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ELCPartially AllowedELC Suit No. 106 of 2012· [2014] KEELC 378 (KLR)

Karanja Mbugua & another v Marybin Holding Co. Ltd [2014] KEELC 378 (KLR)

Environment and Land Court
5 May 2014
PNP. Nyamweya
7,270 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan court cancelled a land buyer's title because the buyer's advocate failed to honour a written promise to pay off the seller's mortgage.

What this practically means

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Executive summary

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The Plaintiffs sold Title No. Nairobi/Block 93/282 to the Defendant for Kshs 10,000,000 by agreement dated 14th July 2010, with a 90-day completion period. They gave vacant possession in October 2010 on payment of the 10% deposit, and furnished completion documents in late November 2010. The property was subject to a KCB mortgage; the Defendant's advocate gave a professional undertaking to pay the redemption amount within 60 days, which was not honoured, nor was the balance of the purchase price paid. After a 21-day completion notice lapsed, the Plaintiffs rescinded the agreement and sued for vacant possession, cancellation of the transfer, rectification of the register, an injunction, damages and mesne profits. The court framed four issues. It held that the written correspondence and the professional undertaking, signed by the advocates as agents, were to be read with the sale agreement and introduced new terms, so the parole evidence rule did not apply and the Defendant was in breach; the Kshs 5 million paid to its own advocate did not discharge its liability. The court further held that the completion notice validly made time of the essence and that rescission on 1st February 2011 was lawful, the Defendant having waived complaint about the Plaintiffs' delay by accepting the documents. Rectification was warranted because the registration was obtained by mistake. The deposit of Kshs 1,000,000 was forfeited under Special Condition D, but damages and mesne profits were refused for want of proof. Judgment was entered for the Plaintiffs with cancellation of the transfer, rectification of the register, vacant possession within 90 days, and costs against the Defendant save for the rectification costs.

Key legal issues

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01

Whether the advocate's professional undertaking to pay the mortgage redemption amount formed part of the sale agreement

Holding

Yes - the post-agreement written correspondence and undertaking were read with the sale agreement and introduced new terms, so non-payment of the loan redemption sum was a breach by the Defendant.

Reasoning

The court found the advocates were agents of their clients and the correspondence specifically referred to the parties and suit premises. The undertaking was in writing and signed, satisfying section 3(3) of the Law of Contract Act, and was made after the sale agreement with the intention of adding new terms, so the parole evidence rule did not apply.

p. 8
02

Validity of rescission

Holding

The 21-day completion notice made time of the essence; the Defendant failed to confirm registration or pay the balance, so the Plaintiffs validly rescinded on 1st February 2011.

Reasoning

Special Condition D entitled the vendors to issue a completion notice and rescind on non-compliance, with forfeiture of the deposit. The notice lapsed on or about 28th January 2011 without compliance, and it was reasonable to issue it given vacant possession had been given in October 2010 and completion documents in November 2010.

p. 9
03

Entitlement to rectification of the register

Holding

The registration of the transfer in the Defendant's name was by mistake within the meaning of the rectification provisions, entitling the Plaintiffs to cancellation of the transfer and rectification of the register.

Reasoning

Section 143 of the repealed Registered Land Act (mirrored in section 80 of the Land Registration Act, 2012) permits cancellation of a registration obtained by fraud or mistake. The Defendant did not fulfil its part of the bargain to entitle it to registration, so the registration was by mistake.

p. 10
04

Forfeiture of the deposit

Holding

The Plaintiffs retain the Kshs 1,000,000 deposit; Special Condition D expressly provided for forfeiture upon rescission and it would be inequitable to refund it.

Reasoning

A deposit secures performance; where the contract gives the vendor an express right of forfeiture on non-performance, the deposit is forfeited. The Defendant breached the agreement, had possession since December 2010, proved no renovations, and filed no counterclaim.

p. 10

Legal principles established

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  • Correspondence and a professional undertaking by advocates, referring to the transaction and signed by the advocates acting as agents, may be read together with a written land sale agreement so as to introduce new terms.
  • A vendor may rescind where a completion notice making time of the essence lapses without compliance, and the legal effect of rescission is restoration of the parties to their former positions.
  • A purchaser who accepts delayed completion documents and proceeds to transfer the property waives rights arising from the vendor's breach in delaying the documents.
  • A deposit is security for performance and may be forfeited where the contract expressly so provides on non-performance.
  • Mesne profits are special damages which must be both pleaded and proved.

Court orders

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  1. 1.Land Registrar, Nairobi County ordered to forthwith cancel the registration of the transfer of Title No. Nairobi/Block 93/282 in favour of Maybin Holding Company Limited and any consequential transfers.
  2. 2.Land Registrar, Nairobi County ordered to rectify the proprietorship section of the register and register and issue a new title to Karanja Mbugua and Mary-Anne Mwendwa Mwiti.
  3. 3.Plaintiffs to meet the costs of the cancellation and rectification in orders (1) and (2).
  4. 4.Defendant, its agents, servants and persons claiming through them to vacate the suit property within 90 days of service of the judgment decree; in default, an order for eviction to issue.
  5. 5.Plaintiffs to retain Kshs 1,000,000 deposit forfeited pursuant to the sale agreement.
  6. 6.Defendant to bear the costs of the suit save for the costs specified in order (3).

Authorities

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Legislation

  • Law of Contract Actsection 3(3)
  • Land Registration Actsection 80
  • Registered Land Act (repealed)section 143
  • Civil Procedure Actsection 27(1); Order 21, Rule 13
  • Law Society Conditions of SaleClause 4(7) and 4(7)(d)

Cases cited (4)

  • Edward Mugambi vs. Jason Mathiu
    Civil Appeal No. 286 of 2002 (2007) eKLR
  • Njamunyu vs. Nyaga
    (1993) KLR 282
  • Harrison Kamau Ng'ang'a vs. Attorney General & Another
    High Court Civil Suit 1241 of 2003; (2004) eKLR
  • Hadley v Baxendale
    (154) 9 Exch 241
Jurisdiction invoked
Environment and Land Court jurisdiction under the Environment and Land Court Act (suit concerning title to land)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (4)

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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, "Karanja Mbugua & another v Marybin Holding Co. Ltd [2014] KEELC 378 (KLR)", Case Analysis (2014). ELC Suit No. 106 of 2012. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2014/378/eng@2014-05-05

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