Emarilly Investments Limited & 13 others v Deluxe Motors Limited & 2 others [2019] KEHC 4936 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYAAT NAIROBI

CIVIL CASE NO. 18 OF 2019

EMARILLY INVESTMENTS LIMITED & 13 OTHERS.......PLAINTIFF

VERSUS

DELUXE MOTORS LIMITED & 2 OTHERS..................DEFENDANTS

RULING

The Plaintiff/Applicant filed the Notice of Motion dated the 30th day of January, 2019, against the Respondents in which the following orders were sought;

1. That this application be certified urgent in the first instance, heard exparte and service herein be dispensed with.

2. That this honourable court be pleased to issue a temporary injunction restraining the 1st, 2nd and 3rd Defendants/Respondents by themselves, their agents and/or servants from attaching and eventual sale of the Plaintiff (head tenant) and all the sub-tenants shop merchandizes who are carrying on their business on LR. No. 209/2439/9 along Koinange Street Nairobi pending hearing and determination of this application.

3. That the defendants/Respondents be and are hereby prohibited and restrained from unlawfully issuing parallel leases and/or distressing for rent until the County Government enforcement Notice dated 16th January, 2019 suspending any development is lifted and each of the sub-tenant be given time to compile their accounts and confirm the amounts they have paid directly to the 2nd Defendant pending hearing and determination of the main suit.

4. That a declaration be issued that the 2nd Defendant has no mandate absolutely to prepare, serve parallel leases when the contract between the Plaintiff and 1st defendant is still in force and the 2nd defendant be compelled to account for the amount of rent it has received from some of the sub-tenants through threats of eviction.

5. That costs be provided for by the defendants.

The same is brought under Order 51(1) and 40(1)(a) of the Civil Procedure Rules and Sections 1(A), 1 (B) and 3 (A)  of the Civil Procedure Act Cap 21 Laws of Kenya.  It is based on the grounds set out on the body of the same and it’s supported by the annexed affidavit sworn by Emar Waithira Mwangi who has described herself as a Director as well as Shareholder of the Plaintiff Company.

The deponent claims that by a lease dated 9th May, 2018, the Plaintiff entered into a contract with the 1st Defendant whereby the Plaintiff leased the entire ground and mezzanine floors on LR. No. 209/2439/9 situated along Koinange Street within Nairobi County at an annual rent of Kshs. 17,849,280. That, the  Plaintiff was given a grace period of three months to enable it remove the already erected structures by the former tenant to enable it elect its own partitions and after the execution of the lease, pay a deposit of kshs. 17,864,831. 21ct. That contrary to the said agreement, the 2nd Defendant entered into the premises with hired goons and embarked on the demolition of the erected structures which were owned by the former tenant which exercise took over three months which in essence meant the 2nd Defendant utilized all the two months grace period which had been granted by the 1st Defendant to the Plaintiff.

That eventually, the Plaintiff was handed the space in a dilapidated state but before it could complete its partitions, Nairobi County Government officials issued it with a suspension notice for the reason that the 1st Defendant had blocked a space which was separating LR. No. 209/2439/9 and the adjacent building which fact, the Defendants failed to disclose to the Plaintiff.  That as a result of this mess, time within which partitioning was to be completed lapsed, hence, exposing the Plaintiff to a lot of difficulties in terms of marketing and partitioning the premises.

It was further averred that the 2nd Defendant without taking into account the time lost because of its negligence, started demanding for rent even before the Plaintiff could complete the partitions and in an effort to complete and let some spaces. That as the Plaintiff was struggling with the marketing, the 2nd Defendant was busy supplying letters of offer and parallel leases to sub-tenants for execution, and upon the Plaintiff demanding an explanation, the 2nd Defendant proceeded to instruct the 3rd Defendant who on 23rd January 2019 served all the sub-tenants with a proclamation claiming rent arrears of Kshs. 21,088,449 from each sub-tenant for unspecified reason. The said proclamations were served upon the Plaintiff, Label Fashions and Kiddy Kids Limited and the same did not specify the period for which the arrears were demanded yet, the Plaintiff had paid a deposit of Kshs. 17,864,831. 21cts which the 1st Defendant was still holding.

