Caleb Kositany & another v Industrial and Commercial Development Corporation & another [2004] KEHC 2674 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT AT NAIROBI

CIVIL CASE NO 473 OF 2004

CALEB KOSITANY                                                                                      

KABOBO COMPANY LTD ……........…………….….….APPLICANTS

VERSUS

INDUSTRIAL AND COMMERCIAL DEVELOPMENT CORPORATION

PETER BIRDS INVESTMENT…........……..………….RESPONDENTS

RULING

This ruling relates to an application by way of a Chamber Summons dated 26.08.2004 on behalf of the applicants for one main relief, that the respondents be restrained from selling by way of a public auction or otherwise the suit property known as LR No 8411, (IR No 100084), Uasin Gishu District, in the Rift Valley Province of Kenya.

By a loan agreement dated 18.12.1996, the respondent, the Industrial and Commercial Development Corporation (ICDC), advanced to Kabobo Co Ltd, (a company associated with the late Simon Sawe Kositany who died on 16.04.1998,) a sum of Kshs 10,000,000/= to develop a flower farm. It appears that the project did not flourish immediately, and this loan together with interest @ 26% blossomed to the handsome sum of Kshs 48,971,490/=  as at 26.07.2004.

In consideration of the principal sum and interest, Kabobo Company Ltd procured the late Simon Sawe Kositany to execute and had a charge dated 18.09.1996 and registered as No IR, 10084/16 on 20.12.1996 at 16.58 hours, as security for the said loan and interest thereon. ICDC has now called up this loan and the Company (Kabobo Co Ltd) being unable to pay, ICDC has resorted to the sale of the property granted by the late Simon Sawe Kositany to secure the repayment of the loan. The plaintiffs/ applicants have objected, and in their application through the supporting affidavit of Caleb Kositany, sworn on 26.08.2004 say ICDC has never served either him or any member of the family of the late Simon Sawe Kositany with any statutory notice calling up the loan and giving notice of intention to sell the suit property in terms of the charge instrument. If there was such notice, it was served upon the Company Kabobo Co Ltd, not the chargor, and by virtue thereof such notice is ineffectual and does not confer upon the chargee ICDC, any right of sale. Mr Gatuguta, counsel for the applicant also referred to other defects under the Auctioneers Rules 1997, but this is hardly the issue here.

The issue here is whether the notice dated 26.02.2004 addressed by ICDC’s senior legal officer, to Kabobo Co Ltd was a valid statutory notice in terms of section 69(1) of the Transfer of Property Act. Section 69A of the

TPA provides, inter alia:–

“69A (A) A mortgagee shall not exercise the mortgagee’s statutory power of sale unless and until –

(a) notice requiring payment of the mortgage money has been served on the mortgagor or one or two or more mortgagors, and default has been made in the payment of the mortgage money, or part thereof, for three months after such service; or

(b) some interest under the mortgage is in arrears and unpaid for two months after becoming due, or

(c) …………………………..”

I have no hesitation at all in stating that so far as the notice period was concerned, it certainly was in terms of the said section 69(1) but in so far as the chargor was concerned it was completely off-side, it was addressed to the borrower, not the chargor, and quite contrary to the provisions of the said section.

Indeed as the Court of Appeal observed in the case of Trust Bank Ltd vs Kiran Ramji Kotendia (Civil Appeal No 61 of 2000 – Omolo, Bosire & O’kubasu JJA) at pp 11 –12 of the Court’s judgment –

“But however correctly a notice is worded, it has and must, at the end of the day, be served upon the mortgagor or chargor. The respondent, as we have seen, says he was never served with the notice. The respondent told the superior court that section 102 (2) TPA provides for service of documents on a mortgagor, mortgagee or any other person required to be served.

Section 102(2) says:-

(a) it is left at the last known place or abode or business in Kenya of the mortgagee, mortgagor, or other person to be served, or

(b) in the case of a notice required to be served on a mortgagor, it is affixed in a conspicuous position to the property comprised in the mortgage; or

(c) it is served on an agent or attorney holding a power of attorney or authority from the mortgagee or mortgagor whereunder such agent or attorney is duly authorized to accept such service, or

 (d) it is sent by post in a registered letter addressed to the mortgagee, mortgagor or another person to be served, by name, at his last known postal address, and if that letter is not redeemed through the post office undelivered; service by post as aforesaid shall be deemed to be made at the time at which the registered letter would in the ordinary course be delivered.”

Although the notice of 26.02.2004 was correctly worded, it was no notice to the mortgagor or in this case the chargor. And indeed, as the charger was deceased, it was not even addressed to his next- of-kin. Instead it was “copied” to Mr Simon Sawe Kositany c/o Kabobo Co Ltd. To me it is a sad testimony that more than four years after the demise of the chargor, ICDC has not rectified its records and is still addressing notices or letters to a deceased person! In the case of Ragui vs Barclays Bank of Kenya Ltd [2002] 1 KLR 647, Ringera J (as he then was) held:-

“A statutory notice addressed to a deceased person is invalid and has no effect. In this case the statutory notice ought to have been served upon the administrators of the estate.”

In this case there was no notice addressed to the estate of the late Simon Sawe Kositany. A statutory notice sent to a company of which a deceased person was a former director or shareholder, is not a statutory notice sent to a mortgagor or a chargor. Such notice being invalid, the mortgagee’s or chargee’s statutory power of sale could not be said to have arisen and consequently no instructions could be issued to the Auctioneer’s firm of Peter Bird Investments to sell the suit property.

In the event therefore the plaintiff’s application succeeds and that there shall be orders restraining the defendant/respondent from any dealing with the suit property until proper and valid statutory notices are issued upon the administrator ad litem of the estate of the late Simon Sawe Kositany.

There shall be orders accordingly.

Dated and delivered at Nairobi this 15^th day of October, 2004

M. J. A. EMUKULE

……………..

Ag JUDGE