Valuation Report prepared by **Highland Valuers** indicates that it was commissioned by the Plaintiffs, and stated that the potential purchaser, one **Naomi Tarus**, also commissioned a valuation whose Report she however agreed has not been produced in evidence. She also agreed that around July 2019, and also by the 1st Defendant’s letter dated 8/10/2019, they were informed that they were in default, and also that they participated in all the 3 auctions as they were informed by the 1st Defendant’s Relationship Manager, and also by the Auctioneers, and that they never made any bids as they were mere observers, and they also did not have money. Regarding the 4th auction however, she denied participating in it but agreed that they owed the 1st Defendant at that time, about Kshs 13,000,000/-. She agreed that the 1st, 2nd and 3rd auctions did not attract any suitable bidders because it was around the time of the COVD pandemic. She insisted that they did not owe any debt after the auction was conducted. 3. Under cross-examination by **Mr. Lagat**, Counsel for the 2nd and 3rd Defendants, she denied receipt of the letter/notice dated 1/07/2019 about the scheduled 3rd auction but agreed that she received a phone call from the 1st Defendant informing her of the auction on the same day it took place. She confirmed that her postal address is **2897 Eldoret**, and also that she had no objection to the sale. She further agreed that the loan awas in arrears at the time of the auction, but insisted that she never saw any advert. She then claimed that the 2nd Defendant was either an employee of the 1st Defendant or its representative. Asked from where she derived this information, she stated that it was in the public domain and used to be in the 1st Defendant’s website but has since been removed. She also claimed that the 2nd Defendant is a Lawyer representing the 1st Defendant and thus had a relationship with the 1st Defendant. She claimed further that the purchaser only paid Kshs 4,000,000/- and the balance of Kshs 12,000,000/- was paid by the 4th Defendant as the payment was Kshs 16,000,000/- but that the total amount exchanged was in fact Kshs 19,000,000/-. She also agreed that their eviction was effected by the 4th Defendant and that although they reported the eviction to the police, no one was found culpable or charged in Court. She denied that they voluntarily vacated and insisted that they were forcefully evicted on 10/12/2020, and that she did not know that both properties had been sold. She contended that although she is aware that the 1st Defendant conducted 3 unsuccessful auctions, she has a problem with the process by which the sale was conducted, and the amount that the properties were sold for. In re-examination, she reiterated that she does not deny that the loan was in default nor that she was notified of the 1st, 2nd and 3rd auctions but insisted that her problem is with the process used to sell the property at the auction, and also that no advertisement of the auction was made. She asserted that she only learnt of the auction on 17/10/2020, 4 days after it had taken place on 13/10/2020, and that it was not until 23/10/2020 that the 1st Defendant issued written communication, and even then, only after the Plaintiffs had gone to the 1st Defendant to inquire. 4. **PW2** was **Gerald Kiptoo Ruto** who introduced himself as a Valuer at **Highland Valuers** Eldoret Branch. He stated that upon the 1st Defendant’s instructions, they prepared the Valuation Report dated 30/08/2019 by which they found the market value of the properties to be Kshs 36,000,000/-. Under cross-examination by **Mr. Robert Mwangi**, he stated that he is the one who conducted the valuation and inspected the properties, and that the valuation was for sale purposes only as per their instructions, since the purpose of the valuation determines the value. He also agreed that he was aware that the properties were at that time charged with the 1st Defendant, the instructing client. He explained that the basis of the valuation was the market value, which is the price that the property could be exchanged for between a willing seller and willing buyer. He stated that he used the Replacement Cost method and the Comparable Sales approach which were the most applicable methods in this case since the properties were residential in nature, and that the fact that the properties were charged as collateral would not change the method he applied, but he would have only used the Comparable method, and not the Replacement method if the properties were vacant. He however agreed that there were ongoing developments, almost complete, in the properties with only about 5% to go. He stated that he valued each of the two properties at Kshs 6,000,000/-, and that valuation is based on comparable values of similar properties, figures which valuers normally obtain from land agents and transactions conducted at the Lands Registries. He insisted that in his valuation, he factored the existing developments in the properties, including the servant quarters, swimming pool, fencing, maisonette, site works and gates, and that he also used the building rates that are normally supplied by Quantity Surveyors. Under cross-examination by **Mr. Lagat**, he basically reiterated matters he had already stated. 5. **PW3** was **Pius Isaiah Khaoya**, who introduced himself as a Registered Valuer practicing under the name and style of **Chrisca Real Estates** and testified that he prepared the Valuation Report dated 20/11/2019, under instructions of the 1st Defendant. He testified that he personally carried out the valuation and confirmed that there are developments on the properties almost 75% completed, and which developments included a swimming pool, fence and gate. He testified that the open market value of each of the properties is Kshs 10,000,000/- each, and that he was not aware that other valuations made in this case 3 months earlier had placed the same at lesser figures as he had not seen those other Valuation Reports, and that he was aware that the properties were charged with the 1st Defendant. Under cross-examination by **Mr. Lagat**, he agreed that although the COVID-19 pandemic was in place around 2020 and affected the economy, it emerged around December 2020 after he had already concluded his valuation. He however agreed that the lesser values estimated by the other Valuers could be attributable to the pandemic. In re-examination, he testified that the property is situated in the **Elgon View** locality, a prime area where one could not get such property size for less than Kshs 6,000,000/-. He insisted that in 2019, the value was Kshs 10,000,000/- even if the economy was affected, and also stated that even now, the value cannot be less than Kshs 10,000,000/- as it could not have shed a whole 1/3 of its value over that period. He explained that forced sale value (auction) is normally 75% of market value or a bit higher, but it cannot be less than 75% of open market value. **Defendant’s Witness Testimony** 1. **DW1**, **Andrew Muchina**, introduced himself as working at the 1st Defendant Legal Department. Led by **Mr. R.G. Mwangi**, he adopted his Witness Statement and produced the 1st Defendant’s bundle of documents. He insisted that the 1st Defendant served all statutory notices upon the Plaintiffs by registered post via the address, **P.O. Box No. 2897-30100 Eldoret**, and he referred the Court to the copies he produced as well as the certificates of postage. He also denied that they undervalued the properties and drew the Court’s attention to the Valuation Reports he