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ELCPartially AllowedNakuru HCCC (Amended Plaint filed 13 March 2012; original plaint filed 8 November 2010)· [2017] KEELC 233 (KLR)

Susan K. Baur & another v Shashikant Shamji Shah & 2 others [2017] KEELC 233 (KLR)

Environment and Land Court
1 November 2017
MSMunyao Sila
10,272 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~41 min to read original · ~4 min brief

The bottom line

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A Kenyan court voided a property transfer because it was back-dated, ordering the seller to refund USD 50,000 with interest.

What this practically means

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Executive summary

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The plaintiffs purchased Nakuru Municipality Block 17/5 from the 1st defendant under an agreement of 27 September 2006 for USD 77000, paying USD 35000 on execution, with the balance of USD 42000 payable over 15 months and secured by a charge over the property after transfer. The transfer and charge instruments were dated 17 October 2006, but the court found overwhelming evidence, including concessions by the attesting advocate Mr Wathigo, that the documents were actually signed on 27 September 2006 and deliberately back-dated. Holding that deliberate false dating of an attested instrument is an illegality rendering the documents null and void, the court annulled both the transfer and the charge. Falling back on the undisputed sale agreement, and since the plaintiffs did not pay the balance within the agreed 15 months, the court held the plaintiffs entitled to a refund of the USD 50000 paid, with interest as a special circumstance, because the 1st defendant sold the property by auction on 24 March 2010, received Kshs 5.5 million, and never informed the plaintiffs or accounted for the residue contrary to Section 78 of the Registered Land Act. The court also addressed two issues hypothetically: it endorsed the Court of Appeal position that an individual may hold a charge; and it held that a Section 65(2) demand notice must precede a Section 74 statutory notice where the debt was not demanded on the due date, and that service by post to a Nairobi address was irregular since the 1st defendant knew the plaintiffs resided in Switzerland and had their Swiss address and email. The 2nd and 3rd defendants were protected as innocent purchasers for value without notice, their remedy lying only in damages against the chargee. Judgment was entered against the 1st defendant for USD 50000 with interest at court rates from 16 April 2010, with costs against him and no costs orders for or against the 2nd and 3rd defendants.

Key legal issues

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01

Validity of the transfer and charge instruments dated 17 October 2006

Holding

The transfer and charge were declared null and void for want of proper attestation, as they were signed on 27 September 2006 but attested as having been executed on 17 October 2006, when the 1st plaintiff was in Switzerland

Reasoning

Section 110 of the Registered Land Act and Section 3(3) of the Law of Contract Act required attestation by a witness present at signing. Mr Wathigo conceded the documents were signed on 27 September 2006 and only dated later for registration. Deliberately inserting a false date in an attestation is not an excusable mistake but an illegality, rendering both instruments void.

p. 7
02

Consequence of invalidity - plaintiffs' entitlement

Holding

Falling back on the undisputed sale agreement, and since the plaintiffs did not pay the balance within 15 months, the plaintiffs were entitled to a refund of the purchase price paid, with interest as a special circumstance given the 1st defendant's failure to account for the auction residue

Reasoning

The agreement lapsed for non-payment within 15 months, entitling the parties to restitution. The 1st defendant, though an unpaid seller who genuinely believed he held a valid charge, sold the property and received Kshs 5.5 million without informing the plaintiffs or paying over the residue under Section 78 of the Registered Land Act, unjustly retaining the funds since 2010. Equity justified interest from the date the auction proceeds were received.

p. 7
03

Sequencing of notices under Sections 65(2) and 74 of the Registered Land Act

Holding

The Section 65(2) demand notice must first issue where the debt was not demanded on the specified repayment date; only on expiry of that notice does the Section 74 statutory notice arise - the two notices serve different purposes

Reasoning

Section 65(2) contemplates a 3-month demand calling the debt where repayment was not demanded on the specified date, which the court treats as a waiver requiring fresh notice. Section 74 is an independent notice invoking the chargee's statutory power of sale. There was no evidence of a demand on 27 November 2007, so a Section 65(2) notice would have been required before a Section 74 notice.

p. 8
04

Service of statutory notices on plaintiffs resident abroad

Holding

Service by registered post to the Nairobi address in the agreement was irregular because the 1st defendant knew the plaintiffs were in Switzerland, knew their Swiss address and had the 1st plaintiff's email

