[2023] KEHC 19562 (KLR)

Gitau & another v Jiangsu Jianda International Company Limited (Civil Suit E211 of 2021) [2023] KEHC 19562 (KLR) (Commercial and Tax) (30 June 2023) (Judgment)

Neutral citation: [2023] KEHC 19562 (KLR)

Republic of Kenya

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

Commercial and Tax

Civil Suit E211 of 2021

EC Mwita, J

June 30, 2023

Between

John Wamaingi Gitau

1st Plaintiff

Hottensiah Kanyi Wamaingi

2nd Plaintiff

and

Jiangsu Jianda International Company Limited

Defendant

Judgment

1. By a plaint dated 22nd April 2021, the plaintiffs sought judgment against the defendant for Kshs. 12,987,397. 23 for loss suffered due to delayed completion of the sale transaction and Kshs. 5,950,000 for loss of rental income for the period between April 2019 and August 2020.

2. The plaintiffs also sought an order for transfer of utility accounts (for water and electricity into their names; supply of internet connectivity, operational manual for in-built oven, and installation of dishwasher and repair of the security fence. The plaintiffs further sought interest on the amount claimed at court rates from the date of filing suit until payment in full and costs of the suit.

Plaintiffs’ case 3. The plaintiff’s case is that on 16th November 2018, they entered into an agreement with the defendant for purchase of Villa Number 3, erected on Land R No. 3734/594 (Original Number 3734/3/151 registered under Number I.R 12299) in Lavington Nairobi, (the property). The Villa was to have car parking spaces, gardens and other facilities.

4. The purchase price for the property was Kshs. 70,000,000, which was to be paid by installments. A deposit of Kshs. 6,000,000 was to be paid on execution of the agreement; Kshs. 54,000,000 within 90 days of execution (14th February 2019) and Kshs. 10,000,000 within 180 days from the date of the agreement (16th November 2018) or on completion, whichever was later. The plaintiffs maintained that the completion date was December 2018.

5. The plaintiffs paid the deposit as required but the second installment of Kshs. 54,000,000 was paid late (on 28th March 2019) after the plaintiffs requested for an extension of the period. The plaintiffs paid a further Kshs. 2,820,000 for stamp duty and disbursements on 7th March 2019.

6. The parties mutually agreed to vary the agreement so that the defendant’s advocates could release Kshs. 20,000,000 to the defendant while Kshs. 40,000,000 was to be held by the defendant’s advocates on stakeholder basis pending successful registration of the lease in favour of the plaintiffs. The balance of Kshs. 10,000,000 and legal costs of Kshs. 1,147,000 was to be paid upon successful registration of the transfer and lease in favour of the plaintiffs.

7. The plaintiffs asserted that they expected the lease to be registered by June 2019 but the defendant failed to complete the transaction within the agreed period. It is the plaintiffs’ case that due to the delay, they suffered loss of rental income of Kshs. 350,000 per month for the period between April 2019 and August 2020, totaling to Kshs. 5,950,000. This was because the plaintiffs had expected to change house and let the house they were occupying.

8. The plaintiffs also claimed interest of Kshs. 12,987,397. 23 on the purchase price at the rate of 12% during the delay period of 595 days from the agreed completion date of 14th February 2019 to the date of actual completion, 31st August 2020. The plaintiffs asserted that the defendant admitted making a mistake with regard to obtaining change of user which resulted into the delay.

9. Regarding the offer to take possession of the property, the plaintiffs maintained that they were not willing to take possession before receiving completion documents. They expected the defendant to adhere to the terms of the agreement.

Evidence 10. During the hearing, the 1st plaintiff adopted his witness statement and produced their bundle of documents as exhibits. The witness statement to a large extent mirrored what the plaintiffs stated in their pleadings.

11. The 1st plaintiff admitted that they sought an extension of the time to pay the second instalment of Kshs. 54,000,000 which they paid on 28th March 2019 instead of 16th February 2019 as had been agreed. This was because the money was in a fixed deposit account. The interest they claimed did not include the extension period.

12. The 1st plaintiff stated, however, he could not recall whether their advocate informed them about the difficulty the defendant’s advocates faced in registering the lease. He also admitted that he was aware that the lands registry was undergoing digitization at the time.

