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ELCPartially AllowedELCA No. E032 of 2026

Phelix v Melrok Energy Limited & another (Environment and Land Appeal E032 of 2026) [2026] KEELC 4393 (KLR)

Environment and Land Court
13 July 2026
6,453 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~26 min to read original · ~4 min brief

The bottom line

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Kenya's Environment and Land Court set aside a Tribunal ruling that dismissed a tenant's rent dispute without a proper hearing, ordering the case back for a full hearing.

What this practically means

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Executive summary

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This is a first appeal against a Ruling of the Business Premises Rent Tribunal at Nairobi delivered on 19th February 2026 in Tribunal Case No. E1385 of 2025. The Appellant, tenant of a shop at Ruai Shell Petrol Station since 2019, fell into rent arrears after his written lease expired and a controlled month-to-month tenancy arose. After the Landlord issued a 90-day termination notice and instructed auctioneers to proclaim and distress his business assets, the Appellant filed a Reference and application for injunctive relief before the Tribunal. The Tribunal, disposing of what was in substance an interlocutory application by written submissions, made final and conclusive findings: it found arrears of Kshs. 962,340/= plus VAT proved, found the tenant undeserving of equitable relief for want of clean hands, dismissed the entire Complaint and Application, ordered payment by a hard deadline with liberty to distress in default, awarded costs of Kshs. 40,000/= and closed the file, while separately holding the termination notice defective under Section 4(2) of Cap 301. Allowing the appeal substantially, the Court (E.K. Wabwoto, J) held that the Tribunal breached the Appellant's right to a fair hearing under Article 50(1) by finally determining the substantive Reference without setting it down for hearing, despite live disputes on rent variation, VAT, set-off, credit for Kshs. 350,000/= paid and the lawfulness of distress over proclaimed goods including a motor vehicle said to belong to the Appellant's spouse. The Court also held that the VAT claim required proof by compliant tax invoices under Section 42 of the VAT Act, 2013, and that failure to credit interim payments was an error apparent on the face of the Ruling. The Tribunal's Ruling was set aside in its entirety; the Reference was reinstated and remitted for hearing on the merits with the status quo of 30th April 2026 maintained. The Court declined to pronounce on the fresh January 2026 notice, the lockout or mesne profits, as these were unpleaded and required a cross-appeal. The Tribunal costs order was set aside and the Respondents were ordered to bear the costs of the appeal.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the Tribunal erred in dismissing the Appellant's substantive Reference and closing the file, in the manner and at the stage that it did
  2. 2.Whether the Tribunal erred in ordering payment of Kshs. 962,340/= together with VAT without resolving the contested questions of quantum, rent variation, set-off, proof of VAT and credit for sums paid
  3. 3.Whether the Tribunal failed to properly exercise its discretion under Section 12 of Cap 301, and whether the consequential award of costs should stand

Key legal issues

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01

Fair hearing - dismissal of substantive Reference at interlocutory stage

Holding

The Tribunal breached Article 50(1) by finally determining the substantive Reference without setting it down for hearing

Reasoning

The Application sought interlocutory relief expressly pending determination of the substantive Reference. The Tribunal's orders went beyond interim relief to make final findings on quantum, VAT and distress, dismissed the entire Complaint and closed the file, without notice or opportunity to adduce further evidence. Genuine disputes of fact subsisted, requiring a formal hearing.

p. 19
02

Proof of VAT and quantum of arrears

Holding

The order for Kshs. 962,340/= plus VAT could not stand absent proof of VAT by compliant tax invoices and proper crediting of payments

Reasoning

The Landlord's own rent schedules and invoice recorded a flat Kshs. 90,000/= with no VAT line, inconsistent with its pleaded position; Section 42(1) of the VAT Act requires tax invoices; the Tribunal failed to credit the Kshs. 350,000/= paid under its own conditional order, an error apparent on the face of the Ruling. These matters require determination upon a fresh hearing.

p. 23
03

Discretion under Section 12 of Cap 301 and costs

Holding

The Tribunal ought to consider structured payment rather than a lump-sum ultimatum; the Kshs. 40,000/= costs order falls away

Reasoning

Section 12(1)(e) and 12(4) vest wide remedial discretion to structure arrears payment balancing landlord recovery against tenant's capacity to pay. Having set aside the underlying determination, the costs order made as part of it cannot stand and must abide the fresh hearing.

p. 26
04

Scope of appeal and matters arising after the decision below

Holding

The Court declined to pronounce on the January 2026 notice, lockout and mesne profits

Reasoning

An appeal is confined to the decision challenged and grounds pleaded; affirmative relief by a respondent requires a cross-appeal; determining unpleaded issues would breach fair hearing; the statute vests the Tribunal with primary jurisdiction over termination notices; and such pronouncements would be obiter and risk prejudicing the remitted hearing.

