HFC Ltd v Kagete (Commercial Appeal E012 of 2025) [2026] KEHC 11240 (KLR) (24 July 2026) (Judgment)

HFC Ltd v Kagete (Commercial Appeal E012 of 2025) [2026] KEHC 11240 (KLR) (24 July 2026) (Judgment) Neutral citation: [2026] KEHC 11240 (KLR) Republic of Kenya In the High Court at Mombasa Commercial Appeal E012 of 2025 J Ngaah, J July 24, 2026 Between HFC Limited Appellant and James Maragara Kagete Respondent (Being an appeal from the judgment and decree of the Chief Magistrate’s Court at Mombasa (Hon. G. Sogomo (PM)) dated 11th July 2025 in Mombasa CMCC No. 630 of 2022) Judgment Introduction 1.By a plaint dated 14th April 2022 filed in the Chief Magistrate’s Court at Mombasa and registered as CMCC No. 630 of 2022, the respondent, James Maragara Kagete, sued the appellant, HFC Limited (sued as Housing Finance Company of Kenya Limited), for damages arising out of the sale to him of all that property known as L.R. Subdivision No. 9763 (Original Number 9677/85) of Section I Mainland North (“the suit property”). The gravamen of the claim was that although the respondent purchased the suit property from the appellant on 3rd September 2007 and paid the purchase price in full, the appellant failed to hand over vacant possession of the property to him for a period of some fifteen years. The respondent accordingly prayed for judgment against the appellant for: (a) the cost of repairs of Kshs 1,700,000; (b) rent for an alternative house at Kshs 20,000 per month from September 2007 to March 2022, computed at Kshs 3,500,000; (c) general damages for breach of contract; (d) costs of the suit; and (e) interest on (a), (b) and (c) at court rates. 2.By a judgment delivered on 11th July 2025, the trial court (Hon. G. Sogomo, PM) dismissed the claims for the cost of repairs and for general damages but entered judgment for the respondent in the sum of Kshs 3,500,000 being, in the words of the learned magistrate, “a recoup of incurred rent”, with no order as to costs. The appellant was aggrieved by that award and preferred the instant appeal by a memorandum of appeal dated 16th July 2025. Background 3.The dispute has a long history. The suit property originally belonged to one Samuel Kiti Lewa who, on 11th June 1998, charged it to the appellant, then known as Housing Finance Company of Kenya Limited, to secure a mortgage facility of Kshs 1,515,940. Mr. Lewa fell into arrears and the appellant, in the exercise of its statutory power of sale, sold the property to the respondent by private treaty. The sale is evidenced by an agreement for sale made in the year 2007 between the appellant as vendor and the respondent as purchaser at a consideration of Kshs 1,700,000, a copy of which appears at pages 1 to 7 of the supplementary record of appeal. The respondent paid a deposit of Kshs 170,000 and financed the balance of Kshs 1,530,000 through Savings & Loan Kenya Limited, to which he in turn charged the property. The transfer by chargee in the respondent’s favour and the charge in favour of the financier were registered on 24th September 2007. 4.Two clauses of the agreement featured prominently in this appeal. Clause 4 provided that the date of completion would be the date of execution of the agreement. Clause 6, under the rubric “Possession”, provided as follows:“The Purchaser shall not be entitled to vacant possession of the property until the purchase price has (and any interest thereon) has been paid in full to the Vendor without any set-off or deductions whatsoever.” 5.Mr. Lewa never yielded possession. Aggrieved by the sale, he sued both the appellant and the respondent in Mombasa HCC No. 37 of 2007 (Samuel Kiti Lewa v Housing Finance of Kenya Limited & James K. Kagete) impugning the charge, the statutory notice and the consequent sale and transfer. By a judgment delivered on 28th July 2017, the High Court (Njoki Mwangi, J.) found that the statutory notice dated 28th November 2005 fell short of the standard set by the Court of Appeal in Trust Bank Ltd v Eros Chemists Ltd & Another, Civil Appeal No. 133 of 1999, declared the transfer in favour of the respondent and the subsequent charge to Savings & Loan Kenya Limited null and void, granted Mr. Lewa sixty days within which to make good the outstanding mortgage payments, and dismissed the counterclaim for his eviction. 