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Case Brief · caselaw.co.ke
ELCPartially AllowedNot stated in the judgment (ELC Kisumu; heard during the ELC Kisumu Service Week)· [2019] KEELC 740 (KLR)

Flavemart Enterprise Limited v Kenya Railways Corporation [2019] KEELC 740 (KLR)

Environment and Land Court
15 November 2019
3,187 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~13 min to read original · ~4 min brief

The bottom line

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Kenya's Environment and Land Court cancelled a company's land title because the company signed the sale agreement and received the lease before it even existed.

What this practically means

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Executive summary

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Flavemart Enterprise Ltd sued Kenya Railways Corporation seeking a declaration that it is the registered proprietor of KISUMU MUNICIPALITY BLOCK 11/7 and a permanent injunction against the defendant, alleging trespass. Kenya Railways denied the claim and counter-claimed, pleading that it had held the property since 1976, had sold it by tender to Dube Holdings Ltd in 2011 but the transfer was blocked by a Government freeze, and that the transfers to Riegate Development Ltd and then to the plaintiff were fraudulent, illegal and null and void. Riegate was later removed from the suit. Both parties called one witness each. The court identified the determinative question as whether the plaintiff could have acquired any interest under the sale agreement dated 12th February 2011 with Riegate Development Ltd. On the plaintiff's own documents, the agreement was executed and the Certificate of Lease issued (11th March 2011) before the plaintiff's incorporation on 16th August 2011. Following Charles Karaithe Kiarie, Haideral Bhimji Motani and Macfoy v United Africa Co Ltd, the court held that a non-existent company cannot hold title, the pre-incorporation contract was a nullity, and everything flowing from it was a nullity. The plaintiff's title was therefore unprotected by Section 26(1) of the Land Registration Act and could be impeached. On the uncontroverted evidence of the defendant's original 1976 lease and its denial of any sale to Riegate, the court found the defendant to be the rightful owner. The plaintiff's suit was dismissed with costs, and judgment was entered for the defendant as prayed in its counter-claim, including cancellation of the plaintiff's title, rectification of the register, eviction and injunction, with costs.

Key legal issues

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01

Capacity of a non-existent company to contract and hold title

Holding

The plaintiff, incorporated on 16th August 2011, could not validly execute the sale agreement of 12th February 2011 or receive the Certificate of Lease on 11th March 2011; the agreement and the resulting title were nullities.

Reasoning

The plaintiff's own documents showed the sale agreement was dated 12th February 2011 and the Certificate of Lease issued 11th March 2011, both before incorporation on 16th August 2011. Following Charles Karaithe Kiarie and Haideral Bhimji Motani, a non-existent company cannot hold title, and following Macfoy v United Africa Co, a nullity cannot support derivative rights. No novation or fresh agreement after incorporation was shown; the pre-incorporation trade name was a different entity.

p. 3
02

Protection of the plaintiff's title under Section 26(1) of the Land Registration Act

Holding

The plaintiff's certificate of lease, though prima facie evidence of ownership, was not indefeasible because it was obtained irregularly and could be impeached under Section 26(1) and cancelled under Section 80.

Reasoning

The court accepted the plaintiff's certificate was prima facie evidence of absolute and indefeasible proprietorship, but held that such protection cannot extend to one who acquired property illegally, unprocedurally or through a corrupt scheme, as provided in Section 26(1) of the Land Registration Act, with Section 80 empowering cancellation of such registration. Given the nullity of the root contract, the title could be impeached as sought in the counter-claim.

p. 4
03

Defendant's ownership and the counter-claim

Holding

On the uncontroverted evidence, including the defendant's original 1976 lease and evidence that it never sold to Riegate Development Ltd, the defendant proved it is the rightful owner and the transfer to the plaintiff was illegal, null and void.

Reasoning

The defendant produced the original lease issued on 10th December 1976 to the East African Railways Corporation. Its witness, Stanley Gitari, testified uncontrovertedly that the defendant never transferred the property to Riegate Development Ltd, and the attempted transfer to Dube Holdings Ltd was blocked by the Land Registrar. Riegate was not a party, and on this evidence the court found no legitimate interest on Riegate's part to enable it to transfer the property to the plaintiff.

p. 4

Legal principles established

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  • A company that did not exist at the time it was purportedly registered as owner of property cannot hold title to that property
  • A contract made with a non-existent company is a nullity, and everything that flows from a nullity is itself a nullity
  • The indefeasibility of title under the Land Registration Act does not protect a title acquired illegally, unprocedurally or through a corrupt scheme

Court orders

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  1. 1.The plaintiff's suit is dismissed with costs to the defendant
  2. 2.Judgment is entered for the defendant as prayed in its Counter-Claim together with costs

Authorities

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Legislation

  • Land Registration ActSections 24, 25, 26(1), 80(1), 80(2)
  • Land ActSection 80(2)

Cases cited (5)

  • CHARLES KARAITHE KIARIE & OTHERS v ADMINISTRATORS OF THE ESTATE OF JOHN WALLACE MATHARE & OTHERS
    C.A Civil Appeal No 225 of 2006 (2013 eKLR)
  • HAIDERAL BHIMJI MOTANI v N. K. THOBANI & ANOTHER
    (1945) 12 EACA 37
  • BEACH BAY HOLDINGS LTD v RATIM RELATIONS & OTHERS
    [2014] eKLR
  • NEWBORN v SENSOLID (GREAT BRITAIN) LTD
    1953 ALL E.R 708
  • MACFOY v UNITED AFRICA CO LTD
    (1961) 3 ALL E.R 1169
Jurisdiction invoked
Original jurisdiction of the Environment and Land Court over disputes relating to title to land (Land Registration Act; counterclaim for cancellation and rectification of register)

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Flavemart Enterprise Limited v Kenya Railways Corporation [2019] KEELC 740 (KLR)", Case Analysis (2019). Not stated in the judgment (ELC Kisumu; heard during the ELC Kisumu Service Week). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2019/740/eng@2019-11-15

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