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Court of AppealPartially AllowedCivil Appeal No. 165 of 2016· [2020] KECA 501 (KLR)

Kenya Commercial Bank Limited v Pickwell Properties Limited [2020] KECA 501 (KLR)

Court of Appeal
24 July 2020
7,248 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~29 min to read original · ~4 min brief

The bottom line

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Kenya's Court of Appeal ruled KCB remained bound by an unsigned lease letter and had to pay rent and 21% contractual interest until it fully vacated.

What this practically means

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Executive summary

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This was an appeal by Kenya Commercial Bank against a High Court judgment (Ogola, J., 20 March 2013) awarding Pickwell Properties rent, interest and an unpaid restoration balance arising from a lease of premises in Shankardass House. The bank contended no enforceable written lease existed, that it vacated before termination, that the claim was time barred, and that it was entitled to a refund of its security deposit and a portion of a restoration payment. The landlord cross-appealed on the interest awarded. J. Mohammed, JA, writing the lead judgment with Sichaale and Kantai, JJ.A concurring separately, distilled six issues. The Court held the letter of offer of 29th November 1993 constituted a valid, binding and enforceable agreement to lease inter partes despite the absence of a formal registered lease, the bank having taken possession, paid rent per its terms and given notice to terminate. The claim was not statute barred because the delayed rent was paid in 2006, reviving the limitation period under section 23(3) of the Limitation of Actions Act. The bank remained in actual possession until 31st October 2006 when it removed its last fixtures, and was liable for rent and interest to that date. The bank was not entitled to a refund of the deposit until it discharged its tenancy obligations, nor to set off the sum it wrongly deducted from the restoration payment, the landlord being a stranger to that transaction. On the cross-appeal, the Court held that where parties have contractually fixed an interest rate, the court has no discretion under section 26 of the Civil Procedure Act and must enforce the agreed 21% per annum. The appeal was dismissed with costs and the cross-appeal allowed with costs, the High Court judgment thus being varied on interest.

Key legal issues

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01

Whether the letter of offer of 29th November 1993 constituted an enforceable tenancy agreement despite absence of a formal registered lease

Holding

A valid, binding and enforceable agreement to lease arose from the letter; the appellant's possession, payment of rent per its terms and notice to terminate bound it to the terms including the 21% interest clause.

Reasoning

The court applied the settled law that a lease exceeding one year requires a registered instrument, but a document merely creating a right to obtain another document does not require registration and is valid inter partes. The appellant remained in possession, paid rent in accordance with the letter's terms and gave notice to terminate, demonstrating conduct consistent with the agreement.

p. 5
02

Whether the claim for interest on delayed rent was statute barred

Holding

Not statute barred, because the delayed rent was actually paid in 2006, and under section 23(3) of the Limitation of Actions Act payment restarts the limitation period.

Reasoning

Although the breach occurred on 1st July 2005, the appellant made the payment in March 2006, so the cause of action accrued then and limitation would have lapsed in 2012, after the suit was filed on 1st December 2011. Acknowledgement or part-payment under section 23(3) not only extends the period but revives a statute-barred action.

p. 5
03

Whether the appellant remained liable for rent after the tenancy terminated on 14th December 2005

Holding

Yes; the appellant was in actual possession until 31st October 2006 when it removed the last of its fixtures (two bank safes), and was liable for rent and interest to that date.

Reasoning

The court engaged with the meaning of possession, holding that possession depends on context and comprises intention to possess together with occupation or control. Because the appellant's fixtures remained on the premises until October 2006, it was in actual possession and liable for rent for January to October 2006 as per the tenancy agreement.

p. 6
04

Whether the court could depart from the contractually agreed 21% interest rate

Holding

No; where parties have agreed a rate of interest the court has no discretion and must enforce it, so the cross-appeal succeeded in replacing court-rate interest with the contractual rate.

Reasoning

Section 26 of the Civil Procedure Act confers discretion on the court only where parties have not fixed the rate by agreement. The tenancy agreement expressly provided 21% per annum on delayed rent, so the learned Judge erred in failing to award it for the delayed 2005 rent and on the Kshs 3,921,800 deduction from the restoration sum.

p. 5

Legal principles established

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  • Where parties have by agreement fixed the rate of interest payable, the court has no discretion under section 26 of the Civil Procedure Act and must enforce the agreed rate unless it is shown to be illegal, unconscionable or fraudulent.
  • An agreement to lease, though not formalised into a registered lease, is valid and enforceable inter partes even in the absence of registration, though it gives no protection against third parties.
  • An acknowledgement or part-payment of a debt under section 23(3) of the Limitation of Actions Act extends the limitation period and revives an otherwise statute-barred action.

Court orders

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  1. 1.The appeal is dismissed with costs
  2. 2.The cross-appeal is allowed with costs
  3. 3.Interest at the contractually agreed rate of 21% per annum awarded on rent for the period 1st July, 2005 to 30th December, 2005 from due date until actual payment on 12th May, 2006
  4. 4.Interest at 21% per annum awarded on Kshs 3,921,800 from 28th August, 2006 when the appellant made the deduction

Authorities

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Legislation

  • Law of Contract ActSection 3(3)
  • Law of Contract ActSection 3(7)
  • Limitation of Actions ActSection 8
  • Limitation of Actions ActSection 23(3)
  • Civil Procedure ActSection 26(1)
  • Civil Procedure ActSection 26(2)

Cases cited (15)

  • Selle and Another v. Motor Boat Company Ltd and Others
    [1968] 1 EA 123
  • Abdul Hameed Saif v. Ali Mohamed Sholan
    (1955) 22 E.A.C.A. 270
  • Mega Garment Limited vs Mistry Jadva Parbat & Co. (Epz) Limited
    [2016] eKLR
  • Bachelor's Bakery Ltd v Westlands Securities Ltd
    (1982) KLR 366
  • Shire v. Thabiti Finance
    [2000] LLR 1455 (CAK)
  • Afrofreight Forwarders Limited V African Linear Agencies
    Civil Appeal No.25 of 2007
  • WJ Blakeman Ltd V Associated Hotel Management Services Ltd
    [1985] eKLR
  • Bank View Mill Ltd and Others v Nelson Corporation and Feyer & Co (Nelson) Ltd
    (1942) 2 All ER 476
  • United States of America and Republic of France v Dolfus Mieg et Compagnie, SA & Bank of England
    (1952) 1 All ER 572
  • Towers & Co Ltd v Gray
    (1961) 2 All ER 68
  • Abok James Odera T/A A. J. Odera & Associates v. John Patrick Machira T/A Machira & Co. Advocates
    [2013] eKLR
  • Ajay Indravadan Shah v. Guilders International Bank Ltd
    [2002] 1 E.A. 269
  • Mbogo & Another V Shah
    [1968] EA 93
  • Mumias Sugar company Limited v Freight Forwarders (K) Limited
    [2005] eKLR
  • Kenya Knitting & Weaving Mills Limited v Kenya Power & Lighting Company Limited
    [2016] eKLR
On appeal from
High Court of Kenya at Nairobi
H.C.C.C. No. 544 of 2011
Jurisdiction invoked
First appellate jurisdiction over the High Court under the Court of Appeal's statutory appellate powers (appeal as of right against the High Court judgment and decree)

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, "Kenya Commercial Bank Limited v Pickwell Properties Limited [2020] KECA 501 (KLR)", Case Analysis (2020). Civil Appeal No. 165 of 2016. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2020/501/eng@2020-07-24

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