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ELCAllowedCivil Suit No. 271 of 2018· [2022] KEELC 1011 (KLR)

Raphael Wamiti Gachoka v Oakpark Apartments Mombasa Limited [2022] KEELC 1011 (KLR)

Environment and Land Court
7 March 2022
5,124 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Mombasa court ordered a property company to complete a Kshs 18 million apartment lease it had accepted payment for but never registered.

What this practically means

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Executive summary

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The Plaintiff sued the Defendant for specific performance of a lease agreement dated 12th September 2012 over Apartment No. 313 in Insulae Africanus, Shanzu beach, damages for breach, and costs. The Defendant never entered appearance despite proper service of summons and hearing notices by a court process server, who effected service on the Defendant's Managing Director. The matter therefore proceeded by way of formal proof, at which the Plaintiff testified and produced twelve documents including the letter of offer dated 1st March 2012, the executed lease, receipts evidencing payment of the full purchase price of Kshs. 18,000,000, and a bankers cheque of Kshs. 720,040 for stamp duty. The court framed four issues: propriety of service, due execution of the agreement, whether time was of the essence and breach, and costs. It found service proper; held that although the lease lacked the Defendant company's common seal, execution by its directors satisfied section 37(2) of the Companies Act, 2015; that the unregistered lease could not confer legal or equitable interest but was enforceable as a contract inter partes per the Court of Appeal in Chon Jeuk Suk Kim; and that although time was not expressly of the essence, demand letters impliedly made it so, and the Defendant's prolonged failure to register the lease was a breach. Holding that the Plaintiff had performed all his essential obligations, the court found it just and equitable to grant specific performance and entered judgment for the Plaintiff as prayed in the Plaint dated 14th November 2018, with costs and interest at the court's rate.

Key legal issues

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01

Validity of execution of a lease by a body corporate

Holding

The lease was validly executed by the directors of the Defendant company; affixation of the common seal is not mandatory under section 37 of the Companies Act, 2015

Reasoning

Section 3(3) of the Law of Contract Act requires contracts for disposition of interests in land to be in writing and signed by all parties. For a body corporate, section 37(2) of the Companies Act, 2015 permits execution by two authorised signatories or a director in the presence of a witness. The Defendant's directors signed, so the agreement is valid and binding despite absence of the common seal.

p. 4
02

Effect of non-registration of the lease

Holding

The unregistered lease could not confer legal or equitable interest, but remained enforceable as a contract inter partes

Reasoning

Section 43 of the Land Registration Act provides that no instrument effecting a disposition operates to transfer land until registered. The lease was never registered despite the Plaintiff forwarding the executed lease and stamp duty. Relying on Chon Jeuk Suk Kim, the court held the unregistered lease enforceable as a contract between the parties, and the Defendant's failure to register was a breach.

p. 5
03

Whether time was of the essence and whether specific performance should issue

Holding

Time was not expressly of the essence but was impliedly made so by demand letters; specific performance was granted as the Plaintiff had performed all his obligations

Reasoning

Clause 13 did not stipulate time for registration as essential, but demand letters including the letter dated 21st July 2016 served as notice making time of the essence. The Plaintiff had paid the full purchase price of Kshs. 18,000,000 plus legal and stamp duty fees. Denying relief after over ten years of appreciation and continued retention of the purchase price by the Defendant would confer an unfair advantage.

p. 6

Legal principles established

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  • An unregistered lease, though it confers no legal or equitable estate, is enforceable as a contract between the parties
  • It is not mandatory for a company to affix its common seal to a document to signify valid execution, per section 37 of the Companies Act, 2015
  • Where time is not of essence in a land contract, a party cannot avoid the contract for delay until a notice making time of essence is served
  • A plaintiff seeking specific performance must show performance of the essential terms he undertook to perform

Court orders

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  1. 1.Judgment entered in favour of the Plaintiff as prayed in terms of the Plaint dated 14th November 2018, including specific performance of the agreement dated 12th September 2012 compelling the Defendant to complete registration of the lease over Apartment No. 313 in Insulae Africanus, Shanzu beach
  2. 2.Costs of the suit to the Plaintiff, borne by the Defendant, with interest at the court's rate

Authorities

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Legislation

  • Law of Contract Act (Cap. 23)Section 3(3) and Section 3(6)
  • Registration of Documents Act (Cap. 285)registration of powers of attorney
  • Companies Act, 2015Section 37 and Section 37(2)
  • Land Act, No. 6 of 2012Section 38(1)
  • Land Registration ActSection 43 and Section 54(5)
  • Civil Procedure Act (Cap. 21)Section 27(1)

Cases cited (4)

  • Chon Jeuk Suk Kim & another - Versus - E. J. Austin & 2 others
    [2013] eKLR
  • Manor - Versus - Baram
    (2003) 2 E.A.
  • Aida - Versus - John Mbiyo Njonjo & Charles Kigwe
    (1962) EA 88
  • Gurdev Singh Birdi and Marinder Singh Ghatora and Abubakar Madhbuti
    Civil Appeal No. 165 of 1996
Jurisdiction invoked
Original jurisdiction of the Environment and Land Court over disputes relating to land contracts and leases

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, "Raphael Wamiti Gachoka v Oakpark Apartments Mombasa Limited [2022] KEELC 1011 (KLR)", Case Analysis (2022). Civil Suit No. 271 of 2018. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2022/1011/eng@2022-03-07

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