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ELCAllowedELC. Case No. 875 of 2012 (O.S)· [2017] KEELC 3301 (KLR)

Kuldip Singh Bhogal v Wambugu Flats Limited [2017] KEELC 3301 (KLR)

Environment and Land Court
3 April 2017
KBK. Bor
1,369 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 ruled that a company cannot unreasonably refuse consent to transfer a flat and its share to a buyer who has paid in full.

What this practically means

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Executive summary

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The Plaintiff purchased Flat No. 5 on L.R. No. 209/90/11 (Wambugu Flats, Nairobi) from Tarlochan Singh Panesar in 2005 for Kshs. 2,000,000/=, fully paying the purchase price. Panesar held one undivided share in the Defendant company and executed the sale agreement and transfer deed, and by letter of 27/1/2006 notified the Defendant of his wish to transfer his share to the Plaintiff, complying with clause 4 of the lease. The Plaintiff occupied the flat from January 2006 with his family and paid all land rates, rents, service charge and outgoings, including the 2017 rates. He also facilitated the extension of the lease at the Defendant's advocate's request. The Defendant refused consent to the transfer, citing preemption rights in its Articles of Association and outstanding sums allegedly due from Panesar. The Plaintiff filed an Originating Summons under Order 37 Rules 3 and 14 of the Civil Procedure Rules seeking declarations that he was entitled to consent and to transfer of the share, an order compelling grant of consent, and a contempt sanction for non-compliance. The Defendant, though participating in early interlocutory appearances, neither attended the hearing nor filed a replying affidavit. The court found that no flat owner had expressed interest in exercising any preemptive right, that the Plaintiff had paid all sums due, and that under clause 1(x) of the lease consent was not to be unreasonably withheld from a respectable and responsible person. The court held the Defendant had unreasonably withheld consent and that the Plaintiff had proved his case on a balance of probabilities. Judgment was entered declaring the withholding of consent unlawful and illegal, ordering the grant of consent within 30 days on pain of contempt, and awarding the Plaintiff the costs of the suit.

Key legal issues

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01

Whether consent to transfer the share in the flat was unreasonably withheld

Holding

The Defendant unreasonably withheld consent; the Plaintiff is a respectable and responsible person who has occupied the flat since 2006 and paid all outgoings, and no evidence showed any flat owner sought to exercise preemption rights.

Reasoning

The refusal was based on alleged preemption rights and outstanding payments. No flat owner expressed interest in exercising the preemptive right, and the Plaintiff paid the sums demanded and even the 2017 land rent and rates. Clause 1(x) of the lease permitted refusal of consent only on reasonable grounds, and the Plaintiff's long residence, payment of outgoings and facilitation of the lease extension showed he was respectable and responsible.

p. 2
02

Whether the Plaintiff is entitled to the transfer of the share held by Mr. Panesar

Holding

Yes. Having fully paid the consideration and established his entitlement, the Plaintiff is entitled to the transfer of the share and to an order compelling the Defendant's servants or agents to grant consent.

Reasoning

Mr. Panesar executed the sale agreement and transfer deed, and notified the company of the intended transfer in compliance with clause 4 of the lease. Under clause 1(xi) of the lease, upon assignment with consent the tenant may transfer the whole of his shares in the company to the assignee. The Plaintiff proved his case on a balance of probabilities.

p. 2

Legal principles established

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  • Where a lease provides that consent to assignment is not to be unreasonably withheld in the case of a respectable and responsible person, a company that unreasonably withholds consent to transfer a share cannot resist the transfer.
  • A purchaser who has fully paid the consideration for a flat and the associated company share is entitled to have that share transferred to him upon assignment of the lease with the company's consent.

Court orders

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  1. 1.Declaration that the Plaintiff is entitled to be granted consent to have the one share in Flat No. 5 erected on L.R. No. 209/90/11, Wambugu Flats Nairobi transferred to him; the continued withholding of consent by the Defendant is unlawful and illegal
  2. 2.Declaration that the Plaintiff is entitled to have the Suit Property transferred to him having fully paid the consideration for it
  3. 3.The Defendant's servants or agents shall give consent to transfer the Suit Property from Mr. Panesar to the Plaintiff to facilitate registration in the Plaintiff's name
  4. 4.The Defendant, its servants or agents shall be held in contempt should they fail to grant consent to transfer the Suit Property to the Plaintiff within 30 days from the date of the Judgment
  5. 5.The Plaintiff is awarded the costs of the suit

Authorities

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Legislation

  • Civil Procedure RulesOrder 37 Rules 3 and 14
  • Civil Procedure RulesOrder 9 Rule 2
  • Civil Procedure ActSection 3
Jurisdiction invoked
Order 37 Rules 3 and 14 of the Civil Procedure Rules, Order 9 Rule 2 of the Civil Procedure Rules and Section 3 of the Civil Procedure Act

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, "Kuldip Singh Bhogal v Wambugu Flats Limited [2017] KEELC 3301 (KLR)", Case Analysis (2017). ELC. Case No. 875 of 2012 (O.S). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2017/3301/eng@2017-04-03

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