13. The 1st plaintiff stated that they needed the English version of the operation manuals for the inbuilt oven, microwave and dishwasher because those available are in Chinese. They also want utility accounts transferred into their names.

Submissions 14. The plaintiffs relied on conditions 5. 2.1 and 13. 3 of the Law Society Conditions of Sale 2015, to argue that the defendant’s advocates were required to hold Kshs. 40,000,000 in an interest earning account to their benefit and particularly upon their request on 28th October 2019 that they do pending completion. The plaintiffs relied on Nelson Andayi Havi t/a Havi & Company Advocates v Jane Muthoni Njage t/a J.M Njage & Company Advocates [2015] eKLR and Naphatali Paul Radier vs. David Njogu Gachanja (HCCC No.582 of 2003 (OS) to support their case.

15. The plaintiffs also relied on condition 13. 3.2 of the conditions to support their claim for loss of rental income. They argued that they had communicated to the defendant through letter dated 28th October 2019 the loss suffered due to the delayed completion. They urged the court to allow their suit with costs.

Defendant’s case 16. The defendant filed a statement of defence and counterclaim. The defendant denied the plaintiff’s claim and the particulars of loss. The defendant’s case is that although the completion date for the project was estimated to be in December 2018, the agreement provided that the completion date would be 14 days after the completion of the project. The project was completed in March 2019 and the plaintiffs’ advocates were duly notified of the completion on 18th March 2019.

17. The defendant contended that the delay in completion was reasonable and justifiable given that change of user was required before the registration of the lease in the plaintiffs’ name. The defendant posited that the parties’ advocates had genuinely overlooked the change of user requirement and the issue was only brought to their attention on 23rd May 2019 when the lease was presented for registration. The defendant stated that the delay was also occasioned by closure of the lands registry to allow digitization and later the Covid 19 Pandemic.

18. The defendant argued that it was not responsible for the delay in completing the transaction and, therefore, the plaintiffs were not entitled to interest. The defendant further argued that the plaintiffs were not entitled to loss of rental income as it was remote to the agreement between the parties.

19. The defendant contended that the plaintiffs’ claim was in bad faith since the plaintiffs were offered possession of the property on 20th June 2019 due to delay in the registration of the lease occasioned by the lands registry but they declined.

20. The defendant, in particular, denied that the plaintiffs suffered loss and averred that the particulars of loss were speculative. The defendant further averred that parties had mutually agreed to the extension of the completion period in the letter dated 16th January 2020 and, therefore, the claim for lost rent cannot arise.

21. The defendant counterclaimed for the balance of the purchase price of Kshs. 10,000,000 together with interest at 12% per annum from 15th October, 2020 until payment in full. The defendant argued that this was necessitated by the fact that despite completion of registration of the lease, handing over of possession and issuing completion notice on 22nd September, 2020, the plaintiffs had not released the balance of the purchase price.

Evidence 22. The defendant called two witnesses, Shi Chong (Mr. Chong) and John Oscar Juma (Mr. Juma). Mr. Chong adopted his witness statement as his evidence and produced two bundles of documents as exhibits.

23. Mr. Chong asserted that the defendant was not responsible for the delay in completing the transaction. He also stated that the claim for loss of rental income was not connected with the sale of the property. According to Mr. Chong, water and electricity account details were handed over to the plaintiffs’ advocates who was to hand them over to the plaintiffs.

24. Mr. Chong testified that the project was completed in August 2019 instead of December 2018 and the plaintiffs’ advocates were aware of reasons for the delay.

25. Mr. Juma also adopted his witness statement as his evidence in court. He stated that the agreement provided that the completion date was 14 days after the date of completion of the project; that on 18th March 2019, the plaintiffs were notified that the house was ready and that the plaintiffs’ claim for interest before that date would be premature because the delay was well explained and was partly attributable to by the plaintiffs.

26. Mr. Juma denied that there was unreasonable delay in completing the transaction because the plaintiffs paid money for stamp duty and registration (Kshs. 2,820,000) on 7th March 2019. According to Mr. Juma, the plaintiffs had also sought an extension to pay the second instalment of Kshs. 54,000,000 on 28th March 2019 instead of 14th February 2019.

