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ELCPartially Allowed· [2022] KEELC 2561 (KLR)

Agro-Chem Housing Cooperative Society Ltd v Lake Holdings (Kenya) Ltd (Land Case 69 of 2012) [2022] KEELC 2561 (KLR)

Environment and Land Court
15 July 2022
5,119 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~20 min to read original · ~4 min brief

The bottom line

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What this practically means

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Executive summary

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The plaintiff, a co-operative society, sued the registered owner of Grant IR No 58279 LR No 13432 within Kisumu Municipality, alleging breach of a memorandum of understanding dated May 17, 2005 under which the defendant was to sell plots arising from subdivision of the suit property to the plaintiff and its members. The plaintiff sought a permanent injunction, cancellation of transfers effected in breach, specific performance, and general damages for breach of contract or alternatively for loss of bargain. The defendant denied the allegations, raised a preliminary objection on jurisdiction, limitation and locus standi (dismissed with costs), and later submitted that the amended plaint was defective and that the plaintiff had failed to prove its case or breach by the defendant. The court framed three issues: validity of the contract, breach, and entitlement to the orders sought. It held the memorandum of understanding satisfied section 3(3) of the Law of Contract Act and was a valid, enforceable contract. On breach, it found the defendant had only transferred and issued titles for 13 plots, showed the plaintiff 10, and failed to show 12; further, the agreement contained no clause permitting the defendant to sell the plots or offer defaulting plot holders new plots at increased prices, yet the defendant advertised the plots through Regent Management and offered them at Kshs 950,000/= each. The plaintiff was found willing and ready to perform, including paying off defaulting members. The court entered judgment in the plaintiff's favour, issuing a permanent injunction, ordering cancellation of transfers effected in breach, ordering specific performance, and awarding general damages of Kshs 2,218,320/= for loss of bargain with interest at court rates, being monies the defendant received and still holds for the remaining plots. Costs were awarded to the plaintiff. The judgment was delivered electronically under COVID-19 directions. Note: the court awarded the plaintiff its costs in the final orders, notwithstanding that the plaintiff's costs claim was framed as 'Costs of this suit be provided for with interest thereon at court rates'; no interest on costs was ordered.

Key legal issues

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01

Whether there was a valid contract between the parties

Holding

Yes. The memorandum of understanding dated May 17, 2005 satisfies section 3(3) of the Law of Contract Act and is a valid contract enforceable by the parties.

Reasoning

The parties did not dispute that a memorandum of understanding was executed on May 17, 2005 for the sale of plots to be subdivided from the defendant's parcel. Section 3(3) of the Law of Contract Act requires that a contract for disposition of an interest in land be in writing, signed by all parties, and attested by a witness. Applying the test in Nelson Kivuvani v Yuda Komora, the memorandum contained the parties' names, the property, price and obligations and was signed and witnessed, hence valid and enforceable.

p. 6
02

Whether the defendant was in breach of the contract

Holding

Yes. The defendant was in breach because it advertised the plots for sale to third parties and offered plot holders who had defaulted new plots at an increased price, terms which were not in the agreement, and parties failed to agree on the new terms.

Reasoning

The plaintiff facilitated signing of individual contracts as required, but the defendant only transferred and issued titles for 13 plots, showed the plaintiff 10 plots and failed to show 12 plots. Although the plaintiff had not fully paid for the remaining plots, the memorandum contained no clause permitting the defendant to sell the plots or give defaulting plot holders a new offer at increased prices. The February 22, 2012 offer at Kshs 950,000/= per plot and instructions to Regent Management to advertise the plots were therefore outside the contract and constituted breach.

p. 8
03

Whether the plaintiff is entitled to the orders sought

Holding

Yes, in substantial measure. A permanent injunction issued, transfers effected in breach were cancelled, specific performance was ordered, and damages of Kshs 2,218,320/= for loss of bargain with interest were awarded.

Reasoning

The court found the plaintiff and its members were willing to perform their obligations, and the defendant failed to meet part of its bargain by advertising the plots for sale to third parties. Specific performance is discretionary but rests on a valid enforceable contract, which existed here. On damages, the court applied Halsbury's measure of loss of bargain, finding the defendant still held Kshs 2,218,320/= received as part of the purchase price, which it was to refund with interest.

p. 8

Legal principles established

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  • An agreement for sale of land containing the names of the parties, the property number, the purchase price, the conditions and the obligations of the parties, signed and witnessed, amounts to a valid contract compliant with section 3(3) of the Law of Contract Act.
  • Jurisdiction to order specific performance is based on the existence of a valid and enforceable contract; it will not be ordered where the contract suffers from a defect making it invalid or unenforceable.
  • Where the vendor of land wrongfully refuses to complete, the measure of damage is the loss incurred by the purchaser as the natural and direct result of the repudiation, including return of deposit with interest and damages for loss of bargain.

Court orders

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  1. 1.A permanent injunction restraining the defendant, its directors, agents, servants, representatives or any person claiming or deriving title under it from selling, alienating, disposing of or interfering with the plaintiff's interests over the specified plots arising out of subdivision of land title Grant IR No 58279 LR No 13432 situate within Kisumu Municipality
  2. 2.Any transfers effected by the defendant over the parcels sold to the plaintiff and its members in breach of the agreements be cancelled for having been accentuated by fraud
  3. 3.An order that the defendant specifically performs the contract by availing title, consent to transfer, duly executed transfer forms and any other documents necessary to facilitate transfer in favour of the plaintiff and its members over the specified parcels
  4. 4.General damages of Kshs 2,218,320/= for loss of bargain with interest thereon at court rates
  5. 5.Costs of the suit to be borne by the defendant

Authorities

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Legislation

  • Law of Contract Act, cap 23 laws of Kenyasection 3(3)
  • Co-operative Societies Act
  • Civil Procedure Rulesorder 4 rule 2 and 3

Cases cited (12)

  • Nelson Kivuvani v Yuda Komora & another
    Nairobi HCCC No 956 of 1991
  • Bid Insurance Brokers Limited v British United Provident Fund
    [2016] eKLR
  • Attorney General of Belize et al v Belize Telecom Ltd & another
    [2009] 1 WLR 1980
  • Trollope Colls Ltd v North West Metropolitan Regional Hospital Board
    [1973] I WLR 601
  • Reliable Electrical Engineers Ltd v Mantrac Kenya Limited
    [2006] eKLR
  • Millicent Perpetua Atieno v Louis Onyango Otieno
    [2013] eKLR
  • Godfrey Ngatia Njoroge v James Ndungu Mungai
    [2019] eKLR
  • Elijah Sadala Msagha v Benedict Mwakio Mchombo & another
    [2020] eKLR
  • Solomon Ndegwa Kuria v Peter Nditu Gitau
    [2019] eKLR
  • Joseph Kangethe Irungu v Peter Nganga Muchoki
    [2018] eKLR
  • Magdalene Nyokabi Guandai v Charles Maato Metiaki & another
    [2018] eKLR
  • Mumias Sugar Company Ltd v Oniango
    [2005] 1 KLR 373
Jurisdiction invoked
Original civil jurisdiction of the Environment and Land Court over a suit relating to land situate within Kisumu Municipality (Land title Grant IR No 58279 LR No 13432)

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, "Agro-Chem Housing Cooperative Society Ltd v Lake Holdings (Kenya) Ltd (Land Case 69 of 2012) [2022] KEELC 2561 (KLR)", Case Analysis (2022). . Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2022/2561/eng@2022-07-15

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