produced, which, according to him, which indicated that the market value was Kshs 30,000,000/- and the forced sale value was Kshs 22,500,000/-. He also insisted that the Notification of Sale and Redemption Notices were all served as indicated by the copies he produced. He then confirmed that they sold the properties to the 2nd Defendant at Kshs 17,000,000/-, which he described as the highest bid, and stated that this was the 4th auction attempt. For confirmation of the first 3 unsuccessful attempts, he referred the Court to the documents produced and reiterated that in the 1st attempt conducted on 3/03/2020, they received a bid for Kshs 12,000,000/-, and that they did not receive any bid for the 2nd and 3rd attempts conducted on 30/03/2020 and 29/07/2024, respectively. He confirmed that the properties were sold for Kshs 17,000,000/- on 13/10/2020. Under cross-examination by **Mr. Terer**, who was holding brief for **Mr. Lagat**, he stated that the Auctioneers’ Notices were served physically. He also stated that the 3rd Defendant was named as the 2nd Defendant’s nominee Under cross-examination by **Mr. Sala**, he stated that the 3rd Defendant did not participate in the auction and was only later named as the 2nd Defendant’s nominee-transferee. 2. He also denied that the 2nd Defendant was in the 1st Defendant’s panel of Advocates, and stated that he does not even know whether he is an Advocate, or even know his law firm, if any. However, upon being pressed further, he agreed that he could not confirm that the 2nd Defendant was not in the panel. He agreed that at an auction, it is the Auctioneer who accepts a bid, not the bank instructing him. He insisted that the auction was advertised but agreed that he did not have a copy of the newspaper advert. He also agreed that although 4 auction attempts were conducted, the statutory notices on record are for only one auction, and also that there is no evidence to show that the Plaintiffs were made aware of the scheduled auctions, and also that he did not produce the 1st Defendant’s letter giving instructions to the Auctioneer. He also agreed that by law, an Auctioneer is to be instructed within 14 days of an auction, and that the Valuation Report relied upon is dated 9/10/2020, and also that this was more than 10 days after the Auctioneer had been instructed since the auction was conducted on 13/10/2020. He also agreed that 9/10/2020 was a Friday and the date of the auction, 13/10/2020, was a Tuesday, and that therefore, considering that there was an intervening weekend and also the Moi day public holiday, there was only 1 working day, 12/10/2020, in between. He also agreed that the property was sold at Kshs 5,500,000/- less than the forced sale value of Kshs 22,500,000/-, that 75% thereof is about Kshs 16,950,000/- and they sold at Kshs 17,000,000/-, a difference of Kshs 50,000/-, and that under **Section 97** of the **Land Act**, no forced sale should be made at less than 75% of such forced value. Regarding the absence of fresh notices served for each new scheduled auction, he stated that the law does not require service of fresh notices. He stated that 5 different advertisements were published for each attempted auction but agreed that he did not produce a single advertisement in evidence, and also that there is no evidence that the Plaintiffs were made aware of the auctions. He then stated that he could not confirm whether the Valuation Report made by the 4th Defendant bore the company seal, and also whether the valuer accessed and inspected the properties or whether it was simply a “drive-by” valuation. He insisted that the auction was actually conducted outside the but also agreed that he did not produce a schedule of the people who attended the auction. He also agreed that the sale document does not mention the bank as the seller but maintained that the 2nd Defendant who bought it at the auction was at liberty to appoint any person as his nominee, and in this case, the 2nd named the 3rd Defendant as such nominee. He however agreed that the bank as the seller would have had to give consent for the transfer to the nominee. He also agreed that for the purchase, an aggregate sum of Kshs 16,500,000/-was paid in 3 instalments of Kshs 4,250,000/- on 14/10/2020, Kshs 12,250,000/- on 22/10/2020, and the last one for Kshs 500,000/- but he could not tell who paid that final balance of Kshs 500,000/- made by cheque. In re-examination, he listed the respective dates when each of the respective auction attempts was made. 3. **DW2** was **Timothy Saruni**, who introduced himself as a Registered Valuer and director of the 4th Defendant, **Advent Valuers**. Also led by **Mr. R.G. Mwangi**, he testified that the 4th Defendant was instructed by the 1st Defendant to carry out a valuation of the properties, upon which he prepared the Valuation Report dated 9/10/2020, which he then produced. Under cross-examination by **Mr. Sala**, he stated that he received instructions on 6/10/2020 to carry out the valuation and he inspected the property on 7/10/2020. He agreed that he did not notify the Plaintiffs of the inspection as there was no duty to do so, and confirmed that the Plaintiffs did not participate in the inspection. He confirmed that he valued the properties at Kshs 30,000,000/- but he is aware that **Chrisca Valuers** had valued it at Kshs 42,500,000/-. He stated that appreciation and depreciation of property is a normal occurrence, and that he could not comment on the question whether property of the nature and size (0.25 acres) as those the subject of this case can attract a purchase price of Kshs 17,000,000/- within the **Elgon View** locality. In re-examination, he stated that the Valuation Report by **Chrisca Valuers**, differs from his perhaps because its timing was different from his own, and may have had an impact because the one by **Chrisca Valuers** was prepared during the COVID-19 period when selling properties was not easy. He also observed that it could be because of the stage of completion of the developments made in the properties since his valuation was carried out when the developments were at about 85% complete while the one by **Chrisca Valuers** was conducted when they were at about 75%. 4. **DW3** was **Silas Kiptoo Kibii**, the 2nd Defendant, who introduced himself as an Advocate. Led by his Counsel, **Mr. Lagat**, he adopted his Witness Statement and produced his bundle of documents. He then testified that he learnt of the public auction from a newspaper advertisement, and denied that he colluded with others to defraud the Plaintiffs of the properties, or that he had ever worked with the 1st Defendant. He stated that he sold the property to the 3rd Defendant which he is not related to in any way, and he is thus no longer the owner. Under cross-examination by **Mr. R.G. Mwangi**, he denied ever being in the 1st Defendant’s panel of Advocates. He also insisted that he is one who paid the purchase price, and that his bid of Kshs 17,000,000/- at the auction was accepted and he was declared the highest bidder. He also maintained that he was personally present at the auction. Under cross-examination by **Mr. Sala**, he stated he has abandoned the prayer for eviction of the Plaintiffs as sought in his Counterclaim since the 3rd Defendant is now in possession. He however insisted that he still pursues the rest of his prayers. He stated that he does not know whether the 4th Defendant was at the auction nor the existence of any forced sale value. He insisted that he paid the purchase price, that he paid the deposit on 13/10/2020 which may however only reflected on 14/10/2020, and paid the balance on 21/10/2020. He also agreed that he has never been registered as owner of the properties, that the sale agreement is dated 20/10/2020, which he entered into under a purchaser’s interest, that he sold the properties on 20/10/2020 to the 3rd Defendant before he (2nd Defendant) had paid the balance to the 1st Defendant, that the 1st Defendant did not sign the Sale Agreement, nor was it aware of the same, and that while he purchased the properties at Kshs 17,000,000/-, he sold them at Kshs 17,500,000/-. In re-examination, he stated that he did not obtain the Plaintiffs’ consent to the sale arrangement between himself and the 3rd Defendant, contending that the Plaintiffs’ interests could not override his purchaser’s interest. 