Agip (K) Ltd & another v Mohideen Gilani [2003] KECA 153 (KLR)
The bottom line
#Kenya's Court of Appeal ruled that a landlord cannot end a lease early using a compensation clause, and tenants paying rent keep protected possession.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the learned judge erred in law and fact in entering summary judgment against the defendants under Order XXXV rule 1 of the Civil Procedure Rules (ground 1)
- 2.Whether clause 3(iii) of the lease conferred on the lessor a right to terminate the lease before the expiry of the term
- 3.Whether the defendants, as lessees paying rent and performing the covenants, were entitled to the statutory protection of section 53(a) of the Registered Land Act (cap 300)
- 4.Whether the learned judge erred in dismissing the defendants' counterclaim on the ground that it sought reliefs identical to those in the plaint (ground 2)
Key legal issues
#Whether clause 3(iii) of the lease conferred a right on the lessor to terminate the lease before the expiry of the term
No. Clause 3(iii) is a compensation provision, not a power of termination; it operates only where the lease has already been determined for a reason attributable to the lessor. In purporting to terminate under it, the plaintiff acted unlawfully.
The court read the clause according to its own words. It is triggered where the lease is determined for a reason attributable to the lessor, and then obliges him to compensate the lessee at Shs 9,700 per month of the unexpired term. It contemplates a determination caused by some act of the lessor, such as contracting to sell with vacant possession or transferring to a new owner who refuses to recognise the lease. Had the parties intended unilateral termination, the clause would simply have provided that the lessor could terminate early.
Whether the defendants enjoyed the statutory protection of section 53(a) of the Registered Land Act (cap 300)
Yes. The defendants were paying the rent and performing the covenants, and were therefore in law entitled to peaceable and quiet possession for the term; the learned judge erred in failing to deal with this substantial point.
Section 53(a) implies in every lease a lessor's covenant that a lessee who pays the rent and observes and performs the agreements and conditions shall possess and enjoy the premises during the term without lawful interruption from the lessor. No breach of covenant or default in rent was alleged when the plaintiff purported to terminate in October 2000. The point was pleaded in the defence, yet the judge did not address it at all in his ruling; had he done so, he would have appreciated that the plaintiff had no right to terminate.
Whether summary judgment under Order XXXV rule 1 was properly entered against the defendants
No. The defence raised a valid triable issue, namely that the plaintiff had no right to terminate the lease; the defendants should have been given leave to defend and were on appeal granted unconditional leave.
Summary judgment lies only where the defendant discloses no defence. Here the defence expressly averred that clause 3(iii) conferred no right of termination, an averment the appellate court held to be well founded on the proper construction of the lease. That was a valid defence which the defendants should have been allowed to urge at trial. Striking out the defence and refusing leave to defend was therefore an error of law, and the court reinstated the defence and counterclaim with unconditional leave to defend.
Whether the defendants' counterclaim was properly dismissed because it sought reliefs identical to those in the plaint
No. The plaintiff's claim to a declaration of lawful termination was no bar to the defendants seeking the converse declaration, and their pleaded statutory point under section 53(a) was substantial and unaddressed; the dismissal of the counterclaim was erroneous.
The judge dismissed the counterclaim solely because it sought the same reliefs as the plaint, in reverse. The Court of Appeal held that in the circumstances the defendants' most important relief was a declaration that the plaintiff was not entitled to terminate the lease. Mirror-image declarations between the same parties on the same transaction are not a bar. Further, the averment of statutory protection under section 53(a) was a substantial point the judge never dealt with, so dismissing the counterclaim compounded the earlier error.
Legal principles established
#- A lease clause providing compensation upon determination of the lease for a reason attributable to the lessor confers no unilateral right on the lessor to terminate the lease before the expiry of the term.
- Under section 53(a) of the Registered Land Act, a lessee who pays the rent and performs the lease covenants is entitled to peaceable and quiet possession of the leased premises for the term, free of lawful interruption by the lessor.
- Where a pleaded defence raises a valid issue, such as that the plaintiff lacked the contractual power relied upon, summary judgment ought to be refused and the defendant given leave to defend.
Court orders
#- 1.Appeal allowed
- 2.Ruling and decree of Rimita J dated 30th March 2001 set aside
- 3.Defendants' defence and counterclaim reinstated
- 4.Defendants given unconditional leave to enter and defend
- 5.Plaintiff's Notice of Motion dated 6th January 2001 dismissed with costs
- 6.Plaintiff to pay the defendants their costs of the appeal
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya
- Jurisdiction invoked
- Not expressly stated in the judgment; the matter proceeded as a first appeal to the Court of Appeal from a summary judgment ruling of the High Court (Rimita J)
Relief refused
#Declaration that the lease had been lawfully terminated (plaintiff's claim)
Clause 3(iii) conferred no right of termination; the plaintiff acted unlawfully in purporting to terminate the lease
Summary judgment for the plaintiff and dismissal of the defendants' counterclaim (Notice of Motion dated 6th January 2001)
The defence raised a valid triable issue; the defendants were given unconditional leave to defend
Perpetual injunction restraining the defendants from interfering with the plaintiff's enjoyment and use of the suit premises
The injunction depended on the plaintiff's claim of lawful termination, which failed; the judgment granting relief was set aside and the defence reinstated
Costs
The plaintiff's Notice of Motion dated 6th January, 2001 is dismissed with costs. The plaintiff to pay the defendants their costs of this appeal.
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
For these reasons, we allow this appeal and set aside the ruling and decree of Rimita J dated 30th March, 2001. The defendants' defence and counterclaim are hereby reinstated and the defendants are given unconditional leave to enter and defend.
Accordingly we are of the opinion that clause 3 (iii) did not give the plaintiff the right to terminate the defendants' lease and in purporting to do so the plaintiff acted unlawfully.
This clause does not give the lessor the right to terminate the lease. If that was the intention, the clause would have been framed differently.
It says that if the lease is determined for any reason attributable to the lessor. This envisages a situation where the lessor has done something which results in the lease being determined
that, so long as the lessee pays the rent and observes and performs the agreements and conditions contained or implied in the lease and on his part to be observed and performed, the lessee shall and may peaceably and quietly possess and enjoy the leased premises during the period of the lease without any lawful interruption from or by the lessor
The fact that the plaintiff had also sought a declaration that he had validly terminated the lease was no bar to the defendants asking for a declaration that the plaintiff had acted unlawfully.
Issues in the judgment
#Party identity ambiguity: the second appellant is identified as Shell & BP (Kenya) Ltd, yet the judgment also states that the first defendant (Agip (Kenya) Ltd) changed its name to Shell & BP (Malindi) Kenya Ltd, and the reply to the termination notice was signed 'Shell & BP Malindi (Kenya) Ltd', leaving the exact identity and name of the second appellant unclear.
Internal discrepancy in the date of the lease: the judgment opens with a lease dated 17th December 1987, but the plaint as summarised seeks a declaration concerning a lease dated 28th December 1987.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Agip (K) Ltd & another v Mohideen Gilani [2003] KECA 153 (KLR)", Case Analysis (2003). Not stated in the judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2003/153/eng@2003-03-21
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.