Bekya Floriculture Limited v Gimalu Estate Limited [2022] KEHC 10630 (KLR) | Breach Of Contract | Esheria

Bekya Floriculture Limited v Gimalu Estate Limited [2022] KEHC 10630 (KLR)

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Bekya Floriculture Limited v Gimalu Estate Limited (Civil Case 276 of 2007) [2022] KEHC 10630 (KLR) (Commercial and Tax) (18 May 2022) (Judgment)

Neutral citation: [2022] KEHC 10630 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Civil Case 276 of 2007

LW Gitari, J

May 18, 2022

Between

Bekya Floriculture Limited

Plaintiff

and

Gimalu Estate Limited

Defendant

Judgment

1. This suit was instituted vide the Plaint dated 4th June 2007. The Plaintiff’s claim is founded on an alleged breach of contract. The original Plaint was amended twice thereafter. On record for consideration by this court is Plaintiff’s claim as contained in its Further Amended Plaint dated 17th November 2017. The Defendant’s response that is contained the Further Amended Defence dated 20th December 2017 and the Plaintiff’s Reply to the Defendant’s Further Amended Defence dated 3rd July 2018. The parties also relied on their respective oral and documentary evidence submitted as well as their respective written submissions.

The Plaintiff’s case 2. The plaintiff’s case is founded on an alleged breach of contract of sale of land dated 6/2/2007. (to be referred to as the said agreement) which was executed by the plaintiff and the defendant. The subject matter of the sale agreement is land parcel No. LR 167/9 originally 167/3/2015 is measuring 145 acres or thereabouts situated at Limuru within Kiambu County. The defendant who was at the material time the registered proprietor of the said piece of land agreed to sell the said land to the plaintiff who agreed to buy the land at the agreed price of Ksh.100,000,000/-. The parties agreed that the plaintiff would pay a deposit of Kshs.10 million (ten million) to the defendant’s advocates then on record, Messrs Hamilton Harrison and Mathews Advocates for onward transmission to National Bank of Kenya Limited to secure the release of the title document and other completion documents. Although it was not stated in the agreement, it came out in evidence that the defendant had agreed to sell the suit properly to the plaintiff so as to use the proceeds of sale to repay an outstanding loan owed to National Bank (NBK) and International Finance Corporation (IFC).

3. It was agreed between the parties that upon the plaintiff executing the agreement and paying the deposit of Kshs.10 million, the plaintiff would be given the vacant possession of the suit property, see clause 3:1 and 4:5 of the agreement.

4. The Plaintiff contends that in breach of the Agreement, the Defendant failed to grant possession of the suit property to the Plaintiff after both parties had executed the agreement and the Plaintiff had paid the deposit of Kshs. 10. Million. Instead, the Defendant’s advocates returned the Bankers Cheque of Kshs. 10 Million to the Plaintiff’s Advocates vide a letter dated 13th February 2007. It was explained in the said letter the Plaintiff could not have possession of the suit property because NBK was yet to confirm the outstanding balance against which a payment can be made for the release of the title documents of the suit property. To this end, the Plaintiff submitted that payment of the deposit was not pegged on a confirmation of the outstanding balance by NBK.

5. The Plaintiff thus urges this court to find that it has proved its case against the Defendant as pleaded in its Further Amended Plaint dated 17th November 2017 on a balance of probabilities and prays that its claim against the Defendant be allowed with costs. The specific orders sought by the Plaintiff are as follows:a.A declaration that the Sale Agreement between the parties made on 6th February 2007 is valid notwithstanding the lapse of the 90 days from the date of its execution.b.A declaration that the Defendant is not entitled to alter and/or raise the agreed purchase price.c.A declaration that the Plaintiff is entitled to specific performance of the Sale Agreement contract dated 6th February 2007 between the parties and an order for specific performance be issued compelling the Defendant to complete the transaction and transfer the suit property to the Plaintiff upon payment of the purchase price stipulated therein.d.An order that the Defendant do involve the Plaintiff in all negotiations and discussions relating to redemption of the property with National Bank of Kenya Limited and the International Finance Corporation.e.An order that any transfer or other dealing in any manner whatsoever by the Defendant with regard to the suit property be stayed in terms of Section 52 of the Transfer of Property Act and any sub-division of the said suit property obtained and the transfers of any such sub-division undertaken without the express authority of the Court be cancelled and the land register of the Suit Property Land reference Number 167/9 be rectified accordingly.f.In the alternative, damages for loss of bargain calculated as the difference between the Purchase Price and the Market Price of the suit property and the sub-divisions therefrom as at the date of the judgment.g.Costs of the suit from the date of filling suit until payment in full.