5. **DW4**, **Lyn Ashley Toroitich**, introduced herself as a director of the 3rd Defendant. Led by **Mr. Langat**, she, too, adopted her Witness Statement and produced the exhibits contained in her bundle of documents, including a newspaper advertisement, land sale and transfer documents, and Certificates of Lease indicating purchase and transfer of the properties to the 3rd Defendant. She stated that the 3rd Defendant is now in possession and she therefore no longer seeks the orders for eviction of the Plaintiffs as prayed in the Counterclaim but still seeks the order for permanent injunction. Under cross-examination by **Mr. R.G. Mwangi**, she denied that the 3rd Defendant participated in the auction and insisted that they only subsequently purchased the properties from the 2nd Defendant. Under cross-examination by **Mr. Sala**, she agreed that she did not produce company resolutions authorizing the purchase, and stated that at the time of purchasing the properties, they had no knowledge whether the 2nd Defendant had paid the full purchase price, and that they did not carry out a search to ascertain ownership, and learnt about availability of the properties from a newspaper advertisement. She then stated that the search they carried out was at the time of paying the purchase price although she had not produced a copy thereof. She agreed that the 3rd Defendant never entered into any separate agreement with the 1st Defendant, and also that the Governor, Uasin Gishu County, is their current tenant in the properties. In re-examination, she stated that they learnt that the 2nd Defendant had already purchased the properties at the auction and they approached him to re-sell to them. In response to questions from the Court, she stated that they did not know the 2nd Defendant earlier, and only got to know him when they approached him for the re-sale. She then revealed that the search they conducted still indicated the Plaintiffs as the registered owners as at that time and the 1st Defendant as chargee, and thus agreed that the 2nd Defendant had not yet been registered as owner. She therefore agreed that paying purchase price to the 2nd Defendant was a risk. Regarding the auction, she stated that they did send a representative but by the time he reached there, the 2nd Defendant had already been declared the highest bidder, and that is why they approached him. 6. At the close of the trial, the parties filed written Submissions. The Plaintiff’s Submissions is dated 13/11/2025, while the 1st and 4th Defendant’s joint Submissions is dated 18/01/2026, and the 2nd and 3rd Defendant’s joint Submissions is dated 25/11/2026. **Plaintiff’s Submissions** 1. **Mr. Sala**, Counsel for the Plaintiffs, after narrating the background of the case and recounting the Plaintiffs’ case, reiterated that the 1st Defendant sold the properties at the auction at Kshs 17,000,000/- despite a forced sale value of Kshs 22,500,000/- as per the bank’s own valuer, the 4th Defendant. He pointed out that earlier valuation conducted by **Chrisca Valuers**, as appears in the Report dated 20/11/2019, placed the forced sale value at Kshs 32,000,000/-, and the open market value at Kshs 42,500,000/-, and that it is instructive to note that at the time of the sale, the Plaintiffs had paid more than Kshs 12,000,000/- in repayment of the loan, and claimed that as at December 2019, the loan arrears stood at only Kshs 200,000/-. He submitted that the sale was marred by multiple procedural and substantive irregularities, violations of statutory duty, lack of proper notices, undervaluation, collusion and fraud, which render the sale and transfer void. Counsel pointed out that **Section 97(1)** of the **Land Act, 2012**, imposes a duty of care on a chargee “***to obtain the best price reasonably obtainable at the time of the sale***”, and also that **Section 97(2)** requires that a forced sale valuation of the charged property be undertaken by a registered valuer before the property, and **Section 97(3)** provides that a sale at less than 75% of the market value creates a rebuttable presumption of breach of the duty of care. According to him therefore, the purpose of **Section 97** is to ensure that the charged property is not disposed of at an undervalue to the detriment of the chargor, and to ensure transparency, accountability, and fairness in the exercise of the statutory power of sale. Counsel pointed out further that in this case, the auction took place on 13/10/2020 merely 4 days after the valuation, the property was sold at Kshs 17,000,000/- which is Kshs 5,500,000/- below the forced sale value, representing a reduction of Kshs 25% from the minimum statutory benchmark considering that earlier valuation reports show significantly higher open market values at Kshs 42,500,000/- and Kshs 36,000,000/-, respectively, and forced sale values of Kshs 32,000,000, and that no explanation has been provided as to how the value of a prime residential property in **Lower Elgon View Estate, Eldoret**, could depreciate from Kshs 42,500,000/- to Kshs 17,000,000/- in less than a year. 2. He submitted that there is no evidence that the 1st Defendant took any step to secure competitive bidding, nor was there any advertisement produced to show that the sale was publicized, and that the Plaintiffs were never served with any statutory notices as required under **Sections 90** and **96** of the **Land Act** as indicated by the 1st Defendant’s failure to produce proof of service of any such notice, nor any notification of sale as required under **Rules 15** and **16** of the **Auctioneers’ Rules, 1997** to be served to give not less than 45 days for redemption. He restated that the forced sale valuation prepared by the 4th Defendant on 9/10/2020 and relied upon by the 1st Defendant was conducted over a weekend and a public holiday, leaving no reasonable time for reliance, marketing, or redemption, and that the Plaintiffs were also not involved or notified. Regarding the depreciation of the properties from Kshs 42,500,000/- in less than 1 year, he described it as commercially implausible and indicative of a deliberately manipulated valuation to justify a grossly undervalued sale. He also faulted the 1st Defendant for allegedly making 5 auction attempts between 3/03/2020 and 13/10/2020, yet relying on a single statutory notice and proclamation for all the attempts without considering the significant change in circumstances and several months’ time lapses. On evidence of fraud and collusion, he contended that the 3rd Defendant did not participate in the auction yet the property was directly transferred to him, that the 3rd Defendant, an Advocate on the bank’s panel, according to Counsel, purportedly purchased the property at Kshs 17,000,000/- and purportedly sold it to the 3rd Defendant at Kshs 17,500,000/- only seven days later