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ELCPartially AllowedELC No. 331 of 2010· [2018] KEELC 3344 (KLR)

Assests Procurement and Development Company Limited v Kenya Breweries Limited & 2 others [2018] KEELC 3344 (KLR)

Environment and Land Court
19 April 2018
EOE. O. Obaga
3,727 words in judgment
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The bottom line

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A Nairobi court ordered Kenya Breweries to refund Kshs.6.3 million and pay Kshs.20.6 million in damages for selling land it fraudulently claimed to own.

What this practically means

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Executive summary

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The plaintiff company contracted to purchase LR No. 209/1498/3, Ziwani, Nairobi from Kenya Breweries Limited (KBL) for Kshs.6,300,000, paid the full purchase price and took possession in December 2004, but the transfer never completed because the Council, the second defendant, disowned the extension of KBL's sub-lease. The Council proved through minutes of its General Purposes Committee that KBL's application for extension of the expired 40-year sub-lease had been expressly rejected in 2000, yet an extension was registered in 2002. The court found the purported extension and its registration were obtained fraudulently, leaving KBL with nothing to convey. Applying Fiat Kenya Ltd v Roble (1973) EA 11, the court declined specific performance because the contract was incapable of performance, and refused permanent and mandatory injunctions as the company held no valid registrable interest. The property was declared to belong legally to the Council and, by extension, the County Government as successor. The third defendant, a former Councillor, was found not liable; he was genuinely concerned about public property passing unlawfully into private hands. However, the company recovered against KBL: loss of rental income of Kshs.20,640,000 (43 units at an average Kshs.5,000 monthly over 8 years) with interest from the date of judgment, and a refund of the Kshs.6,300,000 purchase price with interest from January 2005. The suit against the Council and third defendant was dismissed with costs to the plaintiff, and overall costs were awarded to the plaintiff against KBL. Judgment delivered by E. O. Obaga J on 19 April 2018.

Key legal issues

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01

Whether the purported extension of KBL's lease was valid and lawfully obtained

Holding

The extension and its registration were obtained fraudulently because the Council's General Purposes Committee had rejected the application for extension

Reasoning

Minutes of the General Purposes Committee of the Council produced in evidence showed that KBL's application for extension of the expired sub-lease was expressly rejected in 2000. No fresh application was made, yet an extension was registered in 2002. The Council proved the particulars of fraud through documentary evidence; no approval from the relevant committee supported the registration. Consequently the purported extension was a nullity and the registration was obtained fraudulently.

p. 5
02

Whether the plaintiff was entitled to specific performance of the sale agreement

Holding

No. Specific performance was refused because the subject property did not legally belong to KBL and the contract was incapable of performance

Reasoning

Having found the lease extension fraudulent, nothing remained in favour of KBL to offer for sale. Citing Fiat Kenya Ltd v Roble (1973) EA 11 per Spry Ag P, the court will never award specific performance when it is incapable of enforcing its order or entertains serious doubt the contract is capable of performance. The purchase price was paid, but there was nothing for KBL to convey.

p. 5
03

Ownership of the suit property

Holding

The property legally belongs to the Council and, by extension, the County Government as its successor

Reasoning

Although the suit premises appeared registered in the name of KBL in the Lands Office, that registration was found to have been obtained fraudulently. The property therefore remains the Council's; the Council or County Government need only have the illegal extension expunged for the premises to revert to it.

p. 6
04

Quantum of damages against the 1st defendant

Holding

Loss of rental income of Kshs.20,640,000/= calculated at an average of Kshs.5,000 per unit per month for 43 units over 8 years, plus refund of the purchase price with interest

Reasoning

The company had tenants in 43 units, with rent varying between Kshs.2,500 and Kshs.7,500 per month. Taking an average rent of Kshs.5,000 per unit, annual loss of rental income was Kshs.2,580,000. The suit having been filed in 2010, loss was awarded for 8 years, totalling Kshs.20,640,000. All losses were attributable to KBL entering a contract it could not carry through.

p. 6

Legal principles established

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  • A court will not decree specific performance of a contract where it has serious doubt that the contract is capable of performance
  • An application for extension of lease that has been rejected cannot be revived and lead to a lawful extension and registration without undergoing the normal process of approval
  • A party alleging fraud and illegality may prove it through documentary evidence such as committee minutes
  • The right to indemnity arises only from an express or implied contract or by operation of law

Court orders

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  1. 1.Loss of rental income of Ksh.20,640,000/= with interest at court rates from the date of judgment until payment in full
  2. 2.Refund of purchase price of Kshs.6,300,000/= with interest at court rates with effect from January 2005 until payment in full
  3. 3.Plaintiff's suit against the 2nd and 3rd defendants dismissed with costs payable by the plaintiff
  4. 4.Costs of the suit to be paid to the plaintiff by the 1st defendant

Authorities

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Cases cited (1)

  • Fiat Kenya Ltd Vs Roble
    (1973) EA 11
Jurisdiction invoked
Original jurisdiction of the Environment and Land Court over disputes relating to land (LR No. 209/1498/3, Ziwani, Nairobi)

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, "Assests Procurement and Development Company Limited v Kenya Breweries Limited & 2 others [2018] KEELC 3344 (KLR)", Case Analysis (2018). ELC No. 331 of 2010. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2018/3344/eng@2018-04-19

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