27. According to Mr. Juma, the plaintiffs signed the lease on 6th April 2019 and thereafter valuation of the property had to be done and stamp duty paid before the lease could be lodged for registration. When the lease was eventually lodged for registration on 23rd May 2019, they were informed that change of user was required. The plaintiffs’ advocates were promptly informed of this requirement. Change of user was obtained and the certificate of lease was signed on 21st November 2019.

28. Mr. Juma took the view, that there was a common mistake on both sides regarding change of user because both advocates were under the impression that the provisional approval of change of user was sufficient, until the land registry informed them that change of user was required.

29. Mr. Juma attributed the delay, in part, to closure of the lands registry due to digitization process in March 2018. Mr. Juma further stated that Covid 19 pandemic also played a part in the delay. He admitted that although the lease was lodged for registration before the onset of the Covid 19 pandemic, the certificate of lease was signed on 21st November 2019 but could not be collected due to the closure of the land registry. Mr. Juma maintained that the plaintiffs were offered possession on 22nd January 2020 to mitigate the situation but declined.

Submissions 30. The defendant submitted that the plaintiffs did not exercise the right to rescind the contract under condition 6. 4.5, thus acquiesced to proceeding with transaction to completion and had the property transferred into their names. For that reason, the defendants argued, the plaintiffs are estopped from claiming interest on account of delay.

31. The defendant posited that the claim for loss of rental income was not proved since there was no evidence of a potential tenant. The defendant further argued that clause 12 of the conditions permitted the plaintiffs to take possession prior to completion but they declined when possession was offered to them.

32. On the counterclaim for the balance of Kshs. 10,000,000, the defendant relied on New Tyres Enterprises Ltd v Kenya Alliance Insurance Company Ltd [1988] eKLR for the proposition that it is entitled to interest as compensation for being deprived of the money.

Determination 33. I have considered the evidence and arguments made on behalf of the parties. I have also perused the exhibits produced. The issue that arises for determination is whether the defendant breached the contract; whether the plaintiffs are entitled to interest due to delayed completion and whether they are entitled to loss of rental income.

Breach of contract 34. The plaintiffs argued that the defendant breached the terms of the contract while the defendant maintained that there was no breach.

35. The facts in this case are largely undisputed. Parties entered into an agreement for sale of a villa (No. 3) that was to be constructed on Land Reference No. 3734/594 (Original No. 3734/3/1511, in Lavington, Nairobi.

36. The purchase price and mode of payment are not in dispute. The agreement had a completion clause which both parties rely on to advance their respective claims. There is, however, a disagreement on when the completion date was to be. The plaintiffs argued that the completion date was December 2018 while the defendant takes the view, that the completion date was 14 days after completion of the project.

37. I have gone through the agreement for sale dated 16th November 2018. Clause 5 headed Completion, has several sub clauses. Clause 5. 1 is on the completion date for the project. The clause states that “The estimated completion date for the development is December 2028…”

38. On the other hand, clause 5. 2 is on the completion date and states that the completion date shall be Fourteen (14) days after the completion of the development of the property. This clause further stated that the completion date for the transaction could, however, be extended to allow effecting of changes to the design of the construction of the property as may be proposed by the plaintiffs.

39. What emerges from clauses 5. 1 and 5. 2 of the agreement, is that there were two different completion dated. The first completion date related to the development of the property whose completion date was estimated to be December 2018. The second completion date was for the sale transaction. The completion date for the transaction was to be 14 days after completion of development of the property. That means, completion date of the transaction was dependent on the time and date of completion of the development of the property.

40. It is also worth noting, that clause 5. 1 gave December 2018 as the estimated completion date of development of the property. The date of December 2018 was only an estimated period but not the actual date of completing the development of the property. The plaintiffs were not, therefore, correct in their argument that the completion period of the transaction (sale) was December 2018.

41. Given the clear wording in clause 5. 2 regarding the completion date, did the plaintiff beach the terms of the agreement? From the evidence on record and exhibits, the answer must be in the negative. The time for completing the development of the property was an estimate and not an exact date. It could have been possible to complete development earlier than December 2018, any date in December 2018 or after December 2018. The agreement did not oblige the defendant to complete developing the property in December 2018.

42. The evidence also shows that on 18th March 2019, the defendant’s advocates wrote to the plaintiffs’ advocates notifying them that the project had been completed. This was about two and half months after the estimated time of completing development of the property. Completion of the transaction was, therefore, to be 14 days from 18th March 2019 in terms of clause 5. 2 of the contract. I therefore find and hold that the defendant did not breach the agreement with regard to completing development of the property.

