Rumba Kinuthia t/a Rumba Kinuthia & Co Advocates v Cytonn Real Estate LLP [2022] KEHC 11795 (KLR)

Rumba Kinuthia t/a Rumba Kinuthia & Co Advocates v Cytonn Real Estate LLP (Commercial Case 005 of 2021) [2022] KEHC 11795 (KLR) (Commercial and Tax) (6 May 2022) (Ruling)

Neutral citation: [2022] KEHC 11795 (KLR)

Republic of Kenya

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

Commercial and Tax

Commercial Case 005 of 2021

A Mabeya, J

May 6, 2022

Between

Rumba Kinuthia t/a Rumba Kinuthia & Co Advocates

Plaintiff

and

Cytonn Real Estate LLP

Defendant

Ruling

1. The plaintiff moved this court vide plaint dated February 11, 2021. Contemporaneous with the plaint, the plaintiff filed the Chamber summons dated March 17, 2021 which led to issuance of interim orders made on March 24, 2021 restraining the sale of two units identified as F-502 and F-801 in Alma phase 2 in block F (“the said units”). This was almost immediately followed by the defendant’s Notice of Motion dated April 1, 2021 to discharge those orders.

2. This ruling is on those two applications. The summons was dated March 17, 2021. It was brought under order XXXIX (sic) rules 1, 2 and 3 of theCivil Procedure Rules and section 3A and 6(e) of the Civil Procedure Act.

3. The summons sought orders that the defendants and their representatives be restrained from disposing of the said units pending the determination of the application. It also sought that the said units be transferred to the plaintiff.

4. The application was supported by the affidavit of Rumba Kinuthia sworn on February 11, 2021. It was the plaintiff’s case that he had invested in the defendant to safeguard the firm’s and several client’s fund and to acquire real estate. That following the Covid 19 pandemic, the defendant had reduced cash flow and resolved to allow investors with over kshs 10 million to convert to real estate.

5. The plaintiff had invested over kshs 20 million and in agreement with his clients, he took the conversion option. The defendant sent the plaintiff a document entitled CHYS/CPN Conversion to real estate termsheet July 2020 setting out terms and figures of such conversion.

6. The plaintiff visited Alma Phase 2 with two of his other clients and they identified two apartments in Block F being F-502 valued at kshs 13,700,000/= and F-801 valued at 14,000,000/=, respectively.

7. Subsequently, the plaintiff wrote an email dated December 8, 2020 requesting for the conversion, and orally booked the two units. That the defendant replied vide an email dated January 30, 2021 and referred to a different term sheet entitled CHYS/CPN Conversion to real estate termsheet January 2021 reflecting different terms effectually derogating from the earlier document on which negotiations were based upon, without notice to the plaintiff.

8. That the defendant had now offered the two units for sale and instead offered the plaintiff incomplete units in phase 3 and 4. The plaintiff contended that this would occasion irreparable financial loss as the plaintiff and his clients could not immediately recoup any gain in the incomplete units. That the defendant’s sister entity Cytonn Project Notes (CPN) owed the plaintiff kshs 22,218,037/= as per the statement of account of January 31, 2021 and was willing to top up if necessary and secure the two units.

9. The defendant opposed the application vide the replying affidavit of Jennifer Solovea, the defendant’s legal associate, sworn on April 1, 2021. It was contended that the suit disclosed no cause of action against the defendant and was barred by section 3(3) of the Law of Contract Act as it related to a disposition of interest yet there was no written agreement between the parties.

10. That the units were already being sold off to third parties as follows; unit F-502 to Mr Christian Mwathi as evidenced by attachment JS4 including an agreement for lease dated February 11, 2021, and unit F-801 to Arnold Odhiambo as per JS5 including an agreement of lease. That the sales were made before the suit was filed and even before the plaintiff’s alleged site visit.

