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ELCDismissedELC No. 25 of 2019· [2021] KEELC 1525 (KLR)

Anthony Mbugua Njihia & 36 others v Urithi Housing Co-operative Society Ltd & another [2021] KEELC 1525 (KLR)

Environment and Land Court
12 October 2021
JKJ. G. Kemei
7,572 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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The High Court dismissed plot buyers' claims against a housing cooperative and Family Bank, confirming buyers take land subject to a registered bank charge they knew about.

What this practically means

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Executive summary

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Thirty-seven Plaintiffs sued the 1st Defendant, Urithi Housing Co-operative Society Ltd, from which they purchased plots on L.R. No 11486/6 (Panaroma Estate), and Family Bank Limited, which held a first legal charge over the property securing a Kshs 500 million loan advanced to the 1st Defendant in 2015. After default, Family Bank issued statutory notices of sale, prompting this suit seeking declarations of entitlement to plots, specific performance compelling transfer of 53 plots, an injunction against the 2nd Defendant, and general damages. The court first struck out the suits of 30 Plaintiffs who did not testify, holding that the suit was not a representative suit under Order 1 Rules 8 and 13 and no written authority existed for the 7 who testified. On the merits, the court found the 2015 charge took priority over the sales that occurred from 2016, and that the charge was disclosed in the agreements of sale; the Plaintiffs' claim of charging behind their backs was untrue and they failed to conduct searches. Under Sections 87 of the Land Act and 59 of the Land Registration Act, the chargee's consent was required for transfers, and none was obtained. Specific performance was refused as the vendor lacked the title, which was held by the chargee pending repayment. The injunction against the bank was dismissed for lack of privity, subordinate rights, and failure to demonstrate imminent danger or discharge the burden of proof; damages were held an adequate remedy. General damages were refused as unrecoverable in contract, and no constructive trust was pleaded or proved. The suit was dismissed with each party bearing their own costs, and interim orders of 19/12/2019 were discharged.

Key legal issues

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01

Whether the 30 Plaintiffs who did not testify could rely on the evidence of 7 testifying Plaintiffs

Holding

The suits of the 30 non-testifying Plaintiffs were struck out for want of prosecution since the suit was not a representative suit and no written authority existed

Reasoning

The court found no evidence that the 7 Plaintiffs testified with the authority of the 30. A representative suit requires written authority under Order 1 Rules 8 and 13 of the Civil Procedure Rules, and none was provided, so those Plaintiffs' claims could not proceed.

p. 6
02

Whether the sale of the plots is subject to the charge in favour of the 2nd Defendant

Holding

The sale is subject to the charge; the charge predates the sales and was disclosed in the agreements of sale

Reasoning

The charge was registered in 2015 while the sales occurred from 2016 onwards, so the charge took priority. The charge was disclosed in the agreements of sale, and Sections 87 of the Land Act and 59 of the Land Registration Act required the chargee's consent before registration of any transfer, which was not obtained.

p. 6
03

Whether the Plaintiffs are entitled to specific performance against the 1st Defendant

Holding

Refused because the vendor does not possess the title, which is held by the chargee until the loan is repaid in full

Reasoning

The title is yet to be subdivided and is with the 2nd Defendant as security. Following Oscar Ochieng v Prilcscot, specific performance cannot be decreed where the vendor is unable to convey the land, and the title charged cannot be conveyed until the loan is repaid.

p. 7
04

Whether the Plaintiffs are entitled to an injunction against the 2nd Defendant

Holding

Refused; no privity of contract with the 2nd Defendant and the Plaintiffs took subject to the charge knowing the risks

Reasoning

The Plaintiffs entered the agreements with full knowledge of the charge and assumed the risk of default. Their rights are subordinate to the chargee's rights. They may claim against the 1st Defendant only. No imminent danger of auction was shown given the loan restructuring, and damages are an adequate remedy.

p. 8
05

Whether the Plaintiffs are entitled to general damages

Holding

Dismissed; general damages are not recoverable in breach of contract claims

Reasoning

Though pleaded, the prayer was abandoned midway, and in any event the settled position is that general damages are not awarded in contract claims, following Kenya Tourist Development Corporation v Sundowner Lodge Limited.

p. 8

Legal principles established

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  • A purchaser must carry out due diligence, including a search of the register, before purchasing land
  • Where a charge prohibits transfer without the chargee's consent, no transfer, assignment, lease or sublease shall be registered until written consent of the chargee is produced to the Registrar
  • Specific performance will not be decreed where the vendor is unable to convey the land
  • A purchaser who buys with knowledge of an existing charge takes subject to it, and any beneficial interest is subordinate to the chargee's rights

Court orders

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  1. 1.Suits of the 30 Plaintiffs who did not offer evidence struck out for want of prosecution
  2. 2.Plaintiffs' suit (as concerns the 7 Plaintiffs who testified) dismissed
  3. 3.Each party to meet their own costs
  4. 4.Interim orders issued on 19/12/2019 discharged

Authorities

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Legislation

  • Civil Procedure RulesOrder 1 Rule 8 and 13
  • Land ActSection 85(3)
  • Land ActSection 87
  • Land ActSection 88(1)(g)
  • Land ActSections 90 and 96
  • Land Registration ActSection 59

Cases cited (10)

  • Twalib Hatayan & Another v Said Saggar Ahmed Al-Heidy & 5 others
    [2015] eKLR
  • Gurdev Singh Birdi & Narinder Singh Ghatora Case
  • Reliable Electrical Engineers (K) Ltd v Mantrac Kenya Limited
    [2006] eKLR
  • Kenya Power and Lighting Co. Ltd vs. Sheriff Molana Habib
    [2018] eKLR
  • First Choice Mega Store Limited v Ecobank Kenya Limited
    [2017] eKLR
  • Ibrahim Seikei T/A Masco Enterprises v Delphis Bank
    [2004] eKLR
  • Oscar Ochieng & another v Prilcscot Company Limited
    [2018] eKLR
  • Andrew Muriuki Wanjohi v Equity Building Society Ltd & 2 others
    [2006] eKLR (Nairobi HCC No. 203 of 2005)
  • Monica Waruguru Kamau & another v Innercity Properties Limited & 2 others
    [2020] eKLR (Nairobi HCC No. E035 of 2020)
  • Kenya Tourist Development Corporation v Sundowner Lodge Limited
    [2018] eKLR (Nairobi Civil Appeal No. 120 of 2017)
Jurisdiction invoked
Original jurisdiction of the Environment and Land Court under Article 162(2)(b) of the Constitution

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (3)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Anthony Mbugua Njihia & 36 others v Urithi Housing Co-operative Society Ltd & another [2021] KEELC 1525 (KLR)", Case Analysis (2021). ELC No. 25 of 2019. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2021/1525/eng@2021-10-12

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