Jomo Kenyatta University of Agriculture and Technology v Kwanza Estates Limited [2021] KEELC 4549 (KLR)

REPUBLIC OF KENYA

IN THE ENVIRONMENT AND LAND COURT

AT NAKURU

ELCC No. E19 OF 2020

JOMO KENYATTA UNIVERSITY OF AGRICULTURE AND TECHNOLOGY.....PLAINTIFF

VERSUS

KWANZA ESTATES LIMITED.....................................................................................DEFENDANT

RULING

1. This ruling is in respect of Notice of Motion dated 16th November 2020, through which the plaintiff seeks the following orders:

a) [Spent]

b) [Spent]

c) [Spent]

d) [Spent]

e) THAT pending the hearing and determination of this suit this honorable court may be pleased to issue an order of injunction to restrain the respondent by itself, or through its agents, servants or assigns from levying distress and/or attaching, removing and/or selling or in any other way interfering with the applicant's property and/or goods held in all that property known as Kwanza House Building Block 9/90 Nakuru Municipality.

f) THAT pending the hearing and determination of the suit this honorable court may be pleased to issue an order of injunction to restrain the respondent by itself, or through its agents, servants, employees or assigns from harassing, causing disturbance or in any way being a nuisance to the applicant, and/or barring/preventing the applicant from vacating, exiting and/or leaving the premises known as Kwanza House Building Block 9/90 Nakuru Municipality.

g) THAT the Officer Commanding Station (“OCS”) Nakuru Central Police Station be directed to enforce the above orders.

h) THAT the costs of this application be provided for.

2. The application is grounded on a supporting affidavit and further affidavit, both sworn by Prof. Robert Kinyua, the Deputy Vice Chancellor, Academic Affairs, of the applicant. He deposed that on 1st May 2010 the applicant and the respondent entered into a lease agreement pursuant to which the applicant leased all that property known as Kwanza House situated on the parcel of land known as Block 8/90 Nakuru Municipality for the purpose of housing its Nakuru Central Business District Campus for a period of 6 years ending on 30th April 2016. Upon expiry of the initial lease, the parties entered into another lease on 1st May 2016 a period of 6 years ending on 30th April 2022.

3. He further stated that subsequent to the execution of the second lease, a series of events with negative financial implications on the applicant transpired thus causing the Nakuru CBD Campus to make severe losses and to be unable to financially sustain itself. Among others, he listed such events as reduced government support and a decline in the uptake of programs, reduction of self-sponsored students following a decision by the government to implement a new placement system where all students who qualify for admission to university are placed as Government sponsored students in both private and public universities with resulting decline in enrolment of students in public universities and a corresponding increase in enrolment of students in private universities thus starving the applicant of self-sponsored students for admission into its programs at the Nakuru CBD campus and the government directive on the closure of Universities issued on the 16th March 2020 due to the Covid-19 pandemic.

4. Prof. Kinyua further deposed that the applicant's income and expenditure at the Nakuru CBD Campus is wholly reliant on revenues obtained from academic operations from its self-sponsored students’ program. That consequently, the lease has been frustrated as the applicant is leasing an unutilized premises with no commercial value to it thereby rendering the circumstances upon which the performance of the lease is called for radically different from that which was undertaken or agreed upon by parties. He added that the said events were unforeseen to the applicant at the time of entering into the agreement and as a consequence the applicant has found it impossible to continue with its operations in the premises as envisaged under the lease.

5. That as a result, through a letter dated 10th July 2020, the applicant issued to the respondent a three (3) months’ notice of intention to terminate the agreement. That notwithstanding the notice, the respondent served upon the applicant an invoice dated the 19th October 2020 for KShs 15,776,973 for rent covering the period of November 2020 to January 2021. Subsequently, on 10th October 2020 upon expiry of the notice, the applicant commenced the process of vacating the premises, but the respondent has restrained it by placing security guards and goons at the entry and exit of the premises. Additionally, at the respondent’s instructions, Messrs Pyramid Auctioneers issued to the applicant a proclamation of distress dated 6th November 2020 for purported recovery of rent arrears. He further stated that the applicant has adhered to the terms of the lease and that the respondent cannot force it to stay in the premises whether or not a lease exists.

