Background
1. The Plaintiff instituted this suit by a Plaint dated 21 July 2014 seeking damages arising from an alleged breach of a building contract entered into between itself and the 1st Defendant in December 2009. The contract concerned the design and construction of a commercial building, excluding interior design and partitioning, on L.R. No. 209/2788/13 situated at Nyamakima, Nairobi.
2. The agreed contract price was Kshs. 85,000,000.
3. The Plaintiff pleaded that while it was diligently performing the works, the 1st Defendant unlawfully terminated the contract in February 2013 by ejecting it from the construction site and appointing another contractor. It therefore claimed Kshs. 25,000,000, being 30% of the contract sum pursuant to Clause 3.2 of the agreement as damages for breach of contract.
4. The Plaintiff further pleaded that during the execution of the project, it expended Kshs.10,200,000 of its own funds with the knowledge and approval of the 2nd Defendant, which amount remained unpaid.
5. The Defendants filed their Statement of Defence dated 30th September 2014 and admitted execution of the contract but denied breaching it. Their case was that both parties knew from the outset that the 1st Defendant lacked sufficient financial resources to undertake the project and that the contract had principally been prepared to facilitate applications for project financing from financial institutions.
6. According to the Defendants, financing was never obtained, rendering the contract incapable of performance. The parties thereafter incorporated Karanja Seven Properties Limited, which successfully obtained financing from Equity Bank Limited amounting to Kshs. 54 million in November 2010, and that the new entity became the developer of the project under a separate arrangement. They denied ever ejecting the Plaintiff from the site and contended that construction only ceased after the new developer exhausted the available funds.
7. The Defendants further denied that the Plaintiff had injected Kshs.10.2 million into the project or that any amount remained outstanding.
THE EVIDENCE
Plaintiff’s Witness
8. John Ruo Wanganga, a Director of the Plaintiff company, swore a witness statement on behalf of the Plaintiff with the authority and consent of the company to institute this suit.
9. He stated that, in December 2009, the Plaintiff entered into an express contract with the 1st Defendant, represented by the 2nd Defendant, for the design and construction of a commercial building, excluding interior design and partitioning works, on the 2nd Defendant’s property situated in the Nyamakima area of Nairobi, namely LR No. 209/2788/13. Under the agreement, the Plaintiff was to be paid a contract sum of Kshs. 85 million.
10. The witness averred that, while the Plaintiff was diligently performing its obligations under the contract, the 1st Defendant, in or about February 2014, unilaterally breached the agreement by ejecting the Plaintiff from the construction site, thereby preventing the Plaintiff and/or its servants from continuing with the works, and by appointing a third-party contractor to complete the project to the exclusion of the Plaintiff.
11. He further stated that, as a consequence of the breach, the Plaintiff suffered loss and damage and claimed Kshs. 25 million from the 1st Defendant, being 30% of the contract sum as provided for under Clause 3.2 of the agreement.
12. The witness further deposed that, in the course of performing its contractual obligations, the Plaintiff expended Kshs. 10.2 million of its own funds on the project with the full knowledge and acquiescence of the 2nd Defendant. Despite demand, the 2nd Defendant had failed and/or refused to reimburse the said amount. Consequently, the Plaintiff sought a refund of Kshs. 10.2 million from the 2nd Defendant.
Defendants’ Witness
13. Peter Gathinji Karanja, a director of the 1st Defendant company, recorded a witness statement dated 30 September 2014 on behalf of the 1st Defendant. He stated that he was the son of the late Charles Karanja Kinyanjui and that the shareholders and directors of the 1st Defendant comprised the children of the deceased together with the 2nd Defendant, who was their mother and the administratrix of the deceased’s estate. He described the 1st Defendant as a family company.
14. The witness stated that the deceased owned several properties, including LR No. 36/III/1131 situated in Eastleigh and LR No. 209/2788/13 situated along Cross Road in Nyamakima, Nairobi. According to the witness, the family considered the old commercial building standing on the Nyamakima property uneconomical and resolved to redevelop it into a modern structure through the 1st Defendant company. At the material time, the title to the Nyamakima property remained in the name of the deceased and the lease was undergoing renewal.
15. He further deposed that the family resolved to sell some of the estate properties in order to raise initial capital for the redevelopment project while pursuing additional financing from financial institutions as the project progressed. One of the properties identified for sale was the Eastleigh property. In 2009, the Eastleigh property was placed on the market and, after several unsuccessful offers, John Ruo Wang’ang’a made an offer which culminated in a sale agreement dated 19 October 2009 between himself and the 2nd Defendant at a purchase price of Kshs. 15 million.
16. The witness stated that the court subsequently granted authority on 16 December 2009, permitting the transfer of the property.
17. The witness further explained that, prior to the sale, the family had consulted a contractor, George K. Wanjau, who estimated the redevelopment cost at approximately Kshs. 70 million. The family therefore intended to utilise the proceeds from the sale of the Eastleigh property as seed capital for the project. As the sale transaction progressed, the family became acquainted with John Ruo Wang’ang’a, who informed them that he operated the Plaintiff company and could assist both in the construction works and in sourcing financing from financial institutions by virtue of his alleged banking connections.
18. According to the witness, the family agreed in December 2009 to work with Mr. Wang’ang’a and resolved that the proceeds from the sale of the Eastleigh property would be utilised to commence the project so as to attract financiers to an already ongoing development.
19. According to the witness, Mr. Wang’ang’a allegedly advised that a formal contract was necessary to demonstrate the seriousness of the project to prospective financiers and instructed the firm of M/s Njonjo, Okello & Associates Advocates to prepare the contract between the Plaintiff and the 1st Defendant.
