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ELCAllowedELC. Case No. 843 of 2017 (Formerly Nairobi ELC 180 of 2016)· [2021] KEELC 1992 (KLR)

Patrick Kivai Nduva v Noah Moneria Ole Kurrarru 2 & others [2021] KEELC 1992 (KLR)

Environment and Land Court
16 September 2021
COChristine Ochieng
4,515 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~18 min to read original · ~4 min brief

The bottom line

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A Kenyan court cancelled a fraudulently obtained land title and the bank's loan charge on it, returning the property to its rightful owner.

What this practically means

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Executive summary

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The plaintiff, registered owner of Kajiado/Kitengela/17105 on which he had built 35 apartments, entered an oral agreement in September 2014 with the 1st and 3rd Defendants to exchange the suit property for other rural properties. He surrendered his original title in good faith, but the two colluded to transfer the property to the 1st Defendant, who then used it as security for a loan of about Kshs.50 million from the 2nd Defendant, secured by a registered charge, and defaulted. The 1st and 3rd Defendants filed appearance but no defences; the 2nd Defendant defended, claiming to be an innocent chargee that conducted due diligence. The court framed four issues: legality of the 1st Defendant's acquisition, the bank's status as innocent chargee, entitlement to relief, and costs. Relying on section 26 of the Land Registration Act and the Arthi Highway Developers, Munyu Maina, Alice Chemutai Too and Elijah Makeri Nyangwara authorities, the court held the 1st Defendant's title was fraudulently and unprocedurally acquired and impeachable, and ordered rectification under section 80. It found the charge could not stand because it was registered over a fraudulently procured title, noting the bank's lax internal processes. All reliefs were granted: declarations of fraud and nullity of the charge, re-transfer of the property, Kshs.8,330,000/= in rent refunds, Kshs.24,850,000/= against the 1st and 3rd Defendants, a permanent injunction against sale, and costs to the plaintiff payable by the 1st and 3rd Defendants.

Key legal issues

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01

Whether the 1st Defendant legally acquired the suit property

Holding

The 1st Defendant colluded with the 3rd Defendant to fraudulently transfer the suit property to himself; the title was unprocedurally acquired and impeachable under section 26 of the Land Registration Act, warranting rectification under section 80.

Reasoning

The Plaintiff's evidence that he surrendered his original title in good faith for an exchange transaction remained uncontroverted because the 1st and 3rd Defendants, though served, filed no defences. Applying section 26 of the Land Registration Act and the Arthi Highway Developers and Munyu Maina authorities, the court found the root of the 1st Defendant's title was fraud and misrepresentation, and ordered rectification under section 80.

02

Whether the 2nd Defendant is an innocent chargee without notice to defect in title

Holding

The 2nd Defendant cannot be an innocent chargee because it charged a fraudulently procured title; the charge is null and void.

Reasoning

The court associated itself with Alice Chemutai Too and Elijah Makeri Nyangwara, holding that under section 26(1)(b) a title need not have been procured with the holder's complicity to be impeachable. Evidence also suggested bank staff assisted the 1st Defendant: no CRB due diligence was done and a Branch Manager exceeded his approval limits. The court held the bank's remedy lies against the 1st Defendant personally.

03

Whether the Plaintiff is entitled to the orders sought in the Plaint

Holding

The Plaintiff proved his case on a balance of probability and was entitled to the declarations, re-transfer, refund of rent, damages for fraud and a permanent injunction.

Reasoning

Flowing from the findings on fraud and the invalidity of the charge, the court found the Plaintiff entitled to all the reliefs claimed in the Amended Plaint, including the Kshs.8,330,000/= in rental proceeds and Kshs.24,850,000/= against the 1st and 3rd Defendants for misrepresentation and fraud.

p. 5

Legal principles established

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  • A certificate of title is prima facie evidence of ownership but is impeachable where acquired through fraud, misrepresentation, or illegally, unprocedurally or through a corrupt scheme
  • A registered proprietor whose root of title is challenged must go beyond the title instrument to prove the legality of the acquisition
  • A charge registered over a fraudulently procured title cannot be upheld even against a bank claiming to be an innocent chargee for value

Court orders

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  1. 1.A declaration that the transfer of property Title No. Kajiado/Kitengela/17105 was fraudulent
  2. 2.A declaration that all subsequent dealings with Title No. Kajiado/Kitengela/17105 including the Charge by the 2nd Defendant is null and void
  3. 3.A declaration that the Plaintiff is the lawful owner of property Title No. Kajiado/Kitengela/17105 and entitled to possession and all the rental proceeds thereof
  4. 4.An order that the Defendants do forthwith re-transfer and surrender the property Kajiado/Kitengela/17105 to the Plaintiff
  5. 5.The 1st Defendant directed to pay the Plaintiff Kshs.8,330,000/= on account of rent for December 2014 to December 2015, and the 1st and 3rd Defendants to jointly pay the Plaintiff Kshs.24,850,000/= pursuant to their misrepresentation and fraud
  6. 6.An order of permanent injunction restraining the 2nd Defendant from advertising for sale by auction or private treaty or in any way disposing of the property Kajiado/Kitengela/17105
  7. 7.Costs of the suit awarded to the Plaintiff, to be paid by the 1st and 3rd Defendants

Authorities

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Legislation

  • Land Registration ActSection 26(1)(a) and (b), 26(2)
  • Land Registration ActSection 80
  • Central Bank of Kenya Prudential Guidelines on Due Diligence

Cases cited (11)

  • Arthi Highway Developers Limited v West End Butchery Limited & 6 others
    [2015] eKLR
  • Alice Chemutai Too v Nickson Kipkurui Korir & 2 others
    [2015] eKLR
  • Elijah Makeri Nyangwara v Stephen Mungai Njuguna & Another
    [2013] eKLR (Eldoret ELC Case No. 609 B of 2012)
  • Kibiro Wagoro Makumi v Francis Nduati Macharia & another
    [2018] eKLR
  • Vincent Koskei v Benard Koskei
    [2018] eKLR
  • Munyu Maina v Hiram Gathiha Maina
    Civil Appeal No. 239 of 2009
  • William Muthee Muthoni v Bank of Baroda
    (2014) eKLR
  • Aineah Likuyani Njirah v Aga Khan Health Services
    (2013) eKLR
  • Savings & Loan (K) Limited v Kanyenje Karangaita Gakombe & Another
    (2015) eKLR
  • Kiplangat Shelisheli Mutarakwa v Joseph Rotich Kones
    (2018) eKLR
  • Edward Mwangi Irungu v Chief Land Registrar & 3 others
    (2018) eKLR
Jurisdiction invoked
Original jurisdiction of the Environment and Land Court under Article 162(2)(b) of the Constitution and the Environment and Land Court Act

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (4)

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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, "Patrick Kivai Nduva v Noah Moneria Ole Kurrarru 2 & others [2021] KEELC 1992 (KLR)", Case Analysis (2021). ELC. Case No. 843 of 2017 (Formerly Nairobi ELC 180 of 2016). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2021/1992/eng@2021-09-16

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