Menengai Stores Limited v Blue Nile Wire Products Limited & another (Environment & Land Case 41 of 2020) [2024] KEELC 4957 (KLR)
The bottom line
#A Kenyan court refused to force a land sale because the property was mortgaged without the bank's consent, ordering a refund instead.
What this practically means
#Executive summary
#Key legal issues
#Cause of action against the 2nd Defendant (chargee bank)
The suit against the bank discloses no reasonable cause of action and was struck out.
The contract was between Plaintiff and 1st Defendant; privity of contract binds only those parties. PW1 admitted there was no clause allowing suit against the bank and no contract with it. The parties knew the property was charged yet never obtained the chargee's written consent as required by Sections 87 and 88 of the Land Act, rendering the sale agreement illegal as against and unenforceable against the bank.
Specific performance
Refused; the contract was unenforceable and specific performance impracticable.
Specific performance is discretionary and requires a valid, enforceable contract. The property was charged to the bank; under Section 25 of the Land Registration Act the title is subject to the charge, and without the chargee's consent the vendor had no rights capable of conveyance beyond the equity of redemption. The charge securing about Kes.1 Billion remains outstanding, so a transfer order could not be actualized.
Constructive trust
Refused; unproved and legally unavailable on the facts.
The constructive trust plea was introduced by re-amended plaint long after the Plaintiff's case closed, without recalling witnesses; no evidence was tendered. Trust is a question of fact to be proved by evidence. Further, the property remains charged and the transaction was vitiated for want of the chargee's consent, making a constructive trust declaration impracticable.
1st Defendant's counterclaim for rent arrears
Dismissed; the Deed of variation was never validly executed.
The rent claim depended entirely on the Deed of variation. DW1 conceded the deed had not been signed by 20th April 2017 and that the Plaintiff had withdrawn before the 1st Defendant executed it. The late execution and revenue stamp were condemned as a dishonest endeavor to defeat justice; hence there is no basis for the rent claim of Kes.63,138,747.
Refund of monies paid and vacant possession
Refund of Kes.30,800,000 with interest at 18% granted; 1st Defendant entitled to vacant possession.
DW1 conceded the Plaintiff paid Kes.10 Million deposit and Kes.20.8 Million VAT, and that the 1st Defendant breached the contract; the monies are refundable since the contract was vitiated by illegalities, attracting the contractual interest rate. Having collapsed, the contract confers no basis for continued occupation; the Plaintiff cannot both occupy and receive a refund, so the 1st Defendant recovers vacant possession.
Legal principles established
#- A sale of charged land without the prior written consent of the chargee is not enforceable against the chargee; privity of contract bars claims against a non-party chargee.
- Specific performance requires a valid, lawful and enforceable contract and cannot be granted where the order is incapable of being enforced.
- Constructive trust must be proved by evidence; a case cannot be proved on pleadings alone.
- A party who frustrates execution of a deed and purports to execute it after the counterparty has withdrawn cannot rely on that deed.
- A plaintiff cannot remain in occupation of the suit property while receiving a refund of monies paid under a collapsed contract.
Court orders
#- 1.The Plaintiff's suit as against the 2nd Defendant is struck out for non-disclosure of a reasonable cause of action.
- 2.The Plaintiff shall bear the 2nd Defendant's costs of the suit.
- 3.The Plaintiff is granted an order for refund of the sum of Kes.30,800,000/= paid to and acknowledged by the 1st Defendant.
- 4.The refund monies shall attract interest at 18% per annum from 23rd March 2016 until full payment.
- 5.The 1st Defendant's counterclaim is partially allowed as pertains to the prayer for vacant possession.
- 6.The Plaintiff is ordered to vacate the suit property and hand over vacant possession to the 1st Defendant within 180 days.
- 7.In default of vacating, the 1st Defendant may levy eviction; an eviction order shall issue without further reference to the court, with eviction costs certified by the Deputy Registrar and recoverable from the Plaintiff.
- 8.The Plaintiff shall bear own costs of the suit.
- 9.The 1st Defendant shall bear own costs of the counterclaim.
- 10.Any other relief not expressly granted is declined.
- Jurisdiction invoked
- Original civil jurisdiction of the Environment and Land Court over the suit property L.R No. 12815
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Menengai Stores Limited v Blue Nile Wire Products Limited & another (Environment & Land Case 41 of 2020) [2024] KEELC 4957 (KLR)", Case Analysis (2024). Not stated in the extract (original suit; related suit Nairobi HCC 318 of 2018 mentioned). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2024/4957/eng@2024-06-13
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.