Hasham Lalji Properties Limited v Sigilain Limited & 4 others [2019] KEELC 649 (KLR)
The bottom line
#What this practically means
#Executive summary
#Key legal issues
#Whether the plaintiff had locus standi
The plaintiff had locus standi; the defendants conflated lack of interest in the property with lack of a right to be heard
Relying on Alfred Njau & Others v City Council of Nairobi, the court held that locus standi is the right to appear or be heard, distinct from cause of action. The defendants' argument that the plaintiff's lease had expired went to cause of action, not locus standi, and the plaintiff could not be deprived of its right to be heard merely because its basis for suing had not yet been established.
Whether the plaint discloses a reasonable cause of action
Yes; the issue had already been determined in a prior interlocutory ruling and could not be reopened
By a ruling of 24th May 2013 the court had dismissed the defendants' application to strike out the suit for want of a reasonable cause of action. That decision was not appealed, set aside or varied, so the defendants were barred from relitigating the issue, and nothing was placed before the court to warrant departing from the earlier finding.
Whether the 5th defendant acquired the suit property fraudulently and unlawfully
Yes; the 5th defendant did not exist when it purportedly acquired the property, and no instrument of transfer existed in the registry
The Registrar of Companies confirmed the 5th defendant was incorporated on 23rd September 2000, yet it purportedly acquired the property on 7th October 1999, surrendered the title and obtained a new grant before incorporation. The transfer instrument was missing from the deed file, and no evidence of a sale by the plaintiff existed. Fraud was the only reasonable inference.
Whether the 2nd, 3rd and 4th defendants were complicit in the fraud
The 2nd and 4th defendants were complicit; the 3rd defendant was not involved
The title left court on the same day the property was transferred to the 5th defendant, and the 2nd defendant's own title was substituted as court security. The 2nd and 4th defendants failed to explain their roles, and the court drew the inference of complicity from their silence. No direct involvement by the 3rd defendant was shown.
Whether the surrender of the original title and issuance of the new grant was fraudulent and unlawful
Yes; the surrender was a form of asset laundering in perpetuation of the fraud
Since the 5th defendant did not exist and did not lawfully own the property as at 18th April 2000, it could not validly surrender the title. The lawful owner at the time was the plaintiff, whose lease had not expired. The surrender and new grant merely perpetuated the original fraud.
Whether the 1st defendant acquired a valid title as a bona fide purchaser for value
No; the 1st defendant failed to prove bona fide purchase and took a defective title from a fraudulent root
The 1st defendant's director (the 2nd defendant) was privy to the fraud; no due diligence was done on the 5th defendant or its title; the defendants concealed prior dealings with the 5th defendant involving other plaintiff properties; payment of Kshs. 2,000,000 in cash by the 2nd defendant personally was not credible; and possession was never given. Even an innocent purchaser could not defeat the plaintiff's prior lawful ownership.
Whether the plaintiff is entitled to the reliefs sought despite its lease having expired
Yes; substantive justice required granting the reliefs despite the impossibility of restoring the original title
The plaintiff's original lease had expired and could not be reinstated, but the court refused to render itself helpless before fraud. Sending the plaintiff back to apply for lease renewal would disadvantage it through no fault of its own, while granting the reliefs sends a deterrent message to fraudsters targeting expiring leases. The plaintiff therefore succeeded against the 1st, 2nd, 4th and 5th defendants.
Legal principles established
#- A party whose title derives from a fraudulent transfer cannot convey a valid title; a fraudulent root of title vitiates all subsequent dispositions
- The defence of bona fide purchaser for value requires proof of due diligence, payment of consideration and lawful acquisition from a party with a valid title
- Locus standi and cause of action are distinct; lack of an established basis for a suit does not deprive a party of the right to be heard
- A transfer executed by a company before its incorporation is a legal nullity
- The court will not leave an innocent party remediless in the face of fraud, and will not permit fraudsters to profit from dispossession of leases nearing expiry
Court orders
#- 1.The 1st defendant shall surrender to the Chief Land Registrar within thirty (30) days Grant No. I.R 83451 in respect of L.R No. 209/4360/58
- 2.The Chief Land Registrar shall cancel Grant No. I.R 83451 in favour of the 5th defendant and entry number one (1) thereon through which the property was transferred to the 1st defendant, including in the register and a copy of the Grant held at the land registry
- 3.The Chief Land Registrar shall thereafter register and issue a fresh Grant No. I.R 83451 in favour of the plaintiff in respect of L.R No. 209/4360/58 on the same terms and conditions as the cancelled Grant
- 4.A permanent injunction issued restraining the 1st, 2nd, 4th and 5th defendants from selling, alienating, transferring, charging, pledging, leasing, wasting or in any way interfering with L.R No. 209/4360/58, original Title No. I.R 11791, now registered as Grant No. I.R 83451, together with the improvements thereon
- 5.The suit against the 3rd defendant is dismissed with costs to be paid by the 1st, 2nd, 4th and 5th defendants
- 6.The plaintiff shall have the costs of the suit as against the 1st, 2nd, 4th and 5th defendants
- Jurisdiction invoked
- Original civil jurisdiction of the High Court/Environment and Land Court over a claim of fraudulent acquisition of registered land; no specific provision stated in the judgment
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Hasham Lalji Properties Limited v Sigilain Limited & 4 others [2019] KEELC 649 (KLR)", Case Analysis (2019). Not stated in the judgment text provided. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2019/649/eng@2019-11-21
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.