on 20/10/2020, a public holiday, and even before he paid the purchase price to the 1st Defendant, which he did on 22/10/2020. He also cited the 3rd Defendant’s witness’s admission that the 3rd Defendant did not carry out any search before and when purchasing the property noting that the seller, the 2nd Defendant, has never been the registered owner, and that the 1st Defendant, the seller, was never even mentioned in the Sale Agreement, in breach of the provisions of **Section 87(1)** of the **Land Act** which provides that charge land cannot be sold or dealt with without the chargee’s written consent, in breach of **Section 11(1)** of the **Banking Act** which provides that only licensed institutions (banks) can enforce or deal with securities they hold, and also in breach of **Section 59** of the **Land Registration Act**, which provides that titles remain unencumbered until the charge is discharged. Counsel therefore asserted that no sale on a charged security can take place until it is discharged. He also pointed out that the 3rd Defendant did not produce any company resolutions authorizing it to purchase the properties, or even allowing **DW4** to testify on its behalf. In support of his submissions, Counsel cited several authorities. **1st & 4th Defendants’ Submissions** 1. **Mr. R.G. Mwangi**, Counsel for the 1st and 4th Defendants, in his very lengthy submissions, in summary, contended that the sale was conducted strictly in accordance with the law, after the Plaintiffs admitted and persistent default, and that no illegality, impropriety or fraud has been demonstrated. He submitted that a at 30/04/2018, the outstanding amount stood at Kshs 15,734,187.86, and by 14/06/2019, the arrears alone had escalated to Kshs 1,090,588.77 with the total outstanding amount rising to Kshs 16,090,595,60, which default and figures were not controverted at the trial, and were in fact admitted by the 2nd Plaintiff, **PW1**. Counsel also contended that default was persistent and in excess of the period of 1 month thus meeting the 1-month threshold stipulated in **Section 90(1)** of the **Land Act** thus allowing the 1st Defendant to issue and serve the 14-days’ demand notice and the 90 days’ statutory notice service, receipt whereof was demonstrated and/or admitted by **PW1**, as was service of the 40 days Notification of Sale issued under **Section 96(2)** of the **Land Act**, and the 45 days Redemption Notice issued under **Rule 15(d)** of the **Auctioneers Rules**. 2. Regarding the claim that no fresh notices were served for each of 5 successive auction attempts, Counsel submitted that there is no requirement under the law for re-issuance of fresh statutory notices for every attempted auction as long as the original notices remain valid and the default persists, which was the case herein, and that these repeated auction attempts demonstrate that the sale was neither clandestine. He also asserted that the auction sale of 13/10/2020 was duly advertised and that the highest bid of Kshs 17,000,000/-was accepted, and the 1st Defendant, the successful bidder complied with the auction terms, and that a binding contract arose upon fall of the hammer and the chargee’s power of sale exhausted. Regarding the claim of undervaluation, Counsel asserted that existence of differing valuation figures does not, without more, establish under-valuation as valuation is not an exact science but an expert opinion informed by timing, market conditions, assumptions on completion, depreciation and comparable sales. According to him, in this case, the variation in figures is both explicable and reasonable since the 1st and 2nd Valuations were conducted in 2019 before the economic disruptions occasioned by the COVID-19 pandemic, and were also thus 14 months and 11 months old respectively at the time of the auction conducted on 13/10/2020, and could not therefore reasonably reflect the market conditions prevailing at that time, and that in the 3rd Valuation Report, the 4th Defendant, its author made the general remarks that although property valuers had historically risen, effective demand had significantly slackened due to economic showdown resulting in prolonged transaction periods and discounted prices. He also observed that the respective valuations each returned different verdicts on the extent of completion of the developments made in the properties observing that the 3 valuations returned verdicts of 95%, 75%, and 85% respectively, and thus illustrating that valuation opinions are inherently judgment-based and cannot be treated as definitive proof of actual value. He also submitted that none of the Valuation Reports were impeached through cross-examination, and no evidence of fraud, recklessness or bad faith was established against the valuer whose report informed the sale. Regarding the 25% sale below market value issue as provided in **Section 97(3)** of the **Land Act**, he submitted that Parliament did not outlaw sales below market value, it merely shifted the evidentiary burden to the chargee to demonstrate reasonableness. 3. Counsel also cited **Section 104** of the **Land Act** which he submitted, was enacted precisely to prevent mechanistic invalidation of sales that have otherwise been conducted in accordance with the law, and asserted that the circumstances of this case cried out for restraint in exercise of judicial intervention, and that to undo the sale herein would not vindicate the Plaintiff’s rights but would penalise compliance and substitute judicial hindsight for market reality, and that the Court is not invited to engage in retrospective price engineering, a task for which Courts are institutionally not suited for. He submitted that to hold otherwise would be to introduce paralysis into the credit market, as chargees would be left unable to realize security without fear of ***ex post facto*** invalidation based solely on price dissatisfaction. He also observed that as at 13/10/2020, the outstanding arrears had escalated to about Kshs 22,000,000/-, and that the successful bid of Kshs 17,000,000/- therefore did not extinguish the debt but left a shortfall of Kshs 5,000,000/-. He submitted that this fact is of profound significance because a charge acting in bad faith, collusion or self-interest does not voluntarily accept a loss. Regarding the allegation that the 2nd Defendant was in the 1st Defendant’s panel of Advocates, he asserted that the same was denied by the 2nd Defendant during his cross-examination, and no evidence was produced to substantiate the claim. Counsel also cited several authorities to support the various limbs of his submissions. **2nd & 3rd Defendants’ Submissions** 1. **Mr. Lagat**, Counsel for the 2nd and 3rd Defendants, submitted that the allegations of fraud or illegalities pleaded in the Plaint were never proved. Regarding the allegation of non-service of statutory notices, he submitted that service was proved and **PW1**, the 2nd Plaintiff even admitted receipt thereof during her cross-examination, who also admitted that the Plaintiffs had agreed with the 1st Defendant that the properties be sold as the Plaintiffs were no longer able to pay the loan. As proof of the Plaintiffs’ agreement to sale of the properties, he cited the fact that one of alleged particulars of fraud pleaded in the Plaint is one accusing the 1st Defendant of “***failing and/or neglecting to off-set the loan at the bank when it was agreed by the parties that proceeds from the sale was to off-set the loan***”. He also refuted the claim that the Plaintiffs’ equity of redemption was clogged by failure to issue fresh notices for each fresh auction attempt uring that the statutory power of sale had already crystallized after lapse of the 40 days’ notice. He also contended that service of the Auctioneer’s Redemption Notice and Notification of Sale were all proved, and also refuted the allegation that the sale was conducted in secrecy citing the Plaintiffs’ admission that they was served, and also proof of newspaper advertisement demonstrating that the Plaintiffs were aware of the entire process. 