The Kenya Railways Corporation (KRC) has been given a reprieve after the Court of Appeal set aside orders by the Environment and Land Court (ELC) directing its managing director to refund within 30 days Sh127.4 million overpaid as rent by a company that leased its land in Mombasa.
Appeal Court judges Agnes Murgor, Kibaya Laibuta and George Odunga ruled that even if the money was found to be due and payable by KRC to Milly Glass Works Ltd, the state corporation was not liable to attach its assets or bank deposits.
This, according to the Court of Appeal, was in view of the statute bar imposed by Section 88 (a) of the KRC Act.
The ELC had also ordered KRC to pay the money together with interest at court rates from the date of payment and to ensure that Milly Glass Works Ltd was also paid taxed costs.
It also ruled that if the order for payment was not complied with, the Kenya Commercial Bank (KCB) should release the money in KRC's revenue account not exceeding the amount claimed and transfer it to an account to be provided by Milly Glass Works Ltd's lawyer.
However, the Court of Appeal ruled that Section 88 (a) of the KRC Act placed the company's assets beyond the reach of execution or attachment in satisfaction of a decree or order of a court.
“We reach the conclusion that Section 88 of the Act prohibits execution by garnishment upon its bank deposits or attachment and sale of its property,” the judges ruled.
The court noted that the exact amount of money allegedly paid on account of revised rent in excess of the previous amounts charged was not specifically pleaded or strictly proved.
“There was no refund in the plaint and therefore the trial court had no jurisdiction to sanction recovery of such unquantified sums in the nature of special damages or falling outside the realm of general damages,” ruled the Court of Appeal.
The genesis of the lease dispute began in July 2012, when Milly Glass Works Ltd challenged rent increases by Kenya Railways.
The lease was first entered into by Milly Glass Works Ltd's predecessor in January 1980 at an annual rent of Sh22,000 with a clause for review at the end of 30 years.
On January 1, 1994, Kenya Railways increased the rent to Sh146,000 and on September 30, 2011, it notified Milly Glass Works Ltd that it had revised the rent to Sh10.2 million.
The Court of Appeal held that although KRC had revised the annual rent on January 1, 1994, the unscheduled revision did not amount to a variation of the terms of the lease in respect of the two 30-year anniversaries at which the rent was to be revised based on the unimproved value of the land.
The Court of Appeal further held that, although the 1994 rent review was not provided for in the lease, the defendant had waived its right to claim within the limitation period and was therefore barred from bringing such a claim.
“The first appellant (KRC) had the right to review the annual rent for the property after January 1, 2007 and specifically after January 16, 2010, which was 30 years after the execution of the lease agreement,” the Court of Appeal further ruled.
The ELC had also found that the application by Milly Glass Works seeking to attach the revenue account of the corporation was within the jurisdiction of the court.
It ruled that the law directs the corporation’s managing director to pay the money from the revenue account as he will be undertaking a public and statutory duty.
Milly Glass Works Ltd had, at the ELC, filed an application seeking to attach money in the account held by Kenya Railways at the bank after it (Kenya Railways) was served with the demand for payment but failed to pay. The application was opposed by Kenya Railways.
