Zipporah Wanjiku KariukivProgressive Credit, Carnelian Enterprises Auctioneers & George Njuguna Njoroge [2021] KEELC 1944 (KLR) | Fraudulent Transfer | Esheria

Zipporah Wanjiku KariukivProgressive Credit, Carnelian Enterprises Auctioneers & George Njuguna Njoroge [2021] KEELC 1944 (KLR)

Full Case Text

REPUBLIC OF KENYA

IN THE ENVIRONMENT  AND LAND COURT

AT THIKA

ELC CASE NO. 326  OF 2017

ZIPPORAH WANJIKU  KARIUKI............................................................PLAINTIFF

VERSUS

PROGRESSIVE  CREDIT  LTD......................................................1ST DEFENDANT

CARNELIAN  ENTERPRISES  AUCTIONEERS.........................2ND DEFENDANT

GEORGE NJUGUNA NJOROGE...................................................3RD DEFENDANT

JUDGMENT

By a Plaint dated 13th March 2017, the Plaintiff filed this suit against the  Defendants and sought for orders that ;

a) A Declaration  that parcel  of land number  Muguga/Gitaru/3112  belongs to the Plaintiff  and the charge created  over parcel No. Muguga/Gitaru/3112,   in favour of the 1st Defendant is invalid.

b) An order directing the  District Land Registrar,  Kiambu to cancel  the registration of the 3rd Defendant  as proprietor of Muguga/Gitaru/3112,  and register the  said property in the name of the  Plaintiff.

c) An injunction  restraining the 1st and 2nd  Defendants, their agents, servants, employees, officers  and or any other person acting  on their instructions, control and  directions from auctioning, selling, transferring, alienating  or in any other manner whatsoever  from disposing parcel No. Muguga/Gitaru/3112.

d) Costs of this suit and interest  thereon.

e)  Any  other relief.

In her statement of Claim,   the Plaintiff averred that she is the registered owner of the suit property. That she has constructed a  residential house on the suit property  which is her matrimonial home and she resides there with her children. Further that  she learnt that the 1st Defendant  illegally and irregularly  used the said matrimonial home  as collateral  for a loan allegedly advanced  to the 3rd Defendant,  which  information came to her knowledge after  documents addressed to the 3rd Defendant, were dropped at her house and the property advertised for sale  on 27th January 2017.

That the documents  state that the suit property was for sale on  3rd  April 2017, for monies owed to the 1st Defendant by the 3rd Defendant. That she had given the house documents to the 3rd Defendant as security  for a separate loan that she had taken from him  and at no time had she effected the transfer. That any charge created over the suit property  is unlawful and invalid  as the same was done without her knowledge and consent. She particularized fraud by the  3rd Defendant; as  purporting to transfer the suit property to himself and obtaining the title deed without her  consent.

She  further averred that  before advancing any monies to the  3rd Defendant, the 1st Defendant ought to have done due diligence on the suit property which would have revealed that she occupied the suit property, and that 3rd Defendant does not reside on the suit property and that the  Plaintiff was at all times the legal owner. That the charge was created in breach of the law. That she has never been served with statutory notice  and there are other properties registered in the 3rd Defendant’s name  which have more value than the  1st Defendant is demanding and  the 3rd Defendant is capable of repaying the said amount.

The suit is  contested and the 1st and 2nd Defendants  filed a statement of  Defense dated 8th June 2018, and denied all the allegations made in the Plaint.  They averred that the title in respect of the  suit property  bear the name of the 3rd Defendant  as the legal proprietor  and further affirmed upon conducting a search, that on or about  January 2015, the 3rd Defendant  approached the financier  for a loan facility of Kshs. 5,000,000/= which was to be secured  in the nature of a charge  over Title No.  Dagoretti/Kinoo 5956,  and Muguga / Jet Scheme /4168 and  Muguga / Gitaru / 3112. That they conducted due diligence  before disbursing the funds,  under the facility  and confirmed the authenticity of the document.  That upon successful  registration of the charge, the 1st Defendant  conducted a  post registration charge  and obtained a copy of the green card,  which revealed that the 3rd Defendant was the registered owner of the suit property. That the 3rd Defendant is in breach of the letter of offer and reneged on the loan  repayment  and despite numerous notices, he is in default  and as a consequence thereof, the 1st Defendant  moved to exercise  its Statutory Power of Sale. That they  instructed the 2nd Defendant to issue requisite notices and proceed to advertise the suit property for sale. That they were not obligated to serve  any statutory notices  to the Plaintiff, save for the auctioneers notice  of sale which was affixed in the  suit property.

