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ELCPartially AllowedCivil Suit No. 210 of 2011· [2017] KEELC 13 (KLR)

Lakeview Investments Ltd v Ian Magara Bwosiemo & 2 others [2017] KEELC 13 (KLR)

Environment and Land Court of Kenya
5 October 2017
2,557 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan land buyer who breached the sale contract got only a refund plus interest, and the vendors' second sale was declared void.

What this practically means

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Executive summary

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The Plaintiff, Lakeview Investments Ltd, sued the 1st and 2nd Defendants (registered owners of 10 acres in Mlolongo, LR No. 25693) and the 3rd Defendant, seeking a declaration that a sale agreement between the 3rd Defendant and the 1st and 2nd Defendants was null and void, specific performance of a sale agreement dated 16th February 2010 under which the Plaintiff agreed to buy the land for Kshs. 11 million, an injunction, and costs. The Defendants never entered appearance despite substituted service, and the suit proceeded as an uncontested claim. PW1 and PW2 testified that the Plaintiff paid a 10% deposit of Kshs. 1.1 million plus a further Kshs. 850,000, took possession, fenced the land, subdivided it and contracted to sell 80 plots to the 3rd Defendant for Kshs. 20.6 million, but the 1st and 2nd Defendants refused to sign the transfer. The court framed three issues: validity of the 2010 sale agreement, whether transfer should be compelled, and validity of the 3rd Defendant's agreement. It held the 2010 agreement valid and unchallenged, but refused specific performance because the full purchase price was unpaid, the Plaintiff had breached the contract by subdividing and selling without title, and had failed to pursue completion within the agreed 180 days; relying on Karanja Mbugua v Marybin Holding Co. Ltd, the Plaintiff was entitled only to rescission and a refund. The agreement with the 3rd Defendant was declared null and void as the vendors lacked capacity to contract afresh. Final orders declared that agreement void, ordered a refund of Kshs. 1,950,000 with fencing costs at 18% interest per annum, and awarded costs to the Plaintiff.

Key legal issues

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01

Validity of the Sale Agreement dated 16th February 2010 between the Plaintiff and the 1st and 2nd Defendants

Holding

The agreement was valid and unchallenged, having been duly signed, with part performance by the Plaintiff through payment of the 10% deposit and further sums, and the Defendants' grant of possession.

Reasoning

The agreement was signed by all parties and contained a clause confirming willing entry without undue influence. The Plaintiff paid the 10% deposit of Kshs. 1.1 million plus Kshs. 850,000 on request and took possession as permitted by clause 10.2. No notice of termination under clause 6 was produced, and with no defence filed to controvert the claim, the agreement was held valid.

p. 2
02

Whether the Defendants should be compelled to transfer the suit parcel to the Plaintiff

Holding

Specific performance was refused; the Plaintiff, whose subdivision and resale of the land breached the contract and who failed to pursue completion within the agreed 180 days, is entitled only to a refund of deposits, fencing costs and interest.

Reasoning

The agreement permitted the Plaintiff only to fence the land upon payment of the deposit, not to subdivide and sell to third parties, so its acts amounted to breach since it had no title to pass. Seven years had passed without proof of completion notices. The court cannot rewrite the contract; rescission restores the parties to their former positions, following Karanja Mbugua v Marybin Holding Co. Ltd.

p. 3
03

Validity of the alleged agreement between the 1st and 2nd Defendants and the 3rd Defendant

Holding

The agreement between the 1st and 2nd Defendants and the 3rd Defendant was null and void because the vendors had no capacity to contract afresh over land already subject to a subsisting contract with the Plaintiff.

Reasoning

The prior sale agreement was signed first and the Plaintiff had paid the 10% deposit as agreed. The vendors therefore lacked capacity to enter into a fresh contract over the same suit land while the earlier contract remained in existence, rendering the subsequent agreement null and void.

p. 3

Legal principles established

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  • A vendor who has already contracted to sell land to a purchaser who has paid the agreed deposit lacks capacity to enter into a fresh contract over the same land with a third party; such a subsequent agreement is null and void.
  • The legal effect of rescission of a sale agreement is to restore the parties to their pre-contractual positions, entitling the defaulting purchaser to a refund of monies paid.
  • It is not the court's duty to rewrite the terms of a contract but to interpret and enforce the intentions of the parties.

Court orders

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  1. 1.The Sale Agreement between the 3rd Defendant and the 1st and 2nd Defendants be and is hereby declared null and void
  2. 2.The 1st and 2nd Defendant be and are hereby ordered to refund the deposit of the purchase price amounting to Kshs. 1,950,000/= including costs incurred to fence the land with interest at 18% per annum
  3. 3.Costs of the suit to be borne by the Defendants

Authorities

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Cases cited (1)

  • KARANJA MBUGUA & ANOTHER -V- MARYBIN HOLDING CO. LTD
    [2014] EKLR
Jurisdiction invoked
Original civil jurisdiction of the Environment and Land Court over disputes relating to land (Civil Suit No. 210 of 2011)

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, "Lakeview Investments Ltd v Ian Magara Bwosiemo & 2 others [2017] KEELC 13 (KLR)", Case Analysis (2017). Civil Suit No. 210 of 2011. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2017/13/eng@2017-10-05

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