Uneeco Paper Products Ltd v Kenya Railways Corporation Limited & 2 others [2015] KEHC 4747 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT MOMBASA

CIVIL CASE NO. 293 OF 2010

IN THE MATTER OF:      LR NO. 9695/30, MOMBASA

AND

IN THE MATTER OF:   APPLICATION FOR DECLARATION AS TO OWNERSHIP OF THE REVERSIONARY INTEREST CLAIMED BY KENYA RAILWAYS CORPORATION       &       THE COMMISSIONER OF LANDS

BETWEEN

UNEECO PAPER PRODUCTS LTD………………..……..PLAINTIFF

AND

1. KENYA RAILWAYS CORPORATION LIMITED                                

2. THE COMMISSIONER OF LANDS………………DEFENDANTS    

KENYA COMMERCIAL BANK LTD………..INTERESTED PARTY    

RULING

1.           By a Notice of Motion dated 21^st November, 2014, and

brought under the provisions of Order 1, rule 10 of the Civil Procedure Rules 2010, (the Application), Kenya Commercial Bank Limited (the Applicant) sought to be enjoined in this suit as an Interested Party on the ground that it funded the Plaintiff, UNEECO PAPER FACTORY LIMITED, the sum Kshs. 85 million secured by way of a charge over the property known as LR No. 9695/30 (LR No. 46891) (the suit property) which was pari pasu with a charge with the Commercial Bank of Africa which held an asset debenture of Kshs. 257.3 million.

2.       The application was however opposed firstly by the

Plaintiff (Respondent) in Grounds of Opposition dated 3^rd February, 2015.   The substance of the grounds of opposition was that the Plaintiff’s interest in the suit property over which the Interested Party had obtained a charge to secure its lending to the Plaintiff was by way of a lease and not the reversionary interest in the said land.  Consequently, and regardless of whether the First Defendant or the Second Defendant owned the reversionary interest in the property, the leasehold interest of the Plaintiff and consequently the Applicant’s derived interest remained unaffected.

3.       On the other hand, the First Defendant in its Grounds

of Opposition contended that the Interested Party cannot purport to hold a mortgagee’s interest (security) over a non-existent property.  The First Defendant also pointed out that the Plaintiff’s interest in the property was limited to a residual term of ten (10) years since the original sublease of 52 years would expire in the year 2024, and had not been extended.  A mortgagee cannot have a greater interest in a property than the mortgagor has.  The First Defendant therefore contended that the Interested Party’s application was irredeemably belated and misconceived since the suit had been conclusively determined by the consent Judgment of 31^st March, 2014, and that the court was functus officio.

4.       To answer that question and to understand the origin

of the application, it is necessary to set out briefly, the background to the application itself.

5.       The Kenya Railways Corporation (the First Defendant)

was the registered owner of the property comprised in Title Number LR 11715 being LR No. 9695/30 situate in Changamwe, Mombasa.  The Corporation had subleased the said property and following a series of transactions, the sublease was acquired by the Plaintiff.  The Corporation wishing to extend the lease to the Plaintiff’s predecessor in title surrendered its original  title to the Commissioner of Lands, (the Second Defendant/Respondent) for the purpose of preparing a new lease to the Corporation.  For reasons unknown to the Corporation, the Commissioner of Lands cancelled the title of the Corporation and issued a fresh lease to the Plaintiff in the name of the President of the Republic of Kenya, in place of the Corporation.

6.       As a result, both Defendants, the Corporation and the

Commissioner of Lands demanded rent from the Plaintiff.  The Plaintiff (UNEECO PAPER PRODUCTS LTD) approached the court on 24^th August, 2010, by an Originating Summons dated 23^rd August, 2010 asking the court to determine who between the Corporation and the Commissioner of Lands (the First and Second Defendants) owns the reversionary interest in the land known as LR No. 9695/30 and is therefore entitled to receive the land rent in respect thereof from the Plaintiff.

7.       The primary parties except the Commissioner of

Lands, the Second Defendant, who was not represented, but was served, were heard before this court (Muriithi J), on 31^st March, 2014 pursuant to a consent by the parties present (the Plaintiff and the Corporation (First Defendant), the court declared that the First Defendant (the Corporation) to be the registered proprietor as lessee of Plot Number 9695/30, Section VI/MN.  The Commissioner of Lands (the Second Defendant) was directed to close Grant Number 46891 in respect of LR No. 9695/30 and revoke the lease dated First December 2009 issued thereunder from the President of the Republic of Kenya to UNEECO PAPER PRODUCTS LIMITED for a term of 56 years from First November, 2008, and registered as Number 14464/161 thereby restoring all entries subsisting thereon immediately prior to the said surrender of lease at the cost of the Commissioner of Lands, the First Defendant.

