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ELCPartially AllowedEnvironment & Land Case 23 of 2020· [2023] KEELC 20877 (KLR)

Muiruri & another v Thathi & 4 others

Environment and Land Court
17 October 2023
MGM.N. Gicheru
2,784 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan court cancelled fraudulently obtained land titles and ruled that even a bank that did due diligence cannot keep rights over unlawfully acquired land.

What this practically means

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Executive summary

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The Plaintiffs, brothers and registered owners of L.R. Ngong/Ngong/28954 through transmission following their father's death, discovered in March 2020 that the land had been fraudulently transferred to the first Defendant in October 2018 and onward through a chain to the third Defendant, who charged it to NCBA Bank for Kshs. 15.2 million. They sought declarations, cancellation of titles and the charge, injunctions and damages. The first and third Defendants did not defend. The second Defendant denied involvement, claiming his documents were misused in the fraud. NCBA pleaded due diligence as an innocent chargee and, by a notice under Order 1 Rule 24(1), sought indemnity from the third and fifth Defendants. The Attorney General denied liability and raised non-compliance with Section 13A of the Government Proceedings Act. The court found the Plaintiffs never transferred the land; the transfers were fraudulent and void. Applying Dina Management Limited v County Government of Mombasa, it held that unlawfully acquired property enjoys no Article 40 protection and no bona fide purchaser defence was available to the bank. The Land Registrar's failure to call evidence or produce statutory records was treated as an admission that the transfer was unprocedural. Judgment was entered for the Plaintiffs against the first, third, fourth and fifth Defendants as prayed, and for NCBA against the third and fifth Defendants on indemnity. The second Defendant, himself a fraud victim, escaped liability. Costs were awarded against the first, third and fifth Defendants.

Key legal issues

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01

Whether the fourth Defendant was an innocent chargee for value without notice

Holding

It was not; the suit land was unlawfully acquired, so no protection under Article 40 or the bona fide purchaser doctrine was available

Reasoning

The court found the Plaintiffs never transferred the land and the first and third Defendants acquired it fraudulently. Relying on Dina Management, once the root of title is unlawful, subsequent acquirers cannot claim Article 40 protection or bona fide purchaser status, even where a chargee conducted due diligence such as official searches and valuation.

02

Effect of the fifth Defendant's failure to call a witness

Holding

Failure to call evidence was an admission of the averments against the Land Registrar's office

Reasoning

The Land Registrar was under a statutory duty under Section 7 of the Land Registration Act to maintain parcel files, instruments and records. Its failure to participate or produce transfer documents, Land Control Board consents and stamp duty assessments meant such records did not exist and the transfer was unprocedural.

p. 6
03

Whether failure to join Antony Gaita Warui was fatal

Holding

It was not fatal since there was no lawful transfer in the first place

Reasoning

Because the original transfer was fraudulent and void, the subsequent transactions do not qualify as transfers at all. The necessary parties were the Plaintiffs, the Land Registrar and the bank; the intermediate transferee's absence could not affect the outcome.

p. 6
04

Liability of the third Defendant and Land Registrar to indemnify the fourth Defendant

Holding

Both are liable to indemnify the bank under the notice of claim

Reasoning

The third Defendant, a beneficiary of a fraudulent transfer, covenanted in the letter of offer to repay the loan and is bound to indemnify. The Land Registrar is liable because failure to maintain statutory records enabled the fraud, and it declined to participate in the case to explain what occurred.

p. 1

Legal principles established

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  • Property rights under Article 40 do not extend to property unlawfully acquired; a party claiming through a fraudulent root of title cannot benefit from the bona fide purchaser doctrine
  • Failure by a public officer to call evidence or produce records, where records are by law in its custody, amounts to admission of the averments against it

Court orders

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  1. 1.Judgment entered for the Plaintiffs against the first, third, fourth and fifth Defendants as prayed for in the plaint
  2. 2.Judgment entered for the fourth Defendant against the third and fifth Defendants as per the notice of claim dated 4/3/2022
  3. 3.Costs of the Plaintiffs, the second and fourth Defendants to be borne by the first, third and fifth Defendants

Authorities

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Legislation

  • Constitution of KenyaArticle 40(6)
  • Land Registration ActSection 7
  • Government Proceedings ActSection 13A
  • Civil Procedure RulesOrder 1 Rule 24(1)

Cases cited (1)

  • Dina Management Limited v County Government of Mombasa and 5 others
    Petition No. 8 (E010) of 2021

    Article 40(6) does not protect unlawfully acquired property; no bona fide purchaser protection where root of title is challenged

Jurisdiction invoked
Original jurisdiction under Article 162(2)(b) of the Constitution (Environment and Land Court)

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, "Muiruri & another v Thathi & 4 others", Case Analysis (2023). Environment & Land Case 23 of 2020. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/20877/eng@2023-10-17

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