|Civil Suit 862 of 2010
|FLORENCE WANJIKU GITAU v NATU INVESTIMENTS LIMITED & CHABRIN AGENCIES LIMITED
|08 Apr 2011
|High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)
|Murugi Geteria Mugo
|FLORENCE WANJIKU GITAU v NATU INVESTIMENTS LIMITED & Another  eKLR
|The information contained in the above segment is not part of the judicial opinion delivered by the Court. The metadata has been prepared by Kenya Law as a guide in understanding the subject of the judicial opinion. Kenya Law makes no warranties as to the comprehensiveness or accuracy of the information
REPUBLIC OF KENYA
HIGH COURT OF KENYA
AT NAIROBI (MILMANI COMMERCIAL COURTS COMMERCIAL AND TAX DIVISION)
The application is premised on 5 grounds set out therein and is supported by the affidavit sworn by Florence Wanjiku Gitau, the Applicant, on 14th December 2010.
The genesis of the application is that the 1st Respondent Company was a tenant of the Applicant in the suit premises for a period of 10 years during which she constructed permanent structures (referred to in the Supporting Affidavit as “Further Buildings and Improvements”). After the expiry of the lease, the Applicant and 1st Respondent entered into an agreement dated 31st August 2009 for the sale of the said Further Buildings and Improvements to the Applicant instead of demolishing them as having been illegally erected, in contravention of the terms of the lease.
The parties agreed that the consideration for the sale was the total net proceeds of licence fees to be collected from various licencees occupying the suit premises from 1st September 2009 to 31st March 2011 less KShs.100,000/- payable to the Applicant monthly and certain amounts in respect of fees, charges and premiums, including taxes and impositions of legislative or by any lawful authority, payable on the premises or incomes thereof; penalties as may be levied by any authority and licencees refundable deposits. It was a term of the contract that the collection of the licence fees would be carried out by an agent/manager appointed by the parties by mutual agreement and that the said manager/agent would in addition to collecting the liecence fees, remit all outgoings (as specified in the agreement) and to set aside necessary funds for the payment of the same, before the licence fees are paid to the 1st Respondent as consideration. The 2nd Defendant is sued as the manager/agent appointed by the Plaintiff and the 1st Respondent under a letter of appointment dated 3rd September 2009 (annexture “FWG-2” of the Supporting Affidavit), and is said to have been collecting and/or was expected to collect approximately KShs.1,469,067/- licensees’ fees monthly.
The Plaintiff/Applicant contends that although the 2nd Defendant/Respondent has, on the whole, adhered to the terms of her appointment she has breached the same by:-
Submitting on behalf of the Applicant, learned counsel, Mr. Mugambi stated that the two Defendants appeared to be in cahoots in as far as the non-deduction of statutory dues and non-payment of the same from the licence fees collected was concerned and that it was apparent that the 2nd Respondent was abdicating its obligations to the Applicant so as to assist the 1st Respondent to continue receiving the fees without deductions. He submitted that the two ought to be restrained under Order 40 Rule 2 of the Civil Procedure Rules “as it is quite obvious that the 1st defendant has received more money than she should have received as consideration under the Agreement”. For this reason, he submitted that the 2nd Defendant/Respondent should be restrained from making any further payments to the 1st Respondent and the latter be restrained from collecting monies directly from the tenants.
Submitting in reply, learned counsel for the 1st Respondent, Mr. Ouma, relied on the Replying affidavit sworn by Dr. Daniel K. Kiaraho, a director of the 1st Defendant/Respondent on 20th December 2010 in which the agreement of 31st August 2009 is admitted, with the deponent stating that the same was in respect of the sale of specific assets, the Further Buildings and Improvements on L.R. NO. 1/121 with an agreed purchase price as stipulated in Clause 3 of the agreement and that the suit herein ought not to have been filed since the agreement provided that any disputes between the Plaintiff/Applicant and the 1st Defendant/Respondent in regard to the interpretation of any one or more provisions of the agreement was to be referred to arbitration commenced with written notification by either party and only after attempts to resolve the same amicably had failed.
Regarding the monies claimed by the Applicant, it is deponed that to order the remission of the amounts received by the 1st Respondent to the Applicant would defeat the consideration clause of the contract. In any event, the deponent states, the only tax liability as would attach to the 1st Respondent under the agreement is limited to statutory deductions due in regard to the income from the Further Buildings and Improvement and would be a mater between the 1st Respondent and the KRA wherein the Plaintiff/Applicant cannot purport to be the agent of the KRA.
The 1st Respondent’s position is that the amounts said to be due and/or to have been paid by the Applicant to the KRA are speculative and that since the receipts exhibited in the Supporting Affidavit as representing tax paid by the Applicant (for which she seeks a refund from the Respondents) show that the payments were not made in respect of the matters referred to in the agreement for sale, the receipts having been issued in the name of the Applicant without referring to the subject matter or the agreement at all.
It is further submitted on behalf of the 1st Respondent that the application, particularly as regards prayers ( c), (e) and (f) seems to be an attempt to renegotiate the sale agreement and that to allow the same would disentitle the 1st Respondent from receiving its due consideration for the developments and improvements sold to the Applicant.