2. Counsel also pointed out the inconsistency in the Plaint in referring to the date of auction as 14/10/2020 when the auction was conducted on 13/10/2020 urging that parties are bound by their pleadings and by pleading an inconsistent date, the Plaintiffs proceeded with a case outside their pleadings. He further submitted that the dispute as to the value of the properties cannot negate a sale as **Section 99(4)** of the **Land Act** provides clear remedies to the Plaintiff should the Court hold that they were prejudiced. He also defended the valuation figure relied on for the auction and termed it as acceptable considering that it was confirmed by government valuation for purposes of stamp duty payment. He, too, submitted that no evidence was tendered to support the allegation that the 2nd Defendant was in the 1st Defendant’s panel of Advocates, and also defended the 2nd Defendant’s action of entering into the private treaty sale as he only disposed an interest he had as a purchaser having been declared the highest bidder at the fall of the hammer, and having complied with all terms of the auction, thus extinguishing the Plaintiffs’ rights over the properties. He submitted that as purchaser of the properties, the 3rd Defendant’s rights are protected under **Section 99(1)**, **(2)**,and **(3)** of the **Land Act** even if there were any irregularities in the events leading to sale of the property. Regarding **DW4’s** capacity to testify he referred to the authority produced as **Defendant’ Exhibit No. 28**. In conclusion, he reiterated that should the Court find that the sale was improper, then the only remedy would, under **Section 99** cited above, be an award of damages against the Auctioneer who sold the property. In support of his various limbs of submissions, he cited several authorities. **Determination** 1. **Mr. Langat**, Counsel for the 2nd and 3rd Defendants submitted that the Plaint is inconsistent as it refers to the date of the auction as 14/10/2020 when the auction was conducted on 13/10/2020, and that therefore, by pleading an inconsistent date, the Plaintiffs proceeded with a case outside their pleadings as the Plaintiffs are bound by their pleadings, I do not agree. I reject that contentions as there is no evidence that the Defendants were misled or ambushed by the wrong date of the auction pleaded in the Plaint (see the case of **Odd Jobs v Mumia [1970] EA 476**). 2. Regarding, **Mr. Sala’s** contention that the 3rd Defendant did not produce any company resolutions authorizing **DW4** to testify on its behalf, I also reject that contention as it has been brought too late in the day noting the 3rd Defendant’s List of Witnesses, and **DW4’s** Witness Statement were filed way back yet the Plaintiff never raised that objection before, not even at the pre-trial stage. 3. In view thereof, the substantive issues that now remain for determination can, in my view, be broadly summarised as follows: 1. **Whether the Plaintiffs defaulted in settling the loan the subject of this suit advanced to them by the 1st Defendant, thus according the 1st Defendant the right to exercise its statutory power of sale to recover the amount in default.** 2. **If indeed a debt owed from the Plaintiffs, whether the 1st Defendant complied with the prerequisite procedures, including serving the stipulated notices before disposing of the properties by public auction.** 3. **Whether the public auction was itself properly and lawfully conducted, whether it was advertised, and whether the properties were sold at a reasonable and/or acceptable purchase price at the auction, or at an undervalue.** 4. **What remedies should the Court grant?** 4. It is generally not in dispute that pursuant to an application for loan made by the Plaintiff, and pursuant to the restructured Letter of Offer dated 23/04/2018 issued by the 1st Defendant and accepted by the Plaintiffs, the Plaintiffs were advanced a loan of Kshs 15,596,000/-, which loan was secured by the registration of a charge over the Plaintiffs’ two parcels of land known as **Eldoret Municipality/Block 13/514** and as **Eldoret Municipality/Block 13/515**. The loan was repayable by 144 monthly instalments of Kshs 219,236/- each. It is also not in dispute that claiming that the Plaintiffs had defaulted in repayment of the loan, the 1st Defendant took steps to recover the loan. According to the 1st Defendant, the Plaintiffs were, as at 30/04/2019, barely a year after the loan was advanced, in default to the outstanding amount of Kshs 15,734,187.86, and as at 14/06/2019, the amount had escalated to Kshs 16,090,595.60. 5. Although the Plaintiffs, in their pleadings, feebly alluded that they were making payments, a position reiterated by their Counsel, **Mr. Sala**, the 2nd Plaintiff, who testified as **PW1**, expressly admitted that the Plaintiffs were in default since her husband, the 1st Plaintiff, lost his job almost immediately after the loan was advanced. She even went ahead to testify that, as a result, the Plaintiffs agreed with the 1st Defendant that the properties be sold and the proceeds thereof be used to offset the loan. 6. In view of the foregoing, I find that there is no dispute that the Plaintiffs defaulted in repaying the loan and were indeed indebted to the 1st Defendant, by reason whereof the 1st Defendant became entitled to exercise of its statutory power of sale. The Plainfffs also did not present any argument challenging the accuracy or correctness of the figures alleged by the 1st Defendant as outstanding neither did they controvert the same. For this reason, I find no reason to doubt or disbelieve the figures alleged by the 1st Defendant as outstanding. 7. In respect to the issue whether the 1st Defendant served the requisite notices, the position of the law is that in respect to the right of a lender (charge) to exercise its statutory power of sale in the event of the borrower’s default in repaying a loan, before the lender can exercise such right, the law requires it to issues notices to the borrower as follows: 8. 90 days’ statutory notice of default, pursuant to **Section 90(1)** and **(2)** of the **Land Act, 2012**. 9. 40 days’ notice of intention to sell, pursuant to **Section 96(2)** of the **Land Act, 2012**. 10. 45 days’ redemption notice pursuant to **Rule 15(d)** of the **Auctioneers’ Rules, 1997**. 11. 14 days’ notification of sale, pursuant to **Rule 25(e)** of the **Auctioneers’ Rules, 1997**. 12. In this case, although in the Plaint, the Plaintiffs alleged that they were never served with the said notices, which narrative was again pushed by their Counsel, **Mr. Sala**, in his submissions, the 2nd Plaintiff, again, testifying as **PW1**, admitted receipt of the notices. I note that indeed, copies of the exhibited notices correctly bear the postal addresses captured in the charge documents as the addresses for service submitted by the Plaintiffs, and are also supported by copies of postage receipts. The Auctioneer’s notices also bear the signatures of the recipients served. 