11. That the project was registered in the name of Cytonn Intergrated Project LLP (CIP) on whose behalf the defendant managed the development, yet the suit was against CPN which was also an investor in the development, and was not a party in the suit. That there was no agreement between the parties or any kind of dealings.

12. The plaintiff filed a supplementary and a further supporting affidavit sworn on April 6, 2021 and May 4, 2021, respectively. He deposed that attachment ‘JSF’ produced by the defendant was an undated lease agreement showing that one of the subject units, F-801 was sold to one Amos Odhiambo in August 2020, yet the same unit appeared at page 19 of the Alma available units in CHYS/CPN Conversion to real estate termsheets 2020 marked as RK3. That there was a discrepancy as a sold unit would not have been indicated as available for conversion five months post its sale (January 2021).

13. He further deposed that according to the searches he had conducted on April 29, 2021 for Cytonn Real Estate Project Notes LLP, Cytonn Real Estate LLP and Cytonn Investments Management PLC, Cytonn Real Estate Project Notes LLP and Cytonn Real Estate LLP were the same entity. That the conversion of funds from cash to real estate was initiated by the defendant herein and not CREPN LLP hence the defendant was the right party to sue.

Notice of Motion dated April 1, 2021 14. The motion was brought by the defendant under order 2, rule 15(1) (b) (c) & (d) and order 40 rule 7 of the Civil Procedure Rules, and rules 16 & 17 of the High Court Rules 2016. It sought orders, inter alia, that the restraining order made on March 24, 2021 be discharged and the suit be struck out and dismissed with costs.

15. The application was supported by the affidavit of Jennifer Solovea sworn on April 1, 2021. It was based on grounds that by the time suit was filed and the ex-parte orders of March 24, 2021 restraining the sale of the two subject units was made, the units had already been sold to the third party. That the owner of the subject development was Cytonn Integrated Project LLP which was not a party in these proceedings.

16. Further, that there was no reasonable cause of action against the defendant and the proceedings were barred by section 3(3) of the Law of Contract Act as the suit related to a disposition of land yet there was no written agreement between the plaintiff and defendant.

17. The plaintiff opposed the application vide his affidavit and further affidavit sworn on May 4, 2021 and April 5, 2021, respectively. He deposed that the provisions of section 3(3) of the Law of Contract were irrelevant as the suit was based on CHYS/CPN Conversion to real estate termsheet and not on any written or unwritten agreement between the parties. That the aforementioned document was authored by Cytonn Real Estate, the defendant, and not Cytonn Project Notes. That the lease agreements were undated hence unreliable.

18. He further contended that the orders of March 24, 2021 were not made ex parte as the defendant had ignored the two mention notices dated March 2, 2021 and March 9, 2021, respectively that had been served upon it.

19. The court has considered the pleadings, the various depositions and the parties’ written submissions on record. The issues for determination are whether injunctive orders, both prohibitory and mandatrory, ought to issue and whether the suit ought to be struck out. The two will be determined together.

20. The principles for consideration in granting an injunction were settled in the case of Giella vs Cassman Brown & Company Limited (1973) E A 358. These are that an applicant must show a prima facie case with a probability of success; that an interlocutory injunction will not normally be granted unless the applicant might otherwise suffer irreparable injury, which would not adequately be compensated by an award of damages and finally that if the court is in doubt, it will decide the application on a balance of convenience.

21. On whether the applicant established a prima facie case with probability of success, the plaintiff contended that on the basis of a document titled ‘CHYS/CPN Conversion to real estate termsheet July 2020, he decided to convert his investment into real estate. He visited the development and orally booked the two units. However, the defendant offered different units instead of the two. For that reason, he sought to stay any sale of the two units to any other party pending the hearing of the application.

22. On its part, the defendant produced documents to show that the two units had already been sold off to third parties even before the suit was filed. It also contended that the sale had taken place even before the plaintiff visited the development.

