LWN v PLM & 3 others (Civil Appeal E738 of 2021) [2024] KECA 1954 (KLR) (20 December 2024) (Judgment)
Neutral citation:
[2024] KECA 1954 (KLR)
Republic of Kenya
Civil Appeal E738 of 2021
MS Asike-Makhandia, K M'Inoti & JW Lessit, JJA
December 20, 2024
Between
LWN
Appellant
and
PLM
1st Respondent
Consolidate Bank of Kenya Limited
2nd Respondent
CGK
3rd Respondent
Equity Bank Limited
4th Respondent
(Appeal from the judgment and decree of the Environmental & Land Court at Nairobi (Komingoi, J.) dated 14th October 2021 in ELCC No. 358 of 2010
Environment & Land Case 358 of 2010
)
Judgment
1.The appellant, LWN (W), is aggrieved by the judgment of the Environment and Land Court (ELC) at Nairobi (Komingoi, J.), dated 14th October 2021 by which the ELC dismissed her suit against the respondents. The ELC found that the property known as LR No. xxx (the suit property), which the appellant claimed to be her property, was lawfully transferred and registered in the name of the 1st respondent, PLM (M); lawfully charged in favour of the 2nd respondent, Consolidated Bank of Kenya Ltd. (Consolidated Bank) and upon default on the part of M, lawfully sold to the 3rd respondent, CGK (G) in exercise of Consolidated Bank’s statutory power of sale. The court also found that G lawfully charged the suit property to the 4th respondent, Equity Bank (Equity Bank).
2.The brief background to the appeal is as follows. On or about 26th July 2010, the W filed a suit the ELC against the respondents seeking, among others, a declaration that the registration of the suit property in the names of the M and G and the charging of the same in favour of the Consolidated Bank and Equity Bank, was illegal, null and void; an order for registration of the suit property in her name; and a permanent injunction to stop the respondents from alienating or interfering with the suit property.
3.W pleaded that while cohabiting with M as husband and wife, she purchased and was registered as the owner of the suit property. In order to obtain a loan of Kshs 2.2 million from Co-operative Bank of Kenya Ltd., where M was a manager, she transferred the suit property to M and the same was charged in favour of Co-operative Bank on 26th April 2002. The sum of Kshs 2.2 million was duly disbursed to her and she repaid the amount in full.
4.W further pleaded that in February 2003, she learnt that M had obtained, without her knowledge, a further loan from Co-operative Bank resulting in a further charge of the suit property. Thereafter, M left the employment of Co- operative Bank and joined Consolidated Bank, which took over the charge and further charge.
5.On 4th February 2009, W filed in the High Court at Nairobi, Civil Suit No. 03 of 2009 (OS) against M and obtained an order of injunction retraining him from dealing which the suit property. The order of injunction was registered against the title on 26th May 2009. However, W added, the same was unlawfully cancelled by the Principal Registrar of Titles (the registrar) and on 2nd March 2010, Consolidated Bank transferred and registered the suit property in the name of G. Thereafter, G charged the suit property in favour of Equity Bank.
6.W further pleaded that the transfer of the suit property to G was fraudulent, null and void. The particulars of fraud on the part of M, Consolidated Bank and G were pleaded, among them being unlawful cancellation of the court order; cancellation of the court order by registrar who has no such power; undervaluation of the suit property; conspiracy to sell the same to G, a brother-in-law of M; and violation of the doctrine of lis pendens. The charge of the suit property by G in favour of Equity Bank was also challenged as illegal and fraudulent and the particulars of fraud were pleaded.
7.In his defence, M denied W’s averments and pleaded that he purchased the suit property from her for valuable consideration. He denied all the particulars of fraud.
8.On its part, Consolidated Bank also filed a defence and denied the averments by W, save that M had been its employee and that the suit property was charged in its favour after the same was discharged by Co-operative Bank. Consolidated Bank further pleaded that it was not a party to Civil Suit No. 03 of 2009 (OS) and that no court order was issued against or served upon it and that it lawfully exercised its statutory power of sale after default by M.
9.As for G, he also denied W’s averments and the particulars of fraud and pleaded in his defence that the cancellation of the court order was done by the registrar rather than by himself; that he was not served with the court order and was not a party to the suit in which the order was issued; that he purchased the suit property from Consolidated Bank in exercise of its statutory power of sale for valuable consideration of Kshs. 4,600,000/-; and that as a non-party to the suit in which the court order was issued, he was not bound by the doctrine of lis pendens.