20. The witness stated that the resulting contract, executed in or about December 2009, provided for the construction of a commercial building on the Nyamakima property at a consideration of Kshs. 85 million, exclusive of interior design, décor and partitioning works. He maintained that both the Plaintiff and Mr. Wang’ang’a were fully aware that the Defendants lacked sufficient funds to undertake the project, save for the anticipated proceeds from the Eastleigh property sale and anticipated bank financing. The witness maintained that the contract was intended primarily as a mechanism for soliciting financing from financial institutions.
21. The witness further stated that, on the strength of the anticipated proceeds from the Eastleigh property sale, the Plaintiff commenced the construction works. However, Mr. Wang’ang’a allegedly failed to pay the full purchase price for the Eastleigh property and paid only Kshs. 9 million, leaving a balance outstanding. He added that a substantial portion of the monies paid by Mr. Wang’ang’a was subsequently channelled back to him to facilitate commencement of the Nyamakima project, while the 2nd Defendant also secured a development loan of Kshs. 3.5 million from Family Bank Limited, most of which was utilised on the project.
22. The witness further stated that the Defendants presented the contract to various banks, including Consolidated Bank, Fina Bank and Ecobank, in an effort to secure financing for the project. However, none of those institutions agreed to finance the development. Consequently, the anticipated project financing failed, and the contract became frustrated.
23. The witness stated that, after the 1st Defendant failed to secure funding, the parties reconsidered the structure of the project and Mr. Wang’ang’a proposed the incorporation of another company through which he would participate as both a director and shareholder. Consequently, Karanja Seven Properties Limited was incorporated and, through Mr. Wang’ang’a’s participation, the company secured financing from Equity Bank Limited amounting to Kshs. 54 million in November 2010.
24. According to the witness, the role of developer thereafter shifted from the 1st Defendant to Karanja Seven Properties Limited, a fact allegedly known to both the Plaintiff and Mr. Wang’ang’a. He stated that the new developer entered into an unwritten arrangement with the Plaintiff and Mr. Wang’ang’a for the continuation of the construction works and channelled all monies obtained from Equity Bank Limited into the project through payments made pursuant to certificates issued by the bank’s consultants.
25. The witness further stated that construction progressed successfully and that the main structure up to the second floor, together with the slab for the third floor, was completed. The basement, ground floor and first floor were certified fit for occupation and tenants moved into the premises. However, the developer allegedly exhausted the available funds in 2012, after which the Plaintiff and Mr. Wang’ang’a abandoned the project. He added that, apart from interior works, no further construction works had been undertaken and that the Plaintiff’s billboard remained erected at the site identifying it as the contractor.
26. The witness also alleged that, before abandoning the site, Mr. Wang’ang’a collected substantial goodwill payments from incoming tenants which he failed to account for. He therefore maintained that the Plaintiff was not entitled to damages or any other relief against the 1st Defendant.
27. He further denied that the Plaintiff expended its own funds on the project and maintained that all monies utilised in the development were either paid by the 2nd Defendant or by Karanja Seven Properties Limited from the Equity Bank facility.
28. Accordingly, he contended that the Plaintiff’s claim was without merit and ought to be dismissed with costs.
Analysis and Determination
29. Before I proceed with this section of the judgment, I note that the 2nd Defendant passed away on 22 December 2021 while the suit was still pending. Although the Plaintiff subsequently filed an application dated 8 May 2024 seeking substitution of the deceased Defendant, the claim against the 2nd Defendant had by then already abated. The said application was later withdrawn on 16 July 2024. Consequently, there is no surviving claim against the 2nd Defendant.
30. From the record, I note that the Plaintiff filed a List and Bundle of Documents dated 21 July 2014 and Written Submissions dated 30 May 2025. On their part, the Defendants filed a List and Bundle of Documents dated 30 September 2014 and Written Submissions dated 14 November 2025.
31. I further note from the record that the parties jointly filed an Agreed List of Issues dated 2 June 2022 and a Joint Statement of Agreed Facts dated 16 September 2022. These documents appear on pages 251–253 of the Defendants’ Trial Bundle.
32. It is not in dispute that, on or about December 2009, the Plaintiff and the 1st Defendant entered into a contract for the design and construction of a commercial building on property known as L.R. No. 209/2788/13 situated along Cross Road in the Nyamakima area (hereinafter “the suit property”). The consideration under the contract was Kshs. 85,000,000.
33. The Plaintiff’s case is that it duly performed its obligations under the contract but that, in February 2013, the 1st Defendant unilaterally breached the agreement by ejecting it from the construction site and preventing it from carrying out further works. As a consequence of the alleged breach, the Plaintiff seeks damages in the sum of Kshs. 25,000,000, being 30% of the contract sum allegedly payable under Clause 3.2 of the agreement.
34. The Plaintiffs also claimed against the 2nd Defendant a sum of Kshs. 10.2 million of its own funds, which it allegedly incurred on the project with the full knowledge and acquiescence of the 2nd Defendant.
35. The Defendants, on their part, contend that both parties were aware from the outset that the 1st Defendant lacked the financial capacity to undertake the project and that the agreement was primarily intended to facilitate the sourcing of project financing. They argued that the failure to secure funding frustrated the contract and rendered its performance impossible.
