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Court of AppealPartially AllowedCivil Appeal No. 214 of 2001· [2005] KECA 206 (KLR)

David K. Kipsang v James Kipchenger [2005] KECA 206 (KLR)

Court of Appeal of Kenya
15 April 2005
1,694 words in judgment
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The bottom line

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Kenya's Court of Appeal ruled that a first land registration in Kenya cannot be cancelled even for fraud, and dismissed a buyer's claim over company shares.

What this practically means

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Executive summary

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This unanimous judgment of the Court of Appeal (Omolo, Githinji JJ.A. and Deverell Ag. JA) allowed a first appeal from the judgment of Rimita J in Nakuru HCCC No. 229 of 1995, which had granted the respondent all the relief claimed in his amended plaint over L.R. No. Molo South Kerengeti Block 3/97 (Kirantich) and shares receipt No. 488 for Kshs.5,140 issued by Kiranytich Farms Company Ltd. In 1975 the appellant agreed to sell the respondent half an acre, Plot No. 67, for Shs.6,000; the respondent paid Shs.5,140 to Kiranytich on the appellant's behalf to make him a shareholder, and Shs.860 in cash. The sale failed because Plot No. 67 belonged to the appellant's wife, and by a cancellation agreement dated 27th March 1982 the appellant delivered receipt No. 488 to the respondent ('kupewa'). The core dispute was whether that delivery was security for repayment or an outright transfer of the appellant's shares and any land allocated through them. The Court framed two issues: construction of the cancellation agreement and the legal effect of delivery of the receipt. It held that, absent express security wording, the giving of the receipt was an outright transfer of the paper; but the respondent failed to prove that possession of the receipt carried the shares or the suit land with it, producing neither Kiranytich's Memorandum and Articles nor any Companies Act provisions, and there was no evidence the suit land existed before the appellant's first registration on 21st May 1991. Section 143(1) of the Registered Land Act (Cap 300) barred rectification of a first registration even for fraud, consistent with Mugogo v. Sihowa. The appeal was allowed, the High Court judgment set aside, the respondent's claim dismissed, with no order as to costs in either court.

Key legal issues

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01

Construction of the cancellation agreement - whether delivery of receipt No. 488 was security or an outright transfer.

Holding

In the absence of any words expressly stating that the giving of the receipt was by way of security for the appellant's obligation to repay the Shs.5,140, the delivery of the receipt to the respondent was an outright transfer of the document itself.

Reasoning

The Court examined the cancellation agreement, which contained a single critical sentence directing that the receipt be given to the respondent. Finding no words expressly stating that delivery was by way of security for the appellant's obligation to repay the Shs.5,140, the Court concluded that the parties intended the 'kupewa' or giving of the receipt to be an outright transfer of the paper. The Court did not, at that stage, decide whether that transfer carried the shares with it.

p. 3
02

Legal effect of the respondent's possession of the receipt - whether it transferred the shares in Kiranytich and rights to land allocation.

Holding

There was insufficient evidence that the receipt was either a share certificate or a share transfer; the respondent failed to discharge the burden of proving that possession of the receipt carried ownership of the shares or any land allocated through them.

Reasoning

The Court held the burden lay on the respondent, as the party asserting that the change of possession carried ownership of shares and resulting land allocations. He was bound to produce Kiranytich's Memorandum and Articles, which would presumably govern such events, and to point to applicable Companies Act provisions. He produced neither. Nothing in the Companies Act suggested such a receipt could be a share certificate or share transfer, so the proposition failed for want of evidence.

p. 3
03

Rectification of the register under section 143(1) of the Registered Land Act where the impugned registration is a first registration.

Holding

A first registration is outside the scope of rectification under section 143(1); even if fraud had been established in obtaining the appellant's first registration, it could not have been cancelled or amended.

Reasoning

Section 143(1) of the Registered Land Act permits rectification only where a registration 'other than a first registration' was obtained by fraud or mistake. The appellant's registration on 21st May 1991 was a first registration on which he relied heavily. Even if fraud had been established - which the Court did not accept - the registration could not be cancelled or amended. The Court confirmed this reading by reference to Mugogo v. Sihowa (Nyarangi, Gachuhi and Apaloo JJA), and noted there was no evidence the suit land had even been demarcated before that first registration.

p. 4

Legal principles established

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  • Where an agreement provides for the giving of a receipt or document to another party without any express words stating that the delivery is by way of security, the delivery is construed as an outright transfer of the document itself, not as a pledge or security.
  • Under section 143(1) of the Registered Land Act (Cap 300), a first registration cannot be cancelled or amended on rectification even where fraud or mistake is established; the fraud-or-mistake ground applies only to registrations other than first registrations.
  • A party asserting that a change in possession of a share receipt or similar document carries legal consequences (such as transfer of shareholding or of rights to land allocation) bears the burden of proving those consequences, ordinarily by producing the company's Memorandum and Articles and identifying the applicable statutory provisions.

Court orders

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  1. 1.Appeal allowed.
  2. 2.Judgment and decree of the superior court (Rimita J, H.C.C.C. No. 229 of 1995) set aside.
  3. 3.Judgment substituted dismissing the plaintiff's (respondent's) claim in its entirety.
  4. 4.No order as to costs in the Court of Appeal or in the High Court ('neither here nor in the court below').

Authorities

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Legislation

  • Registered Land ActCap 300, section 143(1)
  • Companies Actreferred to generally (no specific provision identified)

Cases cited (1)

  • Mugogo v. Sihowa
    [1988] KLR 256
On appeal from
High Court of Kenya at Nakuru
H.C.C.C. No. 229 of 1995
Jurisdiction invoked
Not expressly cited in the judgment; the matter was heard as a first appeal under the Court of Appeal's appellate jurisdiction over judgments of the High Court of Kenya at Nakuru (Rimita J) in H.C.C.C. No. 229 of 1995.

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (5)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "David K. Kipsang v James Kipchenger [2005] KECA 206 (KLR)", Case Analysis (2005). Civil Appeal No. 214 of 2001. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2005/206/eng@2005-04-15

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.