8.       In light of that background and antecedents to the

Application the subject of this Ruling, the question is, or issues which arise are, whether –

1. The court is functus officio;
2. Whether the Interested Party’s (Applicant’s) interest in the suit property has been or is likely to be adversely affected by the order of the court issued on 31^st March, 2014.
3. Whether the Applicant is a necessary party and whether it has demonstrated an interest which warrants it to be enjoined as a party at this stage.

9.       I shall consider each of these issues in turn.

OF WHETHER THE APPLICANT IS A NECESSARY PARTY AND WHETHER IT HAS DEMONSTRATED AN INTEREST THAT WARRANTS IT TO BE ENJOINED AS A PARTY AT THIS STAGE

10. The Application herein is premised upon the provisions

of Order 1, rule 2 of the Civil Procedure Rules 2010 which says:-

          “Order 1 rules 1 – 9

          10     (1)    …………………………….

(2)    The court may at any stage of the proceedings, either upon or without the application of either party, and on such terms as may appear to the court to be just, order that the name of any party improperly joined, whether as plaintiff or defendant, be struck out, and that the name of any person who ought to have been joined, whether as plaintiff or defendant, or whose presence before the court may be necessary in order to enable the court to effectually and completely to adjudicate upon and settle all questions involved in the suit, be added.” (emphasis added)

11.     The said provision raises two questions, firstly the stage of proceedings, and secondly, whether the applicant is a necessary party.  On the first question, the rule is quite clear that a party may be joined whether as plaintiff or defendant or as a necessary party for the effectual and complete adjudication and settlement of all questions involved in the suit.

12.    This phrase clearly denotes that there are questions in the suit which are pending effectual and complete adjudication, and that these questions cannot be effectually and completely adjudicated without the presence of the party in the suit, whether as plaintiff, defendant or necessary party.

13.    The question for adjudication in this suit was who, as between the First and Second Defendants’ was entitled to the reversionary interest before the issue was determined by the consent judgment of 31^st March, 2014.  That issue having been effectually and completely adjudicated as between the Plaintiff and the Defendants, there were no more proceedings pending in respect of which the applicant could be enjoined as a necessary party.  The applicant therefore fails on this test.

14.    The above conclusion equally answers the question whether having entered the consent Judgment, the court became functus officio.  Functus officio is a Latin phrase derived from Roman Law.  It literally means having done one’s duty, or exercised one’s authority and brought it to an end in a particular case.  Thus in the English case of JERSEY EVENING POST LIMITED VS. AI THANI [2002] 542, at 550 it was said:-

“A court is functus officio when it has performed all its duties in a particular case.  The doctrine does not prevent the court from correcting clerical errors nor does it prevent a judicial change of mind even when a decision has been communicated to the parties.  Proceedings are only fully concluded, and the court functus, when its judgment or order has been perfected.  The purpose of the doctrine is to provide finality.  Once proceedings are finally concluded, the court cannot review or alter its decision; any challenge to its ruling must be taken to a higher court if that right is available.”

 15.    The adjudication herein was by way of a consent order which effectually and completely settled the question as to who between the two Defendants was entitled to the reversionary interest in parcel of land known as LR No. 9695/30 registered as LR No. 14464.  For the Applicant to be enjoined as a necessary party, that consent order would first have to be set aside, and proceedings reopened.    A consent order is like a contract, it binds the parties thereto.  It can only be set aside on the same grounds for a contract would be set aside, mistake, fraud or misrepresentation or failure of consideration.  There is no such application herein, and the orders in the Judgment of 31^st March, 2014 therefore remain effectual and in force.  The Applicant also fails on the ground that the court is functus officio.

16.    Lastly, the reversionary interest having reverted to the First Defendant with whom the Plaintiff first transacted, the Applicant’s interest is strengthened and is not adversely affected because the Applicant claims under the Plaintiff to which it advanced moneys secured under the reversionary interest to the First Defendant.  The Applicant’s interest is therefore fully secured.

 17.    Having failed on all the three issues, the Applicant’s Notice of Motion dated 21^st November, 2014 is hereby dismissed with costs to the Plaintiff, and the Defendants.

18.   There shall be orders accordingly.

 Dated, Signed and Delivered in Mombasa this 29^th day of May, 2015.

M. J. ANYARA EMUKULE

JUDGE

In the presence of:

Mr. Ondego for Applicant

Mr. Wafula for Respondent