10.G further pleaded that having transferred the suit property to M, W had no enforceable interest in the suit property and that the title he had obtained was valid, lawful and indefeasible.
11.Lastly, Equity Bank also denied W’s averments and pleaded that it lawfully extended a loan of Kshs. 2,760,000 to G to purchase the suit property after conducting due diligence and ascertaining that the suit property was duly registered in G’s name. A charge in its favour was duly registered against the suit property to secure payment of the loan.
12.It was Equity Bank’s further plea that it was not aware of any relationship between M and G; it was not a party to the suit in which the court order was issued and was never served with the said order; that the court order which, appeared to have been irregularly registered on a Sunday, was cancelled by the registrar; that as at the time the suit property was registered in the name of G and the charge registered in favour of Equity Bank, the court order had already been canceled; and that the doctrine of lis pendens did not apply to it.
13.W subsequently filed replies to the defences in which she joined issues with the respondents. The suit was assigned to Gitumbi, J., who heard W’s evidence and cross- examination. The matter was subsequently taken over Komingoi, J., who, with the consent of the parties, proceeded from where Gitumbi, J. had left. Each party called only one witness. The learned judge identified five issues for determination, namely:
14.As earlier indicated, the learned judge found no merit in the suit and dismissed the same. W was aggrieved and filed the present appeal underpinned by 12 grounds, some of which are repetitive and overlapping. Indeed, in her written submissions dated 21st January 2023, W’s learned counsel, Mr. Okatch, framed and urged only three issues for determination by the Court, namely, whether the ELC erred by:i.failing to hold that the transfer of the suit property to G by M and Consolidated Bank was in violation of the court order;ii.holding that failure to include the registrar in the suit was fatal; andiii.Ignoring the relationship between M and G and the fact that they could have conspired with Consolidated Bank to deprive W of the suit property.
15.Singularly missing from the grounds of appeal and the W’s submissions is the foundational issue whether the transfer of the suit property to M, on which all the other issues hinge, was fraudulent, null and void. We shall revert to this issue later in this judgment.
16.In support of the first issue, W submitted that the court order in question was issued on 26th March 2009 while the agreement for sale that resulted in the transfer of the suit property to G was dated 11th June 2009 and that therefore the sale was in violation of the court order. It was also contended that the sale of the suit property while the suit was pending in court was in violation of the doctrine of lis pendens. She relied on the decision in Bellamy v. Sabine [1857] 1 De J. 566 where Turner, LJ. explained the rationale of the doctrine of lis pendens as being to prevent a defendant from alienating property that is the subject of a court action in order to defeat the plaintiff’s claim. She further relied on the decision of this Court in Naftali Ruthi v. Patrick Thuita Gacheru & Another [2015] eKLR and submitted that the purpose of the doctrine is to preserve the suit property pending the hearing and determination of the suit.
17.W further submitted that the suit property was not sold to G with vacant possession, meaning that G and Consolidated Bank were aware that she was in possession. It was also argued that unless set aside, all parties were bound to respect the order of the court, even if they believed it was not valid. The decision of this Court in Shimmers Plaza Ltd v. National Bank of Kenya Ltd. [2015] eKLR was cited in support of the submission.
18.On the second issue, W submitted that the trial court erred by holding that non-joinder of the registrar was fatal to her case. She cited order 1 rule 9 of the Civil Procedure Rules and submitted that a suit cannot be defeated by misjoinder or non-joinder of a party and that the court is obliged to deal with the matter in dispute as between the parties before it. In support of the submission she relied on the decision of this Court in William Kiprono Towett & 1597 others v. Farmland Aviation Ltd & 2 Others [2016] eKLR and submitted that the court order was duly registered against the title and further that the court had power to summon the registrar if it felt that his presence was necessary. It was also contended, on the authority of the decision in Republic v. Registrar of Titles, Mombasa & 4 Others ex parte A. K. Abdulgani Ltd [2018] eKLR, that the registrar was obliged to follow the right process.
19.Lastly, on the third issue, it was submitted that M, in his capacity as a manager of Consolidated Bank deliberately defaulted in servicing the loan so as to sell the suit property by private treaty to G, his brother-in-law. It was also contended that G was not an innocent purchaser in so far as he bought the suit property during the subsistence of a court order. The decision of the Court of Appeal of Ugandan in Katende v. Haridar & Co. Ltd. [2008] 2 EA 173 was cited on the attributes of a bona fide purchaser for value. W contended that the sale of the suit property to G was not in good faith and was merely intended to defeat her claim thereto. She also submitted that it was undersold for Kshs 4,600,000.00 whilst its market value was Kshs 16,000,000.00
20.In his submissions dated 30th March 2023, M, who appeared in person, submitted that he was not involved in the transfer of the suit property to G and was not aware of the court order registered against the title. He contended that W could not have validly registered the court order against the title when she knew that the suit property was charged to Consolidated Bank and that the proceeds of the loan from that bank had been disbursed to her.