Despite  service of  Summons to Enter Appearance, the  3rd Defendant  did not Enter Appearance nor participate in the Court proceedings.   The matter proceeded by way of viva voce evidence wherein the Plaintiff called one witness and the 1st & 2nd Defendants equally called one witness and closed their  case

PLAINTIFF’S CASE

PW1  Zipporah Wanjiku  Kariuki  adopted her witness statement as her evidence in Court. She further produced her list of documents as Exhibit 1. She denied selling the suit property to George nor defaulting  in the payment of her loan. That she had taken a loan of Kshs. 595,700/=from  Georgeand she had paid Kshs.1119,000/=  but he still sold her land. She denied receiving Kshs.1,600,000/=  and that the loan plus interest was coming to Kshs. 800,000/=. That the loan agreement dated 12th November 2015,   stated that she had transferred  title to the lender,  with her full knowledge but that the same was to be transferred back to her  after clearing the loan..

That the signature at the 2nd portion is not hers. Further that  she was given money by George, but she did not  transfer the land to him. That she signed the transfer, but it was not dated  and she was not aware of the LCB  consent.  The letter of consent is dated  October 2016. That she had an agreement with George,and the transfer was done on the next date being  13th November 2015, and consent was dated 11th October 2015 . She further testified that  she had not taken any loan from George in 2015.  That she gave Georgethe title deed as collateral for the loan. Further that she met George  on 12th November 2015,  and he told her that  if she did not pay Kshs.320,000/=, she was to transfer land back to him. That she learnt of the transfer after the auctioneers  landed  and she  was not given enough notice for the sale .

DEFENCE CASE

DW1 Betty Mwongela  testified that she worked for Progressive  Credit Limited, 1st Defendant herein and she adopted her witness statement dated  8th June 2018. She produced the list of documents dated 8th June 2018, as  Exhibit 1 and urged the Court to dismiss the suit.

She further testified  that  George was their client and he made an Application  for a loan in 2012, and secured the loan using various  properties. That the facility was approved around June 2015,  and the amount of money approved was Kshs. 3, 191,702/=. That the security was  two properties and a  Motor Vehicle which the said Georgesubstituted with  Muguga/Gitaru/3112, upon being satisfied that he was the owner of the suit property.

That she came to learn of the loan agreement when the case was filed. That the Loan betweenZipporah and  George was  taken on 12th November 2015,  and they had approved George’s  loan by then . That there is a consent used to transfer  the land fromZipporah  to George and it is  dated 1st October 2015,  and there was no relationship between George and Zipporah before 12th  November 2015. That they charged the property for Kshs. 5,000,000/=  which was George’s Limit .  That they did  not overcharge the  property  and there was no valuation done over the property. That between  the time of offering  the loan  to George  and the time of transfer, it was  about 6 months. That for Zipporah, the transfer was only a day. That the charge document is dated January 2016,  and Georgesigned it on a date given nor is the execution date shown. Further that the spousal consent byGeorge is not  dated and it was registered on 12th January 2016,  and then George came in to substitute it after it  had been charged. That it was not their obligation to date the charge  document. That the account has  not been cleared.

After close of viva voce evidence, the   parties filed written submissions which the Court has carefully read and considered. The Court has also read and considered the  pleadings by the  parties, the evidence adduced and the provisions of law and renders itself as follows;

It is not in doubt that the  Plaintiff was the registered owner of the suit property before the same was transferred to the 3rd Defendant.  It is further not in doubt that  the suit property is now charged to the 1st  Defendant  by the 3rd Defendant  as security  of a loan facility that was granted to the 3rd Defendant. It is also further not in doubt that the 3rd Defendant  has defaulted in the repayment of the said loan and the  1st  Defendant has sought to exercise its statutory power of sale. It is further not in doubt that the Plaintiff and the   3rd Defendant  entered into an agreement that  the 3rd  Defendant would loan the Plaintiff some money and use the suit property as security.  It is the Plaintiff’s contention that she never sold the suit property to the 3rd Defendant and that the 3rd Defendant  fraudulently  transferred the said property to himself and used it to secure  the  loan with the  1st Defendant and therefore the charge created is illegal and unlawful.

The  above being the facts of the case, the Court therefore finds and holds that the issues for determination are;

1. Was the transfer of the suit property to the 3rd Defendant  fraudulent.

2. Is the  Plaintiff entitled to the  prayers sought

3. Who should bear the costs of the suit

1. Was the transfer of the suit property to the 3rd Defendant  fraudulent.

It is not in doubt that the  suit property was transferred and a title deed issued over the suit property to the 3rd Defendant on  13th November 2015. It is the Plaintiff’s contention that the suit property was  transferred fraudulently to the 3rd Defendant as she never entered into any sale agreement over the transfer of the same nor did she authorize the transfer of the same.

According to the Black’s Law Dictionary, 10th Edition, fraud is defined as follows;

“A knowing misrepresentation or know concealment of a material fact made to induce another to act to his or her detriment.”

