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Court of AppealDismissedCivil Appeal No. E084 of 2021

Ndungu & 19 others v Lusiola (Civil Appeal 363 of 2019) [2023] KECA 743 (KLR)

Court of Appeal
22 June 2023
3,786 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~15 min to read original · ~4 min brief

The bottom line

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The Court of Appeal confirmed that land buyers who skip a title search before paying can lose everything when their seller never owned the property.

What this practically means

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Executive summary

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The Court of Appeal (Musinga, Sichale and Gachoka, JJ.A) dismissed this first appeal against the Environment & Land Court at Nairobi (Bor, J.), which had held that the respondent, as registered proprietor of Ruiru/Ruiru East Block 2/4842, was entitled to vacant possession, permanent and mandatory injunctions, and removal of a caution registered by the appellants. The appellants had purchased subdivided plots from Kenneth Gikonyo Mungai through Phibs Investments after paying him monies under an agreement he had made with the respondent, which the respondent rescinded when Gikonyo failed to pay the Kshs.1,000,000.00 balance. The court framed two issues: whether Gikonyo acquired good title capable of passing to the appellants, and whether the trial judge erred by failing to apportion liability to Gikonyo despite an interlocutory judgment entered against him. On the first, applying Lucy Njeri Njoroge on rescission, the court held that the agreement was validly rescinded after 12th September 2011 and no title passed; the appellants, as strangers to that contract, could not perform it, and their Kshs.225,000.00 cheque was post-rescission and grossly short of the balance. Their bona fide purchaser defence failed because counsel conceded a search before purchase would have revealed the respondent's ownership. On the second issue, the appellants never set down their third-party claim for formal proof, so the unprosecuted interlocutory judgment could not shift liability to Gikonyo or undermine the trial court's findings. The trial judgment was affirmed, the appeal dismissed, and costs awarded to the respondent.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether Kenneth Gikonyo Mungai, the third party, had acquired good title to the suit property which he could have passed on to the appellants
  2. 2.Whether the trial court erred by not apportioning liability against the third party, Kenneth Gikonyo Mungai

Key legal issues

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01

Whether the third party acquired good title which he could pass to the appellants

Holding

No. The sale agreement between the respondent and Mr. Gikonyo was validly rescinded for non-payment of the balance of the purchase price; no title passed, and the respondent remains the registered proprietor.

Reasoning

The court applied its prior decision in Lucy Njeri Njoroge v Kaiyahe Njoroge on rescission: a non-defaulting party may rescind on notice after material breach. Mr. Gikonyo never paid the Kshs.1,000,000.00 balance; the respondent gave notice with an extension to 12th September 2011, after which the agreement stood rescinded. The appellants, being strangers to that agreement, could not perform it, and the Kshs.225,000.00 cheque came after rescission and fell far short of the balance. Consequently no proprietary interest passed to Mr. Gikonyo or to the appellants.

p. 5
02

Whether the appellants were bona fide purchasers for value without notice

Holding

They were not. Counsel conceded that a search done before purchase would have shown the respondent as proprietor; the search was done only after purchase.

Reasoning

The court adopted the Katende v Haridar criteria for a bona fide purchaser, including that the vendor must have apparent valid title and the purchaser must act in good faith after due diligence. Here the vendor had no title, and the appellants conceded an official search before purchase would have revealed the respondent as registered owner. Their failure to search before contracting defeated the bona fide purchaser defence, and that ground of appeal failed.

p. 6
03

Whether the trial court erred in failing to apportion liability against the third party given the interlocutory judgment entered against him

Holding

No. The interlocutory judgment was obtained under Order 10 rule 4, but the appellants never prosecuted their third-party claim or set it down for formal proof.

Reasoning

The court distinguished interlocutory judgment under Order 10 rule 4 (liquidated demands) from Order 10 rule 6 (pecuniary damages or detention of goods). The appellants sought no pecuniary relief against Mr. Gikonyo; third-party proceedings exist only for indemnity or relief against the third party and require prosecution. Since the appellants never set the third-party claim down for formal proof and conceded they did not proceed against him, the trial judge's silence on the interlocutory judgment did not negate her findings on the suit property.

p. 7
04

The applicable standard on a first appeal

Holding

The Court re-appraises the evidence and reaches its own conclusions, interfering only where the trial court's findings were based on no evidence, misapprehension of the evidence, or wrong principles.

Reasoning

Relying on Selle v Associated Motor Boat Company, the court reiterated its duty on a first appeal to re-evaluate the evidence and draw its own conclusions, while according deference to the trial court's findings on credibility. The court found no misapprehension or reliance on wrong principles by Bor, J., and accordingly affirmed the judgment granting vacant possession, injunctions, and removal of the caution.

p. 4

Legal principles established

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  • A vendor who has not paid the full purchase price and whose agreement has been rescinded acquires no proprietary interest capable of being passed on to sub-purchasers.
  • A party who conducts an official search only after purchase cannot claim protection as a bona fide purchaser for value without notice.
  • Under the doctrine of privity of contract, strangers to a contract cannot enforce or perform it.
  • A defendant who does not set down a third-party case for formal proof cannot fault the trial court for failing to apportion liability against the third party on the basis of an interlocutory judgment.

Court orders

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  1. 1.Appeal dismissed in its entirety
  2. 2.Costs of the appeal awarded to the respondent

The bench

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One judgment of the whole court — no separate or dissenting opinions.

majority
majority
majority
On appeal from
Environment & Land Court
ELC Case No. 650 of 2012
Jurisdiction invoked
First appeal to the Court of Appeal under the Court of Appeal's appellate jurisdiction over the Environment & Land Court

Relief refused

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Setting aside of the trial court's judgment and dismissal of the respondent's suit, or a fresh hearing

The appeal had no merit: Mr. Gikonyo acquired no title to pass to the appellants, and the appellants failed to prosecute their third-party claim

p. 8

Costs

Costs of the appeal awarded to the respondent

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

In the upshot, this appeal has no merit, and we dismiss it in its entirety and award costs thereof to the respondent.
p. 8Final orders - dismissal and costs
In view of the foregoing, the suit property did not pass to Mr. Gikonyo. It follows, therefore, that Mr. Gikonyo had not acquired any proprietary rights over the suit property which he could pass on to the appellants. The respondent remains the registered proprietor of the suit property.
p. 6No title passed under a rescinded agreement
In those circumstances, the appellants cannot be described as bona fide purchasers. The appellants were not diligent in their transactions with Mr. Gikonyo.
p. 6Bona fide purchaser defence fails absent pre-purchase due diligence
As a general rule a contract affects only the parties to it, and cannot be enforced by or against a person who is not a party, even if the contract is made for his benefit and purports to give him the right to sue or to make him liable upon it.
Privity of contract
In the circumstances, failure by the learned judge to allude to the interlocutory judgment that had been entered against the third party in her final judgment did not negate the trial court's findings in respect of the suit property.
p. 7Effect of unprosecuted third-party proceedings

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, "Ndungu & 19 others v Lusiola (Civil Appeal 363 of 2019) [2023] KECA 743 (KLR)", Case Analysis (2023). Civil Appeal No. E084 of 2021. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2023/743/eng@2023-06-22

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