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ELCPartially AllowedOriginating Summons (undated on record)· [2019] KEELC 2664 (KLR)

Stanley Thyaka Muindi v Matewa Agencies Ltd & 2 others [2019] KEELC 2664 (KLR)

Environment and Land Court
21 June 2019
LGL. Gacheru
2,984 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 ordered a company to complete a land sale after taking full payment, but ruled its directors could not be sued personally.

What this practically means

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Executive summary

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The Applicant brought an Originating Summons seeking specific performance of a sale agreement dated 15th January 2013 with Matewa Agencies Limited for the purchase of L.R Nos. 4953/4746 and 4953/4748 for Kshs. 1,500,000/=. He paid the full purchase price, was granted possession, and had developed the land, but the vendor failed to deliver the completion documents, including the original title deed and executed transfers. The 2nd and 3rd Respondents, directors of the 1st Respondent, opposed the suit, contending that the delay was occasioned by the Ministry of Lands' failure to process titles from the mother title, and sought to have the Ministry's officers summoned. The court framed four issues: whether the directors were improperly sued; whether the sale agreement was valid; who should procure the completion documents; and whether the applicant was entitled to the orders sought. The court held that the directors were wrongly enjoined, the corporate veil not having been lifted and no fraud being alleged; that the sale agreement satisfied Section 3(3) of the Law of Contract Act and was valid and enforceable; and that under the contract the vendor, not the applicant or the Ministry, bore the obligation to procure the completion documents, courts being unable to rewrite contracts. Finding damages inadequate given the applicant's long possession and development of the land, the court granted specific performance, entered judgment against the 1st Respondent on prayers 1, 2 and 3, gave it 60 days to comply, and awarded the applicant costs of the suit.

Key legal issues

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01

Whether the directors could be sued personally for the company's contractual obligations

Holding

The 2nd and 3rd Respondents, having signed the agreement as directors of the 1st Respondent company, were wrongly enjoined since no fraud or grounds for lifting the corporate veil were alleged or proved

Reasoning

The vendor under the sale agreement was Matewa Agencies Limited, a limited liability company, and the directors signed merely in their capacity as such. The court applied the separate legal personality principle, citing authority that directors are only personally liable where the corporate veil is lifted for fraud or improper conduct. The applicant neither alleged misgivings nor sought lifting of the veil, so the claim against the directors personally failed.

p. 2
02

Whether the sale agreement was valid under Section 3(3) of the Law of Contract Act

Holding

The sale agreement was valid and enforceable, satisfying the requirements that it be in writing, signed by all parties and attested by a witness

Reasoning

The court examined the produced sale agreement and found it contained the names of the parties, description of the property, purchase price and conditions. Citing Nelson Kivuvani v Yuda Komora, it held these ingredients, together with signatures witnessed, satisfied Section 3(3) of the Contract Act, rendering the agreement valid and enforceable between the applicant and the 1st Respondent.

p. 3
03

Who bears the obligation to procure the completion documents

Holding

The 1st Respondent, as vendor, is contractually bound to procure and deliver the completion documents; it cannot shift this duty to the Ministry of Lands or the applicant

Reasoning

Parties are bound by their contract, which placed the obligation of presenting completion documents on the vendor. The court rejected the respondents' claim that the Ministry of Lands was responsible, noting there were procedures for compelling government officials and that other parties had obtained titles, showing issuance was possible. Requiring the applicant to follow up alone would be dishonest.

p. 3
04

Whether the applicant was entitled to specific performance

Holding

Specific performance was granted because there was a valid, enforceable contract, damages were not an adequate remedy, and the applicant had been in possession and had developed the land

Reasoning

The contract was valid, in writing, signed by all parties, and supported by consideration, satisfying Section 3(3) of the Contract Act. Specific performance is discretionary but the court found no illegality, defect or hardship to the defendant; other titles had been processed from the same mother title. The applicant had been in possession for years and developed the property, making damages inadequate and specific performance the just remedy.

p. 4

Legal principles established

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  • A company is a separate legal entity from its directors and shareholders, who are not personally liable for its deeds absent fraud or grounds for lifting the veil
  • A contract for the sale of land containing the parties' names, property description, purchase price, conditions, and signed and witnessed complies with Section 3(3) of the Law of Contract Act and is valid
  • Courts cannot rewrite contracts; parties are bound by the terms they voluntarily agreed to
  • Specific performance is a discretionary equitable remedy granted where a valid enforceable contract exists and damages are not an adequate alternative remedy

Court orders

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  1. 1.Judgment entered for the Applicant against the 1st Respondent in respect of prayers No. 1, 2 & 3
  2. 2.An order of specific performance compelling the 1st Respondent to complete the sale agreement dated 15th January 2013 by delivering all the completion documents
  3. 3.An order of specific performance compelling the 1st Respondent to execute the transfer documents and transfer L.R Nos. 4953/4746 and 4953/4748 to the Applicant
  4. 4.Costs of the suit to the Applicant as the successful party
  5. 5.The actions to be performed and completed by the 1st Respondent within 60 days from the date of judgment

Authorities

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Legislation

  • Law of Contract ActSection 3(3)
  • Auctioneers ActCap. 526

Cases cited (7)

  • George Williams Omondi & Another v Co-operative Bank of Kenya Ltd & 2 Others
    [2016] eKLR
  • H M B Kayondo v Somani Amirali
    Kampala HCCS No.183 of 1994
  • Victor Mabachi & Another v Nurturn Bates Ltd
    Civil Appeal No.247 of 2005 [2013] eKLR
  • Nelson Kivuvani v Yuda Komora & Another
    Nairobi HCCC No.956 of 1991
  • Total Kenya Ltd v Joseph Ojiem
    Nairobi HCCC No.1243 of 1999
  • National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & Another
    Civil Appeal No.95 of 1999 (2001) KLR 112 (2002) EA 503
  • Reliable Electrical Engineers Ltd v Mantrac Kenya Limited
    (2006) eKLR
Jurisdiction invoked
Original civil jurisdiction of the Environment and Land Court over a contract for the disposition of an interest in land (L.R Nos. 4953/4746 and 4953/4748)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (5)

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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, "Stanley Thyaka Muindi v Matewa Agencies Ltd & 2 others [2019] KEELC 2664 (KLR)", Case Analysis (2019). Originating Summons (undated on record). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2019/2664/eng@2019-06-21

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