Nelson Mutai t/a Kandie Mutai & Co. Advocates v Benson Mbuvi Kathenge [2019] KECA 978 (KLR)
The bottom line
#Kenya's Court of Appeal confirmed that a lawyer holding a property deposit must not release any of it without the buyer's express approval, and must refund it if the sale collapses.
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 appellant could, by the terms of the agreement, release the deposit to the vendor and pay for rates and for the release of documents of title from the deposit
- 2.Whether the appellant was liable to refund to the respondent the deposit
Key legal issues
#Scope of the vendor's advocate's authority under clause 4.1 to apply the deposit
Clause 4.1 permitted application of the deposit only towards rates and rents and obtaining transfer documents; it did not authorize payment of a third party to release a title held as lien.
The Court construed clauses 2.1 and 4.1 together with the incorporated LSK Conditions of Sale. The rates and rent receipts totalled Kshs. 284,108 but were in the name of a stranger, Dharam Vil Kohil, not the vendor. Clause 4.1 did not authorize paying another third party to release the title, and the certificate of title had been transferred to that third party in breach of clause 2.1.
Duty of an advocate as stakeholder of a deposit
The advocate must hold the deposit as stakeholder until the right to ownership is established, and where the transaction fails through no fault of the purchaser, the deposit is refundable to the purchaser.
Relying on LSK Conditions of Sale clauses 5.2.1 and 5.2.2 and clause 6.4.3, and on George Muriaini Muhoro v George Ndungu Kamiti, the Court held that since the transaction was frustrated by no fault of the respondent, the deposit with accrued interest was to be paid to the purchaser. The appellant acted in breach by making unauthorized payments to strangers without the respondent's consent.
Liability for breach of vendor's warranties and misrepresentation
The appellant, having warranted that the property was free of encumbrances while a third party held the title as lien, was in breach and liable for misrepresentation, concealing material facts from the purchaser.
Clauses 4.1(d) and (e) warranted an unencumbered title. A third party, Mr. Ken, held the certificate of title as lien, and there was no documentation supporting the alleged payment of Kshs. 2,000,000 to him. The Court found the appellant to blame for concealing these material facts and for paying, if at all, a person not privy to the agreement.
Legal principles established
#- An advocate holding a deposit as stakeholder in a land sale must not release any part of it to the vendor or any third party before completion without the express authorization of the purchaser, and where the transaction fails through no fault of the purchaser, the deposit must be refunded to the purchaser.
- On a first appeal, the Court of Appeal has a primary role to re-evaluate the evidence and determine whether the trial court's conclusions should stand.
Court orders
#- 1.Appeal dismissed
- 2.Respondent awarded costs of the appeal
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court at Nairobi
- H.C.C.C (O.S) No. 189 of 2010
- Jurisdiction invoked
- First appeal to the Court of Appeal under its appellate jurisdiction (the judgment does not cite a specific constitutional or statutory provision)
Relief refused
#Appellant's contention that the sum of Kshs. 300,000 already refunded be deducted from the decretal sum beyond the figure found by the trial court
The Court found the trial judge's figure of Kshs. 2,950,000 already took account of the Kshs. 300,000 paid
Costs
The appeal is dismissed with costs to the respondent
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.
The appellant was obliged to hold the deposit and not to release any part of it to the vendor or anyone else before the transfer unless there was express authorization of the respondent.
Accordingly, the appeal is bereft of any substance and we dismiss it with costs.
In a first appeal, this Court has a primary role to re-evaluate the evidence on the record in order to determine whether the conclusions reached by the learned trial Judge are to stand or not and give reasons either way.
Issues in the judgment
#The judgment inconsistently records the decretal/refund figure sought in the originating summons as Kshs. 2,980,975 while the trial judge's conditional judgment and this Court's conclusion refer to Kshs. 2.9 million / Kshs. 2,950,000
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Nelson Mutai t/a Kandie Mutai & Co. Advocates v Benson Mbuvi Kathenge [2019] KECA 978 (KLR)", Case Analysis (2019). Civil Appeal No. 58 of 2012. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2019/978/eng@2019-02-05
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.