21.M further submitted that from her evidence, it was W who dealt with the registrar in registering the court order and that she was subsequently summoned by the registrar to show cause why it should not be removed and appeared before him with her lawyers before cancellation of the order. It was his view that W was blaming the wrong parties, having failed to join the registrar in the suit so that he could shed light on what transpired.
22.It was M’s further view that having not been involved in the transfer of the suit property to G, the fact that he was his brother-in-law was not evidence of conspiracy, fraud or illegality. He also faulted W for alleging fraud and conspiracy between him and Co-operative Bank, yet she did not make that bank a party to the suit. He added that both W and G wrote to Consolidated Bank, independently and without his knowledge, offering to purchase the suit property and that he cannot be blamed for the fact W was not successful in her bid.
23.Wangi also contended that W’s case was inconsistent and contradictory, because while she pleaded in the ELC suit that the suit property was her personal property, in the High Court suit she pleaded that it was matrimonial property. He submitted that the ELC could not validly issue the order sought by W to transfer the suit property to her because it was neither her property nor registered in her name at the material time. Lastly, it was his view that having sold and transferred the suit property to him, W had no locus standi to claim the property.
24.Consolidated Bank, represented by Ms. Gitau, learned counsel, opposed the appeal relying on submissions dated 12th May 2023. Counsel submitted that W sold the suit property for valuable consideration and transferred the same to M free of all encumbrances and that M was duly registered as the proprietor. Before taking over M’s loan from Co-operative Bank and charging the suit property, Consolidated Bank undertook due diligence and confirmed that M was the registered owner and that there was no inhibition on the title after the Co-operative Bank encumbrance was discharged.
25.Consolidated Bank further submitted that upon M’s default in servicing the loan, it exercised its statutory power of sale and sold the suit property by private treaty to G for Kshs. 4,600,000.00. Before the sale, the suit property was valued by qualified valuers who found that its market value was Kshs. 8,500,000.00; mortgage value 7,000,000.00; and forced value Kshs 4,000,000.
26.As regards the first issue in this appeal, it was submitted that Consolidated Bank was not a party to the High Court suit where the court order was issued, was not aware of the same and that at the time of sale and transfer of the suit property to G, the order had already been cancelled and the title had no inhibition. Consolidated Bank invoked the section 23 of the Registration of Titles Act (repealed), and Torrens System of Registration and submitted that as a bona fide purchaser for value, G’s title was indefeasible. In support of the submission the Bank relied on the decision of this Court in Charles Karathe Kiarie & 2 others v. Administrators of the Estate of John Wallace Mathare & 5 Others [2013] eKLR.
27.Turning to the second issue Consolidated Bank submitted that W admitted that the registrar had written to her to show cause why the court order should not be cancelled, which means that the cancellation was not arbitrary. It was also contended that the trial court was entitled to draw an adverse inference from W’s failure to make the registrar a party to the suit or to call him or her as witness. The Bank cited the decision of this Court in Kenya Power & Lighting Co. Ltd. v. Margaret Akoth Olang [2017] eKLR in support of the submission.
28.On the last issue, Consolidated Bank submitted that W had failed to prove that its sale and transfer of the suit property to G was fraudulent, illegal, unlawful or the result of a conspiracy. Citing section 69(1) of the Transfer of Property Act (repealed), it was contended that Consolidated Bank had power to sell the suit property either by public auction or private treaty upon M’s default. Consolidated Bank relied on the decisions in Jennifer Nyambura Kamau v. Humphrey Mbaka Nandi [2013] eKLR) and Central Bank of Kenya Ltd v. Trust Bank Ltd & 4 Others [1996] eKLR and submitted that W had failed to discharge her burden of proof as regards fraud, illegality and conspiracy.
29.Also opposing the appeal was G, whose learned counsel, Mr. Koceyo, relied on submissions dated 6th February 2023. It was submitted that Whad admitted that she willingly transferred the suit property to M and therefore she had no interest or right to the same, which she could enforce in law. It was further contended that G was not a party to the suit in which W had obtained the court order, was not aware of the court order, and that as of the date the suit property was sold and transferred to him, there was no court order prohibiting the transfer. G insisted that he did not purchase the suit property from M, but from Consolidated Bank.
