PAA Brothers Company Limited v Qiye Company Limited [2018] KEELC 4520 (KLR)
The bottom line
#What this practically means
#Executive summary
#Key legal issues
#Whether the arbitration clause ousted the court's jurisdiction
The defendant, having filed a defence without seeking referral to arbitration, was precluded from raising the arbitration clause.
An arbitration clause existed, but the mechanism for invoking it required a timely application. Because the defendant filed a defence without applying to have the matter referred to arbitration, it could not later rely on the clause to defeat the suit. The court thus proceeded to determine the claim on its merits.
Whether the plaintiff should have sued the management company instead of the developer
No - the sale agreement was between the plaintiff and the defendant as developer, so the defendant was the proper party.
The defendant had incorporated Muthangari Suites Management Company and allotted the plaintiff shares, but the company was moribund and not party to the sale agreement. Since the contractual obligations arose from the agreement between plaintiff and defendant, the claim lay against the developer and not the management company.
Liability for the defects
The defendant was liable for both patent and latent defects, having failed to remedy defects reported within the warranty period.
The warranty covered structural defects; adopting the definition of structural defects from the cited journal (faulty workmanship or materials), the defects documented by the plaintiff's engineer fell within it. Complaints were made within the initial and extended warranty periods, and the defendant acknowledged but did nothing, hence liability attached.
Quantum of damages
Cost of reinstatement was adopted as the measure, awarding Kshs.48,952,469.35 as general damages.
Relying on Darlington BC v Wiltshier Northern Ltd and East Ham BC v Bernard Sunley, the court identified reinstatement cost as one of the accepted bases of assessment. The plaintiff's engineer's detailed computation of reinstatement costs was found reasonable, and no other heads were awarded to avoid double compensation.
Legal principles established
#- A party who does not apply to refer a dispute to arbitration before filing a defence is precluded from raising the arbitration clause afterwards.
- The general principle for assessment of damages for breach of contract is compensatory.
- A developer who fails to remedy defects brought to its attention within the warranty period is liable for both patent and latent defects.
Court orders
#- 1.Judgment entered for the Plaintiff against the Defendant in the sum of Kshs.48,952,469.35/= as general damages
- 2.The amount to attract interest at court rates from the date of judgment
- 3.The defendant to pay costs of the suit
- Jurisdiction invoked
- Article 162(2)(b) of the Constitution (Environment and Land Court) - original jurisdiction over the lease and construction dispute
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "PAA Brothers Company Limited v Qiye Company Limited [2018] KEELC 4520 (KLR)", Case Analysis (2018). ELC NO. 698 OF 2015. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2018/4520/eng@2018-02-06
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.