LAXMANBHAI CONSTRUCTION LTD V KIHINGO VILLAGE (WARIDI GARDENS) LTD & 2 OTHERS[2012]eKLR

Key Facts

Transaction Type

Issues

• The court addressed whether the 2nd defendant's professional undertaking to pay Kshs.185,000,000 from the sale of LR 3861/4 (owned by the 3rd defendant) was valid and enforceable, considering the relationship between the 1st, 2nd, and 3rd defendants and the terms of the Memorandum of Agreement.
• The plaintiff sought summary judgment against the 1st defendant for outstanding payments under a construction contract, citing arbitration provisions. The court assessed whether the dispute was properly subject to arbitration and if the plaintiff's application met the legal threshold for summary judgment.
• The 3rd defendant challenged its joinder as a party to the proceedings, arguing it was not a party to the building contract, had not been heard before being joined, and the ex parte orders were obtained through fraudulent misrepresentation. The court evaluated the procedural validity of its inclusion.

Holdings

• The court upheld the ex parte orders issued to restrain the 3rd defendant from selling or transferring LR 3861/4, acknowledging the 2nd defendant's authority to issue the professional undertaking on behalf of the 3rd defendant. The orders were deemed necessary to preserve the property for potential payment to the plaintiff.
• The court dismissed the 3rd defendant's application to set aside the ex parte orders, finding no merit in the claim. The 3rd defendant's challenge to its joinder as a party was rejected, and costs were awarded to the plaintiff and 2nd defendant.
• The court granted the plaintiff's application for interim measures of protection under Section 7 of the Arbitration Act, finding the claim justiciable and the 1st defendant's refusal to accept the final certificate unjustified. The court emphasized the need to preserve the plaintiff's rights pending arbitration, citing the risk of irreparable harm if the remaining residential units and LR 3861/4 property were disposed of.

Remedies

• The court dismissed the 3rd Defendant's application seeking to vacate the ex parte orders issued on 19th April 2012 and 2nd May 2012, affirming the validity of the injunctions and joinder of the 3rd Defendant. Costs were awarded to the plaintiff and 2nd Defendant.
• The court ordered the joinder of Wagema Limited as the 3rd Defendant after determining that its inclusion was necessary to resolve the dispute, given its ownership of LR. 3861/4 and its relationship with the 1st Defendant.
• The court issued interim measures of protection to restrain the 1st Defendant from transferring, alienating, or dealing with the residual interest and four residential units (5L, 15L, 32D, 41D) on LR. 3862, as well as the 2nd Defendant from parting with the certificate of title for LR. 3861/4. These injunctions were maintained pending arbitration to prevent irreparable harm to the plaintiff.
• The court ruled that the 1st and 3rd Defendants shall bear the costs of the applications, with the plaintiff and 2nd Defendant being awarded costs for the proceedings.

Legal Principles

• The court adopted a purposive interpretation of Section 7 of the Arbitration Act to address the plaintiff's request for interim measures, prioritizing the resolution of disputes through arbitration as per the contract. This approach aligned with constitutional mandates to promote alternative dispute resolution and avoid procedural technicalities.
• The court acknowledged privity of estate between the 1st and 3rd defendants, recognizing their close relationship and shared interests in the property. This privity justified the 3rd defendant's liability for the professional undertaking given by the 2nd defendant and the need to join the 3rd defendant as a party to the proceedings.
• The court granted interim injunctions to restrain the 1st and 2nd defendants from transferring or dealing with specific residential units and land (LR 3861/4) to prevent irreparable harm to the plaintiff. The orders were justified under Section 7 of the Arbitration Act and Order 1 Rule 10 of the Civil Procedure Rules, emphasizing the need to preserve assets pending arbitration and to ensure the plaintiff’s rights are protected.

Precedent Name

• WEA RECORDS LIMITED vs. VISIONS CHANNEL 4 LIMITED & OTHERS
• WEERAWANSHA AND OTHERS v ATTORNEY GENERAL AND OTHERS
• SAFARICOM LIMITED vs. OCEAN VIEW BEACH HOTEL LIMITED & OTHERS
• KILLBY & GAYFORD LTD. v. SELINCOURT LIMITED
• BENSON MWANGI WANGAI vs. IBRAHIM NDWIGA & ANOTHER

Key Disputed Contract Clauses

• The court analyzed the arbitration clause in the building contract, determining that disputes between the plaintiff and 1st defendant must be resolved via arbitration. This clause was central to the plaintiff's application for interim measures and the 1st defendant's refusal to accept the final certificate.
• The parties disputed the validity and interpretation of the final account certified by project consultants. The contract required monthly payment applications, interim valuation by a quantity surveyor, and payment within 14 days. The 1st defendant refused to honor the final certificate, arguing the project was not completed per specifications.

Cited Statute

• Arbitration Act
• Civil Procedure Act, Cap 21
• Civil Procedure Rules, 2010
• Constitution of Kenya, 2010

Judge Name

Passage Text

• "The court may at any stage of the proceedings, either upon or without the application of either party... order that the name of any person who ought to have been joined... be added."
• "So long as a certificate is good on the face of it and is within the authority given by the contract (to the architect) then it is in accordance with the conditions. It must be honoured."
• Article 159 (d) of the Constitution of Kenya, 2010 requires the court to administer justice without undue regard to procedural technicalities. Further, Article 159 (2) (c) requires the court to promote alternative forms of dispute resolution including reconciliation, mediation and arbitration, among others.

Damages / Relief Type

• Interim injunction to restrain 3rd defendant from disposing of LR 3861/4, secured by a professional undertaking of Kshs.185,000,000.
• Interim injunction to restrain 1st and 2nd defendants from transferring property and assets, including Kshs.300,876,008 in unpaid construction costs.