Erdemann Property Limited v Gathaiya [2022] KEHC 9879 (KLR)

Erdemann Property Limited v Gathaiya (Civil Appeal 008 of 2022) [2022] KEHC 9879 (KLR) (Commercial and Tax) (8 July 2022) (Judgment)

Neutral citation: [2022] KEHC 9879 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Commercial and Tax

Civil Appeal 008 of 2022

DAS Majanja, J

July 8, 2022

(Formerly ITA NO. E007 OF 2022)

Between

Erdemann Property Limited

Appellant

and

James Ngugi Gathaiya

Respondent

(Being an appeal from the Ruling and Order of HonM W Murage dated December 20, 2021 at the Magistrates Court at Nairobi, Milimani in Civil Case no E1613 of 2020)

Judgment

1. The appellant appeals against the ruling of the subordinate court dated December 20, 2021 allowing respondent’s application dated August 19, 2021 making the following orders:bThat the defendant/respondent delivers up to the plaintiff/applicant, or in the custody of this honourable court, all original leases, stamp duty receipts, application for registrations, official searches and all other registration documents and papers in their possession, custody or power relating to apartments numbers B303, B304, C401, C402 and C403 erected on LR no 27317/2 Great Walls Gardens.

2. The facts giving rise to this appeal are not really in dispute. In December 2017, the appellant, a real estate developer, made an offer to the public to sell 2 bedroom apartments for kes 3,500,000. 00. The respondent took up the offer and executed letters of offer for the purchase of apartment nos B303, B304, C401, C402 and C403 at Great Walls Garden erected on LR no 27317/2 (‘’the Apartments’’).

3. The plaintiff states that he paid the booking fee of kes 10,000. 00 and applied for a loan facility from Bank of Baroda (Kenya) Limited (‘’the bank’’) to purchase the apartments which facility was to be secured by a charge over the apartments. The bank paid the Appellant kes 17,500,000. 00 being the full purchase price for the apartments.

4. In order to facilitate the transaction, the parties executed the sale agreements, the respondent executed the respective leases and handed over to the appellant’s advocates passport photos, copies of identity cards and KRA PIN and paid over stamp duty, deposit and legal charges. The respondent was given vacant possession of the apartments.

5. The gravamen of the respondent’s case before the subordinate court is that despite requests, the appellant failed to register the leases and transfer the apartments to him. He avers that as a result, the bank has threatened to recall the loan facilities.

6. The respondent states that he has suffered loss and damage due to the delay and for loss of bargain as he intended to dispose of some of the apartments at a profit. He claims kes 12,500,000. 00 for loss of bargain and kes 6,159,393. 00 as interest he has been paying on the loan facility. He also claims a refund of valuation fees amounting to kes 68,500. 00 incurred. The respondent also seeks, inter alia, specific performance of the agreements of sale for the apartments and in default the deputy registrar of this court be authorized to execute the relevant documents. It is on the basis of the facts outlined, that the respondent sought interlocutory relief.

7. The appellant resisted the application through the affidavit of its managing director, Zeyun Yang, sworn on September 1, 2021. The appellant states that it entered into sale agreements for the apartments with the respondent but insists that the sale was a cash sale and not through financing as they state in part that, “Upon acceptance of the letter of offer, a payment terms has been agreed as follows … payment by cash without financing”. It asserts that the bank was not a party to the sale agreements and that any obligation that the respondent may have with the bank cannot be imposed on the appellant. The respondent further states that the respondent did not inform it that a charge would be created over the apartments.

8. The appellant argued that allowing the application would amount to concluding the case without hearing the case on its merits. It argued that it was entitled to retain the original leases and registered documents until such time as the suit was completed as it was not privy to the financial arrangements for the loan facilities extended to the respondent by the bank. It accepted that it was willing to pay kes 17,500,000. 00 into a joint escrow account pending resolution of the suit instead of handing over the original lease and registration documents. It urged the court to dismiss the application.

9. After considering the parties written submissions, the trial magistrate held as follows:The Defendant admits having received the purchase price and lease for apartments nos B303, B304, C401, C402 and C403 erected on LR no 27317/2 Great Walls Garden, the same having regards in the plaintiff (sic) name.The defendant has not demonstrated why kshs 17,500,000 should be rendered back to the applicant. I do not think that the defendant will be prejudiced in any way having voluntarily entered into sale agreement on October 05, 2018. I will allow prayer 2 of the application with costs in the cause. Order accordingly.

10. It is the aforesaid ruling that precipitated this appeal. The appellant’s challenge to the ruling is set out in the Memorandum of Appeal dated January 14, 2022. The thrust of the appellant’s case, which counsel agitated in his oral submissions, is that the orders dispose of the main suit at an interlocutory stage without the court having the benefit of hearing the witnesses in the suit. He argues that the trial court violated the appellant’s right to a fair hearing contrary to article 50 of the Constitution. The appellant complains that the trial magistrate erred in law and in fact by interpreting the substantive provisions of the sale agreements without having regard to the issues and facts raised by the Appellant. It further complains that the trial magistrate applied the wrong principles hence the ruling is not supported by the applicable law.

