Statutory Power of Sale Upheld in Long-Standing Debt Recovery Dispute

We are pleased to report on a significant litigation success for our client, NCBA Bank Kenya (formerly NIC Bank), in a long-standing dispute involving the exercise of a statutory power of sale. 

The matter, which had been the subject of extensive litigation for over seventeen years and arose from loan facilities advanced in or about 1994, has now been conclusively determined in favour of the Bank. 

Background 
The dispute arose after the borrower defaulted on substantial loan facilities advanced by the Bank. Following the default, the Bank exercised its statutory power of sale and lawfully sold the charged property to third-party purchasers. 

Over the course of the dispute, the borrower instituted more than thirteen suits and applications before both the High Court and the Court of Appeal challenging the sale of the charged property. Additional parties who were not privy to the loan transaction were also introduced in various proceedings. 

Our Dispute Resolution Team in this matter, Grace Kinyanjui and Lucy Mwaura successfully defended each of these proceedings, including the final suit that ultimately brought the matter to a close. 

The Court considered several issues, including:
● Whether the dispute had previously been litigated and determined; 
● Whether the claimant had the requisite standing to institute the proceedings; and 
● Whether the Bank had lawfully exercised its statutory power of sale. 

The team successfully demonstrated that: 
● There had been prior proceedings concerning the same subject matter, rendering the claim unsustainable;  
● The party instituting the suit was not a party to the loan transaction and lacked requisite capacity to sue; and  
●The Bank had exercised its statutory power of sale properly and in compliance with both procedural and substantive legal requirements.  

Outcome
The Court found in favour of the Bank and upheld the validity of the exercise of the statutory power of sale, bringing an end to litigation that had persisted for over three decades from the commencement of the lending relationship and more than seventeen years of court proceedings.

This outcome reinforces important principles concerning the finality of litigation, suing capacity in legal proceedings, and the protection afforded to lenders exercising statutory rights of enforcement.

These successful outcomes continue to demonstrate our experience in handling complex banking disputes and debt recovery matters before the courts.

This alert serves the purpose of general guidance and does not constitute specific legal advice. For further information or tailored advice on enforcement of securities, debt recovery, or statutory power of sale, please contact our Partner Grace.Kinyanjui@CMS-DI.com.

*Contributors 
Lucy Mwaura - Associate