Uneeco Paper Products Limited v Kenya Railways Corporation & Commissioner of Lands [2014] KEHC 6073 (KLR)

Full Case Text

No. 22

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 CORPORATIO AND THE COMMISSIONER OF LANDS

BETWEEN

UNEECO PAPER PRODUCTS LIMITED........................................PLAINTIFF

AND

KENYA RAILWAYS CORPORATION.....................................1ST DEFENDANT

THE COMMISSIONER OF LANDS......................................2ND DEFENDANT

JUDGMENT

1. This matter arises from an inter-pleader suit by Originating Summons dated the 23rd August 2010 in which the plaintiff lessee sought directions from the court as to who between the defendants owns and is entitled to the reversionary interest in the parcel of land LR NO. 9695/30 Changamwe, Mombasa following demand from the plaintiff for land rent from both the defendants. Save for the 2nd defendant, the parties filed their respective pleadings and affidavits in support and opposition of the inter-pleader.

2. From the evidence presented before the court in the various affidavits by the parties, the brief background of the matter is that the 1st defendant was the registered proprietor of the lease on the parcel of land LR 9695/30 Changamwe upon which it had granted a sub-lease for 52 years and 8 months from 1st May 1972, which sub-lessee had been transferred to various parties over time culminating in the transfer to the plaintiff by the immediate past sub-lessee M/S General Cargo Services Ltd by a transfer dated 18th June 2007. The said M/S General Cargo Services Ltd had before the transfer successfully sought an extension of lease for 35 years from the 1st defendant for which approval the 1st defendant’s Estate Manager communicated to the 2nd defendant by letter dated 2nd November 2006. By a letter dated 24th November 2008, the second defendant informed the plaintiff of the extension of lease for a period of 50 years with effect from 1st November 2008 subject to surrender of the existing title and payment of annual rent and other charges. The plaintiff paid the rent and executed a surrender of lease drawn by the Registrar of titles and subsequently given a Grant on the property registered as No.46891/1 on the 16th December 2009. On a demand for land rent by the 1st defendant in June 2010, the plaintiff considered the demand to be inconsistent with the Grant to it by the 2nd defendant as the Lessor to whom the rent would then be payable and consequently sought the court directions through the inter-pleader proceedings.

3. The plaintiff’s case was that it did not claim ownership of the suit property only an interest in the suit property as a sub-lessee and it therefore sought to establish who between the defendants was the proper owner of the reversionary interest for purposes of its obligations to pay land rent.

4. The 1st defendant on the other hand was completely taken aback by the turn of events and it read fraudulent collusion between the plaintiff and the officials of the 2nd defendant to take way its proprietary right to the suit property and grant the same to the plaintiff without valuable consideration paid to the 1st defendant.

5. The matter was severally adjourned to facilitate negotiations between the parties. It was agreed between plaintiff and the 1st defendant that the directions of the court for resolution of the matter sought as follows:

“DIRECTIONS

a. It is declared that the Kenya Railways Corporation, the 1st defendant herein is the registered proprietor of Plot No. 9695/30 Sec. VI/MN (the Property) and is vested with the leasehold interest created thereon together with all implied and expressed rights and privileges belonging or appurtenant thereto hence entitled to the reversionary interest in the Property.

b. The Commissioner of Lands, the 2nd Defendant herein be and is hereby directed to close Grant No. 46891 in respect of L.R. No. 9695/30 and to revoke the Lease dated 1/12/2009 issued thereunder from the President of the Republic of Kenya to Uneeco Paper Products Ltd for a term of 50 years from 1/11/2008 and registered as C.R. No. 46891/1.

c. The Commissioner for Lands, the 2nd Defendant herein be and is hereby directed to restore the Original title of the Property being C.R. No. 14464 by: -

i. Cancelling the surrender of lease dated 1/12/2009 registered as entry No. 14464/16.

ii. Restoring all entries subsisting thereon immediately prior to the said surrender of lease.

d. The costs of the de-registration of the Title No. 46891 and restoration and rectification of the Title No. 14464 be borne by the Commissioner of Lands, the 2nd defendant.

e. This Order be served on the Commissioner of Lands, the 2nd defendant.”