30.Relying on the decision of the High Court in Thugi River Estate Ltd & another v. National Bank of Kenya Ltd [2008] eKLR, Mr. Koceyo contended that sale by private treaty by a mortgagor is a lawful sale and that from the evidence on record, G was an innocent purchaser for value. He contended that Consolidated Bank was not obliged to accede to W’s request to take over M’s loan as there was no privity of contract between her and the bank and that such refusal did not constitute evidence of fraud or conspiracy. In support of the submission counsel relied on the decision of this Court in Savings & Loan (K) Ltd v. Kanyenye Karangaita Gakombe & Another [2015] eKLR. It was also submitted that, contrary to W’s assertion, G did not purchase the suit property at a throw-away price, but above the forced sale value, which cannot be faulted. Counsel submitted that W did not even produce a valuation report to show that the suit property was undersold.
31.On the cancellation of the court order, it was submitted that G did not participate in the cancellation and that W ought to have made the registrar a party to the proceedings so as to give him an opportunity to be heard.
32.Lastly, on the relationship between M and G, it was submitted that G purchased the suit property from Consolidated Bank and not from M and that at no time did he deal with M as regards the transaction. It was contended that the mere fact that M and G were in- laws was not evidence of fraud to warrant nullification of the transaction between G and Consolidated Bank. Gitari relied on Demutila Nanyama Pururmu v. Salim Mohamed Salim [2021] eKLR on the standard of proof of fraud.
33.For the foregoing reasons G urged the Court to dismiss the appeal with costs.
34.Ms. Mwangi, learned counsel, for Equity Bank did not file any submissions but opted to adopt and rely on the submissions made by Consolidated Bank and G.
35.We have carefully considered the record of appeal, the judgment of the ELC, the submissions by the parties and the authorities they cited. Since this is a first appeal, our duty is to analyse, evaluate, assess and interrogate the evidence on record with a view to arriving at our own independent conclusion. In doing so, we are obliged to bear in mind that unlike the trial court, we did not have the advantage of seeing or hearing the witnesses as they testified and therefore, on issues turning on assessment of credibility of witnesses, we are reminded to be slow interfere with the conclusions of the trial court. (See Seascapes Ltd v. Development Finance Co. of Kenya Ltd. [2009] KLR, 384).
36.The first issue that we find to be extremely curious in this appeal and which we have already adverted to, is that the grounds of appeal urged by W do not include a challenge to the findings of the trial court on the registration of M as the proprietor of the suit property. While that issue formed a major plank of W’s case in the trial court, in this Court she has only raised and urged the three issues we have referred to, namely, whether the transfer of the suit property to G by Consolidated Bank was in violation of a court order; whether the non-joinder of the registrar was fatal; and whether the relationship between G and M proved conspiracy to deprive her of the suit property.
37.Before the trial, court W’s case was that she purchased the suit property “as a femme sole” from her own personal resources. She transferred the same to M for the sole purpose of enabling him charge it to obtain a loan at staff rates from his then employer, the Co-operative Bank. Upon repayment of the loan, M was to transfer the suit property back to her. However, M fraudulently obtained a further loan from Co-operative Bank, and charged the suit property without her knowledge. That second loan was taken over by Consolidated Bank and when M defaulted, Consolidated bank sold the suit property to G.
38.W was the only witness on her behalf and conceded that the loan from Co-operative Bank was recovered from M’s salary and that by the time Consolidated Bank sold the suit property to G, M had already left the employment of Consolidated Bank. She was adamant that she did not enter into any agreement for sale with M and that she only transferred the suit property to him on the understanding that he would transfer the suit property back to her upon repayment of the loan to Co-operative Bank. When shown the agreement for sale dated 6th June 2021 between herself and M, she denied knowledge of the same and claimed that her signature thereon was a forgery.
39.On his part, M testified that he purchased the suit property from W for Kshs 2,200,000.00 and that they entered into the agreement for sale dated 6th June 2021, which was drawn by W’s lawyers. Subsequently she transferred the suit property to him and it was registered in his name on 26th April 2002. W needed the money to complete the development of an estate that she was constructing in Donholm, Nairobi, and the purchase price of Kshs 2,200,000.00 was paid to her on 4th May 2022 vide Co- operative Bank cheque No. 010211. The loan from Co- operative Bank was recovered from his salary.
