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ELCOtherNot stated in the judgment (plaint dated 30/8/2018)· [2019] KEELC 4565 (KLR)

Peter S Muturi Karanja v Wilson Maina Wanjiku [2019] KEELC 4565 (KLR)

Environment and Land Court
14 February 2019
1,976 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Environment and Land Court ruled a land vendor cannot rescind a sale agreement without issuing a proper completion notice meeting all contractual requirements.

What this practically means

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Executive summary

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By a plaint dated 30/8/2018 the plaintiff sued for specific performance of a sale agreement dated 19/3/2018 over Land Title Number Nairobi Block 110/962/963, purchased at Kshs 28,000,000, of which he paid a Kshs 5,000,000 deposit with the balance of Kshs 23,000,000 due within 90 days. Together with the plaint he sought a temporary injunction restraining the defendant from enforcing a rescission notice dated 23/8/2018, from dealing with the property, and an inhibition registered against the title. The defendant opposed, contending the plaintiff failed to complete within the agreed time despite extensions, approached the court with unclean hands, and that the contract was validly terminated by a termination letter dated 24/8/2018. Two issues fell for determination: the court's jurisdiction in the face of an arbitration agreement (clause 18), and whether the plaintiff met the Giella v Cassman Brown criteria. On jurisdiction, the court declined to down its tools because no application under Section 6 of the Arbitration Act or formal objection had been made. On the merits of the application, the court found that although the plaintiff had not provided a professional undertaking for the balance, the defendant's letter of 16/7/2018 was not a valid completion notice under clause 9.3, lacking essential elements such as specification of the default and a demand to make it good within 21 days. The plaintiff therefore established a prima facie case. Rather than granting the injunction as prayed, the court issued interim orders restraining the defendant from rescinding the agreement or disposing of the property without first serving a proper completion notice, while permitting rescission once such notice was issued absent a professional undertaking. Each party was ordered to bear its own costs of the application.

Key legal issues

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01

Jurisdiction in the face of an arbitration clause

Holding

The court retained jurisdiction because no application under Section 6 of the Arbitration Act or formal jurisdictional objection was made

Reasoning

The court acknowledged that clause 18 of the sale agreement provided for arbitration as the dispute resolution forum. However, it held that it could not stay its own proceedings suo motu; a party seeking to invoke the arbitration agreement must move the court formally under Section 6 of the Arbitration Act and demonstrate the statutory criteria. Only upon such an application would an appropriate order be made.

p. 2
02

Validity of the purported completion notice under clause 9.3

Holding

The letter of 16/7/2018 did not meet the requirements of a proper completion notice under clause 9.3, so rescission was premature

Reasoning

The court set out four essential elements of a clause 9.3 completion notice and found the letter of 16/7/2018 lacking them. The letter merely invited the purchaser to indicate readiness to complete rather than specifying the default and demanding it be made good within 21 days, failing which the vendor would rescind. Absent a valid notice, the vendor could not lawfully rescind.

p. 3
03

Criteria for a temporary injunction under Giella v Cassman Brown

Holding

The applicant satisfied the prima facie case and irreparable loss limbs, justifying interim restraining orders in modified terms

Reasoning

Although the applicant appeared to be in breach for failing to provide a professional undertaking for the balance of Kshs 23,000,000, the court found it probable that no proper completion notice had been issued, giving the applicant a prima facie case. The court, however, tailored relief: the defendant was restrained from rescinding or disposing of the property without first serving a proper completion notice, and was at liberty to rescind after issuing one where no professional undertaking was given.

p. 3

Legal principles established

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  • A court will not decline jurisdiction for arbitration absent a formal application under Section 6 of the Arbitration Act demonstrating the statutory criteria
  • A completion notice under clause 9.3 must contain essential elements: confirmation of the vendor's readiness to complete, specification of the purchaser's default, a demand to make good the default within 21 calendar days, and an indication of rescission on failure
  • Until a proper completion notice is issued under clause 9.3, the vendor is not entitled to rescind the agreement for sale

Court orders

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  1. 1.An interim order restraining the defendant against rescinding the sale agreement dated 19/3/2018 or disposing of Land Title Number Nairobi Block 110/963 without serving the plaintiff with a proper completion notice under clause 9.3 of the sale agreement
  2. 2.In the absence of a professional undertaking under clause 8.2 of the agreement for sale, the defendant is at liberty to issue a proper completion notice and proceed to rescind the agreement
  3. 3.Each party to bear their respective costs of the application

Authorities

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Legislation

  • Arbitration ActSection 6

Cases cited (2)

  • Giella v Cassman Brown
    (1973) EA 358
  • Mrao v First American Bank of Kenya & 2 others
    (2003) eKLR
Jurisdiction invoked
Original jurisdiction of the Environment and Land Court over land contracts and interim relief; arbitration objection considered under Section 6 of the Arbitration Act but no formal application made

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, "Peter S Muturi Karanja v Wilson Maina Wanjiku [2019] KEELC 4565 (KLR)", Case Analysis (2019). Not stated in the judgment (plaint dated 30/8/2018). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2019/4565/eng@2019-02-14

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