6.The appellant, the respondent and Savings & Loan Kenya Limited appealed. In consolidated Civil Appeals Nos. 110 and 111 of 2018, the Court of Appeal, by a judgment delivered at Mombasa on 26th September 2019, allowed the appeals, set aside the judgment of the High Court and substituted therefor an order dismissing Mr. Lewa’s suit and allowing the counterclaim by the appellant and the respondent for his eviction from, and for vacant possession of, the suit property, with costs. That decision conclusively terminated the litigation over the validity of the sale. 7.It was upon the conclusion of that litigation that the respondent turned round and sued the appellant, until then his co-appellant, in the suit giving rise to this appeal. He pleaded that the appellant “failed and or refused” to hand over vacant possession of the property despite having received the entire purchase price; that it was the appellant’s failure to notify Mr. Lewa that the property would be sold that occasioned the latter’s refusal to vacate; that the respondent was compelled to service the mortgage without enjoying the property; that he was obliged to rent an alternative house at Kshs 20,000 per month; and that when the property was eventually handed over to him in the year 2022 it was in such a deplorable state that he incurred repair costs of Kshs 1,700,000. Although the reliefs sought were anchored on breach of contract, the plaint, somewhat incongruously, also set out “particulars of negligence” against the appellant. 8.In its statement of defence dated 20th May 2022, the appellant denied that it bore any obligation, as chargee, to give vacant possession; averred that the question of service of the statutory notice was res judicata by dint of the decision of the Court of Appeal; contended that any claim for loss occasioned by the withholding of possession lay against the chargor and not the appellant; and pleaded, at paragraph 9 of the defence, that the suit was precluded by the Limitation of Actions Act, Cap 22 Laws of Kenya. The evidence and the judgment of the trial court 9.At the trial, the respondent testified as PW1 and adopted his witness statement dated 14th April 2022 as his evidence in chief; his documents were produced as PEX 1 to 11. Under cross-examination he admitted that he had been employed by the Kenya Ports Authority from 1989 to the time he testified; that the Kenya Ports Authority pension scheme owns houses which are occupied by employees who pay rent, formerly deducted from their salaries; and that his own payslip bore a deduction of Kshs 9,360 in respect of pension scheme rent. When cross-examination resumed on 18th March 2025, he conceded that the rent receipts he relied upon did not disclose the name of the landlord; that the rented house “was located in Imara Daima estate in Nairobi”; and that he paid for the revenue stamps affixed on the receipts in the year 2023. Significantly, in re-examination he stated: “I purchased the house in the year 2007. I got vacant possession in the year 2019.” The witness statement of Samuel Kiti Lewa was adopted as evidence by consent of the parties without cross-examination, and the respondent closed his case. The appellant called no evidence. 10.In the judgment appealed from, the learned magistrate rejected the claim for the cost of repairs on the ground that the “proposal for renovations” relied upon was neither letter-headed, signed nor dated, did not disclose the professional identity of its author and was therefore of no probative value; special damages, he correctly reminded himself on the authority of Hahn v Singh [1985] KLR 716, must not only be specifically pleaded but strictly proved. He further held, on the authority of Kenya Power & Lighting Company Ltd v Abel Momanyi Birundu [2015] eKLR, that general damages are not awardable for breach of contract. He however found that “the only saving grace for the Plaintiff is the alternative prayer for recoup of rents”, reasoning that the respondent had proved:“… that as a result of judicial injunct against the Defendants by reason of procedural infractions perpetrated by them vacant possession was withheld from him and that he thus had to resort to alternative rental accommodation for the alluded duration.”On that basis he entered judgment for the respondent for Kshs 3,500,000. He declined to award costs because the respondent had not served a demand notice before instituting the suit. The learned magistrate said nothing at all about the plea of limitation. The appeal 11.The memorandum of appeal raises four grounds, namely, that the learned magistrate erred: (i) in law, in failing to determine the limitation defence despite it being raised in the defence and in submissions; (ii) in law and fact, in failing to find that the respondent had not proven any breach of a contractual duty; (iii) in law and fact, in failing to find that the respondent had not proven that the alleged losses flowed from that breach; and (iv) in law and fact, in awarding special damages without discounting for the respondent’s duty to mitigate his losses. The appellant asks the court to allow the appeal with costs and to set aside the judgment and decree of 11th July 2025 and substitute therefor an order dismissing the respondent’s suit with costs. The respondent opposed the appeal by grounds of opposition dated 3rd November 2025. The appeal was canvassed by way of written submissions: the appellant’s are dated 2nd February 2026 while the respondent’s are dated 18th March 2026. The appellant’s submissions 12.On the first ground, counsel for the appellant submitted that limitation was pleaded at paragraph 9 of the defence and canvassed in