p. 28

Legal principles established

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  • An interlocutory application cannot, upon its refusal, be treated as disposing of the substantive claim itself unless the parties have been heard on the substantive claim
  • A VAT claim must be proved by compliant tax invoices; rent schedules reflecting a flat VAT-silent figure do not discharge the burden of proof
  • A respondent seeking relief beyond defence of the decision appealed from must file a cross-appeal or notice of grounds for affirming
  • Where a statutory dispute-resolution mechanism exists, it must be exhausted before resort to a superior court

Court orders

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  1. 1.The Appeal be and is hereby allowed to the extent set out below
  2. 2.The Ruling of the Business Premises Rent Tribunal delivered on 19th February 2026 in Tribunal Case No. E1385 of 2025 be and is hereby set aside in its entirety
  3. 3.The Appellant's Reference dated 2nd December 2025 be and is hereby reinstated and remitted to the Business Premises Rent Tribunal for hearing and determination on the merits, on all issues in dispute, including rent and VAT, quantum of arrears, set-off, lawfulness of distress and mode of settlement
  4. 4.Any claim for Value Added Tax shall be proved by production of compliant tax invoices in accordance with Section 42 of the Value Added Tax Act, 2013, or other cogent evidence, failing which no VAT shall be awarded
  5. 5.The order for costs of Kshs. 40,000/= made against the Appellant by the Tribunal be and is hereby set aside; costs of the Reference before the Tribunal shall abide the outcome of the fresh hearing
  6. 6.Pending the hearing and determination of the Reference by the Tribunal, the status quo directed by this Court in its Ruling of 30th April 2026 shall remain in force
  7. 7.No finding reserved on the validity or effect of the notice dated 27th January 2026, the events of 30th March 2026, or any claim for mesne profits
  8. 8.The costs of this Appeal shall be borne by the Respondents

The bench

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One judgment of the whole court — no separate or dissenting opinions.

majority

Wrote the judgment

On appeal from
Business Premises Rent Tribunal at Nairobi
Tribunal Case No. E1385 of 2025
Jurisdiction invoked
First appeal from the Business Premises Rent Tribunal under the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act, Cap 301

Relief refused

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Respondents' request for declaratory findings on the validity of the fresh statutory notice dated 27th January 2026, its lapse, the lockout of 30th March 2026 and mesne profits

Matters not pleaded in the Memorandum of Appeal, raised without cross-appeal, would breach fair hearing, unexhausted statutory forum, and unnecessary for disposal of the appeal

p. 32

Costs

The costs of this Appeal shall be borne by the Respondents; costs of the Reference before the Tribunal shall abide the outcome of the fresh hearing.

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

An interlocutory application, being ancillary to and in aid of a substantive claim, cannot, upon its refusal, be treated as disposing of the substantive claim itself, save where the parties have been heard, or given a fair opportunity to be heard, on the substantive claim as such.
p. 17fair hearing / summary disposal of substantive claim
Rent schedules and invoices reflecting a flat, VAT-silent monthly figure do not, without more, discharge that burden.
burden of proof - VAT invoices
It is not open to the Respondents to convert what is, in substance, a substantive claim for relief into a submission appended to their opposition to the Appellant's appeal.
p. 28cross-appeal requirement for respondents seeking affirmative relief
i) The Appeal be and is hereby allowed to the extent set out below.
p. 33final orders - disposition
The Ruling of the Business Premises Rent Tribunal delivered on 19th February 2026 in Tribunal Case No. E1385 of 2025 be and is hereby set aside in its entirety.
p. 33final orders - setting aside Tribunal Ruling
The Appellant's Reference dated 2nd December 2025 be and is hereby reinstated and remitted to the Business Premises Rent Tribunal for hearing and determination on the merits, on all issues in dispute
p. 33final orders - remittal
viii) The costs of this Appeal shall be borne by the Respondents.
p. 35final orders - costs

Issues in the judgment

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minor

The lease records 'Kshs. 90,000 plus 16% VAT making it a total of Kshs. 106,000 per month' although 16% VAT on Kshs. 90,000 computes to Kshs. 104,400 - the Court itself noted this internal discrepancy in the lease and the Landlord's schedules

minor

Interim stay was granted on 9th March 2026 conditional on payment within thirty days, but the record shows the Appellant met the condition on 7th April 2026, after the 30th March 2026 lockout

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, "Phelix v Melrok Energy Limited & another (Environment and Land Appeal E032 of 2026) [2026] KEELC 4393 (KLR)", Case Analysis (2026). ELCA No. E032 of 2026. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2026/4393/eng@2026-07-13

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