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Court of AppealDismissedCivil Appeal 225 of 2006· [2013] KECA 335 (KLR)

Charles Karaithe Kiarie & 2 others v Administrators of the Estate of John Wallace Mathare (Deceased) & 5 others [2013] KECA 335 (KLR)

Court of Appeal of Kenya
26 April 2013
JOJ. W. Onyango OtienoSKS. Gatembu KairuJMJ. Mohammed
6,390 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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The Court of Appeal dismissed land buyers' appeal, confirming that a title holder who knew of a prior sale loses legal protection and can lose the land.

What this practically means

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Executive summary

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This was a first appeal by Charles Karaithe Kiarie, Thomas Wanyoike Wainaina and Kalang Enterprises Limited against the judgment of the High Court (Ang'awa J) of 16th August 1999 in HCCC No. 2325 of 1995, which decreed specific performance of an agreement for sale dated 18th September 1990 between Joyce Wanja Gitau and the purchasers Mathare and Rimui, and cancelled the title of the company, Kalang Enterprises Limited, on grounds of fraud. The purchasers had bought 2.5 acres to be excised from Wanja's L.R. No. 2243/3, paid a deposit acknowledged as received by her son Hezron as agent and beneficial owner, and taken possession; Hezron thereafter received a subdivision, sold the parcel to the appellants, and transferred it to the company before it was incorporated. The Court of Appeal restated the settled standard that a first appellate court will not interfere with findings of fact unless based on no evidence, misapprehension of the evidence, or demonstrably wrong principles. It held the remedy of specific performance was properly pleaded, that a valid and enforceable contract existed with sufficiently identified subject matter, and that the trial judge's only error was granting a blanket order of specific performance without distinguishing Wanja from Hezron — an error that did not affect the outcome, since Hezron was in substance privy to and a beneficiary of the transaction. The court found the appellants were not innocent purchasers for value without notice, having known of the purchasers' possession, so the protection of section 23 of the Registration of Titles Act was unavailable; and it upheld the cancellation of the company's title because a non-existent company could not hold title. The court varied the judgment by directing payment of the balance of the purchase price of Kshs. 201,650 to Wanja's estate, dismissed the appeal with costs, and held Wanja's unexplained silence in the proceedings fatal to the belated claim that she was never served with summons.

Key legal issues

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01

Whether the relief of specific performance was properly before the High Court and available to the purchasers

Holding

The relief was expressly pleaded and captured in the agreed issues; a valid and enforceable contract existed with sufficiently described property and terms, and specific performance was correctly granted against Wanja

Reasoning

The court observed that specific performance was pleaded in the further amended plaint and included in the statement of agreed issues, so the trial judge rightly dealt with it. The contract terms — parties, price, and the 2.5-acre parcel to be excised from L.R. No. 2243/3 — were sufficiently certain. Possession had passed and the balance was not yet due since completion was contingent on the vendor obtaining approved deed plans. The uncertainty argument therefore failed.

p. 10
02

Whether specific performance could be enforced against Hezron, a stranger to the written agreement

Holding

The blanket order of specific performance was erroneous as between Wanja and Hezron, but the error did not affect the overall outcome because Hezron was in substance privy to and the beneficiary of the transaction

Reasoning

The court identified the trial judge's only error as failing to distinguish between Wanja (the contracting vendor) and her son Hezron in ordering specific performance. However, the evidence showed Hezron negotiated the sale, held himself out as beneficial owner, received payments as agent and beneficial owner, and continued receiving payments even after selling to the appellants. The error was therefore immaterial to the outcome.

p. 10
03

Whether Kiarie, Wainaina and the company were innocent purchasers for value without notice

Holding

They were not; they knew of the purchasers' possession and interest, and the statutory protection of indefeasibility was therefore unavailable

Reasoning

The court found that when the appellants contracted to purchase, they knew Mathare and Rimui were in possession of the fenced and cultivated property, and that they had knowledge of the prior transaction. As directors of the company that took the transfer, their conduct — including demanding the purchasers clear out — demonstrated notice. Section 23 of the Registration of Titles Act could not protect them.

p. 12
04

Whether the trial judge erred in cancelling the company's title on the basis that the transfer was to a non-existent entity

Holding

The trial judge was right: a non-existent company could not hold title, a transaction preceding incorporation cannot bind the company

Reasoning

Relying on the trial court's finding of fact that the company was registered on 23rd October 1992, after the purported transfer of the property to it, the court held a non-existent company could not hold title, citing Motani v Thobani for the proposition that pre-incorporation transactions cannot bind a company. Counsel's ratification argument did not persuade the court. The cancellation of title was accordingly upheld.

p. 12
05

The appellate standard for interfering with findings of fact on a first appeal

Holding

The Court of Appeal will not interfere with trial findings of fact unless based on no evidence, misapprehension of the evidence, or demonstrably wrong principles

Reasoning

The court restated the settled standard from Selle, Mwangi v Wambugu, Mwanasokoni and Makube. Applying it, the court cautioned itself that it had not seen or heard the witnesses, particularly on the state of mind of the parties, but examined the trial judge's findings as a matter of law and found overwhelming evidence supporting the findings on Hezron's knowledge and the appellants' notice.

p. 9

Legal principles established

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  • An appellate court will not interfere with findings of fact by the trial court unless such findings are based on no evidence, on a misapprehension of the evidence, or the judge demonstrably acted on wrong principles
  • A purchaser seeking specific performance must pay or tender the purchase price at the time and place of completing the sale; where completion is frustrated by the vendor's sale to another party, the condition precedent cannot operate against the purchaser
  • Section 23 protection of the Registration of Titles Act (indefeasibility of title) is unavailable to a registered proprietor who is not an innocent purchaser for value without notice of a prior third-party interest
  • A transaction preceding incorporation of a company cannot bind the company; a non-existent company cannot hold title to land
  • On a first appeal the appellate court's task is to review the evidence and draw its own conclusions, bearing in mind it did not see or hear the witnesses

Court orders

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  1. 1.Appeal dismissed save for the direction on payment of the balance of the purchase price
  2. 2.Administrators of the estates of Mathare and Rimui to pay the balance of Kshs. 201,650.00 to the administrators of the estate of Wanja
  3. 3.The judgment of the High Court granting specific performance and cancelling the company's title otherwise upheld
  4. 4.Appeal dismissed with costs

Authorities

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Legislation

  • Registration of Titles Act (repealed), Cap 281Section 23

Cases cited (7)

  • Selle v Associated Motor Boat Company Limited
    [1968] E A 123
  • Mwangi v Wambugu
    (1984) KLR 453
  • Mwanasokoni v Kenya Bus Services Ltd
    [1985] KLR 931
  • Makube v Nyamuro
    [1983] KLR 403
  • Openda v Ahn
    [1984] KLR 208
  • Mwangi vs. Braeburn Ltd
    [2004] 2 E A 196
  • Haiderali Bhimji Motani v N. K. Thobani & Anor
    [1945] 12 EACA 37
On appeal from
High Court of Kenya at Nairobi
HCCC No. 2325 of 1995
Jurisdiction invoked
First appeal from the High Court to the Court of Appeal under its ordinary appellate jurisdiction (no specific provision is cited in the judgment)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (20)

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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, "Charles Karaithe Kiarie & 2 others v Administrators of the Estate of John Wallace Mathare (Deceased) & 5 others [2013] KECA 335 (KLR)", Case Analysis (2013). Civil Appeal 225 of 2006. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2013/335/eng@2013-04-26

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