11. The respondent supports the decision of the trial court. Counsel for the respondent submits that the orders were justified as the respondent had paid for the apartments in full and the leases have already been registered in his name therefore he has indefeasible title to the apartments in accordance with sections 23 and 26 of the Registration of Titles Act. He adds that he has possession of the apartments hence he is entitled to the reliefs sought.

12. The issue in this appeal is whether the trial magistrate erred in granting a mandatory injunction at an interlocutory stage. The jurisdiction of the court to grant an interlocutory mandatory injunction has been affirmed in several cases. For example, in Kenya Breweries Ltd and Another v Washington O Okeyo NRB CA Civil Appeal Nno 232 of 2000 [2002] eKLR, the Court of Appeal stated as follows on mandatory injunctions:A mandatory injunction ought not to be granted on an interlocutory application in the absence or special circumstances, and then only in clear cases either where the court thought that the matter ought to be decided at once or where the injunction was directed at a simple and summary act which could be easily remedied or where the defendant had attempted to steal a march on the plaintiff. Moreover, before granting a mandatory interlocutory injunction, the court had to feel a higher degree of assurance that at the trial it would appear that the injunction had rightly been granted, that being a different and higher standard than was required for a prohibitory injunction.

13. The same principle was reiterated by the Court of Appeal in Nation Media Group and 2 Others v John Harun Mwau NRB CA Civil Appeal no 298 of 2005 [2014] eKLR, as follows:It is trite law that for an interlocutory mandatory injunction to issue, an applicant must demonstrate existence of special circumstances… A different standard higher than that in prohibitory injunction is required before an interlocutory mandatory injunction is granted. Besides existence of exceptional and special circumstances must be demonstrate as we have stated a temporary injunction can only be granted in exceptional and in the clearest of cases.

14. The cases I have cited show that a court will only issue a mandatory injunction where the applicant proves that there are special and exceptional circumstances. At this point it is important to point out that the grant of a mandatory injunction does not of itself violate article 50 of the Constitution. Article 50 protects that right to a fair hearing. A fair hearing does not mean that in all cases the court must hear witness testify and be subjected to cross-examination. It means that the parties to case must be given a fair opportunity to present their case. That opportunity must depend on the facts and circumstances of each case. In some cases, a full hearing with witness may be required. In others, oral submissions supported by documents would be sufficient. In other cases, the presentation of documents is sufficient to satisfy the right to a fair hearing.

15. In this case, the hearing was in the form of a formal application supported by depositions and written submissions. Each party was given a fair opportunity to present its case before the ruling was delivered. I therefore reject the appellant’s argument that his right to a fair hearing under article 50 was violated. Moreover, and as the authorities show, the requirement of a high standard of proof required before a mandatory order is given at an interlocutory stage safeguards the rights of the parties.

16. Turning to consideration of the facts, it is not in dispute that the parties entered into sale agreements for the apartments. The respondent paid the full purchase price, forwarded all the documents necessary to complete the sale to the appellant and paid stamp duty and legal fees. While the appellant admits that it has received the full purchase price, it contends that it is justified in holding the documents. In its replying deposition before the subordinate court, it states that, “[T]here is legal justification for the defendant to retain the original leases and registered documents until such time that the suit filed by the plaintiff is determined by the court after hearing evidence by both parties.”

17. I do not see any legal justification by the appellant holding on the respondent’s documents once the terms and conditions of the sale agreements were satisfied. The appellant has not set out any instance of any breach of the sale agreements by the respondent. In my view, the respondent established a clear case to warrant the grant of the orders sought as it complied with all the terms of the sale agreements and there is no reason or justification for the appellant to hold on the title documents. The appellant’s case, as I understand, is that there is an outstanding claim for damages against it pending determination. Whether or not the respondent is entitled to the damages will be a matter for consideration by the trial court but at this stage there is no reason or basis for the appellant to hold on to the respondent’s documents.

18. In an appeal against the exercise of discretion by the trial court, the appellate court will not interfere with the decision of the trial court unless it is satisfied that the judge in exercising his discretion has misdirected himself in some matter and as a result has arrived at a wrong decision, or unless it is manifest from the case as a whole that the judge has been clearly wrong in the exercise of his discretion and that as a result there has been an injustice (see Mbogo v Shah [1968] EA 93 and United India Insurance Company Limited and 2 Others v East African Underwriters (Kenya) Limited NRB CA Civil Appeal 36 of 1983 [1985] eKLR).

19. Having considered the facts of the case and the principles applicable to the grant of a mandatory interlocutory injunction, I am satisfied that the trial court properly exercised its discretion. This appeal therefore lacks merit.

20. For the reasons I stated above, the appeal be and is hereby dismissed. The appellant shall pay costs of the appeal assessed at kes 40,000. 00.

DATED AND DELIVERED AT NAIROBI THIS 8TH DAY OF JULY 2022. D S MAJANJAJUDGECourt assistant: Mr M Onyango.Mr Achoki instructed by Zed Achoki Hussein Advocates LLP for the appellant.Mr Gathaiya instructed by Gathaiya and Company Advocates for the respondent.