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ELCAllowedNot stated in the judgment· [2024] KEELC 8 (KLR)

Shikara Limited v Vej & 2 others (Civil Case E020 of 2023) [2024] KEELC 8 (KLR)

Environment and Land Court
17 January 2024
1,749 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Environment and Land Court stopped an auction over disputed service charges, confirming landlords cannot seize property for service charge the way they can for unpaid rent.

What this practically means

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Executive summary

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The plaintiff, registered owner of Unit No. 3B on the 3rd Floor of Links Plaza on subdivision No. 14014 Section I Mainland North, moved the court by application dated September 25, 2023 seeking an injunction restraining the defendants from enforcing a notice for distress for rent dated 18/9/2023 and a proclamation by Tip Top Auctioneers, from demanding service charge of about Kshs. 601,951.88, or from interfering with its quiet possession, pending resolution of the dispute by arbitration under clause 11 of the agreement for sale dated 28/11/2011. The plaintiff deposed that it paid service charge up to 31 August 2023 and that the demands were illegal and backdated. The 1st and 2nd defendants opposed, contending the court lacked jurisdiction over what they termed a purely commercial service charge dispute, that there was no arbitration agreement on service charge, and that service charge rates had been legitimately increased from 1 January 2017. An auctioneer deposed to levying distress for Kshs. 601,951.88 and being restrained. Framing three issues (jurisdiction, the interlocutory threshold, and costs), the court held it had jurisdiction under section 13(2) of the Environment and Land Court Act, following Nakumatt Holdings v Ideal Locations. Relying on Debra Limited and C.Y.O Owayo, it found service charge is a civil debt, not rent, so distress was unlawful. Applying Giella v Cassman Brown, the court found a prima facie case and allowed the application in terms of prayer (c), conserving the suit property pending arbitration and/or determination of the suit, with costs in the cause.

Key legal issues

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01

Jurisdiction of the Environment and Land Court over a service charge dispute

Holding

The court has jurisdiction because the cause of action relates to an instrument granting an enforceable interest in land (the sublease), and service charge disputes under such instruments fall within section 13(2) of the ELC Act.

Reasoning

The court invoked section 13(2) of the Environment and Land Court Act, which confers power to determine disputes relating to contracts and instruments granting enforceable interests in land, including rents. The suit property is an apartment and the dispute revolves around service charge demanded under the sublease, with distress proceedings threatened. The court aligned itself with Nakumatt Holdings v Ideal Locations, which held the ELC has jurisdiction over service charge issues, and rejected the defendants' contention that service charge is purely commercial for the High Court.

p. 4
02

Whether an injunction should issue pending arbitration under clause 11 of the agreement for sale

Holding

The plaintiff established a prima facie case and was granted conservation in terms of prayer (c) pending arbitration and/or determination of the suit.

Reasoning

Applying the Giella v Cassman Brown principles, the court found the plaintiff had a prima facie case: the plaintiff owned the suit property, had paid service charge to 31 August 2023, and disputed the increased, allegedly backdated service charge demanded by distress. The sublease also provided a reference mechanism for service charge disputes. The court found the property should be conserved pending the outcome of arbitration and/or determination of the suit, granting prayer (c) of the application.

p. 4
03

Legality of distress for recovery of service charge

Holding

Attempting to recover arrears of service charge through distress for rent is unlawful because service charge is a debt, not rent.

Reasoning

Relying on Debra Limited v Board of Trustees NSSF, the court noted that distress accrues where a tenant is in arrears of rent and rent services, but service charge is a civil debt recoverable as such, not rent. Drawing on C.Y.O Owayo v George Zephania, an illegal distress includes one levied for a claim which is not rent. The defendants' notice of distress and proclamation by Tip Top Auctioneers for service charge arrears was therefore a wrong move, justifying injunctive protection of the plaintiff's possession.

p. 4

Legal principles established

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  • The Environment and Land Court has jurisdiction over disputes relating to service charge emanating from leases or instruments granting enforceable interests in land.
  • Service charge is not rent; it is a civil debt and cannot be recovered by distress for rent.

Court orders

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  1. 1.That the plaintiff's application dated the September 25, 2023 has merit and is allowed in terms of prayer (c).
  2. 2.That costs be in the cause.

Authorities

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Legislation

  • Environment and Land Court ActSection 13(2)
  • Distress for Rent ActSection 3(1)
  • Civil Procedure ActSection 27
  • Constitution of KenyaArticle 162(2)(b)

Cases cited (6)

  • Nakumatt Holdings Limited & Another vs Ideal Locations Limited
    (2019) eKLR
  • China Zhongxing Construction Company Ltd. Vs Eden Development Limited (K)
    2020 eKLR
  • Co-operative Bank of Kenya Limited vs Patrick Kangethe Njuguna & 5 Others
    (2017) eKLR
  • Debra Limited v Board of Trustees National Social Securities Fund & another
    [2017] eKLR
  • C.Y.O Owayo Vs George Zephania & Adudata T/A Aduda Auctioneers
    (2007) eKLR
  • Giella Versus Cassman Brown & Company Limited
    (1973) EA 358
Jurisdiction invoked
Article 162(2)(b) of the Constitution read with Section 13(2) of the Environment and Land Court Act, No. 19 of 2011

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, "Shikara Limited v Vej & 2 others (Civil Case E020 of 2023) [2024] KEELC 8 (KLR)", Case Analysis (2024). Not stated in the judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2024/8/eng@2024-01-17

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