Automated Summary
Key Facts
Ternic Enterprises Limited (appellant) and Waterfront Outlets Limited (respondent) disputed a property sale agreement dated 16th December 2011. The agreement involved the sale of two-thirds (2/3) of L.R No. 209/16717 Nairobi property for Ksh 28 million, with a Ksh 8 million deposit and Ksh 20 million balance due at completion. Despite non-payment of the deposit, the appellant executed the transfer on 13th February 2012. The property was later charged to Gulf African Bank in November 2013 to secure a Ksh 14 million loan. The appellant filed suit in May 2015 seeking Ksh 28 million, interest, and damages. The respondent countered by alleging the appellant fraudulently transferred shares based on a mistaken belief the appellant owned 2/3 instead of 1/3, and accused the appellant’s director of fraudulent conduct. The High Court dismissed the summary judgment application, citing triable issues of fraud and mistake, which the Court of Appeal upheld, finding the defense raised bona fide issues requiring trial.
Transaction Type
Share Purchase Agreement
Issues
The court considered whether the learned Judge correctly determined that triable issues regarding mistake and fraud were raised by the respondent, thereby justifying the denial of the appellant's summary judgment application under Order 36 of the Civil Procedure Code. The respondent's allegations of a mistaken belief about the share proportions and fraudulent transfer of shares were central to this determination.
Holdings
- The court acknowledged that the claim was not a straightforward liquidated sum because the value of the one-third share of the suit property required evidentiary determination. This rendered the claim unsuitable for summary judgment, as the parties would need to present evidence to establish the share's worth during a trial.
- The court dismissed the appeal, finding that there were triable issues requiring a full trial. The learned trial Judge correctly determined that the respondent's allegations of fraud and mistake raised genuine defences that could not be resolved summarily. The court emphasized that the existence of even one bona fide triable issue necessitates a trial to adjudicate the matter, as per established principles in Kenyan law.
Remedies
- The appeal was dismissed with costs to abide the outcome of the suit.
- Costs to abide the outcome of the suit.
Contract Value
28000000.00
Legal Principles
The court emphasized that summary judgment under Order 36 Rules 1(1)(a) and (2) of the Civil Procedure Code requires the plaintiff to demonstrate there are no triable issues. A defence raising even one 'bona fide triable issue' must be given leave to defend, as per principles in cases like H.D Hasmani v. Banque Du Congo Belge and Isaac Awuondo vs Surgipharm Ltd. The burden lies on the plaintiff to prove the defendant's defence is a sham, not merely that the defence may fail.
Precedent Name
- Moi University V Vishva Builders Limited
- Patel vs. E.A. Cargo Handling Services Ltd.
- H.D Hasmani v. Banque Du Congo Belge
- Continental Butchery Limited vs. Samson Musila Ndura
- Job Kilach versus Nation Media Group Ltd & Others
- Postal Corporation of Kenya vs. Inamdar & 2 Others
- Isaac Awuondo V Surgipharm Limited & Another
- Isaac Awuondo vs Surgipharm Ltd & Another
Key Disputed Contract Clauses
- The contract's payment terms required a Ksh 8 million deposit upon execution and the remaining Ksh 20 million by completion. The dispute centered on the respondent's failure to pay the deposit and the balance, which the appellant argued justified summary judgment.
- The agreement specified a 15% per annum interest rate for late payment of the purchase price. The appellant sought this interest as part of the liquidated claim, while the respondent's defense did not address this provision directly.
- The respondent alleged a mistaken belief that the appellant owned 2/3 shares instead of 1/3, challenging the validity of the transfer. This became a central triable issue, affecting the claim's liquidation and justifying a full trial under the court's principles.
Cited Statute
Civil Procedure Code
Judge Name
- Alnashir Visram
- W. Karanja
- M.K. Koome
Passage Text
- "Accordingly, having found as we have there are triable issues, it goes without saying, this appeal lacks merit and we do order it dismissed with costs to abide the outcome of the suit."
- "In the instant case, I find that the respondent has deposed under paragraphs 10 of the replying affidavit that, the plaintiff... transferred to the plaintiff two thirds shares of the suit property, without paying any consideration..."
- "The law is now settled that if the defence filed by a Defendant raises even one bona fide triable issue, then the Defendant must be given leave to defend. There are several authorities in support of this proposition..."
Damages / Relief Type
Liquidated Damages of Ksh 28 million