36. The Defendants further contend that, following the failure to secure funding, a new company known as Karanja Seven Properties Limited was incorporated by the directors of the 1st Defendant together with the Plaintiff’s director, Mr. John Ruo Wang’ang’a. According to the Defendants, the company subsequently obtained a loan facility of Kshs. 54 million from Equity Bank Limited and the project thereafter proceeded under a separate unwritten arrangement involving the new company. They therefore maintain that the original contract was abandoned.
37. The Defendants denied ejecting the Plaintiff from the site, asserting instead that the Plaintiff ceased construction works after the project funds were exhausted. They further denied owing the Plaintiff Kshs. 10.2 million, maintaining that all monies expended on the project had been fully reimbursed. Consequently, they denied liability for breach of contract and urged the Court to dismiss the suit with costs.
38. From the above, I find that the following issues arise for determination:
i. Whether the 1st Defendant breached the Building Contract dated December 2009.
ii. Whether the Plaintiff is entitled to damages for breach of contract.
iii. Whether the Plaintiff established its claim for Kshs.10.2 million.
Whether the 1st Defendant breached the Building Contract
39. There is no dispute that in December 2009 the Plaintiff and the 1st Defendant executed a Building Contract under which the Plaintiff was to design and construct a commercial building on L.R. No. 209/2788/13, Nyamakima, Nairobi, for a contract price of Kshs.85,000,000.
40. The Plaintiff's case is straightforward. It contends that it faithfully performed its contractual obligations until February 2014, when the 1st Defendant unlawfully ejected it from the construction site, prevented it from completing the works, and appointed another contractor. On that basis, it seeks damages under Clause 3.2 of the contract.
41. The Defendants deny that allegation. Their case is that the project failed to secure financing, the original contract consequently became incapable of performance, and the parties thereafter incorporated another company, Karanja Seven Properties Limited, through which the project proceeded until the new developer exhausted its financing.
42. The resolution of the question whether there was a breach of the contract, in the view of the Court, lies principally in the Joint Statement of Agreed Facts executed by counsel for both parties. Parties are ordinarily bound by facts which they voluntarily admit before the Court unless those admissions are withdrawn or set aside.
43. From the record, I note that parties jointly filed a statement of agreed facts dated 16 September 2022, which essentially were in the following terms: -
i. that at the time of executing the Building Contract neither party had sufficient funds to undertake the project;
ii. that the contract was presented to several financial institutions to secure project financing;
iii. that financing was not obtained;
iv. that by reason of failure to obtain funding the contract became frustrated and was not performed;
v. that thereafter the Plaintiff's director and the directors of the 1st Defendant incorporated Karanja Seven Properties Limited;
vi. that the new company obtained financing of Kshs.54 million from Equity Bank Limited;
vii. that the new company became the developer of the project;
viii. that it entered into an unwritten arrangement with the Plaintiff for continuation of the construction works;
ix. that construction proceeded until the new developer exhausted its funds sometime in 2012.
44. These agreed facts fundamentally contradict the Plaintiff's pleaded case that the 1st Defendant wrongfully terminated the contract by ejecting it from the site.
45. Litigation must proceed on the basis of the facts that parties have agreed, and a party cannot subsequently invite the Court to determine the dispute on a factual foundation inconsistent with its own admissions.
46. From the agreed statement of facts, it is evident that the parties themselves agreed that the original contract became frustrated owing to lack of financing, and thereafter consciously elected to continue the project through another corporate vehicle (Karanja Seven Properties Limited) under a different arrangement; there can therefore be no factual basis for a finding that the original contract was later repudiated by the 1st Defendant.
47. The Plaintiff did not seek to set aside or qualify the Joint Statement of Agreed Facts. Consequently, the Court is bound to determine the dispute on the basis of those agreed facts rather than on evidence inconsistent with them.
48. The agreed facts expressly acknowledge that the Building Contract became frustrated because the intended project financing could not be obtained.
49. In any event, it is settled law that the doctrine of frustration operates where, without default on the part of either contracting party, a supervening event renders contractual performance impossible or transforms the obligation into something fundamentally different from that originally contemplated.
50. When frustration occurs, the contract is automatically discharged, and the parties are released from future performance. Halsbury’s Laws of England (Vol. 9(1), 4th Edition at Paragraph 897 provides that:
“As subsequently developed, the doctrine of frustration operates to excuse from further performance where: (1) it appears from the nature of the contract and the surrounding circumstances that the parties have contracted on the basis that some fundamental thing or state of things will continue to exist, or that some particular person will continue to be available, or that some future event which forms the basis of the contract will take place; and (2) before breach, an event in relation to the matter stipulated in head (1) above renders performance impossible or only possible in a very different way from that contemplated. This assessment has been said to require a 'multi-factorial' approach. Five propositions have been set out as the essence of the doctrine. First, the doctrine of frustration has evolved to mitigate the rigour of the common law's insistence on literal performance of absolute promises so as to give effect to the demands of justice. Secondly, the effect of frustration is to discharge the parties from further liability under the contract, the doctrine must not therefore be lightly invoked but must be kept within very narrow limits and ought not to be extended. Thirdly, the effect of frustration is to bring the contract to an end forthwith, without more and automatically. Fourthly, the essence of frustration is that it should not be due to the act or election of the party seeking to rely upon it, but due to some outside event or extraneous change of situation. Fifthly, that event must take place without blame or fault on the side of the party seeking to rely upon it; nor does the mere fact that a contract has become more onerous allow such a plea.”
51. In Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696, the House of Lords explained that frustration arises where a supervening event makes performance radically different from that undertaken by the parties.
