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ELCPartially AllowedNot stated in the judgment text provided· [2023] KEELC 683 (KLR)

Eastwest Holdings Limited v Hutchinson (Sued in her Capacity as Administratix of the Estate of Raphael Alfonso Hutchinson - Deceased and also beneficiary of such Estate) & 5 others (Environment & Land Case 815 of 2013) [2023] KEELC 683 (KLR)

Environment and Land Court
15 February 2023
14,496 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~58 min to read original · ~4 min brief

The bottom line

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A Kenyan court ordered an estate to complete a land sale despite years of delay, confirming that properly signed sale agreements must be honoured.

What this practically means

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Executive summary

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The Plaintiff, East West Holdings Limited, sued the administrators and beneficiaries of the estate of Raphael Alfonso Hutchinson for breach of an agreement for sale dated 24/01/2012 over two parcels (C and D, 1.29 acres) to be excised from L.R. No. 21/1/39 for Kshs. 32,500,000/-, seeking a declaration of trust, specific performance, injunctions and damages. The Defendants resisted on grounds that the suit lacked a board resolution under seal, that the Plaintiff company did not exist at execution or obtained the contract by fraudulent misrepresentation, that the agreement was an unconscionable bargain struck under financial and medical distress, and that it lapsed on expiry of the 120-day condition precedent. The court held that failure to file a board resolution at institution was not fatal, that the company was incorporated on 13/06/2011 before execution, and that the fraud allegations were not strictly proved. The agreement complied with Section 3(3) of the Law of Contract Act and was valid and binding. The unconscionable bargain defence failed because the parties had equal bargaining power, the contract protected both sides, and no valuation report or evidence of the alleged distress was adduced. The Defendants caused the delay in fulfilling the condition precedent and issued invalid rescission notices without the contractual 30 days' notice, breaching the contract. Specific performance was granted, a declaration of trust issued, and injunctions issued over L.R. No. 21/1/39 and Parcels C and D. Damages for breach were refused as specific performance was an adequate remedy and no special damages were pleaded. The Plaintiff was awarded costs.

Key legal issues

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01

Validity of suit without board resolution under seal

Holding

The absence of a board resolution at filing did not render the suit defective; the resolution filed in 2019 before hearing sufficed

Reasoning

Order 4 rule 1(4) of the Civil Procedure Rules requires a corporation's verifying affidavit to be sworn by an authorized officer, but courts have held the resolution may be filed at any time before the suit is fixed for hearing. Its absence is not fatal, and to hold otherwise would elevate procedural technicalities contrary to Article 159(2)(d) of the Constitution and Section 19(1) of the Environment and Land Court Act.

p. 10
02

Existence of the Plaintiff company and alleged fraudulent misrepresentation

Holding

The Plaintiff company was incorporated on 13/06/2011, before the agreement, and the fraud allegations were not proved

Reasoning

The CR12 showed incorporation on 13/06/2011, prior to execution of the sale agreement, so the company could contract. Fraud must be specifically and strictly proved; the Defendants produced no DCI report, suit, or sufficient documentation to establish fraudulent misrepresentation by the Plaintiff, and the burden lay on them.

p. 12
03

Validity of the Sale Agreement under Section 3(3) Law of Contract Act

Holding

The agreement complied with Section 3(3) and was valid and binding

Reasoning

The agreement for sale dated 24/01/2012 was in writing, signed by all parties (the administrators for the Defendants and directors Jani and Mughal for the Plaintiff), and attested. Section 3(3) of the Law of Contract Act read with Section 38 of the Land Act, 2012 was therefore complied with, making the agreement legal and binding.

p. 13
04

Unconscionable bargain defence

Holding

The unconscionable bargain defence failed; the parties had equal bargaining power and the Defendants proved no disadvantage

Reasoning

The contract contained mutual default clauses protecting both parties; should positions reverse the Plaintiff would forfeit its deposit. The Defendants adduced no valuation report and no evidence of the estate debts or medical bills allegedly forcing the sale. Interference by the court was therefore unjustified.

p. 17
05

Breach of contract by the Defendants

Holding

The Defendants breached the agreement by delaying the condition precedent and by issuing invalid rescission notices

Reasoning

The Defendants failed to obtain the subdivision certificate and deed plans in time, causing the delay, and then purported to rescind by letters of 30/01/2013 and 14/02/2013 without issuing the contractual 30 business days' notice or a completion notice under clause 4(7)(b) and (c) of the Law Society Conditions of Sale. The notices were unprocedural and incapable of rescinding the agreement.

p. 20
06

Entitlement to specific performance

Holding

Specific performance was granted as the Defendants, sued on behalf of the estate, could complete the sale without hardship

Reasoning

A valid enforceable contract existed, the fraud allegations failed, and the Defendants as administrators of the estate of the registered proprietor were in a position to complete and effect transfer. No severe hardship to the Defendants was shown, so the discretionary equitable remedy was properly granted.

p. 21
07

Trust and injunction; damages refused

Holding

A trust arose from the deposit paid; injunctions were granted; damages for breach were refused

Reasoning

Payment of Kshs. 3,250,000 towards the purchase created a trustee relationship, and with specific performance granted, the Defendants hold the property in trust for the Plaintiff. The Plaintiff proved its case on a balance of probabilities, warranting injunctions. General damages are not recoverable for breach of contract, and special damages were not pleaded or particularized.

p. 23

Legal principles established

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  • Failure to file a resolution authorizing the filing of a suit by a company does not invalidate the suit; the resolution may be filed at any time before hearing
  • Allegations of fraud must be strictly proved to a standard above mere balance of probabilities and must be distinctly pleaded and proved
  • A court cannot rewrite a contract between the parties; the parties are bound by its terms unless coercion, fraud or undue influence are pleaded and proved
  • Specific performance is a discretionary equitable remedy granted on well-laid principles and where no adequate alternative remedy exists
  • General damages are not recoverable for breach of contract; special damages must be specifically pleaded and strictly proved