6. The request for these directions flow from the inter-pleader proceedings taken out by the plaintiff with respect to the ownership of the reversionary interest on the suit property.

7. Although duly served the 2nd defendant did not enter appearance or otherwise participate in the proceedings before the court despite opportunity provided by adjournment specifically to enable to enable the 2nd defendant to respond to the suit. When the matter came up for hearing, being satisfied that the 2nd defendant had been duly served, the court ordered the matter to proceed to hearing his absence notwithstanding.

8. The counsel for the parties present – Mrs. Gudka for the plaintiff and Mr. Sitonik for the 1st defendant, made oral submissions and judgment was reserved. The verbatim record of the submissions by counsel are set out as follows:

“Mrs. Gudka

The plaintiff surrendered lease granted by the Kenya Railways. The renewal l was issued in the name of the Government of Kenya instead of Kenya Railways. I have the documents including the history of the matter all attached to the affidavits of the plaintiff in support of the application.

Sublease entry No. 15 shows the transfer of the leasehold interest – 18. 6.2007. Prior to the transfer the previous leasehold had agreed to grant extension of the lease by letter of 2. 11. 2006 attached to the affidavit. When the lease was given it was issued in the name of the President of the Republic of Kenya. This letter is attached to the 2nd affidavit. One dated 24. 9.2010 wrongly indicates that the Plot belonged to East African Railways who transferred it to the plaintiff. This was a misunderstanding. The plaintiff's interest is only in the sublease with reversionary interest in the Kenya Railways. I explained in my letter of 15. 10. 2010. I expected the commissioner to rectify the situation created by himself. The 1st defendant assumed that the plaintiff had colluded with the commissioner to take over their interest from them. After explanation, the counsel for the respondent has conceded that there is no question of collusion. Even against the commissioner it is a question of a misunderstanding of the position. The court to give an order for the commissioner to rectify the register. We have agreed with counsel for the 1st defendant as to what requires to be done to rectify the situation. We have reduced it into writing by a consent letter dated 13. 11. 2012. We may have a mention for compliance by the commissioner within a reasonable time after the order.

Mr. Sitonik

I agree substantially with counsel for the plaintiff. Kenya Railways was shocked when it handed over its title for extension and the ownership was changed upon removal. The gist of the position is in the letter of 2. 11. 2006. The commissioner has shield away from responding to the matter. We take it that the commissioner was in error in his understanding of the matter. We have agreed to have the situation rectified as shown in the letter of 13. 11. 2012. We seek the court's direction as set out therein.”

9. I have considered the matter and I find that although there are certain inexplicable inconsistencies - such as why the transfer of the interest in the land from M/S General Cargo Service Limited to the Plaintiff was effected by a Transfer of Lease of 18th June 2007 in which the said General Cargo Service Limited was indicated as registered proprietor as lessee from the Government of Kenya when in fact it was a sub-lease from the 1st defendant and as to why the 2nd defendant ignored the express terms of the approval of the 1st defendant to the extension of the lease and granted a fresh head lease to the plaintiff - it is not possible to find fraudulent collusion on the part of the plaintiff and the 2nd defendant in granting the lease to the plaintiff as fraud requires to be proved on a standard beyond a mere preponderance of evidence to a standard above the normal civil litigation standard of balance of probabilities.

10. However, I find that there is a clear and apparent error in the grant of the lease to the plaintiff when the request and approval was clearly for extension of the sub-lease to the plaintiff with the ownership of the Lease remaining with the 1st defendant. The 1st defendant’s approval letter of 2nd November 2006 is in the following terms:

“Ref C1/6/2/24 Vo. 3

November 02, 2006

The Commissioner of Lands

P.O. Box 30089

NAIROBI

Dear Sir/ Madam

RE: EXTENSION OF LESE UPON CHANGAMWE PLOT 9695/30

The above parcel is a Kenya Railways Industrial Plot located in Changamwe. The lessee of the parcel, M/S General Cargo Services Ltd. of P.O. Box 86322, Mombasa have applied for an extension of lease for a term of 35 years from the current date to enable it be gazette as an Export Processing Zone.

