Benard Mulongo Mwanja (Suing on his behalf and on behalf of 19 others) v Charles Mbugua Ngugi; Bank of Africa Kenya Ltd (Proposed Interested Party) [2020] KEELC 2520 (KLR)
The bottom line
#A Kenyan court cancelled a bank's charge over land because the bank only did a registry search and never visited the property where buyers had already built homes.
What this practically means
#Executive summary
#Key legal issues
#Whether the Bank of Africa should be enjoined as an interested party and whether the 2017 Judgment should be set aside
Joinder granted; setting aside refused because the Bank failed to exercise due diligence and the Judgment Debtor was out to defraud the Decree Holders, who were in occupation of the portions they bought.
The Court found that the Bank relied merely on a registry search which showed no encumbrances, whereas its officials would have seen homes on the land had they visited. The history of the property was shrouded in secrecy, sale agreements used different LR numbers, and the Judgment Debtor, who claimed ADHD as a defence, went on to charge the very land he had partly sold. Setting aside the judgment would reward fraud and prejudice the Decree Holders.
Whether the charge should be discharged and the portions vested in the Decree Holders
The second application succeeds; the title to be discharged and the portions occupied by the Decree Holders to vest in them, with transfers executed by the Judgment Debtor or the Deputy Registrar in default.
The Court held that the Judgement Debtor knew the property was not available for charging having already sold portions, and the Bank must have been aware of the presence of the Decree Holders. Since the Decree Holders transacted first, their rights prevail over the chargee. Discharge and vesting are necessary to enable the Decree Holders to pursue their respective portions, limited to what they occupy.
Whether the third applicant could file pleadings to pursue his own claim after judgment
Joinder as plaintiff allowed but leave to file pleadings declined; he must prove his own case and cannot ride on the Decree Holders' judgment.
The Applicant did not clarify when he purchased his portion and was trying to come into the proceedings late, after judgment had been delivered. He must prove his case before obtaining judgment and cannot use a shortcut through the existing judgment of the twenty Decree Holders.
Legal principles established
#- A title holder who sells portions of land to purchasers who take possession cannot thereafter validly charge the same portions to a bank; such a charge is illegal, null and void and without contractual effect, leaving the chargee a remedy in debt or restitution against the chargor
- A chargee must do due diligence beyond a registry search, including visiting the land, before accepting it as security
- Purchasers in possession who first transacted with the owner have prior rights that cannot be shelved in favour of a subsequent chargee
Court orders
#- 1.Bank of Africa Kenya Limited enjoined in the suit as an interested party
- 2.Prayer to set aside/vacate the Judgment of 3rd March 2017 dismissed with costs to the Respondents
- 3.The charge and further charge over LR No. 26693/14 Kikuyu (I.R 104873) to be discharged to enable the Decree Holders to pursue their respective portions
- 4.Vesting order issued vesting upon the Decree Holders only the portions they are occupying
- 5.The Judgement Debtor to sign transfer documents in favour of the Decree Holders, and in default the Deputy Registrar to execute the same on his behalf
- 6.Moses Mukundi Chege enjoined as a plaintiff (allowed 24th September 2019 in terms of prayer (1) only)
- 7.Prayer by Moses Mukundi Chege to be allowed to file pleadings declined, with no order as to costs
- Jurisdiction invoked
- Article 162(2)(b) of the Constitution (Environment and Land Court), suit transferred from the High Court
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Benard Mulongo Mwanja (Suing on his behalf and on behalf of 19 others) v Charles Mbugua Ngugi; Bank of Africa Kenya Ltd (Proposed Interested Party) [2020] KEELC 2520 (KLR)", Case Analysis (2020). ELC No. 854 of 2014 (formerly HCCC No. 408 of 2012). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2020/2520/eng@2020-05-05
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.