A significant decision was recently delivered by the Court of Appeal which backs Banks (and other Lenders) on the issue of exercise of power of sale upon the default by the borrower (or a chargor).
In the matter of East African Cables PLC (the “Borrower”) vs Equity Bank (Kenya) Limited (the “Bank”), [2025] KECA 901 (KLR), the High Court dismissed the application by the Borrower seeking an injunction to stop the Bank from auctioning properties charged to it. The Borrower being dissatisfied by this decision appealed to the Court of Appeal and in the appeal also applied for an order of injunction to prevent the sale of the charged properties pending the hearing and determination of the appeal.
The Court of Appeal was asked to determine whether the appeal had merit and whether the Court should therefore grant the injunction before the determination of the appeal. Although the Court of Appeal was of the view that the appeal may have merit and would proceed to full hearing, it nevertheless refused to grant the injunction to stop the Bank from exercising its statutory power of sale.
The Court of Appeal’s decision was based on its finding that even if the properties were sold or otherwise dealt with by the Bank and the appeal was subsequently successful, the remedy for the Borrower would be damages in accordance with section 99(4) of the Land Act, 2012. This section provides that a person prejudiced by an unauthorized, improper, or irregular exercise of the statutory power of sale shall have a remedy in damages against the person exercising that power.
This decision is significant for Banks as it reaffirms the Bank’s right to sell charged property upon default by the borrower. Any claims of unauthorized, improper or irregular exercise of the statutory power of sale should not, on their own, be grounds for stopping the sale of charged property but may be used for a claim for damages.
This is a positive development for Banks, as in many instances, parties in default of their repayment obligations have sought and obtained court orders stopping Banks from exercising their statutory right to sell charged properties sometimes as late as the date of the auction. We hope the decision therefore restores Banks’ confidence in the exercise of the statutory power of sale without the Court’s undue interference. Banks should however ensure that they follow the provisions of the Land Act and issue the required statutory notices to borrowers (chargors) upon default, to ensure that they do not have suits instituted against them by borrowers/chargors in the future.
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