The Defendant’s case 6. In its defence, it was the Defendant’s case that the entire Agreement became frustrated due to the impossibility of performance when the NBK declined to release the title to the suit property. The Defendant denied responsibility for the alleged frustration of the Agreement claiming that the parties had agreed that the completion of the transaction was subject to the consent and cooperation by the mortgagees, to wit, the NBK and IFC.

7. The Defendant has admitted that there existed an Agreement for sale and purchase of the suit property that is dated 6th February 2007. According to the Defendant, the entire Agreement however became frustrated due to the impossibility of performance when the National Bank of Kenya Limited declined to release the title to the suit property. The Defendant denied responsibility for the alleged frustration of the Agreement claiming that the parties had agreed that the completion of the transaction was subject to the consent and cooperation by the mortgagees, to wit, the National Bank of Kenya Limited and the International Finance Corporation.

8. The Defendant further faults the Plaintiff for material non-disclosure on account that the Plaintiff failed to disclose that it did not have the balance of the purchase price to enable it to complete the transaction and that instead, it was relying wholly on a third party to give it money to complete the transaction. The Defendant avers that had it known that the Plaintiff did not have the Kshs. 90 Million to complete the sale, it would not have executed the agreement but would have insisted on execution when, if at all, the Plaintiff gained the ability to complete.

9. According to the Defendant, the agreement became null and void by operation of the law and that it would have committed a crime under the provisions of Section 22 of the Land Control Act had it given possession of the suit property to the Plaintiff. The Defendant further contends that the Agreement became null and void by breach of contract and non-performance of the contract on the part of the Plaintiff. It was finally the contention of the Defendant that the Agreement was nullified by mutual agreement and was therefore invalid and of no consequence whatsoever.

Issues for Determination 10. From the parties’ pleadings and evidence on record, it is my view that the main issues for determination by this court are as follows:a.Whether the Agreement was frustrated by an intervening event rendering it incapable of performance?b.Whether the parties agreed to vary the terms of the Agreement dated 6th February 2007, and if so, what was the legal consequence of the parties not executing the revised agreement.c.Whether either of the parties breached their contractual obligations and if so, what was the import of such breach.d.Whether the termination of the Agreement was mutual, and if not, whether the termination of the agreement was lawful.e.Whether the Plaintiff is entitled to any of the reliefs sought.The plaintiff relies on his pleadings, the further amended plaint, reply to the defendant’s further amended defence, the evidence tendered in court by Mr. Yaacor Mainoa, (PW1), the documentary evidence contained in the list of documents dated 12/10/2011 and the supplementary list of documents, and the witness statement. The plaintiff filed written submissions and has urged this court to find that it has proved its case against the defendant as pleaded in the further amended plaint on a balance of probabilities. The plaintiff submits that the suit is found on breach of agreement for the sale of land dated 6/2/2007. The plaintiff contends that the breach is twofold that-Firstly the defendant failed to grant possession of the property to the plaintiff. Upon execution of the sale agreement and the payment of the deposit of the purchase price as required under clause 4. 5 of the agreement of sale which stated as follows:-“possession of the property shall be granted by the vendor to the purchaser upon execution of this agreement and payment of the deposit of the purchase price set out in clause – 3”The defendant blamed the bank for failing to disclose the outstanding balance and the defendants advocates unilaterally declared that the plaintiff could not take possession. The plaintiff submits that the defendant did not produce any written request to the bank. The plaintiff urges the court to find that the confirmation of the outstanding loan balance with NBK was never a condition precedent to payment of Kshs.10 million. That there was no intervening event that prevent the defendant from giving possession to the plaintiff.It is the plaintiff’s submissions that the second breach of the contract was when the defendant and its advocates unilaterally and without any notice to the plaintiff to complete the agreement declared that the agreement was invalid ab intio and incapable of performance had been frustrated by acts of third parties and had been terminated by effluxion of time. That the defendant has roped in the provisions of the Land Control Act contending that the sale was a controlled transaction and consent was obtained within six months of execution of the agreement and that the court should not entertain the prayer for specific performance. The plaintiff submits that it was the defendants obligation to provide the plaintiff the completion documents including the consent to transfer and therefore it cannot seek to benefit from its failures as a ground to invalidate the agreement of sale. That the defendant declared the agreement invalid by a letter dated 8/5/2007 before the expiry of six months and proposed a new purchase price. The plaintiff submits that the transaction was not a controlled transaction. The plaintiff submits that it has on a balance of probabilities made out a credible case for the defendant to be ordered to complete the transaction and transfer the subject property to the plaintiff upon payment of the agreed purchase price or in the alternative, the court to award it damages to the tune of 4,200,000,000/- for loss of bargain. He relies on Fred I.M. Imbatu –v- Rashid K. Too (2018) eKLR.Andrew Karemi Kingori –v- Joseph Waweru Njoroge (2018) eKLR Gani Properties Limited –v- National Social Security Fund Board of Trustees and 3 Others (2018) eKLR (2018) eKLR

