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Court of AppealDismissedCivil Appeal No. 75 of 2016

Juletabi African Adventure Ltd & another v Lockley (Civil Appeal 75 of 2016) [2017] KECA 118 (KLR)

Court of Appeal
23 November 2017
AVAlnashir VisramWKW. KaranjaMartha Karambu KoomeM. K. Koome
4,575 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Court of Appeal confirmed that whoever pays for property owns it beneficially, even when it's registered in someone else's name.

What this practically means

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Executive summary

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This is a unanimous first-appeal judgment of the Court of Appeal at Mombasa (Visram, Karanja and Koome, JJ.A) dismissing an appeal against a High Court decision (Kasango, J., 21st August 2015) which declared that Juletabi African Adventure Limited held a motor vehicle (KAM 634J) and Plot No. Kwale/Diani S.S/2371 in trust for the respondent, Christopher Michael Lockley, and ordered their transfer to him. The respondent, a UK resident, had advanced funds to the company - formed with the 2nd appellant, his former tour driver - to purchase the vehicle and the parcel of land, but the property was registered in the company's name. The appellants argued the monies were a loan, that the suit was a derivative action brought without leave contrary to the rule in Foss v Harbottle, and that particulars of trust were not pleaded under Order 2 Rule 10. The Court framed two issues: the respondent's locus standi and whether the trial court acted judiciously. It held the suit was personal, not derivative - the respondent sued for breach of trust committed against him personally - so leave was unnecessary. On the merits, applying the resulting-trust principle that a trust automatically arises in favour of the person advancing the purchase money regardless of registration, the Court found the company held both properties in trust for the respondent. It also held particulars of trust were sufficiently pleaded despite not being in the traditional format. The appeal was dismissed with costs and the High Court judgment affirmed in full. The binding takeaway for lower courts is the resulting-trust rule and the personal-vs-derivative distinction in locus standi.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the respondent had locus standi to file the suit, i.e. whether the suit was derivative in nature and whether leave was required before its institution
  2. 2.Whether the High Court acted judiciously in issuing the declaration of trust and transfer orders, i.e. whether a resulting trust arose in favour of the respondent
  3. 3.Whether the respondent failed to plead particulars of trust as required under Order 2 Rule 10 of the Civil Procedure Rules

Key legal issues

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01

Whether the respondent's suit was derivative and required leave under the rule in Foss v Harbottle

Holding

The suit was not derivative; the respondent sued for his own benefit for wrongs committed against him personally (breach of trust), so leave was not required and he had locus standi.

Reasoning

The Court distinguished derivative actions, which are brought on behalf of a company for wrongs done to it, from personal actions by a shareholder asserting his own rights. The respondent claimed the vehicle and land were held in trust for him personally, funded by his own money. He therefore sued in his own right, not for the company's benefit, and the exceptions to and leave requirements of the rule in Foss v Harbottle were not engaged.

p. 5
02

Whether a resulting trust arose in favour of the respondent over the vehicle and the parcel of land

Holding

A resulting trust arose in favour of the respondent because he advanced all the purchase money for the vehicle and the parcel, and registration in the 1st appellant's name did not divest him of his beneficial interest.

Reasoning

Applying the principles in Twalib Hatayan, the Court held that where property is transferred under circumstances suggesting the transferor did not intend to confer a beneficial interest on the transferee, a resulting trust arises in favour of the person who advanced the purchase money, regardless of registration. The respondent gave a detailed account and paper trail of the funds; his intention as to the land was to purchase for his own benefit, and the repayment arrangement over the vehicle showed the company held it for him.

p. 5
03

Whether the respondent failed to plead particulars of trust under Order 2 Rule 10 of the Civil Procedure Rules

Holding

The respondent did set out the particulars of trust, albeit not in the traditional clustered format; failure to use the traditional heading does not cause a claim to fail.

Reasoning

The Court endorsed the trial Judge's reasoning that while clustering particulars under a 'particulars' heading had become the norm, it is not mandatory; what matters is that the particulars are set out in the pleading. The Court also invoked the constitutional injunction under Article 159(2) against undue regard to procedural technicalities.

Legal principles established

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  • The proper plaintiff in respect of a wrong done to a company is the company itself, but a suit brought by a shareholder for wrongs committed against him personally, not for the benefit of the company, is not a derivative suit and requires no leave under the rule in Foss v Harbottle.
  • A resulting trust automatically arises in favour of the person who advances the purchase money, and it is immaterial whether the property is registered in his name or that of another.
  • A court will not imply or presume a trust except in cases of absolute necessity, and the intention of the parties to create a trust must be clearly determined before a trust is implied; the burden lies on the party relying on the trust to prove it.
  • On a first appeal, the Court of Appeal must reconsider, re-evaluate and re-assess the evidence and draw its own conclusions, while making due allowance for the fact that it neither saw nor heard the witnesses.
  • Non-adherence to the traditional format of clustering particulars under a heading does not invalidate a pleading; particulars sufficiently set out in the body of the pleading satisfy Order 2 Rule 10.

Court orders

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  1. 1.The appeal is dismissed with costs
  2. 2.The judgment of the High Court (Kasango, J.) dated 21st August 2015 stands, including the declaration that the 1st appellant holds motor vehicle KAM 634J and Plot No. Kwale/Diani S.S/2371 in trust for the respondent and the orders for their transfer to the respondent

The bench

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One judgment of the whole court — no separate or dissenting opinions.

AV
majority
WK
majority
Martha Karambu Koome
M. K. KoomeJA
Currently serving
majority
On appeal from
High Court of Kenya at Mombasa
H.C.C.C No. 152 of 2012
Jurisdiction invoked
First appeal to the Court of Appeal under the Court of Appeal's appellate jurisdiction (statutory first appeal from the High Court); no specific constitutional provision invoked for jurisdiction

Relief refused

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The appellants' prayer to allow the appeal and set aside the declaration of trust and transfer orders

The Court found the appeal lacked merit; the suit was not derivative, leave was unnecessary, particulars of trust were sufficiently pleaded, and the evidence established a resulting trust in favour of the respondent

p. 6

Costs

The appeal was dismissed with costs to the respondent (costs of the appeal awarded to the respondent, per the trial order the 2nd appellant was to pay the plaintiff's costs of the suit).

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

Having expressed ourselves as herein above, we find that the appeal lacks merit and is hereby dismissed with costs.
p. 6Disposition - dismissal of the appeal with costs
Most importantly, the general rule here is that a resulting trust will automatically arise in favour of the person who advances the purchase money. Whether or not the property is registered in his name or that of another, is immaterial
p. 5Resulting trust principle
The Courts will not imply a trust save in order to give effect to the intentions of the parties. The intention of the parties to create a trust must be clearly determined before a trust will be implied.
p. 5Presumption against implying trusts
Rather, he filed the suit for his own benefit for wrongs committed against him by the appellants, to wit, breach of trust. Consequently, we concur with the trial court that he did not require leave before instituting the suit.
p. 5Locus standi - personal, not derivative, action
On a first appeal from the High Court, the Court of Appeal should reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in that respect.
p. 4Duty of a first appellate court

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (14)

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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, "Juletabi African Adventure Ltd & another v Lockley (Civil Appeal 75 of 2016) [2017] KECA 118 (KLR)", Case Analysis (2017). Civil Appeal No. 75 of 2016. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2017/118/eng@2017-11-23

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