13. Regarding the Plaintiffs’ further contention that the process was flawed because no fresh notices were served for each of 5 successive auction attempts, I agree with the defence that there is no express requirement under the law for re-issuance of fresh statutory notices for every attempted auction as long as the original notices remain valid and the default persists, which indeed was the case herein. It has not been shown that circumstances had significantly changed or positions so altered such that new notices ought to have been issued. In any case, there is no evidence that the Plaintiffs did make any repayments during the intervening period to serve as a possible change in circumstances. In fact, a careful consideration of the 2nd Plaintiff’s testimony reveals that the Plaintiffs are not really challenging the 1st Defendant’s right to exercise its statutory sale, nor do they have an issue with service of the notices. The Plaintiffs’ qualm is basically the manner in which the public auction was conducted, and particularly the allegation that the properties were deliberately sold at a gross undervalue. 14. I therefore return the verdict that the Plaintiffs were duly served with all the requisite notices before the public auction was conducted. 15. In any event, the effect of a flawed public auction sale, or sale of a charged property at an undervalue at a public auction was considered by the Court of Appeal in the recent case of **City Finance Limited & 2 others v Nyanja Holdings Limited & 3 others (Civil Appeal 224 of 2020 & E166 & E174 of 2021 (Consolidated)) [2026] KECA 106 (KLR) (30 January 2026) (Judgment)** in which it was re-affirmed thateven where irregularities in statutory notices are established, the law confines the chargor’s remedy to damages or accounting against the chargee, and does not permit the setting aside of a completed statutory sale. This is what the Court of Appeal stated: **“36. The second issue is whether the learned Judge was entitled to impeach the sale on the basis of alleged irregularities in the service or content of statutory notices.** **37. On this point, the respondents contended that no valid statutory notice had been served, and that the sale was, therefore, unlawful ab initio. They argued that failure to comply with the mandatory notice requirements deprived the Bank of the right to exercise the statutory power of sale.** **38.The appellants responded on two levels. ...................... Secondly, and more fundamentally, they submitted that even where defects in statutory notice are established, the remedy does not lie in undoing a completed sale to a protected purchaser.** **39.We agree with the appellants. ......... Beyond that, the law is clear that defects in statutory notice, even if proved, do not revive the equity of redemption or justify cancellation of a completed sale. Such defects may found a claim in damages against the chargee, but they do not entitle a Court to unravel a sale protected by statute. In Trust Bank Ltd v Eros Chemists Ltd [2000] 2 EA 550, this Court stated so in unequivocal terms:** ***“Failure to serve a valid statutory notice may give rise to a claim for damages but does not, of itself, invalidate a sale that has already taken place.”*** **40.The same position was reiterated in Gitau v National Bank of Kenya Ltd [1999] 2 EA 321, where the Court held:** ***“The only remedy available to a chargor where the statutory power of sale has been irregularly exercised is damages. The court has no jurisdiction to set aside a completed sale.”*** **41.These authorities make plain that even where irregularities in notice are established, the law confines the chargor’s remedy to damages or accounting against the chargee, and does not permit the setting aside of a completed statutory sale.”** 1. Having found as above, the elephant in the room now remains the issue whether the public auction was itself properly and lawfully conducted, whether it was advertised, and whether the properties were sold at a reasonable and/or acceptable purchase price at the auction. 2. Regarding the Plaintiffs’ claim that no copy of any advertisement was produced to show that the sale was publicized, and that the Plaintiffs were also not involved or notified about the auction, although it is true that the 1st Defendant was unable to produce any evidence of the advertisement, the 2nd Defendant did produce an extract indicated to be from the Daily Nation newspaper edition of 28/09/2020 bearing a published notice by **Viewline Auctioneers** inviting bidders to attend the public auction scheduled for 13/10/2020 outside the Post Office at Eldoret for sale of the two properties herein. There being no challenge to this newspaper advertisement, and the same not having been controverted, I have no reason to doubt its authenticity. It is therefore my finding that the public auction was duly advertised. 3. The Plaintiffs’ major contention is clearly that the 1st Defendant sold the properties at the auction at the low sale price of Kshs 17,000,000/- despite the Valuation Report relied upon giving a forced sale value of Kshs 22,500,000/-. The 3 Valuation Reports on record and the figures stated therein can be particularized follows: | | | | | | | --- | --- | --- | --- | --- | | **1.** | **Highlands Valuers** | **30/08/2019** | **Market Value** | **Kshs 36,000,000/-** | | **- - -** | **- - -** | | **2.** | **Chrisca Real Estates** | **20/11/2019** | **Market Value** | **Kshs 42,500,000/-** | | **Forced Sale Value** | **Kshs 32,000,000/-** | | **3.** | **Advent Valuers** | **9/10/2020** | **Market Value** | **Kshs 30,000,000/-** | | **Forced Sale Value** | **Kshs 22,500,000/-** | 1. In effecting the public auction sale, the 1st Defendant and/or its Auctioneers, relied on the last Valuation Report, the one prepared by **Advent Valuers** which placed the forced sale value at Kshs 22,500,000/-. As correctly pointed out by **Mr. Sala**, **Section 97(1)** of the **Land Act, 2012**, imposes a duty of care on a chargee “***to obtain the best price reasonably obtainable at the time of the sale***”, and **Section 97(3)** provides that a sale at less than 75% of the market value creates a rebuttable presumption of breach of the duty of care. 2. Having heard the witnesses, including the respective valuers, and considering that the earlier valuations conducted by **Highlands Valuers**, and by **Chrisca Valuers**, barely a year before, returned much more higher market values for the properties, I am persuaded that the values arrived at by the 4th Defendant, **Advent Valuers** appears, on the face of it, to be quite low to as to raise suspicion of an undervalue. The properties were sold at Kshs 17,000,000/- which is Kshs 5,500,000/- below the forced sale value indicated as Kshs 22,500,000/- in the Valuation Report prepared by **Advent Valuers**, a reduction of about 24%, just barely missing the Kshs 25% minimum threshold stipulated under **Section 97(3)**. One may be forgiven for suspecting that the figure of Kshs 22,500,000/- as forced value may have been deliberately “fixed” for purposes of just evading that 25% minimum threshold rule.It is clear that while the 3rd valuation (**Advent Valuers**) a returned an open market value of only Kshs 30,000,000/-, the 1st and 2nd valuations conducted just about a year before, found significantly higher open market values of Kshs 42,500,000/- and Kshs 36,000,000/-, respectively, with the 2nd valuation indicating a forced sale value of Kshs 32,000,000/-. **DW2**, **Timothy Saruni**, the author of the 3rd Valuation Report (**Advent Valuers)**, agreed that the properties are situated in the prime and relatively affluent locality of **Elgon View Estate**, **Eldoret**. He