Defendant’s submissions: .The defendant denies in total the plaintiff’s claim. The defendant while admitting that it entered in the land transaction as pleaded by the plaintiff the plaintiff blames the defendant for the stalled sale and purchase of the suit property.On its part the defendant states that the plaintiff frustrated the performance of the agreement by failing to honour the terms of the agreement and hence frustrating the entire transaction by filing to pay the defendant the 10% deposit and opting to issue a cheque in the name of National Bank which was not a party to the agreement. That the plaintiff failed to disclose that it had no sufficient funds to settle the balance of the purchase price and that it intended to borrow the purchase price from Kenya Commercial Bank. The defendant contends that the completion period of ninety (90) days lapsed and the plaintiff had not paid the deposit or the balance of the purchase price. It is the contention by the defendant that the agreement became null and void by operation of the law and by acquiescence on the part of the plaintiff. The defendant further argues the court to find that the agreement was null and void for want of consent of Land Control Board.The defendant submits that the plaintiff is not entitled to an order of specific performance as he did not perform his obligation and some portions of the property have been sold to 3rd parties and or reserved for public utilities. The defendant disputes the plaintiff claim for damages as the plaintiff did not suffer loss since it did not pay a single shilling to the defendant in respect of the agreement. The defendant raises four issues for determination as follows: Validity of the agreement

Whether the plaintiff is entitled to specific performance

Whether the plaintiff is entitled to an order for damages

Costs.

On whether the agreement is valid, the defendant submits that the plaintiff breached expressed terms, the agreement failed to take off for none payment of the deposit and the balance.

Analysis 11. The existence of the Agreement dated 6th February 2007 is not in dispute. It is the validity and enforceability of the agreement that are being contested by the parties in this case. The law provides that there is freedom of contracting and courts have a sacred duty to uphold and enforce valid contracts between parties. In the case of National Bank of Kenya Ltd. v. Pipeplastic Samkolit (K) Ltd & Anor. Civil Appeal No. 95 of 1999 it was held that parties are bound by the terms of their contract. In another case of John Njoroge Michuki v. Shell Limited Civil Appeal No. 227 of 1999, the Court of Appeal emphasized that courts “should not overrule any clear intent of the parties.”

12. In view of the above authorities on the role of this court in relation to this case, I deem it prudent to address the issues listed above under the following distinct and separate heads:

(a) Alleged Termination of the Agreement on account of Effluxion of Time 13. In contracts, time is made of the essence by the express provisions therein and subsequently by the conduct of the parties therein. [See: Edward Gitahi Kihia v Thomas Caroll [2020] eKLR]

14. In this case, no time frame was stipulated within which the balance of the purchase price would be paid to the Defendant. Clause 4. 1 of the Agreement stated that:4. 1 “The Completion Date shall be Ninety (90) days from the date of the execution of the Sale Agreement or such earlier date as the parties shall agree.”