The deponent depones that the Plaintiff has expended alot of money on the project and should be given ample time to complete, and thereafter enjoy quiet possession without any interference from the 2nd Defendant.  That the greedy need of the 2nd Defendant, the  unorthodox manner and mishandling the entire exercise has caused the delay and suffering to the Plaintiff and the sub-tenants and if the 2nd Defendant is not restrained, the Plaintiff shall suffer irreparable loss and harassment from the 2nd Defendant which actions are not warranted.  Further, it was averred, the Plaintiff was served with another enforcement notice dated the 16th January, 2019 by the County Government stopping it from carrying out construction on the site and the same has not been resolved to date.

The Defendants have opposed the application vide a replying affidavit sworn by Paul Kiprotich Ruto on 6th February, 2019 and filed in court on even date.  The Deponent has described himself as one of the Directors of the 2nd Defendant and the managing agent of the 1st Defendant.

He avers that the Plaintiff became a tenant of the 1st Defendant on 1st August, 2017 by virtue of a letter of offer dated the 22nd July, 2017 and executed by the parties on 1st August, 2017, for a term of 10 years on a quarterly rent of Kshs. 4,559,400 exclusive of value added tax, water and electricity with an increment of 7. 5% Pa.  He denies that the 1st Defendant entered into a contract with the Plaintiff on 9th May, 2018 as alleged.  He maintained that the commencement date of the lease was 1st August 2017 and not 9th May, 2018 as alleged by the plaintiff/applicant.

He further avers that a grace period of 2 months only was given to the plaintiff to facilitate the partitioning and/or fitting and not three  months as alleged by the  Plaintiff.  He contended that the Plaintiff made an initial deposit of Kshs. 10,071,885. 21cts on signing the letter of offer, which amounts included rent deposit of kshs. 4,559,400, electricity deposit of Kshs. 75,000/- water deposit of Kshs. 30,000/- architect fee of kshs. 15,000 rent for October, November and December at kshs. 4,559,400 inter alia.

That the above payments were to be made prior to handing over of the premises which was to take place on 4th September, 2017 after a joint inspection on the same day.  That in an apparent payment for security deposit of Kshs. 4,559,400, the Plaintiff on 4th September, 2017 made a transfer of Kshs. 2,000,000 and issued five (5) cheques which were returned unpaid as a result of which the premises could not be handed over thus delaying the handover exercise until the 15th February, 2018 after the balance of the deposit was paid.

The first Defendant stated that the Plaintiff’s  contention that it paid Kshs. 17,864,831. 21cts is not true, the correct position being that the deposit payable for the lease was Kshs. 4,559,400 and not Kshs. 17,864,831. 21cts which amount represents the annual rent.

Further, even the RTGS forms annexed in support of the said payments, which are denied, do not add up as some of them did not go through, others are repetitions while others have wrongly been entered and /or are absolute forgeries.

The first Defendant further avers that the total amounts received is Kshs. 18,704,857. 21cts which represents the total amount paid from the date of commencement of the lease on 1st August, 2017 to the date of filing the application, which include payment of deposit and rent for the entire period against a total sum of Kshs. 52,108,849. 03cts which the Plaintiff was required to have paid by then meaning that the Plaintiff is in arrears of Kshs. 33,403,391. 82cts.

The deponent averred that with respect to the notice of enforcement dated 10th July, 2018, it is not within its knowledge as no licence or approval was obtained from the country Government of Nairobi as required under clause 51 of the Third schedule of the lease agreement.  As to the one dated 16th January, 2019, the 1st Defendant contended that the same was a forgery and did not originate from the County Government of Nairobi as alleged.

The Deponent stated that the 1st Defendant started making demands for rent upon default by the Plaintiff and after it had been given sufficient time to pay as the first letter demanding the rent was written on 14th August, 2018 which was one year after the commencement of the lease and after the Plaintiff had issued several cheques that were unpaid and therefore the Plaintiff was given sufficient time.

That pursuant to a letter dated 8th September, 2018, the Plaintiff had voluntarily handed the demised premises to the 1st Defendant through the 2nd Defendant as the Plaintiff’s action  of failing to meet its financial obligations by 17th December, 2018 and latter issuing cheques that returned unpaid amounted to voluntary giving up possession of the premises. The deponent averred that it is pursuant to the re-entry and repossession aforesaid that the 2nd defendant proceeded to issue letters of offer to the subtenants as well as instruct the 3rd Defendant to levy distress.  The first Defendant averred that the proclamations were not served upon all the sub-tenants as alleged by the Plaintiff but to the contrary, they were served upon two of them being labels fashions and Kiddy Kids Limited and these were distressed because the plaintiff through its Director has held the two businesses out as her shops and they are known to be hers.

