Four Farms Limited v Agriculture Finance Corporation & 20 others (Civil Appeal E018 of 2023) [2024] KECA 1802 (KLR)
The bottom line
#Kenya's Court of Appeal confirmed that once a valid auction of charged land happens, the borrower's ownership rights end and any complaints can only be pursued as damages.
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 trial court erred in omitting relevant and material issues, namely whether the 1st respondent was lawfully entitled to transfer to itself the suit property and whether the procedure in section 33 of the Agricultural Finance Corporation Act was followed
- 2.Whether the consent order discharged the rights of the 1st respondent in the suit property and whether the mother title ceased to exist upon subdivision
- 3.Whether the learned Judge erred in applying the provisions of the repealed Registered Land Act instead of the Agricultural Finance Corporation Act
- 4.Whether the suit property was properly advertised and described for the public auction of 26th June 2009
- 5.Whether the 1st respondent, being a government body, was exempt from the requirement of Land Control Board consent under section 6(3)(b) of the Land Control Act
- 6.Whether the Land Control Act consent requirement applied to the sale by public auction and subsequent transfers
- 7.Whether the learned Judge erred in ordering each party to bear their own costs after striking out the counterclaim
Key legal issues
#Whether the mother title ceased to exist upon subdivision, extinguishing the 1st respondent's statutory power of sale
The mother title did not cease to exist; the charge survived the subdivisions and the statutory power of sale was not lost.
The consent of 24th November 1988 contained no express stipulation discharging the existing charge. PW1 admitted in evidence that AFC had a charge over the resultant titles. At the time of the auction, titles to the subdivisions had not been issued, so the parties still dealt with the property by its original title. The mother title could only cease to exist after all deed plans had been registered and titles effectively produced.
Whether the repealed Registered Land Act rather than the Agricultural Finance Corporation Act governed the transaction
The Registered Land Act properly applied; nothing in the Agricultural Finance Corporation Act excluded its operation.
There is no provision in the Agricultural Finance Corporation Act excluding the application of the Registered Land Act to transactions under the former. The repealed Act was the statute guiding dealings in registered land, including charges and realisation of securities, whether registered thereunder or under the Agricultural Finance Corporation Act.
Whether Land Control Board consent was required for the auction sale and subsequent transfers
No consent was required: the 1st respondent as a government body enjoyed the exemption under section 6(3)(b) of the Land Control Act, and an auction sale is by operation of law, not a contractual dealing.
Section 6(3)(b) of the Land Control Act exempts transactions to which the Government is a party, and section 3(4) and 4(2) of the Agricultural Finance Corporation Act establish the 1st respondent as a government body. Further, a sale by public auction in exercise of a statutory power of sale is not a contractual sale; it is complete at the fall of the hammer and the proviso to section 3 of the Law of Contract Act and the Public Trustee v Wanduru Ndegwa principle confirm the Land Control Act does not apply to acquisitions by operation of law.
Whether the property was properly advertised and described in the auction advertisement
The advertisement of the mother title instead of the subdivisions caused no prejudice and the sale could not be faulted for mis-description.
The titles to the subdivisions had not been issued at the date of the auction, so the auctioneer's option was to describe the property per the lands office records, being LR No. 544/III/M.N. The parties themselves continued referring to the property by its original title even after subdivision, and PW1 neither pleaded nor proved non-service of statutory notices. The difference in acreage was a minor issue that could not alter the terms of the sale.
Remedy for an irregular exercise of statutory power of sale
Once the statutory power of sale is legally activated and the transfer completed, the chargor's remedy lies only in damages against the person exercising the power.
Following Mwambeje Ranching Co. Ltd v Kenta National Capital Corporation, any anomaly in a sale under an activated statutory power of sale that prejudices the chargor is remediable with damages under section 99(4) of the Land Act. The appellant therefore could not challenge subsequent transfers by the 2nd respondent to third parties; its remedy, if any, lay in damages only against the 1st respondent.
Whether the learned Judge's costs discretion was exercised judicially
The order that each party bear their own costs was proper since neither party wholly succeeded in the claim or counterclaim.
Costs follow the event, but the discretion is judicial and will not be disturbed if there are grounds supporting it. As neither the appellant nor the 1st respondent, who filed the counterclaim, wholly succeeded, neither could claim costs. The 1st respondent's counterclaim had been struck out as time barred.
Legal principles established
#- A chargor's equity of redemption is extinguished at the fall of the hammer upon a valid sale by public auction in exercise of the statutory power of sale.
- Once a statutory power of sale is legally activated, any anomaly in the sale which prejudices the rights of the chargor is remediable only with damages.
- The Land Control Act consent requirement does not apply to land acquired by operation of law, such as through a sale by public auction in exercise of a statutory power of sale.
- A mother title over subdivided land does not cease to exist until all the deed plans have been registered and their titles effectively produced.
- An appellate court interferes with trial court findings of fact only where the trial court took into account matters it should not have, failed to take into account relevant matters, misapprehended the evidence, or acted on wrong principles.
Court orders
#- 1.Dismissal of the appeal
- 2.No order as to costs
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
Wrote the judgment
Wrote the judgment
- On appeal from
- Environment and Land Court of Kenya at Mombasa
- ELC Civil Suit No. 41 of 2009
- Jurisdiction invoked
- First appeal to the Court of Appeal from the Environment and Land Court
Relief refused
#Setting aside the trial judgment and substitution with judgment for the appellant as prayed in the re-amended plaint
All grounds of appeal were found unmerited; the statutory power of sale was validly exercised, the advertisement and description of the property caused no prejudice, and no Land Control Board consent was required
Orders against the 20th and 21st respondents in respect of subdivisions 3449/III/MN and 3463/III/MN
The appeal against the 20th respondent was withdrawn and the appeal against the 21st respondent consequently collapsed; no orders were sought against him before the trial court
Costs
The appeal was dismissed with no order as to costs; the trial court had ordered each party to bear their respective costs of the suit.
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.
Having considered the grounds of appeal that were urged before us, we find them unmerited and we dismiss the appeal but with no order as to costs.
DATED AND DELIVERED AT NAIROBI THIS 20TH DAY OF DECEMBER, 2024.
This means that the mortgagor's right of redemption is lost as soon as the mortgage either sells the mortgaged property by public auction or enters into a binding contract in respect of it.
Once a statutory power of sale is legally activated, any anomaly in the sale which prejudices the rights of the chargor is remediable with damages under section 99(4) of the Land Act.
We agree that in this case the mother title could only have ceased to exist after all the Deed Plans had been registered and their titles effectively produced.
The procedure under sale by public auction, in our view does not contemplate the issuance of the consent from the Land Control Board as a pre-condition for a valid transfer of land.
the appeal against the 21st respondent must, consequent upon the withdrawal of the appeal against the 20th respondent, collapse.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Four Farms Limited v Agriculture Finance Corporation & 20 others (Civil Appeal E018 of 2023) [2024] KECA 1802 (KLR)", Case Analysis (2024). Court of Appeal appeal from ELC Civil Suit No. 41 of 2009. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1802/eng@2024-12-20
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.