The basis upon which the  3rd Defendant transferred the suit property to himself is the  agreement  dated 12th November  2015, entered into between the  Plaintiff and himself. Though the Plaintiff  testified that she did not  sign the second part of the said agreement, the Court concurs with the 1st & 2nd  Defendant’s submission that the Plaintiff cannot disown a document she herself produced in evidence.  The Plaintiff produced in evidence the loan agreement dated  12th November 2015. Indeed  in the said agreement, the suit property was to secure the amounts loaned to the Plaintiff by the 3rd  Defendant. However, there is additional notes to the said agreement that  state that the suit property was transferred to the 3rd Defendant with the knowledge of the  Plaintiff. Further the notes  which form part of the agreement  states that  the borrower who in the said agreement is the Plaintiff agrees that the lender, the 3rd Defendant herein would use the said security to secure a loan in a bank.

The Plaintiff in her submissions has further admitted that  she signed the transfer documents, consent and left the 3rd Defendant with her documents that were necessary to effect the transfer. As already noted by the  Court, fraud consists of  misrepresentation or concealment of facts. The Plaintiff as per the evidence adduced was aware that the suit property was to be transferred to the 3rd Defendant  and   she allowed the 3rd Defendant to use the same as security for a loan.

Fraud is a serious offence, it must be specifically pleaded and proved.   There is no evidence that the suit property was transferred to the 3rd Defendant by way of fraud as the Plaintiff okayed the said transfer. This court therefore finds and holds that the Plaintiff has not proved any fraud on the part of the 3rd Defendant, in so far as the same  relates to the transfer of the suit property to him. While the Court acknowledges that it may be  suspicious that the  time within which the transfer was effected to the 3rd Defendant was done promptly, but the Court cannot hold that the said act in itself constitutes fraud.

As the 3rd Defendant had the  authority of the Plaintiff to transfer the suit property to himself and further being that the  Plaintiff herself gave the  documents for completion to the 3rd Defendant, the Court finds no misrepresentation nor concealment of facts in the transfer of the suit property. Therefore, this Court finds and holds that the transfer of the suit property  to the 3rd Defendant was legitimate and  therefore lawful.

2. Is the  Plaintiff entitled to the  prayers sought

The Plaintiff sought for various  orders amongst them  a Declaration that the transfer of the suit property to the  3rd Defendant was invalid. The Court having held that the transfer was not fraudulent, finds and holds that the said prayer is not merited.

The Plaintiff has further sought   for an order directing the cancellation of the title deed held by the  3rd Defendant and  an order of injunction against the 1st and 2nd Defendants.  It is not in  doubt that the suit property has been charged  in favour of the 1st  Defendant.  It therefore follows that the 1st Defendant has  an interest over the said suit property. For  the Court to  give an order for cancellation of the title, it would be discharging the charge that is in favour of the 1st Defendant.   As per the loan agreement produced in evidence,  the  Plaintiff authorized the 3rd Defendant to take a  loan and use the suit property  as  security. The suit  property was used to secure a loan and the same charged in favour of the 1st Defendant. Therefore, the Court finds and holds that the  Order for a permanent injunction cannot be  granted as against the Defendants as they have rights over the said property.

While  the Court  is sympathetic to the  Plaintiff who claims to have paid all the amount owed to the 3rd Defendant, it is quite clear that  the Plaintiff enabled the 3rd Defendant and  no amount of due diligence would have led the  1st Defendant to find otherwise as the Plaintiff had  allowed the transfer and  taking of the loan. It would only have been proper for the Plaintiff to have legally sought for the  revocation of the  title held by the 3rd Defendant  which did not happen

The transfer of the suit property to 3rd Defendant has been held to be valid. The registration of a person  as the proprietor of a property grants  the said person.  absolute and indefeasible rights and  privileges appurtenant thereto. Thus, the Court finds and holds that the  Plaintiff is not entitled to the orders sought.

3. Who should bear the costs of the suit

Section 27 of the Civil Procedure  Act gives the Court discretion to   award cost. Though  costs usually follow the event, there are instances in which the  Court  can exercise its discretion  where special circumstances present itself. In the instant circumstances, the Court finds that  it will be in the interest of justice for each party to bear its own costs of the suit.

Having now carefully read and considered the   Pleadings by the parties, the evidence adduced and the relevant provisions of law, the Court finds and holds that the plaintiff has not proved her case on the required standard of balance of probabilities.

For the above reasons, the Court finds that she is not entitled to the prayers sought in her Plaint dated 13th March 2017.

Consequently, the suit is dismissed entirely with an order that each party should bear its own costs of the suit.

It is so ordered

DATED, SIGNED AND DELIVERED AT THIKA THIS 24TH DAY OF SEPTEMBER, 2021

L. GACHERU

JUDGE

Court Assistant – Lucy