23. That unit F-502 had been sold to one Christian Mwathi. Exhibit ‘JS4’ included a reservation dated September 2, 2020, a letter of offer dated November 9, 2020, a breakdown of the payment made of kshs 14,323,000/= inclusive of purchase price of kshs 13,700,000/= and an agreement for lease dated February 11, 2021. As for Unit F-801, the same had been sold to one Arnold Odhiambo. Exhibit ‘JS5’ included a reservation form dated August 19, 2020, letter of offer dated August 28, 2020 and purchase price of kshs 14,000,000/= and an agreement for lease.

24. It was the plaintiff’s contention that the leases were undated and therefore unreliable. That may be true for the lease relating to unit F-801. However, the lease agreement for unit F-502 as well as all other accompanying documents were dated. There is no reason to doubt that the documents were made contemporaneously.

25. The applicant visited the site/development on or about December 8, 2020 and filed this suit on February 11, 2021. It is clear from the record that as at that time, the two Units had already been disposed off. It cannot therefore be said that the plaintiff has a prima facie case against the defendant. The action sought to be restrained is already passed. Any injunctive orders would be in vain.

26. Having failed the first test, there is no need to analyze the other tests. The only conclusion is that the summons have failed to meet the test for granting of both the prohibitive as well as the mandatory injunction.

27. The next issue is whether the suit ought to be struck out. The law for striking out of suits is found under order 2 rule 15 (1) and (2). The provision allows for the striking out of any pleading, at any stage of the proceedings, if it discloses no reasonable cause of action or defence in law, or if it is scandalous, frivolous or vexatious, or if it may prejudice, embarrass or delay the fair trial of the action or is otherwise an abuse of the process of the court.

28. It is settled law that the court’s power to strike out pleadings is to be exercised sparingly and cautiously. This is because the court exercises the power without being fully informed on the merits of the case through discovery and oral evidence.

29. InD T. Dobie & Company (Kenya) Ltd vs. Muchina(1982) KLR 1, the court held: -“No suit ought to be summarily dismissed unless it appears so hopeless that it plainly and obviously discloses no reasonable cause of action and is so weak as to be beyond redemption and incurable by amendment. If a suit shows a mere semblance of a cause of action, provided it can be injected with real life by amendment, it ought to be allowed to go forward for a court of justice ought not to act in darkness without the full facts of a case before it.”

30. The overriding principle to be considered in an application for striking out a pleading therefore is, whether triable issues have been raised.

31. In the instant case, the remaining prayer sought in the plaint is that the defendant be compelled to transfer the two units or any other units of the plaintiff’s choice in phase 2 to the plaintiff. However, the court has found that the two units have already been sold to third parties even before the suit was filed. No temporary or permanent orders restraining their sale can therefore issue.

32. A look at the plaintiff’s attachment marked as RK4 is an email from the defendant to the plaintiff dated January 18, 2021 indicating that phase 1 and 2 of the development were not available for conversion. This court cannot compel the defendant to do the impossible. The defendant has the knowledge of which units have been sold and which ones are available. It would thus be a waste of judicial time to sustain a suit whereas no enforceable orders can be granted.

33. In the same email, the plaintiff was given an opportunity to choose from the list of available units as per the updated term sheets and reserve by the two modes availed, that is, a reservation of kshs 25,000/= or send conversion instructions. The plaintiff still has options to choose units that are available to him and convert his investment as well as his clients. All hope is not lost.

34. In view of the foregoing, the question that arises is, of what use would be to sustain a suit whose prayers cannot be sustained? The plaintiff himself admitted that there was no written agreement between him and the defendant regarding the two units. There is no contract that the plaintiff can rely upon to enforce the document he now seeks to rely upon.

35. The upshot is that the summons dated March 17, 2021 is without merit and is dismissed. The Motion dated April 1, 2021 is merited and is allowed with costs.It is so ordered.

DATED AND DELIVERED NAIROBI THIS 6TH DAY OF MAY, 2022A MABEYA, FCIArbJUDGE