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Courts backs KCB’s auction of client’s 67 acres in Nyandarua
The court also dismissed the borrower’s valuation dispute, rejecting his claim that the Sh4.6 million sale price grossly undervalued the property, which he insisted was worth Sh30 million.
The High Court has dismissed a 12-year lawsuit filed by a businessman challenging Kenya Commercial Bank's (KCB) auction of his 67-acre Nyandarua farm, ruling that the lender lawfully exercised its statutory power of sale following prolonged loan default.
The court found that the trader, Jack Githae, failed to substantiate claims of fraud, illegality, undervaluation, or breach of injunction, affirming KCB's adherence to legal procedures in selling the property.
Mr Githae had sought to nullify the December 2008 auction, cancel titles issued to the new buyer, and reclaim ownership —or alternatively receive compensation for an allegedly unlawful sale at an undervalued price.
The court rejected these demands, noting KCB's compliance with statutory requirements throughout the process.
The dispute originated in 1992 when Mr Githae secured a Sh750,000 overdraft facility from KCB, using the Nyandarua property as collateral. The loan overdraft was for undertaking several farming and herbal medicine research projects on his respective farms.
He attributed repayment failures to financial losses from tribal clashes at his Rumuruti farms, which he claimed rendered him unable to service the loan.
By 2008, accrued interest had inflated the debt to Sh3 million —four times the principal amount. He further alleged KCB disregarded a court injunction issued a day before the auction.
However, the judge noted Mr Githae provided no proof KCB received the injunction order.
"Without evidence of service, the bank could not have knowingly violated any orders," the ruling stated. KCB demonstrated it had issued statutory notices, furnished account statements, conducted a valuation, and advertised the property before proceeding with the sale after years of default.
The court also dismissed the borrower’s valuation dispute, rejecting his claim that the Sh4.6 million sale price grossly undervalued the property, which he insisted was worth Sh30 million.
His supporting report was deemed inadmissible due to missing authentication details. The judge upheld KCB's contemporaneous 2008 valuation as credible.
Citing precedent, the judgment clarified that lenders exercising statutory power of sale are not trustees for borrowers and may prioritize their interests —provided they act fairly and secure reasonable market value.
"No irregularities, fraud, or collusion were proven," the court affirmed.
The borrower's invocation of the in-duplum rule —which limits interest to the principal amount— was rejected since the rule took effect in 2006, long after his 1992 loan agreement. The court stressed parties remain bound by original contract terms.
Even if procedural flaws existed, the judge emphasized post-auction remedies are restricted to damages—not sale reversal—and the borrower established no grounds for compensation. All his requests, including title cancellations and boundary reinstatements, were dismissed.
“The evidence from the bank is very clear that the plaintiff defaulted and continued to default from meeting his obligations for an extended period of time,” the court stated.
“This was not a decision made by the defendant bank at the spur of the moment but after a series of inquiries and concerns on loan repayment.”
