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ELCPartially AllowedELC Case No. 917 of 2005 (consolidated with HCCC No. 5245 of 1988 and HCCC No. 4886 of 1988)· [2020] KEELC 2743 (KLR)

Patricia Wairimu Kung'u & another v Kenya Commercial Bank Limited & 2 others [2020] KEELC 2743 (KLR)

Environment and Land Court
5 May 2020
5,040 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~20 min to read original · ~4 min brief

The bottom line

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A Nairobi court ruled that a land sale without payment of the purchase price is invalid, even if the transfer was officially registered, and the buyer must return all rent collected.

What this practically means

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Executive summary

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This consolidated matter concerned L.R. No. 37/260/29, Codi Road, Nairobi West, originally owned by Robert Mungai Kung'u who died intestate in 1987. His widow Patricia filed HCCC No. 4886 of 1988 against the tenant Wolfgang Roesch seeking vacant possession and rent arrears; Benny Roesch sued Patricia in HCCC No. 5245 of 1988 for specific performance of an alleged sale by the late husband; and Patricia sued KCB and Fatuma Mohamed Ali in ELC No. 917 of 2005 seeking a declaration that the transfer to Fatuma and charge to KCB were irregular for want of consideration. Under a sale agreement dated 25/9/1991, Fatuma was to buy the property for Kshs. 1,000,000/= under a KCB staff house loan, with the transfer and charge registered on 18/12/1991 before release of proceeds. On discovery of the pending suits, KCB withheld the funds, Oraro Advocates refunded the proceeds, and Fatuma bought a different property under the same scheme. The court found that the contract failed for want of consideration, that Fatuma rescinded it as shown by her letter of 30/3/1992, and that she unjustly enriched herself by evicting the tenant and collecting rent from 2008. The consolidated suits of 1988 were dismissed for want of evidence and participation. The court granted prayers (i), (ii) and (iii) of Patricia's plaint, ordered Fatuma to restitute all rent collected within 45 days, dismissed Fatuma's counterclaim, and awarded costs against the 2nd defendant. Judgment was delivered virtually by K. Bor, J on 5 May 2020.

Key legal issues

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01

Validity and enforceability of the sale agreement dated 25/9/1991

Holding

The contract failed for want of consideration; the sale proceeds were never paid to Patricia and the contract was not valid and enforceable despite registration of the transfer and charge

Reasoning

Both KCB and Patricia conceded that the sale proceeds were never paid to Patricia. The agreement was expressly subject to financing by KCB; when the pending litigation surfaced, KCB withdrew financing, the loan was cancelled and Oraro Advocates refunded the proceeds to KCB. Registration of the transfer and charge did not cure the absence of consideration, and Fatuma failed to prove she was a purchaser for valuable consideration.

p. 5
02

Whether Fatuma rescinded the sale agreement

Holding

The court found that Fatuma rescinded the contract, evidenced by her letter of 30/3/1992 cancelling insurance deductions and the conduct of her advocates

Reasoning

Fatuma wrote to KCB's payroll department stating she did not purchase the property due to unavoidable circumstances and sought cancellation of monthly deductions. Her own advocates later wrote that the purchaser had decided to pull out of the transaction. Her letter through Muriuki Ngunjiri & Company acknowledged that the facility was repaid almost as soon as it was availed. These facts demonstrated rescission.

p. 5
03

Unjust enrichment arising from Fatuma's collection of rent

Holding

Fatuma unjustly enriched herself by evicting the tenant in 2008 and collecting rent from property to which she was not entitled, and was ordered to restitute all rent collected

Reasoning

Fatuma testified she collected monthly rent of Kshs. 20,000/= in 2008 and Kshs. 60,000/= in 2020 from the Suit Property. Having rescinded the contract and paid no consideration, she had no entitlement to the property or its fruits. The court held it unconscionable for her to retain the rent and directed restitution within 45 days.

p. 5
04

The claims in the consolidated suits HCCC No. 4886 of 1988 and HCCC No. 5245 of 1988

Holding

Both suits were dismissed for want of prosecution of the claims: no evidence was led in the first, and the plaintiff in the second did not participate in the hearing

Reasoning

Patricia's claim against Wolfgang was overtaken by events when Fatuma evicted the tenant in 2008. Benny Roesch, though served, did not attend the hearing and appears to have lost interest after her eviction. The court dismissed both suits with no orders as to costs.

p. 4

Legal principles established

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  • A transfer of land under a contract of sale fails for want of consideration even where the transfer and charge have been registered
  • A party who collects rent from land she is not entitled to must restitute those proceeds to the entitled party

Court orders

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  1. 1.Dismissal of Patricia's claim for vacant possession and rent arrears against Wolfgang Roesch in HCCC No. 4886 of 1988 with no orders as to costs
  2. 2.Dismissal of Benny Roesch's suit for specific performance in HCCC No. 5245 of 1988 with no orders as to costs
  3. 3.Grant of prayers (i), (ii) and (iii) of the plaint dated 21/7/2005 in HCCC No. 917 of 2005
  4. 4.Fatuma directed to restitute to Patricia all monies she collected as rent from the Suit Property within 45 days of the judgment
  5. 5.Dismissal of Fatuma's counterclaim dated 23/4/2009 with costs to the plaintiff
  6. 6.Costs of HCCC No. 917 of 2005 to be borne by the 2nd defendant

Authorities

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Legislation

  • Indian Transfer of Property Act (repealed)Section 52 (lis pendens)
  • Registration of Titles Act (repealed)Section 23
Jurisdiction invoked
Original civil jurisdiction of the Environment and Land Court over disputes relating to land (L.R. No. 37/260/29, Codi Road, Nairobi West), suits consolidated with transferred High Court suits

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, "Patricia Wairimu Kung'u & another v Kenya Commercial Bank Limited & 2 others [2020] KEELC 2743 (KLR)", Case Analysis (2020). ELC Case No. 917 of 2005 (consolidated with HCCC No. 5245 of 1988 and HCCC No. 4886 of 1988). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2020/2743/eng@2020-05-05

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