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Court of AppealAllowedCivil Appeal No. 265 of 2010· [2013] KECA 150 (KLR)

Chon Jeuk Suk Kim & another v E. J. Austin & 2 others [2013] KECA 150 (KLR)

Court of Appeal
7 October 2013
EGE. M. GithinjiASAsike-MakhandiaAMA. K. Murgor
4,562 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Court of Appeal ruled that an unregistered lease agreement is not a lease, and the landlords' Kshs 7.2 million judgment collapsed.

What this practically means

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Executive summary

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This was a first appeal from the High Court at Mombasa (Khaminwa, J.), which had entered judgment for the respondents (landlords) against the appellants for Kshs.952,500 rent arrears and Kshs.6,247,958/40 as costs of repairs and renovation of allegedly demised premises on Mombasa/Block XXI/Parcel/216. The dispute arose from an undated agreement signed by the appellants and accepted by Austin & Partners Ltd for the lease of part of the building for ten years, with a covenant that the appellants would carry out extensive renovations. The trial judge held that an agreement to lease was as good as a lease, invoking the equity of Walsh v Lonsdale, and that the appellants had exclusive possession. The Court of Appeal, in a single judgment of the court, allowed the appeal. It held that under section 47 of the Registered Land Act an unregistered agreement for a lease confers no legal or equitable estate, that the doctrine of Walsh v Lonsdale was inapplicable because the statutory registration requirement excludes that equity, and that the trial judge erred in treating the agreement as a lease; it also erroneously found a periodic tenancy. Further, agency and due execution by Austin & Partners Ltd were not proved, the demised premises were not identifiable, the renovation covenant was too uncertain to enforce, and the appellants never obtained possession. The damages award was unsupported and would have unjustly enriched the respondents. The appeal was allowed, the judgment and decree set aside, with costs of the appeal and suit to the appellants.

Key legal issues

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01

Whether an agreement to lease is as good as a lease under the Registered Land Act.

Holding

The learned Judge erred in applying the equity of Walsh v Lonsdale and treating an agreement for lease as a lease; an unregistered agreement confers no estate but remains enforceable as a contract inter partes.

Reasoning

Section 47 of the RLA requires leases exceeding two years to be in prescribed form and completed by registration. The Court relied on Souza Figueiredo, Clarke v Sodhoni, Rogan-Kamper and Bachelor's Bakery to hold that although no legal or equitable estate passes, covenants in the unregistered document are enforceable between the parties, and non-registration does not create a periodic tenancy as the trial judge held.

p. 4
02

Whether the contract was validly executed by or on behalf of the respondents.

Holding

Agency and due execution by Austin & Partners Ltd on behalf of the registered proprietors was not proved on a balance of probabilities, rendering the document unenforceable.

Reasoning

The 1st respondent gave no evidence of agency: he did not identify the signatory, disclose the directors, or produce a certificate of incorporation. Although an agent may bind a principal, the learned Judge did not consider this issue and, absent concrete evidence of agency and due execution, the document is unenforceable by either the respondents or the company.

p. 5
03

Whether the contract was enforceable despite uncertainty.

Holding

The contract was unenforceable for uncertainty: the premises were not identifiable and the renovation covenant lacked agreed specifications, drawings, costs and completion period.

Reasoning

The agreement referred only to a 'west half section of the plot' with no plan; evidence showed the parties themselves were unsure whether the whole plot was demised. No specifications or drawings existed at contract formation, and the renovation condition was fundamental since the restaurant business depended on it. The parties' conduct indicated tenancy was to commence only upon completion of construction, with no rent payable before completion.

p. 7
04

Whether the appellants were given exclusive possession.

Holding

The finding of exclusive possession was unsustainable; possession remained with the 1st respondent who supervised and financed the construction under a Power of Attorney.

Reasoning

The 2nd appellant was abroad during construction, no rent receipts were produced, and the respondents' own conduct showed the premises were never handed over. The trial judge's finding of exclusive possession was an abstraction unsupported by the evidence.

p. 7
05

Whether the damages award of Kshs.6,247,958/40 was justified.

Holding

The award was unjustified; it represented the estimated cost of developing a restaurant, not restoration costs, and would unjustly enrich the respondents.

Reasoning

The quantity surveyor's report showed the sum was the current estimated cost of restaurant development as at October 2002, not a reasonable estimate of restoring the building to its pre-construction condition. The award had no justification.

p. 8

Legal principles established

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  • An unregistered agreement for a lease, where statute requires registration, confers no legal or equitable estate but is enforceable as a contract inter partes and its covenants may be sued upon; it does not create a periodic tenancy.
  • The equitable doctrine of Walsh v Lonsdale cannot be applied where a statute requires registration of leases; the operation of the equitable principle is excluded by the statutory requirement.
  • A contract for lease is unenforceable for uncertainty where the premises leased are not identifiable by plan or sufficient description and essential terms such as specifications, costs and time for completion of renovations are not agreed.

Court orders

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  1. 1.Appeal allowed.
  2. 2.Judgment and decree of the High Court, including the awards of Kshs.952,908/= as arrears of rent and Kshs.6,247,958/40, set aside.
  3. 3.Respondents to pay costs of the appeal and costs of the suit to the appellants.

Authorities

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Legislation

  • Registered Land Act (now repealed)section 47
  • Registered Land Act (now repealed)section 45 (proviso)
  • Registered Land Act (now repealed)section 46(1)(b), 46(1)(c), 46(2)
  • Registration of Titles Ordinance (Uganda)section 51
  • Registration of Titles Ordinance (Kenya)section 40 (proviso)

Cases cited (7)

  • Walsh v Lonsdale
    (1882) 21 Ch. D 9
  • Souza Figueiredo v Moorings Hotel Co. Ltd
    [1960] EA 926
  • Clarke v Sodhoni
    [1963] EA 107
  • Gos Venor v Rogan-Kamper
    [1974] (report as printed)
  • Bachelor's Bakery Ltd v Westlands Securities Ltd
    [1982] KLR 366
  • Said Ben Sultan Bin Mohamed v Jokha Binti Sultan Bin Sahim El Muisking
    (1955) 1 EACA 273
  • Rogan-Kamper v Lord Grosvenor (No. 2)
    (1976-80) 1 KLR 558
On appeal from
High Court of Kenya at Mombasa
H.C.C.A. No. 335 of 2001
Jurisdiction invoked
First appeal from the High Court under the Court of Appeal's appellate jurisdiction (statutory appeal against judgment and decree); no specific constitutional or statutory provision is quoted in the judgment.

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (23)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Chon Jeuk Suk Kim & another v E. J. Austin & 2 others [2013] KECA 150 (KLR)", Case Analysis (2013). Civil Appeal No. 265 of 2010. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2013/150/eng@2013-10-07

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