Aziz Ebrahim v Ramzan Ebrahim [2020] eKLR

Transaction Type

Key Facts

Issues

• The court determined the Defendant breached the agreement by withholding the transfer of Wazir House's half share despite receiving payments and retaining collateral. The Defendant claimed the Plaintiff induced misrepresentation regarding share value, but no evidence supported this. The court found the Defendant's retention of the property and shares unjustified.
• The court ordered reconciliation of accounts to resolve outstanding payments. It mandated the Defendant to transfer Wazir House's half share upon payment confirmation and return 6% shares of Alberta Co Ltd. If unresolved, the parties were to revert to the status quo ante. Costs were to be borne separately, with no damages awarded due to insufficient valuation evidence.
• The court examined whether the Plaintiff performed his contractual duties, such as making payments and transferring shares. Evidence showed the Plaintiff paid Ksh 100,000 monthly installments and transferred 6% shares of Alberta Co Ltd. The Defendant disputed the payments' validity, citing lack of reconciliation, but the court found the Plaintiff's evidence credible on a balance of probabilities.
• The court ruled the Plaintiff's claim for breach succeeded, while the Defendant's counterclaims failed due to lack of evidence. The Defendant's assertions about unfulfilled payments and misrepresentation were not substantiated, and his counterclaim for C$575,000 and Ksh 40,000,000 remained unproven.
• The court assessed the validity and enforceability of the 18th November 1995 Memorandum of Understanding for the sale of the Defendant's half share in Wazir House. Both parties conceded the existence of two memoranda, and the court found the contract to be certain, complete, and definite in its terms. The dispute centered on whether the agreement met legal standards for enforceability, particularly under the Law of Contract Act and principles of privity.

Holdings

• The Plaintiff performed his obligations under the contract by making payments to the Defendant as evidenced by the supplementary affidavit. The Defendant's objections to the payment method (e.g., handwritten diary entries) were dismissed due to lack of challenge during cross-examination.
• The Defendant breached the contract by failing to transfer his one-half share in Wazir House immediately as stipulated. He retained the 6% shares of 395432 Alberta Ltd as collateral for 26 years without transferring the property, despite receiving partial payments.
• The court held that the Memorandum of Understanding dated 18th November 1995 is a valid, certain, and enforceable contract, as both parties executed it and acted in accordance with its terms. The agreement was deemed complete and not indefinite, with no evidence of coercion, fraud, or undue influence.
• Remedies include reconciliation of accounts within three months, transfer of Wazir House upon agreement, return of 9% shares to the Plaintiff, and refund of payments. If unresolved, the court orders a return to the status quo with properties retained by the Defendant.
• The Plaintiff's claim succeeds as the Defendant's counterclaim lacks evidence. The Defendant failed to substantiate claims for C$575,000 and Ksh 40,000,000, and did not provide valuation of Ebrahim & Company Ltd or reconcile accounts.

Contract Value

Remedies

• If agreeable, the outstanding amount for the Defendant's portion of Ebrahim's business shall be paid by the Plaintiff, and the Defendant will immediately transfer the 3% shares of Alberta Co Ltd back to the Plaintiff.
• Any party who is aggrieved by this judgment is at liberty to apply to the Court for further remedies.
• The Court acknowledges that the Plaintiff partly performed the terms of the contracts by making partial payments, while the Defendant breached the terms of the contracts.
• If the parties fail to agree and fully perform the terms of the contracts, they shall revert to the status quo ante: the Defendant must release and transfer back 9% shares of Alberta Co Ltd to the Plaintiff's family, refund funds paid so far regarding Wazir House and Ebrahim Ltd, and retain both properties.
• The Court orders that the Plaintiff and Defendant, through their respective advocates, must cause joint or separate reconciliation of accounts within 3 months from the date of delivery of the Judgment.
• If agreeable, the outstanding amount of C$575,000 after reconciliation of accounts shall be paid to the Defendant upon immediate transfer of the ½ share of Wazir House as agreed.
• The 6% share of Alberta Co Ltd must be transferred back to Mrs. Mherbanu Noorali Ebrahim Mavani within 90 days of the Court's judgment, as the Defendant has no risk of losing the Wazir House share and it would amount to unjust enrichment.
• Each party is ordered to bear their own costs of the proceedings.

