TRUST BANK LIMITED v GEORGE ONGAYA OKOTH [2000] KECA 13 (KLR)

REPUBLIC OF KENYA

COURT OF APPEAL AT NAIROBI

Civil Appeal 177 OF 1998

TRUST BANK LIMITED ……………………………………………..APPELLANT

AND

GEORGE ONGAYA OKOTH …………………………..………..RESPONDENT

(Appeal from the Ruling of the High Court of Kenya atNairobi (Hayanga, J.) delivered on the 4th day of May,1998 In H.C.C.C. NO. 1135 OF 1997)

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JUDGMENT OF BOSIRE. J.A.

On 4th May, 1998, the Superior Court (Hayanga, J.) granted aninterlocutory injunction to George Ongaya Okoth, the respondent inthis appeal in its Civil Case No. 1135 of 1997, restraining TrustBank Limited, the appellant in the appeal, from dealing with therespondent's two properties, namely L.R.No.1160/471 andL.R.No.1160/472, both situated in the Karen area of Nairobi. Theappellant was allegedly seeking to sell the properties in purportedexercise of a statutory right without giving the requisite threemonths statutory notice in terms of the provisions of section 69Aof the Transfer of Property Act. Besides, it was alleged that theappellant was demanding from the respondent money which accordingto the latter was not due from him at all.

This being an interlocutory appeal care must be exercised to obviate, as far as it is possible, trespassing on the jurisdictionof the trial court. The dispute between the parties has not beenresolved and their suit before the superior court is still pending.

Litigation between the parties started when the respondentbrought action on 13th May 1997, by way of a plaint dated 12th May, 1997, praying for, inter alia, an injunction restraining theappellant from selling or otherwise alienating, mortgaging orotherwise dealing in or disposing of the two aforementionedproperties; and, also, restraining it from clogging or fetteringhis right to redeem his properties and/or exercising the equity ofredemption. Filed with the plaint was an application by ChamberSummons seeking injunctive reliefs, in effect, on the same terms asin the plaint, and in addition an order of prohibition, prohibitingregistration or change of registration in the ownership, "leasing, allotment, user, occupation or possession or in any kind of right, title or interest" in the two properties with any land registryuntil further orders of the court. The facts giving rise to thesuit and injunction application are brief and straightforward.

By two written instruments of charge dated 5th March, and 28thOctober, 1991, respectively, the respondent mortgaged to theappellant several of his properties in Karen, Nairobi, to securerepayment by him of million and Kshs.2. 5 million respectively, together with interest, commissions, legal chargesand other expenses. Repayment of the loans would be by monthlyinstallments, and in the event of default of any one installment, the appellant would be at liberty to, inter alia, appoint a receiver,  and after due statutory notice to the respondent, realize itssecurities. There was default, and in or about March, 1994, theappellant appointed a receiver. Thereafter by consent of theparties some of the securities were sold. A total of about Kshs.37million was realized which was credited into the respondent's loanaccount. The appellant also waived about Kshs.40 million allegedlyas part of accrued interest. That notwithstanding and despite thefact that the appellant was collecting rents from some of thecharged properties, the appellant, by a letter dated 26th August,1996, addressed to the respondent by its advocates, Ndungu Njoroge& Kwach, demanded Kshs.75,408,911. 75 from the respondent, being the

outstanding Mortgage-Money. The letter was in the following terms:

"26th August, 1996BY REGISTERED POSTCOPY BY ORDINARY POST

George ongaya OkothP. 0. Box 51562NAIROBI

Dear Sir,

OUTSTANDING BALANCE OF KSHS.

75,408,911. 75. DUE BY YOU TOTRUST BANK LIMITED

We are instructed by our above named client toapply to you for immediate payment ofKshs.75,408,911. 75 being the amount due by youto our client in respect of a loan/overdraftfacilities granted to you at your request fullparticulars of which are known to you.

Our instructions are that the said sum carriesinterest at 34% per annum plus penalty untilpayment in full. Such rate of interest issubject to be varied and increased at ourclient's sole discretion without notice toyou.

