Supreme Court to clarify Dina Management principles on Chargee sales
By Faith Cherop Advocate | Despute Resolution, ESG Matters
The Court of Appeal in Civil Appeal (Application) No. 293 of 2016: Intercountries importers and Exporters Limited vs. Telposta Pension Scheme Registered Trustees & 5 others has certified an intended appeal by Intercountries importers and Exporters Limited (“Intercountries”) as raising matters of general public importance and granted leave to appeal to the Supreme Court.
- What is the place of the statutory protections availed to Purchasers upon the exercise of Chargees’ statutory powers of sale?
- Whether the provisions of the Land Act can be read into the repealed land statutes in their construction.
- Does Dina Management Ltd apply strictu sensu to persons deriving title from Chargees’ power of sale? If so, does it qualify; in any way, section 99 (3) of the Land Act?
- What interpretation/ construction is to be accorded to the term ‘constructive notice’? under section 99 (3) of the Land Act?
- How can the conflicting decisions on the above matters be reconciled?
The dispute revolves around Land Reference No. 209/13238 (originally LR 209/2397) (“the property”). Telposta Pension Scheme (Telposta) initially filed a suit in the High Court, claiming the property was fraudulently and illegally alienated by the Commissioner of Lands to Park Avenue Investments Limited, which then charged it to Trust Bank Limited (in liquidation). Trust Bank Limited subsequently sold the property to Intercountries. The High Court, in its judgment delivered on 27th July 2018, ruled in favor of Intercountries, declaring it the lawful owner of the suit property as a bona fide purchaser for value without notice, and ordered Telposta to vacate.
Telposta appealed this decision to the Court of Appeal. The Court of Appeal, in its judgment delivered on 12th July 2024, overturned the High Court’s findings. It held that the suit property was not unalienated land available for allocation to Park Investments in 1996, and therefore, the Commissioner of Lands had no right to allocate or resurvey it. The Court found that the property had been vested on Telposta, despite no title being issued to them. Crucially, the Court concluded that Park Investment’s registration as proprietor was fraudulent because the property was not available for allocation, and consequently, Park Investment had no valid title to charge to the Bank. As a result, the Bank’s purported exercise of its statutory power of sale to Intercountries was a nullity.
The Supreme Court in the case of Dina Management Limited vs. County Government of Mombasa & 5 others eKLR (Dina Management case) held that where the process that was followed prior to issuance of the title to property was illegal, then the title cannot be held to be valid. The court held that the protection under the doctrine of bona fide purchaser does not apply where the root of the ownership of the title is marred with illegality and irregularity. Subsequently, courts of law have applied this holding to various cases where the titles to property are revoked in instances of existing illegality at the root of the title.
There has, however, been an influx in conflicting decisions on matters pertaining to purchases obtained from chargee’s power of sale with some courts holding that such purchases are revoked due to the illegality in the root of the title, implementing the holding in the Dina Management case, while other courts have upheld the statutory protections under section 99(3) of the Land Act for such purchasers. Section 99(3) of the Land Act legally protects purchasers of charged property who during a sale, have actual notice of issues such as no default by chargor or an unnecessary or irregular sale unless, there is fraud, misrepresentation, or dishonest conduct by the chargee that the purchaser knew or should have known about.
It is important to note that in the Dina Management case, the dispute surrounded the validity of ownership of land which had been alienated as private property. The court did not pronounce itself on titles derived from the exercise of statutory power of sale and how far such purchasers should investigate the root of the title.
Our litigation team, led by Managing Partner Mr. Dennis Mosota, was part of the legal team that successfully argued that there was a need to clarify whether the principles in Dina Management as to the validity of the root of a title applied to property acquired through a Chargee’s statutory power of sale, i.e. through a public auction. As such, it would be important to get guidance from the Supreme Court on these matters which affect majority of the members of the public.
Once the Appeal is filed, the Supreme court will render a definitive pronouncement on the question of whether the principles in Dina Management all-encompassing to property is purchased from a bank exercising its statutory power of sale. This decision will provide a critical measure of certainty and conclusively settle the question for players in the lending and property sectors.