Legal Principles

• The Defendant argued the contract lacked consideration because payments were made by OCS (a third party) rather than the Plaintiff directly. The court scrutinized this, referencing the requirement for consideration in contract law and the need for the Defendant to prove his counterclaim's validity.
• The court applied the doctrine of pacta sunt servanda (agreements must be kept), determining that the contract was valid and enforceable despite some uncertainties. It relied on cases like Mamidoil -Jetoil Greek Petroleum Co.SA vs Okta Crude Oil Refinery AD to affirm that courts should interpret contracts to preserve bargains where parties acted in good faith and relied on the agreement.
• The court emphasized the burden of proof under the Evidence Act, ruling that the Plaintiff successfully demonstrated payments made to the Defendant, while the Defendant failed to provide evidence supporting his counterclaim. This principle was pivotal in assessing the validity of claims and defenses.
• The court considered the principle of privity of contract, emphasizing that only parties to an agreement can enforce its terms. This was central to the Defendant's argument that OCS, a third party, could not be bound by or enforce the contract's payment obligations. The court referenced cases like Dunlop Pneumatic Tyre Co Ltd vs Selfridge & Co Ltd and Agriculture Finance Corporation vs Lengitia Ltd to support this analysis.

Key Disputed Contract Clauses

• Clause 3 and 4 outline that OCS would make monthly payments of C$25,000 (including principal and interest) starting January 1997, with a 10.4% annual interest rate on the outstanding balance. The Defendant disputed OCS's legal capacity to make these payments as a third party not bound by the contract, while the Plaintiff argued OCS's actions as a corporate entity under his control constituted valid performance.
• Clause 5 allows the Defendant to retain the 6% shares until December 1996, with the obligation to refund all interest paid if he chooses to keep them. The Defendant claimed he exercised this option via a 1997 fax, but the court found no evidence of communication before December 1996, rendering the option unexercised and the shares subject to return.
• Clause 4 provides that the Defendant could hold 6% shares in 395432 Alberta Ltd as collateral for the unpaid balance. The Defendant argued the shares were overvalued (C$600,000) and retained them for 26 years as security, while the Plaintiff claimed the shares were properly transferred and the collateral claim was unjustified given the shares' actual value (C$1.26 million in 2001).
• Clause 6 mandates immediate transfer of the ½ share in Wazir House. The Plaintiff alleged the Defendant refused to transfer despite full payment (C$575,000 and Ksh 43,067,657.09), while the Defendant claimed the transfer was conditional on full payment. The court found the Defendant breached this clause by withholding the transfer for 26 years.

Precedent Name

• Mannai Investment Co. Ltd vs Eagle Star Life Assurance Co. Ltd
• Michael Kyambati vs Principal Magistrate, Milimani Commercial Courts Nairobi & Anor
• National Bank of Kenya Ltd vs Pipeplastic Samkolit (K) Ltd & Another
• Attorney General of Belize vs Belize Telecom Limited
• Hadley vs Baxendale
• Salomon vs Salomon and Company Limited
• Dunlop Pneumatic Tyre Co Ltd vs Selfridge & Co Ltd
• Mamidoil -Jetoil Greek Petroleum Co.SA vs Okta Crude Oil Refinery AD
• Agriculture Finance Corporation vs Lengitia Ltd

Cited Statute

• Evidence Act
• Law of Contract Act

Judge Name

Damages / Relief Type

• Court ordered specific performance of transferring ½ share of Wazir House to Plaintiff upon reconciliation of accounts confirming payment of C$575,000.
• Court mandated rescission to status quo ante if parties fail to agree, requiring return of 9% Alberta shares and refund of payments made to Defendant.
• Court directed restitution by transferring 6% shares of Alberta Co Ltd back to Mrs. Mherbanu Ebrahim within 90 days as unjust enrichment remedy.

Passage Text

• The Defendant has withheld and obtained benefit from the 6% shares of Alberta Co Ltd (OCS) from 1995 to date (26 years now) while holding them as collateral for full payment of C$575,000.
• The Defendant's claim for damages cannot be granted in the absence of valuation of Ebrahim's business and reconciled Accounts.
• The contract /Agreement is a certain definite and enforceable contract. The Plaintiff legally pursues his claim under the contract from the Defendant.