Barely five months since the landmark decision of the Supreme Court in Dina Management Limited v County Government of Mombasa & 5 others (Petition No. 8 (E010) of 2021), the apex Court on 22 September 2023 delivered another judgment which has the potential to further shake up the process of purchase of land by property investors in Kenya. In a judgment delivered in the case of Petition No. 5 (E006) of 2022; Torino Enterprises Limited v Hon Attorney General (“Torino Enterprise Limited’s case”), the Supreme Court held among other things that a letter of allotment, even if perfected, cannot by and in itself confer transferable title to the Allottee, until the purchasers are registered as proprietors of the land upon perfecting the letter of allotment. The Supreme Court further placed a burden to land purchasers to do a physical site visit for verification of land which the purchasers intend to buy.
Background of Torino Enterprise Limited’s case
On 21 February 1964, a freehold title known as Embakasi L.R No. 11344 (Original No. 41/3) measuring 5639 acres was alienated and granted to Kayole Estates Limited. Thereafter, this parcel of land was transferred to the then Nairobi City Council (hereinafter “NCC”) for valuable consideration and a transfer duly registered on 22 November 1971. In 1973, the parcel of land was subdivided into eight parcels including LR No. 22524, Grant No. IR 85966 situate within the City of Nairobi and measuring 83.910 Hectares (hereinafter the “Suit Property”).
Torino Enterprises Limited (the “Appellant”) filed a suit before the High Court in High Court Constitutional Petition No. 38 of 2011 against the Hon Attorney General (the “Respondent”) contending that upon payment of a consideration of Kes. 12,000,000, it acquired the Suit Property for a term of 99 years commencing the year 2000 from Renton Company Limited which had acquired the property for value from NCC through an allotment letter dated 19 December 1999. It was further Torino Enterprise Limited’s contention that sometime in the year 2005, the Department of Defence (the “DOD”) encroached on the property, unlawfully fenced off ninety acres and proceeded to construct a demining college and auxiliary buildings. Torino Enterprises Limited argued that DOD’s actions were illegal and contravened rights to property guaranteed under Article 40 of the Constitution.
By a judgment delivered on 4 July 2011, the High Court allowed the petition and held that the Appellant was the lawfully registered proprietor of the Suit Property pursuant to Article 40 of the Constitution and Section 23(1) of the Registration of Titles Act. Aggrieved by the judgment of the High Court, the Respondent appealed before the Court of Appeal in Civil Appeal No. 84 of 2012 challenging the entire judgment of the High Court. In a judgment delivered on 4 February 2022, the Court of Appeal allowed the appeal and overturned the High Court’s judgment.
Consequently, the Appellant filed an appeal before the Supreme Court challenging the entire judgment of the Court of Appeal. The Appellant contended that the Respondent did not file any cross petition before the High Court seeking nullification or cancellation of its title and the issue before the Court of Appeal was whether the tort of trespass had been established. The Appellant further argued that the Court of Appeal determined the legality and validity of property rights of Renton Company Limited which party was not before it thus denying it the right to rebut allegations made against it to the Appellant’s detriment. On the other hand, the Respondent argued that the Appellant did not acquire a good title from Renton Company Limited as it acquired a letter of allotment which had been initially issued to Renton Company Limited on 19 December 1999. The Respondent further argued that the Suit Property was not un-alienated government land and consequently, the Commissioner of Lands lacked the authority to allot it to Renton Company Limited. Moreover, the Respondent urged the Court to find that the process leading to the acquisition of the Appellant’s title was shrouded by irregularities.
Supreme Court’s Determination
The Supreme Court in determining whether the Appellant had a valid title to the Suit Property, found that the Suit Property, having been allocated to Kayole Estates Limited and subsequently to NCC was not an unalienated government land but was a private freehold land. In the circumstances, the Commissioner of Lands could not therefore have any authority to allocate the same to any other person. Therefore, Rentons Company Limited could only have acquired the Suit Property from NCC and not the Commissioner of Lands who had long been divested of authority to allocate the same.
Having considered the facts of the case, the Court also held that Rentons had not complied with the terms of the letter of allotment which was to lapse within thirty days. Since Rentons made payments after 127 days from the date of offer, the letter of allotment has lapsed by the time Rentons purported to transfer the property to the Appellant. Further, the Court held that an allotee in whose name the allotment letter has been issued, must perfect the same by fulfilling the conditions therein, and even after the perfection, the said allotee cannot pass a valid title to a third party unless they acquire the title to the land through registration under the applicable law. Consequently, the transaction between Rentons and the Appellant was a nullity.
In dealing with the Appellant submission that they were an innocent purchaser for value without notice, the Court found that the Appellant could not claim so as there was evidence confirming that DoD had been granted access by the defunct Municipal Council prior to Renton’s purchase, and had taken possession of, and erected public infrastructure upon the Suit Property before the purported purchase. Therefore, if the appellant was a diligent purchaser, it ought to have at least known of this fact by inspecting the suit premises. The fact that the Suit Property was occupied must have sounded a warning of “buyer be aware” to the Appellant.
The Supreme Court was equally not convinced by DoD’s claims to the title and found that just as the Commissioner of Lands could not allocate the said land to Rentons, so also was he equally hamstrung in relation to DOD as DOD has equally not been registered as a proprietor. The Supreme Court therefore found that the Suit Property remained vested in Nairobi County which is the legal successor to the defunct Nairobi City Council.
Impact of the Decision
This judgment has further stressed the importance of thorough due diligence on the part of property investors and land purchasers at the point of purchase of land. It is not only critical for purchasers to visit the land and note any structures on the property, but also investigate the root title of the property and ascertain whether the previous purchasers obtained a good title to the property.