National Social Security Fund Board of Trustees v Geoffrey Chege Kirundi & 3 others [2019] KEELC 638 (KLR)
The bottom line
#Kenya's NSSF lost its Kshs.292.5 million refund claim after buying land that was still gazetted forest, because it failed to investigate before buying.
What this practically means
#Executive summary
#Key legal issues
#Whether the suit was statute barred
The suit was not statute barred because the claim was founded on fraud discovered in 2003, and Section 26 of the Limitation of Actions Act postpones the running of time until discovery of the fraud.
Although the transaction occurred in 1995, the Plaintiff pleaded that it only discovered the land could not be used in 2003 when the Forest Department denied it access and wrote letters confirming the land was gazetted forest. Under Section 26, time runs from discovery or when it could with reasonable diligence have been discovered. The suit was filed in 2004, within three years of discovery, so no limitation defence arose.
Whether Kitusuru Ltd had a good title capable of transfer
Kitusuru Ltd's Grant, though regular on its face, was irregularly acquired because the suit land remained gazetted Karura Forest that had never been degazetted, so the company had no good title to pass.
The Ministry of Environment and Natural Resources authorised excision of 18.41 Ha but no gazette notice degazetting the land under Section 4 of the Forests Act Cap 385 was produced. Degazettement was the duty of the relevant Ministry and the Commissioner of Lands was obliged to confirm the land was available for alienation. Following Munyu Maina and Henry Muthee Kathurima, the root of title was defective and alienation of unexcised gazetted forest was a nullity.
Validity of the sale agreement
The sale agreement of 28th September 1995 was a legal and valid contract, complying with Section 3(3) of the Law of Contract Act, though the land sold was irregularly acquired.
The agreement was in writing, signed and attested, named the parties, described the property and the price, and was supported by consideration. Relying on Nelson Kivuvani v Yuda Komora, it amounted to a valid contract for the sale of land. The only shortcoming was the irregular root of the vendor's title, which was attributable to government officials, not the form of the contract.
Whether the Plaintiff acquired good title
The Plaintiff did not acquire good title; its title is voidable since a vendor without good title cannot pass good title, and Section 26(1)(b) of the Land Registration Act impeaches irregularly acquired titles.
Because the vendor's title was irregularly acquired through non-degazettement, no good title passed. Under Section 26(1)(b) of the Land Registration Act, read with Article 40(6) of the Constitution, a title need not be held by a party to the vitiating factors to be impeachable. The court found the Plaintiff's title voidable, noting an allegation of revocation by the National Land Commission was unsupported by evidence.
Whether the Defendants committed fraud
No fraud by the Defendants was proved to the required standard; the Plaintiff itself was not an innocent purchaser and could not feign ignorance.
Fraud must be strictly pleaded and proved to a higher standard. The Plaintiff was legally represented, obtained a valuation, made a counter-offer, and its own advocate knew of the beneficial owner and insisted on payment conditions, showing awareness of the transaction's nature. Political pressure allegations were unsubstantiated as the negotiators and Board members were not called. The Plaintiff was thus not a bonafide purchaser without notice.
Whether the 1st and 2nd Defendants were properly sued
The directors were not properly sued because the corporate veil of Kitusuru Ltd had not been lifted, and the Plaintiff never sought restoration of the dissolved company before suing the directors.
The contract was between the Plaintiff and Kitusuru Ltd, a separate legal person under Salomon v Salomon. Although the veil may be pierced where incorporation is a device for fraud or improper purpose, the Plaintiff sued the directors before the veil was lifted and never invoked Section 339(5) & (6) of the Companies Act (repealed) to restore the company first.
Entitlement to refund of purchase price
The Plaintiff was not entitled to a refund because it failed to carry out due diligence, was in pari delicto, and did not come to court with clean hands.
The Plaintiff, spending workers' pension funds of Kshs.292.5 million, neither visited the land nor verified degazettement, contrary to caveat emptor and the bonafide purchaser requirements. Its management was complicit in the hasty transaction. Applying in pari delicto potior and the clean hands maxim, the court left the parties where it found them and dismissed the refund claim.
Legal principles established
#- Where a registered proprietor's root of title is challenged, the proprietor must go beyond the instrument of title to prove the legality of the acquisition.
- A title obtained illegally, unprocedurally or irregularly is impeachable even where the title holder was not a party to the vitiating factors.
- Allegations of fraud must be strictly pleaded and proved on a higher standard than the ordinary balance of probabilities.
- Under Section 26 of the Limitation of Actions Act, time does not begin to run in a fraud-based action until the plaintiff discovers the fraud or could with reasonable diligence have discovered it.
- A buyer in a contract for the sale of land bears the duty of due diligence under the doctrine of caveat emptor, which goes beyond obtaining an official search.
- Where both parties are equally at fault (in pari delicto), the court will leave the parties where it finds them.
Court orders
#- 1.A declaration that the Grant of Title I.R 66195/1 in respect of LR No. 209/12274 held by the Plaintiff is null and void.
- 2.The Plaintiff's claim for refund of the purchase price of Kshs.292,500,000/=, legal costs of Kshs.3,376,500/= and interest is dismissed entirely.
- 3.The Defendants, being the successful litigants, are awarded costs of the suit.
- Jurisdiction invoked
- Original civil jurisdiction of the Environment and Land Court over a claim relating to title to land (not expressly invoked in the judgment)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "National Social Security Fund Board of Trustees v Geoffrey Chege Kirundi & 3 others [2019] KEELC 638 (KLR)", Case Analysis (2019). . Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2019/638/eng@2019-11-22
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.