Unless we receive your remittance for the saidsum together with interest thereon withinFOURTEEN DAYS (14 days) from the date hereof,our instructions are to sell by public auctionthe immovable properties charged to our clientby way of security.

Would you please note that no further noticeswill be sent to you and that any proposalsmade if acceptable and any installments paid by you subsequent to the date of this Notice will be accepted without prejudice to our client's rights.

Yours faithfully

NDUNGU NJOROGE & KWACH

Sign

A. K. IGERIA"

According to the appellant the aforequoted letter constitutedthe statutory notice under Section 69A (l) (a) of the Transfer of Property Act. The respondent submitted both before the trial Judge and before us that the period of the notice in the letter is inadequate and also, that the letter does not state from which day the notice was to run. Consequently, he contended, the notice was invalid with the result that the appellant's attempt to realize its securities on the basis of the notice was wrongful and unlawful.It was, however, urged on behalf of the appellant that the noticewas given in accordance with the relevant Section, that as long asa Mortgagee allowed three months from the date of the notice, itwould be perfectly entitled to sell its securities, and thatbecause it did not seek to sell the respondent's aforesaidproperties until alter the expiration of over six months, there wasnothing objectionable about the notice. Hayanga J did not thinkthe notice was valid or that the amount claimed was actually dueand payable and he so ruled and thereby provoked this appeal.

There are several grounds of appeal, but to my mind, determination of this appeal, largely hinges on the issue whether or not the aforequoted letter constitutes a valid notice within the meaning of the provisions of section 69A(l)(a) above. The Section, in pertinent part, provides as follows:

"69A (1) A Mortgagee shall not exercise theMortgagee's statutory power of sale unless anduntil -

(a) A notice requiring payment of theMortgage money has been served on theMortgagor or one of two or moreMortgagors, and default has been made inpayment of the Mortgage Money, or of partthereof, for three months after suchservice; or"

From the wording of the section it is quite clear that thePeriod of the notice starts to run from the date of service of the

notice on the chargor or any of the chargors where they are morethan one. There was, however, debate before the trial Judge, andbefore us too, whether the notice must specifically state that the

payment of the Mortgage Money has to be made within three monthsfrom the date of service of the notice on the Mortgagor. Mr. Manyonge for the appellant was of the view that a lesser period maybe stated provided that the Mortgagee does not sell until after theexpiry o± three months. In that submission he relied upon thedecision of this Court in the case of Russel Company Limited v.Commercial Bank of Africa & Another. Civil Appeal No. 89 of 1991(unreported) in which the court held that view. Mr. K'Owade, forthe respondent did not think that the case cited correctly statesthe law.  In his view a statutory notice must not only state that payment should be made within three months from the date of

service, but also, that the Mortgaged property would be liable to

be sold if default in payment is made at the expiry of that period.

In his view if the aforequoted notice is accepted as valid there

will be a departure from the statutory requirements.

The appellant's notice clearly did not give the respondent

three months to pay the Mortgage money.  He was only allowed 14

days to do so.  In the old English case of Metters v. Brown (1863)

VIll Law Times Reports, 567, a Mortgagor sued the Mortgagee for an

order setting aside a sale which was made by the executrix and

devisee of the Mortgagee, under a power of sale contained in a

Mortgage Deed, on the ground, principally, of no notice of the Sale

having been given to the Mortgagor prior thereto.  The notice in

that case read in pertinent part, as follows:

"I hereby give you notice, and require you topay to me, at the expiration of six calendarmonths from the date hereof, the sum of 550/-,which is due and owing to me as the executrixof Richard Jago, late of Plymouth, Devon, ...upon and by virtue of a deed dated 9th day ofJanuary, 1844, ... And take notice, that indefault of your paying this sum, I shallproceed to a sale of the hereditamentMortgaged by you ..."

