HIGH COURT COMMERCIAL AND TAX DIVISION
CASE NO. 237 OF 2013
TIMAU AGRO INDUSTIRES LTD……………………………APPLICANT
VERSUS
NATIONAL OIL CORPORATION OF KENYA…………….RESPONDENT
JUDGEMENT
1. The Plaintiff herein TIMAU AGRO INDUSTRIES LIMITED commenced
this suit vide the plaint dated 11th June 2013 seeking judgment against
the Defendant for
- An Order for Specific Performance by the Defendant of the Contract for the purchase of all that property known as Land Reference MN/VI/3713 CR 28260 situate in the Municipality of Mombasa and registered in the District of Mombasa.
- An Order directing the Defendant to deposit a sum of Kenya Shillings Two Hundred and Twenty Nine Million, Three Hundred and Twenty Thousand Kshs. 229,320,000 being the purchase price for all that property known as Land Reference MN/VI/3713 CR 28260 situate in the Municipality of Mombasa registered in the District of Mombasa as agreed upon between the Plaintiff and Defendant, in an escrow account in the names of the Plaintiff’s Advocates and the Defendant’s Advocates pending the registration of the Transfer in favour of the Defendant.
- An Order for damages in favour of the Plaintiff assessed as the difference between the Contract Price of Kenya Shillings Eight Million, Four Hundred Thousand Kshs. 8,400,000 and the prevailing market price as at the date of the delivery of the judgment.
- Interest on b and c above at Court Rate from the 10th April 2012 until payment in full.
e Costs of this suit.
f Any other or further orders this Honourable Court may
deem fit and just to grant.
2. The Defendant NATIONAL OIL CORPORATION OF KENYA opposed
the suit through their statement of Defence dated 10th July 2013 and
Amended on 5th February 2014.
3. The matter was canvassed by way of Vive Voce evidence with each side
calling one 1 witness in support of their case.
4. At the outset I wish to explain the delay in preparation of this judgment.
When I heard this matter I was stationed in the Commercial & Tax
Division Milimani Court Nairobi. Upon my transfer to the Family
Division the file was on 15th January 2021 allocated to Hon. Justice
Mativo as he then was, who on 3rd March 2021 directed that the
proceedings be typed. On 21st September 2021 the Hon. Deputy
Registrar confirmed that the proceedings had been typed and were
ready.
5. Thereafter on 22nd December 2023 the Hon. Deputy Registrar noted
that the file had no date for future action. On 7th March 2024 the
Presiding Judge allocated the file to Hon. Justice Visram.
6. By that time I had been transferred and had moved to Nyeri High Court.
Vide a letter dated 9th October 2024 the Hon. Principal Judge
forwarded the file to me at Nyeri directing that I prepare the judgment
which I am now undertaking.
BACKGROUND
7. The Plaintiff was at the material time the registered owner of the Property
known as Land Reference Number MN/VI/3713 CR 28260 in
Miritini Mombasa County hereinafter referred to as the suit
property
8. Vide a letter of Expression of Interest for outright purchase of the suit
property dated 27th February 2012 the Defendant invited the plaintiff
to submit its offer.
9. The plaintiff submitted its offer of Purchase dated 28th February 2012.
The property which comprised 27.3 acres was on offer at Kshs.
8,500,000 per acre.
10. On 5th March 2012, the Plaintiff attended the opening of the Plaintiffs
offer at the Defendants premises and the Defendant expressed
satisfaction with all aspects of the plaintiffs offer.
11. Subsequently at a meeting held on 12th April 2012 between the
Plaintiff and the Defendant it was agreed that the total purchase price
was to be Kshs. 229,320,000 and that a deposit of 15 percent being
Kshs. 34,398,000 was to be paid. That the balance of the purchase
price would be paid upon registration of the transfer in favour of the
Defendant. It was further agreed that the Plaintiff would evict all the
squatters on the property and would remove the suit property from the
market.
