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ELCDismissedHCCC (Kericho) - suit instituted by plaint dated 29th June 2009· [2017] KEELC 1019 (KLR)

Bernard Gesora Makori & another v Co-operative Merchant Bank Ltd & another [2017] KEELC 1019 (KLR)

High Court of Kenya
10 November 2017
JMJ. M. Mutungi
7,589 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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The High Court dismissed the Makori brothers' challenge to a Kericho land sale because they couldn't prove fraud or keep their purchase deal alive.

What this practically means

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Executive summary

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The plaintiffs, sons of the late Johnson Makori Onduko, sued over LR No. 631/IV/60 Kericho, which the 1st plaintiff had charged to the 1st defendant to secure an Kshs.8,000,000 facility. After default, the 1st defendant agreed by private treaty dated 1st July 2004 to sell the property to the 2nd plaintiff for Kshs.10,000,000, but the sale was not completed; the 1st defendant instead sold the property to the 2nd defendant in October 2005, with transfer registered on 27th April 2006. The plaintiffs sought a permanent injunction, specific performance of the 2004 agreement, cancellation of the 2nd defendant's title, a declaration that the sale was null and void, and alternatively damages. The court framed six issues. It held that the 1st plaintiff's claim failed for want of evidence, his cause of action being separate from the 2nd plaintiff's. Clauses 13 and 14 of the agreement made time of the essence; the 2nd plaintiff did not pay the balance within 90 days, so the agreement lapsed on 30th September 2004 and could not be specifically performed, and no completion notice was required. Allegations of fraud, collusion and undervalue failed: the 2nd plaintiff admitted having no proof of fraud, and the 2nd defendant, who paid the full price after the earlier agreement had lapsed, was an innocent purchaser for value; the sale price exceeded the chargee's forced-sale valuation. Prior injunctive orders had been discharged when the suits granting them abated or were struck out, so lis pendens did not apply. The suit was res judicata against the 1st plaintiff but not the 2nd. The plaintiffs' suit was dismissed with costs to the defendants.

Key legal issues

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01

Effect of the 1st plaintiff's failure to testify

Holding

The 1st plaintiff's claims were unproved and unsustainable as no evidence was tendered in support of them

Reasoning

The 1st plaintiff's cause of action arose from the charge and loan account, and several particulars of fraud concerned him personally. He did not testify and gave no authority to the 2nd plaintiff to testify for him. The causes of action of the two plaintiffs were separate and distinct, so the 2nd plaintiff could not prove the 1st plaintiff's claim.

p. 6
02

Whether the agreement of sale dated 1st July 2004 remained enforceable

Holding

The agreement lapsed on 30th September 2004 upon failure to complete within the 90-day period and cannot be specifically performed

Reasoning

Clauses 13 and 14 made time of the essence. Because time was of the essence, the Law Society Conditions of Sale completion-notice mechanism did not apply. The 2nd plaintiff never paid the balance or furnished a guarantee; the contract was not subject to obtaining financing, so pending HFCK negotiations could not keep it alive.

p. 7
03

Whether the sale and transfer to the 2nd defendant was fraudulent, collusive or at an undervalue

Holding

No fraud, collusion or undervalue was proved; the 2nd defendant was an innocent purchaser for value

Reasoning

The 2nd plaintiff admitted having no proof of the particulars of fraud. The 2nd defendant bought after the prior agreement had lapsed, paid the full purchase price into the 1st plaintiff's loan account, and the sale price exceeded the forced sale value in the chargee's valuation. The later plaintiffs' valuation was post-sale and of doubtful weight.

p. 9
04

Res judicata

Holding

The suit is res judicata as regards the 1st plaintiff, whose issues were litigated in earlier suits, but not as regards the 2nd plaintiff whose cause of action was new

Reasoning

Previous suits between the 1st plaintiff and the 1st defendant over the same property had dealt with injunctions against the power of sale. The 2nd plaintiff's contract-based claim introduced a new cause of action. In any event the 1st plaintiff's suit would be sub judice the earlier suits under Section 6 of the Civil Procedure Act.

p. 11
05

Effect of prior injunctive orders and lis pendens

Holding

The earlier injunctions stood discharged once the suits in which they were granted abated or were struck out, so the doctrine of lis pendens had no application

Reasoning

The plaintiffs' own pleadings acknowledged that Nairobi HCCC No. 1534 of 2005 (Kericho HCCC No. 46 of 2008) abated as against the deceased 1st plaintiff and was struck out as against Bernard Gesora Makori, and that the 1998 suit was overtaken by events. The registered injunctions therefore had ceased to have legal effect at the time of the transfer.

p. 10

Legal principles established

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  • A party alleging fraud bears the burden of proving it to a standard higher than a balance of probabilities
  • Where time is expressly of the essence and the purchaser fails to complete within the completion period, the agreement lapses automatically without any notice of rescission
  • A mortgagee/chargee whose mortgage-money has fallen due may exercise the statutory power of sale without court intervention
  • A claimant who does not testify or tender evidence in support of his claim fails to discharge the burden of proof
  • Parties are bound by their pleadings and cannot introduce new issues through submissions or evidence

Court orders

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  1. 1.The plaintiffs' suit is dismissed with costs to the defendants

Authorities

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Legislation

  • Transfer of Property ActSection 69(1)
  • Civil Procedure Act, Cap 21 Laws of KenyaSection 6
  • Companies Act, Cap 486 Laws of Kenya (now repealed)not_specified
  • Law Society Conditions of Sale (1989 Edition)Condition 4, sub-clause (7)

Cases cited (5)

  • Salomon & Co. Ltd –vs- Salomon
    [1987] AC 22 HL
  • Management Committee of Shalemi Community Educators & 7 Others –vs- Registered Trustees of Micro Enterprises Support Programmes Trust
    [2016] eKLR
  • West Kenya Sugar Co. Ltd –vs- Busia Sugar Industries Ltd & 2 Others
    [2017] eKLR
  • Bernard Gesora Makori –vs- Co-operative Merchant Bank Ltd (Mombasa HCCC No. 576 of 2001)
    ruling of 26th February 2002 (Onyancha, J.)
  • Bernard Gesora Makori –vs- The Co-operative Merchant Bank Limited (Nairobi HCC No. 1149 of 1998)
Jurisdiction invoked
Original civil jurisdiction of the High Court over a claim founded on contract, land and allegations of fraud (suit by plaint under the Civil Procedure Act, Cap 21)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (2)

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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, "Bernard Gesora Makori & another v Co-operative Merchant Bank Ltd & another [2017] KEELC 1019 (KLR)", Case Analysis (2017). HCCC (Kericho) - suit instituted by plaint dated 29th June 2009. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2017/1019/eng@2017-11-10

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