6. The defendant opposed the application through a replying affidavit sworn by Geoffrey Makana Asanyo, its Managing Director. He stated that the lease entered into by the parties has no break clause and the applicant is therefore bound by it until its determination on 30th April 2022. He referred to correspondence and discussions between the parties and added that it was agreed at a meeting with the applicant’s representatives on 13th August 2020 if the rent of KShs 17,105,821. 65 then due was paid on or before 13th August 2020 then request for early exit would be considered but no payment was made.

7. Mr Asanyo further deposed that on 5th October 2020, the respondent’s advocates wrote to the applicant and informed it that it was in breach of the terms of the lease agreement and that it would be required to restore the building to its original state at a cost of approximately KShs 64,652,250 and that it would take about 6 months to complete the works. Further, that upon realizing that the applicant wanted to remove its goods from the premises to defeat its right to levy distress, the respondent instructed K K Security Services Limited to ensure that no goods were removed from the premises. He added that since there is no break clause in the lease agreement, the respondent made financial commitments to financial institutions and that it will stand to suffer irreparable loss and damage if the prayers sought are granted. He further deposed that the applicant is asking this court to rewrite the lease agreement between the parties, which is not permissible in law.

8. The application was canvassed through written submissions followed by oral highlighting. Counsel for the applicant argued that the unique issue to be interrogated in this matter is the right of the applicant as a tenant to exit the premises. He added that it is not in doubt that a lease agreement exists, that the applicant requested a waiver of rent for a period of time, that the request was rejected by the respondent and that the applicant then issued a three months’ notice of termination. According to counsel, the issue is whether the respondent can detain the applicant in the premises. He argued that the respondent’s actions of detaining the applicant in the premises, even if it turns out that the termination notice is invalid, is unlawful.  Citing inter alia the cases of Chimanlal Meghji Naya Shah & another v Oxford University Press (EA) Limited[2007] eKLR and Panafrican News Agency v Teleposta Pension Scheme & 2 others [2006] eKLR, he argued that courts have held that a landlord cannot force a tenant to stay in its premises whether or not a lease exists.

9. Counsel further noted that the respondent has conceded in its replying affidavit that it has placed guards to prevent the applicant from exiting the premises. He argued that even in the case of commercial lease with a fixed term, the tenant should be allowed to exit the premises and that if there are any losses by the respondent following the applicant exiting, the respondent can be compensated by way of damages. He pointed out that the respondent has filed a counterclaim seeking compensation including the balance of the rent for the unexpired term of the lease.  He argued that owing to decline in student enrolment, the lease has been rendered commercially impossible and has been frustrated. He urged the court to allow the application in terms of payer c, d, e, f and g thereof.

10. On his part, counsel for the respondent argued that the issue for determination is: what is the effect of a lease which does not have a break clause if a tenant wishes to terminate it?   Counsel cited the decision of the Court of Appeal in the case of Kenya Commercial Bank Limited v Popatlal Madhavji & another[2019] eKLR as well as the decision of the High Court in Nginyo Investment Limited v Mobile Pay Limited [2020] eKLR and argued that a lease which does not have a break clause cannot be terminated midstream and further that general damages are not available in such a situation.  He added that the respondent does not mind the applicant leaving so long as it pays what is due under the lease since the applicant knew what it was getting into when it signed the lease.  Counsel further argued that the applicant has not brought itself within the ambit of the doctrine of frustration and that rent which is due has not been paid as a result of which the respondent properly levied distress. He added that the respondent positioned guards to stop the applicant from removing goods which had been distrained and that the applicant has approached the court with dirty hands. He urged the court to dismiss the application.

11. In a brief response, counsel for the applicant argued that the issue of whether or not there is any amount to be paid by the applicant is one for final determination at the conclusion of the suit.

12. I have duly considered the application, the affidavits and the submissions. The applicant is essentially seeking an interlocutory injunction to restrain the respondent from levying distress and selling or interfering with its property pursuant to such a distress. The applicant itself concedes that a proclamation of distress was issued to it on 6th November 2020. In effect therefore, the portion of prayer (e) seeking to restrain the respondent from levying distress is overtaken by events. Nevertheless, the remaining aspects of prayer (e) will be considered. Additionally, the applicant seeks an injunction to restrain respondent from stopping it from vacating the leased premises.