12. The Defendant then wrote a letter of Award dated 10th April 2021 in
which they reiterated their letter of expression of outright purchase of
the suit property. The defendant requested that the plaintiff sign the
letter of Award signifying acceptance of the same and return the signed
letter of Award together with the Plaintiff’s bank details and a Sale
Agreement.
13. By a letter dated 16th April 2012, the plaintiff returned the letter of
Award duly executed and provided all the details requested for by the
Defendant, thereby signifying the Plaintiff’s acceptance of the Award.
According to the plaintiff upon signing its acceptance of the award the
Defendant was expected to immediately make a deposit of Kshs.
34,398,000 into the plaintiffs account and return a duly executed
sale agreement within a reasonable time.
14. The Defendant however did not respond to the Plaintiffs enquiries until
vide a letter dated 24th July 2012 the Defendant indicated that it
would be ready to finalized the transaction in September 2012.
15. The Plaintiff alleges that the Defendant continued in default until at a
meeting held on 13th February 2013, the Defendant agreed that it
would complete the transaction as soon as possible. That the
Defendant also indicated that it would consider any upward adjustment
in the price in order to compensate the plaintiff for the lapsed time.
16. The Plaintiff got tired of waiting for the Defendant to act as per the
Award and filed this suit seeking specific performance of the contract.
17. As stated earlier the suit was opposed. The defendant contended that
the High Court had no jurisdiction over this matter as the suit property
could only be acquired through direct procurement under the Public
Procurement and Disposal Regulations 2006.
18. The Defendant further asserted that no contract existed between
the parties and that the suit was premature as the Defendant was
yet to communicate the decision of its tender committee to the
plaintiff.
19. According to the Defendant no formal agreement setting out specific
details of the sale had been executed between the parties. That in any
event the Defendant had not paid any consideration to the Plaintiff at
the time the suit was filed.
20. The Defendant asserted that there was no consensus ad idem or
meeting of minds between the parties as they were still negotiating
in light of the variation in price by the plaintiff. That the Defendant had
submitted a second expression of interest dated 28th February 2013.
That no price had been agreed upon between the parties and the matter
was still open and subject to negotiations between the parties. As such
there existed no contract capable of enforcement. The Defendant stated
that before it could execute the Sale Agreement the Government of
Kenya issued a directive that all projects for acquisition above Kshs.
50 million were to be subject to a feasibility study. That the Defendant
being a government corporation was bound by this directive. That the
feasibility study took longer than had been anticipated.
21. The Defendant stated that vide a letter dated 6th March 2013 the
Plaintiff subsequently re-valued the property at Kshs. 15,000,000 per
acre making a total purchase price of Kshs. 409,500,000. However
the chief land Registrar valued the property at Kshs. 4,945,054.95
per acre giving a total purchase price of Kshs. 135,000,000 which
amounted to a difference of Kshs. 355,000,000.
22. The Defendant further stated that on 12th June 2013 their tender
committee on the advice of the chief land Registrar advised against
Purchasing the suit land as the same was found not suitable for
construction due to the fact that there were outstanding land rent
arrears on the property and it would involve expensive litigation to evict
the illegal squatters. The Defendant offered that the plaintiff was at
liberty to sell the suit property to a third party of their choice.
23. The Defendant stated that the present suit was defective, frivolous and
vexations and urged the court to dismiss the same in its entirety.
THE EVIDENCE
24. Pw1 LAWRENCE MURIITHI MBABU the Managing Director of the
Plaintiff company who is also an Advocate of the High Court of
Kenya testified on behalf of the Plaintiff. He relied entirely upon his
witness statement dated 11th June 2013 which basically captured the
Plaintiffs claim as stated in the plaint dated 11th June 2013.
25. Pw1 confirmed that the plaintiff was the registered owner of the
property known as LR NO. MN/VI/3713 CR 28260 located in
Miritini, Mombasa County. Pw1 told the Court that the plaintiff had
appointed a company known as Chevron Properties to source for a
buyer for the suit property. That upon securing a buyer, the Plaintiffs
were to pay Chevron a 10 percent commission.