43. Regarding completion of the transaction, the agreement required the plaintiffs to pay the second instalment of Kenya Shillings Fifty-four million (54,000,000) on or about 16th February 2019(90 days after execution of the agreement). The plaintiffs did not pay but sought an extension to 28th March 2019.

44. The defendant agreed to the extension and the plaintiffs paid the second instalment on 28th March 2019, 10 days after they had been notified that development of the property was complete and therefore 4 days to the date of completion of the transaction.

45. It is also noteworthy that in the letter dated 2nd April 2019, the defendant’s advocates reminded the plaintiffs’ advocates that payment of the 3rd instalment of Kshs. 10,000,000 was to have been paid within 180 days after execution of the agreement and Kshs. 1,147,000 (balance of initial costs were yet to be paid.

46. The plaintiffs cannot blame the defendant for breach of contract when there is no evidence to support this claim when they (plaintiffs) did not also stick to the terms of the agreement.

47. The defendant’s advocates informed the plaintiffs’ advocates through letter dated 29th May 2019, that stamp duty on the lease had been paid and the lease stamped. They were waiting finalization of the process of obtaining change of user to facilitate registration of the lease in the plaintiff’s names.

48. The defendant’s evidence is that the documents were lodged for registration once change of user was obtained but there was delay in finalizing registration due to digitization process that was going on in the land registry. The 1st plaintiff admitted to have been aware of those challenges. Even if he was not aware, their advocates were aware since a public notice had been issued regarding closure of the registry for that exercise.

49. The plaintiffs also argued that the defendant breached the terms of the agreement because change of user was not obtained in time. I have gone through the exhibits and could not see any letter addressed to the defendant complaining about lack of change of user.

50. On the other hand, there is letter dated 26th October 2019 from the plaintiffs’ advocates acknowledging that although there were set backs due to processing of approvals, the circumstances were beyond the defendants’ Advocate’s control. In any case, the defendant had obtained a provisional change of user which they genuinely believed was all that was required. However, the defendants’ advocates were later informed that change of user was required after submitting the lease for registration.

51. The plaintiff’s advocates acknowledged through letter dated 20th June 2019 while responding to letter dated 14th June 2019, that the process of obtaining change of user was coming to a conclusion. They proposed that Kshs. 10,000,000 and further costs of Kshs. 1,147,000 be sent to them (purchaser’s advocates) to hold pending registration. The issue of delay in completing the transaction was not raised.

52. Once the documents were lodged, the rest of the processes, including what happened at the land registry or how long it would take to finalise registration, was beyond the defendant’s control. The defendant was not supposed to supervise conclusion of the registration, including endorsement and signing of the lease at the lands registry.

53. The defendant had done all that was within its powers and could not bear blame because of bureaucratic processes in the land registry that were outside its control. I, therefore, find and hold that there was no breach of contract on the part of the defendant.

Loss due to delayed completion 54. The plaintiffs sought Kshs. 12,987,397. 23 for loss suffered due to delay in completion of the sale transaction. The defendant opposed the claim arguing that the plaintiffs were not entitled to interest due to delayed completion.

55. This claim would arise if the plaintiff summoned the aid of the clauses in the contract. That is; if the plaintiffs believed that the defendant had breached the contract, they had a right to invoke clause 9. 2 of the agreement. That clause required the plaintiffs to issue a twenty-one days’ notice to the defendant in case of breach of the terms of the agreement with regard to completion, confirm their readiness to complete the sale and require the defendant to remedy aspects of the default.

56. Clauses 9. 2.1 and 9. 2.2 provided for remedies that were available to the plaintiffs: to rescind the contract and demand refund of the deposit and all monies that had been paid with interest at 10% or sue for specific performance. The plaintiffs did not invoke any of these rights.

57. In an attempt to invoke the rights under clause 9. 1 and 9. 2, the plaintiffs issued a 21 days completion noticed dated 20th December 2019 through their advocates, demanding completion documents dully registered in the plaintiffs’ names. The defendant’s advocates respondent on 14th January 2020 requesting for 30 days extension, pointing out that documents had been lodged for registration and were waiting to collect them.