Finally, the first defendant avers that the plaintiff has come to court with unclean hands and it ought not to benefit from and are not deserving of the equitable remedy of injunction.

The court has considered the Application and the material in support, together with the Replying affidavit by the defendants sworn in opposition to the application.

The plaintiff has sought several orders as particularized in the body of the notice of motion dated 30/01/2019.  The plaintiff’s cause of action is based on a lease agreement dated the 9th may, 2018 between it and the 1st defendant as the lessor and the lessee whereas the 2nd – 14th Plaintiffs are sub-tenants of the first plaintiff.

Parties agreed to canvass the application by way of written submissions which this court has duly considered.

In their submissions, parties have set out their respective issues which in my view can be summed up as follows:

1. Whether the plaintiffs have established a prima facie case.

2. Whether the plaintiff will suffer irreparable loss if the orders sought are not granted.

3. Whether the balance of convenience favours the plaintiff or the defendants.

4. Whether the 2nd defendant has legal capacity to represent and/or swear an affidavit on behalf of the 1st defendant.

The commencement date of the lease is in dispute.  Whereas the plaintiffs contend that it commenced on 9th May, 2018, the defendants allege that it did commence on the 1st day of August, 2017.  I deem it necessary that the court determines this issue first as the terms and conditions of the lease aforesaid are the subject of the application herein.

The documentary evidence availed to the court shows that before the parties entered into the  lease agreement, they had signed the letter of offer dated the 22nd July, 2017, which contains some terms and conditions guiding the relationship between them with the first defendant being described as the lessor and the plaintiff as the lessee.  The offer relates to the premises known as L. R. N. 209/2439/9 (office space).

Among the other terms therein are the term of the lease, the rent, security deposit, subletting, breach of covenant and possession.

The evidence on record also shows that a lease agreement was later signed by the same parties and it’s dated the 9th day of May, 2018.

According to the lease agreement, the commencement date is clearly indicated as 1st day of August, 2017.  Though the execution page of the lease agreement is missing, there is no dispute between the parties as to the existence of the same, the only dispute being the commencement date.  Going by the express provision in the lease agreement on the commencement date, this court does not have any other evidence on the basis of which it can find otherwise.  If the parties had intended that the lease should commence on 9th May, 2018, nothing would have been easier than for them to specifically state so.

Looking at the lease, it has made provisions on the payment of rent and taking of possession by the plaintiff who contends that though it was given a grace period of three months under the lease to enable it remove the already erected structures by the former tenant and to enable it to erect its partitions in line with the sub tenant desires, the second defendant entered into the premises with hired goons and embarked on the demolition of the said structures which took more than the three months and the premises were handed to it in a dilapidated condition.

That upon taking over and as it was trying to clear the premises, it was served with a suspension notice by the County Government of Nairobi for blocking some space which was separating the premises and the adjacent building.  That in addition to the suspension notice, it was also served with an enforcement notice dated 16th January, 2019 stopping it from carrying on any construction, which issue remains unresolved to date.

According to the plaintiff, the  mess caused by the 1st defendant and more particularly the 2nd defendant exposed it to a lot of difficulties in terms of marketing, partitioning, wiring and general completion.  That the aforesaid notwithstanding, the first defendant started demanding for payment of rent even before completion of the partitions and in an effort to complete and let out spaces, the plaintiff hurriedly drew leases and some spaces were taken up by some sub-tenants.

The plaintiff further submitted that as it was struggling with marketing to get more sub-tenants to occupy the remaining spaces, the 2nd defendant was busy supplying letters of offer and parallel leases to the sub-tenants for execution.  That on demanding for an explanation, the 2nd defendant proceeded to instruct an auctioneer to levy distress who served all the sub tenants with a proclamation claiming rent arrears of kshs. 21, 088,449 from each of them.  Among those whose goods were proclaimed are the plaintiff, Label Fashions and Kiddy Kids limited.  They have sought orders as prayed.