52. The principle in Davis Contractors (supra) has been applied in several decisions, including in Five Forty Aviation Ltd v Erwan Lanoe [2019] eKLR, where the Court of Appeal stated as follows:
“Applying the above guidelines to the instant appeal, it is our finding that the appellant’s failure to comply with the prerequisites in section 45 (2) of the Act did not render the said contract illegal, but gave rise to intervening circumstances which rendered the continued sustenance of the said contract as initially executed between the parties impossible. This is what the Court in the same Kenya Airways Limited case (supra) termed “frustration of a contract”. The Court in the said Kenya Airways case Limited (supra), went further and set out the prerequisites for the application of the doctrine of frustration of a contract as follows:-
“....the doctrine of frustration operates to excuse further performance where it appears from the nature of the contract and the surrounding circumstances that the parties have contracted on the basis that some fundamental thing or state of things will continue to exist, or that some particular person will continue to be available, or that some future event which forms the foundation of the contract will take place, and before breach performance becomes impossible or only possible in a very different way to that contemplated without default of either party and owing to a fundamental change of circumstances beyond the control and original contemplation of the parties. The mere fact that a contract has been rendered more onerous does not of itself give rise to frustration.”
53. In the persuasive decision of Omollo v Agricultural Finance Corporation & 2 others [2025] KEHC 3291 (KLR), Mwamuye J, applying the principle of frustration of a contract as espoused in Davis (supra), stated that:
54. “The Court in Davis Contractors Ltd v Farehum UDC held that frustration occurs whenever the law recognizes that without the default of either party a contractual obligation has become incapable of being performed because the circumstances in which the performance is called for would render it a thing radically different from that which was undertaken by the contract. In this case, the economic downturn, combined with the 3rd Respondent’s inaction, contributed to the failure of performance. Therefore, the breach cannot be attributed solely to the Appellant.”
55. In the present case, the parties expressly agreed that the project depended upon external financing; that financing could not be obtained despite approaches to several financial institutions; and that, as a consequence, the original Building Contract became frustrated.
56. Having made that admission, neither party can subsequently contend that the contract remained subsisting and was thereafter wrongfully terminated.
57. The legal consequence of frustration was that the parties were discharged from further performance of the Building Contract.
58. Accordingly, I find as a fact that the Plaintiff has failed to prove that it was unlawfully removed from the project by the 1st Defendant.
Whether the Plaintiff is entitled to damages (Kshs. 25 million) for breach of contract.
59. The Plaintiff claims Kshs.25 million under Clause 3.2 of the Building Contract. That clause presupposes a wrongful termination or breach by the employer.
60. The Court has already found that no such breach occurred. Instead, the contract came to an end by reason of frustration and was subsequently superseded by another arrangement under a different developer. The contractual preconditions for invoking Clause 3.2 were therefore never satisfied.
61. The claim therefore fails.
Whether the Plaintiff proved its claim for Kshs. 10.2 million
62. The Plaintiff also seeks reimbursement of Kshs.10.2 million, which it alleges it expended from its own resources in the course of executing the project with the knowledge and acquiescence of the 2nd Defendant.
63. The burden rested upon the Plaintiff to prove that claim. Sections 107, 108, and 109 of the Evidence Act, Chapter 80 Laws of Kenya, provide that he who alleges must prove. While the legal burden remains throughout upon the party asserting a fact, the evidential burden shifts only after a prima facie case has been established.
64. In Palace Investments Limited v Geoffrey Kariuki Mwenda & another [2015] KECA 616 (KLR), the Court of Appeal observed that a party succeeds on a balance of probabilities where the Court is satisfied that its version of events is more probable than not.
65. Similarly, in Karugi & another v Kabiya & 3 others [1983] KECA 38 (KLR), the Court held that the burden of proof always remains upon the plaintiff and does not lessen merely because the defendant has called evidence.
66. In the present case, the Plaintiff pleaded that it injected Kshs.10.2 million into the project. However, beyond that assertion, no satisfactory documentary evidence was produced demonstrating the actual disbursement of that amount from the Plaintiff's resources, the specific purposes for which the monies were expended, or that the Defendants acknowledged the amount as a debt due and payable.
67. Conversely, the Defendants maintained that all monies utilized during construction originated either from the proceeds of the sale of the Eastleigh property, funds advanced by the 2nd Defendant, or the financing obtained by Karanja Seven Properties Limited from Equity Bank Limited, and that payments made to the Plaintiff were certified and disbursed from those funds. The Plaintiff did not produce cogent evidence to displace that position.
68. More fundamentally, the claim was expressly directed against the 2nd Defendant. As already observed, the 2nd Defendant died on 22 December 2021. The claim against her subsequently abated, and no legal representative was substituted within the period prescribed by law. Although the Plaintiff later filed an application seeking substitution, the application was withdrawn after the cause of action had already abated.
69. The legal consequence is that there is no subsisting claim before this Court against the estate of the 2nd Defendant upon which any relief can be granted.
70. Accordingly, the Plaintiff's claim for Kshs.10.2 million fails both on evidential grounds and because no competent claim now subsists against the 2nd Defendant.
Disposition
71. The upshot of the foregoing is that I find that the Plaintiff has failed to prove its case on a balance of probabilities.
72. Accordingly, the Plaintiff’s suit is hereby dismissed with costs to the 1st Defendant.
73. It is so ordered.
DATED, SIGNED, AND DELIVERED AT NAIROBI
THIS 9TH DAY OF JULY 2026
HON. MR. JUSTICE MOSES ADO
Judge of the High Court
In the Presence of:
Moses C/A
……………… for the Plaintiff
……………for the 1st Defendant
1. The Plaintiff instituted this suit by a Plaint dated 21 July 2014 seeking damages arising from an alleged breach of a building contract entered into between itself and the 1st Defendant in December 2009. The contract concerned the design and construction of a commercial building, excluding interior design and partitioning, on L.R. No. 209/2788/13 situated at Nyamakima, Nairobi.