40.On this issue, the learned judge concluded as follows in the relevant parts of her judgment, which we quote in extenso:
41.As we have pointed out, that finding is not challenged in this appeal. In other words the sale and transfer of the suit property to M is no longer an issue in this appeal. W must therefore be taken to have accepted the finding of the trial court that she willingly and lawfully sold and transferred the suit property to M. Without challenging the decision of the trial court as regards the sale and transfer of the suit property to M, W is a total stranger to the subsequent transactions between M and Consolidated Bank, Consolidated Bank and G and G and Equity Bank. It is only by challenging and proving that the trial court erred in its findings regarding the transfer of the suit property to M, that W can have the basis to challenge the subsequent charge of the suit property to Consolidated Bank, forced sale to G, and charge by G to Equity Bank.
42.But even if W had challenged the findings of the trial Court as regards her sale and transfer of the suit property to M, we would find it difficult to disagree with the trial court on the basis of the evidence on record. W readily admitted that she voluntarily transferred the suit property to M. The transfer was based on the agreement for sale dated 6th June 2001, whose terms were very clear that the transfer of the suit property to M was for valuable consideration and there were no provisions for re-transfer of the suit property to back Wangari.
43.As aptly noted by the trial court, in light of the clear terms of the written agreement for sale, there was no room for introduction of extrinsic evidence to contradict or vary the clear terms of the agreement. That is the clear import of section 97(1) of the Evidence Act, cap 80 Laws of Kenya. In Kukal Properties Development Ltd v. Tafazzal H. Maloo & 3 thers [1993] eKLR, Muli, JA stated:
44.More recently in Fanikiwa Ltd & 2 others v Sirikwa Squatters Group & 17 Others (Pet. No. 32 (E036) of 2022), the Supreme Court cited with approval the following statement of the law on extrinsic evidence from Halsbury’s Laws of England, 4th Ed., Vol 12, para 1478:
45.Although W claimed that her signature on the agreement for sale was a forgery, she did not adduce even a scintilla of evidence in that regard. Moreover, it must be borne in mind that the standard of proof of the fraud and illegality that Wangari had alleged is above a balance of probabilities.
46.In R. G. Patel v. Lalji Makanji [1957] EA 314, the former Court of Appeal for Eastern Africa held that:And in Demutila Nanyama Pururu v. Salim Mohamed Salim, CA No. 138 of 2018, this Court held that there was no room for inferring fraud. The Court held:
47.It must also be remembered that W is not your ordinary naive or ignorant housewife. At the material time, she was an inspector of police, who needed money to complete her housing project in Donholm Estate. From her senior status, she could hardly have executed the agreement for sale and the transfer without knowing exactly what she was doing.
48.It is well established in this jurisdiction that when the root of a registered proprietor’s title to property is challenged, the proprietor had to establish the legality of his or her title. Thus, in Munyu Maina v. Hiram Gathiha Maina [2013] eKLR, this Court held as follows:That reasoning was approved by the Supreme Court in Dina Management Ltd v. County Government of Mombasa & 5 Others, Pet. No. E010 of 2021 where the Court stated:
49.As we have noted, the root of title was unsuccessfully challenged in the trial court and W has not pursued that issue in this appeal. If the findings of the trial court regarding the root of the title which gave rise to the charge in favour of Consolidated Bank followed by the sale and transfer of the suit property to M and ultimately the charge of the same in favour of Equity Bank are not challenged in this appeal, then it follows, as aptly contended by the respondents, that W has no locus standi to challenge what M did with his property.
50.We are well aware that the Court is always under a duty to determine all issues raised by the parties. However, in the circumstances of this appeal, it would serve absolutely no purpose to undertake an academic exercise of determining secondary issues when the primary issue on which the secondary issues hinge, is decidedly against the appellant. At the risk of repetition, without challenging the transfer and registration of the suit property in the name of M, W has no locus standi to challenge the charging of the suit property by M to Consolidated Bank and the transactions subsequent thereto.
51.Accordingly, we find no merit in this appeal, and the same is hereby dismissed.
52.As regards costs, taking into account the family relationship and antecedents between W and M, the main protagonists in this dispute, the order that best commends itself to us is to direct each party in this appeal to bear its own costs. It is so ordered.
DATED AND DELIVERED AT NAIROBI THIS 20TH DAY OF DECEMBER 2024.ASIKE-MAKHANDIA.....................................JUDGE OF APPEALK. M’INOTI.....................................JUDGE OF APPEALJ. LESIIT.....................................JUDGE OF APPEALI certify that this is a true copy of the original.SignedDEPUTY REGISTRAR