Former Limuru MP George Nyanja has suffered a major legal setback after the Court of Appeal overturned a High Court decision that had declared the sale of his Karen home illegal.
The appellate court ruled that Mr Nyanja’s remedy, if any, lay in pursuing damages against City Finance Bank and not in reversing a property sale that took place more than a decade ago.
The court said the High Court fell into multiple and material errors by granting reliefs that were unavailable in law, since once the statutory power of sale had been exercised and the property sold, a purchaser is entitled to statutory protection.
The appellate court further said the court treated alleged defects in a statutory notice as a basis for undoing a completed sale when the law confines the remedy to damages.
“Each of these errors independently undermines the impugned judgment. Considered cumulatively, they render it unsustainable,” said the court.
Evidence tabled in court showed that the former MP borrowed several loans from the bank as from 1985 including an Sh8 million credit facility which was secured using the Karen home.
Problems arose regarding repayment, interest computation, and restructuring, and the lender filed a case in 1991 seeking recovery of monies allegedly due and enforcement of its securities.
Mr Nyanja and his company Nyanja Holdings also filed a case disputing the amount of debt, the interest applied, and the propriety of the bank’s accounting.
The suits were eventually consolidated but by the time the case was heard, the bank had sold the property to Redmars Holdings Ltd for Sh60 million.
The former MP then challenged the sale saying the property was undervalued. In his case, Mr Nyanja said the property was then valued at Sh295 million.
After hearing the case, the High Court found that the lender had charged illegal and unconscionable interest and that Mr Nyanja had, in fact, overpaid the loan.
The court said the sale of the property by private treaty was unlawful and ordered re transfer of the property to Mr Nyanja. The court also dismissed the bank’s counterclaim.
The appellate court, however, said the High Court erred in nullifying the sale and ordering restoration of the property to Mr Nyanja.
According to the court, the relief was not available because there was no proof of fraud or collusion.
The court maintained that past rulings and the law establish a clear rule, that without proof of fraud or collusion to which the purchaser is a party, a completed sale in exercise of the statutory power of sale is unimpeachable.
“A careful reading of the pleadings shows that while fraud was pleaded, its particulars were confined to allegations of undervalue, speed of registration, the use of a private treaty, and alleged subsisting court orders,” said the court.
The court further noted that whereas the trial judge made extensive findings on accounts, interest, and alleged overpayment, it did not proceed to determine the counterclaims in a manner that yielded clear and final conclusions.
The court set aside the High Court decision and directed fresh hearing on the bank’s counter-claim, limited strictly to issues of accounts, indebtedness, interest, and any consequential reliefs.
“For the avoidance of doubt, no order of injunction shall issue restraining Redmars Holdings Limited from possession, occupation, or dealings with L.R. No. 7583/1 Karen Estate, Nairobi, pending the determination of the remitted issues,” said the court.