the parties’ respective submissions before the trial court, yet the learned magistrate did not engage with it at all. Counsel submitted that the defence of limitation goes to jurisdiction, citing Mary Osundwa v Nzoia Sugar Company Limited [2002] KECA 203 (KLR) and Phoenix of E.A. Assurance Company Limited v S. M. Thiga t/a Newspaper Service [2019] KECA 767 (KLR), and that Order 21 rule 4 of the Civil Procedure Rules obliged the court to determine every issue properly raised. On the substance of the plea, counsel submitted that although the plaint purported to found the suit on negligence, the claim was in truth one for breach of contract; that under section 4(2) of the Limitation of Actions Act a suit founded on tort must be brought within three years, and under section 4(1)(a) a suit founded on contract within six years, of the accrual of the cause of action; that in negligence the cause of action accrues when the damage is sustained (Richard Murigu Wamai t/a Graw Enterprises v Attorney General & Another [2019] KEHC 3780 (KLR)) while in contract it accrues upon breach (Odido v Kennedy Odera Obar Maria Kerubo Migiro t/a Odera Obar & Co. Advocates [2025] KEHC 184 (KLR)); that on the respondent’s own pleaded case the breach occurred upon registration of the transfer on 24th September 2007; and that time therefore lapsed on 24th September 2010 in tort or 24th September 2013 in contract, yet the suit was not filed until 22nd April 2022. Either way, counsel submitted, the suit was hopelessly out of time and fell to be struck out. 13.On the second ground, counsel submitted that a claimant for breach of contract must first establish the existence of the contractual duty allegedly breached, citing Hydro Water Well (K) Limited v Sechere & 2 Others [2021] KEHC 22 (KLR); that clause 6 of the agreement, on which the respondent located the duty, does not create an obligation on the appellant to give vacant possession but is a claw-back of the respondent’s right to take possession before completing payment; and that, fundamentally, the document relied upon was not signed by the appellant and the respondent’s signature was not attested, so that section 3 of the Law of Contract Act, Cap 23 and section 38 of the Land Act, Cap 280 rendered it inoperative, citing Grain Bulk Handlers Limited v Juja Coffee Exporters Limited [2017] KEELC 1425 (KLR). The respondent, who was bound by his pleadings, had located the duty nowhere else. 14.On the third ground, counsel invoked the “but-for” test restated in Hydro Water Well (supra) and submitted that the evidence contradicted any causal link between the alleged breach and the rent claimed: the respondent confirmed on the record that the rented house was located in Imara Daima estate in Nairobi and that he obtained vacant possession in the year 2019, while his payslip showed that he worked at the Inland Container Depot in Nairobi; and the rent receipts ran to December 2022, long after possession had, on his own admission, been obtained. The rent, counsel submitted, was paid because the respondent lived and worked in Nairobi, not because he lacked possession of a house in Mombasa. Counsel further submitted that there was no evidence of the “judicial injunct” on which the learned magistrate anchored the award; on the contrary, the Court of Appeal had, in 2019, reversed the High Court and ordered eviction in favour of the appellant and the respondent jointly. Counsel also pointed out that notwithstanding the criticism made of the appellant for calling no witnesses, the respondent bore the burden of first proving his own case, citing Daniel Toroitich Arap Moi v Mwangi Stephen Muriithi & Another [2014] KECA 642 (KLR). 15.On the fourth ground, counsel relied on African Highland Produce Limited v John Kisorio [2001] KECA 364 (KLR) for the proposition that the duty to mitigate arises immediately a plaintiff realises that his interest has been injured by a breach of contract or a tort, and requires no pleading by the defence; that the learned magistrate nevertheless allowed the respondent rent for fifteen years from September 2007 to December 2022 without any consideration of mitigation, notwithstanding the respondent’s admission that he obtained vacant possession in 2019 and his failure to point to any order restraining him from obtaining it sooner. Respondent’s submissions 16.Counsel for the respondent supported the judgment. On limitation, counsel submitted, first, that the breach was a continuing one: the appellant’s obligation to hand over vacant possession was not a one-off event but remained unperformed until the year 2022, fresh harm accruing daily in the form of rent paid elsewhere, and relied on Wakhusama v Obwayi & 2 Others [2025] KEELC 4037 (KLR) for the proposition that continuous harm restarts the lifetime of a cause of action. Secondly, counsel submitted that even if the breach was not continuous, the doctrine of lis pendens suspended the running of time from 2007, when Mr. Lewa filed his suit, until 2019 when the Court of Appeal pronounced itself, since any dealing with the suit property in the interim, including a transfer of possession, would have been an abuse of the court process; reliance was placed on Gilbert Kimani Nyumu v Gideon Kipkoech Kiptisia [2019] KEHC 3123 (KLR). Excluding the twelve years during which time was suspended, counsel computed the cumulative period at less than six years, the suit having been filed in 2022, only three years after the Court of Appeal’s decision. 