15. As per Clause 12. 6 of the Agreement, the parties agreed that the Agreement would continue to be valid despite the effluxion of the time for completion of the transaction. The said clause provided as follows:12. 6 “Notwithstanding completion all the provisions of this Agreement shall continue in full force and effect to the extent that any of them remain to be implemented or performed.”It is trite that unless the contract expressly provides that time is of essence, a party can only rescind the contract after serving the opposite party with notice that it will rescind the contract unless payment is made within the stipulated period. In Gurder Sigh Burdi and Marinder Sigh Ghabra –v- Abubaka Madhubuti C.A 165/1996 (cited by the Plaintiff)It was held that…………….. “ the modern law in the case of contracts of all types may be summarized as follows, time will not be considered of essence unless (1) the parties expressly stipulate that condition as time must be strictly complied with (2) the nature of the contract or the surrounding circumstances show that time should be considered to be of essence or (3) a party who has been subjected to unreasonable delay has given notice to the party in default making time essence.”The defendant did not at any time notify the plaintiff of the failure to comply with any condition in the agreement and require it to remedy any default within 21 day of such notice as contemplated under clause 7. 1.The defendant has not addressed clause 12. 6

16. Clause 12. 6 of the Agreement is therefore an indication that the parties had no intention for the agreement to terminate on the completion date. In any case, the Defendant by his conduct also evidenced that the Agreement did not terminate upon the refusal by NBK to release the title documents to the suit property but only required amendments which the parties started negotiating. Thus, it is my view that the issue of the nullity of the agreement by virtue of the lapse of the completion date as raised by the Defendant does not hold waters.

17. In Gurdev Singh Birdi & Another as Trustees of Ramgharia Institute Of Mombasa V Abubakar Madhbuti [1997] eKLR it was held that:“It is trite that the element of notice I have referred to in a situation where time has not been made the essence of contract is especially important in that no court of law will allow one party suddenly to turn to the other and say: "time has elapsed, the agreement has been cancelled and the deposit has been forfeited.”

18. In the instant case, time was initially of the essence and the Plaintiff made an effort to keep the timelines. The Defendant’s conduct of attempting to revise the Agreement for more than three months rendered the completion date as stipulated in the Agreement immaterial. In consequence the Defendant’s purported repudiation had no legal effect as he was himself in breach. The agreement remained valid not withstanding the laspse of 90 days. The defendant had not given the plaitniff completion documents.

b. Alleged Frustration of the Agreement 19. The nature of the doctrine of frustration of a contract was espoused in the Court of Appeal decision of Kenya Airways Limited v Satwant Singh Flora [2013] eKLR in the following terms:“According to Halsbury's Laws of England (3rd edition), volume 8 pages 185 (ii), the Doctrine of Frustration para 320:“...the doctrine of frustration operates to excuse further performance where (i) it appears from the nature of the contract and the surrounding circumstances that the parties have contracted on the basis that some fundamental thing or state of things will continue to exist, or that some particular person will continue to be available, or that some future event which forms the foundation of the contract will take place, and (ii) before breach performance becomes impossible or only possible in a very different way to that contemplated without default of either party, and owing to a fundamental change of circumstances beyond the control and original contemplation of the parties. The mere fact that a contract has been rendered more onerous does not of itself give rise to frustration.”The modern context of frustration was first formulated by Lord Radcliffe in the case of Davis Contractors LtdvFareham U.d.c, (1956) A.C 696 which sets out the radical change in the contractual obligation at p. 729:“...frustration occurs whenever the law recognizes that, without the default of either party a contractual obligation has become incapable of being performed because the circumstances in which the performance is called for would render it a thing radically different from that which was undertaken by the contract. “Non haec in foedera veni”. It was not what I promised to do.”

20. In the words of Lord Bingham MR in the case of J. Lauritzen AS v Wijsmuller BV ( The Super Servant Two) [1990] 1 Lloyd’s Rep 1,8;“The doctrine of frustration was evolved to mitigate the rigour of the common law's insistence on literal performance of absolute promises … The object of the doctrine was to give effect to the demands of justice, to achieve a just and reasonable result, to do what is reasonable and fair, as an expedient to escape from injustice where such would result from enforcement of a contract in its literal terms after a significant change in circumstances … (2) Since the effect of frustration is to kill the contract and discharge the parties from further liability under it, the doctrine is not to be lightly invoked, must be kept within very narrow limits and ought not to be extended … (3) Frustration brings the contract to an end forthwith, without more and automatically. (4) The essence of frustration is that it should not be due to the act or election of the party seeking to rely on it … A frustrating event must be some outside event or extraneous change of situation … (5) A frustrating event must take place without blame or fault on the side of the party seeking to rely on it …”

21. In this case, the purpose for the sale and purchase of the suit property was given by the evidence of DW1, the Managing Director of the Defendant Company. It was her testimony that the Defendant was selling the suit property to pay off the loan obtained from NBK and IFC. According to the Defendant, the refusal by NBK to release the title documents of the suit property upon payment of the deposit led to the frustration of the Agreement.