2. The agreed contract price was Kshs. 85,000,000.
3. The Plaintiff pleaded that while it was diligently performing the works, the 1st Defendant unlawfully terminated the contract in February 2013 by ejecting it from the construction site and appointing another contractor. It therefore claimed Kshs. 25,000,000, being 30% of the contract sum pursuant to Clause 3.2 of the agreement as damages for breach of contract.
4. The Plaintiff further pleaded that during the execution of the project, it expended Kshs.10,200,000 of its own funds with the knowledge and approval of the 2nd Defendant, which amount remained unpaid.
5. The Defendants filed their Statement of Defence dated 30th September 2014 and admitted execution of the contract but denied breaching it. Their case was that both parties knew from the outset that the 1st Defendant lacked sufficient financial resources to undertake the project and that the contract had principally been prepared to facilitate applications for project financing from financial institutions.
6. According to the Defendants, financing was never obtained, rendering the contract incapable of performance. The parties thereafter incorporated Karanja Seven Properties Limited, which successfully obtained financing from Equity Bank Limited amounting to Kshs. 54 million in November 2010, and that the new entity became the developer of the project under a separate arrangement. They denied ever ejecting the Plaintiff from the site and contended that construction only ceased after the new developer exhausted the available funds.
7. The Defendants further denied that the Plaintiff had injected Kshs.10.2 million into the project or that any amount remained outstanding.
THE EVIDENCE
Plaintiff’s Witness
8. John Ruo Wanganga, a Director of the Plaintiff company, swore a witness statement on behalf of the Plaintiff with the authority and consent of the company to institute this suit.
9. He stated that, in December 2009, the Plaintiff entered into an express contract with the 1st Defendant, represented by the 2nd Defendant, for the design and construction of a commercial building, excluding interior design and partitioning works, on the 2nd Defendant’s property situated in the Nyamakima area of Nairobi, namely LR No. 209/2788/13. Under the agreement, the Plaintiff was to be paid a contract sum of Kshs. 85 million.
10. The witness averred that, while the Plaintiff was diligently performing its obligations under the contract, the 1st Defendant, in or about February 2014, unilaterally breached the agreement by ejecting the Plaintiff from the construction site, thereby preventing the Plaintiff and/or its servants from continuing with the works, and by appointing a third-party contractor to complete the project to the exclusion of the Plaintiff.
11. He further stated that, as a consequence of the breach, the Plaintiff suffered loss and damage and claimed Kshs. 25 million from the 1st Defendant, being 30% of the contract sum as provided for under Clause 3.2 of the agreement.
12. The witness further deposed that, in the course of performing its contractual obligations, the Plaintiff expended Kshs. 10.2 million of its own funds on the project with the full knowledge and acquiescence of the 2nd Defendant. Despite demand, the 2nd Defendant had failed and/or refused to reimburse the said amount. Consequently, the Plaintiff sought a refund of Kshs. 10.2 million from the 2nd Defendant.
Defendants’ Witness
13. Peter Gathinji Karanja, a director of the 1st Defendant company, recorded a witness statement dated 30 September 2014 on behalf of the 1st Defendant. He stated that he was the son of the late Charles Karanja Kinyanjui and that the shareholders and directors of the 1st Defendant comprised the children of the deceased together with the 2nd Defendant, who was their mother and the administratrix of the deceased’s estate. He described the 1st Defendant as a family company.
14. The witness stated that the deceased owned several properties, including LR No. 36/III/1131 situated in Eastleigh and LR No. 209/2788/13 situated along Cross Road in Nyamakima, Nairobi. According to the witness, the family considered the old commercial building standing on the Nyamakima property uneconomical and resolved to redevelop it into a modern structure through the 1st Defendant company. At the material time, the title to the Nyamakima property remained in the name of the deceased and the lease was undergoing renewal.
15. He further deposed that the family resolved to sell some of the estate properties in order to raise initial capital for the redevelopment project while pursuing additional financing from financial institutions as the project progressed. One of the properties identified for sale was the Eastleigh property. In 2009, the Eastleigh property was placed on the market and, after several unsuccessful offers, John Ruo Wang’ang’a made an offer which culminated in a sale agreement dated 19 October 2009 between himself and the 2nd Defendant at a purchase price of Kshs. 15 million.
16. The witness stated that the court subsequently granted authority on 16 December 2009, permitting the transfer of the property.
17. The witness further explained that, prior to the sale, the family had consulted a contractor, George K. Wanjau, who estimated the redevelopment cost at approximately Kshs. 70 million. The family therefore intended to utilise the proceeds from the sale of the Eastleigh property as seed capital for the project. As the sale transaction progressed, the family became acquainted with John Ruo Wang’ang’a, who informed them that he operated the Plaintiff company and could assist both in the construction works and in sourcing financing from financial institutions by virtue of his alleged banking connections.
18. According to the witness, the family agreed in December 2009 to work with Mr. Wang’ang’a and resolved that the proceeds from the sale of the Eastleigh property would be utilised to commence the project so as to attract financiers to an already ongoing development.
19. According to the witness, Mr. Wang’ang’a allegedly advised that a formal contract was necessary to demonstrate the seriousness of the project to prospective financiers and instructed the firm of M/s Njonjo, Okello & Associates Advocates to prepare the contract between the Plaintiff and the 1st Defendant.