26. The witness insists that the Plaintiff duly executed the letter of Award
dated 10th April 2021 which Award set out all the terms and conditions
of the sale. He asserts that the said letter of Award was never
withdrawn, revoked and or terminated thus it remains binding and
enforceable upon the parties.
27. Dw1 states that to date the Plaintiff has received no payment from the
Defendant. He concedes that the parties mutually agreed to have the
purchase price reconsidered in view of the length of time the whole
transaction had taken.
28. However instead of sending the plaintiffs an amended letter of award
the Defendant instead sent a letter dated 28th February 2013
requiring that the Defendant re-submit all relevant documentation and
information relating to the suit property which letter required a
response on or before 17th February 2013 i.e the response was
required before the date when the letter had been written.
29. Pw1 lamented that the failure/refusal by the Defendants to complete
the contract had left the Plaintiff with mounting pending bills and urged
the court to direct specific performance by the Defendant of the
contract. He also sought damages on account of the Defendants
failure to complete the sale.
30. Pw1 ALEX LEONARD testified for the Defendant. He told the court
that he was the Head of Procurement at the National Oil Corporation
of Kenya.
31. DW1 relied entirely upon his witness statement dated 5th March 2015
which was basically a recap of the statement of Defence dated 10th
July 2013 and the Amended Defence dated 5th February 2014.
32. Pw1 insisted that there was no valid and enforceable contract between
the parties. He stated that there were two expressions of Interest one
dated 27th February 2012 and the other dated 6th March 2013.
33. According to Dw1 as a result of the Plaintiffs variation of the purchase
price the parties entered into a re-negotiation of the contract for sale.
That the new price was rejected by the Defendants Tender Committee.
That no formal contract was entered into by the parties, and that at the
time the plaintiff filed this suit the contract was still open and was subject
to negotiations.
34. The Witness states that this suit has been filed mala fides with the
ulterior purpose of compelling the Defendant to Purchase an unsuitable
parcel of land or to compel the Defendant to enter into an illegal
transaction. He urges that the suit be dismissed with costs.
35. Following conclusion of oral hearing parties were invited to file and
exchange their written submissions. The Plaintiff filed the written
submissions dated 10th November 2020 whilst the Defendant relied
upon its written submissions dated 11th January 2021.
ANALYSIS AND DETERMINATION
36. I have considered the plaint filed by the Plaintiff the statement of
defence filed by the Defendant, the evidence on record as well as the
written submissions on record.
37. The first question to be answered is whether there existed a legally
enforceable contract between the Plaintiff and the Defendant. It is trite
law that he who alleges must prove.
38. Section 107 1 of the Evidence Act, Cap 80 Laws of Kenya
provides that:
Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.
39. This was reiterated in Anne Wambui Ndiritu vs Joseph Kiprono
Ropkoi & Another 2005 1 EA 334, where the Court of Appeal held
that:
As a general proposition under Section 107 1 of the Evidence Act, Cap 80, the legal burden of proof lies upon the party who invokes the aid of the law and substantially asserts the affirmative of the issue. There is however the evidential burden that is cast upon any party the burden of proving any particular fact which he desires the court to believe in its existence which is captured in Sections 109 and 112 of the Act.
40. Therefore the Plaintiff who contends that a binding contrast existed
between the parties has the legal burden to satify the court that this is
indeed the case.
41. The elements of a contract were summarized in the Halsburys Laws
of England 4th ed. Re-Issue Vo. 9 ,1 paragraph 603 at page
- as follows
To constitute a valid contract 1, there must be two or
more separate and definite parties to the contract, 2.
those parties must be in agreement, that is, there must
be consensus on specific matters often referred to in
the older authorities as consensus ad idem 3. those
parties must intend to create legal relations in the
sense that the promises of each side are to be
enforceable simply because they are contractual
promises, 4. the promises of each party must be
supported by consideration or by some other factor
which the law considers sufficient. Generally speaking,
the law does not enforce a bare promise.
