Kent Libiso & another v Cirkon Trust Co. Limited & 3 others [2020] KEELC 1411 (KLR)
The bottom line
#A Nairobi property buyer who hadn't paid the purchase price lost the land, but the seller must refund Kshs. 8.5 million with interest.
What this practically means
#Executive summary
#Key legal issues
#Whether the sale agreement discharged the 2nd plaintiff's obligation to pay rent under the lease
No. The lease and sale agreement were separate contracts between separate legal entities; the 2nd plaintiff remained obliged to pay rent.
The court held that the 1st plaintiff and the 2nd plaintiff were distinct legal persons and neither's obligations could cease by the other's act absent express agreement. The sale agreement made no reference to the lease, so it could not be presumed the lease was discarded upon signing the sale agreement. Rent remained payable until completion of the sale, and the levy of distress for rent was therefore lawful.
Whether the 1st plaintiff was in default of the sale agreement when suit was filed
Yes. He failed to pay the balance of Kshs. 14 million by the completion date despite indulgence extended to 30th May 2008, and produced no evidence the funds were available.
Time was of the essence under special condition 3. Although the vendor informally indulged the purchaser to 30th May 2008 and appeared to ratify the variation by receiving further deposits, the purchaser never tendered the balance nor demonstrated he had the funds (no advocate's undertaking or bank evidence). By 16th June 2008, when HCCC No. 319 of 2008 was filed, the purchaser was in default.
Effect of the injunction of 27th November 2008
The injunction only restrained eviction and interference with possession; it did not bar the parties from performing the sale agreement or the lease.
The court reviewed Khaminwa, J's ruling and the extracted order, which restrained eviction and interference with the plaintiffs' quiet possession. The judge's remarks that the respondents acted illegally did not freeze the sale transaction; the vendor could remedy its default and the parties could proceed with completion in accordance with the agreement's terms.
Whether specific performance was available to the 1st plaintiff
No. Being an equitable remedy, it was unavailable to a plaintiff in default of an essential term and without clean hands.
Relying on Halsbury's Laws of England and the Court of Appeal decision in Gurder Singh Birdi, the court held a plaintiff must show performance of all essential terms at the date of the writ. The 1st plaintiff had not paid the balance of the purchase price at filing, did not tender it even after the completion notice of 2nd December 2008, and gave no professional undertaking through his advocates. Equity therefore did not assist him.
Whether the rescission and subsequent sales were valid and whether the 4th defendant was a bonafide purchaser
Yes. The rescission was valid following non-compliance with the compliant completion notice; the sale to the 2nd defendant was valid and the 4th defendant was a bonafide purchaser for value without notice.
The completion notice of 2nd December 2008 complied with the Law Society Conditions of Sale; the purchaser failed to tender the balance, so rescission was effective and the vendor could forfeit 10% of the purchase price and refund the balance of the deposit. The 4th defendant conducted due diligence, took a bank loan, had no notice of any litigation and no fraud was proved against either transferee, save the sale remained subject to the 2nd plaintiff's unregistered lease while in possession.
Legal principles established
#- A plaintiff seeking specific performance must have performed all essential terms of the contract, including payment of the balance of the purchase price, at the time of filing suit
- Separate legal entities' contractual obligations are distinct; a sale agreement signed by one party does not discharge another party's obligations under a separate lease unless expressly agreed
- Once a sale agreement is validly rescinded, the vendor may lawfully sell the property to another person
Court orders
#- 1.The 1st defendant to refund to the 1st plaintiff Kshs. 8,500,000 together with interest at court rates from 7th January 2009 until payment in full
- 2.The sum of Kshs. 1,171,842 deposited in the joint names of the parties' advocates, together with all accrued interest, to be released to the 1st defendant's advocates
- 3.The plaintiffs' suit is dismissed
- 4.All parties to bear their own costs of the suit
- Jurisdiction invoked
- Original civil jurisdiction of the High Court (Environment and Land Division), the suit having been transferred from the Commercial Division by Njagi, J on 13th June 2011 and renumbered Nairobi HC ELC No. 288 of 2011
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Kent Libiso & another v Cirkon Trust Co. Limited & 3 others [2020] KEELC 1411 (KLR)", Case Analysis (2020). Nairobi HC ELC No. 288 of 2011 (formerly Nairobi HCCC No. 319 of 2008), consolidated with HCCC No. 605 of 2009. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2020/1411/eng@2020-07-07
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.