22. The Plaintiff has refuted this contention by the Defendant. It was the Plaintiff’s claim, which I agree with, that the parties only agreed that the deposit would be paid to NBK after which the parties would approach both NBK and IFC to negotiate the outstanding balance with a view of reducing it for the benefit of the Plaintiff. This term was contained under clause 5. 1.4 and 5. 1.5 of the Agreement. In addition, the Plaintiff correctly submitted that no evidence was tendered to prove that the cheque for the deposit was ever delivered to NBK together with the Agreement and that NBK decided to reject the cheque hence warranting the Defendant’s Advocates to return it back to the Plaintiff’s Advocates.

23. It is trite that the frustrating event cannot arise from default of the parties. In Davis Contractors Ltd vs Farehum U.D.C. (supra), it was stated thus,“The doctrine of frustration is in all cases subject to the important limitation that the frustrating circumstances must arise without fault of either party, that is, the event which a party relies upon as frustrating his contract must not be self induced.”

24. The Court of Appeal in the case of Howard & Company (Africa) Ltd vs Burton [1964] EA 157 concurred with Lord Sumner in Bank Line Ltd vs Arthur Capel & Company (26) [1919] AC p. 425 who stated,“It is now well established that the doctrine of frustration cannot apply where the event is alleged to have frustrated the contract arises from the “act or self-election of the party” who seeks to invoke it. Reliance cannot be based on a self-induced frustration”.

25. In the circumstances, it is my view that the alleged refusal by NBK to accept the deposit as consideration for the release of the title documents did not frustrate the Agreement. As per the letter dated 29th January 2007 from NBK, the Defendant knew all along that the said bank was not willing to deal with partial discharges of the suit property because the debts continued accumulating as a result of interest charges. This was communicated to the Defendant prior to the making of the subject Agreement on 6th February 2007. Thus, if at all the bank’s refusal was a frustrating event, it was a self-induced frustration, and the Defendant should be estopped from pleading frustration of the Agreement. The Defendant must have foreseen that the prior advice from the NBK would have made it impossible to enforce Clauses 4. 5 as read with Clause 3. 1 of the Agreement.

26. Furthermore, Clause 12. 3 of the Agreement provided that:12. 3 “If any term or condition of this Agreement shall to any extent be found or held to be invalid or unenforceable, the parties shall negotiate in good faith to amend such term and condition so as to be valid and enforceable.”

27. The question that then begs determination is whether the parties agreed to vary the terms of the agreement.

c. Whether the parties agreed to amend the Agreement 28. According to the Plaintiff, the Defendant unilaterally decided to not give the Plaintiff possession of the suit property after the NBK declared that the payment of the deposit was insufficient consideration for the release of the title document by the bank. This is evidenced by the letter dated 13th February 2007 from the Defendant’s Advocates to the Plaintiff’s Advocates.

29. Vide the letter dated 19th February 2007 from the Defendant’s Advocates to the Plaintiff’s Advocates, the Defendant proposed for amendment of the Agreement to reflect the stand taken by NBK. The Plaintiff through its letter by its advocate date dated 16th April 2007 indicated that it had no objection to executing the proposed amended Sale Agreement. It is therefore clear that the parties did agree to vary the terms of the agreement and negotiations commenced.

30. The Defendant’s Advocates, vide the letter dated 20th April 2007 proposed that the revised agreement should cover the following areas:i.The purchase price;ii.The acreage for sale;iii.Clause 3. 2 on payment of deposit;iv.Clause 5. 1.4 on the parties approaching NBK and IFC to reduce the amount owed;v.The Charge to KCB;vi.The Church and the Police Station.

31. The Plaintiff’s Advocates wrote to the Defendant’s Advocates vide a letter dated 24th April 2007 specifying the Plaintiff’s proposals on amendments to be included in the revised agreement as follows:i.Purchase price to remain at Kshs. 100 Millionii.Acreage of land to be sold to remain as in the initial agreement.iii.Defendant to advise on mode of payment in respect of Clause 3. 2iv.The way forward in respect of Clause 5. 1.4. to be agreed by the parties before executing the amended agreement.v.The charge to KCB secured by the Plaintiff’s advocate using the initial agreement is still on course.vi.The issue of the Police Station to remain subject to a mutual agreement between the Plaintiff and the community involved.