17.On the question of breach, counsel submitted that although the agreement produced was incomplete, the appellant has never denied the contractual relationship; it received the full price, ultimately delivered possession in 2022, and offered no explanation for doing so other than contractual obligation. Counsel invoked the intention of the parties to be legally bound, relying on Anne Jepkemboi Ngeny v Joseph Tireito & Another [2021] KECA 464 (KLR), and submitted that clause 6 is not a claw-back but a condition precedent: it means that there is an obligation to complete payment before vacant possession is given, from which an implied obligation on the vendor to deliver vacant possession upon payment in full necessarily arises; any other construction would defeat the business purpose of the contract, for it would permit the appellant to sell the property, receive the full price and yet disclaim any obligation to deliver it. 18.On causation and mitigation, counsel submitted that the respondent’s unchallenged evidence was that he intended to occupy the premises immediately upon purchase; that the need for alternative accommodation arose because of the appellant’s breach, and the emphasis must be on the reasonableness of the steps taken, not their perfection; that under African Highland Produce Limited v John Kisorio (supra) the burden of proving that a plaintiff failed to take reasonable steps in mitigation lies on the defendant, and the plaintiff is under no obligation to embark on dubious litigation to minimise his losses; and that the appellant, which called no evidence at all, wholly failed to discharge that burden. Counsel relied on sections 107 and 109 of the Evidence Act and on Crown Petroleum & Co. Limited & Another v James Kinyanjui Mwangi [2018] KEHC 1455 for the proposition that averments in a defence unsupported by evidence remain mere statements. Duty of this Honourable Court as the first appellate court 19.This being a first appeal, this court is enjoined to re-evaluate, re-assess and re-analyse the evidence on the record afresh and reach its own conclusions, bearing in mind that it neither saw nor heard the witnesses and making due allowance for that disadvantage. The principle was stated in Selle v Associated Motor Boat Co. Ltd [1968] EA 123 in the following terms:“An appeal from the High Court is by way of a re-trial and the Court of Appeal is not bound to follow the trial judge’s findings of fact if it appears either that he failed to take account of particular circumstances or probabilities or if the impression of the demeanour of a witness is inconsistent with the evidence generally.” 20.Having considered the record of appeal, the supplementary record, the grounds of appeal, the grounds of opposition and the rival submissions, the issues that fall for determination are, in my view, the following: (i) whether the respondent’s suit was barred by limitation; (ii) if not, whether the respondent proved a breach of a contractual duty owed to him by the appellant; and (iii) whether the losses awarded flowed from the alleged breach and were properly assessed. The first issue is logically anterior and, for reasons that will shortly become apparent, dispositive of the appeal. Whether the suit was barred by limitation 21.It is common ground that limitation was squarely pleaded at paragraph 9 of the statement of defence and urged in the appellant’s submissions before the trial court; the respondent’s own submissions before that court joined issue on it. It is equally beyond argument that the judgment appealed from is entirely silent on the plea. That silence was, with respect, an error of law. Order 21 rule 4 of the Civil Procedure Rules requires that judgments in defended suits contain the points for determination, the decision thereon and the reasons for the decision. More fundamentally, a plea of limitation is jurisdictional in character. In Phoenix of E.A. Assurance Company Limited v S. M. Thiga t/a Newspaper Service (supra), the Court of Appeal restated the position thus:“In common English parlance, ‘jurisdiction’ denotes the authority or power to hear and determine judicial disputes, or to even take cognizance of the same. This definition clearly shows that before a court can be seized of a matter, it must satisfy itself that it has authority to hear it and make a determination. If a court therefore proceeds to hear a dispute without jurisdiction, then the result will be a nullity ab initio and any determination