however did not give any persuasive explanation as to how the properties could depreciate from the high open market value of Kshs 42,500,000/- to the drastically low amount of Kshs 30,000,000/- in just about a year, a depreciation of almost 30%. In the absence of a proper explanation, I am not convinced that such drastic sudden depreciation is commercially plausible. As aforesaid, it creates suspicion of some kind of deliberate manipulation. The figure of Kshs 22,500,000/- as forced sale value to me appears to be a clear undervalue fixed to facilitate disposal of the properties at the low purchase price of Kshs 17,000,000/-. Although the 1st Defendant submitted that it had carried out 4 earlier auction bids which did not either attract bidders at all, or returned very low bids, I am not convinced that the 1st Defendant took sufficient steps to ensure competitive bidding. Merely submitting that 4 unsuccessful earlier unsuccessful auction bids were carried out, without also demonstrating how and in what manner those earlier auctions were conducted, including how they were publicized to attract a large number of bidders, is not sufficient. I am also not persuaded by the explanation that the 3rd valuation returned a lower open market value and forced sale value simply because it was prepared during the COVID-19 pandemic period. What was the hurry to sell? What was so difficult in waiting for the pandemic to pass and for the economy to bounce back? I am equally not persuaded by the valuer’s (**Advent Valuers**) explanation that the valuations may have differed because of the stage of completion of the developments in the properties considering that his valuation (the 3rd valuation) was carried out when the developments were at about 85% complete while the one by **Chrisca Valuers** (2nd Valuation) was conducted when they were at about 75%. The assessments on the stages of completion are, in my view, not to far apart to justify such huge depreciation, considering that the valuation by **Highland Valuers** (1st valuation) had just about a year before placed the completion at the much higher completion stage of 95%. There is no explanation how such 95% stage of completion, instead of progressing much higher, could have miraculously receded backwards to 85% a year later. 3. Noting that according to the 1st Defendant, as at the date of the auction, 13/10/2020, the outstanding amount had escalated to about Kshs 22,000,000/-, I am convinced that the 1st Defendant and/or its Auctioneers would most probably have sold the properties at a price that would have completely or substantially offset the loan balance had they been more diligent, reasonable, or had they patiently waited for the opportune or ideal time to sell the properties, rather than unreasonably rushing to conduct the sale during or at the height of the COVID-19 pandemic when the economy had suffered serious adverse effects. 4. I also agree with **Mr. Sala’s** observation that the valuation prepared by **Advent Valuers** (4th Defendant) and relied on in the public auction also appears to have been suspiciously rushed as the instructions were given on 6/10/2020, the Report was prepared on 9/10/2020, and the auction took place on 13/10/2020, only 4 days thereafter. The Report was also quickly conducted over a weekend and a public holiday (10/10/2010), justifiably creating reasonable suspicion. It is clear that the public auction date was first fixed and only thereafter was the valuation “conveniently” conducted probably with a brief to ensure that it aligned with the already fixed or intended sale price of Kshs 17,000,000/- in place. The Valuation Report that would come out was most probably therefore meant to cover for any gap in the auction. The belated preparation of the Valuation Report, after the auction date of 13/10/2020 had already been scheduled, could not have been an afterthought. It was well calculated. Considering the short period over within which the instructions were given and the speed within which it was prepared and presented (4 days, including a weekend and a public holiday), one wonders whether the valuer really even managed to physically visit the properties to physically assess their value. I have serious doubts over the same and the valuer (**DW2**) did not himself give me much comfort as he appeared, during cross-examination, quite evasive and selective when questioned on whether he really visited the premises, on the short period within which he prepared the Report, and on the value of comparable properties over the **Elgon View** neighbourhood in Eldoret. 5. Further suspicion arises from the fact that the 3rd Defendant did not participate in the auction yet the property was directly transferred to him, that the 2nd Defendant, an Advocate purchased the properties at the low price of Kshs 17,000,000/- then immediately (barely about a week later on 20/10/20120, a public holiday) sold it to the 3rd Defendant at Kshs 17,500,000/-, even before he completed paying the purchase price to the 1st Defendant, which he only later did on 22/10/2020. A schedule of the names of the people who attended the auction has also not been given. The 3rd Defendant did also not produce any company resolutions authorizing it to purchase the properties. The 3rd Defendant’s witness’ (**DW4**) also admitted that the 3rd Defendant did not carry out any search before and when purchasing the property yet immediately paid the purchase price to the 2nd Defendant who, has however never been the registered owner. It is curious that the 1st Defendant, the seller, was never even mentioned in the Sale Agreement. Was the 3rd Defendant the real purchaser using the 2nd Defendant as a proxy? Why would the 2nd Defendant sell the properties at only a profit of Kshs 500,000/- barely a week after purchasing it at the auction, and why did the 3rd Defendant trust the 2nd Defendant, whom it barely knew, so much to the extent of releasing to him the purchase price even without the 1st Defendant’s (chargor) knowledge or authority, and knowing very well that the 2nd Defendant was not yet the registered owner? 6. Having found cause for suspicion that the public auction may not have been conducted above board, and not appearing to have been at arm’s length, what recourse does the Court now have to remedy that situation? 7. The effect of a flawed public auction sale, or sale of a charged property at an undervalue at a public auction was also considered by the Court of Appeal in the same case of **City Finance Limited & 2 others v Nyanja Holdings Limited & 3 others (supra)** in which it was held, unfortunately for the Plaintiffs in this case, that“***the law on the remedies available to a chargor once a charged property has been sold in exercise of the statutory power of sale is settled and admits of little controversy***”, and that once a valid sale has taken place, the equity of redemption is extinguished and the Court’s remedial jurisdiction is limited. 8. Indeed, in the earlier case of **Mbuthia v Jimba Credit Finance Corporation Ltd [1988] KLR 1**, the Court of Appea**l** had already held that: ***“Once a sale of charged property has taken place in exercise of a statutory power of sale, the equity of redemption is extinguished. The court cannot set aside the sale; the remedy of the chargor lies in damages.”*** 1. The same principle was reiterated in **Palmy Company Limited v Consolidated Bank of Kenya Limited [2014] eKLR**, in which the Court observed that: ***“The law is now settled that once a property is sold in exercise of a statutory power of sale, even if the sale is subsequently shown to have been irregular, the sale cannot be set aside unless fraud is pleaded and proved against the purchaser. The chargor’s remedy is in damages.”