32. On its part, the Defendant vide its advocates’ letter dated 8th May 2007 proposed the change of the purchase price of the suit property to Kshs. 1. 2 Million per Acre. This meant that the total consideration for the suit property would be Kshs. 174 Million instead of the initial agreed price of Kshs. 100 Million. According to the Plaintiff, the unilateral decision by the Defendant to fix higher purchase price for the suit property was in bad faith and unlawful. In the end, the parties did not agree on the terms of the intended revised agreement and therefore never executed any further agreement in respect of the subject transaction. The subsequent negotiations by the parties also go to show that the Agreement was never terminated on account of frustration as discussed herein above.

d. Legal consequences for not executing a revised agreement 33. It is trite law on this point and is made beyond doubt under Section 3(3) of the Contracts Act (Cap 23 Laws of Kenya) as follows: -“No suits shall be brought upon a contract for the disposition of an interest in land unless –(a)The contract upon which the suit is founded –(i)is in writing(ii)is signed by all the parties thereto; and(iii)incorporates all the terms which the parties have expressly agreed in one document; and(iv)the signature of each party signing has been attested by a witness who is present when the contract was signed by such party.”

34. The Court of Appeal in the case of Kukal Properties Development Ltd v Tafazzal H. Maloo & 3 others [1993] eKLR expressed itself as follows in respect of“As I understand it where the contract is in writing and its terms are clear and unambiguous, no extrinsic evidence may be called to add or detract from it. (See Damodar v Eustagce, [1967] EA 153 at p 159 Spry JA, as he then was).Evidence of negotiations is never admissible to vary the terms of the written contract. However, where there is a latent ambiguity, extrinsic evidence may be given of surrounding facts to explain the ambiguity. But certainly no evidence or correspondence on prior negotiations may be admissible. It is assumed that the intentions of the parties to a written contract are embodied in a written contract itself. I have used the phrase “priority negotiations” because subsequent correspondence may affect the written contract where it is clear from the wording that the parties intended such subsequent correspondence to affect the written contract. For instance, subsequent correspondence may vary the terms of the written contract if it is clear from the correspondence that the parties intended to vary the contract.”

35. In this case, the parties did not execute the intended amended agreement because of differences between them on what should have constituted the new terms for the subject transaction. No amount of correspondence prior or subsequent to the date of the intended agreement will change the legal position. Thus, it is my view that any intended amendment of Agreement by the parties was inoperative and therefore unenforceable for lack of execution by the parties. The initial Agreement remained in force.

36. Noting that the Agreement was neither frustrated nor invalidated as seen herein above, the other issue that is pending determination therefore is whether the initial Agreement was terminated on account of breach of any of the parties’ contractual obligations contained therein.

e. Alleged Breach of Contractual Obligations Whether the Plaintiff breached the agreement in terms of payment of the deposit 37. Clause 3. 1 of the Agreement was to the effect that the Plaintiff would pay the deposit of the purchase price. It is not in dispute that on 7th February 2007, the Plaintiff issued a cheque for Kshs. 10,000,000/= (Kenya Shillings Ten Million) payable to NBK. Clause 3. 1 of the Agreement provided as follows:3. 1 “On or before the date of this Agreement the Purchaser shall pay to the Vendor’s Advocates the sum of Kenya Shillings Ten Million (K.Shs. 10,000,000/= as a deposit and in part payment of the Purchase Price.”

38. The Defendant’s Advocates took issue with the fact that the Plaintiff paid the deposit of the purchase price to NBK and not the advocates. In my view, this contention by the Defendant was an afterthought as the Defendant never raised the same when it returned the Bankers Cheque containing the deposit of the purchase price to the Plaintiff. The only reason given for the return of the deposit was the refusal by NBK to release the title documents to the title land, and were yet to confirm the outstanding balance.

Whether the Plaintiff breached the agreement by securing a loan facility from KCB 39. Clause 3. 3 of the Agreement provided that:3. 3 “The balance of the Purchase Price shall be paid by the Purchaser on the Completion Date to the Vendor’s Advocates.”

40. The Defendant’s Advocate responded to the aforementioned letter from the Plaintiff’s advocate dated 24th April 2007 vide a letter dated 25th April 2007. It was their contention that Clause 5. 1.4 of the initial Agreement did not envisage that the Plaintiff would be borrowing money from a third party to financing the balance of the purchase price. In the circumstances, the Defendant alleged that the Agreement was incapable of being performed a claim that the Plaintiff refuted vide its advocates’ letter dated 11th May 2007. At this point, the negotiations broke down resulting in the filling of this suit.