made by such court will be amenable to being set aside ex debito justitiae.”A court faced with a properly raised plea of limitation “downs its tools” until it has satisfied itself that the suit before it is competent. The learned magistrate was not at liberty to proceed to the merits without first resolving the plea. Since the facts bearing on the plea are not in dispute and the question is one of law, it falls to this court, in the exercise of its mandate on a first appeal, to determine it. 22.The starting point is the characterisation of the claim. The plaint pleaded “particulars of negligence”, and paragraph 5 thereof spoke of holding the appellant “liable in professional negligence”; yet the reliefs sought were for the cost of repairs, rent and “general damages for breach of contract”. The substance of the claim, as both counsel accepted on appeal, was the appellant’s alleged failure to perform an obligation said to arise from the agreement for sale, namely, to deliver vacant possession upon payment of the price in full. The claim was therefore, in substance, one founded on contract; but nothing turns on the label, for the applicable periods of limitation under section 4 of the Limitation of Actions Act point in the same direction. Section 4(1)(a) provides that actions founded on contract may not be brought after the end of six years from the date on which the cause of action accrued, while section 4(2) provides that an action founded on tort may not be brought after the end of three years from the date on which the cause of action accrued. If the claim sounded in tort, the position would be worse for the respondent, not better. 23.When, then, did the cause of action accrue? In a claim founded on contract, time runs from the date of the breach; in one founded on negligence, from the date the damage is first sustained. Both propositions were captured in Richard Murigu Wamai t/a Graw Enterprises v Attorney General & Another (supra), where the court stated:“In torts requiring damages, the cause of action accrues when the damage is first sustained or starts to occur; and there will be no new cause of action unless a fresh causive factor is involved or a different kind of damage is sustained. The period of cause of action for a claim in contract starts to run from the date of breach thereof.”On the respondent’s own pleadings and evidence, the agreement was made on 3rd September 2007; the completion date under clause 4 was the date of execution; the transfer and the charge to the financier were registered on 24th September 2007; and the balance of the purchase price was, under clause 2.2, payable within fourteen days of those registrations. Whatever obligation the appellant bore to deliver vacant possession therefore fell due, at the very latest, in October 2007, and its non-performance — the breach complained of — occurred then. Indeed, the respondent’s counsel candidly conceded as much at paragraph 10 of his submissions, acknowledging that the breach, if any, “occurred immediately after 3rd September 2007 when the Respondent failed to get vacant possession of the suit property after making payments.” The respondent’s claim for rent itself commences in September 2007, which is also when, on the tort analysis, damage was first sustained. Time therefore expired in or about October 2010 if the claim lay in tort, and in or about October 2013 if it lay in contract. The suit was instituted by a plaint dated 14th April 2022 and filed on 22nd April 2022 — more than fourteen years after the accrual of the cause of action and more than eight years after the more generous of the two limitation periods had run out. 24.The respondent seeks to escape that conclusion by two routes. The first is the theory of a continuing breach: that the obligation to deliver vacant possession remained unperformed from day to day, each day giving rise to fresh harm and a fresh cause of action, until possession was delivered. I am unable to accept that theory. The obligation of a vendor to give vacant possession on completion is a single, entire obligation which is breached once and for all when the time for its performance arrives and it is not performed. What continues thereafter is not a fresh breach each day but the consequences — the continuing damage — of the one breach. As Wamai (supra) makes plain, there is no new cause of action unless a fresh causative factor intervenes or a different kind of damage is sustained; the daily accrual of rent was neither, being merely the arithmetic of the same loss. Wakhusama v Obwayi (supra), on which the respondent relied, concerned trespass to land, the paradigm continuing tort, in which the defendant’s wrongful presence on the land constitutes a fresh actionable wrong each day it persists. A vendor’s failure to complete his side of a sale bears no analogy to it. And even if the continuing-breach theory were available, it would not assist the respondent to the extent of the award made: on such a theory a plaintiff recovers only in respect of breaches occurring within the limitation period immediately preceding suit, not, as the trial court allowed, for the entire fifteen-year span; and on the respondent’s own sworn evidence in re-examination, vacant possession was obtained in 2019, so that no breach, however conceptualised, subsisted thereafter. 