42. The Plaintiff contends that upon the Defendants issuing the Agreement
of Award dated 10th April 2013 a valid and legally enforceable contract
came into force. That the Defendant was therefore obliged to
immediately deposit the sum of Kshs. 34,398,000 into the Plaintiffs
account and provide a duly executed Sale Agreement to the Plaintiff
within a reasonable time. However the Defendant failed to do this.
43. On its part the Defendant asserts that no valid Sale Agreement existed
between the parties as the Defendant was yet to communicate the
decision of its Tender Committee to the Plaintiff and in the meantime
the Plaintiff was at liberty to sell off the property to a third party.
44. A contract consists of offer, acceptance and consideration. In the
case of WILLIAM MUTHEE MUTHIANI VS BANK OF BARODA
2014 eKLR the Court of Appeal stated that,
In law of contract, the aggrieved party to an agreement must in addition, prove that there was offer, acceptance and consideration. It is only when those three elements are available that an innocent party can bring a claim against the other for breach
45. Generally the determination of whether or not a valid contract exists will
require an examination of the conduct of the parties, any communication
between them which would objectively lead to the conclusion that they
intended to create a legally binding relationship and that all terms had
been agreed upon between the said parties..
46. In the British case of RTS FLEXIBLE SYSTEMS LTD VS MOLKEREI
ALOIS MULLER [2010] 1 WLR 753, Lord Clarte observed as
follows,
The general principles are not in doubt. Whether there was binding contract between the parties and if so, upon what terms subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of other significance have not been finalized, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a precondition to a concluded and legally binding agreement.
47. I have carefully perused the correspondence on record between the
parties herein. According to the letter of Award dated 10th April 2012
written by the Defendant to the plaintiff see Page 11 of Defendants
Bundle filed on 20th June 2017 the Defendant communicated to the
plaintiff the formers decision to purchase the suit property at a
negotiated price of Kshs. 8,400,000 per acre. The total payable
for the entire property totaling 27.3 acres was to be Kshs.
229,320,000.
48. The same letter went on to state that a 15 percent deposit would be paid to
the Plaintiffs lawyer, that the Plaintiff would have the responsibility to
evict the squatters on the property and that the balance of the
purchase price was to be paid upon registration of the title into the
Defendants name and handover of vacant possession.
49. The final paragraph of the letter stated as follows,
Meanwhile we are finalizing on the due diligence for the land in regards to confirming whether or not the land falls within the jurisdiction of KPLC, Rift Valley Railways or any road reserve. The feedback will be communicated to you
50. The Plaintiff asserts that this letter constituted the Agreement between
the parties. However I do not agree. The letter left many issues up in
the air. Firstly no timeline was given by when the 15percent deposit was to
be paid to the plaintiffs lawyers. Further no timelines were set for the
eviction of the squatters who were on the suit property. In the same
letter the Defendants also mentioned other aspects of due diligence
they would need to undertake before making a final commitment.
51. Finally the Defendant made the sale conditional upon their confirming
that the land was free from any encumbrances. As such the so called
Agreement cannot be said to have been an unconditional acceptance
of the offer by the seller as it depended on confirmations yet to be made
by the purchaser. I therefore find and hold that the letter of Award was
conditional and could only be confirmed once all the conditions
mentioned therein had been met.
52. The plaintiffs state that by way of the letter dated 16th April 2012 they
returned the letter of Award and Sale Agreement duly executed
on their behalf and assert that this act signified the plaintiffs
unconditional acceptance of all the terms and conditions in the letter of
Award.
53. It is pertinent to note that the Sale Agreement was never executed
by the Defendants. Therefore no binding Agreement for sale existed.
Indeed the Plaintiffs have not produced any evidence of Sale Agreement
duly executed by BOTH parties. It is only upon execution of such
Sale Agreement that a binding contract would arise.