41. Clause 5. 1.3 and 5. 1.4 of the Agreement provided as follows:5. 1.3 “The Property is charged to National Bank of Kenya and the International Finance Corporation (hereinafter called “the institutions” to secure advances to the tune of Kenya Shillings Eight Five Million (Kshs. 85,000,000/=)”5. 1.4 “The parties have agreed to approach the institutions to reduce the amount owed”

42. It is clear from the record that Bank advertised the suit property and the defendant entered into an agreement with the Plaintiff for the sale of the same at Kshs. 100 Million. The Plaintiff paid the agreed deposit. Consequently, NBK indicated that the payment of the deposit was insufficient to secure the release of the subject title documents. The mode of financing that the Plaintiff was to use in paying the balance of the purchase price was not stipulated in the Agreement. Having made arrangements with Kenya Commercial Bank Limited (hereinafter “KCB”), using the Agreement as security, for payment of the balance of the purchase price, the Plaintiff was in my view fulfilling its contractual obligation under the Agreement and not in breach of the same.

f. Whether Plaintiff is entitled to the reliefs sought i. Specific performance 43. For a court to grant an order of specific performance, it must be satisfied that there existed valid and enforceable contract between the parties. This was held in Gharib Suleman Gharib v Abdulrahman Mohamed Agil LLR No. 750 (CAK) Civil Appeal No. 112 of 1998 which was cited with approval in the case of Caltex Oil (Kenya) Limited v Rono Limited [2016] eKLR. The court expressed itself as follows:“The jurisdiction to order specific performance is based on the existence of a valid and enforceable contract and being an equitable relief, such relief is more often than not granted where the party seeking it cannot obtain sufficient remedy by an award of damages the focus being whether or not specific performance will do more perfect and complete justice than an award of damages.”

44. The criteria on the appropriateness and efficacy of the equitable remedy of specific performance is well settled. The historical foundation upon which the equitable relief of specific performance of a contract was granted was that the alternative remedy of damages would not be sufficient or adequate. Over the years, the criteria has changed. The approach of whether damages are an adequate remedy has been replaced with that of whether specific performance will do more perfect and complete justice than an award of damages. Put it differently, the criteria is whether specific performance will be a more appropriate remedy than an award of damages in the circumstances of a particular case.

45. The Plaintiff herein submitted that it is still interested in the suit property and urged this court to grant an order of specific performance. According to the Plaintiff, the Defendant should be held to its bargain and be ordered to specifically perform the Agreement by transferring the suit land to the Plaintiff upon payment of the agreed purchase price.

46. As stated above, specific performance is an equitable remedy. Both parties in this case clearly understood the business and clearly expressed their intention in the Agreement. There is also proof that the Plaintiff paid the deposit of the purchase price and committed to pay the balance. The deposit was however returned to the Plaintiff within a week of its payment and the balance thereof remains unpaid. Noting that the suit property has since been sub-divided and sold off, it is my view that the remedy of specific performance would not be appropriate or efficacious in the circumstances. This leaves an award of damages as the only viable remedy in the circumstances of this case.

ii. Damages for loss of bargain 47. In the alternative, the Plaintiff prays that the Defendant be ordered to pay damages for loss of the bargain to be calculated as the difference between the purchase price and the market price of the suit price at the time of the date of delivery of the judgment. Relying on the case of Gami Properties Limited v. National Social Security Fund Board of Trustees & 2 Others [2018] eKLR the Plaintiff proposed an award of Kshs. 4. 2 Billion under this head.

48. In the case of Perpetua Atieno Vs Louis Onyango Otieno [2013)]eKLR, the Court of Appeal set out the type and measure of damages recoverable by a purchaser upon breach of contract by a seller of land. The court in that case held that:“Where it is the vendor who wrongfully refuses to complete the measure of damages is similarly, the loss incurred by the purchaser as the natural and direct result of the repudiation of the contract by the vendor. These damages include the return of any deposit paid by the purchaser with interest, together with expenses which he has incurred in investigating title, and other expenses within the contemplation of the parties, and also, where there is evidence that the value of the property at the date of repudiation was greater than the agreed purchase price, damages for loss of bargain…”

49. In this case, the Defendant repudiated the agreement in 2007. The proposed award of Kshs. 4. 2 Billion under this head is based this on the valuation report dated 2nd September 2019 by Dominion Valuers Limited. This means that the valuation of the property was undertaken about 12 years after the date of repudiation of the Agreement. It is therefore my view that the Plaintiff has failed to demonstrate the legal basis for the proposed figure. Nevertheless, a claimant for general damages for breach of contract who does not prove that he suffered loss is all the same entitled to damages, though nominal.