On the part of the defendants, it was submitted that the plaintiff has not satisfied any of the principles attendant to the granting of temporary orders of injunctions as espoused in the case of Giella s. Cassman Brown.  They contended that the grace period given to the plaintiff was two (2) months and not three months as alleged which period had been pegged on the commencement of lease on 1st August, 2017 and which expired on the 20th September, 2017 and the plaintiff was to start paying rent as from 1st October, 2017.  That the plaintiff defaulted in payment of rent from the onset and even when it purported to make payments of rent and security, deposit it issued cheques that were unpaid.  The defendants in their replying affidavit have annexed copies of funds transfer for monies transferred to the first defendant some of which were made in the months of January and April 2018 which was before the execution of the lease agreement.  Further, the Image Return Documents annexed as “PKR7”  are payments that the plaintiff intended to make in the year 2017, in the month of September,

Going by those documents and as earlier observed, the court is persuaded by the defendants’ submissions and contention that the lease commenced on 1st August, 2017 and not on 9th May, 2018.

The plaintiff in its supporting affidavit averred that it met its obligation of paying the required deposit of Kshs. 17,864,831. 24cts  and has annexed copies of RTGS forms marked “EWM2”.

In response to this, the defendants have attached copies of unpaid cheques which the plaintiff issued to the first defendant.  The court has noted that the plaintiff did not dispute that the cheques were not paid and therefore, the defendants’ contention that the plaintiff is in arrears of rent is tenable.  It should be remembered that a lease is a bilateral agreement/contract between the lessor and the lessee wherein the lessee is not only given an estate in land but also himself gives a covenant to pay rent and execute repairs.  In other words, the tenant has a duty in law to pay rent to the landlord in exchange of quiet possession of the premises.

The plaintiff justifies non payment of rent to the delay of the three (3) months which period, the defendants disputes and avers that it was supposed to be two (2) months as per the letter of offer.

I have perused both the lease agreement and the letter of offer.  The letter of offer talks about two months as the grace period and not three months as alleged by the plaintiff.

That being the case, and considering that the demand for rent was made on 14th August, 2018, which was one year after the commencement of the lease, the plaintiff’s contention that it was not given sufficient time is untenable.

On the issue of enforcement notices served on the plaintiff by the county government, I will first address the one dated 10th July, 2018.  The same was issued after the commencement of the lease and the offending action is stated as carrying out illegal alterations and renovations without approved plans.  Looking at the commencement date of the lease, and the date the notice was issued, it would be reasonable to conclude that by then, the plaintiff had already finished the partitioning and/or alterations to the premises.  As rightly submitted by the defendants, the plaintiffs ought to have obtained prior approval from the City Council of Nairobi in respect of the standard and quality of the materials to be used for the partitioning.  The plaintiff did not tender any evidence before the court that it obtained the said approval as required of it under clause 5. 1 of the lease agreement.

With regard to the notice dated 16th January, 2019, the defendants submitted that the same could be a forgery, for the reason that the serial number therein comes before the one on the notice dated 10th July, 2018, yet, the notice dated 10th July was issued earlier.  The defendants have also stated that they made enquiries with the Nairobi City County Government regarding the notice dated 16th January, 2019 and they were informed that the same is not genuine.

While the court is not in a position to verify this, the defendants’ annextures “PKR 25” and “PKR 26” are of importance in this case.  These are a copy of a letter dated 14th January, 2013 and another dated 4th April, 2017 confirming purchase of reversionary interest in the suit land and the other confirming the 1st defendant has a grant from the County Government over the lane.  In this regard, the court has perused through the documents annexed by the plaintiff and there is nothing to suggest that these two letters exhibited by the first defendant are not genuine.  It is on that basis that this court is prepared to find and do find that the  notice dated the 16th January, 2019 is not authentic and this may explain why the serial number comes before the earlier notice dated 10thJuly, 2018.

In view of the aforegoing, the only logical conclusion that this court can make is that the plaintiff is not truthful in its assertion that the first defendant interfered with its tenancy as a result of which it suffered financial loss.

Turning now to the issue of breach of  the terms of the lease agreement, the defendants have contended that by a letter dated 8th December, 2018 which is annexed to the defendants replying affidavit as “PKR 27”, the plaintiff having failed to met its legal obligation had voluntarily handed the demised  premises to the 1st defendant, through the 2nd defendant and its directors.  That the action led to the automatic repossession of and re-entry of the premises by the 1st defendant as contemplated in the lease agreement and its upon the re-entry that the first defendant issued leases to the sub-tenants.

