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ELCAllowedELC Case (Mombasa) – Notice of Motion dated 5th July, 2021· [2021] KEELC 1694 (KLR)

Izera Enterprises Ltd v Image Font Ltd [2021] KEELC 1694 (KLR)

Environment and Land Court
30 September 2021
LNL.L. NAIKUNI
7,544 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
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The bottom line

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A Mombasa court froze a Kshs. 460 million land sale, locking the deposit in escrow until trial decides who keeps it.

What this practically means

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Executive summary

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This is a ruling of the Environment and Land Court at Mombasa (L.L. Naikuni J) on the Plaintiff/Applicant's Notice of Motion dated 5th July 2021 seeking interim injunctions restraining the Defendant/Respondent from demanding a refund of a Kshs. 69,000,000 deposit paid under a sale agreement dated 11th February 2021 for 2000 acres to be excised from LR 12177/11 for a purchase price of Kshs. 460,000,000. The plaintiff, registered owner of the suit land, asserted it had commenced subdivision, survey and registration, that the defendant took possession and carried out developments, and that the defendant's demand for a refund breached the agreement, which provided for 10% forfeiture on default. The defendant opposed, contending the agreement was a nullity ab initio for want of proper execution (Section 3 Law of Contract Act; Section 37 Companies Act), absence of Land Control Board consent, expiry by effluxion of time on 12th June 2021, non-disclosure of pending suits, and an allegedly forged/expired title; and that damages would be an adequate remedy. The court framed four issues. It found a serious cause of action triable only at full trial; applied the Giella v Cassman Brown principles and Mrao v First American Bank, holding the plaintiff had shown an arguable prima facie claim to part or all of the purchase price; accepted damages would likely be adequate given the defendant's means, but held the balance of convenience favoured preservation of the suit property and deposit. The court granted the temporary injunction restraining both parties from any transaction on the suit land, ordered Kshs. 46,000,000 (the conventional 10%) to be placed in an interest-earning joint escrow account held by both advocates' firms within 14 days, directed the suit to full trial within 90 days after pre-trial conference, and ordered costs of the motion to be in the cause.

Key legal issues

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01

Existence of a cause of action

Holding

There exists a serious and in-depth cause of action arising from the sale agreement, the deposit, allegations of breach, forfeiture and compensation, which can only be determined at full trial.

Reasoning

The court found areas of convergence (ownership of the land, execution of the 11 February 2021 sale agreement, payment of Kshs. 69,000,000 deposit) and serious areas of contestation: taking of vacant possession, legality and integrity of the agreement, breach and its consequences, and compensation/damages. Such issues raise a serious cause of action capable only of determination at full trial with oral evidence and cross-examination.

p. 7
02

Prima facie case with probability of success

Holding

The Plaintiff/Applicant demonstrated an arguable and genuine prima facie claim to part or all of the purchase price and may have a high chance of success at trial.

Reasoning

Applying Mrao v First American Bank, the court held the plaintiff had shown an arguable prima facie claim to either part or all of the purchase price, having engaged all along and worked towards fulfilment of the obligations of the sale agreement. The court noted the defendant's abrupt change of position on 2nd June 2021, raising issues of legality, disclosure and possession that required trial resolution.

p. 8
03

Adequacy of damages and balance of convenience

Holding

Although damages would likely be an adequate remedy given the defendant's financial standing, the balance of convenience favoured granting the injunction to preserve the suit property and the deposit sum pending trial.

Reasoning

The court accepted the defendant was capable of refunding any damages awarded, but noted that vendors conventionally incur substantive expenses at the initial stages of transactions and utilise deposit proceeds, and that the plaintiff owns the suit land. On the third Giella principle, the court allowed the application, holding there was need to preserve the suit property and the deposit sum pending full trial.

p. 8

Legal principles established

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  • The conditions for granting an interlocutory injunction are: prima facie case with probability of success; irreparable injury not adequately compensable in damages; and, if in doubt, the balance of convenience.
  • A right to obtain an interlocutory injunction is not itself a cause of action; it depends on a pre-existing cause of action.
  • A prima facie case in a civil application is a genuine and arguable case showing an apparently infringed right calling for an explanation or rebuttal from the opposite party.

Court orders

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  1. 1.Temporary injunction granted to the Plaintiff/Applicant in terms of preserving the title deed to the suit land, restraining both the Plaintiff and Defendant from undertaking any transaction on the suit land whatsoever until the suit is heard and determined
  2. 2.The conventional conveyancing 10% of the purchase price, being Kshs. 46,000,000.00, derived from the total deposit sum of Kshs. 69,000,000/= to be placed in an interest-earning joint Escrow account within 14 days, to be held by both law firms of M/s. Gikandi Ngubuini Advocate and Njuguna Kiai & Kahari Advocates at a bank of reputable 1st tier status until the case is heard and determined
  3. 3.The matter to be fixed for full trial on priority basis within the next 90 days upon conducting the pre-trial conference in accordance with Order 11 of the C.P.R.
  4. 4.Costs of the notice of motion to be in the cause

Authorities

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Legislation

  • Civil Procedure Rules, 2010Order 11; Order 40 Rules 1 & 2; Order 4 Rule 2; Order 19
  • Companies ActCap 486 (repealed); Sections 37(2) and (3) of the Companies Act of 2015
  • Registration of Titles ActCap 281 (repealed)
  • Evidence ActCap 80; Sections 107 and 120
  • Law of Contract ActSection 3
  • Contract ActCap 23, Section 3
  • Land Control ActCap 302, Section 6
  • Banking ActNot specified

Cases cited (11)

  • John Mburu –Vs- Consolidated Bank Of Kenya (2015) eKLR
  • Vijay Morfaria –Vs- Nansingh Madhu Singh Darbar & another (2000) eKLR
    (2000) eKLR
  • Pius Kimaiyo –Vs- Co-operative Bank of Kenya Ltd. (2017) eKLR
  • Sharok Kher Mohamed Ali & Another –vs- Southern Credit Banking Corporation Ltd. (2008) eKLR
  • Bridge International Academies – Vs - Mwakio Kalondi [2019] eKLR
  • Festus Ogadia –Vs - Haus Molliri [2009] eKLR
  • D. Njogu & Co. Advocates – Vs - National Bank of Kenya Ltd. [2016] eKLR
    Civil Appeal No. 165 of 2007
  • Giella –Vs- Cassman Brown [1973] E.A. 358
    [1973] E.A. 358
  • MRAO –VS- FIRST AMERICAN BANK OF KENYA LIMITED & 2 OTHERS [2003] eKLR 125
    [2003] eKLR 125
  • Director of Public Prosecution – Vs - Justus Mwendwa Kathenge & 2 others [2016] eKLR
  • Nguruman Ltd case
    Civil Appeal No. 266 of 2016
Jurisdiction invoked
Original civil jurisdiction of the Environment and Land Court over a land sale dispute; Civil Procedure Rules, 2010 (Order 40)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (3)

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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, "Izera Enterprises Ltd v Image Font Ltd [2021] KEELC 1694 (KLR)", Case Analysis (2021). ELC Case (Mombasa) – Notice of Motion dated 5th July, 2021. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2021/1694/eng@2021-09-30

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