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ELCPartially AllowedELC Civil Case No. 1252 of 2013· [2021] KEELC 2247 (KLR)

Philip Jalango v Ryan Properties Limited [2021] KEELC 2247 (KLR)

Environment and Land Court
29 July 2021
KBK. BOR
6,188 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 developer to refund a house buyer and pay Sh12 million in damages after breaching the sale agreement.

What this practically means

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Executive summary

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The Plaintiff sued the Defendant, a developer, for breach of a sale agreement dated 10/10/2012 for the purchase of house number 7 in the proposed Grash Gardens development on L.R. No. 12767/3, Karen, for Kshs. 33,000,000/=. He paid Kshs. 17,250,000/= towards the purchase price. He alleged that the Defendant failed to commence construction by the contractual date of May 2012, unilaterally altered the approved building plans by reducing the houses from ten to eight, relocating and reducing the size of house number 7, omitting the swimming pool, boundary wall and bio-digester unit, encumbered the land with a charge to Housing Finance Company Limited contrary to the agreement, and later demanded further payments before rescinding and purporting to retain 10% of the price. The Plaintiff sought rescission, a refund, and damages for loss of investment bargain of Kshs. 12,000,000/=. The Defendant denied the claims, maintained its own rescission and that it properly retained 10%. Earlier interlocutory attempts to strike out the suit and to stay proceedings and arrest judgment failed. The court held that the unilateral alterations without the Plaintiff's consent, the failure to commence construction, the demand for a payment pegged on construction commencement that had not occurred, and the encumbrance of the land were breaches entitling the Plaintiff to rescind. The Defendant had refunded Kshs. 16,161,969/= on 7/10/2016. Judgment was entered for the balance of Kshs. 1,088,037/= with interest, interest on the refunded sum from filing suit to 7/10/2016, and damages of Kshs. 12,000,000/= for loss of bargain, plus costs.

Key legal issues

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01

Breach of the sale agreement through unilateral alteration of the development plans

Holding

The Defendant's unilateral reduction of the houses from ten to eight, relocation and reduction in size of house number 7, and alteration of the plans without the Plaintiff's consent constituted breaches of the sale agreement

Reasoning

The recitals to the sale agreement provided that the Defendant would construct ten houses and that the purchaser had inspected and accepted the approved plans. The evidence showed the plans were altered to eight houses, house number 7 relocated and reduced by over 22 square metres, and amenities like the swimming pool excluded, all without notice or consent. The court held these unilateral alterations amounted to breaches.

p. 5
02

Breach of the construction commencement and completion timelines

Holding

The Defendant breached the term on commencement of construction since construction had not begun by 21/3/2013 despite a commencement date of on or about May 2012 and completion by September 2013

Reasoning

Clause 1.1(g) gave the commencement date as on or about May 2012 and clause 1.1(h) the completion date as September 2013. The Plaintiff's uncontroverted evidence and photographs of 25/6/2013 showed the project had not started. Clauses 8.2.1 and 8.2.2 allowed extension of transaction timelines but not deferment of the construction commencement date.

p. 5
03

Entitlement to rescind and refund

Holding

The Defendant's breaches, including encumbering the suit land contrary to clause 15.3, entitled the Plaintiff to rescind and recover a full refund

Reasoning

Clause 15.3 did not contemplate encumbering the premises since the sale proceeds were to fund construction. The Defendant charged the land to Housing Finance Company Limited to secure a Kshs. 100,000,000/= loan, contrary to the agreement. The court held the Plaintiff was entitled to rescind as he did and to a full refund of the Kshs. 17,250,000/= deposit.

p. 6
04

Measure of damages for loss of bargain

Holding

The Plaintiff was entitled to damages of Kshs. 12,000,000/= for loss of investment bargain because the value of the property at repudiation exceeded the purchase price

Reasoning

Relying on the authorities cited by the Plaintiff, the court accepted that where the value of the property at the date of repudiation exceeds the agreed purchase price, the purchaser recovers loss of bargain. The selling price on 4/7/2013 was Kshs. 43,000,000/=/Kshs. 42,500,000/= against the agreed price of Kshs. 33,000,000/=, supporting damages of Kshs. 12,000,000/=.

p. 6

Legal principles established

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  • Unilateral alterations to approved building plans by a vendor without the purchaser's consent amount to breach of the sale agreement
  • A vendor cannot demand a instalment pegged to the actual commencement of construction where construction has not commenced
  • A purchaser who has repudiated by the vendor is entitled to a full refund of the purchase price paid and, where the value of the property at repudiation exceeded the agreed price, damages for loss of bargain

Court orders

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  1. 1.Judgment entered in favour of the Plaintiff for Kshs. 1,088,037/= being the balance of the purchase price withheld by the Defendant, plus interest at court rates from the date of filing suit until payment in full
  2. 2.The Defendant to pay the Plaintiff interest on the sum of Kshs. 16,161,969/= at court rates calculated from the date of filing suit until 7/10/2016
  3. 3.Damages of Kshs. 12,000,000/= awarded for loss of investment bargain, with interest at court rates from the date of judgment until payment in full
  4. 4.The Plaintiff awarded the costs of the suit
Jurisdiction invoked
Article 165 of the Constitution (jurisdiction of the Environment and Land Court over disputes relating to land was upheld; the Defendant's strike-out application premised on Article 165 was declined)

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, "Philip Jalango v Ryan Properties Limited [2021] KEELC 2247 (KLR)", Case Analysis (2021). ELC Civil Case No. 1252 of 2013. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2021/2247/eng@2021-07-29

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