-VS- CASSMAN BROWN & CO. LTD  E.A 358 had not been met in that a prima facie case had not been established and no irreparable loss has been demonstrated as being likely to accrue to the Applicant. Counsel submitted that the 1st Respondent would be able to compensate such loss, in any event. He submitted that the authorities cited by counsel for the Applicant in this regard were distinguishable and not applicable to this case where, in his opinion no breach has been proved.
For the 2nd Respondent, learned counsel, Mr. Wanjohi, adopted all the submissions made on behalf of the 1st Respondent. Relying on the Replying Affidavit of Stephen Kinuthia, the property Manager of the 2nd Respondent counsel submitted that the allegation that the agreement has been breached on the basis of non-payment of tax has no basis since no evidence has been placed before the court in the form of a demand or threat from the KRA and that it was never a responsibility of the 2nd Defendant to pay tax on behalf of the 1st Respondent.
Counsel submitted further that the 2nd Respondent’s liability to render a full account of the monies collected as licence fees was to arise a month from the expiration of the agreement. Counsel did not go to the specifics of the Replying Affidavit filed on behalf of the 2nd Respondent. I find that some salient facts raised therein are worthy of mention. These are:
I have the considered the documentation filed herein, the submissions of counsel on both sides and the authorities cited. Save for the 2nd Respondent’s statement that it is not a party to the Agreement of 31st August 2009, the agreement and the terms thereof are not disputed. Counsel for the Applicant intimated that the parties to the agreement could not pursue arbitral process to resolve the dispute herein because the 2nd Respondent is not a party to the said agreement. That being the case, the question arises as how 2nd Respondent’s breach of the agreement arises.
The Applicant contend that the 2nd Respondent is bound by the terms of the agreement by virtue of the letter dated 3rd September 2009 which she claims to have been the letter under which the 2nd Respondent was appointed the joint agent of the Applicant and the 1st Respondent under Clause 5 (a) to carry out the functions of Manager/agent as set out in Clause 5 (b). The letter was written by the Applicant’s advocates to the 1st Respondent’s advocate and the 2nd Respondents. Although the same appears to be merely a covering letter forwarding photocopies of the sale agreement for the addressees’ “information, pending any further processes on (our) part”, the same does however state that:-
It is not quite correct therefore, for the 2nd Respondent to say that they only saw the agreement when the application was served upon them. Moreover Clause 5 (a) of the agreement does provide that the Manager/Agent shall be the person stipulated in Schedule III of the Agreement. The 2nd Respondent is so named and cannot therefore deny his appointment under the agreement, alleging that he conducted his business under the previous mandate as the 1st Respondent’s sole agent. If she did so, as is admitted in paragraphs 7, 8 and 9 of the Replying Affidavit of Stephen Kinuthia, which conflict with paragraph 6 of the same affidavit in which the 2nd Respondent now attempts to rely on Clause 5(b) of the “disowned” agreement, then clearly the 2nd Respondent acted in breach. The said Clause provides, inter alia, as follows:-
By virtue of the implied admission contained in paragraph 6 of the 2nd Respondents Replying Affidavit, and the naming of the 2nd Respondent in Schedule III of the Agreement, which, as I have already noted was communicated to the 2nd Respondent vide the letter of 3rd September 2009, I find that the 2nd Respondent is bound to the terms of the sale agreement even if not a prime party thereto. Its dealings in the suit property as from 1st September 2009 were to be governed by the terms thereof until the expiry of the agreement on 31st March 2011. This is buttressed by the deposition in paragraph 11 of the said Replying Affidavit which clearly shows that the 2nd Respondent recognizes the agreement and its binding effect on her.
I find that Rates (payable or apportionable), taxes and impositions of legislative nature on the premises or incomes thereof, insurance premiums, penalties as may be levied by any authority in respect of default, and licencees’ refundable deposits were all to be deducted from the monies remitted to the buyer as is clearly stipulated by Clause 3 of the agreement, which binds both the 1st Respondent and the 2nd Respondent and anything short of compliance is a clear breach on their part. From my reading of Clause 5 (b) as read with Clause 3 (d), (e), (h) and (j) claims made by the purchaser herein legally arise from the agreement itself and cannot be simply wished away at the whim of the two Respondents. The affidavits filed in respect to their positions in the matter do not adequately answer the application, which I find to be meritorious.
This court is much alive to the fact that the Agreement has come to an end by virtue of expiration on 31st March 2011. That however does not affect the jurisdiction of this court to make orders, as are just, in the circumstances. The parties are now in the 30 days accounting period and restraining orders issued herein in terms of prayers (b) and (c) are still in force. The same are hereby confirmed pending the hearing and determination of the suit. Prayer (g) which is directed at the 1st Respondent is also granted.
Having found that the 2nd Respondent is bound by the terms of the Agreement, I grant the prayer sought under (f). To take care of prayers (d) and (e) of the Chamber Summons, I order that a true, proper, fair and honest audit of the accounts be undertaken within 30 days from the date of this Ruling. These shall include an account of all the licence fees collected by the 2nd Respondent and how disbursed, and all monies paid to the 1st Respondent by virtue of the said agreement.