58. The plaintiffs’ advocates agreed to extend time in a letter dated 16th January 2020, on condition that Kshs. 40,000,000 held by the defendant’s advocates be deposited in a fixed deposit account at an interest rate of Kshs. 10%. The advocate also stated that the plaintiffs were losing Kshs. 2000,000 a month, (prospective rent) and loss of interest earnings on the purchase price of Kshs. 62,820,000 at 10% which should be paid as damages.

59. The defendant’s advocate wrote back on 22nd January 2020 pointing out that the claim for loss of rent earning was remote to the contract and that no bank would be willing to take the money at 10% and that the issue of interest at commercial rates did not arise. The defendant’s advocates requested to know if the plaintiffs would take possession of the property to mitigate any loss but the plaintiffs declined.

60. Although the plaintiffs’ advocates were willing to extend time to allow completion, they insisted that the amount held on stakeholder’s basis should attract interest at 10%. Finally, the money (Kshs. 34,000,000) was deposited with Faulu bank at an interest rate of 10%. This was confirmed by letter dated 17th February 2020 from defendant’s advocate to the plaintiff’s advocates.

61. I have perused the exhibits produced by the plaintiffs. There is indeed a lease dated 6th April 2019 which dully was executed by all parties. Stamp duty was paid on 26th April 2019, the lease was presented for registration on 25th June 2020 and was eventually registered on 25th August 2020.

62. The defendant’s advocates sent completion documents, including the registered lease, to the plaintiffs’ advocates on 1st September 2020. Receipt of the document was acknowledged through letter dated 8th September 2020, thus concluding the transaction. This was further confirmation that the transaction was indeed completed thus the defendant discharged its obligations under the contract, thus taking the transaction outside the purview of clause 9. 2.1 and 9. 2.2 of the contract. There was no agreement between the parties that the defendant was to pay interest due to delayed completion. The plaintiffs were offered possession to mitigate any loss but declined. In that regard, the claim for loss due to delayed completion must fail.

Loss of rent 63. Despite completion of the transaction, the plaintiffs claimed Kshs. 5,950,000 for loss of anticipated rent. The plaintiffs’ argument was that they had intended to let out the old premises once they moved into the new property. The defendant resisted this claim, arguing that it was not only remote to the contract, there was also no proof that there was a prospective tenant.

64. I have gone through the evidenced and exhibits produced by the plaintiffs. There is no evidence that there was a ready tenant who had offered to take the house once it was available. and at how much rent. The plaintiffs merely stated that they had lost rent without disclosing the prospective tenant, if any and the offer made.

65. The loss of rent the plaintiffs claimed was in the nature of special damages. The law is firmly settled that special damages must not only be pleaded; they must be strictly proved. (See Provincial Insurance Co. EA Ltd v Mordekai Mwanga Nandwa-KSM Civil Appeal No 179 of 1995).

66. In Attorney General of Jamaica v Clerke (Tanya) (nee Tyrell), (SCCA 109/2002); JM 2004 CA 40; [2004] 12 JJC 2015, Cooke, J A. delivering the judgment of the court, stated that special damages must be strictly proved; the court should be very wary to relax this principle; what amounts to strict proof is to be determined by the court in the particular circumstance of the case and the court may consider the concept of reasonableness.

67. In Union Bank of Nigeria PLC v Alhaji Adams Ayabule & another (2011) JELR 48225 (SC) (SC 221/2005 (16/2/2011)), Mahmud Mohammed, JSC. delivering the judgment of the Supreme Court of Nigeria, stated:I must emphasise that the law is firmly established that special damages must be pleaded with distinct particularity and strictly proved and as such a court is not entitled to make an award for special damages based on conjecture or on some fluid and speculative estimate of loss sustained by a plaintiff….Therefore, as far as the requirement of the law are concerned on the award of special damages, a trial court cannot make its own individual arbitrary assessment of what it conceives the plaintiff may be entitled to. What the law requires in such a case is for the court to act strictly on the hard facts presented before the court and accepted by it as establishing the amount claimed justifying the award.

68. In Bonham –Carter v Hyde Park Hotel Ltd (1948) 64 TLR 177, (at 178), Lord Goddard stated that:Plaintiffs must understand that if they bring actions for damages it is for them to prove their damage; it is not enough to write down the particulars, and, so to speak, throw them at the head of the Court, saying: 'This is what I have lost; I ask you to give me these damages.' They have to prove it. (see also David Bagine v Martin Bundi (Civil Appeal No. 283 of 1996) [1997] eKLR).