50. In Kinakie Co-operative Society Vs Green Hotel (1988) KLR 242, the Court of Appeal held that where damages are at large and cannot be quantified, the court may have to assess damages upon some conventional yardstick. But if a specific loss is to be compensated and the party was given a chance to prove the loss and did not, he cannot have more than nominal damages. (See Nyamogo & Nyamogo Advocates Vs Barclays Bank of Kenya Limited (2015) eKLR.)

51. In this case, the Defendant agreed to sell the suit property to the Plaintiff. The Defendant thereafter breached the agreement and refunded the deposit that had been paid. The Plaintiff has not demonstrated the loss that it suffered. It is however entitled to an award of nominal damages.In Kanji Naran Patel –v- Noor Essa & Another 1965 E.A at 487 paragraph G-1;“Norminal damage is a technical phrase which means that you have negatived anything like real damage but that you are affirming by the normal damages that there is an infraction of a legal right which, though it gives you no right to any real damages at all yet give you a right to the verdict or judgment because your legal right has been infringed. But the term nominal damages does not mean small damages. The extent to which a person has a right to recover what is called by compendious phrase damages but may also be represented as compensation for the use of something that belongs to him, depends upon a variety of circumstances and it certainly does not in the smallest degree suggest that because they are small they are necessarily nominal damages.In the earlier case of Beumont –v- Great head (1946) 2 C.B 494 Maule J spoke of nominal damages as a sum that may be spoken of but that has not existence in point of quantity and as a mere peg of which to hang costs.”Thus in action for breach of contract nominal damages are recoverable although no actual damage is recoverable. The deposit paid to the defendant was refunded, had it not the court would order that interest on deposit be paid with interest as damages. This would have assisted the court to quantity the damages. The Court of Appeal on the case of Atieno –v- Louis Onyango Otieno (supra) held that-“Where it is the vendor who wrongfully refused to complete, the measure of damages is similarly, the loss incurred by the purchaser as the natural and direct result of the repudiation of the contract by the vendor. The damages include the return of any deposit paid by purchaser with interest together with expenses which he has incurred in investigating title and other expenses within the contemplation of the parties, and also where there is evidence that the value of the property at date of repudiation was greater than the agreed purchase price, damage for loss of bargain.”The plaintiff as submitted by the defendant did not at the end of the day pay any money under the contract. He never took possession and did not prove any expenses he incurred other than the legal fees which he has incurred in prosecuting this case which he will recover by an award of costs.In Consolata Anyango Ouma –v- South Nyanza Sugar Co. Ltd (2015) eKLR, the C.A while considering whether the appellant was entitled to damages as a result of breach stated that the purpose of damages for breach of contract is to mitigate loss, the claimant is to be put as far as possible in the same position he would have been if the breach complained of had not occurred. The court went on to say that such damages are not at large or general damages but are in the nature of special damages and they must be pleaded and proved. It is however true to say that a claimant for general damages for breach of contract who does not prove the loss he suffered is entitled to damages, though nominal. See Anson’s Law of Contract 28th Edition page 589 and 590 where it is stated that;“A claimant who has not infact suffered any loss by reason of that breach is nevertheless entitled to a verdict but the damages recoverable will be purely nominal.”Based on the foregoing I find that the plaintiff is entitled to a nominal award of damages which I assess at Kshs.2,000,000/-

Conclusion The upshot of the foregoing, in my view, is that the Plaintiff’s claim against the Defendant is merited in terms of Prayers No. 6 and 7 of the Further Amended Plaint dated 17th November 2017. I order as follows:-1. I enter Judgment for the plaintiff for the loss of bargain in the sum of Kshs.2,000,000/-2. I award the plaintiff the costs of the suit together with interests.

DATED, SIGNED AND DELIVERED AT CHUKA THIS 18TH DAY OF MAY 2022. L.W. GITARIJUDGE18/5/2022Mr. Baaabu for DefendantMr. Kairaria for PlaintiffJudgment has been read out in open court.L.W. GITARIJUDGE18/5/2022