Reasoning

Section 153 of the Registered Land Act deems service good only to a last known address. The address in the agreement could not be the last known address since the chargee knew the plaintiffs' current Swiss address and email and had communicated through them. The alleged note of 2 October 2009 from the 2nd plaintiff was not proved for want of corroboration, and the postal officer confirmed the notices were returned unclaimed.

p. 8
05

Protection of the 2nd and 3rd defendants as purchasers

Holding

The 2nd and 3rd defendants were innocent purchasers for value without notice; their remedy exposure lies only in damages against the chargee under Section 74(3)

Reasoning

They bought at a public auction, were declared highest bidders at Kshs 5.5 million, paid the purchase price and obtained registration. Section 74(3) of the Registered Land Act provides that a person suffering damage from an irregular exercise of the power of sale has a remedy in damages only against the person exercising the power, so their title is protected.

p. 9

Legal principles established

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  • An individual, and not only a bank or lending institution, may hold a charge as chargee
  • Back-dating or front-dating attested instruments is illegal and vitiates the instrument; an attesting advocate must record the true date of execution
  • Where repayment is not demanded on the date specified, a 3-month demand notice under Section 65(2) of the Registered Land Act is required before a Section 74 statutory notice
  • Service of a statutory notice must be to an address the sender knows the recipient will actually receive; sending to a known-defunct address is not good service

Court orders

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  1. 1.Judgment entered for the plaintiffs against the 1st defendant in the sum of USD 50000 with interest at court rates from 16 April 2010 till payment in full
  2. 2.Plaintiffs to have costs of the suit against the 1st defendant
  3. 3.No orders as to costs for or against the 2nd and 3rd defendants

Authorities

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Legislation

  • Registered Land Act (repealed)Sections 38, 65(2), 74(1)-(3), 78, 110, 143, 153
  • Law of Contract ActSection 3(3)
  • Land Registration Actnull (repealed the Registered Land Act in 2012, referred to)
  • Auctioneers Actnull (referred to in Section 3(3) proviso)
  • Law Society Conditions of Sale (1989) Editionnull

Cases cited (19)

  • Jopa Villas LLC vs Overseas Private Investment & 2 Others
    (2009) eKLR
  • Edward Charles Nginyo vs Hans Jurgen Zahlten & 4 Others
    (2015) eKLR; Court of Appeal at Malindi, Civil Appeal No. 34 of 2015
  • Robert Kibagendi Otachi & Another vs Housing Finance Corporation of Kenya & 3 Others
    Court of Appeal No. NAI 251 of 1996
  • Shah vs Devji
    (1965) EA 91
  • Kenya Commercial Bank vs Harumeri
    (2000) 2 KLR 691
  • Julius Mainye Anyega vs Ecobank Kenya Limited
    (2014) eKLR
  • Ooko vs Barclays Bank
    (2002) 2 KLR 394
  • Kinyanjui Kamau vs George Kamau Njoroge
    (2015) eKLR
  • Sammy Likuyi Adiema vs Charles Shamwati Shisikani
    (2014) eKLR
  • Dakianga Distributors vs Kenya Seed Company Limited
    (2015) eKLR
  • Bomet Beer Distributors Limited & Another vs Kenya Commercial Bank & Others
    (2005) eKLR
  • Savings and Loan Kenya Limited vs Mayfair Holdings Limited
    (2012) eKLR
  • Kitur & Another vs Standard Chartered Bank & Another (No.2)
    (2002) 1 KLR 640
  • Jacob Ochieng Muganda vs Housing Finance Company of Kenya Limited
    (2002) eKLR
  • Nancy Kahonya Amadiva vs Expert Credit Limited & Another
    (2015) eKLR
  • Vijay Morjaria vs Nansingh Madhusingh Darbar & Another
    (2000) eKLR
  • Urmila w/o Mahendra Shah vs Barclays Bank International Limited & Another
    (1976-1980) 1 KLR 1168
  • David Katana Ngombe vs Shafi Grewal Kaka
    (2014) eKLR
  • Kipsang Sawe Sisei vs Kenya Commercial Bank
    (2005) eKLR
Jurisdiction invoked
Environment and Land Court jurisdiction under Article 162(2)(b) of the Constitution (as established court hearing a land dispute at first instance)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (13)

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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, "Susan K. Baur & another v Shashikant Shamji Shah & 2 others [2017] KEELC 233 (KLR)", Case Analysis (2017). Nakuru HCCC (Amended Plaint filed 13 March 2012; original plaint filed 8 November 2010). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2017/233/eng@2017-11-01

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