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Court of AppealDismissedCivil Application No. NAI 113 of 1995 (NAI 49/95 UR)

KAPSET AGENCIES LIMITED v SARJIT SINGH CHODA (also known as SURGIT SINGH CHODA [1995] KECA 120 (KLR)

Court of Appeal
31 May 1995
1,737 words in judgment
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The bottom line

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Kenya's Court of Appeal refused to stop a possession order, confirming that a signed lease over five years is not a protected controlled tenancy.

What this practically means

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Executive summary

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The applicant, Kapset Agencies Limited, sought a stay of execution under Rule 5(2)(b) of the Court of Appeal Rules of a judgment by Bosire, J. in the High Court (H.C.C.C. 472 of 1994) which granted the respondent summary judgment for possession of premises on the expiry of a registered lease, with mesne profits to be assessed. The court restated the two settled principles for such applications: the applicant must show an arguable appeal and that the appeal, if successful, should not be rendered nugatory. Counsel for the respondent conceded the second condition but contended the appeal was frivolous. The court nonetheless found the appeal arguable but rejected each of the applicant's substantive defences as raising no triable issue. First, a tenancy for a term exceeding five years created by a written lease is not a controlled tenancy under Cap. 301, because execution of the lease is a reduction of the agreement into writing. Second, a change in the tenant company's shareholding does not break the tenancy, the company being distinct from its directors and shareholders per Salomon v Salomon. Third, a re-entry covenant for bankruptcy is not a provision for termination within five years. Fourth, the alleged October 1993 agreement for monthly tenancy was a sham and a belated afterthought. The application was dismissed with costs, the court refusing to keep the respondent out of possession any longer.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the intended appeal is arguable
  2. 2.Whether the appeal, if successful, would be rendered nugatory in the absence of a stay

Key legal issues

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01

Whether a tenancy created by a registered lease for a term exceeding five years is a controlled tenancy under the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act, Cap. 301

Holding

A tenancy for a period exceeding five years created by a lease embodying the agreement is not a controlled tenancy, because execution of the lease is a reduction of the agreement into writing

Reasoning

Section 2 of the Act excludes tenancies for periods exceeding five years where the tenancy is created by an agreement reduced into writing. The court held that execution of a lease embodying the agreed terms is precisely such a reduction. Holding otherwise would produce an absurdity, and the post-1989 amendment to section 32 of the Registration of Titles Act expressly preserves the contractual operation of unregistered instruments in any event.

p. 2
02

Whether purchase of the entire shareholding of the tenant company created a break in the tenancy bringing it within the Act

Holding

No; the tenancy remained that of the company, a separate legal entity distinct from its directors and shareholders

Reasoning

Applying the Salomon v Salomon principle, the court held that the tenancy at all times belonged to the applicant company, a limited liability company distinct from its directors and shareholders. A change in shareholding therefore could not create a break in the tenancy so as to reduce its remaining term below five years or bring it under Cap. 301.

p. 3
03

Whether a re-entry covenant for bankruptcy and allied events is a provision for termination within five years under section 2 of the Act

Holding

It is not; the right of re-entry may arise after five years and there is uncertainty as to if and when it will occur

Reasoning

The court examined the standard re-entry covenant and held that the events triggering it (bankruptcy and allied matters) may occur at any time during the lease, including after the fifth year, and even if they occur within five years the covenant is not a provision for termination within that period. The lease therefore contained no provision for termination within five years of commencement.

p. 3
04

Whether the alleged October 1993 agreement to continue the tenancy from month to month raised a triable issue

Holding

It did not; the defence was a sham and a belated afterthought

Reasoning

No writing was produced supporting the alleged agreement, the applicant never responded to the respondent's several letters through its advocates between August 1993 and January 1994, and the agreement was never raised until the litigation. The judge below had correctly dismissed this defence, and the Court of Appeal agreed it raised no triable issue.

p. 3
05

Whether a stay of execution should issue pending the intended appeal

Holding

No; the application failed despite the appeal being arguable, because the respondent had already been kept out of possession for sixteen months

Reasoning

The respondent properly conceded the nugatory prong but challenged arguability. Having found the defences raised no triable issues, the court declined to perpetuate the applicant's continued occupation through the appeal process, noting that appellate machinery is sometimes misused in landlord and tenant cases to maintain the status quo.

p. 3

Legal principles established

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  • On a Rule 5(2)(b) application the applicant must show both an arguable appeal and that the appeal, if successful, should not be rendered nugatory
  • Execution of a lease embodying the terms of an agreement constitutes reduction of the agreement into writing, excluding a tenancy exceeding five years from the definition of a controlled tenancy
  • A right of re-entry for bankruptcy and allied events is not a provision for termination of a tenancy within five years from commencement of the term

Court orders

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  1. 1.The application for stay of execution pending intended appeal is dismissed
  2. 2.Costs of the application to the respondent

The bench

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One judgment of the whole court — no separate or dissenting opinions.

majority
majority
majority
On appeal from
High Court of Kenya at Nairobi
H.C.C.C. 472 of 1994
Jurisdiction invoked
Rule 5(2)(b) of the Court of Appeal Rules

Relief refused

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Stay of execution of the High Court judgment for possession pending the intended appeal

The appeal was found arguable but the court saw no reason to keep the respondent out of possession while the same points were argued again on appeal

p. 3

Costs

The application was dismissed with costs to the respondent

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

Accordingly and, for the reasons above stated, this application fails and must be as it is hereby dismissed with costs.
p. 3Final orders - dismissal of stay application
In our judgement, the execution of a lease embodying the terms of an agreement is on reducing into writing of that agreement so that the tenancy is not controlled.
p. 2Controlled tenancy - reduction into writing
They are two: first, the applicant must show that he has an arguable appeal and, record, this court should ensure that the appeal, if successful, should not be nugatory.
p. 2Rule 5(2)(b) principles
We on our part are well aware that in landlord and tenant cases the machinery of appeal is sometimes invoked in order to maintain the status quo
p. 3Abuse of appellate process in possession cases

Issues in the judgment

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minor

The text is corrupted in places, e.g. the passage introducing the 1989 amendment is incomplete, which may affect reliance on quoted wording

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "KAPSET AGENCIES LIMITED v SARJIT SINGH CHODA (also known as SURGIT SINGH CHODA [1995] KECA 120 (KLR)", Case Analysis (1995). Civil Application No. NAI 113 of 1995 (NAI 49/95 UR). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1995/120/eng@1995-05-31

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.