Eric Mwenda Kanyuuru v Charles Mwiti Mugambi & 3 others [2020] KEELC 3352 (KLR)
The bottom line
#A Kenyan court ordered a land seller to complete a sale he tried to cancel, because his own secret bank charge over the property meant he could not lawfully terminate the deal.
What this practically means
#Executive summary
#Key legal issues
#Entitlement to specific performance
The Plaintiff was ready, able and willing to complete and was entitled to specific performance of the 29/8/2012 agreement.
The court found the Plaintiff had paid Kshs. 7,500,000 to the 1st Defendant and Kshs. 8,000,000 to Maingi, and had forwarded a draft agreement to enable a bank loan to pay the balance. The 1st Defendant was in breach for charging the property to KCB contrary to clause 10(c) and never refunded the deposit, so his termination was ineffectual and the equitable remedy was available.
Lawfulness of termination of the contract
The contract was not lawfully terminated because the 1st Defendant had himself breached clause 10(c) by charging the property to KCB and could not transfer clean title until the charge was discharged.
The charge to KCB registered on 27/9/2012 secured Kshs. 10,000,000 and was only discharged on 31/8/2016, the same day the property was transferred to the 2nd Defendant. Since the vendor could not deliver title until discharge, his 21-day completion notice of 8/3/2013 was ineffectual and the purported termination of 29/3/2013 could not stand.
Whether the 2nd Defendant was a bona fide purchaser for value without notice
The court found the sale to the 2nd Defendant could not stand given the Plaintiff's entitlement to specific performance, casting doubt on the bona fides and payment of the 2nd Defendant.
The 2nd Defendant produced no bank statements, cheques or RTGS slips to prove payment; the schedule of payments was internally doubtful (including Kshs. 5,900,000 shown as due to the Plaintiff in November 2016); the same firm of advocates acted throughout despite knowing of the unresolved dispute; and the 1st Defendant had not disclosed the earlier agreement to him.
Legal principles established
#- The rights of a chargee rank in priority over subsequent interests; land cannot be sold and successfully transferred until a subsisting charge is discharged, so a vendor who registers a fresh charge over contracted land cannot terminate for the purchaser's non-payment before performing his own obligations.
- Where a vendor is himself in breach (by charging the property contrary to clause 10(c)), his termination notice is ineffectual and the purchaser who is ready, able and willing may obtain specific performance.
Court orders
#- 1.The Plaintiff's claim for specific performance of the sale agreement dated 29/8/2012 is granted
- 2.The sale between the 1st and 2nd Defendants cannot stand
- 3.Prayers (a), (b), (c) and (d) of the Amended Plaint dated 27/4/2017 are granted
- 4.The 2nd Defendant's claim in ELC Case No. 137 of 2017 is dismissed with costs to the Plaintiff (who was the Defendant in that suit)
- 5.Costs of this suit are granted to the Plaintiff
- Jurisdiction invoked
- Environment and Land Court established under Article 162(2)(b) of the Constitution (original jurisdiction over land disputes)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Eric Mwenda Kanyuuru v Charles Mwiti Mugambi & 3 others [2020] KEELC 3352 (KLR)", Case Analysis (2020). ELC Case No. 143 of 2017 (consolidated with ELC Case No. 137 of 2017). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2020/3352/eng@2020-02-27
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.