13. The test applicable when considering an application for an interlocutory injunction is well settled and I need not belabour it. Such an applicant is required to establish a prima facie case with a probability of success. Even where a prima facie case is established, an injunction will not issue if damages are an adequate remedy in the circumstances of the case. If the court is in doubt as to whether damages will be an adequate compensation, then the court will determine the matter on a balance of convenience. All three conditions and stages are to be applied as separate, distinct and logical hurdles which the applicant is expected to surmount sequentially. If prima faciecase is not established, then irreparable injury and balance of convenience need no consideration. See Nguruman Limited v Jan Bonde Nielsen & 2 Others [2014] eKLR.

14. As to what constitutes a prima faciecase, we need look no further than the decision of the Court of Appeal in Mrao Ltd vs First American Bank of Kenya Ltd & 2 Others (2003) KLR 125where the court defined the term as follows:

... a case in which on the material presented to the court a tribunal properly directing itself will conclude that there exists a right which has apparently been infringed by the opposite party as to call for an explanation or rebuttal from the latter… [it] is more than an arguable case. It is not sufficient to raise issues. The evidence must show an infringement of a right, and the probability of success of the applicant’s case upon trial. That is clearly a standard which is higher than an arguable case.

15. There is no dispute that the applicant and the respondent are in a tenant and landlord relationship. The terms of the lease are not in dispute. Parties are in fact in agreement that the lease is for a fixed term of 6 years which commenced on 1st May 2016 and is scheduled to end on 30th April 2022. A major question to be determined at the trial of the suit is whether the applicant could validly terminate the lease as it sought through its notice dated 10th July 2020. If the termination is valid then the proclamation of distress for rent issued by the respondent and all claims for rent for the period after October 2020 would be unfounded. Among others, the applicant wants the court to determine whether the respondent can tie it to the premises until 30th April 2022. It argues that it is being detained in the premises.

16. As I see it, the parties have a contract whose terms are not disputed. The applicant does not dispute that it has not paid the rent in respect of which the proclamation of distress for rent has been issued. To the extent that there is unpaid rent, distress for rent is a natural and in fact lawful consequence. Similarly, the obligation not to remove distrained goods is a legal one. There has been absolutely no suggestion that the respondent is unwilling to let the applicant exit the premises even if rent which is due under the lease is paid. Consequently, the submission that the applicant is being detained in the premises is one that the applicant will be hard pressed to sustain at the hearing.

17. As was stated by the Court of Appeal in Kenya Commercial Bank Limited v Popatlal Madhavji & another (supra), midterm termination of a lease without a break clause is not available and a notice of termination of such a lease cannot validly terminate it. Validity of the applicant’s notice of termination dated 10th July 2020 has to be looked at against that background. If the court was to intervene in the matter to allow the applicant to exit at this stage as is sought, there would be risk of the court attempting to rewrite the contract between the parties. That is not permissible. See National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & another[2001] eKLR. The applicant may be having financial challenges but that is no reason for the court to intervene and force yet another form of financial challenges upon the respondent. For good measure, the respondent has equally argued that the current stalemate is causing it financial challenges. I am not satisfied that the applicant has any prima faciecase. That is sufficient to dispose of the application.

18. Even if I would have found that the applicant has a prima faciecase, the application would still fail on the second limb of the test in Giella –vs- Cassman Brown & Co. Ltd [1973] E.A 358. Existence of a prima faciecase is no guarantee that an interlocutory injunction will issue. An injunction will not issue if damages are an adequate remedy. The dispute between the parties ultimately boils down to payment of rent. There is no dispute as to what rent would have been payable if the issue of the applicant’s notice of termination had not arisen. In other words, damages can be ascertained with a good degree of precision and such damages will be an adequate compensation. The application fails the second limb of the test in Giella -vs- Cassman Brown and cannot thus succeed.

19. In view of the foregoing, Notice of Motion dated 16th November 2020 is dismissed with costs to the defendant.

Dated, signed and delivered at Nakuru this 28th day of January 2021.

D. O. OHUNGO

JUDGE

In the presence of:

Mr Mukele for the plaintiff/applicant

Mr Konosi for the defendant/respondent

Court Assistants: B. Jelimo & J. Lotkomoi