It is trite that under the law, a lease or a tenancy may come to an end in various ways which include; by expiry, notice, surrender or forfeiture among others.

The right to forfeiture entitles a landlord to re-take the premises prematurely and put the lease to an end.  This entitlement must arise under the terms of the lease or tenancy. The lease should contain a forfeiture clause which is a provision which is exercisable only in the event of some default by the tenant and which operates to bring the lease to an end earlier than it would others terminate.

In some cases, rather than making the lease conditional upon the performance of the tenants obligations, the more common practice is to set out the tenants duties in the form of covenants and then add a forfeiture clause providing that if the tenant commits a breach of covenant, it shall be lawful for the lessor to re-enter upon the premises and immediately thereupon the term shall absolutely determine

Under this sort of provision, the lessor reserves to himself a right of re-entry and the lease continues unless and until he exercises it.  As in the case of a condition, even if a provision for re-entry states that the lease shall determine or become void immediately upon the breach, it is settled that the lease remains valid until the lessor re-enters or perhaps, otherwise indicates his unequivocal intention to determine the lease.  The lease is thus not void but merely voidable by the lessor but not by the lease.  See  (The law of Real Property)  byMegarry and Wade 7th Edition.

To constitute peaceable re-entry by the landlord, there must be some unequivocal act or words as to where he changes the locks or grants a new tenancy to a third party.

With that literature in mind, the court has keenly perused the lease agreement vis-a-vis, the letter dated 8/12/2018 by the plaintiff.

Clause 9. 2 of the lease agreement gives the lessor the right to re-enter into and upon the demised premises or any part thereof in the name of the whole and the same to have again repossess and enjoy as in its former state and thereupon the term shall absolutely determine.  The court has noted that the clause provides for issuance of a notice by the landlord specifying the nature of the breach.

A cursory perusal of the aforesaid letter which was written by the plaintiff will reveal that;

i.  The tenant was aware of the breach as it has through its director acknowledged that it was in arrears of rent

ii. The amount in arrears has not been stated which means that it is not in dispute and both parties knew how much was owing.

iii. The plaintiff undertook to pay the rent arrears by 6pm of the date set out therein.

In the said circumstances the first defendant was at liberty to enter into any lease agreements with the sub-tenants, the plaintiff having handled back the premises to the 1st defendant by its failure to pay rent as it had promised.

As for the proclamations issued to the plaintiff, Labels Fashion and Kiddy Kids Limited, the defendants have averred that the two are businesses owned by the plaintiff and therefore, it was within the defendants right to proclaim.  The plaintiff has not denied that assertion and no evidence has been adduced to the contrary.  In the absence of such evidence, the only logical conclusion that the court can make is that the businesses are run by the plaintiff.  In any event, the two sub tenants that is to say; Label Fashion and Kiddy Kids Limited failed to comply with section 19 of the distress for rent Act Cap 293 Laws of Kenya.  The section requires an under-tenant or a Lodger to make a declaration that the goods distressed are his property.  Under that section, the sub-tenant is supposed to state the amount of rent that is due to his immediate landlord and the times at which future installments of rent will become due, the amount thereof, and an undertaking to pay the superior landlord any rent so due or become due to its immediate landlord, unless the arrears of rent in respect of which the distress was levied or authorized to be levied have been paid off.  This was not done.  In the absence of such declaration, the two sub-tenants cannot complain that the distress was unlawful.

Before I conclude, the plaintiff raised the issue of the 2nd defendants’ capacity to swear the replying affidavit.  I have considered the same and the response by the 2nd defendant.  In the replying affidavit, the deponent one Paul Kiprotich Rutto is described as a director of the 2nd defendant and also managing agent of the 1st defendant.

Order 19 (3) of Civil Procedure Rules is clear on the matters to be contained in an affidavit.  The deponent having been described as an agent and the matters herein relating to leases and tenancy, what he has deponed to, were matters within his knowledge as the managing agent.  I therefore find that it was in order for him to swear the affidavit.

In view of the aforegoing, I find that the plaintiff has failed to establish a prima facie case and therefore the application dated 30/01/2019 is hereby dismissed with costs to the defendants.

Dated, Signed and Delivered at   Nairobi  this   4TH Day of   JULY, 2019.

…………………………….

L. NJUGUNA

JUDGE

In the Presence of

…………………………. For the Applicant

…………………………. For the Respondent