69. In Ratcliffe v Evans (1892) 2 QB 824, Bowen, L J. stated on the same point:As much certainty and particularity must be insisted on both in pleading and proof of damages as is reasonable, having regard to the circumstances and to the nature of the acts themselves by which the damage is done. To insist upon less would be to relax old and intelligible principles. To insist upon more would be the vainest pedantry.

70. The jurisprudence in the above decisions is that the court must not only insist on certainty and particularity of special damages in pleading but also on strict proof thereof. That is, a plaintiff should not throw figures at the court of what he thinks are special damages he has suffered and ask the court to award him those damages. He must strictly prove the damage he has suffered.

71. In this case, the plaintiffs claimed loss of rent for the period April 2019 to August 2020. No evidence was, however, placed before the court to prove that there was a tenant ready to take the house. The plaintiffs’ claimed 350,000 per month for that period again without evidence that someone was willing to take up the house at that monthly rent.

72. In the letter dated 16th January 2020, the plaintiffs’ advocates had stated that the monthly rent loss was Kshs. 200,000. The plaintiffs did not also explain how this had changed to the amount claimed in the suit.

73. This is a classic example of what Lord Goddard had in mind when he stated that “Plaintiffs must understand that if they bring actions for damages it is for them to prove their damage. The plaintiffs claim for loss of anticipated rent fails.

Utility bills and instruction manuals 74. The plaintiffs urged that the defendant should give them utility bills for water and electricity, supply of internet connectivity, provide English version of operational manuals for in-built oven and microwave, install a dishwasher and repair the security fence. The defendant maintained that utility bills were passed on to the plaintiffs’ advocates, a fact that the plaintiffs did not deny.

75. Regarding operational manuals for the oven, microwave and dishwasher, the plaintiffs argued that they needed an English version of the operating manuals because those available are in Chinese. The defendant did not say anything on this. It goes without saying, that the plaintiffs are entitled to operating manuals in a language they understand and the defendant is obliged to provide them otherwise the equipment would be useless to the plaintiffs.

76. The issue of internet connectivity, installation of a dishwasher and repair of the security fence were not seriously canvassed. In any case, the plaintiffs had not taken possession and did not show that those items were provided for in the agreement but had not installed in the house. That is a claim the plaintiffs can mount once they have inspected the house and found them wanting. I say no more on it.

Counter claim 77. The defendant mounted a counter claim for Kshs. 10,000,000, being the balance of the purchase price that had not been paid. Having concluded that the defendant did not breach the contract, and since completion documents were delivered to the plaintiffs’ advocates, there is no reason why the balance of the purchase price should not be released to the defendant.

Conclusion 78. Having carefully considered the evidence and submissions made on behalf of the parties, the conclusion I come to, is that the plaintiffs did not prove all the elements of their case on a balance of probabilities.

79. The plaintiffs did not prove that the defendant breached the contract. The plaintiffs had a recourse to turn to in the event of breach but did not fall back to it. They allowed the process to go on to conclusion and received title documents once registration was concluded.

80. Any claim for interest could only arise under clause 9,2. 1 or if parties mutually agreed. It was not open to the plaintiffs to demand interest on the deposit and other money paid otherwise that as was provided for in the contract, or as mutually agreed by parties. The claims for loss of interest and rent were not, therefore, proved.

81. The plaintiffs are however entitled to the English versions of operating manuals for the oven, microwave and Dishwasher if any were installed in the property.

82. Regarding the counterclaim, the plaintiff is entitled to the balance of the purchase price of Kshs. 10,000,000.

Disposal 83. The defendants do supply to the plaintiffs English versions of operating manuals for the inbuilt oven, microwave and dishwasher if installed in the house. The rest of the plaintiffs’ claims fail.

84. The plaintiffs do release the balance of the purchase price of Kshs. 10,000,000 to the defendant. This amount shall attract interest at court rates from the date of this judgment until payment in full.

85. Each party shall bear own costs.

DATED, SIGNED AND DELIVERED AT NAIROBI THIS 30TH DAY OF JUNE 2023E C MWITAJUDGE