Court orders

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  1. 1.A declaration that the 1st - 6th Defendants hold L.R. No. 21/1/39 upon trust for the Plaintiff
  2. 2.An Order of Specific Performance as per the terms of the Sale Agreement dated 24/01/2012
  3. 3.An injunction restraining the 1st - 6th Defendants from selling, charging, or parting with possession of L.R. No. 21/1/39 until exercise by the Plaintiff of its option to purchase in accordance with the contract of sale
  4. 4.A permanent injunction restraining the 1st - 6th Defendants from selling, charging or parting with possession of Parcels C and D of L.R. No. 21/1/39
  5. 5.The Plaintiff is awarded costs of the suit

Authorities

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Legislation

  • Constitution of Kenya, 2010Article 159(2)(d)
  • Environment and Land Court Act, 2011Section 19(1)
  • Civil Procedure RulesOrder 4 rule 1(4)
  • Law of Succession ActSection 79
  • Law of Contract ActSection 3(3)
  • Land Act, 2012Section 38
  • Land Registration ActSection 26
  • Law Society Conditions of SaleClause 4(7)(b) & (c)
  • Trustee Actdefinitions of trust and trustee
  • Auctioneers ActCap 526 (referenced in Section 3(3) proviso)

Cases cited (35)

  • Spire Bank Limited v Land Registrar & 2 others
    [2019] eKLR
  • Fidelity Commercial Bank Limited v Simon Maina Gachie
    [2016] eKLR
  • Leo Investments Ltd v Trident Insurance Company Ltd
    (2014) eKLR
  • Republic vs. Registrar General and 13 Others Misc. Application No. 67 of 2005
    [2005] eKLR
  • Clement Muturi Kigano v Kibera Development Company Limited
    [2019] eKLR (Civil Appeal 189 of 2016)
  • RG Patel vs Lalji Makanji
    (1957) EA 314
  • Jennifer Nyambura Kamau vs Hampherey Nandi
    (2013) eKLR
  • Koinange & 13 Others vs Nyati
    (1984) EA 425
  • Gudka vs Dodhia
    CA No 21 of 1980
  • Richard Ekwesera Onditi vs Kenya Commercial Finance Co. Ltd
    CA No 329 of 2009, Nairobi
  • Vijay Morjaria vs Nansingh Madhusingh Darbar & Another
    [2000] eKLR
  • Machakos District Cooperative Union Vs Philip Nzuki Kiilu
    CA No 112 of 1997
  • National Bank Of Kenya Ltd Vs Pipeplastic Samkolit (K) Ltd & Another
    (2002) E.A 503
  • Margaret Njeri Muiruri Vs Bank of Baroda (Kenya) Limited
    (2014) eKLR
  • Commercial Bank of Australia Ltd Vs Amadio
    [1983] 51 CLR 447
  • Strydom Vs Vendside Ltd
    [2009] EWHC 2130 (QB)
  • William Kazungu Karisa Vs Cosmus Angore Chanzera
    (2006) eKLR
  • Bernard Alfred Wekesa v John Muriithi Kariuki & 2 Others
    HCCC Nairobi 1059 of 1995 [2000] eKLR
  • Reliable Electrical Engineers Ltd Vs Mantrac Kenya Limited
    (2006) eKLR
  • Mangi v Munyiri & Another
    [1991] eKLR
  • Openda v Ahn
    [1984] KLR 208
  • Juletabi African Adventure Limited & another Vs Christopher Michael Lockley
    [2017] eKLR
  • Twalib Hatayan Twalib Hatayan & Anor vs. Said Saggar Ahmed Al-Heidy & Others
    [2015] eKLR
  • Giella V Cassman Brown & Company Limited
    1973 E.A 358
  • Kenya Tourism Development Corporation Vs Sundowner Lodge Ltd
    2018 eKLR
  • Consolata Anyango Ouma vs. South Nyanza Sugar Co. Ltd
    (2015) eKLR
  • Kenya Industrial Estates Ltd v Lee Enterprises Ltd
    NRB CA Civil Appeal No. 54 of 2004 [2009] eKLR
  • Kenya Breweries Ltd v Natex Distributors Ltd
    Milimani HCCC No. 704 of 2000 [2004] eKLR
  • Standard Chartered Bank Limited v Intercom Services Ltd & Others
    NRB CA Civil Appeal No. 37 of 2003 [2004] eKLR
  • Coast Bus Service Ltd v Sisco Murunga Ndanyi & 2 others
    NRB CA Civil Appeal No. 192 of 92 (UR)
  • Charles C. Sande v Kenya Co-operative Creameries Ltd
    NRB CA Civil Appeal No. 154 of 1992 (UR)
  • Mohammed Ali & another v Sagoo Radiators Limited
    [2013] eKLR (Civil Appeal No. 231 of 2005)
  • Hahn vs Singh
    [1985] KLR 716
  • Ritho v Kariithi and another
    [1988] KLR 237
  • Gharib Suleman Gharib v Abdulrahman Mohamed Agil
    LLR No. 750 (CAK) Civil Appeal No. 112 of 1998
Jurisdiction invoked
Original jurisdiction under the Environment and Land Court Act, 2011 (Section 19(1) referenced)

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, "Eastwest Holdings Limited v Hutchinson (Sued in her Capacity as Administratix of the Estate of Raphael Alfonso Hutchinson - Deceased and also beneficiary of such Estate) & 5 others (Environment & Land Case 815 of 2013) [2023] KEELC 683 (KLR)", Case Analysis (2023). Not stated in the judgment text provided. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/683/eng@2023-02-15

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