Dhanjal Investments Limited v Shabaha Investments Limited
The bottom line
#Kenya's Court of Appeal upheld a Kshs.69.66 million interest award in a 24-year property sale dispute but slashed the buyer's damages claim to just Kshs.30,000.
What this practically means
#Executive summary
#Key legal issues
#Whether the 24-year duration of the suit raised a constitutional fair-trial issue
No constitutional violation was established; the issue was not pleaded with the required precision and no particulars of infringement were provided.
The cause of action was contractual; the Appellant did not plead the constitutional issue in its counterclaim or as a preliminary issue, and provided no particulars or evidence of how the Respondent or the courts breached the right to a fair trial. The Anarita Karimi Njeru threshold, restated in Mumo Matemo, was not met, so neither the High Court nor this Court could make findings on the alleged violation.
Breach of the sale agreement and the effect of time being of the essence
Both parties were in breach of the completion conditions; the Respondent was in breach of Special Condition 7 by failing to disclose pending litigation; but both parties affirmed the contract, waived rescission and were estopped from terminating it.
The Respondent admitted it had not obtained the necessary consents by the completion date, and the Appellant had not paid the balance, so both breached the time-is-of-the-essence condition. The undisclosed suit HCCC 289 of 1994 was material litigation breaching Special Condition 7. However, by their conduct - taking possession, transfer, deed of indemnity and the 2012 consent - both parties affirmed the contract, which remained valid and subsisting.
Application of the doctrine of lis pendens
The High Court erred in applying lis pendens to defer payment of the purchase price; the doctrine only restricts transfer or disposition of the suit property and had no bearing on payment of the purchase price.
By the time HCCC 85 of 1996 was filed, the property had already been transferred to the Appellant; lis pendens required only that the Appellant not dispose of the property. The orders on deposit of the purchase price merely secured the Respondent's position and did not result in disposition of the property, so the doctrine cannot justify non-payment of the purchase price.
Entitlement to interest, its rate and period
Interest was payable at the contract rate of 30% from 13th July 2006 (dismissal of HCCC 85 of 1996) to 7th September 2012 (payment in full), amounting to Kshs.69,660,000/=, affirming the High Court's award.
Interest was contractually provided for at 30% and was due as of right. The Appellant did not deposit the balance or give notice as required by Condition 8(1) and (2) of the LSK Conditions of Sale. It would be unconscionable to allow the Respondent interest during its own continuing breach of Special Condition 7, so interest ran only from dismissal of the pending suit.
Entitlement to damages and quantum
The Appellant was entitled only to nominal damages of Kshs.30,000/= for breach of condition 5 and Special Condition 7, offset against the interest payable to the Respondent.
The Appellant was not prevented from trading by lis pendens or court orders and had a duty to mitigate. The only period for which loss of income could validly be claimed was the 8 months between completion (15th April 1995) and transfer (15th February 1996), but no claim or evidence was made for that period, so only nominal damages were awardable.
Legal principles established
#- On a first appeal, the Court of Appeal is not bound by the findings of fact of the trial court and may re-evaluate the evidence and draw its own conclusions, subject to due allowance for not having seen or heard the witnesses.
- A constitutional violation claim must set out with precision the complaint, the provisions infringed and sufficient particulars of the manner of infringement.
- Where a contract makes time of the essence, no completion notice is required under condition 4(7) of the LSK Conditions of Sale before treating the contract as breached.
- The doctrine of lis pendens only prevents transfer or disposition of the suit property, or dealings that may take the property out of the reach of other parties, and cannot be extended to other dealings such as payment of the purchase price.
- A party entitled to rely on a contractual stipulation for its benefit may waive it and allow the contract to proceed as though the stipulation did not exist.
- Where special damages are not proved but breach is established, the loss is capable of compensation by an award of nominal damages.
Court orders
#- 1.The orders of the High Court awarding interest to the Respondent of Kshs.69,660,000/= and costs of the suit and counterclaim in Mombasa HCCC 38 of 1997 are affirmed
- 2.The orders of the High Court dismissing the Appellant's Counterclaim are set aside and substituted by an award of nominal damages of Kshs.30,000/= to the Appellant, to be offset against the interest payable to the Respondent
- 3.Each party shall bear its respective costs of the appeal and cross appeal
- On appeal from
- High Court of Kenya at Mombasa
- High Court Civil Case No. 38 of 1997
- Jurisdiction invoked
- First appeal to the Court of Appeal from the High Court under Article 164(1A) of the Constitution (first appellate jurisdiction); the judgment expressly frames the appeal as 'a first appeal from the decision of the High Court'
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (1)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Disney Insurance Brokers Limited v County Government of Mombasa[2014] KEHC 4855 (KLR)5 Jun 2014
Cite this brief
#Cite this brief
Caselaw, "Dhanjal Investments Limited v Shabaha Investments Limited", Case Analysis (2022). Civil Appeal 80 of 2019. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2022/366/eng@2022-02-18
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.