20. The witness stated that the resulting contract, executed in or about December 2009, provided for the construction of a commercial building on the Nyamakima property at a consideration of Kshs. 85 million, exclusive of interior design, décor and partitioning works. He maintained that both the Plaintiff and Mr. Wang’ang’a were fully aware that the Defendants lacked sufficient funds to undertake the project, save for the anticipated proceeds from the Eastleigh property sale and anticipated bank financing. The witness maintained that the contract was intended primarily as a mechanism for soliciting financing from financial institutions.
21. The witness further stated that, on the strength of the anticipated proceeds from the Eastleigh property sale, the Plaintiff commenced the construction works. However, Mr. Wang’ang’a allegedly failed to pay the full purchase price for the Eastleigh property and paid only Kshs. 9 million, leaving a balance outstanding. He added that a substantial portion of the monies paid by Mr. Wang’ang’a was subsequently channelled back to him to facilitate commencement of the Nyamakima project, while the 2nd Defendant also secured a development loan of Kshs. 3.5 million from Family Bank Limited, most of which was utilised on the project.
22. The witness further stated that the Defendants presented the contract to various banks, including Consolidated Bank, Fina Bank and Ecobank, in an effort to secure financing for the project. However, none of those institutions agreed to finance the development. Consequently, the anticipated project financing failed, and the contract became frustrated.
23. The witness stated that, after the 1st Defendant failed to secure funding, the parties reconsidered the structure of the project and Mr. Wang’ang’a proposed the incorporation of another company through which he would participate as both a director and shareholder. Consequently, Karanja Seven Properties Limited was incorporated and, through Mr. Wang’ang’a’s participation, the company secured financing from Equity Bank Limited amounting to Kshs. 54 million in November 2010.
24. According to the witness, the role of developer thereafter shifted from the 1st Defendant to Karanja Seven Properties Limited, a fact allegedly known to both the Plaintiff and Mr. Wang’ang’a. He stated that the new developer entered into an unwritten arrangement with the Plaintiff and Mr. Wang’ang’a for the continuation of the construction works and channelled all monies obtained from Equity Bank Limited into the project through payments made pursuant to certificates issued by the bank’s consultants.
25. The witness further stated that construction progressed successfully and that the main structure up to the second floor, together with the slab for the third floor, was completed. The basement, ground floor and first floor were certified fit for occupation and tenants moved into the premises. However, the developer allegedly exhausted the available funds in 2012, after which the Plaintiff and Mr. Wang’ang’a abandoned the project. He added that, apart from interior works, no further construction works had been undertaken and that the Plaintiff’s billboard remained erected at the site identifying it as the contractor.
26. The witness also alleged that, before abandoning the site, Mr. Wang’ang’a collected substantial goodwill payments from incoming tenants which he failed to account for. He therefore maintained that the Plaintiff was not entitled to damages or any other relief against the 1st Defendant.
27. He further denied that the Plaintiff expended its own funds on the project and maintained that all monies utilised in the development were either paid by the 2nd Defendant or by Karanja Seven Properties Limited from the Equity Bank facility.
28. Accordingly, he contended that the Plaintiff’s claim was without merit and ought to be dismissed with costs.
Analysis and Determination
29. Before I proceed with this section of the judgment, I note that the 2nd Defendant passed away on 22 December 2021 while the suit was still pending. Although the Plaintiff subsequently filed an application dated 8 May 2024 seeking substitution of the deceased Defendant, the claim against the 2nd Defendant had by then already abated. The said application was later withdrawn on 16 July 2024. Consequently, there is no surviving claim against the 2nd Defendant.
30. From the record, I note that the Plaintiff filed a List and Bundle of Documents dated 21 July 2014 and Written Submissions dated 30 May 2025. On their part, the Defendants filed a List and Bundle of Documents dated 30 September 2014 and Written Submissions dated 14 November 2025.
31. I further note from the record that the parties jointly filed an Agreed List of Issues dated 2 June 2022 and a Joint Statement of Agreed Facts dated 16 September 2022. These documents appear on pages 251–253 of the Defendants’ Trial Bundle.
32. It is not in dispute that, on or about December 2009, the Plaintiff and the 1st Defendant entered into a contract for the design and construction of a commercial building on property known as L.R. No. 209/2788/13 situated along Cross Road in the Nyamakima area (hereinafter “the suit property”). The consideration under the contract was Kshs. 85,000,000.
33. The Plaintiff’s case is that it duly performed its obligations under the contract but that, in February 2013, the 1st Defendant unilaterally breached the agreement by ejecting it from the construction site and preventing it from carrying out further works. As a consequence of the alleged breach, the Plaintiff seeks damages in the sum of Kshs. 25,000,000, being 30% of the contract sum allegedly payable under Clause 3.2 of the agreement.
34. The Plaintiffs also claimed against the 2nd Defendant a sum of Kshs. 10.2 million of its own funds, which it allegedly incurred on the project with the full knowledge and acquiescence of the 2nd Defendant.
35. The Defendants, on their part, contend that both parties were aware from the outset that the 1st Defendant lacked the financial capacity to undertake the project and that the agreement was primarily intended to facilitate the sourcing of project financing. They argued that the failure to secure funding frustrated the contract and rendered its performance impossible.
