How Equity Bank lost Sh1.4million land battle to Alice Wahome 27 years later

Failure to follow the law in disposal of a client’s property after she defaulted on a Sh1.4million loan facility extended to her in 1998 has cost the Equity Bank, Alice Muthoni Wahome will now be smiling all the way to the bank after getting back her multimillion land now valued close to Sh100million.

Group Chief Executive Officer and Managing Director James Mwangi’s led Equity Bank lost the case it lodged against Alice Wahome.

In a ruling dated May 16, 2025, the High Court faulted the bank for failure to observe the law during the auctioning of Wahome’s land which was sold in July 2005 and cancelled the sale.

Justice Alfred Mabeya said section 69A of the repealed Indian Transfer Property Act of 1882 provided that no statutory power of sale was to be exercised unless there was default and a three-month statutory notice for sale was given to a mortgagee.

The judge held that the mortgage between the parties clearly provided that section 69 (1) of the Indian Transfer of Property (ITP) Act 1882 applied to the mortgage.

Although Wahome had defaulted payment, this notice was not properly given to her.

The bank ought to have given Wahome three months’ notice, followed it with another 45 days and additional 14 auctioneer’s notice which it did not follow before selling her property and which has now made the high court cancel the sale.

This now means Wahome will get her land back.

“The evidence on record shows that a statutory notice was sent to (Wahome) on 28/8/2000 by registered mail. (Wahome) herself admitted having received the notice. Accordingly, the Court finds that there was service of the three (3) months’ statutory notice and (Wahome) contention that no notice had been given is without basis,” ruled the judge.

The judge also noted that Equity Bank contended that after the notice period lapsed and the default was not made good, it attempted to sell the suit property by public auction, failing of which it sold the same to the interested party by private treaty on 15/7/2005 for Sh800,000/-.

“It was admitted by a witness that apart from the initial three months’ statutory notice, no other notice was given to (Wahome). Obviously, for a proper exercise of a Mortgagee’s statutory power of sale under the then legal regime, the Mortgagee was required to give a 45-day notice and an auctioneer’s notice of 14 days in addition to the three-month statutory power of sale,” stated the judge.

“There was no evidence that any of these two were given by the (Equity Bank). There having been no subsequent notices as aforesaid, there could be no proper exercise of the mortgagee’s statutory power of sale. What of the sale by private treaty? Under the then legal regime and the mortgage instrument, the 9bank) had the right to sell the suit property by private treaty.”

The bank had extended a loan to Wahome in 1998 when it was known as Equity Building Society before she defaulted payments.

The bank later disposed of the property that the businesswoman had used as the collateral while obtaining the credit facility after failure to service the loan.

However, the court established that property which was the centre of the legal dispute was registered under the Government Land Act which has been repealed.

The judge ruled that the land already sold to another person still belongs to Wahome.

The judge said the sale of Wahome’s property was bound by the provisions of the ITP Act which was repealed more than a decade ago.

The law that Equity Bank did not follow is a legal relic enacted in 1882 and which governed land in Kenya until 2012.

The businessman who bought the land cited evidence that the sale of the property was advertised in the East African Standard of 2/4/2002.

He never attended the intended public auction by M/S Marchet Auctioneers (K) Ltd of 3/4/2002. However, he was called to the offices of a different auctioneer in 2005 where he gave his offer of Sh800,000/- which was accepted and he purchased the suit property on 15/7/2005 for the said amount.

Justice Mabeya said that although sale by private treaty is permitted, it is not to be the first option. This is because the same is open to abuse and “arranged sales” to the extreme prejudice of a mortgagee. A lender must first attempt sale by public auction before resorting to sale by private treaty,

“The (Equity Bank) admitted that it had no evidence of any bids made for the suit property during the public auction or any other evidence that the auction did actually occur as advertised,” said the judge.

“It only contended that it was unable to sell the suit property by public auction and that that is when it resorted to sale by private treaty. The old adage goes that, he who alleges must prove. There was no evidence of any auction or any attempted auction before sale by private treaty could be resorted to.”