*** 1. The Court of Appeal, further, in the caseof **In Arthi Highway Developers Limited v West End Butchery Limited & 6 Others [2015] eKLR**, cautioned that Courts must be slow to disturb completed conveyances, particularly where third-party rights have intervened, and underscored the importance of certainty and finality in commercial transactions. 2. It is therefore generally the position in law that a purchaser’s title shall not be impeached on the ground that no case had arisen to authorise the sale, or that due notice was not given, or that the power was otherwise improperly exercised. Therefore, unless where fraud or collusion to which the purchaser has been demonstrated to be a party, a completed sale in exercise of a chargee’s statutory power of sale is unimpeachable, and the Courts cannot grant orders cancelling the sale or directing re-transfer of the property. In overturning the Judgment of the High Court which had nullified the sale of a charged property at a public auction including nullification of registration into the name of the third-party purchaser, the Court of Appeal, in the case of **City Finance Limited & 2 others v Nyanja Holdings Limited & 3 others (supra)** held as follows: **“33. Applying that law to the present case, the learned Judge could only have impeached the sale if fraud or collusion involving the purchaser had been specifically pleaded and strictly proved. A careful reading of the pleadings shows that while fraud was pleaded, its particulars were confined to allegations of undervalue, speed of registration, the use of a private treaty, and alleged subsisting court orders. There was no pleading of conspiracy involving advocates, no allegation of professional misconduct against Mr. Gitau, and no pleading of collusion implicating the purchaser. Yet it was on the strength of these matters that the learned Judge proceeded to nullify the completed statutory sale. In our view, that conclusion rested on a factual and legal foundation that was not supported by the pleadings or by strict proof at the trial.** **34. Moreover, fraud must not only be pleaded, but strictly proved to a standard higher than a balance of probabilities. As this Court stated in Vijay Morjaria v Nansingh Madhusingh Darbar & Another [2000] eKLR, and reiterated in Central Bank of Kenya v Trust Bank Limited & 4 Others [1996] eKLR,** **suspicion, conjecture, or inference cannot suffice. In the present case, the findings of fraud rested largely on inference and perceived gaps in documentation rather than on cogent evidence directed at pleaded particulars. The available quantum of evidence was simply insufficient to sustain a finding of fraud or collusion.** **35. We, therefore, conclude on this first issue that the learned Judge erred in nullifying the sale and ordering restoration of the property. In law, such relief was unavailable absent proper pleading and strict proof of fraud or collusion, neither of which was established.”** 1. I must say that although I have found justifiable cause to question the ***bona fides*** of the auction conducted on 13/10/2020, I have not found evidence of express fraud or collusion in this case. As they say, lack of evidence does not necessarily mean innocence. It may be just that the “fraud”, if any, has been carefully covered up. However, it is the Plaintiffs who bear the burden of proving the fraud alleged. There being no clear evidence of outright fraud or collusion involving the 2nd and/or 3rd Defendants, under the guidance of the case of **City Finance Limited & 2 others v Nyanja Holdings Limited (supra)**, I am unbale to nullify the auction or cancel the sale to the 2nd Defendant, and/or his subsequent transfer to the 3rd Defendant, as shady and suspicious as the whole deal appears to be.I say so because as observed above, the law dictates that suspicion, conjecture, or inference or perceived gaps cannot suffice. What is required is cogent evidence of fraud before the Court can nullify a public auction sale. 2. For reasons of the clear undervalue sale of the properties however, and appreciating the detriment that the Plaintiffs have been placed by the 1st Defendant’s actions and conduct, by itself and/or through its agents, I shall award damages to the Plaintiff, among other reliefs. **Final Orders** 1. In view of the above findings, I deliver Judgment in terms of the orders and/or declarations made hereinbelow as follows: 2. Despite the finding that the parcels of land known as **Eldoret Municipality/Block 133/514**, and **Eldoret Municipality/Block 133/515**, were sold at an apparent undervalue at the public auction conducted on 13/10/2020, and also the existence of other apparent conduct or actions creating suspicion or the strong impression that the process may not have been conducted above board or in ***bona fides***, this Court declines to issue a declaration that the public auction sale conducted of 13/10/2020 is null and void, or to cancel the sale to the 2nd Defendant as the purchaser, or the 3rd Defendant as the subsequent purchaser. * 1. Judgment is however entered in favour of the Plaintiffs ordering the 1st Defendant to pay to the Plaintiffs the amount of Kshs 5,500,000/-, being the difference between the forced sale price estimated in the Valuation prepared by **Messrs Advent Valuers** dated 9/10/2020, at Kshs 22,500,000 and the sum of Kshs 17,000,000/-, the purchase price at which the properties were sold at the public auction, with interest thereon at Court rates from the date of the sale, 13/10/2020, until payment in full. 2. This Court further finds that the 1st Defendant and/or its Auctioneers would most probably have sold the properties at a price that would have completely or substantially offset the loan balance had they been more diligent, reasonable, or had they patiently waited for the opportune or ideal time to sell the properties, rather than unreasonably rushing to conduct the sale during or at the height of the COVID-19 pandemic when the economy had suffered serious adverse effects. For these reasons, the 1st Defendant is hereby barred or prohibited from pursuing any further payment of any purported outstanding loan balance from the Plaintiffs. 3. The 1st Defendant shall also pay the Plaintiffs’ costs of this suit. 4. The 2nd and 3rd Defendant's joint Counterclaim is only allowed to the limited extent that an order of permanent injunction is hereby issued restraining the Plaintiffs, together with their agents, servants and/or any employees from trespassing, entering, alienating and/or interfering with the properties known as **L.R. Nos**. **Eldoret Municipality/Block 133/514**, and **L.R. Nos**. **Eldoret Municipality/Block 133/515**. 5. Save for the order (**v**) above, the rest of the prayers made in the 2nd and 3rd Defendant’s Counterclaimed are hereby dismissed. 6. Save for dismissal of some of the prayers made in the Plaint, the 1st Defendant’s Counterclaim is also dismissed. 7. Noting that the Plaintiffs have only marginally succeeded, the dismissal of the respective Counterclaims is with no order on costs. **DELIVERED, DATED AND SIGNED AT ELDORET THIS 22ND DAY OF MAY 2026** **……………..……..** **WANANDA JOHN R. ANURO** **JUDGE** **Delivered in the presence of:** | | | | --- | --- | | **Mr. Sala for the Plaintiffs** | | | **Ms. Kosgei h/b for Mr. R.G. Mwangi for the 1st and 4th Defendants** | | | **N/A for the 2nd and 3rd Defendants** | | | **Court Assistant: Rodgers Tshombe** | |