The Board of Directors of Kenya Railways have approved the request for an extension of lease subject to surrender of the remaining term.

The Original title is herein enclosed for your preparation of a new one in the name of Kenya Railways and a certificate of Title for a term of 35 years at an annual rent of Ksh.170,000. 00 issued in the name of General Cargo Services Ltd. of P.O. Box 86322, Mombasa.

Your prompt action will be highly appreciated. Annual rent is payable to Kenya Railways account.

Yours faithfully

L.K. Gitau

Estate Manager

FOR: MANAGING DIRECTOR”

[emphasis added]

11. The error, or misunderstanding as the counsel for plaintiff would have it, on the part of the 2nd defendant is glaringly exhibited in the contents of 2nd defendant’s letter dated addressed to the counsel for the plaintiff erroneously asserting a transfer of the ownership of the plot by the 1st respondent to the plaintiff, in terms as follows:

“Ref. No. 90548

Date: 24th September 2010

RE: L.R. NO. 9695/30/VI/MN

I refer to your letter ref. No. VCK/V-752/06/404 dated 1. 7.2010 in connection with the above.

Please note that the above plot initially belonged to the East African Railways Corporation who later transferred their interest to Uneeco Paper Products Limited.

Uneeco applied for an extension of lease which was granted by this office and thereafter a title issued and forwarded to Mombasa for registration.

Therefore the plot belongs to Uneeco Paper Products Limited for a 50 year term with effect from 1. 11. 2008.

Annual rent is payable to Commissioner of Lands.

S.M. Osodo

FOR:COMMISSIONER OF LANDS”

[emphasis added]

12. Accordingly, I find that the transactions leading to the grant of lease on the suit property to the plaintiff was based on errors of law and fact in that:

a. The transferee M/S General Cargo Services Limited were never registered proprietor of the lease on the suit property LR 9695/30 for the Government of Kenya as asserted in the Transfer of Lease dated 18th June 2007.

b. The plaintiff did not by the transfer of 18th June 2007 become the owner of the lease on the suit property because the transferee M/S General Cargo Services, in accordance with the nemo dat principle, could not confer by the transfer a better title that it had as a sub-lessse of the property.

c. The plaintiff not being the proprietor of the lease on the suit property could not lawfully surrender it as purported by the Surrender of Lease dated 1st December 2009.

d. The Grant of the Lease No. 46891 registered as No. 46891/1 of 1st December 2009 was based on an unlawful Surrender of Lease and is therefore unlawful, null and void.

13. For the reasons set out above, I grant orders in terms of the directions sought by the parties herein as follows:

b. The Commissioner of Lands, the 2nd Defendant herein be and is hereby directed to close Grant No. 46891 in respect of L.R. No. 9695/30 and to revoke the Lease dated 1/12/2009 issued there-under from the President of the Republic of Kenya to Uneeco Paper Products Ltd for a term of 50 years from 1/11/2008 and registered as C.R. No. 46891/1.

c. The Commissioner for Lands, the 2nd Defendant herein be and is hereby directed to restore the Original title of the Property being C.R. No. 14464 by: -

i. Cancelling the surrender of lease dated 1/12/2009 registered as entry No. 14464/16.

ii. Restoring all entries subsisting thereon immediately prior to the said surrender of lease.

d. Any costs for the de-registration of the Title No. 46891 and restoration and rectification of the Title No. 14464 be borne by the Commissioner of Lands, the 2nd defendant.

e. This Order be served on the Commissioner of Lands, the 2nd defendant for compliance.

14. Each party will bear its own costs of the suit.

15. The matter will be mentioned on a date within sixty (60) days to be fixed in consultation with the parties for confirmation of compliance with the orders of the court.

Dated, signed and delivered on the 31st March 2014.

EDWARD M. MURIITHI

JUDGE

In the presence of: -

Mrs. Gudka for the Plaintiff

Mr. Sitonik for the 1st Defendant

No appearance for the 2nd Defendant

Miss Linda - Court Assistant