Kiambu Murutani Company Limited v Michael Njuguna, Equity Bank Limited & Antique Auctions (Environment & Land Case 942 of 2013) (Environment and Land) [2020] KEELC 326 (KLR)
The bottom line
#A rent agent who forged sale agreements to steal his client's Kiambu property lost it all, paying back rent and Kshs 1 million in punitive damages.
What this practically means
#Executive summary
#Key legal issues
#Fraud and forgery of the sale agreements
The two sale agreements dated 4th September 2009 and 16th December 2009 were forgeries, established by the 1st defendant's conviction in Kiambu Criminal Case No. 299 of 2010, and the transfer founded on them was null and void
The plaintiff produced the proceedings and judgment in the criminal case in which the 1st defendant was convicted of forging the sale agreements; the purported witness, Kimani Charagu Advocate, denied witnessing them. The court found the issue of fraud and forgery had been determined by a competent criminal court, and the 1st defendant's bare denials in his defence, unsupported by any witness statement or documents, amounted to mere denials.
Breach of fiduciary duty by an agent
The 1st defendant, engaged to collect rent as agent of the plaintiff, acted in breach of his fiduciary duty by fraudulently transferring the suit property to himself
The court found a principal/agent relationship existed because the 1st defendant traded as Njuakim Commercial Agencies collecting rent for the plaintiff. Like any agent, he owed a fiduciary duty to act in the best interest of his principal, and his fraudulent transfer of the property to his own name was a clear breach of that duty to the detriment of the plaintiff.
Mesne profits
Mesne profits of Kshs.3,276,000/- awarded, computed at the proven monthly rent of Kshs.25,200/- for 130 months from the fraudulent transfer on 20th November 2009
Relying on Rajan Shah t/a Rajan S. Shah & Partners v Bipin P. Shah, the court applied the principle that liability for mesne profits attaches to actual wrongful possession. Although PW1 asserted the current rent was Kshs.100,000/-, no evidence supported that figure, so the court adopted the proven monthly rent of Kshs.25,200/- evidenced by the rent collection records from September to December 2007, multiplied by 130 months.
Exemplary/punitive damages
General and punitive damages of Kshs.1,000,000/- awarded because the 1st defendant's conduct was calculated to procure financial benefit at the plaintiff's expense
Following Abdulhamid Ebrahim Ahmed v Municipal Council of Mombasa, the court noted exemplary damages are awarded in actions in tort in three categories, one being where the defendant's conduct is calculated to earn him a profit. The 1st defendant, occupying a fiduciary position, forged sale agreements to enrich himself and collected rent from the premises for over ten years, justifying a punitive award, which the court fixed at Kshs.1 million as adequate compensation.
Unprosecuted defence
The 1st defendant's defence amounted to mere denials as he never filed a witness statement or bundle of documents despite leave granted by consent
The 1st defendant filed a defence denying fraud but filed no witness statement or documents, ignored court directions to file a bundle, and did not attend the hearing on 13th July 2020. The court inferred he had lost interest and found the denial of fraud in the defence to be mere denial, leaving the plaintiff's uncontroverted evidence intact.
Legal principles established
#- An agent who fraudulently transfers his principal's property to himself acts in breach of fiduciary duty and the fraudulent transfer is liable to be declared null and void
- Liability for mesne profits goes with actual wrongful possession of land; the person in wrongful possession is liable to compensate the true owner
- Exemplary damages are punitive damages awarded to punish the defendant and vindicate the strength of the law, including where the defendant's conduct is calculated to earn him a profit
Court orders
#- 1.A declaration that the transfer of Title of Land Parcel No. Kiambu Municipality Block 1/57 to the 1st defendant is null and void
- 2.A declaration that the plaintiff is the legitimate owner of Land Parcel No. Kiambu/Municipality Block 1/57
- 3.An order directing the Land Registrar, Kiambu Land Registry to amend the register for Kiambu Municipality Block 1/57 to indicate the plaintiff as the registered owner
- 4.General and punitive damages of Kshs.1,000,000/-
- 5.Mesne profits of Kshs.3,276,000/-
- 6.Costs of the suit and interest
- Jurisdiction invoked
- Original civil jurisdiction of the Environment and Land Court over disputes relating to title to land (Article 162(2)(b) of the Constitution as read with the Environment and Land Court Act, not expressly cited in the judgment)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Kiambu Murutani Company Limited v Michael Njuguna, Equity Bank Limited & Antique Auctions (Environment & Land Case 942 of 2013) (Environment and Land) [2020] KEELC 326 (KLR)", Case Analysis (2020). ELC No. 942 of 2013. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2020/326/eng@2020-12-10
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.