36. The Defendants further contend that, following the failure to secure funding, a new company known as Karanja Seven Properties Limited was incorporated by the directors of the 1st Defendant together with the Plaintiff’s director, Mr. John Ruo Wang’ang’a. According to the Defendants, the company subsequently obtained a loan facility of Kshs. 54 million from Equity Bank Limited and the project thereafter proceeded under a separate unwritten arrangement involving the new company. They therefore maintain that the original contract was abandoned.
37. The Defendants denied ejecting the Plaintiff from the site, asserting instead that the Plaintiff ceased construction works after the project funds were exhausted. They further denied owing the Plaintiff Kshs. 10.2 million, maintaining that all monies expended on the project had been fully reimbursed. Consequently, they denied liability for breach of contract and urged the Court to dismiss the suit with costs.
38. From the above, I find that the following issues arise for determination:
i. Whether the 1st Defendant breached the Building Contract dated December 2009.
ii. Whether the Plaintiff is entitled to damages for breach of contract.
iii. Whether the Plaintiff established its claim for Kshs.10.2 million.
Whether the 1st Defendant breached the Building Contract
39. There is no dispute that in December 2009 the Plaintiff and the 1st Defendant executed a Building Contract under which the Plaintiff was to design and construct a commercial building on L.R. No. 209/2788/13, Nyamakima, Nairobi, for a contract price of Kshs.85,000,000.
40. The Plaintiff's case is straightforward. It contends that it faithfully performed its contractual obligations until February 2014, when the 1st Defendant unlawfully ejected it from the construction site, prevented it from completing the works, and appointed another contractor. On that basis, it seeks damages under Clause 3.2 of the contract.
41. The Defendants deny that allegation. Their case is that the project failed to secure financing, the original contract consequently became incapable of performance, and the parties thereafter incorporated another company, Karanja Seven Properties Limited, through which the project proceeded until the new developer exhausted its financing.
42. The resolution of the question whether there was a breach of the contract, in the view of the Court, lies principally in the Joint Statement of Agreed Facts executed by counsel for both parties. Parties are ordinarily bound by facts which they voluntarily admit before the Court unless those admissions are withdrawn or set aside.
43. From the record, I note that parties jointly filed a statement of agreed facts dated 16 September 2022, which essentially were in the following terms: -
i. that at the time of executing the Building Contract neither party had sufficient funds to undertake the project;
ii. that the contract was presented to several financial institutions to secure project financing;
iii. that financing was not obtained;
iv. that by reason of failure to obtain funding the contract became frustrated and was not performed;
v. that thereafter the Plaintiff's director and the directors of the 1st Defendant incorporated Karanja Seven Properties Limited;
vi. that the new company obtained financing of Kshs.54 million from Equity Bank Limited;
vii. that the new company became the developer of the project;
viii. that it entered into an unwritten arrangement with the Plaintiff for continuation of the construction works;
ix. that construction proceeded until the new developer exhausted its funds sometime in 2012.
44. These agreed facts fundamentally contradict the Plaintiff's pleaded case that the 1st Defendant wrongfully terminated the contract by ejecting it from the site.
45. Litigation must proceed on the basis of the facts that parties have agreed, and a party cannot subsequently invite the Court to determine the dispute on a factual foundation inconsistent with its own admissions.
46. From the agreed statement of facts, it is evident that the parties themselves agreed that the original contract became frustrated owing to lack of financing, and thereafter consciously elected to continue the project through another corporate vehicle (Karanja Seven Properties Limited) under a different arrangement; there can therefore be no factual basis for a finding that the original contract was later repudiated by the 1st Defendant.
47. The Plaintiff did not seek to set aside or qualify the Joint Statement of Agreed Facts. Consequently, the Court is bound to determine the dispute on the basis of those agreed facts rather than on evidence inconsistent with them.
48. The agreed facts expressly acknowledge that the Building Contract became frustrated because the intended project financing could not be obtained.
49. In any event, it is settled law that the doctrine of frustration operates where, without default on the part of either contracting party, a supervening event renders contractual performance impossible or transforms the obligation into something fundamentally different from that originally contemplated.
50. When frustration occurs, the contract is automatically discharged, and the parties are released from future performance. Halsbury’s Laws of England (Vol. 9(1), 4th Edition at Paragraph 897 provides that:
“As subsequently developed, the doctrine of frustration operates to excuse from further performance where: (1) it appears from the nature of the contract and the surrounding circumstances that the parties have contracted on the basis that some fundamental thing or state of things will continue to exist, or that some particular person will continue to be available, or that some future event which forms the basis of the contract will take place; and (2) before breach, an event in relation to the matter stipulated in head (1) above renders performance impossible or only possible in a very different way from that contemplated. This assessment has been said to require a 'multi-factorial' approach. Five propositions have been set out as the essence of the doctrine. First, the doctrine of frustration has evolved to mitigate the rigour of the common law's insistence on literal performance of absolute promises so as to give effect to the demands of justice. Secondly, the effect of frustration is to discharge the parties from further liability under the contract, the doctrine must not therefore be lightly invoked but must be kept within very narrow limits and ought not to be extended. Thirdly, the effect of frustration is to bring the contract to an end forthwith, without more and automatically. Fourthly, the essence of frustration is that it should not be due to the act or election of the party seeking to rely upon it, but due to some outside event or extraneous change of situation. Fifthly, that event must take place without blame or fault on the side of the party seeking to rely upon it; nor does the mere fact that a contract has become more onerous allow such a plea.”
51. In Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696, the House of Lords explained that frustration arises where a supervening event makes performance radically different from that undertaken by the parties.