The notice in the above cited case is slightly different from that in our case.  The holding in the case is what is clearly material. The Vice Chancellor of the Court of Chancery had this to say about the notice reproduced above:

"The intention certainly was, in order toguard the rights of the Mortgagor, that thereshould be six months' notice of the intentionon the part of the Mortgagee to sell. Allthat the power can be held to mean is that, previously to any sale, six months' notice ofthe intention to sell must be given. It hasalso been contended that the effect of thenotice was to require the money to be paid ata particular time. That in my opinion is nota just view. The plain meaning of the wordsis, that there must be six months’ noticegiven of the intention to sell. The noticewas in fact a requisition to pay as well as anotice of intention to sell. It was as if theMortgagee had said: "Take notice, if you don'tpay me on or before a certain day, I will sellthe property.' But no time was fixed for thesale. That was, in my opinion, unnecessary;because, after the expiration of six months,the Mortgagee was entitled to sell at anytime, unless the money was paid."

In Russel's case (supra) a notice more or less similar to theone in our case was given. This court held that since theMortgagee had at least three months after the expiry of the periodof the notice, there was sufficient compliance with the provisionsof the law with regard to notice. The notice fixed the date of itsdrawing as its commencement day.

Section 69A (l) (a) of the Transfer of Property Act fixes acommencement date of the notice. A Mortgagee has no right to pickon any other date as the date of commencement. The period runsfrom the date of service of the notice on the Mortgagor. Forpurposes of the aforementioned section the date of the notice isimmaterial. Besides the sub-section requires that the noticespecify what the Mortgagor needs to do before the expiration of thenotice. He must make payment of the Mortgage Money. Besides thenotice must warn him of the consequences of default, viz either toappoint a receiver or sell the Mortgaged property. The notice inRussel's case, although it warned that if default was made in the payment of the Mortgage Money, the Mortgagee would sell the chargedproperty, it did not give the Mortgagor the stipulated three monthsto pay. A statutory notice is in effect a demand letter to makepayment. The relevant sub-section clearly stipulates "noticerequiring payment of the Mortgage Money has been served, anddefault has been made in payment ... for three months after suchservice."  So time starts running from the date of Service and

terminate three months thereafter.In Russel's case the commencement date was the date of thenotice. To the extent that the Mortgagor's default was notconsidered from the date of service, and the requisite three monthswas not allowed from the date of service of the notice on theMortgagor, it is my view that the notice in that case, did not withdue respect, accord with the relevant section and was thereforeinvalid. The case does not therefore assist the appellant in thisappeal. It is the notice of intention to sell which is required torun tor three months from the date of its service on the Mortgagor, before the right to sell the charged property can accrue. TheLegislature having stipulated that period and the date from whichit would run, it is my view that giving a lesser period denies aMortgagor a right to which the law expressly gives him. Holdingotherwise it will mean that the period the Mortgagee withholdsaction after the expiration of the notice as the one here, will betreated as ex gratia or an act of good will on the part of theMortgagee when it is not.

In view of the conclusion I have come to above, I do not consider it necessary to consider the other issues raised as to mymind they are best suited for consideration by the trial Judge. AsI stated earlier, this is an interlocutory appeal and I eschew anyattempt to deal with issues which need evidential proof.  For

instance the respondent contends that he does not owe the appellantany money, and that whatever money it is claiming from himcomprises of illegal charges, commissions and fees.  These are

aspects which require oral testimony and the cross-examination ofwitnesses.

The upshot of the foregoing is that this appeal lacks meritsand I would dismiss it with costs to the respondent to be taxed ifnot agreed.

Dated and delivered at Nairobi this 14th day of January, 2000.

S. E. 0. BOSIRE

JUDGE OF APPEAL

I certify that this is atrue copy of the original.

DEPUTY REGISTRAR

TRUST BANK LIMITED........................... APPELLANT

AND

GEORGE ONGAYA OKOTH…..…….RESPONDENT

(Appeal from the Ruling of the High Court of Kenya atNairobi (Hayanga, J.) dated 4th May, 1998 In H.C.C.C. No. 1135 of 1997)

JUDGEMENT OF OWUOR, J.A.

I have had the advantage of reading and considering in draft the judgments of the learned Judges, Gicheru J.A. and Bosire J.A. I am in full agreement with the expressed conclusions therein and consider that there is nothing I can usefully add. Dated and delivered at Nairobi this 14th day of January, 2000.

E. OWUORJUDGE OF APPEAL

I certify that this isa true copy of the original.

DEPUTY REGISTRAR