54. The Plaintiff states that instead of remitting the deposit to their
Advocates, the Defendants instead went quiet. That is not entirely
correct. In February 2013 the parties held another meeting and there
was a move by the plaintiff to renegotiate the purchase price due to
the time that had elapsed. The plaintiff proposed a higher purchase
price for suite land. Quite understandably the Defendant would have
needed time to consider that new price and follow its laid down
procedures with respect to the new purchase price proposed by the
plaintiffs. In their letter dated 24th July 2024 the Defendant wrote to
the plaintiffs Advocate explaining the reasons why they had not
executed the Sale Agreement. In said letter the Procurement co
ordinator for the Defendant stated thus
We have not executed the agreement due to pertinent issues which have emerged and which need to be resolved. We are undertaking some studies related to this acquisition to guide us on the way forward in line with mandatory financial requirements that have emerged. Our position on this matter will be provided after all matters that require our attention are resolved. own emphasis
55. By the above letter Defendants made it very clear that they were not
ready and did not intend to enter into a binding contract with the plaintiff
at that stage. The fact that the plaintiff entered into and entertained
fresh discussions on a purchase price is further proof that no binding
Agreement had as yet been reached.
56. The second round of discussions led to a second expression of interest
which was issued by the Defendants on 28th February 2013. By a
letter dated 6th March 2013 see page 17 of Defendants bundle filed
on 20th June 2017 the plaintiff through their Advocate offered to sell
the property at an increased price of Kshs. 15,000,000 per acre
making a total purchase price of Kshs. 409,500,000.00 It is clear that
the old offer had been abandoned. The plaintiffs chose to maintain a
studious silence on this second offer in their evidence.
57. By declaring new purchase price the plaintiff had by its conduct
effectively retracted/abandoned its earlier Expression of Interest and
were starting the process afresh. No agreement was ever reached as
his second expression of interest. It is my finding that the
correspondence exhibited by the plaintiff did not meet the threshold of
a binding contract. Moreover the Plaintiffs did not prove that they had
fulfilled the conditions which they were to meet i.e the removal of all
squatters from the suit land. The preconditions for entering into a
contract had not been fulfilled.
58. Having found that no valid contract existed between the parties, there
would be no basis upon which the court can make an order of specific
performance. The letters and correspondence amounted merely to
negotiations between the parties. No binding contract was entered into.
No consideration was paid and the plaintiff had the option to sell the
property to a third party.
59. In the case of GHARIB SULEMAN GHARIB -VS- ADBULRAHMAN
MOHAMED AGIL CIVIL APPEAL No. 112 of 1998 the Court held
that.
“The jurisdiction to order specific performance is based on the existence of a valid and enforceable contract and being an equitable relief, such relief is more often than not granted where the party seeking it cannot obtain sufficient remedy by an award of damages, the forces being whether or not specific performance will do more perfect and complete justice than an award of damages.” [own emphasis]
60. Likewise in Thrift Homes Ltd vs. Kenya Investment Ltd 2015
eKLR the court stated that:-
“Specific performance like any other equitable remedy is discretionary and will be granted on well settled principles. The jurisdiction of specific performance is based on the existence of a valid enforceable contract and will not be ordered if the contract suffers from some defects or mistake or illegality. Even where a contract is valid and enforceable, specific performance will not be ordered where there is an adequate alternative remedy. The court then posed the question as to whether the Plaintiff who was seeking specific performance in that case had shown that he was ready and able to complete the transaction”. [own emphasis]
61. The Plaintiff had the duty to show that a contract existed and to show
that it had performed all the preconditions of the contract which it had
undertaken to perform. The Plaintiff has failed to prove this thus the
relief of specific performance is not available to them.
62. For the same reasons the plaintiffs prayer for an order of damages is
not tenable. There was no legally enforceable contract between the
plaintiff and the Defendant therefore the plaintiff’s claim for payment of
the difference between the alleged contract price and the prevailing
market price for the suit property has no basis.
63. Finally I find no merit in this suit. The same is dismissed in its entirety.
Costs will be met by the plaintiffs.
Dated in Nyeri this 21st day of February, 2025
………………………….
MAUREEN A. ODERO
JUDGE