52. The principle in Davis Contractors (supra) has been applied in several decisions, including in Five Forty Aviation Ltd v Erwan Lanoe [2019] eKLR, where the Court of Appeal stated as follows:
“Applying the above guidelines to the instant appeal, it is our finding that the appellant’s failure to comply with the prerequisites in section 45 (2) of the Act did not render the said contract illegal, but gave rise to intervening circumstances which rendered the continued sustenance of the said contract as initially executed between the parties impossible. This is what the Court in the same Kenya Airways Limited case (supra) termed “frustration of a contract”. The Court in the said Kenya Airways case Limited (supra), went further and set out the prerequisites for the application of the doctrine of frustration of a contract as follows:-
“....the doctrine of frustration operates to excuse further performance where it appears from the nature of the contract and the surrounding circumstances that the parties have contracted on the basis that some fundamental thing or state of things will continue to exist, or that some particular person will continue to be available, or that some future event which forms the foundation of the contract will take place, and before breach performance becomes impossible or only possible in a very different way to that contemplated without default of either party and owing to a fundamental change of circumstances beyond the control and original contemplation of the parties. The mere fact that a contract has been rendered more onerous does not of itself give rise to frustration.”
53. In the persuasive decision of Omollo v Agricultural Finance Corporation & 2 others [2025] KEHC 3291 (KLR), Mwamuye J, applying the principle of frustration of a contract as espoused in Davis (supra), stated that:
54. “The Court in Davis Contractors Ltd v Farehum UDC held that frustration occurs whenever the law recognizes that without the default of either party a contractual obligation has become incapable of being performed because the circumstances in which the performance is called for would render it a thing radically different from that which was undertaken by the contract. In this case, the economic downturn, combined with the 3rd Respondent’s inaction, contributed to the failure of performance. Therefore, the breach cannot be attributed solely to the Appellant.”
55. In the present case, the parties expressly agreed that the project depended upon external financing; that financing could not be obtained despite approaches to several financial institutions; and that, as a consequence, the original Building Contract became frustrated.
56. Having made that admission, neither party can subsequently contend that the contract remained subsisting and was thereafter wrongfully terminated.
57. The legal consequence of frustration was that the parties were discharged from further performance of the Building Contract.
58. Accordingly, I find as a fact that the Plaintiff has failed to prove that it was unlawfully removed from the project by the 1st Defendant.
Whether the Plaintiff is entitled to damages (Kshs. 25 million) for breach of contract.
59. The Plaintiff claims Kshs.25 million under Clause 3.2 of the Building Contract. That clause presupposes a wrongful termination or breach by the employer.
60. The Court has already found that no such breach occurred. Instead, the contract came to an end by reason of frustration and was subsequently superseded by another arrangement under a different developer. The contractual preconditions for invoking Clause 3.2 were therefore never satisfied.
61. The claim therefore fails.
Whether the Plaintiff proved its claim for Kshs. 10.2 million
62. The Plaintiff also seeks reimbursement of Kshs.10.2 million, which it alleges it expended from its own resources in the course of executing the project with the knowledge and acquiescence of the 2nd Defendant.
63. The burden rested upon the Plaintiff to prove that claim. Sections 107, 108, and 109 of the Evidence Act, Chapter 80 Laws of Kenya, provide that he who alleges must prove. While the legal burden remains throughout upon the party asserting a fact, the evidential burden shifts only after a prima facie case has been established.
64. In Palace Investments Limited v Geoffrey Kariuki Mwenda & another [2015] KECA 616 (KLR), the Court of Appeal observed that a party succeeds on a balance of probabilities where the Court is satisfied that its version of events is more probable than not.
65. Similarly, in Karugi & another v Kabiya & 3 others [1983] KECA 38 (KLR), the Court held that the burden of proof always remains upon the plaintiff and does not lessen merely because the defendant has called evidence.
66. In the present case, the Plaintiff pleaded that it injected Kshs.10.2 million into the project. However, beyond that assertion, no satisfactory documentary evidence was produced demonstrating the actual disbursement of that amount from the Plaintiff's resources, the specific purposes for which the monies were expended, or that the Defendants acknowledged the amount as a debt due and payable.
67. Conversely, the Defendants maintained that all monies utilized during construction originated either from the proceeds of the sale of the Eastleigh property, funds advanced by the 2nd Defendant, or the financing obtained by Karanja Seven Properties Limited from Equity Bank Limited, and that payments made to the Plaintiff were certified and disbursed from those funds. The Plaintiff did not produce cogent evidence to displace that position.
68. More fundamentally, the claim was expressly directed against the 2nd Defendant. As already observed, the 2nd Defendant died on 22 December 2021. The claim against her subsequently abated, and no legal representative was substituted within the period prescribed by law. Although the Plaintiff later filed an application seeking substitution, the application was withdrawn after the cause of action had already abated.
69. The legal consequence is that there is no subsisting claim before this Court against the estate of the 2nd Defendant upon which any relief can be granted.
70. Accordingly, the Plaintiff's claim for Kshs.10.2 million fails both on evidential grounds and because no competent claim now subsists against the 2nd Defendant.
Disposition
71. The upshot of the foregoing is that I find that the Plaintiff has failed to prove its case on a balance of probabilities.
72. Accordingly, the Plaintiff’s suit is hereby dismissed with costs to the 1st Defendant.
73. It is so ordered.
DATED, SIGNED, AND DELIVERED AT NAIROBI
THIS 9TH DAY OF JULY 2026
HON. MR. JUSTICE MOSES ADO
Judge of the High Court
In the Presence of:
Moses C/A
……………… for the Plaintiff
……………for the 1st Defendant