25.The second route is the doctrine of lis pendens: that the pendency of HCC No. 37 of 2007 and the appeals therefrom suspended the running of time between 2007 and 2019. That submission, in my respectful view, misapprehends both the doctrine and the statute. The doctrine of lis pendens preserves the subject matter of pending litigation by rendering dealings in the suit property during the pendency of the suit subject to the outcome of that suit; it exists to protect the court’s jurisdiction from being defeated by alienation pendente lite. It says nothing about the time within which a party must bring a distinct claim for money against another. There was nothing in HCC No. 37 of 2007, or in any order made in it that was placed before the trial court, which precluded the respondent from suing the appellant for damages for breach of the sale agreement within the statutory period; a money claim of that kind is not a “dealing” in the suit property at all. The respondent was himself a party to that litigation from 2007 and was at all times at liberty to assert his claim against his co-defendant. 26.More fundamentally, the Limitation of Actions Act is a complete and exhaustive code on the circumstances in which time is extended or excluded. Part III of the Act (sections 26 to 28) provides for extension in cases of disability, acknowledgment and part payment, fraud and mistake, and, on leave of the court, ignorance of material facts in specified actions in tort. The pendency of other litigation, whether between the same or different parties, is not among the grounds. The maxim expressio unius est exclusio alterius applies. The Court of Appeal put the matter beyond doubt in Mary Osundwa v Nzoia Sugar Company Limited (supra):“The section does not give jurisdiction to the court to extend time for filing suit in cases involving contract or any other causes of action other than those in tort. Accordingly Osiemo, J. had no jurisdiction to extend time as he purported to do on 28th May, 1991. That the order was by consent can be neither here nor there; the parties could not confer jurisdiction on the judge by their consent.”If even the express consent of the parties cannot enlarge time in a contract claim, an equitable doctrine directed at an entirely different mischief cannot do so by a side wind. In Gilbert Kimani Nyumu v Gideon Kipkoech Kiptisia (supra), on which the respondent placed considerable reliance, the court expressed the view that where a sale agreement is caught up in pending litigation over the property, “any timelines pending are suspended until the matter is resolved.” That is a decision of a court of coordinate jurisdiction which, with the greatest respect to the learned judge, I am not bound to follow; and to the extent that it suggests that the periods prescribed by the Limitation of Actions Act may be suspended on account of the pendency of other proceedings, a ground nowhere provided for in the Act, I respectfully decline to follow it as being inconsistent with the clear language of the statute and with the binding authority of Mary Osundwa (supra). 27.The consequence is inescapable. Whether the respondent’s claim is characterised as one in contract or in tort, it was instituted long after the expiry of the period prescribed by section 4 of the Limitation of Actions Act. A plaint that is barred by limitation is a plaint barred by law, and the court seized of it has no option but to reject it: see Iga v Makerere University [1972] EA 65. The trial court, had it addressed the plea as it was bound to do, could only have struck out the suit. Its failure to do so, and its proceeding instead to enter judgment on a claim over which it had no jurisdiction, renders the judgment and decree a nullity liable to be set aside ex debito justitiae. The first ground of appeal accordingly succeeds, and that is sufficient to dispose of the appeal. 28.In the result, the appeal succeeds. The following orders commend themselves to me and I hereby make them:(a)The appeal is allowed.(b)The judgment of the Chief Magistrate’s Court at Mombasa (Hon. G. Sogomo, PM) delivered on 11th July 2025 in Mombasa CMCC No. 630 of 2022, and the decree issued in consequence thereof, are set aside in their entirety.(c)There is substituted therefor an order striking out Mombasa CMCC No. 630 of 2022 as barred by the Limitation of Actions Act, Cap 22, with costs to the appellant.(d)The respondent shall bear the costs of this appeal. 29.It is so ordered. DATED, SIGNED AND DELIVERED ON 24 JULY 2026NGAAH JAIRUSJUDGEIn the presence of:…………………………………… for the Appellant…………………………………… for the Respondent…………………………………… Court Assistant