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ELCPartially Allowed· [2024] KEELC 4994 (KLR)

Sandy Creek Holdings Limited v Hewa Bora Limited & another (Environment & Land Case E119 of 2021) [2024] KEELC 4994 (KLR)

Environment and Land Court
19 February 2024
ADA.E. Dena
8,558 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~34 min to read original · ~4 min brief

The bottom line

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The court ordered buyers to pay the vendor the remaining purchase price with interest, finding their fraud claims unsupported and the written agreement binding.

What this practically means

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Executive summary

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The Plaintiff, Sandy Creek Holdings Limited, sued Hewa Bora Limited and Lewis Kamau Kanyoro for breach of an agreement dated 28/5/2014 for the sale of title No. Kwale/Ramisi Phase II S.S/969 for Kshs 16,464,000. The 1st Defendant paid the 50% deposit and a further Kshs 1,800,000 on 22/10/2015, leaving Kshs 6,432,460 unpaid. The Plaintiff sought a declaration of breach, the outstanding balance with contractual interest, damages for fraud, and a permanent injunction. The Defendants, by defence and counterclaim, alleged they were induced by misrepresentation (brochures depicting a beach gated community) and material non-disclosure of squatters, sought reversal of the transfer and a refund of Kshs 13,463,150. The court found a valid written contract under section 3(3) of the Law of Contract Act. It held vacant possession was conditional on completion and full payment, so the Defendants, not the Plaintiff, breached the agreement. Relying on the disclaimer and entire-agreement clauses and the parol evidence rule, and noting the Defendants paid part of the balance after their site visit and never pleaded fraud in their notices, the court held the fraud allegations were not proved to the heightened standard required. Judgment was entered for the Plaintiff jointly and severally: a declaration of breach and payment of Kshs 6,432,460 with interest at 5% above the CBK base lending rate from 15/11/2015. The permanent injunction and damages for misrepresentation were refused. The counterclaim was dismissed with no orders as to costs, and the Defendants were ordered to bear the Plaintiff's costs.

Key legal issues

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01

Validity of the contract for sale of land

Holding

The agreement dated 28/05/2014 satisfied section 3(3) of the Law of Contract Act and was valid and binding

Reasoning

The agreement was in writing, for the sale of title No. Kwale/Ramisi Phase II S.S/969, sealed and signed by the directors of both vendor and purchaser in the presence of an advocate. Both parties conceded in submissions that the statutory formalities under section 3(3) of the Law of Contract Act were met, so the court found a valid, binding contract.

p. 8
02

Breach of contract

Holding

The 1st Defendant breached the agreement by failing to pay the balance of the purchase price on or before 30/11/2015 in one instalment as required by clauses 5.1 and 5.2

Reasoning

Payment of the 50% deposit and part-payment of Kshs 1,800,000 were admitted, leaving Kshs 6,432,460 unpaid. Clause 6 made vacant possession conditional on completion and full payment, so the Defendants' demand for vacant possession before payment was a condition imposed outside the agreement. The non-disclosure claims could only arise after completion and were precluded by the disclaimer clause.

p. 11
03

Fraud and misrepresentation by the Plaintiff

Holding

The Defendants failed to prove the allegations of fraud and misrepresentation to the required standard

Reasoning

Fraud must be proved to a standard higher than balance of probabilities. The parol evidence rule barred reliance on brochures to vary the written agreement; the complete brochure related to a Funzi Island project. The Defendants made part-payment after the site visit, their notices omitted the fraud allegations, and they never enjoined the alleged agent. The fraud claim therefore failed.

p. 14
04

Remedies available to the Plaintiff

Holding

The Plaintiff, having opted to sue under the default clause after a valid completion notice, was entitled to the unpaid balance with contractual interest

Reasoning

Clause 10.1 gave the vendor the option to sue for sums due and for specific performance after a 21-day notice. The completion notice of 11/5/2016 complied with the agreement and went unheeded. The court awarded the outstanding Kshs 6,432,460 with interest at 5% above the CBK base lending rate, but declined the injunction and damages for misrepresentation.

p. 14

Legal principles established

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  • A contract for the disposition of an interest in land is only enforceable if in writing, signed by all parties and attested as required by section 3(3) of the Law of Contract Act
  • Vacant possession of sold land is conditional upon completion and payment of the balance of the purchase price where the agreement so provides
  • A purchaser who freely executed an agreement containing a disclaimer and entire-agreement clause cannot rely on extrinsic representations such as brochures
  • The standard of proof for fraud is higher than a balance of probabilities

Court orders

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  1. 1.A declaration that the 1st Defendant is in breach of the sale agreement made as of 28/5/2014 and is not entitled to enjoy the full legal and beneficial rights and interests in the land comprised in title no Kwale/Ramisi Phase II S S/969 unless and until it pays the sum ordered to the Plaintiff in full
  2. 2.The sum of Kenya shillings 6,432,460.00 together with interest thereon at the agreed contractual rates of 5% per annum above the base lending rate prescribed by the Central Bank of Kenya from the contractual due date of 15/11/2015 until payment in full
  3. 3.The Counterclaim is dismissed with no orders as to costs
  4. 4.The Defendants shall bear the Plaintiff's costs for the suit

Authorities

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Legislation

  • Law of Contract ActSection 3(3)
  • Evidence ActSections 107, 108, 109
  • Evidence ActSection 97(1)
  • Land ActSections 38, 39, 40, 41, 42
  • Civil Procedure ActSection 26
  • Civil Procedure ActSection 27
  • LSK Conditions of Sale (1989)Special Condition 8(3)

Cases cited (10)

  • Mbuthia Macharia V Annah Mutua Ndwiga & Another
    [2017] eKLR
  • RG Patel V Laid Makanji
    [1957] EA 314
  • Central Kenya Ltd V Trust Bank Limited & 4 Others
    [1996] eKLR
  • National Bank of Kenya Limited Vs. Pipeplastic Samkolit (K) Ltd & another
    (2001) eKLR
  • Highway Furniture Mart Limited Vs. Permanent Secretary Office of the President & Another
    (2006) eKLR
  • Joseph Kangethe Irungu V Peter Ng'ang'a Muchoki & Others
    Muranga ELC no 484 of 2017
  • General Properties Limited V Saika Two Estate Developers Limited
    Nairobi ELC No 209 of 2019; (2021) eKLR
  • Vijay Morjaria Vs Nansigh Darbar & Another
    (2000) eKLR
  • Bernard Gathogo Kangoro v David M Muchemi & another
    [2006] eKLR
  • Susan Wangechi & 8 Others V Shabaan Salim Nyere & 6 Others
    ELC No. 111 of 2016
Jurisdiction invoked
Original jurisdiction of the Environment and Land Court over disputes relating to land (a suit for breach of a sale agreement over title No. Kwale/Ramisi Phase II S.S/969)

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, "Sandy Creek Holdings Limited v Hewa Bora Limited & another (Environment & Land Case E119 of 2021) [2024] KEELC 4994 (KLR)", Case Analysis (2024). . Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2024/4994/eng@2024-02-19

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